Bloomberg News

Solyndra Sought Second Guarantee a Week After Getting the First

October 06, 2011

Oct. 6 (Bloomberg) -- Solyndra LLC, the failed California solar-panel maker, applied for a second U.S. loan guarantee a week after receiving its first as it sought to expand a factory it hadn’t built yet.

The company received a $535 million federal loan guarantee on Sept. 3, 2009, and broke ground for its so-called Fab 2 facility the next day, at an event that Energy Secretary Steven Chu attended. Seven days later, the company requested $469 million for more construction and equipment at Fab 2 in a bid to cut costs of its tubular panels by increasing production, according to a December 2009 filing to the U.S. Securities and Exchange Commission.

The company and the department “mutually agreed that the application should not receive further consideration” in October 2010, Damien LaVera, an Energy Department spokesman, said in an e-mail today. “The department was not poised to approve a second loan application.”

E-mails released this week as part of a congressional investigation into Solyndra’s loan guarantee said officials from the Office of Management and Budget worried the second guarantee request was imminent.

“I’ve been told we should expect to see that project soon for conditional commitment,” a budget office official wrote in an April 8, 2010, e-mail.

Another official said in an e-mail: “Possible to close and default on one before closing on a second??? Could be a record.”

Solyndra Plans

Solyndra had forecast that the next phase of its factory would cost $642 million, which it planned to raise through the second loan guarantee and by selling shares to the public, according to the December filing.

By the time of the decision to drop the application, Solyndra’s financial problems were becoming clearer. It had amended its SEC filing in March 2010 to include a warning from its auditor that it might have to cease operating and in June had withdrawn its planned initial public offering.

In December 2010, Solyndra violated the terms of its $535 million award by failing to set aside the first of six $5 million payments for a reserve fund.

The administration then restructured the loan, which placed Solyndra’s debt to the government behind $75 million in fresh money from outside investors, a decision that congressional Republicans have criticized. Energy Department officials said the agreement was a last-ditch effort to save the company.

FBI Raid

Solyndra filed for bankruptcy protection on Sept. 6. Two days later the FBI raided the company’s Fremont, California, offices as part of an investigation into possible accounting fraud.

Matt Rogers, an Energy Department adviser on stimulus projects, said in a May 24, 2010, e-mail to Rod O’Connor, who was then Chu’s chief of staff, that Solyndra faced economic challenges, including falling silicon prices that benefited rival companies and declining demand in Europe for solar panels.

Rogers also said the company had been counting on “an energy bill to pass,” including a renewable-energy standard, “to ensure adequate U.S. market size.”

Rogers said Solyndra would face problems in the “18-24 month window, but the company should be going strong into the fall with their new facilities on line.”

House Republicans expanded an eight-month investigation into the loan guarantee yesterday, demanding all communications about Solyndra among White House officials since Obama’s 2009 inauguration.

--Editors: Judy Pasternak, Steve Geimann

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus