Dept. of Energy's SunPower Loan Guarantee Under Fire
Here’s why people should be upset at yet another Department of Energy guaranteed loan to a solar company:
The company, SunPower, got a conditional guarantee for a $1.2 billion loan from the Energy Dept. back in the spring, according to the DOE's website.But this company was getting financing in the capital markets. Why hit up taxpayers to get backstops on loans?
And soon after the project run by SunPower got this loan guarantee, SunPower sold a big stake in itself, an estimated $1.3 billion, to French energy giant Total, at a 46% premium to its shares at the time
Total also gave it a $1 billion credit line, according to the company's filings with the Securities and Exchange Commission. The Total deal, along with the loan guarantee, helped SunPower's stock rise.
A SunPower spokesman confirmed all this, but said the company is in a quiet period in advance of its next quarterly profit report, due out in early November. The Department of Energy did not return calls for comment, but its press statement on this loan guarantee says it conducted "months of rigorous technical, financial and legal due diligence" on this project so it met "the requirements of the program -- helping America win the clean energy race and create new industries for American workers."
However, there is a chance that this project will fail, and guess what? If it fails, you and I and the American taxpayer will be on the hook for a $1.2 billion tab. Even despite the fact that SunPower sold the underlying solar ranch that it got this loan guarantee for to NRG. California Valley Solar Ranch is a limited liability corporation that was established to build this power plant. The ranch must pay the loan back.
SunPower says it is still involved in the ranch's operations, and it is developing this project, meaning it will get money if this project succeeds. A government official says the project has a power purchase agreement in place. But given the track record for solar companies, do you feel comfortable?
SunPower has been burning through cash and lost $150 million in the first half. SunPower admits in its SEC filings that it is very dependent on government, without which its revenues would drop.
It also says in its SEC filings that it doesn’t have long-term contracts with customers and could lose customers without warning, and that a big slug of its revenues depends on a limited number of customers .SunPower and its executives face class action lawsuits over alleged accounting misstatements. A SunPower spokesman declined comment.
Another outrage: This project will only create 15 new, permanent jobs, according to the DOE website. If it fails, that would come at a cost of more than $80 million in taxpayer money for each of those jobs.
There’s also a political element here; SunPower tells FOX Business that Rep. George Miller (D-CA) had toured one of its plants last fall, touting it as a success in California. Miller’s son works at a lobbying firm that represents SunPower, which the lobbying firm confirmed to FOX Business.
Rep. Miller's office did not return a call seeking comment.
Even so, SunPower has enjoyed bipartisan support. Republican governor Arnold Schwarzenegger toured the company in 2008 and the head of the Federal Energy Regulatory Commission under President George W. Bush is on SunPower's board. In 2008, President Bush's energy secretary reportedly installed 819 SunPower solar panels on the roof of the Energy Dept.'s headquarters in Washington, D.C.