The Barometer heard a caller on a talk show discussing two things: (1) She was one of 1,100 employees laid off from the failing solar-panel maker, Solyndra LLC; and (2) She and the other employees knew as the company’s facilities were being built that the business would fail because factories in China were producing the panels at a fraction of Solyndra’s cost. One never knows on talk-show callers. They could be sitting at the computer with tin-foil hats on as they swap conspiracy theories about s’mores. Low and behold, a mere few days later, the FBI did a search and seizure raid of the company’s headquarters in Fremont, California and paid visits to the homes of three Solyndra executives. No one can know for sure what the FBI and Justice Department are looking for or what each knows because investigations are just that, investigations. However, one assumes that the FBI was not invited over by the executives for tea and crumpets, or whatever sustainability business executives have for snacks (arugula and soy milk?) However, here’s what has emerged from public records:
1. The U.S. government invested $527 million in the company under a Department of Energy program created to promote renewable energy firms. Solyndra was the first DOE deal under the 2009 stimulus plan.
2. In a March 2010 S-1 registration statement filing (a registration statement is required by the SEC in order to sell securities), the company included the following disclosure:
“Our average sales price was $3.24 per watt, which was $1.29 per watt, or approximately 66%, higher than the $1.95 average sales price per watt of leading crystalline silicon photovoltaic manufacturers during the same period,” the company stated. “As a result, certain system owners who focus more on the up-front price of solar panels than on achieving the lowest levelized cost of electricity per kilowatt hour, or LCOE, may choose the product offerings of those competitors that have a lower initial panel purchase price.” TRANSLATION: Folks are buying the Chinese solar panels because they are cheaper.
3. Also in March 2010, the company’s external auditor, PricewaterhouseCoopers, added a “going concern” statement to the amended S-1. Going concern statements are added when a company slips into a pattern of non-earnings. PwC included the following qualifier in its audit report:
“The company has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit that, among other factors, raise substantial doubt about its ability to continue as a going concern,”
For those of you unschooled in the language of SEC filings and audit reports, the literal translation is – the company is going under. And the numbers bore out PwC’s position. In fiscal 2009, Solyndra lost $172.5 million (following losses of $232.1 million for 2008 and $114 million 2007). Total losses: $557.7 million – more money than the federal government invested. And the March 2010 S-1 registration statement added the following, “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future.”
4. PwC was correct. The company’s S-1 filing was a bust. No one wanted to invest in it.
5. Still, President Obama visited the Fremont, California plant in May 2010 and gave a speech describing the company as a “a model investment†by the U.S. government as well as a “testament to American ingenuity and dynamism.â€
6. Flailing about for cash, Solyndra laid off employees in November 2010.
7. In February 2011, Solyndra did secure $75 million in additional funding from a group of investors, but the loan guarantee negotiated with the federal government provided that this group of investors would assume the number one creditor position if Solyndra had to declare bankruptcy. The renegotiation means that, in all likelihood, the U.S. government will not be repaid its $527 million.
8. Since March 2009, a few months after Mr. Obama assumed the presidency, Solyndra executives and investors have been to the White House at least 20 times. One of those investors, the George Kaiser Family Foundation, is named after George Kaiser, a wealthy Oklahoma oil and gas magnate, who worked to raise money for the 2008 Obama campaign.
The House Energy and Commerce Committee is investigating and has issued subpoenas for White House records and other documents. Who can know what will emerge from the investigations? However, the tangled web of interconnections is surely the impetus for the DOE’s Inspector General seeking to find out exactly who did what for whom and when and why.
As part of the September 6, 2011 announcement of a Chapter 11 filing, Solyndra CEO, Brian Harrison stated:
“Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion. Raising incremental capital in this environment was not possible. This was an unexpected outcome and is most unfortunate. Customers who have implemented Solyndra solutions can be assured that their systems will generate economical, clean, solar power for decades.â€
Well, the little talk-show caller, just a frontline employee, was absolutely correct. What she may not have known were the financial details and investment priorities that make that knowledge of “it won’t work because they won’t sell†critical to a criminal investigation.
The Barometer is as much of an optimist as anyone. Let’s hope nothing nefarious happened. Let’s hope Solyndra can find a buyer, generous creditors, or something to allow it to emerge from Chapter 11. We can hope, but, for those who have had Solyndra systems installed: Begin developing a Plan B for maintenance and repair.
