APNewsBreak: Report: Energy loans could cost $3B
The government could lose nearly $3 billion on Energy Department loans for green energy programs — far less than the $10 billion Congress set aside for the high-risk program, according to an independent review.
The White House ordered the review after criticism of a $528 million loan to Solyndra Inc., a solar company that went bankrupt.
The review, led by former Treasury Department official Herb Allison, looked at 30 loans or loan guarantees totaling $23.8 billion that were offered to green energy companies and auto makers such as Ford and Nissan.
The review did not involve Solyndra or Beacon Power, an energy storage company that also went bankrupt after receiving a federal loan. The government has lost a total of $567 million from those two loans.
The 75-page report, released Friday, says that about one-third of the money allocated — $8.3 billion — had been spent as of Nov. 28.
The government could reduce its losses from the loan program if it withholds money from companies that fail to meet certain benchmarks, the report said. The comment echoes criticism by some Republicans in Congress who say the Obama administration should have cut off money to Solyndra far sooner than it did.
The report recommends several steps the Energy Department can take to improve the loan program, including creation of a chief risk officer to monitor all of the agency's loans. The risk management unit should be separate from the loan program office and should report directly to senior DOE managers, the report says.
While the report generally backs department estimates of potential losses from the loan program, it says the loan values are far below what the companies would have to pay a private bank, without a government guarantee. Under a so-called "fair-market value," the loans have been discounted by anywhere from $5 billion to $6.8 billion, the report says.
A White House spokesman said the purpose of the program was to spark investment in alternative and renewable energy programs that otherwise would not qualify for a private loan.
The finding about subsidies "simply means that a private bank wouldn't be willing to buy the (Energy) Department's loans at face value unless they could charge a higher interest rate," said spokesman Eric Schultz. He called that unsurprising, "since the entire point of the program ... was to make loans available for emerging clean energy companies so they have the best chance of succeeding in early stages, when innovative technologies traditionally have a difficult time accessing private capital."
Schultz called the report thorough, substantive and objective and said it confirms that the overall loan portfolio is expected to perform well.
The White House ordered the review in October as congressional Republicans investigated the Solyndra bankruptcy amid embarrassing revelations that federal officials were warned the company had problems but nonetheless continued to support it. Energy Secretary Steven Chu attended a 2009 groundbreaking at the company's California headquarters, and President Barack Obama visited the company in 2010.
Solyndra, of Fremont, Calif., was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model.
Since then, the company's implosion and revelations that the administration hurried to finish its review of the loan in time for its September 2009 groundbreaking has become an embarrassment for Obama and a rallying cry for GOP critics of his clean-energy program.
Follow Matthew Daly's energy coverage at Twitter.com/MatthewDalyWDC