Congress Calls Hearing About Huge Loan to 'Connected' Energy Firm
Solyndra, funded by Obama backer, won $535 million before going under.
Sept. 8, 2011 — -- The collapse of the politically-connected solar energy firm Solyndra has unleashed a barrage of fresh questions from House and Senate investigators, who want to know why the Obama Administration agreed to invest $535 million in the now-bankrupt company, and what can be done to recover those funds.
The House Energy and Commerce Committee's investigative panel announced it will hold hearings next Wednesday on the government's Solyndra loan. ABC News and iWatch News have also learned that Senate investigators have begun seeking answers from the administration about the deal.
"How did this company, without maybe the best economic plan, all of a sudden get to the head of the line?" said committee chairman Rep. Fred Upton, R.-Michigan, in an ABC News interview last week. "We want to know who made this decision ... and we're not going to stop until we get those answers."
The California firm shut its doors abruptly last week, firing workers. It filed for bankruptcy this week. The company's failure came after officials in the Department of Energy had spent two years touting the company's promise, and fast-tracked Solyndra through the normally cumbersome process of securing hundreds of millions in federal funds. All that help caught the attention of federal auditors, who questioned why the Energy Department granted it conditional loan approval even before completing the legal and financial reviews that were typically required.
This morning, ABC News and iWatch News reported that the federal loan to Solyndra came through the U.S. Department of Treasury's Federal Financing Bank, and was approved with a quarterly interest rate lower than that of any other federally-backed green energy project -- a rate that is now 1.025 percent. ABC News and iWatch News first reported on the Solyndra loan and the company's political connections in March.
WATCH the Original ABC News Report on Solyndra
READ About Solyndra's Low Interest Loan
Department of Energy officials said the rates for all of its green energy loans were set by the bank using a formula, and Solyndra's favorable terms were not the result of special treatment.
"All borrowers under the [government loan guarantee] program receive the same treatment," Energy Department spokesman Damien LaVera wrote to iWatch and ABC News in response to questions.
Congressional investigators, though, have told ABC News and iWatch News they are still unclear why Solyndra was the first loan approved, why it received the most favorable lending terms, and why the administration gave the company so much attention – even going so far as sending President Obama to the company's California headquarters to tour the plant and tout its potential.
While Energy Department officials steadfastly vouched for Solyndra -- even after an earlier round of layoffs raised eyebrows -- others questioned the viability of the company. Peter Lynch, a longtime solar industry analyst, told ABC News the company's fate should have been obvious from the start.
"Here's the bottom line," Lynch said. "It costs them $6 to make a unit. They're selling it for $3. In order to be competitive today, they have to sell it for between $1.5 and $2. That is not a viable business plan."
Energy Officials Defend Decisions
Even after the bankruptcy, Energy officials have continued to defend the decision to not only loan the company money, but restructure the loan after the company began to struggle.
"The Department of Energy conducted exhaustive reviews of Solyndra's technology and business model prior to approving their loan guarantee application," said LaVera,. "Sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment."
One of those private investors was George Kaiser, an Oklahoma oil billionaire who was a bundler of campaign donations for Obama's 2008 race. Kaiser's Argonaut Ventures and its affiliates have been the single largest shareholder of Solyndra, according to SEC filings and other records. The company holds 39 percent of Solyndra's parent company, bankruptcy records filed Tuesday show.
Under terms of the bankruptcy filing, investors including Argonaut -- which led a $75 million round of financing for Solyndra earlier this year -- will stand in line before the federal government and other creditors to recoup its losses. Energy officials confirmed this arrangement, saying that after private investors including Kaiser recover $75 million, the U.S. government would have a chance to seek $150 million of its investment.
Kaiser has declined interview requests for months from iWatch and ABC News. His Tulsa-based George Kaiser Family Foundation, which in 2009 cited a $342 million investment value in Solyndra, issued a statement after Solyndra's collapse saying the solar firm faced "serious challenges in the marketplace, especially the drastic decline in solar panel prices during the past two years caused in part by subsidies provided by the government of China to Chinese solar panel manufacturers."