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Solyndra Losses a Fraction of Default Budget: BGOV Barometer

The default rate on the U.S. clean- energy loan program that funded Solyndra LLC is a fraction of what the government budgeted for losses.

The BGOV Barometer shows the default rate on the $16.1 billion Energy Department loan portfolio is less than 3.6 percent. The White House planned for defaults of as much as 12.85 percent for loans to solar, wind and bio-energy projects, according to the Office of Management and Budget.

While it’s possible that more companies may fail to meet their obligations, “I’m willing to bet more-than-even money that the default rate, when all is said and done, is under 5 percent,” said Greg Kats, who worked at the Energy Department from 1994 to 2000, including five years as the department’s director of financing for energy efficiency and renewable energy. “I do not see a scenario in which the default rate gets out of single digits,” Kats said in an interview.

The aid to Solyndra, a Fremont, California-based maker of cylindrical thin-film solar panels, was a $529 million government bet on specialized technology that didn’t find a market, Kats said. Solyndra filed for bankruptcy protection on Sept. 6. The company’s failure prompted Republican lawmakers to criticize the loan-guarantee program and led the Obama administration to order an independent review of the portfolio.

About 90 percent of the loan guarantees went to projects that will produce electricity with conventional solar and wind technology and that carry a lower risk because they have agreements with utilities to buy their output, Kats said.

The loan program is under investigation by congressional Republicans who have questioned links between the White House, campaign donors and investors in Solyndra. Democrats led by Representative Henry Waxman of California said the probes are overly broad and amount to a “fishing expedition” intended to embarrass the administration.

Independent Analysis

The White House appointed former Treasury Department official Herbert Allison on Oct. 29 to analyze the portfolio, focusing on future monitoring and management.

Beacon Power Corp., an energy-storage company based in Tyngsboro, Massachusetts, has also struggled. The company got $43 million in loan guarantees in August 2010 and sought protection from creditors Oct. 30 after building the world’s first plant that uses spinning flywheels to retain power and help stabilize the electric grid.

The Energy Department holds a lien on the 20-megawatt facility in Stephentown, New York, and may take ownership until it can be sold, according to Theodore Hesser, an analyst with Bloomberg New Energy Finance in New York. The Energy Department said it is working with the Department of Justice to recover the financing in bankruptcy court.

Recouping Funds

“The facility is operating,’ Damien LaVera, spokesman for the Energy Department, said in an interview. “It’s producing revenue to cover its operating expenses.”

If the government recovered nothing from Solyndra and Beacon, the default rate would reach 3.6 percent. Recouping funds from Beacon and from Solyndra would lower the default rate, said Kats, who is president of Capital-E, a clean-energy advisory firm in Washington.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

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

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