June 29 (Bloomberg) -- The failure of a second solar manufacturer that received loan guarantees from the U.S. Energy Department adds to pressure on President Barack Obama to justify incentives for the clean-energy industry that’s being undercut by Chinese competition.
Abound Solar Inc., a U.S. solar manufacturer that was awarded a $400 million loan guarantee in 2010, said yesterday it will suspend operations and file for bankruptcy next week.
Abound said its thin-film panels couldn’t compete against Chinese products, the same reason cited by Solyndra LLC, which closed its doors in August after receiving a $535 million guarantee from the same program. Half of the four solar manufacturers that received loan guarantees have failed, supporting the argument that backing clean-energy is a mistake, according to Representative Cliff Stearns.
“We know why they went bankrupt. We warned them they would go bankrupt,” Stearns, a Florida Republican, told reporters yesterday. “The larger question is why the administration was pursuing a green-energy policy in which companies are going bankrupt and wasting taxpayer money.”
Stearns is chairman of the House Energy and Commerce Committee’s oversight panel that has held hearings on the Energy Department’s loan guarantee program.
Representative Jim Jordan, an Ohio Republican and chairman of the House Oversight and Government Reform Committee’s stimulus oversight panel that has investigated loan guarantees to solar companies, said Abound’s failure is further proof the Energy Department program was a mistake.
“It just adds to the weight of how ridiculous this was,” Jordan told reporters.
Abound plans to file for bankruptcy in Wilmington, Delaware, next week and will fire about 125 employees, according to a statement yesterday.
The company, based in Loveland, Colorado, borrowed about $70 million against its guarantee. U.S. taxpayers may lose $40 million to $60 million on the loan after Abound’s assets are sold and the bankruptcy proceeding closes, Damien LaVera, an Energy Department spokesman, said in a statement.
“When the floor fell out on the price of solar panels, Abound’s product was no longer cost competitive,” LaVera said.
Abound stopped production in February to focus on reducing costs after a global oversupply and increasing competition from China drove down the price of solar panels by half last year.
“Aggressive pricing actions from Chinese solar-panel companies have made it very difficult for an early stage startup company like Abound to scale in current market conditions,” the company said in the statement.
Abound was awarded the loan guarantee to build two factories to make thin-film panels using cadmium telluride. It completed one plant, in Longmont, Colorado, and never began construction on the second, which was planned for Tipton, Indiana. The company last received money from the Energy Department in August, before Solyndra’s collapse.
Representative Dan Burton, an Indiana Republican, said he supported Abound because he thought the company would boost his state’s economy.
“We had a terrible economic problem. Plants were closing there in that area,” Burton told reporters yesterday. “We thought this would be a great way to create jobs. If I had known that Abound, or Solyndra, had been in the fiscal situation it was in, I certainly would have never supported it.”
“This is not surprising at all,” Anthony Kim, an analyst at Bloomberg New Energy Finance in New York, said in an interview. “They were trying to sell to a competitive, over-supplied market with limited production. That keeps costs high.”
The Energy Department has provided almost $35 billion in loans, loan guarantees and conditional commitments to renewable-energy companies. About 35 percent of that is for solar-generating projects, which benefit from falling panel prices, compared with less than 4 percent for solar manufacturers, according to LaVera.
Besides Abound and Solyndra, two other solar manufacturers received loan guarantees. 1366 Technologies Inc. won approval to borrow as much as $150 million to produce polysilicon for solar panels and SoloPower Inc. was awarded a $197 million guarantee to make rolls of flexible solar panels using a copper-indium-gallium-selenide composite.
Neither 1366 nor SoloPower have drawn funding under the Energy Department program, LaVera said.
To contact the editor responsible for this story: Reed Landberg at email@example.com