Barack Obama - Solyndra

Last Updated : Sep 04, 2012

The Energy Policy Act of 2005  created the Loan Guarantee Program in Title XVII. This program would allow the federal government to guarantee private loans that banks and other entities would make to emerging energy companies. The program required that the company pay a Credit Subsicy Cost (CSC). The Loan Guarantee program was slow to start, taking years to staff up, and years to develop the required system to monitor the loan guarantees to ensure they would be repaid. Republican and Democrats are both on record expressing a desire to speed up the implementation of the program.

Solyndra was created in 2005. It's business model was the manufacturing of solar power systems that mounted solar cells onto cylinders. This had the dual benefits of lowering the time and cost of manufacturing with an increase in solar power production. When the Department of Energy (DOE) issued it's first solicitation under the Loan Guarantee Program in August of 2006, Solyndra applied to the program. In October of 2007, Solyndra was one of 15 applicants asked to submit a full application.

Solyndra wanted to build a second facility to increase manufacturing capacity and was seeking a $535 million loan guarantee to help them obtain the funds from private investors. From October of 2007 to January of 2009, Solyndra navigated the approval process for the loan guarantee while credit rating companies gave Solyndra a B+ and a "fair" credit rating.

 

Credit Committee

The first problems with the Solyndra application emerged in one of the final steps in the loan guarantee approval process, which was a review by a credit committee. The credit committee turned back Solyndra's application, but did so without prejudice. This means that while there were problems with the application, those problems did not necessarily indicate a problem with the overall project. The committee noted a number of reporting items which had not yet been completed due to the speed of the program. More importantly, the committee noted that the strength of the parent company had not been established.

Solyndra created a separate company to apply for the Loan Guarantee. This is a common practice and allows the program to consider the new company as a separate entity without the liabilities of the parent company. This company was called Solyndra Fab B LLC, noting it's purpose of financing fabrication facility B. The credit committee comments are shown below and note that the strength of the parent company is not established. This means that Solyndra had not yet allocated the required amount of funds to Fab 2.

  • The apparent haste in recommending the project meant that certain LGPO credit procedures were not adhered to. Of particular concern were the receipt of the Final Committee Paper and Credit Committee policies and procedures without the requisite advanced notice.
  • While the project appears to have merit, there are several areas where the information presented did not thouroughly support a finding that the project is ready to be approved at this time:
    • There is presently not an independent market study addressing long term prospects for this specific company beyond the sales agreement already in place. Since the independent credit assessment raised the issue of obsolescence in marketing this project it is important to have an independent analysis of that issue as well as the current state of the competitive market.
    • While the sales agreement is said to have been analyzed by the outside legal advisor assigned to this case, the committee did not have access to this document.
    • There are questions regarding the nature and the strength of the parent guarantee for the completion of the project.
    • While it is encouraging to see the apparent progress in the development of the product at the Fab 1 facility, there is concern regarding the scale-up of production assumed in the plan for Fab 2.
       

 

Conditional Committment

After assuming office, the Obama administration began to pursue an economic stimulus program combined with a green jobs agenda. The American Recovery and Reinvestment Act (ARRA) added a new section - 1705 - to the loan guarantee program. This new section allowed the government to appropriate funds to cover the Credit Subsidy Costs for alternative energy companies. This meant that the loan guarantees would come at no cost to the requesting companies.

At that same time, the DOE under President Obama was addressing the issues found in the credit committee report for Solyndra. It hired engineers and outside consultants to complete the required reports and market studies and submitted those reports to the committee. On March 12, 2009 the Credit Committee approved the Solyndra deal, and on March 20 the DOE announced a conditional committement to the Solyndra loan guarantee. One of those conditions was that Solyndra must come up with roughly $200M in private funding.

Since that time, emails have emerged that show that while the reporting issues were resolved, the overall problem of financial stability of the parent company (Solyndra) was not resolved. These emails also indicate that there was an effort to quickly approve the Solyndra loan guarantee to show the effects of the ARRA, advance the green jobs initiative, and embarass the Bush administration. An email dated March 10, two days before the credit committee approval, is shown below and prompted the well known response that "this deal is not ready for prime time." 

 

Full Approval

Following the conditional commitment, Loan Programs Office staff, with the assistance of outside counsel, negotiated the terms and conditions of the final loan guarantee agreement with Solyndra. In addition, Solyndra began working to raise the $198 million in equity that was required for the company to receive the DOE loan guarantee and to satisfy other conditions precedent to closing.

Once the terms and conditions were nearly complete, DOE generated the proposed credit subsidy cost for the Solyndra loan guarantee, and presented this information to OMB staff and officials on August 25, 2009. This presentation included information about the financial status of the company, the structure of the deal, and the potential risks and mitigants of the guarantee. Following that presentation, OMB asked DOE a number of questions about the company in order to determine whether DOE had assigned the proper risk values to the Solyndra guarantee. In particular, OMB questioned whether the risk rating assigned to the Solyndra deal was too high, considering that the debt service for the deal comes from the project, and not the parent company, Solyndra, Inc., and how competitive pressures in the photovoltaic market might impact DOE’s recovery analysis.

Ultimately, OMB recommended certain changes to the credit subsidy cost factors to reflect these concerns, which DOE accepted. The Solyndra loan guarantee closed on September 2, 2009. At the time, DOE’s Loan Program Office estimated that the guarantee would create 3,000 construction jobs and 1,000 jobs once the facility opened. Solyndra was the first company approved through the program.

Investigations following the bankruptcy of Solyndra have found that approval of the loan guarantee may have been rushed to facilitate announcing the program at a September 4, 2009 press event for Vice President Biden at Solyndra. Emails have surfaced that show numerous problems with the models used to approve the loan. These issues include items such as failing to include property tax costs and questions about income tax. More importantly, the emails show that there was still a problem with the working capital side of Solyndra. According to those emails, all models showed Solyndra running out of funds by September of 2011.

 

Solyndra’s Financial Problems

Following the loan closing, DOE continued to monitor Solyndra’s financial status and construction progress at the new manufacturing facility. Pursuant to the loan guarantee agreement, Solyndra was required to provide monthly engineering reports about its technology and monthly constructions reports.

In 2010, Solyndra experienced a number of financial setbacks. In March 2010, Solyndra’s auditor, PricewaterhouseCoopers stated in the company’s S-1 amended filing to the Securities and Exchange Commission (SEC) that the “Company had suffered recurring losses from operations, negative cash flows since inception and has a net stockholder’s deficit that, among other concerns, raise substantial doubt about its ability to continue as a going concern.” While this sort of analysis is not uncommon for a start-up company about to go public, three months later, in June 2010, the company cancelled a $300 million Initial Public Offering (IPO). Instead, to raise capital, the company issued $175 million of convertible promissory notes to various investors.

In the fall of 2010, DOE told Solyndra that, due to the company’s financial problems, the department would refuse its request for a loan disbursement unless Solyndra obtained additional capital. Solyndra, DOE, and two of Solyndra’s lead investors — Argonaut Venture Capital and Madrone Capitol Partners —began negotiations to restructure the Solyndra loan guarantee agreement. On November 3, 2010, Solyndra announced that it was closing its older manufacturing facility, resulting in the layoff of 135 temporary employees and approximately 40 full-time employees.

 

Loan Restructuring

From December 2010 through February 2011, DOE, Solyndra, and two of its investors, Argonaut Venture Capital and Madrone Capitol Partners, negotiated the terms and conditions of an agreement to restructure the Solyndra loan guarantee.

On February 23, 2011, the parties signed an agreement to restructure the Solyndra deal. Under that agreement, Solyndra’s investors agreed to a $75 million credit facility, with the option of a second $75 million. DOE agreed to extend the term of Solyndra’s loan guarantee from seven to 10 years, and to postpone the first repayment installment by one year, from 2012 to 2013.

At the time of the restructuring agreement, $95 million remained to be paid out on the Solyndra loan guarantee.

The agreement also provided that, in the event of the company’s liquidation before 2013, the investors have the senior secured position with respect to the first $75 million recovered. DOE has the second senior secured position with respect to the next $150 million recovered in liquidation. If Solyndra had not liquidated or declared bankruptcy by 2013, the investors would have lost their senior secured position to DOE.

The practice of allowing private investors to be reimbursed ahead of the government is known as "subordinating" the government loans to those private loans. This practice of subordination is expressly forbidden in the 2005 Energy Policy Act which created the loan guarantee program.

The question of the legality of subordination was asked during the loan restructuring and answered by White House legal counsel. That legal counsel found that while the legislaiton forbid subordination, the legislation only addressed rules for loans originating under the program and did not discuss restructuring loans. In other words, since Solyndra was already in the loan guarantee program, it no longer fell under the rules for loan guarantees. Since the legislation did not address or envision restructures, none of the rules applied.

Furthermore, Counsel found that subordinating the government loans was in keeping with the overall goal of attempting to ensure the best possibility of government reimbursement. The believed that with the restructuring and subordination Solyndra may still fail and lose all of it's money, but that without the restructuring and subordination Solyndra would surely fail.

An email sent out by OMB officials notes the "poor optics" that this could create in future. It states that should the Obama administration allow Solyndra to fail, it may be seen as poor judgement in making the loan guarantee. However, if the Obama administration makes a second loan (the additional $75 million upon restructure), the situation would look even worse.

 

Bankruptcy and FBI Raid

The restructuring agreement also provided for enhanced monitoring of Solyndra’s financial position by the DOE. Under the original agreement, the loan guarantee project was not required to provide financial information about the parent company, Solyndra, Inc. The restructuring agreement required Solyndra to provide weekly information about its cash flow to DOE, as well as monthly financial reports and statements. The DOE also took an “observer” seat on Solyndra’s board.

In the summer of 2011, representatives of Solyndra, including its Chief Executive Officer, Brian Harrison, came to Congress and met with several members of the Committee on Energy and Commerce. During those meetings the week of July 18, Mr. Harrison and other representatives of Solyndra claimed that Solyndra's financial condition was improving, and that Solyndra's revenues were growing. However, during a briefing with Committee staff the week of September 6, DOE Loan Programs Office staff stated that during that same period, the company was preparing to restate some of its projected financial statements to reflect increasing market and pricing pressures on its products, resulting in decreased revenues. When senior management of Solyndra informed the Solyndra board about this planned restatement, Solyndra’s investors stated that they were not comfortable with providing the second $75 million credit facility to the company in August unless the terms of the restructuring agreement were changed.

Loan Programs Office staff informed Committee staff that it then began negotiating with Solyndra and its investors over the first few weeks of August about proposed terms for a second restructuring agreement. DOE also contracted with an outside investment banking firm to scope out potential terms and investors for this deal. The Loan Programs Office staff stated that it engaged in an “interagency process” regarding this development with Solyndra, and the possibility of a second restructuring agreement. Ultimately, DOE determined that a second restructuring was not feasible, and informed the company and its investors of this on August 30, 2011. The Solyndra board met shortly after, and voted to announce its bankruptcy. The announcement was made on August 31, 2011.

Solyndra filed for bankruptcy under title 11 of the United States Code on September 6, 2011, in United States Bankrupcty Court for the District of Delaware. The company attributed its decision to file for bankruptcy to the “dramatically reduced solar panel pricing world-wide” caused by an oversupply of solar panels, as well as certain subsidies that have been offered by foreign governments to their solar manufacturers and the reduction in subsidies and incentives for the purchase of solar energy.

Two days after Solyndra filed for bankruptcy, Federal Bureau of Investigation (FBI) agents, acting together with agents from the DOE Office of Inspector General (OIG), executed search warrants on Solyndra’s headquarters in Fremont, California, as well as at the home of certain Solyndra executives. Neither the FBI nor the DOE OIG have commented on the details of this criminal investigation, and the warrants remain under seal with the court. (as of Oct 2011)

 

Congressional Hearings

On September 14, 2011, September 23, 2011, and October 14, 2011, the Subcommittee for Oversight for the Energy and Commerce Committee held hearings to investigate the Solyndra loan guaratee and restructuring. They submitted requests for all communications between the White House, DOE, and OMB. Those requests led to the emails discussed above.

 

Solyndra Timeline

 

2005 Solyndra Inc. is founded by Dr. Christian Gronet.
2005 Title XVII Loan Guarantee Program created (as part of EPAct 2005)
2006 Solyndra opens its headquarters in Fremont, Calif.
Aug. 8, 2006 DOE issues solicitation seeking pre-applications for Title XVII loan guarantees
Dec 28, 2006 Solyndra submits pre-application, seeking funding for its Fab 1 manufacturing facility
April-June 2007 DOE conducts financial and technical review of Solyndra pre-application
2007 Production begins on the company’s solar rooftop panels.
Oct 4, 2007 DOE invites Solyndra, and 15 other applicants, to submit full applications
2008 Fitch Ratings assigns the company a B+ credit rating. Dun & Bradstreet assess its credit as “fair.”
May 6, 2008 Company submits full application, seeking funding for its Fab 2 manufacturing facility. DOE begins due diligence.
Sept. 4, 2008 DOE loan programs staff draft memorandum indicating that Solyndra was the “earliest mover” and may receive conditional commitment by January 16, 2009
Sept 30, 2008 DOE engages RW Beck to prepare an Independent Engineering Report for the Solyndra transaction
Nov 17, 2008 DOE formalizes agreement with RW Beck for Independent Engineering Report
Nov 25, 2008 DOE engages RW Beck to prepare an Independent Market Consultant’s Report for the Solyndra transaction
Dec 4, 2008 DOE CFO notifies Acting DOE Deputy Secretary that presenting the Solyndra transaction for approval by Jan. 15, 2009 is one of the loan program’s three highest priorities
Dec 2008 DOE engages outside legal counsel (Morrison & Foerster LLP) to assist it in completing its review of the Solyndra transaction
DOE, assisted by outside counsel, negotiates transaction terms/conditions with the company
Jan 5, 2009 Outside legal counsel submits draft due diligence memo.
Independent Engineer submits draft technical report.
Jan 9, 2009 Solyndra transaction reviewed by DOE Credit Committee, and remanded for further analysis
Jan 15, 2009 Loan Programs staff notifies the DOE Credit Review Board (CRB) that it has developed a schedule to complete Solyndra due diligence that would bring the project to approval in early March 2009 and final closing by early to mid-April 2009.
Jan 20, 2009 Obama Administration takes office
Jan 30, 2009 DOE formalizes agreement with RW Beck for Independent Market Consultant’s Report
Feb 17, 2009 Sec. 1705 Loan Guarantee Program created by the American Recovery and Reinvestment Act (ARRA).
Feb 27, 2009 Final draft of Independent Engineer’s report submitted
Mar 12, 2009 DOE Credit Committee considers and approves Solyndra transaction
Mar 17, 200 DOE CRB considers and recommends that the Secretary issues a conditional commitment to Solyndra
Mar 20, 2009 DOE issues a conditional commitment to Solyndra
March 2009 Energy Secretary Steven Chu announces Solyndra will receive the Energy Department's first energy loan guarantee—a $535 million financing to expand the company’s solar rooftop production. From the release: “Secretary Chu initially set a target to have the first conditional commitments out by May—three months into his tenure—but today's announcement significantly outpaces that aggressive timeline. Secretary Chu credited the Department's loan team for their work accelerating the process to offer this conditional commitment in less than two months.”
Aug 20 2009 Email traffic shows that fundamental issues with Solyndra finances had not been resolved and that Solyndra Fab 2 was scheduled to run out of money in September of 2011
Sept 3, 2009 DOE formally issues the loan guarantee to Solyndra (i.e., the deal reaches financial close)
Sept 2009 The loan closes and Solyndra begins construction of its "Fab 2" factory to expand its production line. Chu and then-Gov. Arnold Schwarzenegger attend the groundbreaking. "This announcement today is part of the unprecedented investment this Administration is making in renewable energy and exactly what the Recovery Act is all about," Vice President Joe Biden says via teleconference. U.S. Treasury’s Federal Financing Bank issues the loan.
Dec 2009 Solyndra files papers with the Securities and Exchange Commission as it plans to proceed with an Initial Public Offering.
March 2010 PricewaterhouseCoopers issues a report that raises serious doubts about Solyndra's future. From the audit: “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.”
May 2010 President Obama visits Solyndra, touting the company as a symbol of progress to cheers from workers and California leaders. “The true engine of economic growth will always be companies like Solyndra,” he said.
June 2010 Solyndra cancels its IPO. A month later, the company appoints Brian Harrison as its new CEO.
Nov 2010 The company announces it is laying off nearly 180 full and part-time employees. By year’s end, according to the Department of Energy, Solyndra is facing a “cash flow crisis that is very common for innovative start-up companies that are growing quickly.”
Feb 17, 2011 The House Energy and Commerce Committee and its subcommittee on Oversight and Investigations launch an investigation of Energy Department stimulus funding, with a focus on the Solyndra loan guarantee. Over the ensuing months, the House Committee and White House Office of Management and Budget engage in a scuffle over records, with the Committee subpoenaing OMB and the office turning over thousands of pages of files.
Feb 28, 2011 Solyndra announces it has raised $75 million in financing led by the corporate entity of George Kaiser, Solyndra’s chief financial backer and a bundler of campaign donations for Obama. DOE refinances its loan to extend Solyndra’s payoff date – and agrees to put investors in line first in case of default. “The Department reached an agreement with Solyndra that gave the company and its 1100 employees a fighting chance to go forward,” DOE said.
May 24, 2011 The Center for Public Integrity’s iWatch News and ABC News disclose that DOE announced its commitment to support Solyndra in March 2009 before receiving full marketing and legal reviews—a shortcut criticized by GAO auditors.
July 2011 Amid the House investigation, CEO Harrison travels to Washington to meet with members of Congress and journalists to tout Solyndra’s successes, presenting a slide show with the heading: “The real story about Solyndra.”
Aug 1, 2011 OMB viewed the Solyndra loan as a riskier bet to taxpayers than DOE had, iWatch News reports.
Aug 31, 2011 Solyndra shuts its doors, fires more than 1,100 full and part-time workers and announces it is filing for Chapter 11 bankruptcy.
Sept 6, 2011 Solyndra files for bankruptcy. Investors who infused the company with cash will be repaid before the government.
Sept 7, 2011 iWatch News and ABC News report that Treasury’s loan to Solyndra carried an interest rate of 1 percent, another element in a long line of favorable treatment for the company. Energy officials say the bank set the loan and Solyndra was not given special treatment.
Sept 8, 2011 The FBI and Energy Department’s inspector general conduct a surprise raid on Solyndra’s office, seizing records and signaling a likely criminal probe of the company. The U.S. Attorney’s Office declined comment.
Sept 14, 2011 The House Committee on Energy and Commerce held a hearing on Solyndra and the DOE loan guarantee program.
Oct 5, 2011 Congressman Fred Upton and Congressman Cliff Stearns send a letter to Kathryn Ruemmler, counsel to President Obama. The letter asks for all additional information relating to the communications at the White House concerning Solyndra.

 

 

 

Solyndra

Solyndra is a solar panel manufacturer located in Fremont, CA. The company manufactured thin firm solar modules for flat, commercial rooftops, or flat rooftops. Solyndra used a unique cylindrical design for the panels based on Copper Indium Gallium Selenide, or “CIGS,” technology. Solyndra claimed that its product had an advantage over other solar panels because its panels were easier to install, lighter, had cheaper rooftop installation costs, and potentially higher efficiencies due to better wind performance and design.

Solyndra planned to use a loan guarantee to build a full-scale production facility (referred to as “Fab 2”) capable of building solar panels that would produce 210 megawatts of electricity a year. As part of the loan guarantee process, Solyndra created a separate company called Solyndra Fab 2 LLC. Solyndra was it's parent company. Creating this "Fab 2" LLC allowed Solyndra to apply for the loan without disclosing Solyndra's entire economic situation to the Department of Energy. By doing this, Solyndra only needed to show that the Fab 2 LLC had adequate financial backing required for the loan guarantee. This is a common practice, but caused some minor issues that can be seen in the DOE and White House emails.

 

Solar - Cylinder Power

Two of the main problems with solar panel installation is the load placed upon the structure the panels are mounted to and the loss in electricity generation when the sun is not directly striking the panel. Solyndra was an effort to solve these two problems by arranging the solar cells in cylindrical arrays instead of on flat panels.

Cylindrical Panels

Instead of flat solar cells sitting on flat panels, the Solyndra idea was to take the solar cells are wrap them around cylinders. A panel contained roughly 40 cylinders and each cylinder contained a number of solar cells. This arrangement provided two benefits over typical flat panels. First, the wind would pass through the array of cylinders and the load on the mounting structure would be considerably less. Second, no matter how the orientation of the sun changed throughout the day, it would always strike some portion of each cylinder directly. This would maximize direct sunlight without the need to rotate the array thoughout the day. This also meant that the panel did not have to be tilted towards the sun.

An additional benefit of the Solyndra model was that sunlight would be reflected off of a white roof and captured on the bottom section of the cylinder.

 

Wind Load

When a typical solar panel array is mounted to the roof of a structure, it must be oriented to face the sun. This means that the array must be tilted to the south if you live in the northern hemisphere and to the north for those in the southern hemisphere. These tilted arrays catch the wind as it moves across the roof and require counter-loads and ballasts to prevent damage to the roof. As the solyndra arrays did not have to be tilted and allowed wind to pass through them, they carried a lower wind load onto the mounted structure. This lowered installation costs and materials as ballast was no longer needed.

 

 

Energy Policy Act of 2005

The Energy Policy Act of 2005 created the section 1702 loan guarantee program that Solyndra would later use to guarantee it's loans. The legislation states that no loan should be made unless it seems clear that the company will pay it back, and that the goverment shall not be subordinate to private interests, meaning that the goverment gets paid back before private investors.

 

Credit Subsidy Costs

The Energy Policy Act of 2005 authorized the Secretary of Department Of Energy to make loan guarantees to companies investing in either innovative clean technologies or commercial-scale renewable energy projects. Under the law, companies that receive loan guarantees under the DOE program must pay a credit subsidy cost. The credit subsidy cost represents the cost of the loan to the taxpayer if the recipient of the guarantee defaults on the loan and reflects several factors, including the cash flows of the loan recipient; the rate of recovery the government expects from the assets pledged as security for the loan; and the risk of default.

Credit subsidy costs can be considerable, and many loan guarantee applicants had been unable to come up with the funding themselves. A program called “Section 1705” loan guarantees was created to allow the DOE to issue loan guarantees for clean energy projects.

 

Loan Guarantee Process

Applications for DOE Loan Guarantees are received in response to specific solicitations issued by the Loan Guarantee Program. Once an application is filed, DOE reviews the initial application to determine whether the applicant meets the solicitation criteria. If so, those applicants submit a second, more comprehensive application. DOE then conducts due diligence — including legal, environmental, engineering, and market reviews — and sometimes engages outside consultants for these reviews. Once these reviews are complete, the Loan Programs Office then negotiates a term sheet with the applicant company. A credit paper is then drafted and submitted to a DOE “Credit Committee,” which is comprised of DOE officials. If the Credit Committee approves the credit paper and term sheet, a DOE “Credit Review Board” then reviews and votes on the matter. The Credit Review Board is comprised of senior DOE officials, including the Deputy Secretary, the General Counsel, the Chief Financial Officer, and other senior advisors. If the Credit Review Board approves the term sheet, a conditional commitment is made to the company.

Following the conditional commitment, DOE and the loan guarantee applicant begin to negotiate the terms for the final loan guarantee agreement. DOE is also responsible for calculating the credit subsidy score of the guarantee. Under the Financial Credit Reform Act (FCRA) of 1990, the Office of Management and Budget (OMB) is responsible for determining and approving the subsidy estimates associated with loan guarantees awarded by federal agencies. DOE submits its credit subsidy estimate to OMB along with other information about the guarantee. OMB then reviews the underlying information, and asks questions or seeks additional information from DOE about the guarantee. OMB can either approve the credit subsidy calculated by DOE, or can recommend that the cost be increased or decreased based on the perceived risk of the guarantee. Once OMB approves, the loan guarantee is finalized and DOE begins making disbursements to the company. The tenor of the loan and the repayment schedule is set out in the final loan guarantee document.

Following the loan closing, the DOE Loan Programs Office tracks and monitors the loan guarantee project. The loan guarantee agreement spells out the type of information and data the company must provide about the status of the loan project (in some cases, construction updates), as well as engineering reports and other information. These kinds of reports and data must be submitted to the DOE before the Loan Programs Office will authorize the disbursement of funds to the company.

The Loan Programs Office was created under President Bush as Title XVII of the Energy Policy Act of 2005. The office hired its first federal employee on August 1, 2007. At the time Solyndra’s application went into due diligence in late 2008 and 2009, the Loan Programs Office had 16 federal employees. By late 2009, the office had 44 employees, and as of March 1, 2011, the Loan Programs Office told Committee staff it had 90 federal employees. In addition to federal employees, the Loan Programs Office contracts with private firms and consultants to conduct due diligence of the loan guarantee applications. The fees for this work are paid by the applicants. Solyndra was the first company to receive funding through the loan programs office.

 

  1. The Loan Guarantee Program puts out a solicitation
  2. An initial application is filed by the company
    1. The DOE reviews all applications
  3. Chosen applicants that meet the criteria file a second, more comprehensive application
  4. DOE conducts due diligence
    1. legal, environmental, engineering, and market reviews
  5. Loan Programs Office negotiates a term sheet with the applicant company
  6. A credit paper is then drafted and submitted to a DOE “Credit Committee,”
  7. If the Credit Committee approves the credit paper and term sheet, a DOE “Credit Review Board” then reviews and votes on the matter
  8. If the Credit Review Board approves the term sheet, a conditional commitment is made to the company
  9. DOE and the loan guarantee applicant begin to negotiate the terms for the final loan guarantee agreement
  10. OMB determines and approves the subsidy estimates associated with loan guarantees awarded by federal agencies
  11. DOE submits its credit subsidy estimate to OMB
  12. OMB can either approve the credit subsidy calculated by DOE, or can recommend that the cost be increased or decreased based on the perceived risk of the guarantee
  13. Onced approved, DOE begins making disbursements to the company
  14. A final loan guarantee document is created
  15. The DOE Loan Programs Office tracks and monitors the loan guarantee project

 

Solyndra's Loan Guarantee Process

Solyndra first applied for a DOE loan application in December 2006, in response to an August 2006 solicitation. In August 2007, a technical review of the application was complete; staff from the Loan Programs Office informed Committee staff that Solyndra’s application scored 88 out of 100. Two months later, in October 2007, DOE invited 16 applicants from the 143 that responded to the August 2006 solicitation to submit a full application. Solyndra submitted that application in May 2008, and it was deemed complete in August 2008.

Once the application was deemed complete, formal due diligence of the Solyndra application began, beginning with the independent engineer’s review. Emails exchanged between DOE staff in early December 2008 show that Solyndra was one of a handful of projects that was slated to be presented to a Credit Review Board by January 15, 2009. These emails also show that DOE staff did not believe that an independent market analysis would be complete by that time, but that the Loan Programs Office would use “off the shelf” analyses to inform its review of the market for Solyndra’s panels. The final draft of the independent engineer’s report was submitted on January 5, 2009.

In early January 2009, DOE made a presentation to OMB staff regarding the Solyndra deal and some of its credit concerns. During that time, staff for the Loan Programs Office had drafted a proposed term sheet and credit paper for the Credit Committee’s review. The January 2009 credit paper stated that the total Solyndra project cost was $722,701,000: $534,214,000 through the DOE loan guarantee and $204,697,000 from equity. This money would finance Phase I of the Fab 2 manufacturing facility, or three production lines. Once the facility reached full capacity in Phase II, six manufacturing lines would be operational. The Credit Committee paper noted certain concerns with the CIGS technology, including that it was “immature” compared to other thin-firm technologies, and that the company had not yet demonstrated the efficiency and yield levels that would be reached at full-commercial production. In addition, the Credit Committee paper stated that, while Solyndra’s prices on a per-watt basis were higher than the projected market prices, Solyndra’s price included the cost of installation while its competitors’ price did not. It also noted, though, that the company had raised $750 million in private capital, that the photovoltaic market was growing, and that the company was managed by a “highly-experienced team of technical and financial professionals.”

The Solyndra application was presented to a DOE Credit Committee on January 9, 2009. While the Credit Committee stated “that the project appears to have merit, there are several areas where the information presented did not thoroughly support a finding that the project is ready to be approved at this time.” Specifically, the Credit Committee noted that there was no independent market analysis “addressing the long term prospects for this company beyond the sales agreements already in place.” The Credit Committee also stated that “[t]here are questions regarding the nature and strength of the parent guarantee for the completion of this project.” The Credit Committee concluded that the “number of issues unresolved makes a recommendation for approval premature at this time.” It voted against offering a conditional committment to Solyndra and remanded the project to the Loan Programs Office for “further development of information.”

 

Credit Committee Recommendation

On January 9, 2009 the Credit Commitee which rejected Solyndra's committment wrote a memo to explain their actions. That memo is reproduced below:

Solyndra Fab 2, LLC

Credit Committee Recommendation

From: Chairman Loan Credit Committee

To: Director Loan Guarantee Program Office

Subject: Credit Committee Recomendation re: Solyndra Fab 2 LLC, solat photovoltaic power panel project for a loan guarantee of $535,000,000

On January 9, 2009, the Credit Committee convened to consider the referenced project for a loan guarantee of $535,000,000 under Title XVII of the Energy Policy Act of 2006. On January 9, 2009, following a presentatiion to the Credit Committee and further deliberations among its members, the committee reached the following conclusions:

  • The apparent haste in recommending the project meant that certain LGPO credit procedures were not adhered to. Of particular concern were the receipt of the Final Committee Paper and Credit Committee policies and procedures without the requisite advanced notice.
  • While the project appears to have merit, there are several areas where the information presented did not thouroughly support a finding that the project is ready to be approved at this time:
    • There is presently not an independent market study addressing long term prospects for this specific company beyond the sales agreement already in place. Since the independent credit assessment raised the issue of obsolescence in marketing this project it is important to have an independent analysis of that issue as well as the current state of the competitive market.
    • While the sales agreement is said to have been analyzed by the outside legal advisor assigned to this case, the committee did not have access to this document.
    • There are questions regarding the nature and the strength of the parent guarantee for the completion of the project.
    • While it is encouraging to see the apparent progress in the development of the product at the Fab 1 facility, there is concern regarding the scale-up of production assumed in the plan for Fab 2.

 

The Credit Committee is appreciative of the hard work done by the origination staff, but believes that the number of unresolved issues left makes a recommendation for approval premature at this time. Therefore, the committee, without prejudice, remands the project to the LGPO for further development of information addressing the issues outlined above.

 

Stimulus

The American Recovery and Reinvestment Act of 2009 amended the Loan Guarantee Program’s authorizing legislation by adding Section 1705. Section 1705 is a temporary program designed to address the current economic conditions of the nation. It authorizes loan guarantees for certain renewable energy systems, electric power transmission systems and leading edge biofuels projects that commence construction no later than September 30, 2011. Title XVII specifies that the Department of Energy must receive either an appropriation for the Credit Subsidy Cost (CSC) – the expected long-term liability to the Federal Government in issuing the loan guarantee – or payment of that cost by the borrower. The Department has appropriated funds to pay the Credit Subsidy Cost of Section 1705 projects. In some cases, 1703 eligible projects may also be eligible under 1705, thereby qualifying them for appropriated CSC.

 

Continuation through Loan Program

In late January 2009, DOE contracted with an outside consultant to provide a marketing analysis of the Solyndra application. Documents presented to the Committee show that the Loan Programs Office was continuing with its credit policy assessment of the Solyndra deal. On March 6, 2009, the first draft of the independent marketing analysis was submitted. Six days later, on March 12, 2009, a second Credit Committee meeting on the Solyndra application was held, and the Committee voted unanimously to approve the project provided that the Loan Programs Office answer 11 specific questions from the Committee, address certain risks discussed in the independent engineer’s report, and provide additional analysis of the company’s revenue information.

On March 17, 2009, the DOE Credit Review Board met to consider the proposed conditional commitment to Solyndra. The Credit Review Board members were the Chief of Staff to DOE Secretary Steven Chu; the Senior Advisor to Secretary Chu for ARRA Activities; the DOE Chief Financial Officer; and the DOE Acting General Counsel. After discussing the terms of the deal, the market for Solyndra’s products, and DOE’s proposed efforts to monitor the loan, the board voted to offer a conditional commitment to Solyndra. The conditional commitment was announced on March 20, 2009.

Following the conditional commitment, Loan Programs Office staff, with the assistance of outside counsel, negotiated the terms and conditions of the final loan guarantee agreement with Solyndra. In addition, Solyndra began working to raise the $198 million in equity that was required for the company to receive the DOE loan guarantee and to satisfy other conditions precedent to closing.

Once the terms and conditions were nearly complete, DOE generated the proposed credit subsidy cost for the Solyndra loan guarantee, and presented this information to OMB staff and officials on August 25, 2009. This presentation included information about the financial status of the company, the structure of the deal, and the potential risks and mitigants of the guarantee. Following that presentation, OMB asked DOE a number of questions about the company in order to determine whether DOE had assigned the proper risk values to the Solyndra guarantee. In particular, OMB questioned whether the risk rating assigned to the Solyndra deal was too high, considering that the debt service for the deal comes from the project, and not the parent company, Solyndra, Inc., and how competitive pressures in the photovoltaic market might impact DOE’s recovery analysis.

Ultimately, OMB recommended certain changes to the credit subsidy cost factors to reflect these concerns, which DOE accepted. The Solyndra loan guarantee closed on September 2, 2009. At the time, DOE’s Loan Program Office estimated that the guarantee would create 3,000 construction jobs and 1,000 jobs once the facility opened.

 

Solyndra’s Financial Problems

Following the closing, DOE continued to monitor Solyndra’s financial status and construction progress at the new manufacturing facility. Pursuant to the loan guarantee agreement, Solyndra was required to provide monthly engineering reports about its technology and monthly constructions reports.

In 2010, Solyndra experienced a number of financial setbacks. In March 2010, Solyndra’s auditor, PricewaterhouseCoopers stated in the company’s S-1 amended filing to the Securities and Exchange Commission (SEC) that the “Company had suffered recurring losses from operations, negative cash flows since inception and has a net stockholder’s deficit that, among other concerns, raise substantial doubt about its ability to continue as a going concern.” While this sort of analysis is not uncommon for a start-up company about to go public, three months later, in June 2010, the company cancelled a $300 million Initial Public Offering (IPO). Instead, to raise capital, the company issued $175 million of convertible promissory notes to various investors.

In the fall of 2010, DOE told Solyndra that, due to the company’s financial problems, the department would refuse its request for a loan disbursement unless Solyndra obtained additional capital. Solyndra, DOE, and two of Solyndra’s lead investors — Argonaut Venture Capital and Madrone Capitol Partners —began negotiations to restructure the Solyndra loan guarantee agreement. On November 3, 2010, Solyndra announced that it was closing its older manufacturing facility, resulting in the layoff of 135 temporary employees and approximately 40 full-time employees.

From December 2010 through February 2011, DOE, Solyndra, and two of its investors, Argonaut Venture Capital and Madrone Capitol Partners, negotiated the terms and conditions of an agreement to restructure the Solyndra loan guarantee. Throughout this process, DOE consulted with OMB about the proposed terms and conditions of this arrangement.

On February 23, 2011, the parties signed an agreement to restructure the Solyndra deal. Under that agreement, Solyndra’s investors agreed to a $75 million credit facility, with the option of a second $75 million. DOE agreed to extend the term of Solyndra’s loan guarantee from seven to 10 years, and to postpone the first repayment installment by one year, from 2012 to 2013. In addition, the agreement provided that, in the event of the company’s liquidation before 2013, the investors have the senior secured position with respect to the first $75 million recovered. DOE has the second senior secured position with respect to the next $150 million recovered in liquidation. If Solyndra had not liquidated or declared bankruptcy by 2013, the investors would have lost their senior secured position to DOE. Solyndra announced this as a $75 million credit facility. The legality of the restructuring agreement was questioned later.

The restructuring agreement also provides for enhanced monitoring of Solyndra’s financial position by the DOE. Under the original agreement, the loan guarantee project was not required to provide financial information about the parent company, Solyndra, Inc. The restructuring agreement required Solyndra to provide weekly information about its cash flow to DOE, as well as monthly financial reports and statements. The DOE also took an “observer” seat on Solyndra’s board.

This summer, representatives of Solyndra, including its Chief Executive Officer, Brian Harrison, came to Congress and met with several members of the Committee on Energy and Commerce. During those meetings the week of July 18, Mr. Harrison and other representatives of Solyndra claimed that Solyndra's financial condition was improving, and that Solyndra's revenues were growing. However, during a briefing with Committee staff the week of September 6, DOE Loan Programs Office staff stated that during that same period, the company was preparing to restate some of its projected financial statements to reflect increasing market and pricing pressures on its products, resulting in decreased revenues. When senior management of Solyndra informed the Solyndra board about this planned restatement, Solyndra’s investors stated that they were not comfortable with providing the second $75 million credit facility to the company in August unless the terms of the restructuring agreement were changed.

Loan Programs Office staff informed Committee staff that it then began negotiating with Solyndra and its investors over the first few weeks of August about proposed terms for a second restructuring agreement. DOE also contracted with an outside investment banking firm to scope out potential terms and investors for this deal. The Loan Programs Office staff stated that it engaged in an “interagency process” regarding this development with Solyndra, and the possibility of a second restructuring agreement. Ultimately, DOE determined that a second restructuring was not feasible, and informed the company and its investors of this on August 30, 2011. The Solyndra board met shortly after, and voted to announce its bankruptcy. The announcement was made on August 31, 2011.

 

Solyndra Bankruptcy and FBI Raid

Solyndra filed for bankruptcy under title 11 of the United States Code on September 6, 2011, in United States Bankrupcty Court for the District of Delaware.

In its filings, Solyndra states that its significant investors include Argonaut Venture Capital (38.9%); Madrone Capitol Partners (13.00%), U.S. Venture Partners (9.20%) and Rockport Capital Partners (7.33%). The company attributed its decision to file for bankruptcy to the “dramatically reduced solar panel pricing world-wide” caused by an oversupply of solar panels, as well as certain subsidies that have been offered by foreign governments to their solar manufacturers and the reduction in subsidies and incentives for the purchase of solar energy. In Solyndra Chief Financial Officer W.G. Stover’s affidavit accompanying the bankruptcy filings, he states that Solyndra will engage in a “four-week exploratory period” during which it will search for a “turnkey buyer” and consider all restructuring options, including liquidation.

Two days after Solyndra filed for bankruptcy, Federal Bureau of Investigation (FBI) agents, acting together with agents from the DOE Office of Inspector General (OIG), executed search warrants on Solyndra’s headquarters in Fremont, California, as well as at the home of certain Solyndra executives. Neither the FBI nor the DOE OIG have commented on the details of this criminal investigation, and the warrants remain under seal with the court. (as of Oct 2011)

 

WH Memo on the DOE Loan Guarantees

The DOE Loan Guarantee Program was the subject of an October 25, 2010, White House Memorandum addressed to the President from Carol Browner (then-Director of the White House Office of Energy and Climate Change Policy); Ron Klain (then-Chief of Staff to Vice President Biden); and Larry Summers (then-Director of the National Economic Council). The memorandum sought President Obama’s “direction” regarding the implementation of the Loan Guarantee Program, and notes that the program had been subjected to criticism for its “slow implementation” and “making commitments to projects that would have happened anyway and thus fail to advance [the President’s] clean energy agenda.” In addition, the memorandum states that:

OMB and Treasury . . . have raised implementation questions, including “double dipping” — the total government subsidy for loan guarantee recipients, which have exceeded 60%, “skin in the game” — the relatively small private equity (as low as 10%) developers put into projects; and non-incremental investment —some loan guarantee projects would appear likely to move forward without the credit support offered by [Section 1705 loan guarantees] including those projects that already exist and for which the loan guarantee simply provides a means for refinancing.

The memorandum also mentions a “policy review” conducted by the White House of the DOE loan guarantees, and explains that this review has sometimes resulted in extending the amount of time a guarantee is under review. It concludes by discussing a number of options to change the way the loan guarantee program is implemented, including limiting OMB’s oversight role.

 

Problems with Solyndra

With the bankruptcy of Solyndra and the subsequent investigation, numerous allegations have been made concerning the loan and the restructuring. The first allegation is that the loan guarantee itself was rushed and that had proper due diligence been followed, the DOE may have found that Solyndra was not steady enough to qualify for the guarantee. The second allegation is that the restructuring of the loan was illegal and improper.

 

Rush to Approval

One of the primary allegations is that the Obama administration rushed to approve the Solyndra loan guarantee for political reasons after the credit committee rejected the Solyndra loan guarantee in January of 2009. The source of these allegations are numerous sets of emails between White House staffers and DOE staffers. Some of these emails are hoping to have the deal complete prior to a political event at Solyndra and some of them deal with an overall desire to push the green agenda.

It is important to note that the rejection by the credit committee in January of 2009 was done without prejudice, meaning that it was not a complete rejection of the Solyndra loan guarantee but rather a delay to obtain the needed information. However, among the items cited by the committee was the need to ensure that the parent company (Solyndra) had the necessary resources to secure the loan for Solyndra Fab 2 LLC.

March 2009 emails

On March 10, 2009 an email chain was started by the Senior Advisor to the Secretary of Energy for the Recovery Act Spending Department in which the desire to see the Solyndra loan completed quickly is shown. The Director notes the pace of approval shows the superiority of the new administration and the success of the Stimulus plan.

 

 

This email prompted a response two hours later from an unnamed OMB staffer which notes the political motives of the rush and their opinion that the deal is not ready. The staffer also notes that OMB will not be completing the loan guarantee if the required actions are not fulfilled.

 

August 2009 emails

From August 19-31 of 2009, numerous emails were sent between the White House and OMB and DOE noting the desire of the White to see the Solyndra loan deal complete in time for a Vice Presidential event for Solyndra on September 4 of that year. Within the emails, it is clear that the White House wants the deal done in time for the VP's event and that the DOE and OMB feel rushed. However, it is not clear if DOE and OMB are merely rushed by a few days to expedite paperwork, or if there still remains questions as the validity of the loan guarantee.

However, August 19-20, 2009 emails indicate that Solyndra had still not addressed issues with working capital which were addressed in the January 2009 credit committee. The emails state that Solyndra Fab 2 LLC is expected to run out of working capital by September of 2011. It also states that Solyndra's model does not take into account property taxes. The email below took place on August 19, 2009 and notes the problems with Solyndra's models.

 

A second email dated the following day of August 20, 2009 deals with many of the same issues but does not directly cite the previous email. It nores the property tax problem, and income tax problem, and the overall issue with working capital. It also states given these problems, the Solyndra deal should have a "lender case" which addresses what happens with the company should it go bankrupt.

 

Improper Restructuring

Solyndra first defaulted on the loan guarantee on December 1, 2010. At that time, $95 million of the $535 million remained to be paid out by the Department of Energy. Despite this set back, the DOE found that a restructuring would "yield the highest probable net benefit to the Federal Government by minimizing the Federal Government's potential loss on the guaranteed loan." The restructuring of the loan guarantee did the following:

  • Assets from Solyndra were transferred to Solyndra Fab 2 LLC to help secure Fab 2's obligations
  • The $535 million loan obligation was amended to move $385 million to "Tranche D" and $150 million to "Tranche B"
  • Solyndra was allowed to obtain an additional $75 million in secured loan money at "Tranche A"
  • An additional $175 million was issued at "Tranche E" to third party lenders
  • Solyndra had the right to get an additional $75 million at "Tranche C"
  • Tranche A, B, and C were now considered "Senior Facilities"
  • Tranches D and E were "Subordinate Facilitites"
  • The senior facilities have lien and payment priority over subordinate facilities

 

This restructuring made three primary changes to Solydra's loan agreement. First, assets from Solyndra were moved under Solyndra Fab 2 LLC. Second, Solyndra was allowed to go out and secure an additional $75 million in lending from private investors. Third, should the company go bankrupt, this new loan would get repaid first. As previously stated, Solyndra went bankrupt without being allowed to pursue the second $75 million.

This makes the government loan subordinate to the private investors, a move that is clearly illegal under Section 1702 of the Energy Policy Act of 2005. The question of legality of this loan restructure was put to Susan Richardson, Chief Counsel of the Loans Program Office. Mrs Richardson found that although the legislation clearly states that the government funding for the loan guarantee cannot be subordinate to private funding, it does not address restructuring of the loan. Since the legislation does not address restructuring the loan, it does not expressly forbid making the goverment loan subordinate within that restructure.

In summary, this restructuring allowed Solyndra to secure an additional $75 million in private loans with the condition that those new private loans would be paid back first if the company failed. This is expressly forbidden in the legislation that created the loan guarantee program. However, the Loan Programs office found that the legislation applied only to the start of the loan and does not address and therefore cannot forbid such structuring in a restructure.

On August 17, 2011, Treasury Assistant Secretary for Financial Markets Mary J. Miller sent Jeffrey D. Zients, the deputy director of the White House Office of Management and Budget an email questiioning this move which stated:

[O]ur legal counsel believes that the statute and the DOE regulations both require that the guaranteed loan should not be subordinate to any loan or other debt obligation. The DOE regulations also state that DOE shall consult with OMB and Treasury before any ‘deviation’ is granted from the financial terms of the Loan Guarantee Agreement. In February, we requested in writing that DOE seek the Department of Justice’s approval of any proposed restructuring. To our knowledge, that has never happened.

The DOE responded to this email by stating the following:

Assistant Secretary Miller's email was written in August 2011, six months after the restructuring decision was finalized. When the Treasury Department raised questions with the Energy Department in February, the career staff at the two departments discussed these issues. Ultimately, DOE's determination that the restructuring was legal was made by career lawyers in the loan program based on a careful analysis of the statute.

 

Optics

On January 31, 2011 an email was sent out by OMB regarding the Solyndra loan restructuring and how it would appear to the public. The email notes that Solyndra is likely to fail and giving the company an additional $75 million to restructure the loan will not appear good to the public.

 

House Sub-Committee Hearing

On September 14, 2011 the House Energy and Commerce Committee Subcommittee on Oversight and Investigations held a hearing to investigate the funding to Solyndra. The full video of that hearing is below. It is roughly three hours and 42 minutes.

 

On September 23, 2011 the Subcommittee on Oversight and Investigations held another hearing to discuss the Solyndra situation. The hearing was titled "From DOE Loan Guarantee to Bankruptcy to FBI Raid: What Solyndra's Executives Knew."  It is roughly one hour and 12 minutes long. Solyndra executives pleaded the fifth amendment during this hearing.

 

On October 14, 2011 the House Energy and Commerce Oversight Commitee held another hearing. That video is show below and is roughly two hours and thirty-nine minutes.

 

List of Cited Documents

 

 

Congressional and other Documents
Document Date Description
Credit Committee Recommendation Jan 9, 2009 The report issued by the Credit Committee on January 9, 2009. It notes why Solyndra is being rejected for a loan guarantee.
Announcement Mar 20, 2009 Official annoucement of loan guarantee
Memo - Solyndra Update April 6, 2010 Memo from Jonathon Silver of the Loan Guarantee Program Office. The memo states that even though Solyndra has received the "going concern" letter and has obvious long term financial problems, this is not unusual for a company in this position.
Restructuring Memo 1 Jan 19, 2011 An initial memo noting the findings on subordination and the need to restructure the loan guarantee for Solyndra. The memo finds that it will be in the best interest of the government to restructure the loan to subordinate the government to private investors.
Restructuring Memo 2 Feb 15, 2011 A memo for the General Counsel from Susan Richardson for the Loans Program Office. This document finds that it is legal to subordinate the government loans to private loans even though the legislation clearly forbids it. This allowed private entities to be paid back before government. The reasoning for the find was that the legislation only forbid subordination at the onset of the project and did not address restructuring.
US House Memo Sept 12, 2011 Memo noting the Subcommittee to investigate Solyndra. It addresses a number of items to be discussed and reviews Solyndra's loan guarantee process.
Energy and Commerce Memo Sept 14, 2011 Memo from the Republican led Committee on Energy and Commerce noting the recent hearings on Solyndra and the findings.
US House Memo Sept 22, 2011 Memo from Congressman Upton and Waxman on the upcoming hearing for Solyndra on Sept 23. The memo is to other Democrats on the Subcommittee. It addresses numerous concerns raised in the previous meeting.
US House Memo Oct 3, 2011 Memo form Democratic leaders of the Subcommittee on oversight for the Energy and Commerce Committee. It notes the release of new emails and rebukes allegations of favoritism.
White House Memo Oct 14, 2011 Memo in response to House request for all information involving Solyndra. The White House invokes executive privilege.

 

 

Department of Energy Documents
Document Description
Solar Background  Document 1 A timeline of Solybdra's application process for loan guarantee as presented by the Department of Energy.
Solar Background Document 2 A list of news articles noting the emergence of solar energy and the bright future expected from Solyndra.
Solar Background Document 3 A list of private financial backers of Solyndra and how much each one contributed
Solar Background Document 7 A comparison of costs for material related to Solyndra manufacturing and it's competitors.
Event Memo - Loan Finalization A DOE Memo addressing the September 4, 2009 finalization of the loan guarantee for Solyndra.
Solyndra Timeline A figure timeline for the Solyndra application process for loan guarantee

 

 

Emails Concerning Solyndra
Dates Description
Jan 12, 2009 Emails between Steve Isakowitz of the DOE and Chris Gronet - CEO of Solyndra. Gronet is upset about the Credit Committee rejecting Solyndra loan guarantee.
Jan 26, 2009 Email noting that Solyndra was still going through the loan approval process and needed to correct the problems cites in the Credit Report (page 3)
Mar 10, 2009 Email from unnamed sources noting that the Obama administration hopes to get first loan guarantee done within 60 days of inauguration to cite the fact that Bush administration could not complete it in four years. This email then states that the Solyndra deal is "not ready for prime time." (page 5)
Aug 19, 2009 Email noting the numerous working capital problems with Solyndra. (page 7). The followup email notes that this is somehting that needs immediate attention. (Page 8). Later emails note that property tax was not in the original models.
Aug 27, 2009 An email from someone at the Department of Energy asks for a Sept 3 or 4 closing date for the loan guarantee. (page 10)
Aug 31, 2009

Someone at the OMB sends an email to Terrell McSweeny noting his concern that due diligence may not be followed due to the rushed nature of the loan approval

A reply email states concern that word of the approval and DOE/VP event at Solyndra could leak before OMB finishes the numbers. This would look bad if OMB numbers are not good (page 13)

Dec 26, 2009 Email between Larry Summers and Brad Jones. Summers is seeking end of the year views. Jones notes the Solyndra loan (but not by name) and states that this is not good use of taxpayer money.
April 2, 2010 An email between two unnamed people who note a Reuters article detailing the economic problems at Solyndra. The email notes that the DOE monitoring system is not ready and that the company may default while in the process of securing a DOE loan guarantee.
April 2, 2010 An unsigned email string noting a Green Tech Media article that highlighted Solyndra's economic problems and concerns with their IPO.
 May 19, 2010 A series of emails looking to set up a speaking location for President Obama during a west coast visit. Solyndra is proposed as a viable location.
May 21, 2010 An email from unnamed people in the White House noting more articles about President Obama's trip to Solyndra and the company's economic problems. The senders states that he/she hopes that the company does not fail before President Obama's appearance.
May 24, 2010 An email from Ronald Klain to Valerie Jarrett and others. The email notes Mr Klain's concern that President Obama is visiting Solyndra on his upcoming trip. Klain notes that the company is in financial trouble, that it's IPO may be put off, and that a "going concern" letter has been issued by their auditors.
May 24, 2010 Email responses from the DOE noting that the "going concern" letter was typical of a startup that was pre-IPO as these companies are normally short on cash and that is the reason for the IPO. Jarrett says she is comfortable with going ahead with the visit if Klain agrees.
May 24, 2010 An email chain from unnamed White House staffers discussing Solyndra's problems and President Obama's visit. The email notes that the "going concern" letter is typical for start-ups and that President Obama should be careful what he says.
July 21, 2010 Email from Ryan Cunningham to Christina Reynolds and others. The email notes numerous economic points about Solyndra that indicate the company has a "strong future."
 Dec 15, 2010 An email between Carroll and Lyberg discussing concerns with the Solyndra loan restructuring that it may give more to Solyndra's financing companies in the event of default instead of DOE
Dec 16, 2010 - Jan 3, 2011 A discussion between the Loan Guarantee Office and other sections of the Department of the DOE. The emails discuss reorganization of Solyndra's loan guarantee.
Jan 7, 2011 Email between Colyar and Richardson discussing scenarios for Solyndra. This includes scenarios of the compan becoming profitable and the company being liquidated
 Jan 11, 2011 A second email between Carroll and Lyberg discussing subordination and it being forbidden in the legislation that created these types of loan guarantees.
Jan 11, 2011 Email from William Richardson to undisclosed person concerning restructuring of Solyndra loan guarantee.
Jan 31, 2011 The optics email. In an email to undisclosed recepients, a staffer notes that Solyndra's failure may be unavoidable. He/She states that the optics would be better if Solyndra failed before a second adjustement to the loan guarantee (page 18)
Aug 17, 2011 Email from Mary Miller to Jeffrey Zients stating that the previous adjustment may not have been legal. "[O]ur legal counsel believes that the statute and the DOE regulations both require that the guaranteed loan should not be subordinate to any loan or other debt obligation.  The DOE regulations also state that DOE shall consult with OMB and Treasury before any ‘deviation’ is granted from the financial terms of the Loan Guarantee Agreement. In February, we requested in writing that DOE seek the Department of Justice’s approval of any proposed restructuring.  To our knowledge, that has never happened."

  

References

[1] Website: Solyndra Article: Technology / Products Author: Solyndra Accessed on: 10/17/2011

[2] Website: The Hill Article: Emails raise questions about Energy, Treasury disagreement on Solyndra Author: Ben Geman Accessed on: 10/18/2011

[3] Website: Solyndra Article: Solyndra Closes $75 Million Credit Facility Author: NA Accessed on: 10/18/2011

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