US Energy Secretary Steven Chu defended his decision to approve a $535m loan guarantee for Solyndra – and a subsequent restructuring that subordinated taxpayer money to that of private investors – during a high-profile Congressional hearing.
“I want to be clear: over the course of Solyndra’s loan guarantee, I did not make any decision based on political considerations,” Chu says.
“My decision to guarantee a loan to Solyndra was based on the analysis of experienced professionals and on the strength of the information they had available to them at the time.”
Republicans on the subcommittee prodded Chu to apologise for the debacle.
“It was very regrettable what happened to Solyndra,” was the most he would say, adding that his decision to restructure the loan early this year when the company’s financial peril became acute was taken to try to recover as much taxpayer money as possible.
To stop loan disbursements immediately would mean Solyndra’s new factory would not have be completed and would have ensured an immediate bankruptcy, Chu says.
He and his advisors determined it would be better to complete the factory, giving the company a fighting chance and creating a more valuable asset – the completed factory – in the event of a bankruptcy.
“It was a difficult choice for us to make,” Chu says.
That choice will be tested this week as Solyndra’s core business, including intellectual property and real estate assets, goes up for auction as part of its bankruptcy liquidation. Asked how much the government may recoup through that process, Chu said “not very much”.
Update: Solyndra says in bankruptcy court filings that it did not receive adequate acceptable bids and will delay the core-assets auction until 19 January. The new deadline for offers is 17 January.]
The Department of Energy (DOE) agreed to put the government’s loan to Solyndra second in line for repayment behind a new $75m equity investment from the company’s private investors. Subcommittee members said this was a violation of the law creating the Loan Guarantee Program and nearly unprecedented in federal government lending.
Chu says he was advised by internal and external DOE legal counsel that the step was legal because the subordination occurred in the context of the loan restructuring, rather than in the original loan to which the law refers – a legal theory subcommittee members described as “strained”.
Chu told the subcommittee that Solyndra’s demise was largely the result of the precipitous drop in solar prices driven by a large increase in Chinese production capacity and a softening European market.
Republicans on the subcommittee grilled Chu with questions about what he knew of Solyndra’s financial health and when; whether he had been in contact with the White House or a political donor to the Obama campaign, George Kaiser, whose family foundation is behind Solyndra’s biggest investor, Argonaut Capital; and whether the DOE has the financial wherewithal to manage large, complex loans.
After Chu testified that he did not know who Kaiser was at the time he evaluated the Solyndra loan, Congressman Joe Barton, Republican of Texas, insisted that “everybody and their dog knew who [Kaiser] was and what he was involved in”.
Democrats, meanwhile, tried to turn the hearing toward the bigger picture of climate change, energy independence and the need for the US to compete with other nations in supporting and deploying renewable energy.
“House Republicans and their coal and oil industry allies are manufacturing a scandal, trying to discredit you, President Obama and clean energy companies,” says California Democrat Henry Waxman.