Another DOE Loan Scandal: Are We Bailing Out Spain's Solar Collapse?
Yet again, evidence of impropriety surrounds the issuance of federal Department of Energy "green" loan guarantees -- in this instance, loans were granted to a foreign company with Democratic Party ties.
Over the last two years, DOE Secretary Steven Chu has awarded Spain-based Abengoa -- a sprawling, multi-national industrial firm operating in 70 countries -- loan guarantees worth a staggering $2.78 billion for solar and ethanol plants.
Abengoa is a Madrid-based conglomerate that operates throughout Europe, the Middle East, Latin America, and Asia. It is not starved for cash: according to its 2009 annual report, the firm was valued at $25.5 billion, enjoying a cash flow of $4 billion and a net profit of $288 million. It is traded on the Madrid and Barcelona stock exchanges and employs more than 25,000 workers.
At first glance, Abengoa does not appear to require U.S. government-backed loan guarantees. In 2010 it qualified for private bank loans in 11 countries worth $161 million. In July 2009 alone, Abengoa issued convertible bonds in Europe worth $688 million.
Overall, the Energy Department has awarded Abengoa three separate loan guarantees.
One was awarded on September 29, just before the deadline for the end of the fiscal year. This $132 million loan guarantee went to Abengoa Bioenergy Biomass of Kansas for the construction of an ethanol plant to be built in Dodge City. Earlier in September, a $1.2 billion loan guarantee was awarded to Abengoa to construct a solar facility in the Mojave desert. And in July 2010, DOE awarded a $1.45 billion loan guarantee to Abengoa's Solana solar project. It is a highly leveraged arrangement: the deal was structured in such a way that the company has to put up very little of its own money:
Abengoa's Solana 250 MW (net) project in Arizona finalized its Loan Guarantee from the DOE, which will cover up to $1.45B of the total $2.0B in project cost.
A small percentage of the balance will come from Abengoa. The piece that remains (around 25% of the total cost) will need to come from direct equity investors (such as NRG) and tax equity investors (such as Morgan Stanley and Union Bank).
Congressional leaders say the September issuance of DOE loan guarantees -- including the two for Abengoa -- may have been part of a group of loans that were rushed by the DOE to meet a September 30 funding deadline. In a September 20 letter to Energy Secretary Steven Chu, House Energy and Commerce Chairman Fred Upton (R-MI) wrote:
We are concerned that another rush to meet stimulus deadlines will result in DOE closing those deals before they are ready.
DOE ignored Upton's letter: by September 30, DOE had released more than $4.7 billion in federal funds to several "green" energy firms.
According to DOE, the $1.45 billion loan guarantee will employ or "save" 60 permanent jobs at the Solana solar plant, working out to $24.2 million per permanent job “created or saved.” The Mojave solar plant is similar. It will save or create 70 permanent jobs, which is $17.1 million per permanent job. The biomass plant will create 65 permanent jobs. That is a real job creator, generating each permanent job for $2 million.
The firm's global profitability is due to non-renewable industrial activities; yet Abengoa's U.S. solar and ethanol projects would not exist without the existence of Obama administration money. The $2.78 billion constitutes an American bailout of Spain -- and Europe's -- collapsed solar industry.
As the Solyndra bankruptcy illustrates, solar technology is not profitable or sustainable without major government subsidies. Spain briefly enjoyed one of the most advanced solar industries in the world when it was subsidized by $26 billion in grants from the socialist-led Spanish government. However, the short-term injection of government funding was not sustainable. When the money ran out the Spanish solar industry collapsed, and more than 30,000 solar energy workers lost their jobs.
For years, Abengoa has been extolled by former Vice President Al Gore, including during a high-profile speech he delivered at the company’s Spanish headquarters in October 2010. Gore himself invested in the company in November 2007. The day he announced his investment, the company’s stock jumped 7 percent.
The Spanish firm has connections to Democratic operatives. According to federal lobbying records, Democrat Mark Rokala -- a top Washington lobbyist who worked at the now-discredited Democratic lobbyist firm PMA -- headed up Abengoa’s effort.
In 2008, PMA was embroiled in a government ethics “pay-to-play” scandal in which the late Democratic Rep. John Murtha directed $137 million in government contracts to PMA clients. PMA and its clients in turn donated $2.37 million to Murtha and other Democratic congressmen who sat on a defense appropriations subcommittee.
In 2007, the non-profit Citizens for Responsibility and Ethics in Washington named Murtha one of the “most corrupt” members of Congress. Rokala’s boss and PMA president Paul Magliocchetti is now serving a 27-month federal sentence for illegal campaign contributions. PMA has shuttered its doors, but since 2006, Rokala has led the lobbying effort on behalf of Abengoa at another D.C. lobbying firm, Cornerstone. Since 2006, Cornerstone has received $870,000 in lobbying fees from Abengoa.
Abengoa’s reputation on the European Continent does not fare much better. In 2008, the company shared the "Worst EU Lobbying Award" given out by environmental groups including Friends of the Earth Europe. The company was cited for making "false media claims about research that shows the EU can sustainably grow enough agrofuels to meet demand without needing imports."
President Obama could be the “salvation” for the European solar industry, says Gabriel Calzada, president of Spanish think tank Instituto Juan de Mariana. He tells PJ Media:
Companies like Abengoa have invested heavily in solar. ... The subsistence of those branches of the company depend on the construction of new "profitable" plants since Spain (and Europe for that matter) is not anymore that profitable.
Calzada believes the Obama administration may be bailing out Europe’s ailing solar energy industry:
The creation of new plants in countries like the U.S. that would now substitute the subsidies they have lost in Europe would represent their salvation.
[The crash] was an inevitable consequence of a policy that was not ... a long-term sustainable market design," said Julie Blunden, vice president of public policy at U.S.-based SunPower Corp. "Whenever you've got something that's unsustainable, eventually it gives. And lo and behold, that happened."
According to Chris Horner, a senior attorney at the Competitive Enterprise Institute, Abengoa is not an exception, but the rule for the Obama administration's artificially stimulated "green" industry. He tells PJ Media, "This is not unique to Abengoa. It defines the [green] industry, which exists in any meaningful way solely due to political creation, not performance or economics."