Friday, July 6, 2012

Tales from Bailout Nation (cont.)


... or how green energy loans are like steak sauce.

The ranks of Department of Energy green loan failures continue to mount.

A geothermal energy company with a $98.5 million loan guarantee from the Obama administration for an alternative energy project in Nevada — which received hearty endorsements from Energy Secretary Steven Chu and Senate Majority Leader Harry Reid — faces financial problems, and the company’s auditors have questioned whether it can stay in business.

Much like Solyndra LLC, a California solar-panel manufacturer with a $535 million federal loan guarantee that went bankrupt, Nevada Geothermal Power (NGP) has incurred $98 million in net losses over the past several years, has substantial debts and does not generate enough cash from its current operations after debt-service costs, an internal audit said.

“The company’s ability to continue as a going concern is dependent on its available cash and its ability to continue to raise funds to support corporate operations and the development of other properties,” NGP auditors said in a financial statement for the period ending March 31.

“Consequently, material uncertainties exist which cast significant doubt upon the company’s ability to continue as a going concern,” the statement said.

(italics, ours)

So, we are being told that NGP's ability to continue as a going concern is dependent upon factors other than actually turning a profit. Good to know.

Mr. Reid, a Nevada Democrat who led passage of the $814 billion stimulus bill and worked to include the loan guarantee program to help finance clean-energy projects, predicted in 2010 that NGP would “put Nevadans to work” and declared that Nevada was the “Saudi Arabia of geothermal energy.”

Comparing your state to a country that hands out checks to its citizens because of all that oil they're sitting on begs the question of why NGP would need tax-payer assistance in the first place.

Cue the evil Republicans:

But Rep. Jim Jordan, Ohio Republican and chairman of the House Oversight and Government Reform subcommittee on regulatory affairs, stimulus oversight and government spending, is concerned about NGP’s finances and the timing of the loan guarantee.

“The company was in danger of defaulting on its financial obligation, and the [Department of Energy‘s] assistance served as a de facto bailout,” Mr. Jordan said. “After receiving a taxpayer-backed $98.5 million loan guarantee, the company is still struggling.”

He said the loan guarantee “essentially served to prop up an already-faltering firm.”

We thought the following was of particular interest:

Mr. Jordan said the Energy Department handed out more than 20 loan guarantees to companies with an average credit rating of BB-, or “junk status,” meaning they were vulnerable to default if economic or business conditions changed. NPG was rated BB+, which is considered speculative or junk and a step below investment grade.

Mr. Jordan and Mr. Issa have questioned why taxpayer money was “put at such risk.”

That pretty much sums up why this DOE green loan program is such a disaster. Where you wouldn't waste a wooden nickel of your own scratch on junk-rated investments, the DOE, because it has no real skin in the game - it's not like it's coming out of their hide, is more than willing to pour billions of tax-payer dollars down the drain.

The next time you hear the President drone on about "investing" in the future with respect to clean/green energy, recall the rule our chow hall table captain laid down during our first year at Seminary regarding his ban on steak sauce: "Good steak don't need it and bad steak don't deserve it."



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