ReutersExecutives from the failed solar company Solyndra are expected to take the Fifth today.
WASHINGTON, D.C. – Less than two months before his solar panel company filed for bankruptcy, Solyndra CEO Brian Harrison told lawmakers on Capitol Hill that thanks to the $535 million taxpayer loan to build a new factory, his company had shipped record-breaking numbers of solar panels to buyers and was poised to double its revenue in 2011.
"Factory output is ramping rapidly," Harrison wrote in a June 22 presentation to members of Congress titled, “Exceeding Expectations, Solyndra Today.”
Harrison said sales, which were said to be double 2010 revenue of $140 million, were picking up, selling more than 10,000 panels a week, or enough to power 500 homes, according to the presentation obtained by California Watch.
While Harrison was painting a rosy picture of his company to lawmakers, the private sector was more skeptical. Elliott Gansner, a San Francisco-based broker of solar products, wasn't sure who was buying Solyndra's products. While unique, he said, they were just a niche product to his company, which has a worldwide portfolio of more than 7,500 solar companies.
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"We traded more than 200 solar panel brands, and Solyndra wasn't one of them,” Gansner, the North America sales director for Berlin-based pvXchange, said in an interview.
President Barack Obama visited Solyndra in May 2010, calling the Fremont-based company's products “incredible” and “cutting-edge.”
Solyndra filed for bankruptcy on Aug. 31, less than two months after Harrison's Capitol Hill trips, stating it was $784 million in debt, including $527 million borrowed from taxpayers. The company shut its doors for good Sept. 6, laying off more than 1,100 workers without warning. Two days later, the FBI, along with the Department of Energy's inspector general, raided the Fremont, Calif., plant and the homes of the company's executives.
Now, many executives in the solar industry, especially in California, are seeking answers about Solyndra's failure and how it burned through more than a half-billion dollars in taxpayer money in less than two years.
“It's going to be interesting to get in and look at the accounting,” said James Nelson, CEO of Santa Barbara-based Solar3D and a former partner with management consultant Bain & Co. "Given the scale they were trying to go for, they can burn through that cash pretty quick."
Except that the company's top executives, Harrison and CFO William Stover, won't be talking. Earlier this week, the pair reversed a promise to testify before the House Energy and Commerce Committee, citing their Fifth Amendment constitutional protection against self-incrimination.
“It’s disappointing that the officials who canvassed the halls of Congress in mid-July and misled our members about the financial state of their company are now unwilling to answer direct questions,” House Energy and Commerce Committee Chairman Fred Upton, a Michigan Republican, said this week after lawyers for Harrison and Stover announced the executives would appear today and be sworn in, but would not answer questions.
Despite Solyndra's optimism on Capitol Hill and in investor presentations, its filings with the Securities and Exchange Commission told a far different story, including net losses every year since its inception in 2005 as Gronet Technologies.
Its auditor, PricewaterhouseCoopers, raised questions as early as March 2010 about whether the company would be able to continue as a “going concern,” auditor-speak for a potential failure.
An IPO that might have raised $300 million was shelved in June 2010, robbing the company of capital that had to be made up elsewhere. Solyndra already had applied for a second $469 million loan guarantee with the Department of Energy shortly after receiving its first one in September 2009, SEC filings show.
“Despite having over $1 billion in private capital, it appears as though Solyndra had significant issues with working capital and liquidity throughout the life of the DOE loan guarantee,” Upton wrote in a letter this week to Jason Martin, managing director of Tulsa, Okla.-based Argonaut Private Equity, Solyndra's largest investor.
Argonaut is the financing arm of billionaire George Kaiser, who gave more than $50,000 to Obama's 2008 presidential campaign and visited the White House several times shortly before the Department of Energy announced its $535 million loan to Solyndra, prompting charges of political favoritism from Republicans.
In its statement announcing its plans to seek Chapter 11 bankruptcy protection, Solyndra claimed that competition from Chinese solar panel makers undercut its thin-film circular panel technology, known as copper indium gallium diselenide, or CIGS, which used no silicon, typically the biggest cost in making solar panels.
Could Solyndra's market have collapsed that fast? PvXchange's Gansner says there were more fundamental factors at work. "The reason why Solyndra struggled was it was a bad bet on technology,” he said.
The company also may have made other bad bets, as well such as locating its factory in high-cost Alameda County. The lease for its Fremont headquarters and its Milpitas offices would cost nearly $40 million through 2013, according to Solyndra's SEC filings.
“I don't know who made the decision to locate in Fremont, but when it comes to manufacturing, low cost is key,” said Solar3D's Nelson. “I wouldn't have located there."
Moreover, counting on manufacturing solar panels in the U.S. put them at a disadvantage with other countries straight from the beginning, Nelson said. “There are some companies that will never succeed, and that's the problem with Solyndra. They're just in a strategic black hole when they're competing with China. That's a tough wall to scale.”
Gansner disagreed, saying that lessons from Solyndra's collapse will help other manufacturing companies in the alternative energy space avoid the same mistakes. “There are winners and losers, and Solyndra happened to be one of the losers,” he said.
That's small comfort to Avice Meehan of the Howard Hughes Medical Institute in Chevy Chase, Md., which invested $19.4 million in Solyndra between 2009 and 2010. Now $15 million of the investment is gone, and the institute is hoping the bankruptcy court can salvage some of the $4.4 million that was invested in convertible bonds.
“We have no way of knowing if we'll get anything back,” she said.