Good news: the Government picks another winner!

Abound Solar, a company that President Obama has specifically touted by-name as a poster child of the glorious green future, was supposed to “creat[e] more than 2,000 construction jobs and 1,500 permanent jobs.” …Not quite. The company has been on the rocks for months, and now they’re officially bankrupt:

Abound Solar Inc., a U.S. solar manufacturer that was awarded a $400 million U.S. loan guarantee, will close its doors and file for bankruptcy because its panels were too expensive to compete with Chinese products, according to the U.S. Energy Department.

Abound, based in Loveland, Colorado, borrowed about $70 million against the guarantee, the Energy Department said today in a statement. Calls to Abound executives weren’t returned today. …

U.S. taxpayers may lose as much as $30 million on the loan after Abound’s assets are sold and the bankruptcy proceeding closes, he estimated.

This article tries to spin the situation to suggest that the company’s failure is the result of too much unfair competition and global oversupply, and we should therefore direct our ire at China. No — just no. This is the fault of the Obama administration. Maybe if we had just left the decision to develop solar (or not!) up to the private sector, we would’ve quickly figured out that investing in solar energy was a bad idea. People are much more judicious when they’re making bets with their own money, since they personally have to feel the loss, than the federal government is in floating free taxpayer cash to their politically-profitable pet projects.

Speaking in Iowa yesterday, Vice President Joe Biden criticized Mitt Romney for having the audacity to oppose sending more taxpayer money down the tubes with subsidies for green energy:

Vice President Joe Biden on Wednesday lashed out at Mitt Romney in Iowa for the second straight day, this time taking issue with the Republican’s reluctance to embrace tax credits for wind and solar energy. …

“We are importing less oil than [at] any time in the last 16 years,” Biden said. “But we think you got to bet on it all … You had our good friend Mitt Romney saying he dismissed wind and solar by saying they’re ‘two of the most ballyhooed forms of alternative energy.’ Tell that to the 7,000 workers manufacturing wind power here in Iowa.”

Get this through your heads, big-government environmentalists: If it’s a good idea, the free market will take care of it, and take care of it to the degree that there’s a demand for it. If the private sector declines to get too involved in it, that should probably tell you something pretty significant.

Yes!

Re-elect Obama/Biden! They know what they're doing!

PS: But, I don't think bankruptcy is the goal, is it?

Unbelievable. Well, except for all the failed companies the President has already picked.

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.

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.”

Mr. Chu celebrated NGP’s potential in his June 2010 announcement of the loan guarantee, saying the federal government’s support of the company demonstrated its commitment to geothermal power to achieve the nation’s clean-energy goals.

Can we please admit all of this investing in companies that cannot get private money is just a bad idea?

Doctor Fate wrote:Can we please admit all of this investing in companies that cannot get private money is just a bad idea?

Not in the absolute sense you seem to want. There are surely occasions when the public interest makes an investment more worthy than the private sector alone can value. For instance, DARPA helps many small companies develop cutting edge technologies that might one day increase our national security. Lots fail but in general DARPA has a splendid reputation for public-private partnerships. They pick winners in the private sector; I'm not sure if they provide any venture capital or guaranteed loans. Maybe they just award lucrative contracts that don't demand successful completion.

That said, DARPA is an unusual agency - small and flexible. I agree with you 100% that government bureaucrats in general can't outperform the market in evaluating risk/reward of start-ups or of R&D efforts in most industries. (They might not be so bad when it comes to medical technology.) However, when the public interest is strong enough, we should be willing to put up with some degree of ineptitude.

The real problem begins when this activity gets too much involvement from political appointees. Obama and company seem to be more inept than most, and there are several (?) rather nasty instances where there's at least an appearance of political contributions leading to preferential treatment.

Look, I'm no expert on all the different ways government gets involved in "investing in companies that cannot get private money". (I doubt any of us are.) All I'm trying to do is issue a gentle caveat: don't get so absolutist as an idealist that you throw out the baby with the bathwater; leave some room for pragmatism.

Purple wrote:There are surely occasions when the public interest makes an investment more worthy than the private sector alone can value. For instance, DARPA helps many small companies develop cutting edge technologies that might one day increase our national security. Lots fail but in general DARPA has a splendid reputation for public-private partnerships. They pick winners in the private sector; I'm not sure if they provide any venture capital or guaranteed loans. Maybe they just award lucrative contracts that don't demand successful completion.

That said, DARPA is an unusual agency - small and flexible. I agree with you 100% that government bureaucrats in general can't outperform the market in evaluating risk/reward of start-ups or of R&D efforts in most industries. (They might not be so bad when it comes to medical technology.) However, when the public interest is strong enough, we should be willing to put up with some degree of ineptitude.

The real problem begins when this activity gets too much involvement from political appointees. Obama and company seem to be more inept than most, and there are several (?) rather nasty instances where there's at least an appearance of political contributions leading to preferential treatment.

And, the point is not that the government can NEVER partner with the private sector. The point is that the government should not speculate on "investments."

Research is one thing. However, investing on start-ups in sectors that have no particular reason to commend them (save wishful thinking) is not something the government should be spending money on. The whole Solyndra/Chevy Volt/Wind/Solar debacle just underscores one truth: the private sector knows (generally) what will NOT work. Now, it doesn't always figure out what will work. However, it's smarter than a few ideologically-driven politicians using other people's money.

Look, I'm no expert on all the different ways government gets involved in "investing in companies that cannot get private money". (I doubt any of us are.) All I'm trying to do is issue a gentle caveat: don't get so absolutist as an idealist that you throw out the baby with the bathwater; leave some room for pragmatism.

I'm with you, especially when it comes to defense research. However, many of these "investments" were clearly more political and/or ideological than they were shrewd business decisions.

Still another one bites the dust. The President has quite the touch:

The Amonix solar manufacturing plant in North Las Vegas, heavily financed under an Obama administration energy initiative, has closed its 214,000-square-foot facility 14 months after it opened.

Officials at Amonix headquarters in Seal Beach, Calif., have not responded to repeated calls for comment this week. The company today began selling equipment, from automated tooling systems to robotic welding cells.

A designer and manufacturer of concentrated photovoltaic solar power systems, Amonix received $6 million in federal tax credits and a $15.6 million grant from the U.S. Department of Energy to build the plant in North Las Vegas.

Okay, so now we have evidence the Administration knew Solyndra was going under and subordinated the interests of taxpayers, in an apparent violation of the law, so that a bundler would get his money back and taxpayers would get stuck with the loss.

Solyndra was quite brazen about its government-centric business strategy, as this email from CEO Chris Gronet demonstrates.

Read it all and tell me this does not at least appear criminal.

http://cdn-files.soa.org/web/research-cost-newly-insured-infographic.pdf

At least it is not higher costs for everyone!

bbauska wrote:http://cdn-files.soa.org/web/research-cost-newly-insured-infographic.pdf

That's really interesting. As I read it what this is saying is that claims costs to insurers are going to go up, which makes perfect sense: if you are suddenly adding all these uninsured people into the private insurance system, some of them are actually going to start using it and claims will rise, significantly in places where there are a lot of uninsured people.

What's curious to me, is why does the ACA cause claims to drop in the Northeast? I understand that Medicaid/care are more generous there, so is that a part of it? And why are there such differences by state? Wisconsin sees an 80% increase, but Iowa is less than 10, what's up with that? Would like to know more about the numbers and assumptions behind this.

I thiink in the Northeast much of this coverage was already mandated by state law. In other words, in Mass we already cover pre-existing conditions. It may be negative because they are including the "doctor fix" in their numbers, but it is highly unlikely that the doctor fix will actually be implemented.

The loans to Fisker have been in the spotlight.

http://www.theatlanticwire.com/business ... ure/64544/

the government is not good at venture capital.

ray

the government is not good at venture capital

Compared to what? depending on your source, the failure rate of venture capital companies is between 75% and 90%. Usually 90% in the high tech area.

http://online.wsj.com/article/SB1000087 ... 29190.html

http://www.statisticbrain.com/startup-f ... -industry/

Fisker was part of the DOE Loan program wasn't it? They've had two, and now three high profile, failures... But as a percentage return, so far, they've been a ;lot better than private capital. And remember the venture capitalist says he only needs one big winner to pay for the 9 losers .... and still make out. So far, the DOE program is doing okay as an investor. If it has also added knowledge and industry culture to the nation from its failures thats a benefit as often that creates innovation from the particiapants from other applications in the area...

The DOE Loan program has three parts, two of which were established in the George W. Bush administration and one of which was established in the Obama administration," Former DOE Director of Financing for Energy Efficiency and Renewable Energy and Capital E President Gregory Kats testified to Congress earlier this year.
The first part was a 2005, $10.3 billion Bush program “with two nuclear commitments.” The second was a 2007, five-loan, $8.4 billion program for “advanced technology vehicles manufacturing.” The third was part of the 2009 American Reinvestment and Recovery Act.
“Like other loan guarantee programs, Kits told Congress, the grants were provided “with the expectation that most funded projects would succeed commercially but that some would not.”
As of early 2012, Kits said, the program “approved 28 loans worth $16.1 billion dollars, and has so far experienced two highly publicized defaults (both in the fall of 2011): Solyndra and Beacon. These loans were for $535 million and $43 million, respectively.” The total defaults, he said, “are likely to net out to $300 million to $400 million. This is roughly 2 percent of the amount guaranteed.”

http://www.greentechmedia.com/articles/ ... -and-loans

geojanes wrote:What's curious to me, is why does the ACA cause claims to drop in the Northeast? I understand that Medicaid/care are more generous there, so is that a part of it? And why are there such differences by state? Wisconsin sees an 80% increase, but Iowa is less than 10, what's up with that? Would like to know more about the numbers and assumptions behind this.

It most likely has to do with level of existing coverage requirements. For example, PA by state law requires any health insurance offered in state to cover Autism Spectrum Disorder testing and some levels of services. Therefore, if the ACA requires that coverage, it will not cause an increase in PA but will in another state that does not require it.

Ricky, the difference is that the gains go to the company, but the losses are socialized. However, with real VCs, the VC gets their money back with a healthy profit when they are successful. And when there are losses, it's not the taxpayer's problem. Too bad the government can't use the $500 million they gave to Solyndra to air trafic controllers.

ray[
quote]Ricky, the difference is that the gains go to the company, but the losses are socialized. However, with real VCs, the VC gets their money back with a healthy profit when they are successful. And when there are losses, it's not the taxpayer's problem. Too bad the government can't use the $500 million they gave to Solyndra to air trafic controllers.[/quote]

Actually, when a VC loses his investment, he writes it off his corporate earnings and is taxed lower. So to an extent the loss is indeed "socialized".
You are also assuming that the loan guarantees under the DOE program are free. They aren't. Should the company move to profitability they have to pay the loans back, with interest. Or the government owns shares in the company that they can sell. TO really analyze the investment success of the program, you'll have to include the revenue from the companies that do work themselves to a viable position.
You will also acknowledge that all of the Solyndra employees also paid taxes, and the economic activity created spin off taxes and benefits?
Moreover, you didn't really address the issue of governments ability to make good investments. Compared to private VCs the program has been pretty successful. If it does succeed in helping create a competitive alternative energy sector in the US, it will pay off remarkably well. That jury is probably still out.
But thats the essential measuring stick that really should be applied. After all the program is working in an area where the VC community didn't have the capacity to fund a large economic development.... Not unlike many other successful government investments in the US energy sector like the Tennessee Valley Authority - for instance.

rickyp wrote:Actually, when a VC loses his investment, he writes it off his corporate earnings and is taxed lower. So to an extent the loss is indeed "socialized".

Fine, but a venture capital company that invested primarily for ideological purposes and consistently invested in obvious losing ventures would not last too long.

You will also acknowledge that all of the Solyndra employees also paid taxes, and the economic activity created spin off taxes and benefits?

Um, just think what MIGHT have been done with the money instead. Imagine if the market was allowed to work instead of the political hacks of the Administration investing and reinvesting in a loser. Remember--they were the morons who agreed to let Obama's buddies get in line in front of the taxpayers, which just happened to be a violation of the law.