There is some food for thought in the world of alternative energy against the hatred of banks. It is a very painful observation, but it is turning out to be that the government may have done far better financially by backing the banks with rescue loans than in its loan guarantee efforts in alternative energy.
Earlier this year came reports that the publicly hated Troubled Asset Relief Program (the TARP) was going to generate some $24 billion in profits for the Treasury Department. Some immediately challenged the math on how that profit was tallied up, but the wave of bankruptcies in DOE-backed loan guarantees is currently creating a dilemma that only heats up the debate between environmental issues and capitalism. With the exception of American International Group, Inc. (NYSE: AIG), the “too big to fail” institutions have by and large paid Uncle Sam back what was borrowed under the TARP.
The DOE website shows some $35.9 billion in total loans over nearly 40 projects since 2009 which were listed as being able to create some 60,000 jobs, and which could provide enough clean electricity to power three-million homes with a claim of saving some 300-million gallons of gasoline each year.
The problem is that the half-billion dollar loan to Solyndra in California was the worst investment made in alternative energy. Other bankruptcies from Evergreen Solar and Beacon Power Corporation (NASDAQ: BCON) have only added more public scrutiny over how financially feasible many alternative energy companies are.
Prologis, Inc. (NYSE: PLD) may be an unlikely “green company” in office warehouse operations, but it was adding solar panels to the roofs of its warehouses throughout most of the nation where it could generate power for use or resale back into the grid. These projects appear all over the DOE loan guarantee map of the United States.
Ford Motor Co. (NYSE: F) is supposed to be the most publicly appreciated car company in America because it did not take any government bailouts while General Motors Corp. (NYSE: GM) still has Uncle Sam owning a large part of the company. Under the ATVM loan guarantees seen, Ford was listed on the DOE program site as having had just over $5.9 billion from a 2009 guarantee and Tesla Motors, Inc. (NASDAQ: TSLA) was given part of an ATVM loan program in early 2010, .
US Geothermal Inc. (AMEX: HTM) is another troubled sub-$1.00 stock and it has received $97 million in DOE loan guarantees. It was as recently as the end of this August that the company noted the first funding drawdown under the $96.8-million loan guarantee to construct its planned 23-megawatt-net power plant at Neal Hot Springs in Eastern Oregon.
Others in Solar deals which have either directly received loan guarantees or which were shown to be working in the projects over the last year or so were SunPower Corporation (NASDAQ: SPWRA) and First Solar Inc. (NASDAQ: FSLR). First Solar noted at the end of September that the Topaz Solar Farm project will not meet the statutory deadline to receive a federal loan guarantee from the DOE.
Bank of America Corporation (NYSE: BAC) does not have any of that TARP money in it, and its shares are the worst performing by far of all of the money-center banks deemed as “too big to fail” with a drop of 56% from its 52-week high. First Solar is down about 74% from its 52-week high and SunPower is down about 60% from its 52-week high. Those losses are quite common throughout almost the entire solar and alternative energy sector.
The U.S. Green Building Council touts on its website that a study from Booz Allen Hamilton was released by USGBC in November 2009 predicting that green building would support or create 7.9 million jobs between 2009 and 2013 and would contribute $554 billion to the gross domestic product. That seems a bit impossible now… Doesn’t it?
It has been sad to see and it is nearly painful to say, but Uncle Sam has at least so far proven to be a better fiduciary of investing in the banking sector than it has in picking alternative energy companies. Maybe that will change in the quarters ahead, or maybe not. We are talking about the government after all.
JON C. OGG