OMB spokeswoman Moira Mack said the agency’s career staff members, who were responsible for calculating the cost of the proposed restructuring, ultimately determined that the Energy Department’s approach was reasonable, considering the information available at the time.
On Wednesday, the House energy committee passed the No More Solyndras Act, which would wind down the Energy Department’s loan guarantee program for clean-energy initiatives, require greater transparency and prohibit the department from restructuring loan guarantees without consulting Treasury Department officials.
Documents show that in January 2011, when Solyndra was in technical default on its loan, OMB analyst Kelly Colyar concluded that if the company were immediately liquidated, taxpayers would lose $141 million. If the loan were restructured and more money were released to Solyndra, she estimated, a subsequent default would cost taxpayers $385 million. The loss was attributable in part to allowing private investors to recover some of their money first.
Colyar said in e-mails that the Energy Department appeared to be giving away its “upper hand” in financing negotiations with private investors, creating additional risk. At the time, Solyndra had failed to meet the terms of its loan and was on the edge of bankruptcy because disbursements from the loan had been frozen.
Colyar said in one e-mail that she was “vastly confused by DOE’s decision to negotiate away their senior position in this transaction.” She also questioned whether the Energy Department underestimated how much taxpayers could recoup if the company were shut immediately and its California factory sold. The proceeds of an immediate sale would be “significantly HIGHER than DOE’s estimate,” she wrote in a January 2011 e-mail, meaning that the government “is better off liquidating the assets today than restructuring under DOE’s proposal.”
Colyar could not be reached for comment Wednesday.
A colleague at the OMB agreed, saying the analysis “confirms our earlier concern that DOE’s restructuring could effectively result in higher costs than liquidation.” He added that, given the project’s high visibility, “DOE is likely to be very sensitive about optics if it should default.”
OMB analysts also questioned whether the bailout would be enough to save Solyndra, considering that cheap solar panels from overseas had begun flooding the market. “With increasing competition from China, and other low-cost competitors, it wasn’t clear how Solyndra would be able to achieve the scale-up and margins needed” to survive, one e-mail said.