Wednesday, March 21, 2012

Alternative Energy Farce: US Taxpayers Subsidizing First Solar to Sell Solar Panels to Itself

From Washington Examiner (3/18/2012; emphasis is mine):

Firm sells solar panels - to itself, taxpayers pay

by Timothy P. Carney

A heavily subsidized solar company received a U.S. taxpayer loan guarantee to sell solar panels to itself.

First Solar is the company. The subsidy came from the Export-Import Bank, which President Obama and Harry Reid are currently fighting to extend and expand. The underlying issue is how Obama's insistence on green-energy subsidies and export subsidies manifests itself as rank corporate welfare.

Here's the road of subsidies these solar panels followed from Perrysburg, Ohio, to St. Clair, Ontario.

First Solar is an Arizona-based manufacturer of solar panels. In 2010, the Obama administration awarded the company $16.3 million to expand its factory in Ohio -- a subsidy Democratic Gov. Ted Strickland touted in his failed re-election bid that year.

Five weeks before the 2010 election, Strickland announced more than a million dollars in job training grants to First Solar. The Ohio Department of Development also lent First Solar $5 million, and the state's Air Quality Development Authority gave the company an additional $10 million loan.

After First Solar pocketed this $17.3 million in government grants and $15 million in government loans, Ex-Im entered the scene.

In September 2011, Ex-Im approved $455.7 million in loan guarantees to subsidize the sale of solar panels to two solar farms in Canada. That means if the solar farm ever defaults, the taxpayers pick up the tab, ensuring First Solar gets paid.

But the buyer, in this case, was First Solar.

A small corporation called St. Clair Solar owned the solar farm and was the Canadian company buying First Solar's panels. But St. Clair Solar was a wholly owned subsidiary of First Solar. So, basically, First Solar was shipping its own solar panels from Ohio to a solar farm it owned in Canada, and the U.S. taxpayers were subsidizing this "export."

First Solar spokesman Alan Bernheimer defended this maneuver, saying this really was an export, pointing out that First Solar paid sales taxes on the transaction.

But this subsidy undermines the arguments for Ex-Im's existence. Ex-Im, whose authorization expires May 31, is supposed to be a job creator, helping U.S. manufacturers beat foreign manufacturers by having U.S. taxpayers backstop the financing.

"It is critical that we encourage more American companies to compete in the global marketplace," Ex-Im Chairman Fred Hochberg said about the First Solar deal, saying the subsidy "will boost Ohio's economy, create hundreds of local jobs and move us closer to President Obama's goal of doubling U.S. exports by the end of 2014."

The implication here is that First Solar was "competing" with foreign solar panel makers in order to sell solar panels -- to First Solar.

This isn't the first time Ex-Im has subsidized companies selling to themselves. In late 2000, for instance, the ill-fated power giant Enron won a $132 million direct-loan package from Ex-Im (that is, from the taxpayers) in order to sell "engineering services & process equipment" to a Venezuelan power company owned 49.25 percent by Enron. Enron was both the buyer and the seller in a 1995 sale to Turkey that Ex-Im financed through a $250 million loan.

Enron's healthy feedings at Ex-Im's trough before its bankruptcy also help poke holes in another Ex-Im defense: that it operates at no cost to taxpayers.

Sure, as long as the foreign buyer pays off the debt, then Ex-Im's loans and guarantees don't increase the deficit. But Fannie Mae and Freddie Mac were profitable for years, too, before they failed and taxpayers had to bail them out. Once foreign governments and foreign companies start defaulting, taxpayers pick up the tab. At least one Enron deal resulted in U.S. taxpayers contributing to the Enron bankruptcy fund. Also, Ex-Im has ended up owning a 747 after Air Nauru failed to make its payments because the island nation's economy -- dependent on seagull droppings -- went under.

This week, First Solar unloaded its St. Clair solar farm to NextEra Energy, and so First Solar's financial troubles don't threaten to put the taxpayer on the hook for this deal. But the Ex-Im subsidy itself was a great case in point as to how national industrial policy pitched in the name of helping the U.S. economy often does nothing to help the broader economy, instead helping only those companies lucky -- or politically connected -- enough to get the handouts.

Obama, Reid and most of the Republican leadership want to reauthorize Ex-Im this month and boost the amount of debt it can have outstanding. The lobbyists at Boeing, the Chamber of Commerce and the National Association of Manufacturers agree. They'll claim Ex-Im is crucial to prosperity. And for a few companies, it is.

First Solar (ticker symbol FSLR) was a darling of Wall Street until about the beginning of last year. The stock's all-time high was in mid 2008 when it hit above $300 a share. By January 2011 the share price had dropped to about $150. Then, a tumble below $100 started in September 2011, and the share now trades at $26, less than one-tenth of the all-time high.


Anonymous said...

Better to subsidise the Solar industry than the uranium mining industry.

"Virginia Uranium is seeking a public subsidy to cover the risks associated with their venture. This could result in a scenario not unlike the recent public bailout that covered the sub-prime loan risks taken by mortgage banks."
From -

Morbid said...

I see nothing wrong in trying to get Solar going big time.

The oil subsidies in the form of tax breaks run around $10 BILLION a year.

I am very much in favor of renewables.

First Solar said...

After reading Tim Carney’s column, “Firm sells solar panels - to itself, taxpayers pay,” or the summary posted here, readers might assume that First Solar sold panels to itself, and that taxpayer money was at risk. Neither is true. Though Ex-Im Bank did originally propose a financing arrangement to support the export of solar panels from our 1,250-worker Ohio factory to the project in Canada, the transaction recently closed without Ex-Im financing. No taxpayer money was involved. The owner of the solar panels, and the Canadian project they were exported to, is one of the world’s leading renewable energy investors, NextEra. And while Carney implies this was a hasty transaction, it was announced in 2010 ( Carney also references $15 million in loans from Ohio, but those loans went to another manufacturer in no way related to First Solar. Finally, just to be clear, the solar panels are being used in a solar farm, not a wind farm, as Carney wrote. Such wanton disregard for the facts do the readers of The Examiner and this blog a disservice.

Ted Meyer
VP, Communications
First Solar

Anonymous said...

A rose by any other name, Teddy.

STeVe the JeW said...

shorting first solar has becomae a cottage industry.

Anonymous said...

NextEra "operates clean, emissions-free nuclear power generation facilities in New Hampshire".

Until something goes wrong! Then the Emissions will be free to everyone in New Hampshire like they are in Fukushima.

Such wanton disregard for the earth!

Richard said...

I, for one, must say thanks to Ted Meyer for contributing a reply to this blog and enenews.

It's the first time I've seen any indutry spokesperson make a direct comment to the blog-o-sphere. I've certainly never seen a response from the nukers.

So First Solar and Ted get kudos for both replying and being in the solar industry.

Of course, that doesn't discount possible pork-barrelling, nor do I approve of it. But at least Ted and FS have tried to contribute and/ or explain.

Like all MSM media articles (ie, The Examiner), they cannot be trusted. I'm giving Ted and FS a great big benefit of doubt and wish them every success in the future, please be legit. And continue to be in discussion where it applies.

Anonymous said...

The "nukers" and the solar industry are already in the same bed. So Ted's in bed with the likes of Tepco.

Nancy said...

Wherever there is taxpayer money to be had someone will be all over a way to get as much of it as they can possibly get away with. At least solar panels won't blow up and kill people.

arevamirpal::laprimavera said...

@Nancy, they may not blow up, but farmland in China got heavily contaminated by the Chinese solar panel manufacturers who dump the toxic waste on the land. Farmers cannot eat what they grow, cannot sell. People are getting sick and dying.

Mike said...

First Solar did persuade Exim to provide an $84.3 million loan for a sale of solar cells to India. On March 4, 2012, First Solar admitted its technology was unsuitable for hot climates. This story does not appear to involve the elements of self-dealing disputed above, but it certainly does raise questions about the standards of due dilligence applied by Exim to transactions with politically favored companies.

Anonymous said...

The "politically favored campanies" could read, "companies with links to the nuclear industry" As in NextEra's case.

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