[Debate] World's Largest Solar Plant, With Second Largest Ever Department of Energy Loan Guarantee, Files For Bankruptcy

Riaz K Tayob riaz.tayob at gmail.com
Tue Apr 3 07:53:52 BST 2012


  World's Largest Solar Plant, With Second Largest Ever Department of
  Energy Loan Guarantee, Files For Bankruptcy

Tyler Durden's picture <http://www.zerohedge.com/users/tyler-durden>
Submitted by Tyler Durden <http://www.zerohedge.com/users/tyler-durden> 
on 04/02/2012 20:14 -0400


Solyndra was just the appetizer. Earlier today, in what will come as a 
surprise only to members of the administration, the company which 
proudly held the rights to the world's largest solar power project, the 
hilariously named Solar Trust of America 
<http://solartrustofamerica.com/>("STA"), filed for bankruptcy. And 
while one could say that the company's epic collapse is more a function 
of alternative energy politics in Germany, where its 70% parent Solar 
Millennium AG filed for bankruptcy last December, what *is *relevant is 
that last April STA was the proud recipient of a $2.1 billion 
conditional loan from the Department of Energy, incidentally the second 
largest loan ever handed 
<http://gigaom.com/cleantech/doe-offers-2-1b-loan-guarantee-for-giant-solar-farm/>out 
by the DOE's Stephen Chu. That amount was supposed to fund the expansion 
of the company's 1000 MW Blythe Solar Power Project in Riverside, 
California. From the funding press release, "This project construction 
is expected to create over 1,000 direct jobs in Southern California, 
7,500 indirect jobs in related industries throughout the United States, 
and more than 200 long-term operational jobs at the facility itself. *It 
will play a key role in stimulating the American economy,"* said Uwe T. 
Schmidt, Chairman and CEO of Solar Trust of America and Executive 
Chairman of project development subsidiary Solar Millennium, LLC." 
Instead, what Solar Trust will do is create lots of billable hours for 
bankruptcy attorneys (at $1,000/hour), and a good old equity extraction 
for the $22 million DIP lender, which just happens to be NextEra Energy 
Resources, LLC, *another *"alternative energy" company which *last year 
received a $935 million loan 
<http://www.nexteraenergyresources.com/news/contents/2011/082611.shtml>courtesy 
of the very same (and now $2.1 billion poorer) Department of Energy*, 
which is also a subsidiary of public NextEra Energy (NEE), in the 
process ultimately resulting in yet another transfer of taxpayer cash to 
NEE's private shareholders.

As Bloomberg notes 
<http://www.bloomberg.com/news/2012-04-02/solar-millennium-s-u-s-units-file-for-bankruptcy-protection-1-.html>: 
"The company joins Energy Conversion Devices Inc., a U.S. solar 
manufacturer that suspended production last year; LSP Energy LP, the 
owner of a natural-gas-fired power plant in Mississippi; Ener1 Inc., 
maker of lithium-ion batteries for plug-in electric cars; solar-panel 
maker Solyndra LLC; and energy storage company Beacon Power Corp. 
(BCONQ) in bankruptcy."

And so central planning fails again, and again, and again, and again. 
But it sure will be better with the centrally planned monetary (and in 
the absence of a working Congress - also fiscal) policy. Because this 
time it really will be different.

 From Reuters 
<http://newsandinsight.thomsonreuters.com/Legal/News/2012/04_-_April/Solar_Trust_of_America_files_bankruptcy/>:

    Solar Trust of America and several affiliates filed for protection
    from creditors with the U.S. bankruptcy court in Delaware. It
    estimated to have as much as $10 million of assets, and between $50
    million and $100 million of liabilities.

    Blythe is about 220 miles (354 km) southeast of Los Angeles.

    "We have been working with Solar Trust of America for a couple of
    years in getting this project going," David Lane, Blythe's city
    manager, said in an interview. "Although the project is not in the
    city limits, we are the only city within 100 miles. My sense is that
    with the large investment in what was to have been the world's
    largest solar power plant, someone somewhere will buy it and build it."

At least someone's reputation will be tarnished as a result of this 
latest epic failure of the Obama administration to misallocate capital :

    Solar Millennium said it has been sued by former Chief Executive Utz
    Claassen over public statements by company representatives that he
    claims have damaged his reputation and left him unable to find a
    job. Solar Millennium said the lawsuit would not directly affect its
    insolvency proceedings.

Two people, however, who won't be humiliated at all are California 
Governor Jerry Brown, and Secretary of the Interior Ken Salazar, who 
reprise the role of Joe Biden, last seen praising not only MF Global's 
Jon Corzine <http://www.youtube.com/watch?v=xm3VMrKqJSA>, but that other 
epic administration failure: Solyndra 
<http://www.thedailyshow.com/watch/thu-september-15-2011/moment-of-zen---joe-biden-on-solyndra>. 
Watch them praise the groundbreaking for the Blythe facility.

Epic embarrassment. And not even a full year ago.

But before that, of course, we had the funding of the plant with a $2.1 
billion loan guarantee from the US Department of Energy, the second 
largest ever, smaller only than Georgia Power's $8.33 billion loan 
guarantee <https://lpo.energy.gov/?page_id=45>.

 From the DOE:

    U.S. Energy Secretary Steven Chu today announced the offer of a
    conditional commitment for a $2.1 billion loan guarantee to support
    Units 1 and 2 of the Blythe Solar Power Project, sponsored by Solar
    Trust of America, LLC. The concentrating solar thermal power plant
    includes two units comprising a combined 484 megawatt (MW)
    generating capacity, an eight-mile transmission line and associated
    infrastructure. The project will be built adjacent to the City of
    Blythe in Riverside County, California and is expected to create
    over 1,000 construction jobs and approximately 80 operations jobs.
    The plant is estimated to avoid over 710,000 tons of carbon dioxide
    emissions annually, equivalent to the annual greenhouse gas
    emissions from over 123,000 vehicles.

    "Loan guarantees play an important role in facilitating the
    development and deployment of innovative technologies at massive
    scope and scale," said Secretary Chu. "Continued investments like
    this project make solar power more efficient and cost competitive
    while creating thousands of jobs and strengthening the economy."

    "California is the national leader in clean energy, and our great
    state is poised to become the world leader in renewable energy
    generation," said Governor Jerry Brown. "I commend President Obama
    and Secretary Chu for making another major investment in California."

    "This clean energy project will create more than 1,000 jobs and
    strengthen the economy of Riverside County. Investments like this
    one are critical to reducing America's dangerous dependence on
    foreign oil, protecting our children from pollution and creating
    clean energy jobs here in California," said Senator Barbara Boxer.

And while we do not know just how much the government will have to pay 
out of pocket, we do know that STA had at least $50 million in debt at 
filing.

What we do know for sure is that at least the firm's financial advisors 
made money on the deal. From the company's Investors 
<http://solartrustofamerica.com/investors/index.html>page:

    *World-Class Financial Advisors*

    	
    	

    In October 2009 Solar Trust engaged Citigroup Global Markets Inc.
    and  Deutsche Bank Securities, Inc. as advisors to assist in
    securing more than $6 billion in financing for construction of the
    company's solar  power plants in California and Nevada.*Citigroup
    and Deutsche  Bank are also providing advisory services for Solar
    Trust's efforts to  develop models for debt and equity project
    financing for  its solar power plant projects. *

Great job there Citi and Deutsche: can you please advise us how much in 
taxpayer cash you received as part of your incalculable "advice" please?

Also, as noted earlier on, as part of its first day filings, the company 
was prompt announce the procurement of DIP funding (link), which will 
come in the form of a $22.3 million secured loan (against what assets?) 
at Libor + 800bps, courtesy of NextEra Energy Resource, LLC. The same 
NextEra featured in the following press release:

    *NextEra Energy Resources' subsidiary closes on $935 million
    financing and secures a DOE loan guarantee for its Genesis solar
    project*

    JUNO BEACH, Fla. -- NextEra Energy Resources, LLC, announced that
    its subsidiary, Genesis Solar, LLC, has closed on construction and
    term financing consisting of $702 million in project bonds, a $150
    million project term loan facility and an $83 million project letter
    of credit facility. The U.S. Department of Energy has provided a
    loan guarantee of 80 percent of the principal and interest on the
    project bonds and project term loan under its Financial Institution
    Partnership Program. Proceeds from the financing will be used
    primarily for the construction of the Genesis project, a
    250-megawatt utility-scale concentrating solar thermal generating
    facility featuring proven parabolic trough solar thermal technology,
    located in Riverside County, Calif.

    "This financing marks a significant milestone in the development of
    the Genesis project," said Armando Pimentel, executive vice
    president and chief financial officer of NextEra Energy, Inc., the
    parent of NextEra Energy Resources. "We are very pleased with both
    the strong investor reception for this financing, which we view as a
    validation of our solar development efforts, and the receipt of a
    loan guarantee from the Department of Energy Loan Programs Office."

That's right: one ward of the state, bailing out another ward of the 
state, all to reduce those evil carobn emissions. Although that is not 
all. NextEra is also a subsidiary of the publicly traded, albeit with 
very private investors, NextEra Energy (NEE). Which means that every 
dollar extracted out of Solar Trust via the DIP, and ultimately via a 
Credit Bid in which NextEra will acquire the STA assets at pennies on 
the dollar, will go straight to NEE's shareholders. Who are these 
shareholders you ask? Here they are: spot the odd one(s) out.

<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/03/NEE%20Holders.jpg>

And that is how in crony America taxpayer money goes from one insolvent 
pocket, to another, to Wall Street, all under the guise of idealistic 
pursuits and clean energy.

There is more to this story but we will stop here as we have had enough.

/For those interest here is the first day affidavit 
<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/03/Solar%20Trust%20Affidavit.pdf>, 
as well as the DIP term sheet 
<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/03/Solar%20Trust%20DIP%20Term%20Sheet_0.pdf>. 
And the last time we saw an Org Chart this fun 
<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/03/Org%20Chart.jpg>, 
the company's name started with En and ended in ron./

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