DOE Deals Another Bad Energy Loan as Beacon Power Files for Bankruptcy
November 1, 2011 10:03 AM
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Beacon Power received a nearly $43 million loan guarantee from the government in August 2010
The Solyndra failure has put alternative energy loans in a negative light as of late, and now the financial failure of yet another renewable energy company is here to add insult to injury. Beacon Power has claimed bankruptcy after
receiving government loans
Beacon Power, which creates flywheels to store power and
increase grid efficiency
by preventing blackouts, filed for bankruptcy protection on Sunday. The company received a nearly $43 million loan guarantee from the Department of Energy in August 2010.
More specifically, Beacon Power owes the Department of Energy $39.1 million and the state of Massachusetts $3.45 million. It received these loans because its technology was seen as aiding grid reliability.
Rep. Cliff Stearns (R-FL), who is leading the recent Solyndra investigation, was quick to attack the Department of Energy with its decision to give not just one bad alternative energy loan, but now two.
"This latest failure is a sharp reminder that DOE has fallen well short of delivering the stimulus jobs that were promised," said Stearns. "Now taxpayers find themselves millions of more dollars in the hole."
The Department of Energy defended its position with Beacon Power, saying that unlike Solyndra, Beacon Power has an operational facility in Stephentown, New York. Solyndra may have closed down completely the day it claimed bankruptcy, but Beacon Power has long term contracts with the Stephentown facility as well as cash reserves, which can be used to pay the government back.
"Protecting taxpayer dollars remains the top priority for Secretary [Stephen] Chu and the Department, which is why we were careful to include many protections for the taxpayer in the loan guarantee for the Stephentown project," said Damien LaVere, DOE spokesman.
While analysts such as Walter Nasde of Ardour Capital believe Beacon Power's technology was a good idea,
reports that the company couldn't survive due to the low rates that the government put in place for utilities. In other words, Beacon Power couldn't charge utilities any more than the rates the government set, and it wasn't enough to keep Beacon Power alive.
The low price of natural gas for generating additional power, its failure to attract investors, and an issue with one of its flywheels in July were also listed as nails in Beacon Power's coffin. In addition, Beacon Power's shares, which were down to $3.44 at the end of February and were recently at below $1 a share, led to a notification from NASDAQ that Beacon would be delisted. The company's shares traded for as much as $47.40 in 2005, but closed Monday at 10.7 cents a share, which gives Beacon Power a market value of $3 million.
"The current economic and political climate, the financing terms mandated by DOE, and Beacon's recent delisting notice from NASDAQ have together severely restricted Beacon's access to additional investments through the equity markets," said Beacon Power CEO William Capp.
Beacon Power's revenues from the Stephentown plant were $525,000 in Q2 2011.
Back in September, Capp described the government's role in supporting the construction of the Stephentown plant, and how it would have been impossible without the loan.
"We absolutely couldn't have done it without
support from the government
, because no one was willing to do it," said Capp. "The projects are so huge, that's the problem. If you demonstrate an energy technology on a grid scale, that's $100 million."
The Beacon Power bankruptcy echoes
Solyndra's recent failure
, which is a solar panel manufacturer that received $535 million in loan guarantees back in 2009. Solyndra filed for bankruptcy two months ago, and there is an investigation looking into whether DOE properly assessed the risks before giving the loan and whether the Obama administration was pushing the loan despite risks in order to meet political deadlines.
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RE: Just give me back my tax money
11/1/2011 11:42:02 AM
If you want to allow the Gov. to piss away your money that's fine with me, but they don't have my permission to piss away my tax dollars. I fully agree that the banks, oil industry and many other entities are criminal and should not receive our tax dollars, tax breaks, etc. but that does not make the $550 million pissed away on two bad loads acceptable to me. Just give me back my tax money and the Gov. can do whatever they chose with YOUR money. <LOL>
"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg
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