Unfortunately, the disasters keep on coming faster than we can review them. Today, we will review the three latest collapsed efforts, starting with A123:
1) According to an October 16, 2012 Bloomberg news article, A123 Systems Inc. an electric car battery maker, has filed for bankruptcy and said it would sell its automotive business assets to another company. A123 just happens to be a company that received a $249.1 million Federal grant, not a loan or loan guarantee, so that the potential of recovering any of that taxpayer wealth is quite small.
In the bankruptcy filing, the company said that it will sell off its remaining assets for $125 million. Thus, the market value of the company is only about half of what the government gave it to operate. It is not a good investment when the initial value of your investment is down about 50% in just three years, during the time period that the stock market experienced significant positive gains.
Additionally, the company listed assets of $459.8 million and debt of $376 million as of Aug. 31 in the Chapter 11 bankruptcy documents, a difference of $83.8 million, one third the value of the taxpayer investment. Terrible, terrible waste and investment of taxpayer money for nothing in return.
How terrible? According to Bloomberg, the company has had 14 consecutive quarters of negative financial results and its stock has fallen about 85% in just the past year. That terrible. But just another “bump in the road" as the Obama administration likes to categorize its failings.
2) Recent news reports indicate that the Internal Revenue Service and Treasury Department's inspector general are investigating and auditing SolarCity, another solar energy company that has received taxpayer wealth from the Energy Department’s many corporate welfare programs. The issue being investigated is whether or not Treasury Department inappropriately give stimulus money to the company.
President Obama's economic stimulus program converted a long-standing tax credit for renewable energy investment into a direct grant from the Treasury Department worth 30% of a company's investment in a renewable energy project. SolarCity has applied for approximately $325 million in these stimulus grants, according to the SEC filing.
The specific potential criminal or ethical act is whether or not SolarCity repeatedly overstated the value of its renewable energy investments, according to the SEC filings indicate. The Treasury department had awarded smaller grants than SolarCity had tried to claim. Now the department's inspector general and the IRS are doing a broader audit of all the projects for which SolarCity and other large solar companies got stimulus cash. Investigators want to know if the companies regularly overstated the value of their investments and thus received overly generous taxpayer grants.
By the way, SolarCity is owned and operated by Elon Musk, a California businessman. You may recognize the name from previous posts in this blog. Mr. Musk is also the primary owner of Tesla Motors, the electric car company that has already received nearly a half a billion dollars of taxpayer wealth to help finance the Tesla operation, the purpose of which is to make all electric cars that will be out of the financial reach for except the richest Americans. Mr. Musk, no unexpectedly, has been an often and generous campaign contributor to President Obama in the past.
3) And what would a review of solar energy wasteful spending be without the latest insult form the Solyndra mess? According to a recent Wall Street Journal editorial:
- The Solyndra Federal loan guarantee has already cost the American taxpayer about $530 million. Is that the end of the misery?
- According to the Journal piece: “No such luck. In the latest twist, Solyndra's investors could be rewarded for their failure, thanks to a tax benefit the Administration handed out in a bid to evade political accountability.”
- It turns out that the Internal Revenue Service recently objected to Solyndra's Chapter 11 reorganization, claiming its "principal purpose is tax avoidance."
- How can a bankrupt company with no sales or revenue avoid taxes? According to the IRS analysis, the only real assets Solyndra still has left are what the IRS calls "tax attributes."
- These tax attributes are estimated to be between $875 million to $975 million in net operating losses that can reduce future taxable income by as much as $350 million.
- Since tax-loss carry-forwards are worthless if a company doesn’t have profit’s, the IRS is challenging the position held by Solyndra's owners who are requesting the bankruptcy court to liquidate the rest of the business and contribute a net $6.7 million to pay off creditors for pennies on the dollar.
- And then magically, out of the Solyndra corpse, a holding company would then arise of the bankruptcy that would not make any products, but would receive the tax benefit.
- Thus, the owners and operators of the new shell company could use the tax losses against other tax gains. Out of a business failure comes tax advantages, only in America.
Thus, even when an Obama backed company fails and dies, political cronies of this President still seem to come out ahead at the expense of the American taxpayer.
More waste of taxpayer wealth, more political cronies of the President that get enriched for failures, and nothing back to society of any worth in the alternative energy field. Unfortunately, just another business as usual day in Washington D.C., the home of wannabe, but failed, venture capitalists.
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