Wednesday, November 2, 2011

Another bankruptcy for Obama's green energy program

Energy program suffers new blow 11/1/11


A Massachusetts energy company that received a $43 million U.S. loan guarantee has filed for bankruptcy protection, in a new black eye for the Obama administration's clean-energy program following the collapse of solar-panel maker Solyndra LLC two months ago.

Dow Jones Newswires Reporter Katy Stech has details of Massachusetts-based Beacon Power Corp., which filed for bankruptcy after receiving a $43 million U.S. loan guarantee. AP Photo/Lisa Poole

Beacon Power Corp. used the U.S. backing to build a plant outside Albany, N.Y., designed to store power and help electric companies manage minute-by-minute movements in supply and demand. But the firm said it was operating at a loss and couldn't raise more funds amid the political furor over Solyndra, whose bankruptcy filing could cost taxpayers more than $500 million.

Compared with Solyndra, Beacon's Chapter 11 filing, made on Sunday, will be less costly. The company has drawn down $39 million of its U.S.-guaranteed loan, which carries the New York plant as collateral. Unlike the Solyndra case, in which the government agreed to take second place behind other creditors for some assets, the U.S. has first priority on the Beacon collateral.

Republicans renewed their criticism of the Department of Energy's loan guarantee program. Rep. Cliff Stearns (R., Fla.) of the House Energy and Commerce Committee called Beacon Power's bankruptcy filing "a sharp reminder that DOE has fallen well short of delivering the stimulus jobs that were promised, and now taxpayers find themselves millions of more dollars in the hole."

The White House last week said it had ordered an independent review of the Energy Department program, which has offered final or provisional guarantees for nearly $36 billion in loans to projects in clean energy, electric cars and other areas. The 2009 economic-stimulus bill provided funding for the Solyndra and Beacon guarantees.

Energy Department spokesman Damien LaVera said, "Protecting taxpayer dollars remains the top priority for Secretary [Steven] Chu and the department, which is why we were careful to include many protections for the taxpayer" in the Beacon deal. He said the plant in Stephentown, N.Y., was "operational and generating revenue," making it a "valuable collateral asset."

A Beacon spokesman didn't return calls requesting comment.

Solyndra received $535 million in loan guarantees and had drawn down about $527 million when it filed for bankruptcy protection in September. Mr. Chu is set to testify about Solyndra before the House Energy and Commerce Committee Nov. 17.

Mr. Chu and President Barack Obama have said that failures of some companies in the loan-guarantee program are to be expected because they are working with unproven technologies.

Beacon's plant takes excess electrical energy from the power grid and converts it into the energy of a series of spinning flywheels. It has sought to win contracts from grid operators to supply power when needed to even out the flow of electricity.

Beacon Power was also awarded a $24 million Smart Grid stimulus grant in 2009 to build a plant outside Wilkes-Barre, Pa. That plant hasn't been built yet but could "attract equity capital or be sold on advantageous terms" once it begins operating, the company said in court papers.

Beacon, which employs 65 people and is based in Tyngsboro, Mass., trades on Nasdaq but has been warned by the exchange that it faces delisting. It told investors earlier this year that its survival was at risk if it failed to raise more capital.

"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," Chief Executive F. William Capp said in court papers.

Beacon listed assets of $72 million and debt of $47 million in its Chapter 11 filing.

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