A Tale of Two (More) Bankruptcies

posted at 10:45 am on October 31, 2011 by Ed Morrissey

Stop me if this sounds familiar.  The Department of Energy approves multi-million-dollar loan to green-tech energy firm as part of its job-stimulus bill, only instead of stimulating jobs, the company declares bankruptcy.  In this case, it only took a year after the loan was granted for Beacon Power to file for protection from its creditors:

Beacon Power Corp filed for bankruptcy on Sunday, just a year after the energy storage company received a $43 million loan guarantee from a controversial Department of Energy program.

The bankruptcy comes about two months after Solyndra — a solar panel maker with a $535 million loan guarantee — also filed for Chapter 11, creating a political embarrassment for the administration of President Barack Obama, which has championed the loans as a way to create “green energy” jobs.

Beacon Power drew down $39 million of its government-guaranteed loan to fund a portion of a $69 million, 20-megawatt flywheel energy storage plant in Stephentown, New York.

Well, who could have seen this coming?  Er … anyone who could read a ledger, apparently:

The Tyngsboro, Massachusetts-based company was spun off of SatCon Technology Corp in 1997 and went public in 2000. It said in documents filed with Delaware’s bankruptcy court that it had $72 million in assets and $47 million in debts.

Beacon currently operates at a loss and its revenues are not enough to support its operations, it said in court documents.

How well did Beacon operate?  NASDAQ delisted the company not too long after getting the DoE loan, and no one else but the DoE was prepared to offer financing for a company that couldn’t turn a profit even with taxpayer-backed loans.  Beacon blames this on the “current political climate,” but it sounds a lot more like the problem is Beacon’s current economic model.

That’s not the only noteworthy taxpayer-backed loan recipient to go under in the last few days.  The other case doesn’t involve a green-tech firm, nor did its loan originate in the Obama administration.  However, it’s a good object lesson in crony capitalism and in regulatory interference.  Open Range promised that it could deliver high-speed Internet access via satellite to isolated, rural areas, but despite having a $267 million line of taxpayer credit, never delivered:

As the government prepares Thursday to commit billions of dollars to bring high-speed Internet to rural areas, the biggest-­ever such project has collapsed.

The company Open Range, backed by a commitment of $267 million in loans from the Agriculture Department, filed for bankruptcy this month. Taxpayers are on the hook for $74 million that the upstart hasn’t repaid. And now the company, some analysts and a senior government official are blaming poor judgment and Washington bureaucracy as the reasons Open Range failed.

Democrats are demanding a probe of Open Range, thinking that the Bush-era loan guarantees will soften the blow of Solyndra and Beacon, among other Obama Porkulus flops.  However, there is more to this story than just the original loan, and the Washington Post points to a regulatory effort to boost an Obama crony.  In order to make its system work, Open Range had to get the FCC to approve waivers for usage of frequency ranges — but the FCC chose a different company to boost instead:

The FCC’s handling of the matter has come under scrutiny by lawmakers partly because the agency promoted a similar venture called LightSquared about the same time it was turning its back on Open Range. Critics of the FCC have accused the agency of favoring LightSquared because it is backed by Democratically connected hedge fund financier Philip Falcone.

“There is clearly the perception of favoritism,” said Tim Farrar, an independent analyst at TMF Associates. Farrar said his consultancy has no financial interests in LightSquared or Open Range’s venture. A similar charge was levied by Globalstar in a recent letter to the FCC.

Readers will remember the LightSquared story, where a 4-star Air Force general accused the White House of pressuring him to change his Congressional testimony to favor the firm, and a second witness got “guidance” to do the same.  The House Oversight Committee is already probing LightSquared’s deal.  What we can say at the moment that having government conduct these loans tends to distort the marketplace, and it’s hardly a coincidence that those distortions end up favoring political allies — at the expense of taxpayers.

UpdateVerum Serum makes a notable catch on the Beacon Power story, which is that the firm was alerted to a possible NASDAQ delisting before the DoE granted the loan:

In mid-September [2009], Beacon received word from NASDAQ that it was out of compliance with the exchange’s minimum trading-price of $1 per share. Beacon Power closed at 72 cents a share the day NASDAQ sent its notice. Beacon said it believes it meets applicable standards, other than the minimum bid price requirement.

So how did Beacon get the loan?  The company spokesman explained in 2009:

Beacon is using the money to develop a 20 MW regulation plant at a site in Stephenton, NY. The site will use several 1 MW flywheels to store energy as well as electrical and technological equipment.

Company spokesman Gene Hunt said Beacon didn’t have financial advisors per se, just its outside law firm of Edwards, Angell, Palmer & Dodge. “We also used our in-house expertise and we have good relationships with our congressional members.

Who needs financial advisers when you have Congressmen in your pocket?  Other than taxpayers, I mean.

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Beacon Power Corp filed for bankruptcy on Sunday, just a year after the energy storage company received a $43 million loan guarantee from a controversial Department of Energy program.

Using other peoples money. That’s why socialism doesn’t work.

dirtseller on October 31, 2011 at 10:49 AM

So what? Did you hear about Herman Cain???

sandee on October 31, 2011 at 10:51 AM

heh. Ed is mertalizing charles Dickens….. Back in 6th grade, I had to memorize that opening 1st page of The Tale of Two Cities—-Great Read and quite appropriate for today’s times. The setting is the French R3V0looshun.

ted c on October 31, 2011 at 10:52 AM

We also used our in-house expertise and we have good relationships with our congressional members.

so did former Congressman Anthony Weiner…so much so, in fact, that he tweeted it frequently.

ted c on October 31, 2011 at 10:54 AM

So, all this money was given to these very financially unsound companies because they were run by Obama cronies? Sounds like a scandal involving the WH to me.

Blake on October 31, 2011 at 10:57 AM

and dear leader has no scandals under his belt
-alter

cmsinaz on October 31, 2011 at 10:57 AM

The actual total is FOUR…

(when you add in Evergreen out of MA.)

singlemalt 18 on October 31, 2011 at 10:58 AM

This thing stinks worse than some old stinky thing.

DuctTapeMyBrain on October 31, 2011 at 11:01 AM

My question is, what happens to this money once all of these companies go bankrupt? Those assets have to be declared and they have to go somewhere? Where do they go, who gets them? That money doesn’t just vanish into the black hole of Democratic coffers? or does it?……

ted c on October 31, 2011 at 11:01 AM

Ed: You need to talk to Jonathan Alter and stop this BS…Obama has no scandals in his administration…

PatriotRider on October 31, 2011 at 11:01 AM

So what? Did you hear about Herman Cain???

sandee on October 31, 2011 at 10:51 AM

Yes I heard the Liberal Media was doing a hatchet job on Cain, using “Anonymous” sources.

I predict whoever this Anonymous may be, will be showing signs of serious stress by the time we vote in November of 2012.

Dr Evil on October 31, 2011 at 11:03 AM

and dear leader has no scandals sandals under his belt bed
-alter

cmsinaz on October 31, 2011 at 10:57 AM

editing for possible accuracy ;)

Dr Evil on October 31, 2011 at 11:06 AM

Company spokesman Gene Hunt said Beacon didn’t have financial advisors per se, just its outside law firm of (John) Edwards, (Hell’s) Angell, Palmer (of Tax Dollars) & Dodge (Responsibility). “We also used our in-house expertise and we have good relationships with our congressional members.”

More accurately…..

Patrick S on October 31, 2011 at 11:07 AM

Change.

visions on October 31, 2011 at 11:12 AM

Holy Carp. This just gets better and better, doesn’t it?

Uh… Hello? Media? ::tap:tap:tap:: Hello?

Book on October 31, 2011 at 11:13 AM

Well, geeezesusss, give these folks a break. It wasn’t like they lost their own money, right?

Bet management all got golden parachutes on the way out, too.

coldwarrior on October 31, 2011 at 11:13 AM

Is there a Republican candidate with the interest and ability to begin the process of getting the federal government out of this subsidy business? The stories keep coming in but there is little meaningful outrage expressed in congress, which is a major culprit in all of this. Every one of these stories could be cited as a reason not to pass any Obama spending bill. Instead, crickets.

GaltBlvnAtty on October 31, 2011 at 11:18 AM

Beacon Power Corp and Solyndra merely the tip of the iceburg?

Bilking the public with the Administration’s consent.

Seems to be standard Chicago practice.

Why are we surprised at all?

coldwarrior on October 31, 2011 at 11:18 AM

A third companie is going under

http://www.cbsnews.com/8301-31727_162-20127308-10391695/another-solyndra-electric-car-battery-maker-facing-financial-hardship/

EnerDel got an Energy Department grant in early 2010 for battery manufacturing in Indiana but the stock of EnerDel’s parent company, Ener1, fell from $4.04 in 2010 to just 9 cents on Thursday. By Friday NASDAQ had pulled the company from its listing leaving the stock at $0.00.

NASDAQ took action after sending the company a notice saying it was out of compliance for failing to file its June 30th financial quarterly filing. The company notified shareholders back in August that two of the company’s quarterly filings “should no longer be relied upon” and the company would have to re-do their financial statements.

William Amos on October 31, 2011 at 11:19 AM

But but but… I did drive up the cost of energy and do substantial damage to what was left the economy!! I just couldn’t make energy costs, you know, skyrocket!! That would have made all these green energy thingies profitable!!

Congress didn’t pass cap and trade!!! Those damned evil skeptics!!! They don’t know what’s good for them!! And what is good for Al Gore!! And what is good for our green energy investor supporters and bundlers!!

Lisa Jackson is doing her best to kill dinosaur energy!! So is Ken Salazar!! And Steven Chu!! Look at how many coal and pil industry employees we have put out of work!! But I can’t do it all by myself from the White House!!!

It’s not my fault!!

“The best laid plans of mice and men…”

novaculus on October 31, 2011 at 11:25 AM

Uh… Hello? Media Propaganda Dept? ::tap:tap:tap:: Hello?

Book on October 31, 2011 at 11:13 AM

More accurately…

platypus on October 31, 2011 at 11:27 AM

Then there is the SEC investigation of this company- ECOtality.

http://blog.heritage.org/2011/10/28/energy-department-backed-company-under-sec-investigation/

Look at the timeline of insider trading Aug 2008-Aug 2009- wonder if there were promises of DOE loans made just in time to get more election money? Wasn’t August/Sept 08 a huge windfall month for his campaign?

journeyintothewhirlwind on October 31, 2011 at 11:33 AM

Booooosh made those loans!! Wha? He di’in’t? WEll, you know that they wanted to…we’re just here cleanin’ up the messes that they left for us, dammit.

ted c on October 31, 2011 at 11:34 AM

We have to get this Administration in check NOW!! Too much money being WASTED!!

Khun Joe on October 31, 2011 at 11:37 AM

Chu’s got lotsa splainin’ to do!!!

Bob in VA on October 31, 2011 at 11:49 AM

Too much money being WASTED!!

Khun Joe on October 31, 2011 at 11:37 AM

Wasted?

No, wasted is what the fiscal wizards over at DoE appear to have been. Wasted is what most of Congress appears to be.

Irretrievably lost is more like it.

Wasn’t their money, so why should they care?

More likely, irretrievably “lost” into the pockets of Dem donors, bundlers and union heads.

coldwarrior on October 31, 2011 at 11:51 AM

Here is Solyndra’s bankruptcy auction…
http://www.hgpauction.com/?auctionid=146

Kermit on October 31, 2011 at 11:53 AM

I predict whoever this Anonymous may be, will be showing signs of serious stress by the time we vote in November of 2012.

I think Anonymous will have their own problems soon.

Trying to take on The Zetas typically doesn’t go well.

teke184 on October 31, 2011 at 12:02 PM

Lets give the OWS campers a share of green energy loans…..

tomg51 on October 31, 2011 at 12:05 PM

What Chu mean?

ultracon on October 31, 2011 at 12:12 PM

LightSquared is also in a major contraversy over its signals interfering with GPS recievers.
Also, wasn’t Obama an investor with LightSquared’s previous incarnation?

Gyro on October 31, 2011 at 12:19 PM

LightSquared is also in a major contraversy over its signals interfering with GPS recievers.
Also, wasn’t Obama an investor with LightSquared’s previous incarnation?

Gyro on October 31, 2011 at 12:19 PM

I’m pretty sure he was.

I think that opening the door on Open Range in an attempt to slime W is going to backfire, BIG TIME.

teke184 on October 31, 2011 at 12:21 PM

Meanwhile consider John Corzine, former head of Goldman Sachs, former US Senator, former Governor

From the WSJ:

MF Global, the brokerage run by former Goldman Sachs CEO Jon Corzine, today filed for bankruptcy protection, becoming one of the highest-profile U.S. victims of bad bets on European government debt.

To think he helped grow Goldman Sachs, he guided our nation in the Senate, he ran a state, and then he decided to invest in his own politiks

Ay yi yi

entagor on October 31, 2011 at 12:27 PM

Just think of all the green jobs this’ll create, when all those butt ugly windmills need to be dismantled.

ORrighty on October 31, 2011 at 12:34 PM

I should point out that Beacon Power isn’t an alternative energy company.

The company flywheels store power for a short periods of time in order to help balance the constant differences between the grid’s electrical generation sources and the electrical loads on the grid.

That being said, government needs to get out of the venture capital business.

blink on October 31, 2011 at 11:13 AM

Flywheels are one of the storage schemes to attempt to make “green” energy more functional; they are trying to even out the intermittent nature of “green” sources.
You’re technically correct but the usage is another part of the “green” scam.

mad scientist on October 31, 2011 at 1:29 PM

Democrats are demanding a probe of Open Range, thinking that the Bush-era loan guarantees will soften the blow of Solyndra and Beacon

If we can find proof of the government wasting money pointlessly in the past, it’ll defend us pointlessly wasting more money in the future.

Once people know other politicians also wasted their money; they’ll love us again for wasting their money… somehow.

Does anyone see this actually working? Sure it’ll work on the most liberal partisan 10-15% of the country; but so would a claim of “we figured it was worth the risk” and letting it go… or any other claim really; they’re not going to be picky about your excuses.

Will it work outside the limited hard-left partisans who would accept any excuse?

gekkobear on October 31, 2011 at 1:54 PM

But Bohener wanting 5 million per job for a battery factory is ok?

Rainsford on October 31, 2011 at 2:04 PM

and dear leader has no scandals under his belt
-alter

cmsinaz on October 31, 2011 at 10:57 AM

Actually, even a super-wide WWF belt is too narrow to hide the Obama scandals:
Preferential treatment of Black Panther Election tampering thugs…
Acorn frauds
The $500 Million Solyndra Scandal
The theft of GM from its stockholders, which include tens of thousands of retirement accounts…
The theft of Chrysler from its bondholders, which include tens of thousands of retirement accounts…
Multiple scandals surrounding Obamacare…this, this, this, this, this, this, this, and many more…
The Green scandal

and that’s just a very, very small sampling of the corruption in the Obama Administration!!!

landlines on October 31, 2011 at 2:09 PM

Fire them all. Then prosecute the top management (and their Congressional lapdogs).

RebeccaH on October 31, 2011 at 2:32 PM

Flywheels are one of the storage schemes to attempt to make “green” energy more functional; they are trying to even out the intermittent nature of “green” sources.
You’re technically correct but the usage is another part of the “green” scam.

mad scientist on October 31, 2011 at 1:29 PM

Not exactly. I just browsed around on their website and what they’re trying to do is come up with a mechanism to reduce the need for units within a system to perform what we refer to as load follow. Load follow designated units drop or raise output based on system needs. Some fossil units actually have controls that give the load dispatchers the ability to raise or lower generation themselves within pre-set parameters. One problem I see with their system is that it’s too small to be of much use, it would take a lot of those little flywheels to be effective. Here’s what we went with for “Storing” our generation to reduce the need to load follow.

Oldnuke on October 31, 2011 at 2:33 PM

But Bohener wanting 5 million per job for a battery factory is ok?

Rainsford on October 31, 2011 at 2:04 PM

Are you seriously trying to excuse (defend???) obama’s stupidity by pointing to boehner’s stupidity? Do you really think anyone here agrees with either stupidity? No, of course not. You just had to have your knee-jerk reaction brought on by never thinking a politician and lawyer would ever do anything unethical (as long as he’s a democrat).

It will never occur to you that any politician with a “D” behind their name could ever be anything but totally perfect. Pity really.

runawayyyy on October 31, 2011 at 4:02 PM

You’re correct. They were trying to sell their services for frequency regulation – helping the grid operators maintain 60Hz by providing load or power depending on what the grid needed.

mad scientist, you are right about the green sales pitch. They sold themselves as something that would be needed to smooth the variance of wind power. It seems as if government employees believed this hype.

blink on October 31, 2011 at 5:31 PM

Oddly enough plant operators don’t usually even think in terms of frequency. About the only time we concerned ourselves with it is when we were placing a unit on the line or when we were testing one of our emergency diesels in the isochronous mode. Our only true indication of grid frequency was on a strip chart recorder in the back of the control room. The guy operating the unit couldn’t even see it. Once every four hours the control room rover logged what it indicated. The load dispatchers probably monitored it a lot closer but I don’t really know. When I talked to them, which was frequently all they seemed interested in was megawatts/$$$$. I do recall one instance when my unit did a large load grab which we correctly judged to be caused by a very large power plant tripping somewhere. Our frequency actually dipped by a small fraction of a cycle (hertz), enough that we could see the dip on the strip chart which was most unusual. When we contacted system operations they were completely oblivious to the event and hadn’t even noticed that there was a change in frequency. Turns out that it was one of the D.C. Cook units up in Michigan that had tripped. About 1100 Mwe at that time.

You’re right about the sales pitch but it’s not only government employees that believe this hype it’s most people who aren’t involved in power generation. People in general just don’t understand this subject. It’s sad that the government employees that make decisions about this are so ignorant of facts concerning it.

Oldnuke on October 31, 2011 at 6:41 PM

your notes about frequency doesn’t surprise me. There doesn’t seem to be a good reason to care very much.

blink on October 31, 2011 at 7:28 PM

There are so many units tied onto the network that no individual plant can change it much. Once a unit is synched to the grid it’s locked into whatever frequency the system is running. That’s always 60 hertz. Don’t know if you know this but when synching a generator onto the grid we don’t actually check frequency. The standard procedure is to run the turbine/generator up to the correct rpm and then turn on an instrument called the synchroscope. You then adjust the turbine speed until you get the synch scope turning in the fast direction at about the same rate as the minute hand of a clock or slower. That means that generator frequency is slightly higher than system frequency. When the scope is between five till noon and straight up you close the output breaker. When that breaker closes frequency locks in at system frequency and the unit will pick up a few megawatts. You don’t ever want to close that breaker out of synch bad things will happen if you do. We actually had an auto synch mode that worked fine and we used it as the preferred method but everyone trains to do it manually if needed.

Oldnuke on October 31, 2011 at 8:11 PM

Here is Solyndra’s bankruptcy auction…
http://www.hgpauction.com/?auctionid=146

Kermit on October 31, 2011 at 11:53 AM

Was scouring the catalog database to try to find some actual product being auctioned. There doesn’t seem to be anything actually produced there. Everything for auction seems to be board room or factory floor goods.

Does anyone know about theses guys? Did they get to any competent production level?

hawkdriver on November 1, 2011 at 5:58 AM