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A abysmal record of defrauding investors and rewarding cronies.
We’re heard a lot about Bain Capital and how it throws people out of work in order to enrich investors, but how about the record of DOE Capital, which has compiled a fantastic record of defrauding investors while benefiting cronies and insiders?
DOE Capital is a Washington-based investment operation that looks for fledgling companies in the field of renewable energy and pours money into them in an attempt to get them get them up and running, building value and creating jobs. Although its purposes are noteworthy, its performance has been at best spotty, at worst catastrophic.
In 2008, for instance, DOE Capital invested in Range Fuels, a company that claimed to have solved the long-standing problem of extracting ethanol from cellulosic plant material. In his 2006 State of the Union Address, President George Bush, Jr. had charged America with being “addicted to oil” and promised cellulosic ethanol from “switchgrass” and other materials as the solution. Charging right ahead, Congress adopted the 2007 Energy Independence and Security Act, which mandated the consumption of 100 million gallons of cellulosic ethanol in 2010, 250 million by 2011, and 500 million in 2022 at a time when no one had yet mastered the technology.
Months later, Range Fuels, a Colorado company, claimed to have the answer. In November 2007, Range broke ground on a plant in Soberton, Georgia, promising to generate 100 million gallons of ethanol a year out of pine-logging wastes. Before it even built the plant, Range Fuels won the 2008 North American Fuels Technology Innovation Award for Green Excellence. Full production was promised in 2009.
By 2010, Range hadn’t gotten anywhere, however, and so DOE Capital sunk $50 million into the project. The State of Georgia contributed another $6 million and the U.S. Department of Agriculture added an $80 million loan guarantee from the U.S. Biorefinery Assistance Program. Still, Range was unable to produce a single gallon of cellulosic ethanol. In January 2011 it finally opened the factory and produced one 200-gallon run of methanol, which can’t be used in cars, and then closed down. Dozens of people were put out of work and the job benefits promised to the region never materialized. By making that single run of methanol, however, Range was able to collect the last $26 million from DOE Capital, leaving the venture outfit holding the bag. DOE lost its entire investment — but Range tried to make up for it by donating to DOE’s favorite causes.
In 2011, DOE Capital took another flyer with a small California company that had developed an unusual technology for solar electricity. While most solar panels are flat and made of silicon, this company had invented a tube-shaped device lined with a thin film of rare earths that it claimed could collect reflected light off a white roof, improving conversion by 20 percent. The company had built a fabrication plant in Fremont and had begun production. Silicon prices dropped, however, and conventional panels began gaining the upper hand. It was at this point that DOE Capital decided to try to rescue the company, providing $535 million in loan guarantees. Its CEO made a special trip to Fremont to celebrate the deal.
DOE’s supervision was lax, however, and the company immediately took advantage of the new money by building an entirely unnecessary new fabricating facility along with a lavish new corporate headquarters. The market was already moving in the opposite direction and a year later the company went bankrupt, putting 1,000 people out of work. Once again, DOE Capital lost its entire investment, although again the owners tried to compensate by donating to DOE’s favorite causes.
Another DOE venture that went sour was Massachusetts startup Beacon Power. Beacon had developed a 2,800-pound cylindrical flywheel that spins at supersonic speed in order to store electricity for smoothing voltage irregularities on the electrical grid. DOE Capital liked the technology and invested $43 million. This time its COO traveled to Boston to make the presentation.
Beacon was able to build an innovative 20-megawatt storage facility connecting to the upstate New York grid but state regulations wouldn’t allow it to collect higher rates for providing short-term emergency power. Beacon secured a contract to build a second facility in Pennsylvania but by the time the Federal Energy Regulatory Commission got around to changing the rules in Beacon’s favor, the company was forced to declare bankruptcy. Beacon was able to auction its assets and for once DOE Capital retrieved some of its investment.
In short, DOE’s record of building companies and creating jobs has been abysmal. Worst hurt have been its investors, who have watched hundreds of millions of dollars go down the drain.
The California company that spent its way into bankruptcy, of course, is Solyndra. DOE’s full name is the U.S. Department of Energy. Its COO is Secretary of Energy Steven Chu and its CEO is President Barack Obama. DOE Capital’s favorite cause is the president’s re-election campaign. Its unfortunate investors are you, the American taxpayers.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?