By Ben Geman - 10/31/11 08:04 AM ET
A Massachusetts company that received a $43 million Energy Department loan guarantee last year filed for bankruptcy Sunday, a step certain to fuel criticism of federal green energy financing in the wake of the solar company Solyndra’s collapse.
Beacon Power Corp., which develops energy storage systems, filed for bankruptcy protection in the U.S. Bankruptcy Court in Delaware.
Beacon Power had received federal loan guarantee to help build an energy storage plant in Stephentown, New York that began operating in January. The Treasury Department’s Federal Financing Bank provided the loan.
Beacon sought bankruptcy protection two days after the White House ordered an independent 60-day evaluation of the Energy Department's loan programs aimed at ensuring effective management and monitoring.
The review, conducted by a former Treasury Department official, will include examination of how Beacon’s project is performing going forward, and whether there are additional steps that can be taken to protect taxpayers, according to the Obama administration.
The Beacon bankruptcy comes roughly two months after the California solar panel maker Solyndra, which had received a $535 million Energy Department (DOE) loan guarantee in 2009, went belly up and laid off 1,100 workers.
Solyndra’s collapse unleashed a torrent of GOP-led attacks on the Energy Department’s loan guarantee program.
Solyndra and the broader loan guarantee program are under investigation in the House Energy and Commerce Committee and the House Oversight and Government Reform Committee.
“This latest failure is 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,” said Rep. Cliff Stearns (R-Fla.), the GOP’s point man on the Solyndra investigation and a senior member of the Energy and Commerce Committee, in a statement to The Hill and other outlets.
“Unfortunately for the American taxpayers, I am deeply concerned that other DOE programs could follow which goes to the heart of the President's flawed economic program,” he said.
Stearns is chairman of the energy panel’s Oversight and Investigations Subcommittee, which is expected to vote Thursday to subpoena internal White House communications about Solyndra.
Energy Department spokesman Damien LaVera said there are “many protections for the taxpayer” in the agreement with Beacon Power.
“The Department’s loan guarantee is for the project Stephentown Regulation Services, LLC, not the parent company, and the loan was set up in a way that ensures the Department is not directly exposed to the liabilities of the parent company,” he said in an email Monday.
The department also sought to contrast the Beacon Power project and Solyndra, noting that Solyndra stopped manufacturing operations when it went bankrupt, while Beacon Power intends to continue operating the New York energy storage plant.
“It is important to note that this plant itself, which is operational and generating revenue, is a valuable collateral asset. In addition, under the terms of our loan guarantee agreement, Stephentown Regulation Services, LLC currently has cash reserves and proceeds from the plant that it was required to hold as collateral on the loan,” LaVera said.
The Energy Department also noted that the federal government retains its “senior status” for repayment in the loan agreement with Beacon Power.
In contrast, the Solyndra loan guarantee was restructured in early 2011 to put private investors – who had agreed to provide another $75 million to the struggling company – first in line for repayment if the company liquidated.
Beacon drew $39 million of the guaranteed loan to help finance the plant.
Beacon’s bankruptcy filing lists assets of $72 million and debt of $47 million, according to Bloomberg.
“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,” CEO F. William Capp said in the bankruptcy filing, according to the financial news service.
The Energy Department has lauded Beacon’s flywheel energy storage technology as a way to improve power grid stability and help bring renewable power sources into the system.
“We will continue to support the development and deployment of innovative energy systems like this energy storage project that support our goal of expanding renewable energy generation and reducing greenhouse gas emissions,” Energy Secretary Steven Chu said when announcing the finalization of the agreement in August of 2010.
The loan guarantee program was first authorized in a 2005 energy bill crafted under GOP control of Congress and signed into law by then-President Bush, and expanded under President Obama’s stimulus law.
The program was slow to get off the ground, and first loan guarantees were not issued until the Obama administration took power.