Solyndra suspends operations despite DOE solar loan guarantees

Fremont, CA--Solyndra, manufacturer of cylindrical solar-cell modules that incorporate copper indium gallium diselenide (CIGS) thin-film technology, announced that it will close its remaining Fremont factory, lay off its 1100 employees, and file for bankruptcy. Solyndra was the first company to win guarantees from the U.S. Department of Energy (DOE) in 2009, receiving $535 million to build its second factory in Fremont less than a mile from the company's original plant. Both President Obama and former CA Governor Arnold Schwarzenegger toured the new plant, citing it as a symbol of the nation's economic recovery and commitment to a green economy.

Solyndra has struggled to compete against a flood of low-priced solar cells pouring out of heavily subsidized factories in China. Last year, the company canceled plans for a $300 million initial public stock offering and closed its first Fremont factory, laying off 40 people."We are incredibly proud of our employees, and we would like to thank our investors, channel partners, customers and suppliers for the years of support that allowed us to bring our innovative technology to market," said Solyndra CEO Brian Harrison in a news release. "This was an unexpected outcome and is most unfortunate."

Republican critics of the loan program were livid. A congressional panel had started investigating in February how Solyndra won approval for the loan guarantees. "In an apparent rush to push stimulus dollars out the door, the Obama administration wasted $535 million in taxpayer funds in guaranteeing a loan to a firm that has proven to be unviable in the global market," Rep. Cliff Stearns, R-Fla., who chairs the House Energy and Commerce Committee's oversight and investigation subcommittee, said Wednesday. The panel already had subpoenaed records about the Solyndra loan from the U.S. Department of Energy.

The Energy Department's public affairs director said that while Solyndra's application was carefully vetted, investing in startup companies always carries risks. The loan program was created under the Bush administration in 2005 but became part of the federal stimulus effort under Obama. The federal government must now try to recover its investment through Solyndra's Chapter 11 bankruptcy proceedings, or taxpayers will be on the hook. Solyndra executives, meanwhile, will consider selling the business or licensing its technology.

Solar module prices have plunged more than 40% in recent years, squeezing companies' profit margins even as sales of solar systems grow. Two other U.S. solar companies, Evergreen Solar and SpectraWatt, filed for bankruptcy protection in August. "The Chinese have really done an incredible job of eating everyone's lunch," said Stephen Simko, a senior stock analyst who covers the solar industry for the Morningstar research firm. "I would assume there are going to be other upstart solar companies that won't make it."

The company started selling its cells in 2008, and its revenue grew quickly, from $6 million in the first year to $140 million in 2010. But Solyndra's timing proved disastrous. Even as the company moved closer to full-scale manufacturing with its second Fremont plant, solar module prices were plunging. According to a company spokesman, Solyndra's cost of production was roughly $2 per Watt. Some Chinese companies have production costs of roughly $1.20 to $1.25 per Watt, Simko said.

SOURCE:San Francisco Chronicle; www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/09/01/MN1R1KU8G2.DTL