WASHINGTON (AP) — The government could lose nearly $3 billion on Energy Department loans for green energy programs — far less than the $10 billion Congress set aside for the high-risk program, according to an independent review.
The White House ordered the review after criticism of a $528 million loan to Solyndra Inc., a California solar company that went bankrupt.
The review, led by former Treasury Department official Herb Allison, looked at 30 loans or loan guarantees totaling $23.8 billion that were offered to green energy companies and auto makers such as Ford and Nissan.
The review did not involve Solyndra or Beacon Power Corp., a Massachusetts energy storage company that also went bankrupt after receiving a federal loan. The government has lost $567 million from those two loans so far, although officials said this week they could recover as much as $28 million from the sale of Beacon to a private equity firm.
The 75-page report, released Friday, says that about one-third of the money allocated — $8.3 billion — had been spent as of Nov. 28.
The White House ordered the review in October as congressional Republicans investigated the Solyndra bankruptcy amid embarrassing revelations that federal officials were warned the company had problems but nonetheless continued to support it. Energy Secretary Steven Chu attended a 2009 groundbreaking at the company's Fremont, Calif., headquarters, and President Barack Obama visited the company in 2010.
A White House spokesman called the report thorough, substantive and objective and said it confirms that the overall loan portfolio is expected to perform well.
The government could reduce its losses from the loan program if it withholds money from companies that fail to meet certain benchmarks, the report said. The comment echoes criticism by some Republicans in Congress who say the Obama administration should have cut off money to Solyndra far sooner than it did.
The report recommends several steps the Energy Department can take to improve the loan program, including creation of a chief risk officer to monitor all of the agency's loans. The risk management unit should be separate from the loan program office and should report directly to senior DOE managers, the report says.
Chu said the report makes clear that the Energy Department is operating under congressional requirements to provide loans to projects that would have trouble obtaining private financing — which is why Congress appropriated $10 billion to cover expected losses.
"We have always known there were inherent risks in backing innovative technologies at full commercial scale, and it is very likely that there will be other companies in the portfolio that won't succeed," Chu said in a statement, "but the vast majority of companies are expected to pay the loans back in full, on time and with about $8 billion in interest."
Counting loans and guarantees to U.S. car makers and the nuclear industry, the loan program is supporting as many as 60,000 jobs and generating up to $40 billion in private investment, Chu said.
GOP critics of the loan program were not impressed.
"This is less a report than an umbrella to deflect the criticism that's pouring down on the administration," said Rep. Jim Sensenbrenner, R-Wis., adding that he was disappointed the report did not evaluate the Solyndra or Beacon loans.
"A study that excludes inconvenient evidence isn't independent," Sensenbrenner said.
Reps. Fred Upton, R-Mich., and Cliff Stearns, R-Fla., said taxpayers "should not have been placed in the position to lose one dollar, let alone billions" because companies with shaky finances received loans without collateral.
"It would be a stunning case of bureaucratic disregard to declare victory because the government is expecting to lose 'just' $3 billion," they said. Upton and Stearns are top leaders of the House energy panel and are heading an investigation into the Solyndra loan.
While the report generally backs department estimates of potential losses from the loan program, it says theloan values are far below what the companies would have to pay a private bank, without a government guarantee. Under a so-called fair-market value, the loans have been discounted by anywhere from $5 billion to $6.8 billion, the report says.
White House spokesman Eric Schultz said the purpose of the program was to spark investment in alternative and renewable energy programs that otherwise would not qualify for a private loan.
The finding about subsidies "simply means that a private bank wouldn't be willing to buy the (Energy) Department's loans at face value unless they could charge a higher interest rate," Schultz said. He called that unsurprising, "since the entire point of the program ... was to make loans available for emerging clean energycompanies so they have the best chance of succeeding in early stages, when innovative technologies traditionally have a difficult time accessing private capital."
Solyndra was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model.
The company filed for bankruptcy last year and laid off its 1,100 workers. Solyndra's implosion and revelations that the administration hurried to finish its review of the loan in time for a September 2009 groundbreaking has become an embarrassment for Obama and a rallying cry for GOP critics of his clean-energy program.