The Washington Times reports that a recent audit of Nevada Geothermal Power shows the company has racked up a staggering $98 million in net losses over the past several years, it cannot produce enough cash from current operations after debt service payments and it is carrying a significant amount of debt.
Does this story sound familiar? It should, because it’s not all that different than the debacle surrounding Solyndra LLC, a California company that received a $535 million federal loan guarantee and then proceeded to declare bankruptcy.
Senate Majority Leader Harry Reid, D-Nev., has his fingerprints all over this. From the Times:
“Mr. Reid, a Nevada Democrat who led passage of the $814 billion stimulus bill and worked to include the loan guarantee program to help finance clean-energy projects, predicted in 2010 that NGP would ‘put Nevadans to work’ and declared that Nevada was the ‘Saudi Arabia of geothermal energy.’”
Maybe the Obama administration should have looked a little closer at Nevada Geothermal Power and its financial health before issuing the loan guarantee in the first place. The company was on poor financial footing to begin with, and at the time it had an average credit rating of BB+, which is considered speculative or junk, and a step below investment grade.
Rep. Darrell Issa, R-CA, chairman of the House Oversight and Government Reform Committee, has been quite vocal about this loan, loudly asking why “the Energy Department was investing significant taxpayer resources in a company with well-established financial problems,” and the committee’s report said the loan “did not help to create a single job.”
If only the problems stopped there. Although Nevada Geothermal Power officials insist the company is current on the federally supported loan, they have reluctantly admitted to not being current on a different, privately held $88.4 million loan. Since this second loan is not backed by the federal government and is subordinate to the government-supported one, the feds have first claim to any remaining assets in the event of default, which leaves the Washington firm that holds the second note in a pretty bad position.
This is a spectacular failure for the Obama administration. There are times that government subsidies can be used effectively, but Washington should not simply endeavor to pick winners and losers or wager huge amounts of taxpayer monies on previously untested industries or companies that can’t even demonstrate the ability to pay their existing bills. It’s one thing to inspire research, it’s completely different to try and buy a PR victory with the taxpayers’ money.
I am a supporter of alternative energy and I look forward to a future in which America and the rest of the planet are less dependent on petroleum, but this isn’t the way to do it. Our government must stop throwing hundreds of millions of taxpayer dollars at failing companies and find a better way. Solyndra LLC has failed. Nevada Geothermal Power is well on the way to failing, and a French company, Soitec Solar, which received a $25 million grant, is also losing $2.44 for every dollar in sales in its solar division. Someone, somewhere is going to have to accept the dim reality: The Obama administration’s loan guarantee program, a big part of the president’s stimulus plan, has failed and the taxpayers have lost a ton of money as a result.
Nevada can still become the Saudi Arabia of geothermal energy, but it’s going to take innovation and entrepreneurship, not gambling our future on flawed decision making and shoddy business.
Sean Cary is a local business owner, freelance writer, host of “Week in Review” heard on Fox News Radio 99.1 FM and pundit on the television show “Nevada Newsmakers.” Contact him at email@example.com and read his blog at www.seancary.com.