DOE Took “Excessive Risk” In Giving $2.8 Billion To Spanish Solar Firm

August 3, 2012
By

Marita Noon 2013 greyWe are about to close with the final two installments of this Special Seven series––the renewable energy (mainly solar) firms that not only received billions in Department of Energy (DOE) loans and federal grants, but those that received “preferential treatment” from the Department of Interior to lease federal land in a no-bid process, meaning that they were approved without “adequate vetting.” Whereas the review process for establishing an oil and gas lease on federal land can take up to five years, some of these favored green-energy projects were pushed through in less than a year.

Our first five chapters on Solar Reserve, BrightSource Energy, Nevada Geothermal, Ormat Nevada (the two Nevada companies were featured in one report), and First Solar; revealed a convoluted and tangled trail of political ties in each of these green-energy crony-corruption cases.

This chapter looks at the Spanish company Abengoa that received more than $2.8 billion in loans and grants—making them the second largest recipient of the $16 billion doled out through the DOE 1705 loan guarantee program.

From the introduction of this serialized book, the thumbnail says:

Abengoa has two solar projects: Solana and Mojave Solar. Solana’s Fitch rating is BB+. Just before Christmas, 2010, the company received $1.45 billion from the DOE for a solar thermal plant, to use parabolic trough technology in Gila Bend, AZ. Mojave Solar’s rating was BB. Yet the company received $1.2 billion in September 2011 for its solar assembly collection project in San Bernardino County, CA. Abengoa has connections to California’s Democratic Senator Dianne Feinstein.

In addition to the two solar projects listed above, Abengoa also has a biofuel project located in Kansas, which Fitch rated CCC, that got a $132.4 million loan in August 2010.

As a report on Abengoa from the Institute for Energy Research says: “It’s true, a loan guarantee is not the same thing as an explicit subsidy. So long as Abengoa Solar doesn’t default on its loans, the US taxpayer hasn’t kicked in anything. Nonetheless, the whole reason Abengoa Solar had to get the guarantee from the government is that no private lender thought the risk was worth it. It is not ‘costless’ for the US taxpayer to be on the hook in this fashion.”

So how did such a poorly rated, non-American company get billions in US taxpayer loan guarantees? Can you say “crony corruption?” In short, Abengoa has a cadre of cronies in high places which includes Al Gore, former New Mexico Governor Bill Richardson, Senator Dianne Feinstein, and, of course, President Obama—plus, many others whose names you’ve probably never heard of.

Friends in high places

In 2007, Gore’s UK-based Generation Investment Management (GIM) bought a stake in Abengoa. He has extolled Abengoa for years, visiting “the largest solar platform in Europe” (operated by Abengoa) in October 2008 and delivering a high-powered speech at the company’s Spanish headquarters in October 2010. GIM Advisory Board Member Mario Molino also serves on Abengoa’s Advisory Committee. GIM was started in 2004 by Al Gore and several Goldman Sachs’ big wigs, including David Blood, Mark Ferguson, and Peter Harris. (Note: Goldman Sachs was a top Obama donor in 2008.)

Bill Richardson is who got me chasing this whole green-energy crony-corruption scandal in the first place as my column addressing his crony capitalism is how I got connected with Christine Lakatos—who’s been researching this for years. Here in the middle of the Abengoa story is my former governor! Richardson has long been a supporter of solar energy, giving now-defunct Schott Solar $16 million in New Mexican state funds—so it is appropriate that he be involved here, too. Under President Clinton, Richardson served as the Secretary of Energy—leading the DOE—for three years. President Obama tapped Richardson to be his Secretary of Commerce but personal scandals kept him from passing the vetting—he withdrew his nomination. (Remember, John Bryson—former CEO of BrightSource—did become Secretary of Commerce.) With this vast résumé, Abengoa CEO Manuel Sanchez Ortega, felt that Abengoa was “extremely fortunate” to have Richardson’s “extensive knowledge of the renewable energy sector and his background in public policy” join Abengoa’s Advisory Board in March of 2011—which is reportedly a paid position. Richardson’s policies while Governor benefitted Abengoa. One of Abengoa’s DOE loans came through after Richardson joined the Advisory Board.

My introduction teased California Senator Dianne Feinstein’s involvement in Abengoa. Admittedly, direct connections are minor: she wrote a letter to the DOI on behalf of Abengoa asking the DOI to speed up the permitting process for accessing private land for DOE loan guarantees. One of the projects is in California, so advocating for it would seem reasonable. However, her husband, Richard Blum, is Chairman and President of Blum Capital, an equity investment management firm with investments in bio-fuel companies and Abengoa has a bio-fuel company—though, so far, no Blum investments in Abengoa Bioenergy Biomass of Kansas, LLC have been found. Feinstein has been accused of arranging to have the US Navy buy bio fuels from her husband, so a connection to Abengoa would not be unexpected. Feinstein is no stranger to conflict of interest and PG & E may be the bigger player in this story, as they are one of her largest campaign donors (2010 & 2012), and they have a contract to buy California’s required renewable energy from Abengoa—along with five other projects that got DOE loans. One last Feinstein/Abengoa link: Fred Morse—Senior Advisor of US Operations for Abengoa. Dr. Morse, who interestingly was a member of the New Mexico CSP Task Force, donated $1000 to Feinstein.

Lobbyists

Fred Morse provides a perfect transition to the lobbyists and their connections, as Morse is a lobbyist for Abengoa with DOE roots. Morse was Executive Director of the White House Assessment of Solar Energy as a National Resource, serving in the Nixon, Carter, and Regan administrations and is thought of as Abengoa’s most credentialed conduit to policymakers. He currently sits on the board of various solar industry groups.

While Morse may be the “most credentialed conduit,” he is not the most interesting story. The “most-interesting” moniker would have to go to either Mark Rokala or Santiago Seage—you decide.

Before joining Abengoa, Seage was a partner with McKinsey & Company (another 2008 Obama donor)—where Jonathan Silver, the former executive director of the Energy Department’s loan guarantee program, started his career and Matt Rogers, a former senior adviser on the Recovery Act, was an executive. When Rogers left the DOE in September 2010, he returned to McKinsey & Company at their San Francisco office. A handful of McKinsey & Company executives sit on Obama’s Jobs Council. Making the connections more provocative, we find that Silver held parties for Gore.

Abengoa’s lobbying efforts are headed up by Mark Rokala, a founding member of Cornerstone Government Affairs—which has received $870,000 from Abengoa in lobbying fees. Rokala came to Cornerstone from the PMA Group, which was shuttered in 2008 following a pay-to-play scandal—in which late Democratic Rep. John Murtha directed $137 million in government contracts to PMA clients, which in turn donated $2.37 million to Murtha and other Democratic congressmen who sat on the appropriations committee. PMA’s president, Paul Magliocchetto, is serving a 27-month federal sentence for illegal campaign contributions. Rokala has been a lobbyist for more than 20 years, the last seven in energy policy, and has served as legislative assistant for a Democrat senator.

Abengoa spent $540,000 on lobbying efforts for just 2011, with $160,000 going to Cornerstone Government Affairs.

Jobs

More than $80 billion was earmarked for green energy in the 2009 stimulus package—which was sold to the American people as a means to stimulate the economy and create jobs. So, what kind of bang for our buck did we get from the $2.8 billion we gave to Abengoa? The Institute for Energy Research reports “the DOE’s own fact sheet claims that the Solana project has created 1,700 temporary construction jobs, while yielding a permanent 60 jobs ‘created or saved.’ Simple division shows that the $1.45 billion guarantee therefore works out to $824,000 per job (when we include the temporary construction ones), and a whopping $24.2 million per permanent job ‘created or saved.’ The numbers are similar for the more recent Mojave Solar project. For a guarantee of $1.2 billion, the DOE estimates it will create 830 temporary construction jobs, and will ‘create or save’ 70 permanent jobs. This works out to $1.33 million per job (including temporary ones), and $17.1 million per permanent job.”

The report from the March 20, 2012, hearing of the House Oversight and Government Reform Committee looking into the green-energy, crony-corruption debacle says this about the loans to Abengoa: “A single Spanish firm, Abengoa…reveals excessive risk. … making this concentration of investment in one company speculative and highly questionable.”

What is truly questionable is why did the DOE take “excessive risk” in giving $2.8 billion to a Spanish firm? The answer is friends in high places. Abengoa got a good return for its investment. They spent hundreds of thousands in lobbying fees, hired some big guns like former Governor Bill Richardson, and made friends with the likes of Al Gore—and what do they get in return? $2.8 billion in American taxpayer dollars.

What have your friends done for you lately?

Author’s note: Thanks to Christine Lakatos, the Green Corruption blogger, for research assistance.

 

 The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy.

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