Green investors call U.S. loan process rigorous

WASHINGTON Wed Sep 21, 2011 2:52pm EDT

WASHINGTON (Reuters) - U.S. renewable energy investors defended the government energy loan program at the center of the political firestorm ignited by the high-profile collapse of solar panel maker Solyndra, one of the program's beneficiaries.

Partners at top private equity firms that have participated in the government's loan guarantee program for alternative energy described the program's review process for applicants as "robust" and even more in-depth than in the private sector.

"It's probably the toughest due-diligence exercise that any of us had ever experienced," Neil Auerbach, a managing partner at Hudson Clean Energy Partners, a private equity firm that invests in the sector, told the Retech renewable energy conference in Washington on Wednesday.

The Department of Energy has until September 30 to finalize $8.9 billion in loan guarantees for 14 pending renewable energy projects, and the investors' comments about the rigorous and lengthy loan guarantee application process stood in stark contrast to those made in recent weeks by Republican lawmakers investigating the loan guarantee program.

On Tuesday, for instance, Republicans on the House Energy and Commerce Committee expressed concern in a letter to Energy Secretary Steven Chu that "another rush to meet stimulus deadlines will result in DOE closing these deals before they are ready."

Republicans on the committee are investigating the Obama administration's handling of the loan aid program in the wake of the bankruptcy of Solyndra, a solar start-up that was the first recipient of a loan guarantee under the DOE program aimed at supporting innovative energy technologies.

Solyndra, which was awarded a $535 million loan guarantee in 2009, is also the subject of a Department of Justice investigation. The company's offices were raided by the FBI earlier this month.

Auerbach said his experience with the loan guarantee program might reflect the Energy Department's applying lessons it learned after approving earlier projects, such as Solyndra.

"What we might have seen over these 40 loan guarantee approvals is a program start with a prototype -- the first one through the chute was Solyndra -- then successive screw-tightening exercises that were going on," said Auerbach, a former partner with Goldman Sachs.

Solopower, a solar company backed by Auerbach's fund, received a $197 million loan guarantee this year to retrofit a solar manufacturing plant in Wilsonville, Oregon.

Still, the government's conditions were so tough for one of the firm's portfolio companies, Calisolar, that the company decided to look elsewhere for financing, Auerbach said.

Ed Feo, a managing partner at USRG Renewable Finance, said he also found that the level of detail required for the federal program was more than he was used to. He said in his experience the agency conducted "rigorous" oversight.

"The level of diligence performed and the structuring expertise was extraordinary, and frankly our borrower thinks it was maybe a little too extraordinary in terms of the amount of digging," Feo told the conference.

USRG and SolarCity received a conditional loan guarantee earlier this month for a project that would install solar panels on military housing throughout the country.

Feo said the loan guarantee program should not be blamed for the fall of Solyndra but should judged on the basis of all its investments, not just those involving a single company.

"If you want to innovate and you want to facilitate innovation, you have to accept the fact sometimes things don't work and there's a cost associated with that," Feo said.

(Additional reporting by Matt Daily in Washington, editing by Gerald E. McCormick)