THE SOLYNDRA FAILURE: VIEWS FROM 

DEPARTMENT OF ENERGY SECRETARY CHU 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

NOVEMBER 17, 2011 

Serial No. 112–104 

( 

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76–267 PDF 2013

THE SOLYNDRA FAILURE: VIEWS FROM 

DEPARTMENT OF ENERGY SECRETARY CHU 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

NOVEMBER 17, 2011 

Serial No. 112–104 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

KATHY CASTOR, Florida 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

DONNA M. CHRISTENSEN, Virgin Islands 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 4 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 6 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 11 

Prepared statement .......................................................................................... 13 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 14 

Prepared statement .......................................................................................... 15 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 17 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, prepared statement .................................................................................. 565 

WITNESS

Steven Chu, Secretary, Department of Energy ..................................................... 19 

Prepared statement .......................................................................................... 21 

Answers to submitted questions ...................................................................... 567 

SUBMITTED MATERIAL

Letter, dated November 10, 2011, from Mary Anne Sullivan, Partner, Hogan 

Lovells UP LLP, to Mr. Waxman, submitted by Ms. DeGette ......................... 8 

Article, ‘‘Solyndra: Energy Dept. pushed firm to keep layoffs quiet until after 

midterms,’’ dated December 13, 2010, The Washington Post, submitted 

by Mr. Gingrey ..................................................................................................... 64 

Letter, dated December 13, 2010, from Jonathan Silver, Executive Director, 

Loan Programs Office, Department of Energy, to Solyndra Inc., submitted 

by Mr. Griffith ...................................................................................................... 71 

Solyndra Chronology, undated, submitted by Mr. Barton ................................... 87 

Email, dated January 4, 2011, to Kelly T. Colyar and Fouad P. Saad, submitted by Ms. DeGette ......................................................................................... 116 

Subcommittee exhibit binder .................................................................................. 123 

(1) 

THE SOLYNDRA FAILURE: VIEWS FROM 

DEPARTMENT OF ENERGY SECRETARY CHU 

THURSDAY, NOVEMBER 17, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:03 a.m., in Room 

2123, Rayburn House Office Building, Hon. Cliff Stearns (chairman 

of the subcommittee) presiding. 

Members present: Representatives Stearns, Terry, Myrick, Sullivan, Murphy, Burgess, Blackburn, Bilbray, Gingrey, Scalise, Griffith, Barton, Upton (ex officio), DeGette, Schakowsky, Ross, Markey, Green, Christensen, Dingell, and Waxman (ex officio). 

Also present: Representatives Pompeo and Kinzinger. 

Staff present: Carl Anderson, Counsel, Oversight; Michael 

Beckerman, Deputy Staff Director; Allison Busbee, Legislative 

Clerk; Stacy Cline, Counsel, Oversight; Todd Harrison, Chief Counsel, Oversight and Investigations; Kirby Howard, Legislative Clerk; 

Alexa Marrero, Communications Director; Carly McWilliams, Legislative Clerk; Andrew Powaleny, Assistant Press Secretary; Krista 

Rosenthall, Counsel to Chairman Emeritus; Alan Slobodin, Deputy 

Chief Counsel, Oversight; Sam Spector, Counsel, Oversight; Peter 

Spencer, Professional Staff Member, Oversight; John Stone, Counsel; James Thomas, Policy Coordinator, Oversight; Kristin 

Amerling, Minority Chief Counsel and Oversight Staff Director; 

Alvin Banks, Assistant Clerk; Jeff Baran, Minority Senior Counsel; 

Phil Barnett, Minority Staff Director; Stacia Cardille, Minority 

Counsel; Brian Cohen, Minority Investigations Staff Director and 

Senior Policy Advisor; Karen Lightfoot, Minority Communications 

Director and Senior Policy Advisor; and Matt Siegler, Minority 

Counsel. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Good morning, everybody. We will open the subcommittee hearing of Oversight and Investigations on the Solyndra 

failure and views from the Department of Energy Secretary Chu. 

My colleagues, we welcome this hearing of the Subcommittee on 

Oversight and Investigations to further examine the Department of 

Energy’s review and approval for the $535 million loan guarantee 

to Solyndra as well as its repeated efforts to keep this company 

atop President Obama’s green-jobs pedestal. While our investigation continues, it is readily apparent that senior officials in the adVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
2 

ministration put politics before the stewardship of taxpayers’ dollars. 

My colleagues, we have methodically investigated the circumstances surrounding Solyndra’s failure for 9 months now and 

have followed the facts every step of the way. Our goal is to determine why the Department of Energy and the administration tied 

themselves so closely to Solyndra and why they were so desperate 

to repeatedly prop up this company. Why did DOE make these bad 

decisions? And what can we do to prevent a waste of taxpayer dollars in the future? 

But as our investigation has unfolded, many more questions have 

emerged about the loan guarantee to Solyndra, the subsequent restructuring and subordination of the taxpayers’ money, and the extent of the White House involvement. So, today, we are focused on 

the loss of $535 million of taxpayers’ money. 

When DOE was reviewing the Solyndra application at the end of 

the Bush administration, too many issues with the parent company’s cash flow and liquidity remained unresolved, leading them 

to end discussions with Solyndra and remand the application itself. 

Later that month, President Obama was inaugurated, and Secretary Chu took over the reins of the Department of Energy. He 

implemented an acceleration policy for the loan guarantee reviews. 

And despite the deal posing significant financial problems, 

Solyndra was labeled a litmus test for the program’s ability to fund 

good projects—quickly, too. 

Secretary Chu and Vice President Biden’s ribbon-cutting ceremony was scheduled before DOE even presented the final deal to 

OMB. OMB staff did not feel as though they had sufficient time to 

conduct adequate due diligence, and their concerns about models 

showing Solyndra running out of cash in September 2011, prophetically, were apparently ignored. 

Only 6 months after the loan closed, Solyndra’s financial problems became increasingly severe. Nonetheless, President Obama 

visited Solyndra in May of 2010 and proclaimed, quote, ‘‘The true 

engine of economic growth will always be companies like Solyndra,’’ 

end quote. 

It is important to understand how Secretary Chu addressed 

these concerns and the extent of authority he was granted to make 

sure this company, so closely connected with the fate of President 

Obama’s green-jobs agenda, ultimately succeeded. In the fall of 

2010, just 1 year after the loan closed, Solyndra had basically flatlined and started to default on the terms of the loan. Documents 

show DOE granting the company several waivers, including waivers from Davis-Bacon requirements, and desperately trying to figure out ways to keep it afloat. 

In early December, after several lengthy negotiation sessions 

with Solyndra’s primary investors and despite clear language in 

the statute barring them to from doing so, DOE made a lastminute offer that would subordinate taxpayers with regard to the 

first $75 million recovered in the event of liquidation. We have 

since uncovered serious disagreements within the administration 

about not only the legality of this arrangement but whether it was 

a good deal for anyone involved but the rich hedge-fund investors. 

3 

As I said before, if Solyndra really is a litmus test, we have a 

much bigger problem on our hands. Two of the first three deals approved under Secretary Chu’s acceleration policy have now blown 

up and filed for bankruptcy. GAO has serious concerns about 

DOE’s ability to monitor the loans. The White House itself now has 

initiated a review of the portfolio. No one has admitted any fault 

whatsoever, and the President and our Democrat colleagues just 

shrug it off and say, ‘‘Hey, sometimes things just don’t work out,’’ 

end quote. 

The administration is still refusing to allow DOE and OMB witnesses to testify under oath. And OMB refuses to make some important witnesses available to us at all, with no one from the administration taking responsibility. 

With that, that concludes my opening statement, and I recognize 

my distinguished colleague, Ms. DeGette from Colorado. 

[The prepared statement of Mr. Stearns follows:] 

4 


76267.001

Opening Statement of the Honorable Cliff Stearns 

Chairman, Subcommittee on Oversight and Investigations 

"The Solyndra Failure: Views from DOE Secretary Chu" 

November 17,2011 

(As Prepared for Delivery) 

Wc convene this hearing of the Subcommittee on Oversight and Investigations to further 

examine the Department of Energy's review and approval of the $535 million loan guarantee to 

Solyndra, as well as its repeated efforts to keep this company atop President Obama's green jobs 

pedestal. While our investigation continues. it is readily apparent that senior officials in the 

Administration put politics before the stewardship of taxpayer dollars. 

We have been methodically investigating the circumstances surrounding Solyndra's 

failure for ninc months now and have followcd the facts every step of the way. Our goal is to 

determine why DOE and the administration tied themselves so closely to Solyndra. and why they 

were so desperate to repeatedly prop this company up. Why did DOE make these bad decisions, 

ami what can we do to prevent such a waste of taxpayer dollars in the future? But as our 

investigation has unfolded. many more questions have emerged about the loan guarantee to 

Solyndra, the subsequent restructuring and subordination of the taxpayer's money. and the extent 

of the White House's involvement. Today we are focused on the loss of $535 million in taxpayer 

dollars. 

When DOE was reviewing the Solyndra application at the end of thc Bush 

Administration, too many issues with the parent company's cash tlow and liquidity remained 

unresolved, leading them to end discussions with Solyndra and remand the application. Later that 

month, President Obama was inaugurated and Secretary Chu took over the reins at DOE. He 

implemented an acceleration policy for the loan guarantee reviews and, despite the deal posing 

significant financial problems. Solyndra was labeled a litmus test for the program's ability to 

fund good projects quickly. Secretary Chu and Vice President Biden's ribbon cutting ceremony 

was scheduled before DOE even presented the final deal to OMB. OMB staff did not feci as 

though they had sufficient time to conduct adequate due diligence and their concerns about 

models showing Solyndra running out of cash in September 2011 were apparently ignored. Only 

six months after the loan closed, Solyndra's financial troubles became increasingly severe. 

Nonetheless, President Obama visited Solyndra in May 2010 and proclaimed "the true engine of 

economic growth will always be companies like Solyndra." 

It is important to understand how Secretary Chu addressed these concerns and the extent 

of authority he was granted to make sure this company-so closely connected with the fate of 

President Obama' s green jobs agenda -ultimately succeeded. In the fall of 20 I 0, just one year 

after the loan closed. Solyndra had basically nat-lineel and started to default on the terms of the 

loan. Documents show DOE granting the company sever,ll waivers, including waivers from 

Davis-Bacon requirements, and desperately trying to figure out ways to keep it atloat. In early 

December, after several lengthy negotiating sessions with Solyndra's primary investors and, 

despite clear language in the statute barring them from doing so, DOE madc a last minute offer 

that would subordinate taxpayers with regard to the first $75 million recovered in the event of 
5 


76267.002

liquidation. We have since uncovered serious disagreements within the administration about not 

only the legality of this arrangement but whether it was a good deal for anyone involved but the 

rich hedge fund investors. 

As I've said before, if Solyndra rcally is the litmus test, we have a much bigger problem 

on Ollr hands. Two of the first three deals approved under Secretary ehu's acceleration policy 

have now blown up and filed for bankruptcy, GAO has serious concerns with DOE's ability to 

monitor the loans, the White House has now initiated a review of the portfolio, no one has 

admittcd any fault whatsoever, and the president and our Democrat colleagues just shrug and 

say, "Hey, sometimes things don't work out." The Administration is still refusing to allow DOE 

and OMB witnesses to testify under oath, and OMB refuses to make some important witnesses 

available at all. Will no one from this Administration take responsibility? 

##It 
6 

Ms. DEGETTE. Thank you. 

Before I start my opening statement, Mr. Chairman, which witnesses has the White House refused to produce to testify under 

oath? Please give me their names. 

Mr. STEARNS. We will be glad to give you a list, and certainly—— 

Ms. DEGETTE. If I could have a list before—— 

Mr. STEARNS. Sure. 

Ms. DEGETTE [continuing]. The conclusion of this hearing—— 

Mr. STEARNS. We will be glad to give it to you. 

Ms. DEGETTE [continuing]. We will use our exercise to get those 

witnesses. Thank—— 

Mr. STEARNS. Just between you and me, I think you know. 

Ms. DEGETTE [continuing]. You very much. No, I would like to 

know, please. Thank you. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Now, Mr. Secretary, I would like to welcome you and thank you 

for joining us today. Mr. Waxman and I have been urging the majority for some number of weeks now to have you over to discuss 

the important and legitimate issues relating to the Solyndra loan 

guarantee and the broader issue of the efficacy of loan guarantees 

for solar energy. 

This investigation, we all believe, is of critical importance to the 

American public, both so we can get to the bottom of what happened to over half a billion dollars of taxpayer money in the short 

term and also to ensure the knowledge we gain from this situation 

can inform our efforts to drive American clean energy innovation 

for the long term. 

Unfortunately, instead of conducting a serious inquiry into the 

facts relating to Solyndra and the lessons we can learn from this 

case, the majority, to date, as evidenced by my colleague’s opening 

statement, has focused on firing partisan broadsides at the Obama 

administration. For example, 2 weeks ago, the committee created 

an unnecessary and unprecedented subpoena battle with the White 

House, despite good-faith efforts on the part of the White House to 

negotiate an accommodation to produce information regarding key 

committee concerns in the investigation. And then, last week, when 

the White House did produce documents, the majority selectively 

released to the press three emails that presented a distorted account of Mr. Kaiser’s activities while withholding documents and 

communications, as well as statements by Mr. Kaiser in his interview with both Democratic and Republican staff, that directly contradicted the majority’s interpretation. 

But let me be clear: None of us on my side of the aisle are here 

to defend or to apologize for the actions of anyone in the administration or in the White House in particular. In my 15 years on this 

committee, we have had a strong tradition of thorough and meaningful bipartisan investigations. And as ranking member of this 

distinguished subcommittee, it had been my hope that we could 

have continued that tradition in order to fulfill our oversight duties 

to the American people. Unfortunately, this has not been the case. 

7 

The point of this inquiry should not be to score partisan victories 

or to smear individuals who happen to support one political party 

over the other. What we should be trying to do is figure out what 

happened with the Solyndra loan guarantee so we can bring accountability to the American people and improve our ability to advance the United States as a leader in the clean energy market. 

Toward that end, I hope the Secretary’s appearance here can provide relevant information on several key issues that we are allegedly investigating. 

First, we need to examine whether appropriate due diligence occurred before DOE’s September 2009 approval of the loan guarantee. Committee staff recently conducted interviews of key former 

and current DOE officials who were involved with the loan guarantee decisions, including Steve Isakowitz, who was appointed by 

President Bush and served as chief financial officer from July 2007, 

under the Bush administration, through July 2011, under the 

Obama administration. 

Mr. Isakowitz told the committee staff that he believed the DOE 

award of a loan guarantee to Solyndra was based on the merits and 

that Secretary Chu did not ask anyone to cut corners on the decision. Other DOE officials who were interviewed made similar statements. I am looking forward to hearing the Secretary’s perspective 

on the process that led to the Solyndra loan guarantee award. 

Second, we need to look at whether DOE exercised good judgment by restructuring the loan guarantee and subordinating part 

of the government’s interest in early 2011 when Solyndra was 

verging on default. Some members of this committee have alleged 

that subordination violates the Energy Policy Act. To help the committee assess this issue, we asked a former DOE general counsel 

to review DOE’s legal rationale for subordination. 

The former DOE general counsel concluded the analysis was reasonable, stating, quote, ‘‘I conclude from the statute, the loan guarantee regulations, and DOE’s prior interpretations of Section 1702 

that, had it expressly considered the question of its authority to 

subordinate its guaranteed debt in a post-restructuring before the 

Solyndra default situation arose, DOE likely would have reached 

the same conclusion reflected in the opinion and that its conclusion 

is legally supported,’’ end quote. 

Mr. Chairman, I ask unanimous consent that this letter be included in the record today. 

Mr. STEARNS. So ordered. 

Ms. DEGETTE. Thank you. 

[The letter follows:] 

8 


76267.003

I-logan 

Lovells 

November 10,20 II 

The Honorable Henry A. Waxillan 

Ranking ~klllbcr 

Committee on Enerb'Y and Cummercc 

U.S. I louse of Representatives 

Washington, D.C. 205 I 5 

Hogan love!!s US LLP 

ColumbIa Square 

555 Thirteenth Street. NW 

WashIngton, DC 20004 

T +1 202637 5600 

F +12026375910 

WW'N hoganlovells com 

Re: Energy Polky Act of2005 Section 1702 Interpretation 

Dear Congressman \Vaxlllnn: 

The letter responds to the request nwdc by your st"ff tll provide YOII with m)' views cllncerning the 

interpreTation llf SecTion 1702 of The Ener!?y Policy t\el of ::'005, focllsing 'pceitically on the question of 

whether Section 1702 elf the ,\et gives the Department of I'ncrgy ("DUE") the "uthority t() sub,,,dinate a 

guaranteed loan to other debt incun'ed by a project in a post-delault, restructuring situation. In particular, 

I was asked to comJ11cnt on whclher the February 15,2011, opinion of Susan Richardson, ChierCounsel 

or the Loan Programs Ortiee, entitled Solyndra Restructuring (hereafter referred to as the "Opinion") is 

.supporteci by the stalutc. 

As I explained t<l your stJtT in connection "ilh responding to this request, I have no CClnftdential 

information abollt the facts ofthc Solyndra loan guarantee, and I have not had access to the Sol,ndra loan 

guafRntec documents, My knl)\\lcdge of the matter comes from what has been publicly reported. In 

addition, while I have reprcsenkd several clients in DOE luan and loan guar"nt"c matters, I have not had 

occasion previously to consider the question of DOE's authority \(l subordinate a guaranteed loan in a 

restructuring. fin,)II), as I alsl) explained to your staft: Susan Richardson is someone whom I know. I 

have not, however, discussed the Committee's request It" my views or the substance orwhat follows wilh 

Ms. Richardson or anyclnc else at DOE. 

I have concluded that the Opinion is supported bllth by the statu Ie and by DOE's interprdation ur Section 

1702 as rellected in 10 CFR Part 609, Ihe regulations governing the loan guarantee program, and the 

associated rulcmaking proceedings. (It is noteworthy thM the initial ruiemaking was concluded during the 

prior Administrati011, [lnd 1 tx'lic.:ve that the :'iuhscqucnt amendments \\'er~ also concluded bcrore the 

Solyndra loan restructuring isstl~s arose.) The Opinion is abo supported by commercia! practice with 

respect to the restructuring of loans that arc in dcbu!t. 

Stal1ing with the stat\lte itselt~ Section) 702(d)(3) stales: "The obligation shall be subject to the condition 

that the obligation is not subordinate to other tinaneing." Had Congress sO\lght to prohibit subordination 

of a guaranteed obligation nt any time, under any circumstances, one might expect the provision to be 

phrased in more detinitiv,' t"rlm, such as: "The obligation shall not be subordinated 10 olher tinancing.~' 

Three aspects of Section 1702(d)(3) sug"est that Congress had a more limited intent. First. Seclion 

\,DC - iC3~38i0ClO5}O 3324505,,2 
9 


76267.004

The Honorable Henry A. Waxman - 2 - November 10,2011 

1703(d)(J) is presented as one of three conditions that must be met prior to the issuance of a loan 

guarantee. The three conditions are presented as detenninations the SceretaJY must make before issuing 

the loan guarantee. This is reinforced by the phrasing "the obligation is not subordinate to other 

financing." The usc or the present tense "is" suggests a requircment at a particular point in time, Le., the 

point at which the guarantee is issued. Finally, I agree with the Opinion that the use of the tenn 

"condition" as it appears in the context of Section 1702(d)(3) is reasonably understood to refer to a 

"condition precedent." that is a condition that must he met prior to issuance of the guarantee. 

I find it significant that DOE plainly understood Section 1702(d)(3) in this light when it undertook the 

rulemaking to implement the loan guarantee program in 2007. In 10 eFR 609.1 Oed), DOE set out a long 

list of requirements that flOE must ensure are satisfied "fplrior to the execution of a Loan Guarantee 

Agreement," that is, conditions precedent. Included in that list were the statutory requirements set out 

Section 1703(d)( I), (d)(2) and - or interest hcre .- (d)(3). Following the strllcture of the statute, the rule 

used the present tense "is," describing the required condition as: "Any Guaranteed Obligation is not 

subordinate to any loan or other debt obligation .... " 10 eFR 609.10(d)(13).' A requirement that must he 

satisfied as a condition precedent to the issuance of a loan guarantee is not necessarily a requirement that 

must prevail regardless of whilt occurs thereatier, and neither the statute nor the regulations elsewhere 

state that the non-subordination requirement must be met at all times. 

DOE repealed this understanding of the statute as distinguishing between what is required hefore a loan 

guarantee is issued and what requirements apply in the event of default in a 2009 rulemaking amending 

10 eFR Part 609: "section 1702(d) addresses eertain threshold requirements that must be met before the 

guarilnty is made; and section 1702(g) addresses the Secretary's rights in the event of default of the loan." 

74 Fed. Reg. 63544, 63545 (2009). DOE went on to note that the structure or the statute "keyfed] its 

particular provisions to the sequence of stages that are foreseeable in the loan guarantee relationship." ld. 

It is noteworthy that Section 1702(g), which dcals with default. does not contain language prohibiting 

subordination. 

Two other aSJlects of DOE's loan guarantee ndemaking provide indirect support for the conclusion that 

the non-subordination requirement, which clearly must he met before a loan guarantee is issued, does not 

prohibit DOE from agreeing to subordination if tile borrower defaults and a loan must be restructured. 

The regulations provide that, where the loan guarantee agreement or any applicable intercreditor 

agreement so provides, in the event of default, a lender and the Secretary may agree to a workout strategy 

andlor a plan of liquidation. 10 eFR 609.15(h). There arc no limitations in that provision on what a 

workout strategy might include. 1n panicu!nr, the rule does not preclude subordination of the guaranteed 

debt as n component of a workout strategy. 

Finally, it is significant in Illy analysis that, in amending the loan guarantee rules in 2009, DOE 

eliminated a restriction that would have required it to hold a iirst lien position on all assets of a project 

receiving a loan guarantee. In making that change, DOE explained that its "original reading of the statue 

was in tension with the financing structure of many commercial transactions in the energy sector:' 

involving for example ownership by tenancy-in-common Or co-lenders or co-guarantors commercial 

structures that some who had planned to apply for loan guarantees nceded to employ if their projects were 

to go forward. DOE concluded that the statute did not strictly require the first lien requirement and that 

imposing a restriction that was not consistent with cOJlllllercial practices would have had the efTect of 

As originally adopted tn 2007, 10 CFR 609.1 O(d)( 13) also required that DOE have a tlrst lien on all project 

assets. That requirement was removed in 2009, as discussed below. 

\IOC" 70:)1381000630· 3324.'iCB v2 
10 


76267.005

The Honorable Henry /\. Waxman 3 - November 10, 20 I I 

limiting the ability of the loan guarantee program to serve its intended purposes. 74 Fed. Reg. at 63545-

46. 

Likewise here, interpreting the statute to prohibit subordination of the guaranteed debt, even where 

additional new money is necessary as part of an effol1 to reduce the losses associated with a default, 

would not be consistent with commercial practice. A lender providing additional funding to a transaction 

already in default routinely insists that its debt be superior to earlier incurred debt because such later debt 

is being incurred at a point at which it has become apparent that the risk associated with a project is 

higher than anticipated at the time of the original financing and neither the e,xisting lenders nor the equity 

has elected to provide ti,e additional funds. Given this commercial expectation that, in a default situation, 

earlier incurred debt would expect to be subordinate to later incurred debt, had DOE reached any other 

conclusion about its authority under Section 1702, it would have sharply constrained DOE's ability to 

undertake any meaningful restructuring of guaranteed loans, a result that would likely increase taxpayer 

risk from projects that nm into unexpected tinancial difticulties. While in the case of Solyndra, even the 

aJditionalmoncy injected into the project as a resuit of the restructuring proved to be insufficient to save 

the project, one would expect that in other cases, an infusion of additional debt could help to rescue a 

project and thereby protect taxpayer interests, 

In short, I conclude from the statute, rhe loan guarantee regulations, and DOE's prior interpretations of 

Section 1702 that, had it expressly considered the question of its authority to subordinate its guaranteeJ 

debt in a post-default restructuring before the Solyndra default situation arose, DOE likely would have 

reached the same conclusion rclleeted in the Opinion, and that its conclusion is legally supported. 

I hope the foregoing analysis is helpful to you in your deliberations, 

Very truly yours, 

~~ Ma~nne Sullivan 

Pal1ner 

maryannt:.sullivan@hoganlovells,com 

[) 202/637 -3695 

\\DC ·703138.'000530 - 33;'4506 '12 
11 

Ms. DEGETTE. Along those lines, I would like to hear from Secretary Chu about the lessons we can learn from DOE’s experience 

with restructuring the Solyndra loan guarantee. 

Third, I would like to hear from the Secretary regarding the status of DOE’s efforts to monitor the Solyndra loan guarantee and 

the extent to which this has evolved over his tenure. I hope the 

Secretary can give us insight into whether Solyndra made accurate 

representations to DOE throughout the loan guarantee process. 

And, finally, given the majority’s heavy emphasis on allegations 

relating to corruption, we also need to hear from the Secretary 

whether political fundraising by Mr. Kaiser or anyone else had any 

bearing on decisions relating to the Solyndra loan guarantee. 

More broadly, I hope this three-ring circus leads us to a robust 

discussion relating to the state of our national energy policy and, 

in particular, renewable energy. This situation is an excellent opportunity for us to learn how to best develop and implement policies that provide U.S. innovators the support they need to make 

the United States a clean energy market leader. 

Thank you very much, Mr. Chairman. 

Mr. STEARNS. I thank my colleague. 

I now recognize the full chairman of the Energy and Commerce 

Committee, the distinguished gentleman from Michigan, Mr. 

Upton. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you, Mr. Chairman, for holding this 

hearing on the Department of Energy’s role in the approval and 

subsequent restructuring of the Solyndra loan guarantee. 

And welcome, Mr. Secretary. 

The central focus of the investigation is to understand why DOE 

did and what it did and how we find ourselves with this taxpayerfunded debacle. The number of red flags about Solyndra that were 

raised along the way, many from within DOE, and either ignored 

or minimized by senior officials is astonishing. Before the loan 

guarantee was approved, DOE and OMB staff repeatedly questioned the financial health of Solyndra. And based on the rate it 

was burning through cash and other troubling issues, the truth is, 

the expert staff were, indeed, concerned that the company was 

bound to fail. 

We have heard from President Obama and even from you, Mr. 

Secretary, that nobody had a crystal ball and no one could have 

predicted Solyndra’s demise. But the truth is that DOE staff did 

predict this. One of the models reviewed by DOE staff specifically 

showed that Solyndra would run out of cash in September of 2011. 

And in March of 2010, just 6 months after the initial loan agreement was finalized, Solyndra’s auditors echoed many of the same 

issues about working capital and recurring losses and warned that 

Solyndra was going to have problems staying afloat. 

These concerns were not only shared by industry experts, they 

reached the highest levels of the West Wing. Yet, at DOE, officials 

were shrugging it off and calling it par for the course. Two months 

later, the President actually went to Solyndra’s headquarters and 

gave a speech touting the company as an economic success story, 

12 

in spite of numerous warnings from both supporters and government staffers. 

These are just a few examples of the red flags DOE could have 

acted on to limit taxpayer losses. Instead, at every opportunity, 

Solyndra and DOE officials, including you, Mr. Secretary, publicly 

assured the American people that Solyndra was on track and 

would eventually thrive, right up until the time that Solyndra declared bankruptcy. 

They continued telling this story even when they clearly should 

have known it was not the case. DOE was receiving financial reports showing that Solyndra was bleeding cash and going bankrupt. DOE also failed to mention that, behind the scenes, they were 

continually taking extraordinary steps to keep Solyndra on financial life support. 

So, Mr. Secretary, what did you know about the situation at 

Solyndra, when did you know it, and how did you act on that information, if at all? These are important questions that all of us will 

be asking today. Your testimony is an important piece of the overall puzzle, and we will work methodically, following the facts, to 

get to the bottom of why taxpayers are now on the hook for more 

than half a billion dollars. 

And I yield back the balance of my time to Mr. Barton. 

[The prepared statement of Mr. Upton follows:] 

13 


76267.006

Opening Statement of the Honorable Fred Upton 

Chairman, Committee on Energy and Commerce 

"The Solyndra Failure: Views from DOE Secretary Chu" 

November 17,2011 

(As Preparedj()r Delivery) 

Thank YOll, Me Chainnan, for holding this hearing on the Department of Energy's role in 

the approval and subsequent restmeturing of the Solyndra loan guarantee. Welcome, Secretary 

Chu, and thank you for your participation today. A central focus of the investigation is to 

understand why DOE did what it did and how we find ourselves with this taxpayer-funded 

debacle. 

The number of red flags about Solyndra that were raised along the way-many from 

within DOE-and either ignored or minimized by senior officials is astonishing. 

Before the loan guarantee was approved, DOE and OMB stafT repeatedly questioned the 

financial health of Solyndra and, based on the rate it was burning through cash and other 

troubling issues; the truth is, the expert staff were concerned that the company was bound to fail. 

We have heard from President Obama, and even from you, Secretary Chu, that nobody 

had a crystal ball and no onc could have predicted Solyndra's demise. But the tmth is, the DOE 

staffDlD predict this one of the models reviewed by DOE staHspeeifically showed that 

Solyndra would run out of cash in September 2011. In March 2010,just six months after the 

initial loan agreement was finalized, Solyndra's auditors echoed many of the same issues about 

working capital and recuning losses, and warned that Solyndra was going to have problems 

staying afloat. These concerns were not only shared by industry experts, they reached the 

highest levels of the West Wing. Yet, at DOE, officials were shl1lgging it off and calling it par 

for the course. Two months later, President Obama actually went to Solyndra's headquarters and 

gave a speech, touting the company as an economic success story - in spite of numerous 

warnings from both supporters and government staffers. 

These are just a few examples of the red flags DOE could have acted on to limit taxpayer 

losses. Instead, at every opportunity, Solyndra and DOE oftleials, including Secretary Chu, 

publicly assured the American people that Solyndra was on track and would eventually thrive, 

right up until the time that Solyndra declared bankruptcy. They continued telling this story even 

when they clearly should have known it was not the case. DOE was receiving financial reports 

showing that Solyndra was blceding cash and going bankrupt. DOE also failed to mention that, 

behind the scenes, they were continually taking extraordinary steps to keep Solyndra on financial 

life support. 

What did Secrctary Chu know about the situation at Solyndra, when did hc know it, and 

how did he act on this information, ifat all~ Thcse arc all important questions we will ask today. 

As I've said before, Secretary Chu's testimony is an important piece of the overall Solyndra 

puzzk. We will work methodically, following the facts, to get to the bottom of why taxpayers 

Hre now on the hook for a half billion dollars. 
14 

Mr. STEARNS. Mr. Barton is recognized for the balance of the 

time. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Chairman Upton and Chairman 

Stearns. 

And thank you, Mr. Secretary, for being here this morning. We 

appreciate you agreeing to voluntarily testify about the Solyndra 

loan guarantee program. I have been on this committee 25 years. 

Rarely, if ever, have I seen a more—to put it as positively as possible, a more mismanaged program than the Solyndra loan guarantee. We are hopeful that you will be able to answer a number 

of our questions today. And I know, as a man of integrity, you are 

going to do your best, because I do sincerely mean that, that you 

are a man of integrity. 

But the first question that I hope you will answer is, why did the 

Obama Department of Energy reverse the Bush Department of Energy decision that the Solyndra loan guarantee was not ready for 

prime time? To this day, that puzzles me. 

Secondly, I would like to hear your answer as to why apparently 

you made the decision to violate the clear letter of the law in Title 

XVII of the Energy Policy Act that plainly states that a loan guarantee financed by the taxpayers cannot be subordinated to private 

investors. That just absolutely puzzles me. 

And, finally, what guarantees do we have on behalf of the taxpayers that changes are going to be made in the existing loans that 

have been put out on this program, I think to the tune of about 

$16 billion, that we are not going to have a repeat of this fiasco? 

This is an important program. I happen to continue to support 

a loan guarantee for alternative energy, contrary to what some of 

my friends on the Democratic side of the aisle state. But I cannot 

continue to support it if we can’t get some assurances that this 

isn’t going to be history that will be repeated. 

So thank you, Mr. Secretary, for being here, and I look forward 

to your answers. 

[The prepared statement of Mr. Barton follows:] 

15 


76267.007

Opening Statement of the HonOl'able Joe Barton 

Chairman Emeritus, Committee on Energy & Commerce 

Subcommittee on Oversight and Investigations, Hearing 

"The Solyndra Failure: Views from DOE Secretary Chtl" 

November 17, 2011 

Thank you Mr. Chairman. This Committee has been investigating the Department of 

Energy's (DOE) loan guarantee program for over nine months and the Solyndra scandal 

represents a mismanagement orthat program to the highest degree. 

The truth is that aftcr reviewing the documents and examining thc facts, this Committee 

has discovered mischievous dealings by Solyndra executives and investors. Department of 

Energy representatives. personnel at the Ollice of Management and Budget. and staff at the 

White Housc itself. As I have said before. the facts show that Solyndra was a bad bet. a bad 

deal. and now a failed enterprise flnanccd on the backs of honest taxpayers who will not be 

repaid. And. now. unfortunately, there is another bankrupt green energy company that received 

43 million dollars under this same DOE program. 

I would like to welcomc Dr. Chu, the Sccretary of thc Department of Energy, and thank 

him for his testimony and I hope he is prepared to answer this Committee's questions. 

Secretary's Chu's answers today will hoperully lill in the mallY gaps that remain in the Solyndra 

story including; did his acceleration policy of the loan program lead to poor decisions and 

improper due diligencc of companies that received the first round of loans, did the Department of 

Energy ignore multiple warnings and red-flags about the linancial viability and market 

competitiveness of Solyndra. did the Department restructure a bad deal to make it even worse for 

the taxpayers because they felt they had too much invested in Solyndra or was the Department 

feeling pressure 11'0111 a White House that felt it had too mueh to lose with the collapse of the 

company they touted as "a green energy success story and the true engine of cconom ic growth", 
16 


76267.008

was the Secretary aware that the restructuring of the Solyndra loan, in my opinion, violated Title 

17 of the Energy Policy Act, and finally should the taxpayers trust that the Department is issuing, 

monitoring, and restructuring these loans in a fair, thorough, and responsible way0 

18 billion dollars was appropriated under the stimulus for the DOE Loan Guarantee 

Program, Over 16 billion dollars has been allocated, 4.5 billion went out on the last day 

authorized under the stimulus alone. We know that nearly $600 million oflhat has gone to two 

now bankrupt companies. Mr. Secretary we want to make sure that the Department remembers 

that these billions of dollars come from hard-working Americans and they want us to make 

prudent investments in companies that demonstrate they are strong investments based on merit. 
17 

Mr. STEARNS. I thank my colleague and recognize the distinguished gentleman from California, the ranking member of the full 

Energy and Commerce Committee, Mr. Waxman. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. 

And, Secretary Chu, I want to welcome you to our hearing today. 

As I have said from the outset, I believe in this oversight on the 

Solyndra loan guarantee issue. It is part of our job. We want to 

know about these taxpayers’ dollars that have been lost and how 

we can learn from this experience not to have it repeated. 

But I don’t support the way Chairman Stearns and Chairman 

Upton have been running this investigation. They held an emptychair hearing. They humiliated witnesses for asserting their constitutional rights. They denied Democratic requests for witnesses. 

They resisted the release of exculpatory documents and provoked 

a gratuitous conflict with the White House. And, just last week, 

they released cherry-picked emails that were contradicted by other 

documents and unjustly smeared George Kaiser. And, as we 

learned today in the newspaper, they criticize you for awarding 

loan guarantees at the same time they were seeking loan guarantees for solar energy projects in their own districts. 

That is no way to conduct a responsible investigation. We should 

be fair and impartial, and our goal should be to find the truth. 

We also need to put this investigation into context and ask the 

most important question: How do we make the transition to the 

clean energy economy of the future? 

Last week, the International Energy Agency released its ‘‘World 

Energy Outlook.’’ While Solyndra stories made news across the 

country, there was virtually no coverage of the International Energy Agency’s findings, yet they are far more important to the future of our country and the business of this committee than whether the Department of Energy asked Solyndra to delay announcing 

a plant closure. 

The International Energy Agency found, and I quote, ‘‘We cannot 

afford to delay further action to tackle climate change if the longterm target of limiting the global average temperature increase to 

2 degrees Celsius is to be achieved. If stringent new action is not 

forthcoming by 2017, the energy-related infrastructure then in 

place will generate all the CO2 emissions allowed, leaving no room 

for additional power plants, factories, and other infrastructure unless they are zero-carbon.’’ 

What this means is that our future depends on developing clean 

energy. There will be $38 trillion invested in the new energy infrastructure over the next 20 years. Our economic growth, our national security will be determined by whether we succeed in building these new industries. Our competitors recognize this. China spent $30 billion to subsidize solar energy in the last year alone, and jobs in manufacturing facilities are booming in China as a result. Our chairman of 

the subcommittee says the answer is to give up. Last month, Mr. 

18 

Stearns said, and I quote, ‘‘The United States can’t compete with 

China to make solar panels and wind turbines.’’ 

Well, I don’t believe in surrender, Mr. Chairman. We can’t outcompete China, but to succeed we have to reject the anti-science, 

anti-progress policies of the Republicans in Congress and their oil 

and coal industry allies. 

The agenda of congressional Republicans is clear: Do everything 

possible to maintain our addiction to fossil fuels and cripple clean 

energy companies that could compete with oil and coal. House Republicans voted against putting a price on carbon pollution, which 

would have created market opportunities for clean energy. House 

Republicans voted to slash funding for energy research and development into the clean technologies. And now they are opposing government investments in solar, wind, and other clean energy companies. 

We need to move past Solyndra and to begin addressing our 

pressing energy challenges. The voluminous records before the committee—and we have received over 186,000 pages of documents 

from the Department of Energy, over 13,000 pages from the Office 

of Management and Budget, over 1,000 pages from the White 

House, nearly 200 pages of documents from the Treasury—all of 

these records show that the decision to award a loan guarantee to 

Solyndra was based on the merits, not political considerations. As 

Steve Isakowitz, a Bush appointee, the chief financial officer at 

DOE, told us, the integrity of the review process was never compromised. 

It is time for House Republicans to stop dancing on Solyndra’s 

grave and start getting serious about energy policy. And it is 

shameful for members of this committee to deny the science and 

pretend that we do not need a comprehensive clean energy policy. 

Something far more important is at stake today than scoring partisan political points. The future of our economy and the health of 

our planet will be at risk until we find a way to come together and 

enact policies that stop weather-changing carbon pollution and 

make our Nation the world leader in clean energy. 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the gentleman. 

Since he—I will take the chairman’s prerogative here, since you 

mentioned my quote from NPR. It was taken out of context. And 

without elaborating, I would point out that if we intend to subsidize our industries to compete with China, who is subsidizing 

their industries, I think that is not a good way to handle it. 

With that, now we will welcome our witness, Secretary Chu, and 

thank him for coming. 

You have a book to your left there with tabs with lots of quotes 

that the committee members will be using, so we will just refer you 

to that tab. 

Before we go any further, we have a member from the full committee, from Kansas, Mr. Pompeo—oh, Mr. Kinzinger from Illinois, 

rather, is here as a member from the full committee, but he does 

not want to participate, but he would like to be in the hearing, 

with unanimous consent. Is that acceptable to the minority? 

So ordered. He is welcome. 

19 

As you know, Mr. Secretary, the testimony you are about give is 

subject to Title 18, Section 1001 of the United States Code. When 

holding an investigative hearing, this committee has a practice of 

taking testimony under oath. Do you have any objection to testifying under oath? 

Mr. CHU. No. 

Mr. STEARNS. The chair then advises you that, under the rules 

of the House and the rules of the committee, you are entitled to be 

advised by counsel. Do you desire to be advised by counsel during 

your testimony today? 

Mr. CHU. No. 

Mr. STEARNS. In that case, if you would please rise and raise 

your right hand, I will swear you in. 

[Witness sworn.] 

Mr. STEARNS. Welcome. And, Mr. Secretary Chu, you are welcome to give your opening statement, 5 minutes. 

STATEMENT OF STEVEN CHU, SECRETARY, DEPARTMENT OF 

ENERGY 

Mr. CHU. Thank you, Chairman Stearns, and thank you, Ranking Member DeGette and members of the subcommittee, for the opportunity to speak with you today. 

Investments in clean energy reached a record $243 billion last 

year. Solar photovoltaic systems alone represent a global market 

worth more than $80 billion a year today. In the coming decades, 

the clean energy sector is expected to grow by hundreds of billions 

of dollars. 

We are in a fierce global race to capture this market. In the past 

year and a half, the China Development Bank has offered more 

than $34 billion in credit lines to China’s solar companies. China 

is not alone. To strengthen their countries’ competitiveness, governments around the world are providing strong support to their clean 

energy industries. Germany and Canada operate governmentbacked clean energy lending programs. And more than 50 countries 

offer some type of public financing for clean energy projects. 

In the United States, Congress established Section 1703 and 

1705 loan guarantee programs as well as the Advanced Technology 

Vehicles Manufacturing program, all of which provide support to 

cutting-edge clean energy industries that involve technology and 

market risks. In so doing, Congress appropriated nearly $10 billion 

to cover potential losses in our total loan portfolio, thereby acknowledging the inherent risks of funding new and innovative technologies and also ensuring that those risks are properly accounted 

for in the budget. 

We appreciate the support that the loan programs received from 

many Members of Congress, who have urged us to accelerate our 

efforts and to fund worthy projects in their States. In total, the Department received nearly 500 congressional letters about the loan 

programs. 

Through the loan programs, the Department of Energy is supporting 38 clean energy projects that are expected to employ more 

than 60,000 Americans, generate enough clean electricity to power 

3 million homes, and displace more than 300 million gallons of gasVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
20 

oline annually. These important investments are helping to make 

America more competitive in a global clean energy economy. 

Today, we are here to specifically discuss the Solyndra loan guarantee. The Department takes our obligation to the taxpayers seriously and welcomes the opportunity to discuss this matter. As you 

know, the Department has consistently cooperated with the committee’s investigation, providing more than 186,000 pages of documents, appearing at hearings, and briefing or being interviewed by 

committee staff eight times. 

As this extensive record has made clear, the loan guarantee to 

Solyndra was subject to proper, rigorous scrutiny and healthy debate during every phase of the process. As the Secretary of Energy, 

the final decisions on Solyndra were mine, and I made them with 

the best interests of the taxpayer in mind. 

And I want to be clear: Over the course of Solyndra’s loan guarantee, I did not make any decision based on political considerations. My decision to guarantee a loan to Solyndra was based on 

the analysis of experienced professionals and on the strength of the 

information they had available to them at the time. 

Solyndra’s potential was widely recognized outside the Department. Highly sophisticated, professional private investors, after 

conducting their own reviews, had collectively invested nearly a billion dollars in the company, which was named as one of the 

world’s, quote, ‘‘50 Most Innovative Companies’’ by MIT’s Technology Review in February of 2010. In March of 2010, the Wall 

Street Journal included Solyndra in its ranking, ‘‘The Next Big 

Thing: The Top 50 Venture-Backed Companies.’’ 

It is common for it to take some time for startup companies, especially manufacturing companies, to turn a profit. And in the 2 

years since the Department issued the loan guarantee, Solyndra 

faced deteriorating market conditions. Solar PV production has expanded at the same time, and the demand has softened due to the 

global economic downturn and the decline in subsidies in countries 

including Spain, Italy, and Germany. The result has been an acute 

drop in the price of solar cells, which has taken a toll among many 

solar companies in Europe, Asia, and the United States. 

Meanwhile, countries like China are playing to win in the solar 

industry. China has invested aggressively to support its companies, 

and, in recent years, China’s market share in solar cell and solar 

module production has grown significantly, to roughly half the 

market today. 

While we are disappointed in the outcome of this particular loan, 

we support Congress’ mandate to finance the deployment of innovative technologies and believe that our portfolio of loans does so responsibly. The President asked for a review of the Department’s 

loan portfolio. We support that review, and I look forward to the 

results. 

The Energy Department is committed to continually improving 

and applying lessons learned in everything we do because the 

stakes could not be higher for our country. When it comes to the 

clean energy race, America faces a simple choice: compete or accept 

defeat. I believe we can and must compete. 

I thank you and welcome your questions. 

[The prepared statement of Mr. Chu follows:] 

21 


76267.009

Statement of Secretary Steven Chu 

V.S. Department of Enet'gy 

Before the 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

V.S. House of Representatives 

November 17,2011 

Thank you Chairman Stearns. Ranking Member DeGctte. and members ofthc 

Subcommittee for the opportunity to speak with you today. 

Investments in clean energy rcached a record $243 billion last year. Solar photovoltaic 

systcms alone rcpresent a globalmarkct worth more than $80 billion today. In the coming 

decades. the clean energy sector is expected to grow by hundreds of billions of dollars. We are 

in a fierce global race to capture this l11arket. 

In the past year and a half. the China Devclopment Bank has offered morc than $34 

billion in credit lincs to China's solar companics. China is not alonc: To strcngthcn their 

countries' competitivencss. governments around the world are providing strong support to their 

clean energy industries. Gcrmany and Canada opcrate govcrnment-backed clean energy lending 

programs. and more than 50 countries offer some type of public financing for clean energy 

projects.' 

In the Unitcd States. Congress established the Section 1703 and 1705 loan guarantee 

pmgrams as well as the Advanced Tcchnology Vehiclcs Manufacturing Program- all of which 

providc support to cutting-edge clean encrgy industries that involve technology and market 

risks. In doing so. Congress appmpriated nearly $10 billion to cover potcntiallosses in our total 

loan p0l1folio. thereby acknowledging and ensuring that the inhcrent risks of funding new and 

innovative technologies were recognizcd and accounted for in the budget. We appreciate the 

support the loan programs have receivcd from Illany members of Congress - including nearly 

500 letters to the Department - who have urged us to accclerate our efforts and to fund worthy 

projects in their states. 

Through the loan programs. the Energy Department is supporting 38 clean energy 

projects that arc expectcd to employ more than 60.000 Americans. generate enough clean 

electricity to power nearly 3 million homes and displace more than 300 Illillion gallons of 

gasoline annually. These important investments are helping to make America more competitive 

in the global clean energy economy. 

Today. we are here to specifically discuss the Solyndra loan guarantce. The Department 

takes our obligation to the taxpayer seriously. and welcomes the opportunity to discLiss this 

matter. 
22 


76267.010

As you know. the Department has consistently cooperated with the Committee's 

investigation, providing more than 186,000 pages of documents. appearing at hearings, and 

briefing or being interviewed by Committee staff eight times. 

As this extensive record has made clear. the loan guarantee to Solyndra was subject to 

proper, rigorous scrutiny and healthy debate during every phase of the process. 

As the Secretary of Energy, the final decisions on Solyndra were mine. and I made them 

with the best interest of the taxpayer in mind. I want to be clear: over the course ofSolyndra's 

loan guarantee, I did not make any decision based on political considerations. 

My decision to guarantee a loan to Solyndra was based on the analysis of experienced 

professionals and on the strength of the information they had available to thelll at the time. 

The Solyndra transaction went through more than two years of rigorous technical. 

financial and legal due diligence, spanning two Administrations. before a loan guarantee was 

issued. Based on thorough internal and external analysis of both the market and the technology, 

and extensive review of information provided by Solyndm and others, the Department concluded 

that Solyndra was poised to compete in tile marketplace and had a good prospcct of repaying the 

government's loan. 

Solyndra's potential was widely recognized outside the Department. Highly 

sophisticated, professional private investors. after conducting their own reviews. had collectively 

invested nearly a billion dollars in the company, which was named as one of the world's "50 

Most Innovative Companies" by MIT's Technology Review in February 01'2010. 

It is common for it to take some time for start-up companies. especially manufacturing 

companies, to turn a profit. And in the two years since the Department issued the loan guarantee. 

Solyndra faced deteriorating market conditions. 

Solar PV production has expanded at the sal11e time that demand has softened due to the 

global economic downturn and a decline in subsidies in countries including Spain, Italy and 

Germany. The result has been an acute drop in the price of solar cells. which has taken a toll Oil 

many solar cOl11panies in Furope, Asia and the United States. Meanwhile. countries like China 

are playing to win in the solar industry. China has invested aggressively to support its 

companies. and in recent years, China has seen its market share in solar cell and solar module 

production grow significantly, to roughly half the l11arket today. 

Facing a liquidity crisis near the end 01'20 I O. Solyndra informed us that it needed 

emergency financing from its existing investors to complete scale-up of its operations and reach 

profitability. 

The Department faced a difficult decision: force the company into immediate bankruptcy 

or restructure the loan guarantee to allow the company to accept emergency financing that would 

be paid back first if the cOl11pany was still unable to recover. 

2 
23 


76267.011

Immediate bankruptcy meant a 100 percent certainty of dcf:1ult. with an unfinished plant 

as collateral. Restructuring improved the chance of recovering taxpayer money by giving the 

company a fighting chance at success, with a completed plant as collateral. Although both 

options involved signi ilcant uncertainty for the value of the company, our judgment was that 

restructuring was the better option to recover the maximum amount of the government's loan, It 

also meant continued cmployment for the company's approximately 1,000 vvorkers. I approved 

restructuring of the loan guarantee to give the taxpayers the best chance at recovery. It is worth 

noting that the nearly $1 billion of original equity investment from Solyndra's investors remains 

subordinate to the debt owed to the government. 

In August of201 L Solyndra faced another liquidity crisis and the Department again 

faced a tough choice. We asked some of the smartest fInancial analysts to look at the health of 

the company. We reviewed a number of options, and ultimately, vve concluded that providing 

additional support to this company was not in the taxpayer's best interests. 

While we arc disappointed in the outcome of this particular loan, we support Congress' 

mandate to tlnanee the deployment of innovative technologies, and believe that our portfolio of 

loans does so responsibly. The President has asked for a review of the Departlllent's loan 

portfolio. We support that review, and I look forward to the results. The Energy Department is 

committed to continually improving and applying lessons learned in everything we do, because 

the stakes could not be higher for our country. 

When it comes to the clean energy race, America faces a simple choice: compete or 

accept defeat. I believe we can and must cOlllpete. 

Thank yOll, and I welcome your questions. 

REN21. "Renewables 20 I I Status Report," 

http"' \\'\\' \\ .rt'!1~ I.net Portal:,,97 documents/GSRiRF:,\21 CiSR20 UJ2g..f 

3 
24 

Mr. STEARNS. Thank you, Mr. Secretary. 

And I will start off with my questions. As I mentioned, we have 

a book to your left there with different tabs we will be asking you 

to look at. When my questions are asked, I would like you to answer ‘‘yes’’ or ‘‘no,’’ and I phrased my questions in such a way that 

you could do that. 

In that book, on tab 5, there is an interview you had with the 

Wall Street Journal on February 6th, 2009. And you were simply 

asked what percentage of the roughly $37 billion that you had to 

spend at DOE for these loan guarantee programs. You replied you 

wanted about half to be spent in a year. 

So the question is, are you aware that the Department of Energy 

inspector general testified just this month that the Department had 

spent, not allocated, had spent only 45 percent of the stimulus 

funds nearly 3 years later, yes or no? 

Mr. CHU. I am aware that we did not—— 

Mr. STEARNS. OK, just—you are aware, yes. 

So the Department of Energy stimulus program failed to meet 

even your, based upon that interview in the Wall Street Journal, 

50 percent performance target you set. Is that correct? 

Mr. CHU. That is correct. 

Mr. STEARNS. OK. 

Now, you have repeatedly stated, in hindsight—you keep mentioning hindsight, 20/20—no one could have predicted about 

Solyndra going bankrupt. But here is the crux and here is the 

problem we have: In August 2009—and this is tab 14—before you 

signed off on the loan guarantee, one of your own Department of 

Energy staffers actually predicted, prophetically, that Solyndra 

would go bankrupt. And I will quote: ‘‘The issue of working capital 

remains unresolved. The issue is cash balances, not cost. Solyndra 

seems to agree that the model runs out of cash in September 2011, 

even in the base case without any stress.’’ 

So the bankruptcy was predicted 2 years ahead of time. Knowing 

of this assessment, you are the Secretary of Energy, continued to 

give tranches of money to Solyndra all through the next 2 years, 

even though your staff had predicted that Solyndra would go bankrupt in September 2011. 

When you signed off on the loan guarantees, were you aware of 

this, of these emails and of these concerns from DOE? And OMB 

emails also showed that. Were you aware of that, that Solyndra 

was a bad bet, yes or no? 

Mr. CHU. This is not—sir, this is not a yes-or-no question. Let 

me explain the context of what this—— 

Mr. STEARNS. Well, I—— 

Ms. DEGETTE. You know, let’s hear him out. 

Mr. CHU [continuing]. Email was about. 

Mr. STEARNS. OK. OK. 

Ms. DEGETTE. Do you want the information? 

Mr. STEARNS. I don’t want you to take all my time, but can you 

just give a short answer? 

Mr. CHU. Very shortly, this email—the cash flow had to do with 

the construction of Fab 2 facility. And if you look at the full analysis of that facility and the cash flow of that facility, it was going 

25 

to go very rapidly into the black. In fact, that Fab 2 facility was 

completed on time, on budget. And the parent company—— 

Mr. STEARNS. OK, I understand that. But yes or no, were you 

aware of these DOE emails that said it would go bankrupt? That 

is the basic question. Were you aware of them, yes or no? 

Mr. CHU. I wasn’t aware of this particular email at the time. 

Mr. STEARNS. Were you not aware of it? 

Mr. CHU. I was—it was an issue of an analysis that was in 

the—— 

Mr. STEARNS. No, the question is, were you aware that your own 

staff that worked for you was predicting bankruptcy in 2011, prophetically, 2 years, yes or no? 

Mr. CHU. It wasn’t predicting bankruptcy of the company. It was 

predicting a cash-flow issue that, upon further analysis, did not appear and, in fact, did not appear in reality. 

Mr. STEARNS. Were you aware of it at the time? 

Mr. CHU. I was not aware of this email at the time. 

Mr. STEARNS. OK. 

During an interview with committee staff, the DOE chief financial officer admitted that he did not remember the Department 

validating any assumptions about the Chinese market before approving the application. 

Was that, in hindsight, the Department should have known? And 

wasn’t that the failure of DOE? 

Mr. CHU. Could you repeat the question, please? 

Mr. STEARNS. Sure. Basically, just asking, did you do any research about the Chinese market before you approved this loan, yes 

or no? 

Mr. CHU. I personally did not do it, but I am—— 

Mr. STEARNS. OK. 

Mr. CHU [continuing]. Sure my loan people have done many market surveys. 

Mr. STEARNS. OK. 

When Solyndra ran into financial problems and you authorized 

taxpayers’ funds to be subordinated to these two hedge funds, were 

you aware that DOE staff originally told Argonaut and the DOE 

funds could not be subordinated under the Energy Policy Act of 

2005, yes or no? 

Mr. CHU. When we discussed the subordination of the loan with 

my general counsel, it was the decision of the general counsel of 

the Department of Energy—their considered opinion was that the 

subordination was proper. 

Mr. STEARNS. OK. 

The President recently appointed Mr. Allison to look at the 

DOE’s loan, the entire portfolio. Doesn’t the fact that the President 

appointed somebody outside of DOE show that he doesn’t think you 

have the wherewithal, the financial acumen, to step in and actually 

understand the condition of all these loan guarantees? Doesn’t this 

mean simply—it does to me—that the President has lost confidence 

in you and your management—your financial-management acumen 

of this loan guarantee program? 

Mr. CHU. We welcome outside eyes, and we welcome Herb Allison and his investigation. I made no bones about it. I should also 

26 

say, before that happened, we, ourselves, within the loan program, 

we looked outside the loan—— 

Mr. STEARNS. So, basically, you don’t take it as any affront on 

your—— 

Mr. CHU. Pardon? Pardon? 

Mr. STEARNS. You don’t take it as a personal affront on your integrity to run the DOE that the President has an outside group 

looking at it? 

Mr. CHU. No. I—— 

Mr. STEARNS. I accept that. 

Mr. CHU [continuing]. I—I—— 

Mr. STEARNS. Let me complete with one last question. Were you 

aware in early 2011 that, to subordinate this loan, the chief financial officer of the Department of Treasury said, in his 28 years, he 

has never seen taxpayers subordinated to outside commercial 

loans? Were you aware that Mr. Burner said that? 

Mr. CHU. No, I was not aware he said that. 

Mr. STEARNS. Are you aware of it today? 

Mr. CHU. Yes. 

Mr. STEARNS. And do you think that he is right, or do you disagree with him? 

Mr. CHU. I believe that other loan—like OPIC and Ex-Im, have, 

in some cases, subordinated loans. 

Mr. STEARNS. We are talking about taxpayers. 

Mr. CHU. Well, OPIC and Ex-Im—— 

Mr. STEARNS. All right. 

Mr. CHU [continuing]. Serve the taxpayers. 

Mr. STEARNS. My time has expired, and we recognize the 

gentlelady from Colorado. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

Secretary Chu, did any Obama campaign donor ever contact you 

and ask you to take any action relating to the Solyndra loan guarantee or to the restructuring of that loan guarantee? 

Mr. CHU. No. No one did. No Obama campaign—— 

Ms. DEGETTE. You are under oath. 

Mr. CHU. Yes. 

Ms. DEGETTE. OK. 

Now, are you, as Secretary of Energy, aware, personally aware, 

of any contact by any Obama campaign donor to any employee of 

the Department of Energy asking them to take any action relating 

to the loan guarantee or to the restructuring? 

Mr. CHU. I am not aware of any such—— 

Ms. DEGETTE. Have you asked your employees and the folks involved with Solyndra if they—— 

Mr. CHU. They were having discussions, and no one has said that 

something like that occurred. No one—— 

Ms. DEGETTE. OK. 

Mr. CHU. They, in fact, said that, to the best of their knowledge, 

it has not occurred. 

Ms. DEGETTE. Did anyone from the White House ever contact 

you—anyone from the White House ever contact you—to take any 

action on the Solyndra loan guarantee or restructuring for any reason other than the actual financial analysis? 

Mr. CHU. No. 

27 

Ms. DEGETTE. Now, are you aware of any contact by someone 

from the White House to anybody in the DOE? Did anybody bring 

that to your attention, asking them to take an unusual action relating to the loan guarantee or to the restructuring? 

Mr. CHU. No, I am aware of no communication from White House 

to Department of Energy saying to make the loan or to restructure. 

Ms. DEGETTE. Now, in your responses to the chairman’s question, you said the decisions were yours based on professionals within the Department. Briefly, can you describe the process for—I 

mean, originally, the loan was not approved under the Obama administration; it was the Bush administration. But, certainly, the 

tranches of money were given under the stimulus, and then there 

was the restructuring. 

So the question is, which professionals did you rely on within the 

Department to make those decisions? 

Mr. CHU. So, what happened when I came in as Secretary of Energy is that there was, beginning with the confirmation hearings, 

tremendous interest in the loan program, getting it going. When I 

came into the Department, I asked, what are the loans first in line 

that have been prepared? And I was told by Department of Energy 

career people that Solyndra was the first loan; this was first in 

line. 

Ms. DEGETTE. These are people who had been there previously. 

They were career Department of—— 

Mr. CHU. They were career people who had been there during 

the previous administration. 

Ms. DEGETTE. OK. 

Mr. CHU. And they said that this was the first in line. It went 

before—I think in early January it went before the review committee, the credit review committee. And the credit review committee said there was incomplete information, we needed more information, for example on market surveys, things of that nature. 

So they gave it back to the loan originators—again, career people— 

and said, we need more information before we can make a decision 

yes or no. 

And so that is what happened. So, one set of career people told 

the loan originators, go back and we need this additional information before we can make an up-or-down vote. 

Ms. DEGETTE. And then what happened? 

Mr. CHU. And then, several months later, after these things were 

obtained—market surveys, things of that nature—they came back 

to the credit review committee, and, at that time, the same career 

folks said, ‘‘OK, you have satisfied our questions, and we recommend moving forward with the loan.’’ 

Ms. DEGETTE. And so you moved forward with the loan. 

Mr. CHU. Right. At that time—— 

Ms. DEGETTE. Now, then, some months later, the bottom really 

fell out. Why do you think that happened? Was it improper reviews 

and data used by the career people in that analysis, in getting that 

market analysis? Very briefly, because I have about the same 

amount of time as the chairman. 

Mr. CHU. Very briefly, the largest issue of why that happened is, 

the price of solar panels dropped precipitously. And by ‘‘precipitously’’ I mean in a single year it dropped by 40 percent. 

28 

Ms. DEGETTE. And was that primarily because of China’s infusion of capital, or were there other market reasons for that as well? 

Mr. CHU. There were two factors. First, there was a large production ramping up, namely in China. And, secondly, there was a 

softening of the market in Europe. 

Ms. DEGETTE. OK. 

Mr. CHU. A lot of subsidies were being—they were decreasing, 

and the demand was softening. 

Ms. DEGETTE. Now, at some point, there was a decision, then, to 

restructure the loan, correct? 

Mr. CHU. Yes. 

Ms. DEGETTE. And why didn’t the Department just walk away 

from the loan? Why was this decision made to restructure? 

Mr. CHU. By that time, the Department knew that because of the 

very competitive nature of solar—I said 40 percent in 1 year; 70 

percent over a 3-year period of time, which was unheard of—we 

had a half-completed factory. And it was a difficult decision. We 

had two choices: We either had to stop the loan, which would make 

Solyndra go into immediate bankruptcy, with a half-empty factory—half-completed factory; or we could say, we can continue on 

the contract of the loan, which was to build this factory. Once the 

factory was complete, Solyndra would have a fighting chance of 

continuing or it could offer that factory sale as a whole unit. 

Ms. DEGETTE. So there was some hope that you could recoup the 

taxpayers’ money? 

Mr. CHU. Yes. And we—— 

Ms. DEGETTE. Now, one last question. Why was the decision 

made to subordinate the government’s interest to the private investors in the restructuring? 

Mr. CHU. At the time, the investors—in the time where we were 

disbursing the loans, again, it was a contractual arrangement with 

the Department of Energy, the investors were putting in more equity. And as the rapidly changing market conditions dictated, the 

investors said, if you want us to put in another—first $75 million, 

followed by another $75 million, this first $75 million should come 

ahead of the Department of Energy. 

And, again, we faced—after discussing the legality of that—and, 

again, our general counsel advised me that it was legal—then we 

faced this difficult decision. Do you stop giving them the money 

that was agreed upon and force them into bankruptcy, or do you 

go forward? 

And so, this whole—it was a difficult decision, and we were always, always focused on that path that could get as much taxpayer 

recovery as possible. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

Mr. STEARNS. I thank my colleague. 

I recognize the full chairman, Mr. Upton, the gentleman from 

Michigan, for 5 minutes. 

Mr. UPTON. Thank you, Mr. Chairman. 

I am going to follow the Dingell model of asking yes-and-no questions, if I can. 

Were you aware, Mr. Secretary, that DOE staff was concerned 

throughout 2009 that the company did have a liquidity problem? 

Mr. CHU. I am aware now—well, yes. I was aware—— 

29 

Mr. UPTON. Were you aware then? 

Mr. CHU [continuing]. There was a liquidity problem in—it 

wasn’t a liquidity—it was a temporarily liquidity problem in the 

project, which was what we were funding, namely the construction 

of Fab 2, but it was only a 1-month. And afterwards—— 

Mr. UPTON. All right. 

Mr. CHU [continuing]. It was not an issue. 

Mr. UPTON. That goes back to the question that Mr. Stearns 

asked, but I am looking at a—on October 8th, 2010, Solyndra executives informed DOE that the company’s situation—this is a 

quote now—‘‘situation has changed quote dramatically,’’ end quote. 

Bill Stover, the CEO, informed DOE that it would not be able to 

raise capital by the end of the year, as it originally had planned 

to do so, and, quote, ‘‘Without access to FFB loans in October, November, and December for work that has been completed, Solyndra 

would run out of cash in November,’’ end quote. 

So that is there, in addition to the email that was sent in 2009 

which said that they would run out of cash by the end of August 

of 2011, which, of course, was true. 

So were you aware of either one of those two emails to DOE? 

Mr. CHU. Again, I want to not conflate the issue. The issue of the 

first instance I believe was—— 

Mr. UPTON. It shows to me that there was a pattern, that they 

announced that they were going to run out of cash. 

Mr. CHU. There was one instance when, in the construction of 

the Fab 2 project, where—which is, I believe, the first one you were 

referring to. And that, as you said—if you then go to the next 

month, it goes into the black and it was a modeling issue. In fact, 

history shows that that fab was constructed on time, on budget. 

Mr. UPTON. But in the email from nearly a year ago, they indicated, again, that they were going to run—without access to funds, 

they would run out of cash in November of last year. There was 

another email—are you aware of that email? 

Mr. CHU. I believe those emails are still about the construction 

of Fab 2. 

Mr. UPTON. All right. Were you aware of the company’s problem containing costs, that it had a cash burn rate of almost $10 million 

a week, yes or no? 

Mr. CHU. We knew that they had—in fact, their business 

model—and this is true of many companies, especially manufacturing companies. You have a cash burn rate, you build up your 

factory, you build up your sales, you begin to sell your product, and 

there was a business plan that they were going to—which, again, 

nearly $1 billion of equity investments by savvy people knew of 

this plan. 

Mr. UPTON. Were you aware in 2010 that both OMB and Treasury were concerned that DOE was not monitoring the loan and did 

not have a grip on Solyndra’s financial condition? 

Mr. CHU. We were, in fact, monitoring the loan. In fact, about 

that time—first, we started by monitoring the loan, and then we 

set up, later, a different entity. So a person that was not part of 

the loan origination by that time was beginning to monitor the 

loan. We set up—— 

Mr. UPTON. Yes. 

30 

Mr. CHU. We further set up another organization within the loan 

program to monitor the loan. And now what we have done is set 

up organizations outside the loan program but who have expertise—— 

Mr. UPTON. It is our understanding that you weren’t monitoring 

very closely until after it was restructured. 

Do you stand by the restructuring even though the arrangement 

put Solyndra’s interest and investors ahead of the taxpayers? 

Mr. CHU. As I said, this was a difficult choice. There was a 

lengthy discussion—— 

Mr. UPTON? So you do. 

Mr. CHU [continuing]. About that. And it was a difficult choice 

for us to make. And, at that time, we felt that the first $75 million—the company would not put in—the investors would not put 

in an additional $75 million in order to continue this project. And 

so it was a choice of either facing immediate bankruptcy, as I said 

before—— 

Mr. UPTON. So, because of that decision, how much money do you 

think the Federal Government will be able to recover? 

Mr. CHU. Well, that remains to be seen, but I—— 

Mr. UPTON. Well, what is your—— 

Mr. CHU [continuing]. Am anticipating not very much. But we 

would not have, had we said no, stopped disbursement of funds, 

stopped the completion of the factory and have it a half-complete 

factory. We felt that we weren’t going to recover much of anything 

at all, at that point, as well. 

Mr. UPTON. Documents produced to the committee show that negotiations between Solyndra, its investors, and DOE came to a 

head this last August, August 26th, over whether DOE should advance yet another almost $5.5 million to the company. The decision 

was made when OMB, DOE, Treasury—the decision was collectively no; it was stopped. And 2 days later, they declared bankruptcy. 

What was DOE’s position among those three? Were they in favor 

of this additional money in August? 

Mr. CHU. No. In fact, during that time, there were some phone 

calls. I wanted to—we got another outside, independent—Lazard, 

another outside firm, to give us their estimate—— 

Mr. UPTON. So your—— 

Mr. CHU [continuing]. Of the condition of Solyndra. 

Mr. UPTON. So, was it a decision that you were afraid to send 

more good money after bad? 

Mr. CHU. From their analysis and from—— 

Mr. UPTON. The writing was on the wall? 

Mr. CHU. At that time, in August of 2011—or July of 2011? 

Mr. UPTON. Last question. I know my time has expired. Based 

on what you know and what has happened, who is to apologize for 

the half a billion dollars that is out the door? 

Mr. CHU. Well, it is—— 

Mr. UPTON. DOE? 

Mr. CHU. It is extremely unfortunate what has happened to 

Solyndra. But if you go back and look at the time decisions were 

being made, was there incompetence? Was there any influence of 

a political nature? And I would have to say no. 

31 

Mr. UPTON. So no apology? 

Mr. CHU. Well, it is extremely unfortunate what has happened 

to Solyndra. And I think you and I both feel the same. 

But when the bottom of a market falls out and the price of solar 

decreases by 70 percent in 2–1/2 years, that was totally unexpected, not only by us, but if you look at the range of predictions 

that were being made by financial analysts from the last quarter 

of 2008, 2009, the average—there are some outliers, but the average of those were not expecting these prices to plummet. And so, 

fundamentally, this company and several others got caught in a 

very bad tsunami, if you will. 

Mr. STEARNS. The gentleman’s time has expired. 

The gentleman from California, Mr. Waxman, is recognized for 5 

minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. I hope you will be as 

generous to me in the time allotted to me as you have to our other 

colleagues. I will try to stay within the 5 minutes, but I might go 

a little bit over it, as the others have as well. 

Secretary Chu, you are a scientist, and I want to ask you a 

science question. Many House Republicans, including many Republicans on this committee, deny that climate change is occurring. 

Are they right? Is climate change a hoax, or is it real? 

Mr. CHU. No, the climate is changing, and there is much compelling evidence to suggest that a large part of it is due to human activity. 

Mr. WAXMAN. And that is because most of our world’s energy 

comes from fossil fuels, like coal and oil, that emit quantities of 

carbon pollution; is that right? 

Mr. CHU. That is correct, that it is due to greenhouse gas emissions, carbon dioxide being the biggest. 

Mr. WAXMAN. Does our future economic prosperity depend on 

building new energy industries? 

Mr. CHU. Yes. 

Mr. WAXMAN. And that is for our economic wellbeing, but it is 

also for stopping the climate change, if that is possible; isn’t that 

correct? 

Mr. CHU. That is absolutely true. I think because of these two 

factors that we will need clean energy. But there is another very 

important factor, that if you look at the market and you look at 

what the price is going to be for solar and wind, the expectation 

is that wind—wind, right now, according to Bloomberg New Energy 

Finance, costs, levelized cost, 7 cents a kilowatt hour. This is getting in the range of the cost of any new form of energy. 

Mr. WAXMAN. Well, you mentioned in your comments, your opening statement, China and Germany. Are we in a race with China 

and other countries to make the solar panels and wind turbines 

that will be the cornerstone of the clean energy economy for the future? 

Mr. CHU. Yes, we are. 

Mr. WAXMAN. I ask you these questions because they are the lens 

in which we need to understand Solyndra. Investing in Solyndra 

involved risk, but it was a risk that you thought was worth taking 

because of the importance of clean energy to our economic future; 

is that right? 

32 

Mr. CHU. That is correct. 

Mr. WAXMAN. Members on this committee say they are shocked— 

shocked—that you would invest in a company as risky as Solyndra. 

But, in March 2009, before Solyndra received its conditional commitment, you said publicly that you were going to set aside some 

loan guarantees for higher-risk projects, which you said were 

projects that had a default rate as high as 10 to 30 percent. 

I want to show you on the monitor what you said. Quote, ‘‘We 

should be making some higher-risk loans. These would be much 

more innovative, might be more likely to fail, but could create bigger changes in the long run,’’ end quote. You said this in March 

2009 before the Energy Department gave Solyndra a loan. 

When DOE awarded Solyndra the loan guarantee, were you 

aware there was a risk that the project could fail? 

Mr. CHU. I think, not only was I aware of it, all of Congress, in 

passing the bill, as they said, they appropriated $10 billion to cover 

for loan losses. That appropriation is very valuable; it could have 

been appropriated for other worthy causes. And so Congress knew 

of the risks. 

Mr. WAXMAN. Secretary Chu, your reputation for integrity is unimpeachable. You have just told us that you gave Solyndra a loan 

guarantee that you knew was risky because we are in a race with 

China and other nations to develop a clean energy economy for the 

future. Republicans on this committee paint a very different picture. They say you gave Solyndra a loan guarantee as a political 

favor to a campaign contributor to President Obama. 

Can you tell us unequivocally that the decision to give Solyndra 

a loan guarantee was made on the merits? 

Mr. CHU. Absolutely, it was made only on the merits. 

Mr. WAXMAN. And can you tell us unequivocally that campaign 

contributions played no role in that decision? 

Mr. CHU. Yes. They played no role. 

Mr. WAXMAN. It’s pretty obvious what’s going on in this hearing 

room. House Republicans and their coal and oil industry allies are 

manufacturing a scandal, trying to discredit you, President Obama, 

the clean energy companies. That’s a great deal if you’re an oil 

company or a coal executive, but it’s unfair to you and a disservice 

to the American people. This was a decision made on the merits 

because of the urgent need to build a clean energy economy. There 

is no evidence in the voluminous records before the committee to 

support the allegations of political favoritism. 

The Republicans on this committee have said over and over 

again, they haven’t been able to get the information they’ve requested. Your Department has already turned over to this committee 186,000 pages of documents. Is there anything you are holding back? 

Mr. CHU. No. In fact, we—I’ve instructed my staff to be as cooperative as possible with this committee. 

Mr. WAXMAN. And there have been 13,000 pages of documents 

from the Office of Management and Budget, and over a thousand 

pages of documents from the White House, which the White House 

was willing to give this committee, but the committee rushed to a 

subpoena to force it, and there are nearly 200 pages of documents 

from the Treasury. 

33 

With all of these documents in before this committee, I don’t 

think the Republicans have been able to sustain the accusations 

that they’ve tried to make, mainly on innuendo, that this was a 

loan guarantee that should not have been made or that should not 

have been continued when the loan was restructured. I thank you 

for your cooperation in today’s hearing. 

Mr. STEARNS. The gentleman’s time has expired. 

Recognize the gentleman from Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Thank you, and Mr. Secretary, I, too, will stipulate 

that I think you’re a man of integrity, so I do share that sentiment 

with Chairman Waxman. 

He and Ms. DeGette have just made a big deal of asking you 

about political influence, and you have stated under oath that there 

was no political influence and that you are not aware of any, and 

I believe that you believe that. 

Having said that, who at the White House or the Department of 

Energy, since there was no political influence, asked Solyndra to 

delay the announcement of plant closures and layoffs until after 

the election in November of 2010, since there was no political influence on this? Who made that request? 

Mr. CHU. Sir, I don’t know. I just learned about that. I think—— 

Mr. BARTON. You do know that it was made, though, don’t you? 

Mr. CHU. I just learned about it very recently. 

Mr. BARTON. So you all don’t operate in a total vacuum. I mean, 

you know, you know who George Kaiser is, I’m sure? 

Mr. CHU. Yes, I know now. 

Mr. BARTON. You knew that he was a major investor in a venture capital firm that had a major stake in Solyndra; you knew 

that? 

Mr. CHU. Not at the time of the evaluation of the loan, not at 

the time of the restructuring. I know now what his connection— 

what his role has been. He was one of the equity investors. 

Mr. BARTON. I believe that you’re being truthful when you state 

that he never asked you about this particular loan program. I absolutely believe that, but it’s the elephant in the room. Everybody 

and their dog at DOE knew who he was and knew what he was 

involved in, and we have on the record that he was in and around 

the White House at least 16 times in the time period that the 

Solyndra loan program was being reviewed after the Bush administration has said that it wasn’t ready. 

I’m going to ask you a series of questions here, and I hope that 

you can answer them with a yes or no answer. 

Could we put up on the screen the Energy Policy Act, Section 

1702? 

Mr. Secretary, I’m sure that you’ve read Section 1702 of the Energy Policy Act, conditions, part D, subsection 3, regarding subordination, and it reads, item No. 3, the obligation shall be subject to 

the condition that the obligation is not subordinate to any other financing. You’ve read that, right? 

Mr. CHU. Yes. 

Mr. BARTON. OK. Do you understand what the word ‘‘shall’’ 

means? 

Mr. CHU. Yes. 

34 

Mr. BARTON. OK. I believe that the Solyndra loan restructuring 

program was in violation of this law because—and your department did not follow the plain language of the law—because the obligation shall not be subordinate to other financing. In fact, since 

you made the opposite decision, who did you consult with before 

you made that decision? 

Mr. CHU. The general counsel of the Department of Energy. 

Mr. BARTON. The general counsel. 

Mr. CHU. And I believe that that was about the origination of the 

loan, and under the conditions of the origination of the loan, we 

shall not subordinate to any other—— 

Mr. BARTON. So the general counsel would be Susan Richardson? 

Mr. CHU. No, this would be Scott Harris. 

Mr. BARTON. Who is Susan Richardson? 

Mr. CHU. She works—she’s a counsel who works in the loan program, and she—— 

Mr. BARTON. She works, OK. I understand that she is the chief 

counsel of the loan program. Is that your understanding also? 

Mr. CHU. That is my understanding. 

Mr. BARTON. OK. Did she consult directly with you about the 

language of the law that we’ve just read? 

Mr. CHU. She consulted extensively with the General Counsel’s 

Office, with Scott Harris and others. There was an extensive discussion about that issue, and it was again when it was finally 

brought to me by the general counsel, Scott Harris, it was their 

opinion that this did not violate the terms of the law. 

Mr. BARTON. When did Mr. Harris bring that to you? 

Mr. CHU. This was in a discussion as we were discussing whether we should subordinate or not, and it had to do with restructuring, and so before we could even think of restructuring in a subordination, we had to make sure that it was legal. 

Mr. BARTON. What date was that? 

Mr. CHU. I can’t—— 

Mr. BARTON. Well, my—the reason—— 

Mr. CHU. I don’t remember the exact date, but it was—— 

Mr. BARTON. I don’t want to cut you off, Mr. Secretary, but the 

reason the dates is important is that my understanding is the decision was made to subordinate before the memo accepting subordination was prepared. So there was a decision, and then after the 

decision made—at least I’m told this—the decision was made to 

subordinate, but the action memo which authorized it wasn’t 

signed until after the decision had been implemented. Is that true 

to your knowledge? 

Mr. CHU. No, I don’t—I would not know that, but it certainly 

would not be the way we do things in business, the way we do 

things in the Department of Energy. One has to first decide whether what are the legal bounds—— 

Mr. BARTON. My time is just about to expire. Does the name the 

law firm Morrison & Foerster mean anything to you? 

Mr. CHU. Yes. 

Mr. BARTON. What are they? 

Mr. CHU. They’re a law firm in California in the Bay Area. 

Mr. BARTON. All right. And they’re also a consultant for your Department of Energy. Are you aware that they prepared a memo 

35 

saying that this subordination was illegal and shouldn’t be allowed? Are you aware of that? 

Mr. CHU. No, I’m not aware of that. 

Mr. BARTON. Even though you said you welcome outside ears and 

eyes, and they were asked to prepare a draft memo, but once they 

prepared it and your general counsel saw what was in the draft 

memo, they basically said, we don’t want to hear that. Are you 

aware of that? 

Mr. CHU. I’m not aware of that. I’m aware of the fact that there 

was a lot of discussion with Morrison & Foerster with our General 

Counsel’s Office. 

Mr. BARTON. OK, my time has expired, Mr. Chairman, but we’re 

going to do more than one round; is that not correct? 

Mr. STEARNS. That’s correct. 

Mr. BARTON. Thank you, Mr. Secretary. 

Mr. STEARNS. Recognize the distinguished gentleman from Michigan, Mr. Dingell, for 5 minutes. 

Mr. DINGELL. Mr. Chairman, thank you. 

Mr. Secretary, these questions are yes or no. Did DOE hire experienced people in loan programs to do the analysis on loan applications? 

Mr. CHU. Yes, we did. 

Mr. DINGELL. Did DOE hire experienced outside consultants to 

help in analyzing industries, markets, and other areas of concern 

to the Loan Programs Office? 

Mr. CHU. Yes. 

Mr. DINGELL. Did the Loan Programs Office share information 

with OMB and Treasury during due diligence process? 

Mr. CHU. Yes. 

Mr. DINGELL. Was that process open and transparent? 

Mr. CHU. We shared a lot of information with OMB and Treasury. 

Mr. DINGELL. So it was open? 

Mr. CHU. I mean, I don’t know what you mean—— 

Mr. DINGELL. Yes or no. 

Mr. CHU. It was open between OMB and Treasury and us. 

Mr. DINGELL. Thank you. 

Now, you mentioned in your opening statement that Members of 

Congress submitted letters for projects in their districts. I happen 

to know I did. As a matter of fact, I did with my good friend Mr. 

Upton, we submitted it together for a project in Michigan, which, 

curiously enough, happens to be in trouble because of a similar 

market collapse. 

Now, did DOE or the Loan Programs Office take these letters 

into account when examining loan applications? 

Mr. CHU. Yes. 

Mr. DINGELL. So it’s correct that DOE or the Loan Programs Office only examined the merits of loan applications and did not consider any influence from the Congress or the White House, yes or 

no? 

Mr. CHU. We did not consider any influence. 

Mr. DINGELL. All right. 

36 

Now, let me look at this. We’ve heard all these complaints about 

the fact that the Federal guarantee was subordinated to private 

loans. It was superior to earlier private loans, was it not? 

Mr. CHU. Yes. 

Mr. DINGELL. OK. 

Mr. CHU. Well—— 

Mr. DINGELL. It was not superior to and it was subordinated to 

subsequent private loans; is that right? 

Mr. CHU. Yes. The first $75 million of the initial funds. 

Mr. DINGELL. Now let me keep going. 

Without that step, you would not have been able to get any private money to assist the Federal guarantee in saving Solyndra; is 

that right? 

Mr. CHU. That is correct. 

Mr. DINGELL. OK. 

Now, I’m sure you’re aware this committee has issued subpoenas 

for documents to OMB and to the White House, and we have not 

done so for DOE, your agency, and for your department because 

you’ve provided us over 186—pieces of documents related to this 

issue. Are you aware of any of the 186,000 documents included in 

communications between the DOE and the White House? 

Mr. CHU. Are you asking am I aware of all 186,000 pages? 

Mr. DINGELL. Well, the question is, are you aware of any of these 

documents that were communications between DOE and the White 

House? 

Mr. CHU. I’m not sure what communications there were between 

DOE and the White House, but certainly we did not communicate 

with the White House on whether we should approve a loan and 

especially the Solyndra loan. That was our responsibility. 

Mr. DINGELL. OK. So did you have any personal communications 

with President Obama, with the Vice President, or campaign donors or others who had financial interests in Solyndra? 

Mr. CHU. No, I did not. 

Mr. DINGELL. Now, based on the information you have received 

and have reviewed regarding the due diligence done by DOE during the Bush and Obama administrations, do you believe that the 

Solyndra loan was awarded based on the merits of the application? 

Yes or no. 

Mr. CHU. Yes, I believe it was awarded on the merits of the application. 

Mr. DINGELL. So here—do you agree with this statement: I believe that, first of all, you had a law which said that you should 

make these guarantees. 

Second of all, you have got a situation where the Chinese are 

eating our lunch. They’re producing batteries and solar panels and 

all kinds of things because, as you have observed, their government, through the China Development Bank, has offered more 

than $34 billion in credit lines to China solar companies alone. 

Other countries are doing the same thing, Japan, Korea, and probably other South Asian countries. 

Now, having said this—and of course, Germany and Canada are 

doing exactly the same thing. So you found yourself in a position 

where you had a law that says you’ve got to do something. You had 

a depression on your hands. And you were trying to produce jobs. 

37 

And you had an industry that you were trying to develop in the 

United States so that we’re going to be able to compete instead of 

the Chinese dominating the market, as they seem now to be proceeding to do. Is that a fair statement? 

Mr. CHU. They certainly want to dominate the market, and we 

were executing the laws as passed by Congress on the loan program. 

Mr. DINGELL. This is one of the things that motivated you to try 

to get Solyndra into the business, isn’t that so? 

Mr. CHU. That is true. I mean, this is a worldwide competition, 

as I said before. 

Mr. DINGELL. Now, what caused the big problem as near as I can 

gather is that the market collapsed; is that right? 

Mr. CHU. Well, the price of solar modules plummeted, that is correct. 

Mr. DINGELL. That’s what I’m saying. I yield back the balance of 

my time. 

Thank you, Mr. Secretary. 

Mr. STEARNS. Thank the gentleman. 

The gentleman from Nebraska, Mr. Terry, is recognized for 5 

minutes. 

Mr. TERRY. Thank you. 

And, you know, the ultimate question before this subcommittee 

is really, was it a meritorious loan? Is it something that should not 

have been finalized and spent? That’s why you’re here, so we can 

ask the questions and get the feelings. 

So, first of all, the Solyndra loan was finalized in September 

2009, is that your understanding? 

Mr. CHU. That’s my understanding. 

Mr. TERRY. All right. So you were one of the—I mean, you have 

a premier resum, one of the most respected people in the Cabinet, 

and you were sworn in. You were confirmed easily. And what was 

the first day you took office? 

Mr. CHU. I think it was January 22nd. 

Mr. TERRY. And when were you first briefed by DOE staff on the 

Solyndra application? 

Mr. CHU. Actually, I don’t know about the Solyndra application, 

quite candidly. Certainly early on, once I became Secretary, there 

was—I was focused on trying to get the loan program going. As I 

said before, in my confirmation hearings, that was a central theme 

among many Members of Congress. 

Mr. TERRY. So you don’t—you can’t identify when you were first 

briefed on this loan? 

Mr. CHU. On Solyndra? No, I—I think early on, it was—— 

Mr. TERRY. Certainly you knew about it before September 2009? 

Mr. CHU. Yes. 

Mr. TERRY. OK. Then you testified earlier that you were aware 

of the January 9th credit committee voted against offering a conditional commitment to Solyndra, noting, quote, number of issues unresolved makes a recommendation for approval premature at this 

time. 

Were you aware of that January 9th decision—— 

Mr. CHU. I’m aware—— 

38 

Mr. TERRY. [continuing]. Prior to the loan being finalized in September of 2009? 

Mr. CHU. I’m aware of it now, but was I aware of it when the 

loan was being finalized? I think it’s safe to say that it was just 

remanded back for additional information, and so, quite often, 

when the loan program tells me about the loan, what it is, whether 

we should be funding it—— 

Mr. TERRY. All right. So you didn’t know that there was a decision that it was premature at the time, direct quote, until later on? 

Mr. CHU. There are many instances, sir, when—— 

Mr. TERRY. Let me ask you—— 

Mr. CHU [continuing]. Applications are incomplete or there is not 

enough—— 

Mr. TERRY. I appreciate that. 

Did you know that the credit committee also noted that it had, 

quote, questions regarding the nature and strength of the parent 

guarantee for the completion of the project and Solyndra’s ability 

to scale up the production, also stated in that January 9th document? Were you aware of that before the loan was finalized January—I’m sorry, September 2009? 

Mr. CHU. I was aware, as it was briefed to me at the time, this 

was before March, and the conditional commitment at that 

time—— 

Mr. TERRY. So you received a briefing in March? 

Mr. CHU. I received a briefing. 

I’m not exactly sure when I received the first briefing, but certainly since Solyndra was at the head of the line, based on the 

work of—during the previous administration, then it was the one 

that—— 

Mr. TERRY. Did you—— 

Mr. CHU [continuing]. Came up. 

Mr. TERRY. February 12, 2009, DOE stimulus adviser stated, 

quote, litmus test for the loan guarantee program’s ability to fund 

good projects—that Solyndra, I’m sorry. That Solyndra is the, 

quote, litmus test for the loan guarantee program ability to fund 

good projects quickly. Were you aware of his quote? 

Mr. CHU. I’m aware of it now. 

Mr. TERRY. Before September? 

Mr. CHU. But I think what we were—this was Matt Rogers, and 

both Matt Rogers and I felt very focused to make the loan program, 

and from time of application of a complete application to the time 

of approval, something akin to about a year of due diligence. 

Mr. TERRY. All right, but he stated that on February 12, 2009. 

Mr. CHU. Right. 

Mr. TERRY. Did you have a discussion in around February 12, 

2009, that Solyndra is the litmus test? 

Mr. CHU. I believe by ‘‘litmus test,’’ what he meant was that this 

was going to—— 

Mr. TERRY. No, I’m sorry, I didn’t ask you for your interpretation 

of his statement. 

Mr. CHU. Right. 

Mr. TERRY. But he said Solyndra is a litmus test. Were you 

aware of that statement? 

39 

Mr. CHU. You know, I don’t recall that, but if he went and said 

that, I’m sure we—— 

Mr. TERRY. All right. And you had a conversation with Matt— 

what was his last name?—— 

Mr. CHU. Rogers. 

Mr. TERRY [continuing]. Rogers around middle of February of 

2009 about this Solyndra application? 

Mr. CHU. Right, because Solyndra was first on the line—— 

Mr. TERRY. Did you hire Matt Rogers? 

Mr. CHU. I did. 

Mr. TERRY. Pardon me? 

Mr. CHU. I did. 

Mr. TERRY. You hired him, OK. Was he recommended by the 

White House? 

Mr. CHU. No. 

Mr. TERRY. You just out of the blue said I need a stimulus adviser? 

Mr. CHU. Actually, yes. What I wanted, because the—at the time, 

the U.S. economy was in free fall; we were losing hundreds of thousands of jobs a year, and I wanted someone that could manage this 

huge portfolio to spend the money wisely but also to spend it quickly to put Americans back to work. 

Mr. TERRY. All right, thank you. 

Mr. CHU. Mr. Chairman, could I—— 

Ms. DEGETTE. The witness would like to add something. 

Mr. CHU. Yes. Mr. Chairman, could I—— 

Mr. STEARNS. Yes, go ahead. 

Mr. CHU. Could I just interrupt just briefly. I just wanted to correct the record. My staff told me Morrison & Foerster, the legal 

firm in the Bay Area, had specifically reviewed the Susan Richardson memo and approved her analysis, at least that’s what my staff 

tell me. They approved it. 

Mr. STEARNS. Your counsel approved the memo? 

Mr. CHU. The outside counsel Morrison & Foerster. 

Mr. STEARNS. Outside counsel, OK. Do we have a copy of that? 

Mr. CHU. We’ll be glad to give it to you. 

Mr. STEARNS. If not, I think we would like a copy. That would 

be good. 

Dr. Christensen is what we show on our records. 

Dr. Christensen, you’re recognized for 5 minutes. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

And welcome, Secretary Chu. We really thank you for your willingness to come and help us to better understand what’s happening. 

I think everyone agrees that we need to understand what went 

wrong with the Solyndra loan guarantee and how the loan guarantee programs can be improved going forward. We all also should 

be supporting innovative technologies, while, of course, as we have 

been doing, watching out for the taxpayer, but we also need to understand the big picture. 

The loan guarantee program doesn’t just support solar, wind, and 

other renewable energy projects. A substantial portion of the incentives are also available for nuclear projects. In fact, Congress has 

authorized $18.5 billion in loan guarantees for nuclear plant conVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
40 

struction costs. An additional $4 billion in loan guarantees is available for uranium enrichment facilities. The Vogtle nuclear plant 

project has already received a conditional commitment. The loan 

guarantee would be worth over $8 billion. That’s 16 times the size 

of the Solyndra loan. A $2 billion conditional commitment has also 

been provided to Areva for a uranium enrichment facility in Idaho. 

So my first question, Secretary Chu, I think it’s important to 

have a balanced program. If we’re going to provide billions of dollars in loan guarantees for new nuclear power plants, we should 

also support innovative solar, wind, and geothermal energy 

projects. What do you think? 

Mr. CHU. I agree. 

Mrs. CHRISTENSEN. You agree. 

Unlike the nuclear industry, the renewable energy industry is 

still in the early stages of development. Some of the technologies 

supported by the loan guarantee program have never before been 

built at utility scale. So Secretary Chu, what role do you think the 

loan guarantee program should play in encouraging the development of emerging technologies? 

Mr. CHU. Well, according to the bill passed by Congress, and I 

agree with their sentiment, precisely that we should be investing 

in innovative technologies. We should be investing in first-of-a-kind 

or first large-scale deployment of some of these innovative technologies, and by doing so, we create a marketplace within the 

United States. And also we, as we invest in innovative manufacturing technologies, we are in the race of a high technology race 

that is in a sweet spot of the United States. 

The United States invented the modern solar photovoltaic technologies, not only silicon but also the thin film technologies, and I 

believe we can compete and compete successfully in those technologies for what will be a hundreds-of-billion-dollars-a-year market. 

Mrs. CHRISTENSEN. I agree. And we just can’t afford to sit on the 

sidelines and allow other countries like China to dominate the market. We need those jobs and investments. 

When we try to help U.S. companies compete against heavily 

subsidized Chinese competitors, not every project is going to succeed, but we cannot just let Solyndra’s failure be an excuse to 

throw up our hands and give up on this huge market. 

Secretary Chu, can you share your thoughts about why we need 

to compete for this clean energy market, whether American—well, 

I guess you’ve really answered that we need to compete. American 

companies can be successful. As you said, we invented the photovoltaic solar machinery. 

Mr. CHU. Right. Well, let me add again—— 

Mrs. CHRISTENSEN. But also what policies should we put in place 

to help make this happen beyond what we’ve already done? 

Mr. CHU. Well, first, let me tell you about the size of the market. 

As I said in my opening remarks, it’s something of a $235 billion 

renewable energy market. According to some recent analysis by 

Bloomberg New Energy Finance, by 2020, that’s expected to be 

close to $400 billion a year. By 2030, that’s expected to be roughly 

$460 billion a year renewable energy, most of it, 80 percent of it 

roughly, in wind and solar technologies. By 2030—2020 or even 

41 

less than 2020, wind is expected to reach parity with any form, 

new form of energy. Solar, there’s a debate whether it becomes as 

inexpensive as, let’s say, gas, by 2020 or 2030 or 2025, but there’s 

a heavy expectation in the business world that these technologies 

will become competitive without subsidy in a short period, relatively short period of time. 

And so the whole issue, and this is why it’s so important to the 

United States, is that in this hundreds-of-billion-dollars-a-year 

market, do we want to be buyers or sellers? And we have the intellectual capacity to be the sellers. 

Mrs. CHRISTENSEN. And with all of that investment comes jobs, 

correct? 

Mr. CHU. Yes. 

Mrs. CHRISTENSEN. Lots of jobs? 

Mr. CHU. Lots of jobs, lots of wealth creation in the United 

States. 

Mrs. CHRISTENSEN. Thank you. 

Mr. CHU. And there’s a world market out there. 

Mrs. CHRISTENSEN. Thank you. 

Mr. STEARNS. Ms. Myrick is recognized for 5 minutes. 

Mrs. MYRICK. Thank you, Mr. Chairman. 

Mr. Secretary, were you aware that Solyndra sent the committee 

a letter on July 13th of 2011, describing the financial condition of 

the company? 

Mr. CHU. I can’t say to the exact date, but around that time, the 

company was in trouble. 

Mrs. MYRICK. Well, Mr. Harris wrote the committee at that time 

with the purpose of providing us with the most accurate and upto-date information regarding Solyndra and our performance in the 

market, and that’s a quote. And he also wrote the following fact, 

and I quote, Solyndra’s revenues grew from $6 million in 2008 to 

$100 million in 2009 to $140 million in 2010, and for 2011, revenues are projected to nearly double again. PriceWaterhouseCoopers 

audited the financial statements that were completed on June 30th 

in 2010, and they substantially agreed with that, but there were 

several points that they didn’t mention, and I would like to state 

those. 

They didn’t mention that the 2010 revenue amount was exactly 

half of the $284 million they had originally projected in their loan 

application. And they did not mention that audited cost of revenue 

was $162 million in 2009 and $284 million in 2010 for a gross loss 

of 61 percent and 100 percent of revenue respectively. Additionally, 

audited operating expenses showed a loss from operations, and 

Solyndra did not mention that audited net loss was a staggering 

$172 million in 2009 and another $329 million in 2010. They didn’t 

mention that cash flows from operations showed a massive outflow 

of net cash used of $170 million in 2009 and $194 million in 2010. 

This, to me, is a large red flag as cash flow from operations is usually a source of cash, not a use, and cash flow showed cash depleting at a rapid rate, from $82 million in 2008, $52 million in 2009 

to $32 million in 2010. So when did you become aware of this what 

I think is misleading information that Solyndra submitted to Congress? And, you know, if you did, when you became aware of it, 

what did you do, if anything? 

42 

Mr. CHU. Well, certainly, I became aware that the company was 

in financial stress at the time of restructuring, as we were discussing what to do, and as time progressed, became increasingly 

aware that the projections of the company were not being met, and 

so certainly by 2011, by the spring of 2011, I knew that this company was in deep trouble. 

Mrs. MYRICK. Well, Mr. Silver, when he testified at the committee in September, said he’s doing the best job we know how to 

do and the company was meeting projections. 

Also, were you made aware of the fact that based on this data, 

the auditors issued a going concern qualification in March of 2010 

that raised substantial doubt about the company’s ability to continue in business? 

Mr. CHU. I’m aware of it now. I believe that was the 

PriceWaterhouseCoopers audit. 

Mrs. MYRICK. Correct. 

Mr. CHU. And I think in that instance that they were asked to 

assist and give an audit as to whether Solyndra could have an initial public offering, and due to the circumstances of Solyndra and 

due to the market in a terrible recession, they said no, this was not 

the time to have an IPO. 

Mrs. MYRICK. Did anyone in DOE review that financial information then and raise the concerns? 

Mr. CHU. I’m sure they did, but I don’t know personal knowledge 

of to what extent they reviewed the PriceWaterhouseCoopers analysis. 

Mrs. MYRICK. Did Solyndra say how the sales were going to cover 

its selling and general administrative costs? 

Mr. CHU. I believe that Solyndra had expectations of sales that, 

as you pointed out, did not come to pass. 

Mrs. MYRICK. And also they, their manufacturing cost was up to 

twice sales revenue for a gross loss, that was part of it as well? 

Mr. CHU. I certainly knew they had—that they were—their sales 

were not up, that they had to be selling at a discount because, 

again, all companies had to sell their product at a discount. Solar 

panels, although very high tech, are a commodity, and when prices 

go down by 70 percent in 2.5 years, you’re knuckling down. All the 

companies are knuckling down; they’re trying to ride out this 

storm. 

Mrs. MYRICK. Did that auditors’ growing concern question—raise 

concern within the department? Was that expressed and talked 

about at all? 

Mr. CHU. Certainly, first, the growing concern, that is kind of a 

standard language. In a start-up company, there is a question as 

to whether, as you start this company, as you start up the manufacturing, the business plans, are you going to have negative cash 

flows, and at sometime those cash flows turn positive. The investors, the very savvy investors who invested nearly a billion dollars, 

the part of their business plan was that it would be sometime in 

2011 before they would actually go in the black, and that turned 

out to be incorrect, and then more recent projections pushed that 

back several quarters. 

Mrs. MYRICK. Thank you. 

Mr. STEARNS. The gentlelady’s time has expired. 

43 

The gentleman from Massachusetts, Mr. Markey, is recognized 

for 5 minutes. 

Mr. MARKEY. Today Americans are focused on the oversized influence of the oil companies and others through the Occupy Wall 

Street movement, yet Republicans are pushing their own pre-occupy movement in the hopes that Americans will be too preoccupied with this one loan to a clean energy company that they 

won’t see the tens of billions of dollars in government subsidies 

given to the oil, coal, and nuclear industries, the Republican favorites. The result, we’re getting a distorted picture of the real market 

conditions that threaten our economic future. 

Who we should really be talking about are not the bureaucrats 

at DOE, but the bureaucrats in China, who have made a strategic 

decision to drive foreign competitors out of the solar market. They 

did it with the rare earth minerals industry in the 1990s, and they 

are doing it right now with the solar industry. 

Secretary Chu, many of my colleagues on this committee think 

renewable energy is the stuff of the Jetsons. They think solar panels are just like flying cars or life-sized robots that do housework, 

maybe some day way in the future. They’re completely oblivious to 

the revolution that is going on. 

Mr. Secretary, last year globally 194,000 megawatts of new electrical generating capacity was installed on the planet. What percentage of that new electrical generation power came from renewable sources? One-half of it in 2010. Half. And solar is by far the 

fastest growing energy industry in the world. Over the last 5 years 

global solar installments have increased 1,000 percent to 17,400 

megawatts in 2010. For every new nuclear power plant globally 

that went online last year, four times as much new solar capacity 

was deployed. In the U.S., there are now 85,000 employees in the 

coal industry; 85,000 employees in the wind industry; and 100,000 

employees in the solar industry. That’s the story here. Solar has 

big coal and big nuclear and the established energy sector scared 

stiff, and they’ve enlisted the Republican party to do something 

about it. That’s the real story here. 

The Republicans have now essentially eliminated loan guarantees for renewable energy this year, and they have left $30 billion 

for nuclear and coal as loan guarantees. They passed legislation to 

cut the solar research budget for next year by 64 percent, but 

they’ve increased the budget for nuclear and fossil energy. In their 

budget, they promised to cut clean energy investments by 90 percent over the next 3 years. 

Historically, just as there has been a Moore’s law for computer 

chips, there also has been a Moore’s law for solar. For every doubling of solar deployments worldwide, the price declines by 18 percent. At least that was the case until this year. Through the first 

8 months of this year, the price of solar panels has fallen 42 percent, a 42 percent drop in just 8 months. So the irony here is that 

the Republicans attack renewable energy because they claim it’s 

too expensive, but Solyndra failed because solar is getting too 

cheap. The price of solar and wind and other clean energy is dropping while coal and oil prices have risen. And the Republicans and 

the fossil fuel industry can’t let clean energy win. 

44 

And why has this happened? Why has there been a 42 percent 

drop? I will tell you why. Our country is in a race right now. 

There’s a global race to become the leading maker of solar technology, and we have some fierce competitors. Last year alone, 

China gave five solar companies $31 billion in financing assistance. 

That’s on top of free land, extensive tax breaks. That’s on top of 

a domestic currency that is substantially undervalued and allegations of dumping by Chinese state-sponsored solar companies into 

the U.S. market by our solar industry. 

Secretary Chu, do you agree that this massive intervention into 

the market by China has fundamentally altered the market for 

solar panels and in fact made it very difficult for solar, for Evergreen, for Energy Conversion Devices in Michigan to survive, that 

the prices have plummeted and just like pets.com and the dot-com 

bubble, there are individual companies that are going to fail inside 

of a larger success story for solar and renewables? 

Mr. CHU. Yes, I agree with that. Certainly, as I’ve indicated before, China has targeted all renewable energies as on their critical 

path for their future prosperity, not only for their domestic use, 

and they’re going to be the leading user of renewable energies, but 

also they see a huge export market. 

Mr. MARKEY. So when the price of silicon dropped dramatically, 

90 percent, that hurt the technology of Solyndra because it was 

something that they were depending upon to have a much higher 

price point. 

Mr. CHU. Right. 

Mr. MARKEY. And that price point collapsed for them? 

Mr. CHU. That is correct. Silicon and solar modules in general 

dropped, you said 42 percent in 8 or 9 months and 70 percent in 

a couple years. That’s unheard of. It was violating the learning 

curve, the Moore’s law that you spoke about, it was—— 

Mr. MARKEY. That’s what happened with cell phone prices because of action in this, is that the price dropped 90 percent for cell 

phones after we passed three bills out of this committee. We don’t 

mourn the old brick size of phones. We all decided to put those 

phones at under 10 cents a minute in our pocket. That’s what’s 

happening in the solar market. 

Mr. STEARNS. The gentleman’s time has expired, and recognize 

Mr. Sullivan for 5 minutes. 

Mr. SULLIVAN. Thank you, Mr. Chairman. 

Thank you, Secretary, for being here today, and I hear my good 

friend from Massachusetts talking about all these jobs that have 

been created, and you’ve talked about all these jobs that have been 

created in renewable energy and solar and wind, and looking at 

your Web site, it says you’ve created 60,000 American jobs. Is that 

true? 

Mr. CHU. I believe that to be correct. 

Mr. SULLIVAN. And, you know, these jobs seem pretty expensive 

to me, you know. You talk about the low cost, you know. At least 

in the coal and gas and oil industry, we’re not paying for these 

jobs. These are private sector jobs that aren’t helped by the government. And on your Web site, we took the 60,000 in Section 1703, 

you obligated $10,647,000,000 for those jobs. Sir, that’s $1,625,000 

per job. On Section 1705, 05, you obligated $16,128,500,000 for 

45 

those jobs. That cost $963,585 per job. The ATV program you obligated $9,129,000,000, that’s a cost of $221,557 per job. I mean, 

that’s a lot. How do you justify paying that much? I mean, sir, I 

want to have jobs; 14 million people out of work and unemployment 

at 9 percent, I want jobs, but I think paying for them like this is 

a really bad idea. What do you have to say about that? 

Mr. CHU. Well, let’s start with, for example, the nuclear loan. I 

believe that was something like an $8 billion loan. The Federal 

funds, the company, the applicant that applied for the loan had to 

pay the credit subsidy for that loan. I think it was 3 or 4 percent; 

I’m not exactly sure how much. So the amount of government taxpayer dollars that went into that $8 billion or $9 billion loan was 

essentially zero, and so because the company itself paid for that. 

Mr. SULLIVAN. Do you stand by paying this much for these jobs? 

Mr. CHU. I’m trying to explain, sir, that when you have a 1703 

program where the company, the applicant pays for the credit subsidy, they are actually—that’s not taxpayer dollars. That’s coming 

from the company. 

Mr. SULLIVAN. Back to the Solyndra loan, would you do that loan 

again, knowing what you know today? 

Mr. CHU. Would I do Solyndra knowing—— 

Mr. SULLIVAN. Knowing what you know today, would you approve that loan? 

Mr. CHU. Certainly knowing what I know now, we would say no, 

but you don’t make decisions, you fast forward 2 years in the future and then go back. I wish I could do that. 

Mr. SULLIVAN. How closely were you involved in the loan process 

there? 

Mr. CHU. In the loan process, I was—I have to approve all the 

loans, and I have to be briefed on all the loans, and I ask questions 

about the loans as they come up. 

Mr. SULLIVAN. But, Mr. Secretary, with respect to the Solyndra 

loan application, were you aware that Solyndra reported zero sales 

in 2005 and 2007? You talked about that model being acceptable 

earlier. 

Mr. CHU. 2005, I’m not even sure they actually had a fab plant 

up in that time, in the early days, when it was first formed as a 

company. You first have to build a factory, you have to build product, and then you sell. 

Mr. SULLIVAN. Well, in 2010, you were Secretary at that time; is 

that correct? 

Mr. CHU. Yes. 

Mr. SULLIVAN. And Solyndra at that time, did you notice—you 

said earlier you noticed they were having some difficulty, and they 

expressed that to you, right? 

Mr. CHU. Certainly by the end—certainly by 2011, we knew that 

there were—Solyndra was in trouble. 

Mr. SULLIVAN. Did you know that from then, in 2010, did they 

discuss with you that they potentially would have to lay people off 

and do some downsizing? 

Mr. CHU. They did not discuss that with me. 

Mr. SULLIVAN. They never discussed anything like that with you? 

Mr. CHU. They might—— 

46 

Mr. SULLIVAN. Did they discuss it with anyone at the Department of Energy? 

Mr. CHU. They may have discussed it with people in the loan 

program. 

Mr. SULLIVAN. OK. So they discussed it with people in the loan 

program, so they were aware that Solyndra was having some difficulty in 2010. Would you say that, yes or no, is that correct, that 

that was expressed to someone in the loan department? 

Mr. CHU. I would say that people in the loan department would 

know about it. 

Mr. SULLIVAN. Why—who put the pressure on you or them to 

delay divulging that knowledge until after the elections? 

Mr. CHU. There was no pressure. I was not part of that decision, 

and I certainly would not have been in favor of that decision. 

Mr. SULLIVAN. And I believe you to be truthful in that statement, 

but someone put pressure on them to not—delay that divulging of 

that information on Solyndra until after the elections in 2010, and 

that’s very political. I think it was done for political reasons. Do 

you think that’s a proper way to do business? 

Mr. CHU. No, I don’t think it’s a proper way to do business. 

Mr. SULLIVAN. Thank you. 

Now, who at the White House put pressure on you to get these 

loans done so quickly without doing the proper due diligence? 

Mr. CHU. First, no one in the White House. We never cut corners 

in doing the proper due diligence. As I said before, if you look at 

the average time of due diligence from the time of formal application of the loans, it’s something like 300—— 

Mr. SULLIVAN. Would you say proper due diligence by you would 

be no information on projected sales, general administrative expenses or estimated net profits, is that proper due diligence, and 

then get the loan out before getting that kind of information? 

Mr. CHU. The business plan of Solyndra and of any start-up company is that as you’re building the factory and building sales, you 

expect to be taking losses. The business plan was they actually expected to be in the red until sometime around 2011, and with that 

business plan, remember, there’s a lot of savvy investors who spent 

nearly, invested nearly a billion dollars before the U.S. Government 

looked at them. 

Mr. SULLIVAN. Thank you, Mr. Secretary. 

Mr. STEARNS. The gentleman’s time has expired. 

Recognize the gentleman from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

Thank you, Secretary Chu, for appearing before the subcommittee. The events surrounding Solyndra are of great concern 

to me because—and a number of us were on this committee in 2005 

when we put the loan program into effect and authorized it. It was 

a program that championed by both Democrats and Republicans in 

2005, first passed by a Republican House and then signed by President Bush. 

When I voted for the 2005 energy bill, I never intended that taxpayer money would be made a lesser priority for repayment than 

other outside investors, and I know we saw the section of 

1701(d)(3) on the board a few minutes ago, and I’ve read the opinion from an outside counsel that went into the decision of saying 

47 

that that’s really not true, but, you know, the black letter law typically is the one that we all look at. I understand that the taxpayer 

money was subordinated for those outside investments as part of 

the restructuring and not the original loan. 

Can you explain how the department came to that conclusion 

that you would be living up to your fiduciary relationship as Secretary of Energy, just like we have a fiduciary relationship to the 

taxpayers, and responsibility for that subordination? And like I 

said, I did read the section and the opinion. I obviously disagree 

with the opinion of the outside counsel that, all of a sudden, you 

could subordinate that loan. Was it based on that outside counsel 

opinion to the Department of Energy? 

Mr. CHU. As I said, we went through a very rigorous process, 

starting with Susan Richardson and the General Counsel’s Office 

in the Department of Energy, also outside counsel, as pointed out 

in the opening statements of Congresswoman DeGette. The previous general counsel, a previous general counsel of the Department of Energy also concurs that that was a decision that was 

within the bounds of the law. So this was a decision that was heavily vetted through our system. And I’m not a lawyer, but in discussing with them, the first one was in the instance of the loan, 

would it be subordinated? No, that was very clear. But as the 

record stands for itself on the decision both by the memo that was 

communicated to me through Scott Harris and also outside counsel 

and also, finally, a previous general counsel of the Department of 

Energy had no bone to pick in no way one way or the other, so we 

have a number of people saying that this is commensurate with the 

law. 

Mr. GREEN. OK. Well, has the Department of Energy or, if you 

know of, any Federal agency ever subordinated a Federal loan to 

an outside investor? 

Mr. CHU. In the case of when a loan is in trouble and in the case 

of a restructuring, I do know, as I said, I’ve been told that, you 

know, in very rare instances to be sure that Ex-Im or OPEC, I forget which one, has done this. Usually what happens in a restructuring is either the government takes an equity position or a subordination, and so when you do do a restructuring, if there’s not additional money, what we were facing was the imminent bankruptcy 

of a company, and we looked at both cases, of whether it goes bankrupt now or it goes bankrupt later, or when you have a complete 

factor, if it goes bankrupt, what would be the chance of recovery? 

Mr. GREEN. Well, I guess I have some concern about it because, 

except for OPEC—and I would appreciate any information on that 

because we tried to receive that from the Department of Energy— 

and we couldn’t, I cannot, couldn’t find any example of where we 

subordinated the United States interest to someone else, but I appreciate if you could get that to us. 

And I understand if you went with lawyers and outside lawyers, 

previous counsel. But, as you know, sometimes like 10 economists, 

you’ll get 11 different opinions. If you hire 10 lawyers, you may get 

11 different opinions on it, but those of us who are on the committee and actually helped draft that law and support that program didn’t ever intend that, and hopefully, for the record, that in 

the future, that will be the case, and if we have to, we’ll change 

48 

the language to what this outside opinion says, but the language 

is pretty clear, that subordination shall be subject to a condition 

that the obligation is not subordinate to other financing. I don’t 

know how else you can read that except, you know, maybe getting 

around it saying, this is a second, we’re trying to refinance the 

loan, but it seems like the refinancing should have been under the 

same rules as the original loan application because I couldn’t find 

any time in history—I know all of us, if we have, if we owe the 

Federal Government and I owe Bank of America or Chase, believe 

me, the Federal Government gets our payment first, and so that’s 

why I think it’s unusual. But you may have had—counsel may 

have not been correct. Did you talk with the Department of Justice 

at all? I know you talked with in-house counsel at the Department 

of Energy. Was there ever any effort to talk with the Department 

of Justice for an interpretation on that? 

Mr. CHU. No. We talked—I talked with our in-house counsel, and 

as I noted, the Department of Energy people also sought opinion 

of Morrison & Foerster. 

Mr. GREEN. You know, it seemed like subordination is not the 

common practice. Was there any concern at all except for getting 

opinions of, like you said, previous counsel to the Department of 

Energy or outside counsel, that you were making precedent here or 

breaking precedent? 

Mr. CHU. There was a discussion, and you’re quite right, in the 

time of origination of the loan, we could not subordinate to any 

other equity partners or things of that nature, and so there is another clause in that act that said above all, we have to look out 

after the taxpayer interests and maximize recovery, and that also 

is part of that act. 

Mr. GREEN. Was it ever offered that we would take, the taxpayers would take an equity portion of Solyndra in exchange for 

our secondary—— 

Mr. CHU. There’s a discussion about equity position. Again, this 

is a new loan program, and I’m not even sure whether this loan 

program can actually—I was just referring to a practice of Ex-Im 

and OPEC. 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. GREEN. Well, Mr. Chairman, I would like to make sure, 

though, if we need to change the law because I don’t think our committee made that—— 

Mr. STEARNS. I think you made that clear. In fact, you were on 

the conference committee when you made that law. 

Mr. GREEN. Well, I wasn’t on the conference committee; I was on 

this committee. But having supported that loan guarantee program, because I support both the solar, the wind, the nuclear, you 

name it. In fact, I’ve been disappointed we weren’t able to do a 

more aggressive program in alternative energy, but we need to 

change that law because I don’t think we ever ought to let the taxpayers be subordinate to a new investor even under a—— 

Mr. STEARNS. Well, I understand that. 

Mr. GREEN [continuing]. Restructuring. 

Mr. STEARNS. But I think you made a very excellent point that 

that’s—how Mr. Chu used the law was not how it was intended, 

and I think you made a good point on that. 

49 

Ms. DEGETTE. Well, now, wait a minute. 

Mr. STEARNS. I mean, that’s my interpretation as the chairman. 

Mr. WAXMAN. Well, Mr. Chairman, that’s your interpretation, but 

the lawyers said otherwise—— 

Mr. STEARNS. Well, I appreciate that. 

Mr. WAXMAN [continuing]. And that has to weigh on the Secretary far more than your opinion or Mr. Green’s opinion. 

Mr. STEARNS. Well, I certainly think—— 

Mr. WAXMAN. The rest of us are not willing to go along in changing the law. 

Mr. STEARNS. Well, Mr. Green’s opinion is what I’m agreeing 

with, not yours. 

Let me recognize the gentleman from Pennsylvania, Mr. Murphy. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Secretary Chu, at the Solyndra ground breaking on September 4, 

2009, you said your agency, ‘‘moved aggressively to get stimulus 

money out the door.’’ Were you aware that 4 days earlier, August 

31st, the staff of OMB wrote to your agency and said, quote, I 

would prefer that this announcement be postponed, this is the first 

loan guarantee, and we should have full review with all hands on 

deck to make sure we get it right. Were you aware of that? 

Mr. CHU. I’m aware of it now. 

Mr. MURPHY. All right and not before that. Were you aware that 

the following day, on September 1st, 2009, OMB downgraded 

Solyndra’s credit rating because of the, quote, weakening world 

market prices for solar generally? 

Mr. CHU. What—another way of saying that, yes, is that the—— 

Mr. MURPHY. OK. 

Mr. CHU [continuing]. Credit subsidy score went up slightly. 

Mr. MURPHY. There’s also an email—I appreciate that. I’m just 

trying to move, sir. There’s an email between Steven Mitchell, 

managing director at Kaiser’s venture capital firm, Argonaut Private Equity, and George Kaiser on March 5th, 2010, where Mitchell writes that, ‘‘Chu is apparently staying involved in Solyndra’s 

application and continues to talk up the company as a success 

story.’’ That’s on tab 23. Now, is that a fair characterization, to say 

that you were personally interested and personally involved in 

Solyndra’s effort to get Federal financing? Is that a yes or no? 

Mr. CHU. As I said, Solyndra was the first company, the head of 

the line by the loan program, and so what we were doing is in 

order to get the loans out, we said, all right, who are at the head 

of the lines, who are the most promising, what are the most promising loans? Again—— 

Mr. MURPHY. The most promising, you said, sir? 

Mr. CHU. The most promising in the opinion—— 

Mr. MURPHY. Let’s hang on to that word. Let me just—because 

I have to ask you some questions because most promising is important. So were you aware then on March 16, 2010, in Solyndra’s IPO 

filing with the SEC, PriceWaterhouseCoopers said it had, ‘‘substantial doubt about Solyndra’s ability to continue as a growing concern’’? Were you aware of that? 

Mr. CHU. I am aware of it now. 

50 

Mr. MURPHY. That doesn’t sound most promising. Were you 

aware that in the following month, OMB staff began expressing 

concern about your agency’s monitoring of the loan? 

Mr. CHU. Sorry, say that again? 

Mr. MURPHY. Were you aware that in the following month, that’s 

April of 2010, that OMB staff began expressing concern about your 

agency’s monitoring of the loan? 

Let me help you with that. What they said in April was that 

when evaluating the riskiness of Solyndra, they said, ‘‘DOE seems 

to separate the parent from the project, but I think the deal is 

structured in a way that does not support that view.’’ So at that 

time were you worried that your agency’s calculation of the 

project’s risk was completely different from the OMB model? 

Mr. CHU. I think there’s lots of robust conversations that go on 

between OMB and Department of Energy, and in the end, I think 

OMB did not object to—— 

Mr. MURPHY. Can you just—I’ve got to—— 

Mr. CHU [continuing]. The restructuring. 

Mr. MURPHY. So were you aware then, in May of 2010, 2 days 

before the President’s visit to Solyndra, the White House Adviser, 

Valerie Jarrett, and Vice President Biden’s chief of staff, Ron 

Klain, contacted your chief of staff to express their worries about 

the ‘‘growing concern’’ letter from Price Waterhouse, were you 

aware of that conversation? 

Mr. CHU. No. 

Mr. MURPHY. At any point in the spring of 2010, did you discuss 

with the White House the, quote, growing concern letter or the disagreements between OMB and DOE on Solyndra’s financial 

strength? 

Mr. CHU. As time progressed, there was certainly—— 

Mr. MURPHY. At that point? 

Mr. CHU. I can’t say exactly at that point. 

Mr. MURPHY. OK. 

Mr. CHU. But certainly as time progressed. 

Mr. MURPHY. So were you aware—let me just try and get these 

in. Were you aware that in June, after Solyndra cancelled its IPO, 

an Office of Management and Budget staffer have suggested this 

would be a good moment to, quote, insist that DOE ramp up its 

monitoring function immediately? I mean was your agency monitoring or not monitoring up to that point? 

Mr. CHU. I was told that by that time, we were monitoring the 

loans, but we had—I’m not really sure of the exact timing, but we 

had one—Solyndra was our first loan, and we then established a 

loan monitoring program, which has consistently been made more 

robust as time progressed. 

Mr. MURPHY. So the following, month you had a meeting with 

OMB director Peter Orszag about policy issues; is that correct? Do 

you recall that meeting? 

Mr. CHU. Yes. 

Mr. MURPHY. OK. Now, the day before the meeting, OMB and 

Treasury both sent your agency a list of information needed about 

Solyndra’s finances. Did you discuss Solyndra with Mr. Orszag? 

Mr. CHU. No, we were discussing much higher policy issues than 

a particular loan, I believe, at that time. 

51 

Mr. MURPHY. So he didn’t ask you for any critical information 

about Solyndra’s finances, including financial statements, actual 

performance information, market price reduction? 

Mr. CHU. Well, my recollection at the time was that we were discussing loans, for example, about whether if you took the loan plus 

1603 plus production factors, other things, State subsidies, that 

some of the loans might be getting, there’s a policy issue about—— 

Mr. MURPHY. Well, let me ask you this, then: Were you aware 

that prior to your meeting with Mr. Orszag, OMB staffers said on 

June 22nd, quote, if DOE does not stay on top of the project, it 

risks becoming embarrassing, given the high profile S1 POTUS and 

VPOTUS events over the past year. So I have to ask, you said it 

was promising, we have lots of other agencies saying and 

PriceWaterhouseCoopers and OMB and Treasury people saying 

this was not going to work out. So my question is, will you admit 

that there were problems in monitoring this loan and getting you 

the information or you having the information reviewed to draw a 

conclusion that this was promising? 

Mr. CHU. By the word ‘‘promising,’’ what I mean is that that loan 

was the head of the line; it was the people in the loan program that 

were from the previous, who were there in the previous administration. 

Mr. MURPHY. Well, I didn’t ask you where they were in the line, 

I asked if you there were problems you were aware of that you 

were monitoring or not in spite of it being promising—— 

Mr. CHU. Well, at the time of the origination of the loan after 

OMB’s assigned credit subsidy score was something like 7.8 percent. What that means effectively is that there is a very low probability at the time in the OMB estimation that one would enter 

into default. 

Mr. MURPHY. And that was when? 

Mr. CHU. This was at the time of the—when the loan—— 

Mr. MURPHY. But it was restructured later on, sir. 

Mr. CHU. No, after restructuring, certainly, then you reevaluate, 

and our loan program does this all the time. 

Mr. MURPHY. Well, can you just tell me then finally, were you 

aware or not of the problems of monitoring this loan? 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. CHU. We are making the loan monitoring more robust. We 

have a separate office, and we continue to make it more robust. 

Mr. MURPHY. I’m asking you, were you aware, do you admit 

there were problems with monitoring this loan by your agency? 

Mr. CHU. At the beginning, when we had one loan, we began to 

set up a loan monitoring office. It was roughly at about the same 

time when OMB said we want you to set up a monitoring office, 

we did set it up, and so within certainly weeks—— 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. MURPHY. Thank you. 

Mr. STEARNS. Ms. Schakowsky is recognized for 5 minutes, the 

gentlelady. 

Ms. SCHAKOWSKY. Thank you. 

Secretary Chu, as you can see, the Solyndra bankruptcy has generated a political controversy, as you might expect when taxpayers 

take this big a hit. And the debate is not a bad thing if we use it 

52 

to learn lessons about the most effective means of government support for clean energy, the amount of risk we are willing to accept 

to create jobs and help our country lead the energy industries of 

the future. 

Unfortunately, I don’t feel like that is the direction the majority 

has taken in this investigation. In fact, what we have seen are 

misstatements of fact and the use of selective documents out of 

context. 

I want to ask you some questions to see if we can get the record 

straight regarding the history of the Solyndra loan guarantees. 

Solyndra applied for a DOE loan during the Bush administration; 

is that correct? 

Mr. CHU. That is correct. 

Ms. SCHAKOWSKY. When you received early briefings on the loan 

program’s project pipeline, was Solyndra presented as an ongoing 

application that had undergone due diligence and was nearly ready 

to proceed, or was it presented as an application that had been rejected by the previous administration? 

Mr. CHU. It was presented as an application that the various 

processes recommended that we go forward with this loan. 

Ms. SCHAKOWSKY. I would like to address one specific refrain 

from our Republican colleagues, the assertion that the Bush administration rejected—that is a quote—Solyndra’s application, only to 

have it revived by the Obama administration. 

There is a document, tab 73 in your binder, that was sent to the 

director of the Loan Programs Office during the final months of the 

Bush administration. It lists Solyndra as one of the three highest 

priorities through January 15th—it says 2008, but given the time 

of the email, it is obvious that means 2009, because the email was 

December of 2008. 

Mr. Chairman, I would like to have this document made part of 

the record. 

Mr. TERRY [presiding]. Not hearing an objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Ms. SCHAKOWSKY. In early January 2009, Solyndra’s application 

was reviewed by the credit committee at DOE. They raised some 

specific questions about the loan and remanded it for further consideration, quote, ‘‘without prejudice.’’ The committee staff interviewed David Frantz, who has served as the director of the Loan 

Programs Office since 2007. The committee also interviewed Steve 

Isa—Isakow—— 

Mr. CHU. Isakowitz. 

Ms. SCHAKOWSKY. Thank you—Isakowitz, who was appointed by 

President Bush to serve as CFO of the Department. Mr. Isakow— 

Isakowitz—I don’t know—— 

Mr. CHU. Isakowitz. 

Ms. SCHAKOWSKY. Yes. I should talk, ‘‘Schakowsky.’’ Anyway— 

who was appointed by President—he continued to serve as CFO 

until July of 2011 and was Mr. Frantz’s supervisor as Solyndra’s 

application was reviewed. 

Do you have any reason to doubt the credibility of these individuals? 

Mr. CHU. No. 

53 

Ms. SCHAKOWSKY. Both ‘‘Mr. I.’’ and Mr. Frantz made it clear 

that Solyndra’s application was not in any way rejected by the 

Bush administration. They stated that the career DOE team in the 

Loan Programs Office continue to gather more information and negotiate a better equity split for the taxpayers after the first credit 

committee. 

Both of these officials confirmed that consideration of the 

Solyndra application went on unabated as the Bush administration 

left office and the Obama administration came into office. Is that 

your understanding, as well? 

Mr. CHU. That is my understanding. 

Ms. SCHAKOWSKY. Was it ever your understanding that the 

Solyndra application had been rejected during the previous administration or that the application was somehow on the shelf, only to 

be, quote, ‘‘revived by the Obama administration’’? 

Mr. CHU. No, not—quite the contrary. The career folk in the Department of Energy in both administrations felt that this loan was 

at the head of the line of the ones that we should be looking at. 

And it was progressing according to the procedures. 

Ms. SCHAKOWSKY. Well, I thank you, Mr. Secretary, because I 

think it is very important to clarify the record regarding the history of the loan guarantee and to put to rest some of the statements that were made that contradict that record. 

And I am happy that we have the email and the documents that 

I think clearly show that this was something that was proceeding 

forward and was recommended to proceed forward when the Bush 

administration left and handed this over, with these career people 

that—Dr. Frantz was still there, as I understand it. 

Mr. CHU. Yes. 

Ms. SCHAKOWSKY. And I yield back my time. Thank you. 

Mr. TERRY. All right. The gentleman from Texas, Mr. Burgess, 

you are recognized for 5 minutes. 

Mr. BURGESS. I thank the chairman for the recognition. 

Secretary, thank you for being here today, and thank you for 

your generous time that you are spending with the committee. 

I just want to say at the outset, I think solar energy has a place 

in the future of this Nation’s armamentarium of energy sources. 

But I must say, what has happened with Solyndra—and the hearing we are having today kind of underscores it—I think it has set 

back the prospect for perhaps some time. 

Let me ask you a question. You said earlier it is regrettable what 

happened and that some of these were going to fail. And, in fact, 

the first two out of three, between Solyndra and Beacon, the first 

two out of the three projects that you approved have failed. The 

President has said it could be as high as a 50 percent failure rate. 

So what is an acceptable failure risk for this type of project? 

Mr. CHU. I would say that, given the credit—the total credit subsidy that was appropriated and set aside, the $10 billion, which included $2.4 billion for the 1705 program, certainly if we approached 

something on that number, that would be very bad. I, personally, 

don’t think we are going to get anywhere close. 

And if you take the loan program in its total, not only 1705 but 

the ATVM Loan Program, it would—— 

54 

Mr. BURGESS. Yes, let me stop you there for a second, because 

my time is going to be very limited. They won’t let me go over like 

others. You watch. 

Mr. TERRY. Thank you for recognizing that. 

Mr. BURGESS. But here is the deal. I mean, the confluence of the 

loan guarantees, coupled with the rapid injection of dollars from 

the stimulus bill, has really led, in my opinion, to some touchy decisions being made. And it has led you, as the Secretary of the Department of Energy, to behave like a venture capitalist. 

But you are the Secretary of Energy. You hold the Nation’s nuclear secrets. You maintain the Nation’s nuclear arsenal. You are 

not supposed to be a venture capitalist who takes risk. Is that correct? 

Mr. CHU. First, the loan program is not a venture capital—it is 

actually for something beyond the initial stages of investment. And 

the loan program, as set up by Congress, said, here is the money, 

here is appropriate funds to cover for losses, but we need—— 

Mr. BURGESS. Yes, but the bottom line is, with all due respect, 

you are—I mean, look, I was in private business. I understand 

what it is like to take a risk. I understand what it is like to fail. 

But you are the Secretary of Energy. You earn almost $200,000 a 

year. If you approve a program that fails, at the end of the day you 

go home and you are still earning $200,000 a year. None of your 

assets are attached, nothing of yours personally is put at risk, because these are taxpayer dollars that were put on the line. 

Do you understand how people are uncomfortable with this concept of the Department of Energy behaving as a venture capitalist? 

Mr. CHU. Well, as I said before, this loan program was set up by 

Congress, and Congress appropriated in the 1705 program $2.4 billion to account for the losses. 

Mr. BURGESS. As someone who was sitting in this committee in 

2005 when the loan guarantee program was approved, I don’t think 

any of us could have foreseen what was around the corner with, 

again, the rapid injection of cash from the stimulus bill. Most of us 

on this side of the dais oppose that. 

Let me ask you some questions about subordination, because my 

colleague from Texas, Mr. Green, asked some. You said it was a 

difficult choice to make, about the subordination, correct? 

Mr. CHU. It was difficult because, by that time, we knew that the 

company was in trouble, and we, again, were trying to maximize 

taxpayer recovery. And so, all our actions were focused on maximizing taxpayer recovery. 

Mr. BURGESS. Yes. And, you know, this almost seems like a tortured legal opinion that have we come to. But do you see how some 

people could look at this and say, this was a violation of the law, 

1702, that has been much talked about this morning, where taxpayer obligations were not allowed to be subordinated? And I realize there was, again, what I would describe as a tortured legal 

opinion. But do you understand that the average person looking at 

this says, that is not right, that shouldn’t have happened? 

Mr. CHU. Again, we had—I had the opinion of general counsel I 

trusted, I had the opinion of many others, it went through a rigorous review process within the Department of Energy—— 

55 

Mr. BURGESS. Correct, and I don’t dispute that. I will stipulate 

to that. But, with all due respect, do you see how regular people 

would look at this and say, I don’t think that is right? 

Now, I will be the first to admit that in the Energy Policy Act 

of 2005—perhaps just an oversight, certainly could be regarded as 

a mistake—there is no penalty, civil or criminal, no penalty for violation of that. 

But do you feel—and, again, at the end of the day, you are still 

earning your salary whether things work out or not. But do you 

feel that you owe people an apology for having subordinated the 

taxpayer dollar to what now turns out to be a very risky venture? 

Mr. CHU. I think, certainly, it was very regrettable what happened to Solyndra. But I go back and say that when the market 

was falling out, the prices were falling out, we were focused on trying to recover as much of the taxpayer dollars as possible under 

those conditions. 

Mr. BURGESS. One last thing. Again, in my mind, this was technically a violation of the law, although there is no penalty. Have 

you discussed with your boss whether or not you should continue 

in your position, having violated the spirit of the Energy Policy Act 

of 2005? 

Mr. CHU. Have I discussed with my boss that? No. 

Mr. BURGESS. Is he comfortable, do you think, with you continuing your position—— 

Mr. CHU. I believe so. 

Mr. BURGESS. [continuing]. When there was a violation of law, 

even though there is no penalty? 

Mr. CHU. We believe there was no violation of the law. 

Mr. BURGESS. Again, that is a fairly tortured legal explanation 

that has been provided to this committee. I think the language is 

straightforward. Mr. Green, a Democrat, was very uncomfortable 

about the subordination aspect. I remain very uncomfortable. And 

I have to tell you, I haven’t seen a poll done on this, but I think, 

broadly, across the country, people understand that this was not 

right. 

Mr. TERRY. Let the record show we let you go 1 minute over like 

everybody else. 

The gentleman from Arkansas is recognized for 5 minutes. 

Mr. ROSS. Thank you, Mr. Chairman. 

And, Mr. Secretary, I believe it is important to Members on both 

sides of the aisle to understand exactly why Solyndra went bankrupt and to make sure the Department of Energy is doing enough 

to protect the taxpayers. There has been a lot of partisan and political rhetoric associated with this investigation. I want to try to take 

it beyond that and remove the partisan and the political nature of 

it and try to get to the facts. 

And, as I understand it, the Department of Energy was not the 

only entity that believed in Solyndra. Private equity investors 

made significant investments. In March of 2010, the Wall Street 

Journal ranked Solyndra number 5 in a list of the top 50 venturebacked companies. In that same year, MIT’s Technology Review 

named Solyndra one of the world’s 50 most innovative companies. 

Mr. Chairman, hindsight is 20/20, and predicting the future of 

innovative technologies is particularly difficult. In the case of 

56 

Solyndra, none of us like the end result, just as any banker does 

not like to make a loan that ends up defaulting. But it is clear that 

the Department of Energy wasn’t the only entity convinced that the 

company had a good shot at success. Smart investors, smart market analysts, smart technology experts from Wall Street to MIT, 

and other outside observers also got this one wrong. 

So how do we learn from this, and how do we move forward 

while continuing to advance alternative and renewable forms of energy, something I feel very strongly about? We are shipping about 

$300 billion a year overseas to buy energy. That is a $300 billion 

annual payroll we could have right here at home in America if we 

could learn how to grow and make more of our own energy. 

So I want to ask you some questions until I run out of time on 

the type of due diligence done on the Solyndra application. Given 

your scientific background, I would also like to get your views on 

why the Department of Energy and major private investors decided 

to bet on the company’s technology. 

In 2007, the Department of Energy submitted Solyndra’s application to the National Renewable Energy Lab in Golden, Colorado, 

for review, and the National Renewable Energy Lab gave Solyndra 

the highest technical merit score of any application DOE has ever 

received. And I might add, that was in the previous administration 

when all that happened. 

So, Secretary Chu, you are a Nobel Prize-winning physicist, and, 

during your academic career, you ran a national laboratory that did 

work on renewable energy. So what can you tell us about the National Renewable Energy Lab process that really helped us to get 

to where we are today? 

Mr. CHU. Well, the NREL, National Renewable Energy Lab, is 

one of our national laboratories. They have great expertise in solar 

technologies. And, in fact, I should say that out of the NREL grew 

another thin-film technology called cad telluride that is—that patent has now been licensed to General Electric. And General Electric today is investing in—$400 million investment in cad telluride 

that grew out of NREL. And this is—I just spoke with Jeff Immelt, 

the CEO of GE, and he said, no, we think that this is going to be 

a very competitive technology; we think we can compete head-tohead with the Chinese. 

And, going back, this is work that came out of Department of Energy laboratories, but in addition to dropping new technologies, 

they are also experts in assessing technologies. 

Mr. ROSS. After the Department of Energy’s own technological 

review, Solyndra was invited to submit a full application to the Department of Energy. And during this process, it underwent multiple third-party reviews. The consultant CH2M HILL submitted a 

technology and manufacturing review for Solyndra. Solyndra’s 

business plan relied on studies by PHOTON Consulting, Navigant 

Consulting, and New Energy Finance. DOE relied on outside marketing reviews of Solyndra by a host of experts on energy markets, 

creditworthiness, and engineering, including Dun & Bradstreet, 

R.W. Beck, Black & Veatch, Fitch, and Navigant Consulting. 

So, Secretary Chu, given all of this internal and external analysis, dating back to 2007, as it relates to Solyndra, do you feel confident that the DOE did its due diligence on the Solyndra loan? 

57 

And, if not, what could we have done differently to ensure that we 

wouldn’t be here today? 

Mr. CHU. As you recounted, I mean, there is extraordinary due 

diligence not only in the Solyndra loan but every loan. And that is 

why it took, on a rough scale, even with the processes, a year or 

2 years to actually do the due diligence on these loans. 

And so, it was this combination of events, the most striking being 

the rapid drop in prices that affected and is stressing companies all 

around the world, not only in the United States but in Asia, as well 

as in Europe. 

Mr. ROSS. Mr. Secretary, I would encourage you to try to figure 

out what went wrong, keep this from ever happening again, while 

continuing to advance alternative renewable American-made energies here at home. 

Mr. CHU. We, in fact, have—if the chairman will allow me—we, 

in fact, based on the Solyndra experience, not only have now a separate team within our loan office to monitor the loans and the disbursements, but we are also bringing in others. For example, in the 

Department of Energy, Renewable Energy, there is a group that is 

expert in solar; it is called our SunShot team. It is headed by someone we recruited, a member of the National Academy of Engineering, understands the business very well. And they provide yet another set of independent eyes to monitor the loans and disbursements. 

So what we are doing, as these loans go forward, is we are going 

to be watching like a hawk, especially given the rapid changing 

market conditions. 

Mr. TERRY. The gentlelady from Tennessee is recognized for 5 

minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

And, Mr. Secretary, thank you for being with us today. 

I feel almost the need to sit here and remind all of us in this 

room, this hearing today is not about solar power. The hearing 

today is about the possible abuse of Executive power and of the 

taxpayers’ money. And we desperately want to get, and we are 

being diligent in trying to get, to exactly what happened with this 

process and where it ran so far afield. 

Now, we have been through a series of red flags that existed and 

seem to have been transparent prior to the loan being approved, 

but I want to pick up right there. After that loan closed in September 2009, at that point did DOE require Solyndra to provide 

DOE with financial information or other additional data? After that 

loan was approved, did you go back to them and say, we need to 

find some additional data? 

Mr. CHU. After a loan is approved and as we go through disbursements, we are in constant communication with the company. 

Otherwise—because these disbursements—we have a contractual 

agreement, and as they build the fab plant, they have to be building it as they said they would build it, and then we disburse the 

funds after they have spent it to build it. So we are in constant 

communication the whole—— 

Mrs. BLACKBURN. You are in constant contact. But the question 

is really a yes-or-no: Did you or did you not require additional financial information from Solyndra? 

58 

Mr. CHU. Yes. 

Mrs. BLACKBURN. Yes. OK. 

Were you aware that DOE staff repeatedly raised the issue of 

Solyndra’s parents’ financial health and the lack of working capital 

as a cause for concern? 

Mr. CHU. Now, there are two parts of this. One part was the 

working capital in order to complete the project. And, as I said, 

there was a model which—that there would be an interruption of 

cash flow, but in actual fact, upon re-examining this, it was not an 

issue, and in actual fact the plant was built on budget, on time. 

Mrs. BLACKBURN. OK. So, given that you were aware there was 

a possibility of an interruption of cash flow, why wouldn’t you have 

gotten additional financial information on their cash flow and on 

the cash burn rate? 

Mr. CHU. I believe during this time there was communication 

with the company on this cash-flow issue. And, again, it was relayed to me that this was a particular model that said this. In 1 

month, it would come to a point, but then the following months 

that they would be just fine in the building out of that plant. 

Mrs. BLACKBURN. Looking at lessons learned, does the DOE now 

require financial information about the parent companies of its 

project financial deals? 

Mr. CHU. Well, we always do. And, as I said before on lessons 

learned, when there is a rapidly changing situation, rapidly changing market, we have additional sets of eyes, not only within the 

loan program but also outside the loan program. 

Mrs. BLACKBURN. OK. And the Loan Programs Office has engaged in the kind of enhanced monitoring that you are saying you 

have put on Solyndra in these type situations. Are you doing these 

with the other companies, the 28 other—— 

Mr. CHU. We are now monitoring—— 

Mrs. BLACKBURN [continuing]. Companies that are in the loan 

program? 

Mr. CHU. Of course. We are monitoring all the loans on a minimum of a monthly basis because—— 

Mrs. BLACKBURN. What about weekly cash flows? 

Mr. CHU. Actually, in some instances, weekly, absolutely. 

Mrs. BLACKBURN. What about a board observer seat? 

Mr. CHU. As you know, we did have a board observer seat in 

Solyndra after the restructuring. And in that board observer seat, 

as with the equity investors, again, it was a rapidly changing dynamic, and the equity investors were as surprised as we were. 

Mrs. BLACKBURN. OK. Let’s go back to the cash burn rate issues 

because you have talked about the savvy investors that were there 

for Solyndra. They had a billion dollars in cash. But we keep hearing about that cash burn rate. 

In your opinion, was DOE and were you aware of those cash 

burn rate issues before or after that loan was closed in September 

2009? 

Mr. CHU. I believe that they were aware of what would be happening, the business plan. And with any manufacturing plant, a 

new manufacturing plant, as you manufacture, as you build up 

the—— 

Mrs. BLACKBURN. Were you personally aware, or was—— 

59 

Mr. CHU. I was aware—— 

Mrs. BLACKBURN [continuing]. It just the analysts? 

Mr. CHU. In general, as I said, I certainly have enough experience with looking at startup companies to know that that is 

very—— 

Mrs. BLACKBURN. Did anyone brief you specifically on Solyndra’s 

cash burn rate issues? 

Mr. CHU. As the loan progressed, yes, they did. 

Mrs. BLACKBURN. But not before the loan closed? 

Mr. CHU. Not before the loan closed, not that I recall. But I can’t 

be sure. 

Mrs. BLACKBURN. What did you know about the financial health 

of Solyndra before you approved that deal? 

Mr. CHU. It was believed to be a healthy company at the time 

of closing. I think the bond rating was something like a B-plus at 

the time of closing—— 

Mrs. BLACKBURN. OK. 

Mr. CHU [continuing]. As dictated by, actually, the OMB. 

Mrs. BLACKBURN. Let me ask you this. Why did you allow that 

company to continue to pull down millions of taxpayer dollars after 

you discovered the financial problems in that company? 

Mr. CHU. OK. That is an excellent question. 

So, as we began to know that the company had—the parent company had cash-flow problems, not the project, we faced a decision. 

You are building—the loan was to build a factory. The factory was 

half-built, roughly speaking, or two-thirds built. And if we had 

pulled the plug then, we were certain that Solyndra would go into 

bankruptcy. 

And then we did two analyses. If you completed the factory and 

sold the factory and give them a fighting chance to survive as an 

ongoing company, what was the probability. So we faced this difficult choice. And we felt, in the taxpayers’ interest, the highest 

probability of recovering as much as possible of taxpayer dollars 

was to disburse the funds. 

Mrs. BLACKBURN. Was it in the taxpayer interest or in the desire 

for green energy jobs that you made that decision? 

Mr. CHU. When we make a loan, we have a very green eyeshaded approach to this loan. It is a business transaction. And so, 

when we make this loan, we said—we have to, by statute of the 

law, say that there is a reasonable prospect of this loan being paid 

back. 

Now, having said that, we have also been mandated to make innovative loans. And, again, the loan loss reserve was designed and 

appropriated by Congress in order to take care of unfortunate instances such as the one in Solyndra. 

Mrs. BLACKBURN. I yield back. 

Mr. STEARNS. [presiding.] The gentlelady’s time has expired. 

And the gentleman from California, Mr. Bilbray, is recognized for 

5 minutes. 

Mr. BILBRAY. Thank you very much for being here today, Mr. 

Secretary. 

Mr. Secretary, I had the pleasure of listening to your testimony 

back on March 3rd of 2010. And, at that time, you stated quite distinctly that you believe that nuclear energy remains a safe and seVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
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cure and economical source of clean energy. Do you still believe 

that today? 

Mr. CHU. Well, if you are asking—yes, I believe nuclear energy 

can be safe and secure. We—— 

Mr. BILBRAY. That is all I needed to know. I just wanted to make 

sure that—— 

Mr. CHU. All right. 

Mr. BILBRAY. You are a high energy physicist. You are somebody 

who knows that. Probably of anybody who has ever been sitting in 

your chair, you probably understand the realities of that technology 

better than most, if not all, of your predecessors. 

You are also well versed in not just nuclear technology, but you 

have been on a steep learning curve when it comes to photovoltaic 

technology, too, right? 

Mr. CHU. Well, the learning curve started perhaps 10 years ago. 

Mr. BILBRAY. OK. My question is this. You distinctly understand 

the difference, the advantages and disadvantages, of poly, mono, 

and amorphous or thin-film technologies, right? 

Mr. CHU. I do know the advantages and disadvantages, yes. 

Mr. BILBRAY. Now, do you personally own a solar array, a photovoltaic of any configuration? 

Mr. CHU. No. Oh, well, little flashlights, solar ones, but not on 

my roof. 

Mr. BILBRAY. Yes, a little flashlight solar would be thin film. 

Mr. CHU. Yes. 

Mr. BILBRAY. With what you know today and if you were buying 

something today you were going to put on your roof and you had 

the choice of the three different divisions, which technology would 

you choose? 

Mr. CHU. It would really depend on the price, the guarantee, the 

warranty, how long the panels would last. So it would be an economic decision. 

Mr. BILBRAY. Knowing what you know with those three categories, with the same square-footage array, same price, wouldn’t 

you agree that a reasonable consumer at this time would be choosing either mono or poly crystal if you were going to use it on your 

own residence at this time? 

Mr. CHU. No, I—it is not clear, because the thin-film technology 

is actually a very, very good technology, and this is why U.S. companies are investing, in part, in thin-film technology. 

Mr. BILBRAY. Are you saying the production of thin film is equal 

to the other two technologies? 

Mr. CHU. Well, there are companies like General Electric placing 

big bets, saying that it is going to be superior. 

Mr. BILBRAY. Big bets for the future. 

Mr. CHU. Well, they are investing today. 

Mr. BILBRAY. And the existing technology today doesn’t reflect 

that. 

Mr. CHU. No, sir. I would disagree with that. I think—— 

Mr. BILBRAY. OK. I appreciate that. And I am very surprised 

that you are disagreeing with that. But when we make reference 

to China and China’s investment, are you aware that the overwhelming majority of China’s investment is in poly and mono and 

not in amorphous technology? 

61 

Mr. CHU. I am aware of that. 

Mr. BILBRAY. OK. Was that, the fact that the Chinese were betting on the traditional, proven technology, was that in your understanding or was that sold as being a reason to move into a new, 

pretty radical concept of how to produce solar panels using the 

amorphous technology, was there a conscious effort that you were 

going to be able to then sort of jump over and beat the Chinese at 

the game by using a new type of approach that they were not willing to invest in? 

Mr. CHU. Well, what the Chinese do, typically, is they take an 

existing technology and they bring it to a very, very large scale and 

they get economy of scale. And that is, in fact—— 

Mr. BILBRAY. But was that a decision, that you knew that the 

Chinese weren’t really placing bets on amorphous and, thus, there 

was a market—there could be a market opportunity to move and 

beat them to it? 

Mr. CHU. Well, the Chinese actually—this is thin film. The Chinese actually were investing in amorphous silicon, but that turned 

out to be a bad bet for the Chinese. What was happening—— 

Mr. BILBRAY. Mr. Secretary, I must interrupt you. It seems like 

it was a bad bet for us, too, on this one, too. So I am just saying, 

and I think you will reflect, that the false starts in photovoltaics— 

the worst problem we have had with the failed projects have been 

in amorphous, that the Chinese have run into? 

Mr. CHU. Well, I think you mean thin film. 

Mr. BILBRAY. Thin film. 

Mr. CHU. No, I think—first of all, this is not at Department of 

Energy. We have loan applicants—there are other companies investing in thin film. 

The reason they are investing in thin-film technology is because, 

first of all, since we invented both the silicon technology, the cad 

telluride, the CIGS technology, there is more technological headroom in thin film. It is much cheaper to manufacture. The quantum efficiency—efficiency of the thin film is coming up much more 

rapidly. And so, this is why—— 

Mr. BILBRAY. But, historically, it has also had a much bigger 

problem—historically, it has had a problem with durability and 

production, except for in very low-light applications. 

Mr. CHU. No, I think—— 

Mr. BILBRAY. You think the durability of thin film traditionally 

has been equal? 

Mr. CHU. You again may be mixing up, conflating amorphous silicon with cad telluride. 

Mr. BILBRAY. OK. Cad telluride is hopefully the new breakthrough that we will see coming in the future? 

Mr. CHU. Well, this cad telluride, again, it was developed in a 

national laboratory, licensed to other companies. And it is very 

competitive with—— 

Mr. BILBRAY. Was Solyndra proposing to use that? 

Mr. CHU. No. Solyndra was using another technology called 

CIGS. This is—— 

Mr. BILBRAY. Which does not have the same capabilities as cad 

telluride. 

62 

Mr. CHU. No, it has the same capabilities as cad telluride in 

terms of the overall theoretical efficiency. At the time, they were 

in the same place in terms of the production efficiency, and they 

were making improvements. 

Mr. BILBRAY. Thank you, Mr. Chairman. I think the big issue 

was—— 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. BILBRAY [continuing]. ‘‘Theoretical’’ was the big word there. 

Thank you. 

Mr. STEARNS. The gentleman from Georgia is recognized for 5 

minutes. 

Mr. GINGREY. Mr. Chairman, I thank you. 

Dr. Chu, I hate to start off with a sports analogy, but in regard 

to the restructuring of the Solyndra loan, I think I will give you 

a little sports analogy. 

This Sunday, the Atlanta Falcons were playing the world-champion New Orleans Saints in Atlanta, and they went to overtime 

tied. And the Falcons coach made a decision deep in his own territory, 4th and 1, to go for the first down, knowing that if he punted 

the ball back to the New Orleans Saints and their great quarterback Drew Brees that they would be unlikely to stop them. So he 

goes for a first down, and he misses it. And two plays later, the 

New Orleans Saints have a chip-shot field goal, and they win the 

game. 

So he takes a chance, makes, I think, a ridiculous decision, but 

it wasn’t against the law. It was not against the law. 

Now, in this situation of restructuring the Solyndra loan, I think 

what was done by the Department of Energy, despite what the 

counsel has said, is breaking the law under the Energy Policy Act. 

And I would just like to know from you, Mr. Secretary, when the 

folks at Treasury, the people that actually made the loan—because 

this wasn’t a $535 million loan guarantee; it was a loan coming 

straight out of the Federal Financing Bank. And they said in a letter or an email to your folks at the Department of Energy, ‘‘Before 

you do this restructuring, I think you better get an opinion from 

the Justice Department.’’ Now, the Department of Energy ignored 

that and went ahead and got their own letter from in-house counsel 

and came up with some, in my opinion cockamamie, idea of why 

it was OK to do this. And the law was broken. 

You have explained to us here today that, you know, your feeling 

about all of that was, well, if you didn’t do it, the taxpayer was 

very likely almost immediately to see a bankruptcy of the company 

and a total loss of the loan, the $535 million, and that if you restructured and allowed them to come in with $75 million more of 

private equity, that that that might save the day. 

And so, it was a tough decision, and you approved and went 

ahead with this restructuring of the loan—clearly breaking the law. 

I mean, the language—and you have seen the slide earlier—the 

language is pretty clear. And the result, of course, was the same, 

not unlike what happened in Atlanta this past Sunday when Coach 

Smith made that fateful decision. My colleague here from Louisiana says it was a good decision. But everybody says that this decision that you made was a bad decision. 

63 

And I just don’t understand why you didn’t go ahead and submit 

this to the Justice Department and ask one of their high-powered 

lawyers, assistant attorney generals or whatnot, to give you a legal 

opinion on that. Why not? 

Mr. CHU. It is my understanding that one goes to Justice if there 

is a change in the conditions of the loan, if you, for example, decrease the amount that would be paid back or a decrease in the interest rate—things of that issue. And, again, it was not only the 

opinion of the counsel within the Department of Energy, with 

Susan Richardson, in a very vigorous review process—— 

Mr. GINGREY. Well, Mr. Secretary, I apologize for interrupting 

you, but I don’t think the folks within the Department of Energy 

in that loan program were the experts in this case. The bankers 

of the Federal Financing Bank in the Treasury Department, clearly, they are the experts, who—all of a sudden, they are worried 

about the loan. 

Let me move on to another subject, and I want to ask you if you 

are familiar with a recent Washington Post article—I believe this 

is November 15th, so just a couple of days ago—by Carol Leonnig 

and Joe Stephens. And the title of this, Mr. Secretary, ‘‘Solyndra: 

Energy Department Pushed Firm to Keep Layoffs Quiet Until After 

Midterm Elections.’’ 

Now, this article—and, Mr. Chairman, I would like to ask unanimous consent to submit this for the record. 

Mr. STEARNS. So ordered. 

[The article follows:] 

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[hI.' \t1u51)1ngton ~J05t 

Back to previous page 

Solyndra: Energy Q8pt. 

pushed firm to keep layoffs 

quiet until after midterms 

By Carol D. Leonnig and Joe Stephens, 

Published: November 15, 2011 

The Obama administration, which gave the solar company 

50lyndra a half-billion-dollar loan to help create jobs, asked 

the company to delay announcing it would layoff workers 

until after the hotly contested November 2010 midterm 

elections that imperiled Democratic control of Congress, newly released e-mails show. 

The announcement could have been politically damaging because President Obama and others in the 

administration had held up 50lyndra as a poster child of its clean-energy initiative, saying the company's 

new factory, built with the help of stimulus money, could create 1,000 jobs. 5ix months before the midterm 

elections, Obama visited 50lyndra's California plant to praise its success, even though outside auditors had 

questioned whether the operation might collapse in debt. 

As the contentious 2010 elections approached, 50lyndra found itself foundering, and it warned the Energy 

Department that it would need an ernergency cash infusion. A 50lyndra investrnent adviser wrote in an 

Oct. 30, 2010, e-rnail without explaining the reason that Energy Department officials were pushing 

"very hard" to delay making the layoffs public until the day after the elections. 

The announcement ultimately was rnade on Nov. 3, 2010 - irnrnediately following the Nov. 2 vote. 

E-rnails describing the events were released Tuesday as part of a House Energy and Cornmerce Committee 

memo, provided in advance of Energy Secretary SteY.erLCbJ..l_:s...schedu!ed testimony before the committee's 

investigative panel on Thursday. As a result of the 2010 elections, that cornmittee is now controlled by 

Republicans, whose aggressive nine-rnonth investigation into 50lyndra has focused partly on whether 

politics played a role in the company's selection to receive a federal loan. 

Amid the fallout frorn the company's shutdown in August, the White House has said tough scrutiny of the 

departrnent's oversight efforts is warranted and it has begun its own independent review of the loan 

program. Although the president has publicly supported Chu, senior White House officials in February 

circulated an outside adviser's recommendation that Chu be replaced because of antiCipated political 

controversy over the energy loans. 

On Tuesday, Energy Department spokesman Damien LaVera declined to confirrn events described in the ernails or to identify who at the departrnent may have urged the delay in the layoff announcement. He 

stressed, however, that "decisions about this loan were made on the merits." In an interview aired Tuesday 

on NPR, Chu said that politics did not enter into any decisions he or his staff made regarding 50lyndra and 

that there was no way to foresee the cornpany's demise. 

The White House declined to comment Tuesday on whether senior White House officials attempted to 

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influence the timing of the layoff announcement "These e-mails, again cherry-picked by House 

Republicans, refiect nothing more than the White House being given a heads-up about an upcoming press 

release from Solyndra," White House spokesman Eric Schultz said. 

The e-mail release came on the heels of more bad news for Chu. Energy Department Inspector General 

Gregory Friedman released a report Tuesday calling for a far-reaching review of the agency's operations. 

He wrote that the department spent $10 billion last year on its core laboratory operations, but more than a 

third went toward overhead and program support. 

In late 2009, Chu attended a ground breaking for the factory Solyndra built with its $535 million federal 

loan, and Vice President Biden spoke at the event by satellite. 

But Solyndra chief executive Brian Harrison warned the agency in an Oct 25, 2010, e-mail that he intended 

to announce layoffs in three days. He wrote that journalists and investors were asking about rumored 

layoffs and the possible closure of one of its two factories. 

Five days later, an adviser to Solyndra's primary investor, Argonaut Equity, explained in an internal e-mail 

that the Energy Department had strongly urged the company to delay the layoff announcement 

The Energy Department "continues to be cooperative" and committed to a November drawdown on the 

loan, the Solyndra adviser wrote. "They did push very hard for us to hold our announcement of the 

consolidation to employees and vendors to Nov. 3rd - oddly they didn't give a reason for that date." 

Solyndra has become a rallying cry for Republicans who believe Obama used his clean-energy initiative to 

steer loans to campaign donors. Argonaut is a private equity firm for the family funds of George Kaiser, a 

Tulsa billionaire and Obama fundraising bundler. Kaiser has said he played no part in helping Solyndra win 

the loan. Even so, previously released e-mails have shown Kaiser strategized with his business associates 

about the best way to approach the White House to help Solyndra deal with its financial problems. 

In the fall of 2010, Solyndra executives and investors warned the Energy Department that they needed 

emergency financing to keep the company operating past December. 

In the Oct 25 e-mail, Harrison warned the Energy Department's loan staff that the story of Solyndra's 

financial problems "is starting to leak outside Solyndra." 

He said he would "like to go forward with the internal communication [to employees regarding layoffs] on 

Thursday, October 28." 

Harrison's e-mail was forwarded to the Energy Department's loan program director, Jonathan Silver. Silver 

forwarded the e-mail to Chu's chief of staff, who then alerted White House climate change czar Carol 

Browner and Ron Klain, Biden's point person on stimulus efforts. Browner reportedly asked for more 

information, and Chu's chief of staff explained that he had left a voice-mail message on her cell phone. 

Browner's spokesman, David DiMartino, said Tuesday that Browner doesn't recall the voice-mail and did not 

advise the Energy Department on how to handle the timing of Solyndra's layoff announcement 

On Nov. 3, 2010, Solyndra publicly announced that it would layoff 40 workers and 150 contractors and 

shut down its original factory. The department agreed to continue giving Solyndra loan installments despite 

its failure to meet key terms of the loan. In February, the agency restructured its loan to give Argonaut and 

other investors a chance to recover $75 million in new money they put into the company before taxpayers 

would be repaid. 

Silver resigned from the agency last month. 

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© The Washington Post Company 

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Mr. GINGREY. In this article, basically, they are saying the 

Solyndra people were trying to make sure that the bank, the Federal Financing Bank, would continue to advance them loan proceeds, maybe even a little in advance of when they were due. And, 

basically, the Department of Energy, according to this article, said, 

‘‘Well, look, we know you all are going to have some layoffs coming 

up. It has been leaked to the press. And we would prefer that you 

not make those layoffs, at least the announcement of it, until November 3rd, 1 day after the midterm elections.’’ And then, of 

course, they got their advancement of the loan. A little bit suspicious. 

Do you have any comments on that at all, the timing of that? 

Mr. CHU. Yes. First, I was not aware of any communications 

with our loan office with the Solyndra people until that article 

came out. It is not the way that I do business. We don’t—I am looking at the loan, the process of repayment, looking after the taxpayer interest, and those factors are not part of our consideration. 

Something like that was not discussed with me, and I would have 

not approved it—— 

Mr. GINGREY. Mr. Secretary, I believe you. I believe you. But this 

looks highly political. 

Mr. Chairman, I yield back. 

Mr. STEARNS. I thank the gentleman. 

And the gentleman from Louisiana, Mr. Scalise, is recognized for 

5 minutes. 

Mr. SCALISE. Thank you, Mr Chairman. I appreciate you having 

this hearing. 

Mr. Secretary, thank you for coming before our committee. 

I want to express similar sentiments as Dr. Burgess and others 

expressed. I strongly support an all-of-the-above energy policy. I 

think, frankly, in our country, we are sadly lacking a real energy 

policy that allows us to utilize the natural resources we have in 

this country. We have to use all the things we have, including wind 

and solar. But, clearly, as we can see, those technologies still 

haven’t advanced to the level that they need to. 

And what is at heart here is this question of this Solyndra loan, 

the $535 million of taxpayer money that have been lost, and how 

did we get to this point. 

I think one of the big issues that I have struggled with, and others, is when we get to this question of subordination, as the loan 

was restructured, you know, we go back and we look at the law— 

this is the law of the United States—and it seems clear to those 

of us who have looked at the law that you cannot subrogate the 

taxpayer, meaning you can’t put the taxpayer in the back of the 

line when you come to this decision of whether or not you are going 

restructure. 

And so, this is—first, this is the document, this is the actual restructuring that we got from your agency. This is the document 

that initiated the restructuring of the loan, including the subordination of the taxpayer. And I notice that on the last page, is this 

your signature on this page? Did you sign off on this document? 

This is noted as tab 59. 

Mr. CHU. Fifty-nine? 

68 

Mr. SCALISE. Department of Energy—and this actually deals 

with the restructuring of the loan guarantee to Solyndra, including 

the restructuring. Did you sign off on this? I think you have 

said—— 

Mr. CHU. Yes, I did. 

Mr. SCALISE [continuing]. In some public statements I have seen. 

I just want to verify—— 

Mr. CHU. Yes, I did. 

Mr. SCALISE [continuing]. This is your signature on this document? 

Mr. CHU. That is my signature. 

Mr. SCALISE. And so, clearly, when you go back and look at the 

law—and I would hope—did you look at the law, yourself, before 

you signed off on this document? 

Mr. CHU. Yes. 

Mr. SCALISE. And this is not a long law. It is not 50 pages. It 

is not even a paragraph. 

Mr. CHU. That is right. In—— 

Mr. SCALISE. You looked at this law, you looked at this one paragraph, and you said, even though it says, ‘‘The obligation shall be 

subject to the condition that the obligation is not subordinate to 

other financing,’’ you can tell me you read this and you can still 

determine that it is OK for you to subordinate the taxpayer even 

though the law says it is not? 

Mr. CHU. We did not subordinate the taxpayer under the terms 

of the original loan, and we followed the law. 

Mr. SCALISE. Does the taxpayer have first dibs on the $535 million—— 

Mr. CHU. At the time of the—— 

Mr. SCALISE. [continuing]. When the first dollar comes in from 

Solyndra, if one even does? 

Mr. CHU. At the time of the original—— 

Mr. SCALISE. That is a yes-or-no question. 

Mr. CHU. Right now, after the—— 

Mr. SCALISE. Yes or no, Mr. Secretary? Does the taxpayer have 

first dibs, or is some other company going to get first dibs on the 

first dollar that comes in or the first $75 million? 

Mr. CHU. After restructuring—— 

Mr. SCALISE. Yes or no—— 

Mr. CHU [continuing]. No. 

Mr. SCALISE [continuing]. The American taxpayer? 

Mr. CHU. No. 

Mr. SCALISE. What was your answer? 

Mr. CHU. After restructuring, no. 

Mr. SCALISE. No. OK, so, you did that. 

Now, let’s go back to your legal counsel. Your legal counsel did 

look at this. Not only did your legal counsel look at this and their 

determination—and I will go to page 5 of the legal opinion; that is 

tab 67. Their legal opinion says that ‘‘this reading of the provision 

is reinforced by the use of the word ’is.’’’ So here we go again with 

it is going to come down to the definition of the word ‘‘is,’’ if that 

is really how you are going to hang your hat. 

But let’s go beyond your department’s attorneys. We have an 

email—and we discussed this in a previous hearing in our comVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
69 

mittee. I would hope you have seen this. Gary Burner over at the 

Treasury said, ‘‘The statute rests with the Department of Justice 

the authority to accept the compromise of a claim to the U.S. Government in those instances.’’ 

They recommended that you all go to the Department of Justice. 

Did you do that? 

Mr. CHU. We did not because we—— 

Mr. SCALISE. Why would you not go to the Department of Justice? If you are getting—this isn’t within, this isn’t somebody on 

our side. This is the Obama administration, the Treasury Department, saying, you ought to go to the Department of Justice because 

we don’t think it is legal to put the taxpayer in the back of the line 

on a $535 million loan. 

Why didn’t you at least do that due diligence? 

Mr. CHU. Because when you—within the covenant of the loan 

and within the boundaries of the original loan, if you are acting 

within those original agreements, you need not go to the Justice 

Department. My understanding—— 

Mr. SCALISE. Then I guess that is your opinion. I think it is 

wrong, and I think it is going to come out that you did violate the 

law in that regard. And it is a shame for the taxpayer. 

I want to know who all the people were in the decision-making 

process. Was anyone at the White House involved in the decision 

to restructure the loan, not just to subordinate the taxpayer but to 

restructure? Did you get any pressure? 

Because we have emails showing there was pressure coming from 

the White House. That is one of the reasons why we are still trying 

to get documents from the White House. We haven’t been able to 

get that. We had to subpoena it, and we still haven’t gotten it all. 

Who in the White House was talking to you about restructuring 

the loan? 

Mr. CHU. To the best of my knowledge, I have no knowledge of 

anyone saying, ‘‘You need to restructure this loan.’’ This was something that they repeatedly—— 

Mr. SCALISE. And if you get any information on that, we are still 

going to try to get the facts here. We are trying to get to the bottom 

of the loss of $535 million. 

I have heard a lot of talk about politics. I have seen a lot of 

emails from within the administration about politics. As we have 

seen, The Washington Post had the front-page story talking about 

emails from within your department, Department of Energy, pressing Solyndra. They are not concerned about the layoffs; they are 

not concerned that people are going to lose their jobs. They are just 

concerned about the timing, the politics. ‘‘Wait until after the election.’’ This is disgusting. 

And I would hope that you are going to go, in your department— 

it happened under your nose. You testified here, under oath, you 

knew nothing about it. It happened in your agency. I hope you will 

go back in your agency and have some heads roll. People need to 

be held accountable. Because political decisions were being made in 

your department. They were being made in the White House above 

you; they were being made below you. And, hopefully, maybe you 

weren’t making any of those. But it sure is strange that they are 

being made all around you. 

70 

And I hope that somebody is going to be held accountable, because we are going to fight to hold people accountable because $535 

million in taxpayer money was lost. I don’t see any chain of emails 

looking out for the taxpayer money. I see a whole lot of emails in 

the administration that are concerned about the politics. That is 

what stinks the most about this. 

And so, I know we are going have another round. I look forward—— 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. SCALISE. I yield back. 

Mr. STEARNS. Just to follow up, you still don’t know who at the 

White House, and you have no interest in finding out, based upon 

this Washington—— 

Mr. CHU. We—— 

Mr. STEARNS. Excuse me—in your department, you don’t have 

any—you don’t know who in your department was involved with 

this and you—— 

Mr. CHU. We—— 

Mr. STEARNS [continuing]. Have no interest in finding out? 

Mr. CHU. No, we do have interest in finding out. And we—— 

Mr. STEARNS. When are you going to do it? 

Mr. CHU. Well, certainly, our general counsel’s office will look at 

who was doing these things. 

Mr. STEARNS. The gentleman from Virginia is recognized for 5 

minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Take a deep breath. It has been a long day. 

I am going in a slightly different direction. 1702(d)(3) is the subordination section, and I will be getting back to that. But, first, I 

would draw your attention to 1702(g)(4)(A). It is a slightly different—it is the same question with a slightly different legal basis 

for it. And that would be—the language of that is, ‘‘If the borrower 

defaults on an obligation, the Secretary shall notify the Attorney 

General of the default.’’ 

I point out to you a December 13, 2010, letter to Solyndra from 

Mr. Silver, Jonathan Silver, who is the head of the program, and 

that is not in your book. 

Mr. Chairman, may that document be admitted to the record, by 

unanimous consent? 

Mr. STEARNS. So ordered. 

Mr. GRIFFITH. And if we could get a copy to—— 

Ms. DEGETTE. Reserving the right to object. 

Mr. GRIFFITH. Here are a couple copies. 

It is a letter from Mr. Silver, who testified previously, the executive director of loan programs, to Solyndra Fab 2 and to Solyndra, 

Inc. In that letter, he notices them that they are in default. This 

is December 13, 2010. 

Mr. STEARNS. The gentleman will suspend. 

Without objection, the document is part of the record. 

[The letter follows:] 

71 


76267.015

Solyndra Fab 2 LLC 

47488 Kato Road 

Fremont. CA 94538 

Solyndra, Inc. 

4nOO Kato Road 

Fremont, CA 94538 

Ladies and Gentlemen: 

Department of Energy 

Washington, DC 20585 

December 13. 2010 

Reference is hereby made 10 (i) the Common Agreement (the "Common 

Agreement'') dated as of SeptemQer 2. 2009, by and among Solyndra Fab 2 LLC 

(''Borrower''), the U.S. Department of Energy (the ''DOB'') as guarantor of the DOEOuaranteedLoan and as Loan Servicer, and U.S. BankNational Association (the 

"Collateral Agent''); and (ii) the Equity Funding Agreement dared aa of September 2, 

2009, by and among Borrower, DOE and Collateral Agent. Capitalized tenns used and 

not dclmed herein shall have the respective meanings set forth in the Common Agreement 

You are hereby advised that as a consequence of the following (collectively, the 

"Identified Events ofDefault',: (a) the Sponsor's failure to depoait S5,OOO,OOO into the 

Equity Funding Account on December 1, 2010, an Event of Default has occurred 

pursuant to Section 8.1 (g) of the Conunon Agreement and Section 2.2,2 of the Equity 

Funamg Agreement, mid (b) the Borrower's failure comply with Section 6.30 of the 

Common Agreement (compliance with Davis Bacon Act rt,gulatory requirements 

appUcable to .the..J>I:Qject).JlS mort, particularly des~ibed in·the ~1TO'\\'Jlf'a tetter to DOE 

dated November 23, '2olO as supplemented by that ietter dated DeCember 13, 2010. 

While any discussions with us continue and Until such Identified Events of 

Default are addressed, there are certain implications under the Common Agreement and 

the othet Loan Documeota resulting from such Identified Events of Default. These 

include, without limitation, the right of the DOE to exercise its rights and remedies under 

Section 8.2 of the Common Agreement and under the other Loan Documents. We advise 

you that any failure on the part of the DOE to exercise. or any delay in exercising. any of its 

rights under the Common Agreement and the other Loan Documents as a result of the 

Identified Events of Default described above or otherwise shall not be construed or 0pel81e 

as 8 waiver, estoppel, acceptance of course of conduct or forbearance by the DOE or 

preclude the exercise of any rights or :remedies under the Common Agreement or the other 

Loan Documents, as the case may be. The DOEheteby expressly reserves all of its rights, 

remedies and elaima 8S provided for in the Common Agreement, the Loan Documents 

* Prfnl8d \0'1111 cV( Ink em "'cyd8d paper 
72 


76267.016

and/or by applicable law in cODJlection with such Identified Events of Default and 

otherwise. The DOE may exercise any ofns rights or remed~ without further notice or 

demand except as may be required pursuant ~ applicable Jaw and the Loan Documents. If 

any such actions are taken, the DOE will hold Borrower responsible fur all additional COSIli 

and expenses, including attorney's "fees and court costs, incurred in connection therewith. 

Notwithstanding the furegoing, with respect to the BOIrO~t's failure to comply 

with Section 6.30 of the Common Agreement, DOE hereby notifies the BOD'ower that it 

will forbear from exe.reising its remedies pursuant to the Common Agreement and the 

other Loan Documents until January 10, 201 l. provided that during that time the 

Borrower is using its best efforts to obtain and deliver to DOE a written certification that 

(1) it has obtained a cel1i:.fi.cation from each site contractor to the Project to the effect that, 

and has othetwise determined that, all Davis-Bacon Act (''DBA'') covered contractors 

and subcontractors on the Project have complied with Section 6.30 oftpeCommon 

Agreement, and (2) it is as of the date of such certification in full compliance with the 

requirements of Sections 5.39 and 6.30 of1he Common Agreement, including the 

n:quirement of collection and review of al1 certified payrolls and the reimbursement 10 

employees of any underpayments of wages, and it bas independently reviewed and 

detettnined that all W1!ges are DBA-compliant. 

Thill letter shal.l not be construed to limit, modify, wIthdraw, amend or vary the 

terms of the Common Agreement or the other Loan Documents. Nothing herein or in any 

previous or subsequent discussions with the Borrower. sbalI prejudice or impair the right 

of the DOE to demand peaformance by the Borrower of i1s obligation under the Common 

.Agreement or the other Loan Documents. as the case may be. 

Very truly yours, 
73 

Mr. STEARNS. Thank you. 

Mr. GRIFFITH. Thank you. 

In that document, he notices the Solyndra folks that they are in 

default and then goes through the reasonings why that is in default and says that the Department is not going to waive any—if 

it doesn’t take action immediately, it is not waiving any of its 

rights under the contract. 

Further, I would point you to what is document 67, which is the 

memorandum from Susan Richardson authorizing the subordination. And in that, she indicates in paragraph 3, first sentence, ‘‘A 

default relating to a financial requirement has occurred under the 

loan agreement. When that default occurred on December 1st, 

2010, $95 million of the guaranteed loan commitment remains to 

be advanced.’’ 

And, further, in an email from—tab 59—in February, Silver further acknowledges that there was a default in December by 

Solyndra. 

That being said, Mr. Secretary, did your office, in compliance 

with the code 1702(g)(4)(A), the section that requires if a borrower 

defaults the Secretary shall notify the Attorney General of the default, did you do that? 

Mr. CHU. First, I have to look back at this code of the Justice 

Department. 

Now, this particular letter is about—— 

Mr. GRIFFITH. I am just asking you if you notified the—when 

there was a default, in December, did you notify the Attorney General, as required by the code? I am not asking for your interpretation of the letters. I have laid those out; everybody can look at 

those later. I only have a certain amount of time. I want to know 

if you notified the Attorney General, in accordance with the law. 

Mr. CHU. That, I will get back to you on that. But this was a 

deposit in an—— 

Mr. GRIFFITH. So you don’t recall—I understand. But you don’t— 

the bottom line is your people said it was a default and it looks like 

a default. And on a default, you are supposed to notify the Attorney 

General. I am just asking you, did you do it? Do you have any 

recollection of doing it? 

Mr. CHU. I don’t have—I can get back to you on that. 

Mr. GRIFFITH. Thank you. I appreciate that. 

Let me ask you this. Do you know what the value of the patents 

and other IP, intellectual properties, of Solyndra are? Do you know 

what those values are? 

Mr. CHU. No. 

Mr. GRIFFITH. Do you believe that they have value? 

Mr. CHU. They should have some value, yes. 

Mr. GRIFFITH. And do you believe it will be greater than or less 

than $75 million? 

Mr. CHU. The IP? I couldn’t have any way of assigning that. 

Mr. GRIFFITH. OK. 

And I would draw your attention to tab 68 in your book. We are 

now talking about that it appears from that particular tab—do you 

have that in front of you? 

Mr. CHU. Sixty-eight? Yes, I do. 

74 

Mr. GRIFFITH. OK. It appears that there is something going on— 

it is during the time period that they were beginning to discuss the 

subordination, and a lot of it is redacted. Do you have any idea who 

that was from and who it was to? It looks like it might have been 

from Susan Richardson. 

Mr. CHU. No, I don’t. 

Mr. GRIFFITH. And do you know why all of that information was 

redacted? 

Mr. CHU. No, I don’t. 

Mr. GRIFFITH. Can you find out for me as to what the purpose— 

I mean, I understand there may be some reason, but can you find 

out why all that information was redacted? 

Mr. CHU. We can get that back to you. 

Mr. GRIFFITH. And were you aware that there were numerous 

discussions about Solyndra’s default and the problems they were 

having and subordination came up fairly early in December of 

2010? Were you aware of that? 

Mr. CHU. I am now, that they were thinking of subordination. 

But, again, one can’t move forward until one understands the law. 

Mr. GRIFFITH. But do you understand that Solyndra was looking 

at bankruptcy at that point, and without some understanding that 

there would be a new $75 million they would have had to file bankruptcy pretty quickly? 

Mr. CHU. That is my understanding. About that time scale, they 

had this cash flow issue, and they needed funds to continue. And 

that is why one restructures. 

Mr. GRIFFITH. I understand that, but don’t the records reflect 

that there was already an understanding within the Department of 

Energy with Francis Nwachuku that there was going to be a subordination, even before the lawyers had had an opportunity to determine whether or not they could? 

Mr. CHU. We do not do anything until—I mean, is it OK to look 

at things in parallel? Yes. But before our lawyers—— 

Mr. GRIFFITH. OK. 

Mr. CHU [continuing]. Determined whether it was legal or 

not—— 

Mr. GRIFFITH. I understand you couldn’t do anything. 

Mr. CHU [continuing]. We could not move forward. 

Mr. GRIFFITH. But do you understand that, based on the documents that have been provided, it is pretty clear from the record 

that Solyndra would have had to have filed bankruptcy, that the 

investors were not willing to put the $75 million in, unless DOE 

subordinated? And, therefore, when writing the legal memorandum, everybody in your department knew that, unless they 

could figure out a way to subordinate, Solyndra was going down. 

Mr. CHU. Sir—— 

Mr. GRIFFITH. Isn’t that true? 

Mr. CHU. No. I—no. That is not correct. Our counsel’s office, general counsel’s office, and Susan Richardson’s responsibility, as lawyers, to protect the Department of Energy, to make sure we act 

under the law, that always comes first. 

Mr. GRIFFITH. You know, it is interesting, I just questioned why 

you didn’t—and I go back to some of the other questions—why you 

didn’t get opinions, when you had OMB and Treasury saying that 

75 

they didn’t think it was legal, why you didn’t go to Justice. Were 

you afraid of getting an answer that you didn’t like? 

Mr. CHU. First—— 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. GRIFFITH. I yield back. 

Ms. DEGETTE. I think you should let him answer. 

Mr. STEARNS. Oh, no, I want to let you answer. Go ahead. 

Mr. CHU. OK, certainly. 

We are required to go to Justice because if there was a—in a revision of the loan that meant we were not going to get paid back 

as much, things of that nature, we went to Justice. We did, as you 

know, go to outside counsel and sought other opinions. And, as 

noted earlier, there was a previous general counsel of the Department of Energy, upon looking at the decision, who also concurred 

with that decision. 

Mr. STEARNS. The gentleman’s time had expired. 

The gentleman from Kansas is recognized for 5 minutes. 

Mr. GRIFFITH. Mr. Chairman, if I might? 

Mr. STEARNS. Sure. 

Mr. GRIFFITH. Because I haven’t seen it, I have only seen the 

draft that flags that you can’t do the subordination, if we could get 

that outside counsel’s opinion, I would greatly appreciate it. 

Mr. STEARNS. Mr. Secretary, can we get that opinion? 

Mr. CHU. Yes. 

Mr. STEARNS. Is that possible to get it today? Do you have access 

to that? 

Mr. CHU. I don’t know about today. But we have an opinion of 

the previous general counsel of the Department of Energy. 

Mr. STEARNS. But I think the gentleman is asking—— 

Mr. GRIFFITH. I am asking for what you had at the time the decision was made, not a Monday-morning-quarterbacking coverup. 

Mr. CHU. We could certainly make those records available. 

Mr. STEARNS. We need the final, is what the gentleman is asking 

for. 

Mr. GRIFFITH. That is correct. 

Mr. STEARNS. OK. Correct. 

The gentleman from Kansas is recognized for 5 minutes. 

Mr. POMPEO. Great. Thank you, Mr. Chairman. 

Thank you, Secretary Chu, for being with us this morning. 

You know, you have been asked a couple times if there is anybody who ought to apologize. So far, as far as we have been able 

to get you is to say ‘‘unfortunate’’ and ‘‘regrettable.’’ I have a different view. I would use ‘‘reckless’’ and ‘‘grossly mismanaged’’ as a 

program. 

And you have talked about some of the changes you have made 

to try and strengthen that oversight, and I appreciate that. I want 

to test that just a little bit. 

When the loan was originally applied for, it was applied for 

under Section 1703; is that correct? 

Mr. CHU. The Solyndra loan? Yes. 

Mr. POMPEO. And then it became—then when Section 1705 

Obama stimulus money became available, it changed to a Section 

1705 program; is that correct? 

Mr. CHU. That is correct. 

76 

Mr. POMPEO. Did you approve the decision to change it from a 

1703 loan to a 1705 loan? 

Mr. CHU. Did I approve? I think this is an action of the company 

and the loan program. 

Mr. POMPEO. Got it. So you weren’t involved in that process, the 

decision to allow it to be moved from 1703 to 1705? 

Mr. CHU. No. 

Mr. POMPEO. Great. 

And, you know, the difference in those two programs is that in 

1703 the company has skin in the game and has an incentive to 

make their company successful and make the loan less risky, but 

in Section 1705 it is very different. Is that correct, Mr. Chu? 

Mr. CHU. No, that is not correct. As I said, the company had a 

billion dollars’ skin in the game. 

Mr. POMPEO. Right. But in Section 1705, this credit subsidy that 

you have referred to several times doesn’t get paid by the company. 

Under Section 1705, the American taxpayer provides the credit 

subsidy. 

Mr. CHU. Yes, the American taxpayer provides the credit subsidy, but, in addition to that, going forward, there is a minimum 

of 20 percent additional that the equity people would have to put 

in. 

Mr. POMPEO. Right. But that is very different. You would agree. 

I mean, this legislation that has the credit subsidy, the Federal 

Credit Reform Act, had a reason that they wanted these credit subsidies paid for by the company, correct? Because it caused the company to have a greater interest in success. There was a reason that 

the private entities were designed to be the ones that paid the 

credit subsidy. So it is a change in risk, would you agree? 

Mr. CHU. There was a—the 1705 bill that was passed by Congress was passed because they acknowledged that many of the renewable companies would not be able to afford the credit subsidy. 

And, therefore, they said that tax dollars would be used to pay for 

that credit. 

Mr. POMPEO. So these were such bad investments that the company couldn’t even afford that minimal amount to pay of that credit subsidy. 

Mr. CHU. No. I was going back to the way that bill was designed 

by Congress. 

Mr. POMPEO. Let me ask a question. The credit subsidy that was 

calculated, do you know what it was under the Section 1775 program? Do you know what the calculation said? 

Mr. CHU. I believe it was something like 7.8 percent. 

Mr. POMPEO. Right. So on a $535 million loan, we are talking 

about $40 million, $50 million, right? Ten percent of 535 is 53. You 

are talking $40 million, $50 million that the company couldn’t afford to pay. 

Mr. CHU. The credit subsidy score, again, it is something—and 

the credit subsidy as appropriated by Congress was there for a reason. 

Mr. POMPEO. Right. The company couldn’t afford to pay it, so the 

government stepped in to take care of that little incremental 40 

million bucks. Is that correct? That is what happened. 

Mr. CHU. Well—— 

77 

Mr. POMPEO. Yes or no? That is what happened, correct? 

Mr. CHU. That is what happened. 

Mr. POMPEO. Great. 

I want to ask you something. In light of the bankruptcy, has the 

DOE changed that credit subsidy score, the calculation? 

Mr. CHU. Of course. 

Mr. POMPEO. What is it now for the Section 1705 program? 

Mr. CHU. It is presumably quite high, because we—when we constantly re-evaluate loans, as the marketplace changes, as the 

health of the company changes, we are constantly updating what 

the risk is. That is reflected, in part, by the credit subsidy score. 

Mr. POMPEO. So how does that—what is the change? It went 

from, you said, roughly 7 percent to——? 

Mr. CHU. I would guess it would probably be—just sort of a raw 

guess—probably in the 80s. 

Mr. POMPEO. Wow. 

Mr. BARTON. Would the gentlemen yield? 

Mr. CHU. That is because when you change it, you know that the 

company is now in deep financial trouble, and that reflects the risk 

to the taxpayer. 

Mr. POMPEO. Have you changed the credit subsidy scores for the 

other loans in the portfolio, as well, to reflect this increased risk? 

Mr. CHU. We—well, in some instances, the credit subsidy decreases, as, for example, our loan, a $5.9 billion loan, to Ford Motor 

Company. That credit subsidy score is greatly decreased because 

we feel that Ford is an ongoing, stable company, and that loan did 

what it was supposed to do. 

Mr. BARTON. Would the gentlemen yield briefly? 

Mr. POMPEO. Yes. 

Mr. BARTON. Just to point out on this point, since the Secretary 

put this $10 billion on the table, nowhere in the law, nowhere in 

the definitions does it say that that program is to subsidize the loss 

of principle. 

Mr. POMPEO. Thank you. Appreciate that. 

Mr. BARTON. The gentleman from Kansas was absolutely correct 

that it is designed for subsidized interest rates, longer maturities, 

deferral of interest, but it is not designed to cover the loss of principle. So your opening statement, Mr. Secretary, is incorrect in asserting that it is. 

And I yield back. 

Mr. POMPEO. Thank you, Mr. Barton. 

I would agree. I want to talk about that $10 billion number, as 

well. That is for the entire program, not just for Section 1705. That 

$10 billion that was appropriated was for the entire portfolio of 

loans, correct? 

Mr. CHU. Pardon? 

Mr. POMPEO. I am trying to make sure—in your opening statement, you said there was $10 billion to cover potential losses, 

which I think Mr. Barton and I both agree is not what that $10 

billion was designed for. It wasn’t designed to cover losses; it was 

designed to cover interest rates and subsidies. But even the $10 

billion overstates what was appropriated for the Section 1705 program. 

78 

Mr. CHU. It was designed to cover losses in the loans if the company could not—my understanding of what a credit subsidy—what 

the credit subsidy and what the appropriated funds were for was 

for in the event that, as we invest in innovative companies, that 

some of those companies might have difficulty paying back their 

loans. 

Mr. POMPEO. We have a different view of that. Section 1705 

number was $2.5 billion; that’s the amount of money appropriated 

for the Section 1705 loans. 

Mr. CHU. That’s right, the $10 billion, as I said before, was 1705 

plus a little bit of 1703 and ATVM. 

Mr. POMPEO. I have one more question. You talked about all the 

other cross subsidies. We have production tax credits. We have 

mandates in States. When you provide your credit subsidy score, 

what is the assumption about the continuation of those other subsidies; that is, when you’re calculating the risk, do you assume that 

these programs, these other enormous subsidies will be renewed or 

do you assume that they will expire as the law directs that they 

will expire? 

Mr. CHU. The major part that goes into the credit subsidy is the 

financial health of the company, the assets of the company, and 

most of the loans are on projects, whether it’s a new fabrication 

plant or a project that installs solar, wind or something like that. 

And the credit subsidy score goes to the fact that in the event of 

a problem with the company or the parent company or the project, 

how much can the U.S. Government get repaid back? And it reflects that uncertainty and the evaluation of ultimately the OMB 

as to whether, what’s the probability of default on the loan? 

Mr. POMPEO. Well, I yield back my time. 

Mr. CHU. In rough—— 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. POMPEO. I yield back my time. I did not get an answer to 

that question. 

Mr. STEARNS. Mr. Secretary, we’re going to do a second round, 

and it appears mostly Republicans, I don’t know how many are 

going to do a second round, but I would, out of deference, would 

you like a break of about 15 minutes for any reason, or would you 

like us to continue on? 

Mr. CHU. I’ll take a break. 

Mr. STEARNS. OK, all right. 

So, Mr. Secretary, we’re going to reconvene here at 1:15. 

Mr. CHU. All right, thank you. 

Mr. STEARNS. Yes, thank you. 

[Recess.] 

Mr. STEARNS. The subcommittee will reconvene. The ranking 

member is on her way, and I will open with a second round of 

questions. 

And my questions will start, you know, obviously with Solyndra 

going bankrupt, you go back and look what the President said in 

his press conference about Solyndra, he said it was the true engine 

of economic growth and there will always be companies like 

Solyndra to make it possible for this growth. 

Then when Beacon Power went bankrupt, we were also concerned about that, and of course, we found out that a quote from 

79 

the administration on that company that went bankrupt was 100 

percent—100 Recovery Act projects that are changing America, 

Beacon Power being one of them. 

And so the question is, when you have two of the first three 

loans out of the 1705 program go bankrupt, the question for you 

is, how many loan guarantees that you are involved with and covering and monitoring are going to fail, in your opinion? 

Mr. CHU. Well, it’s very hard to predict, but if I look at the portfolio—— 

Mr. STEARNS. You’ve indicated that these kinds of things go 

bankrupt, and it is sort of an anomaly, and it’s what happens in 

life. Are you also saying there is going to be more bankruptcies in 

the loan guarantee? Yes or no. 

Mr. CHU. I could not say one way or the other, but I could say 

that the majority of our loans were not—they were loans, for example, to establish wind farms or solar farms where there were 

power—— 

Mr. STEARNS. OK. Are any of your loans in trouble today? Can 

you categorically say that none of your loans are in trouble today 

or are they in trouble? 

Mr. CHU. Like I was—as I was saying, that if you look at the 

portfolio of loans, many of the loans, the majority of the loans are 

loans where you establish a wind farm, a solar farm, something of 

that ilk, and there is a power—— 

Mr. STEARNS. Wasn’t Beacon Power similar to your definition of 

what you’re talking about? 

Mr. CHU. No, not—— 

Mr. STEARNS. Was Solyndra similar to what you’re talking 

about? 

Mr. CHU. No, these—— 

Mr. STEARNS. So the question is, are any of these loans guarantee in financial trouble, yes or no? 

Mr. CHU. As I said, it’s very hard to predict what will happen. 

Mr. STEARNS. Just say no. 

Mr. CHU. But I would say—— 

Mr. STEARNS. Well, let me ask you this, let’s help you out a bit. 

Are any of them in high risk? 

Mr. CHU. There are different varies—— 

Mr. STEARNS. You’re not answering the question, Mr. Secretary. 

Mr. CHU. There are high risk—— 

Mr. STEARNS. I mean, you know, this Mr. Ellison is going to come 

back and tell us which ones are in high risk and which ones possibly could go under. You’re the Secretary of Energy. Tell me today 

are any of these loans going to go bankrupt, yes or no, your opinion? This is all your opinion. 

Mr. CHU. Sir, this is like saying do I believe that the nuclear reactors in the United States are safe. 

Mr. STEARNS. Well, OK, let’s back up then. Are any of them in 

financial trouble? You certainly should be able to tell that as Secretary of the Energy. You’re monitoring this. You’re trying to convince us that you’re on top of the situation. 

Mr. CHU. Right, right. 

Mr. STEARNS. Are any of them in financial risk, yes or no? 

Mr. CHU. There are always risks, and then—— 

80 

Mr. STEARNS. So all of them are in financial risk? 

Mr. CHU. No, there are always risks regarding the loan, and 

that’s when we are tasked to invest in—— 

Mr. STEARNS. It doesn’t sound like you’re answering the question. I’m just asking you, yes or no, are any of them in financial 

risk? 

Mr. CHU. There are varying degrees of risk. 

Mr. STEARNS. So some of them are? 

Mr. CHU. Well, whenever you invest in high risk, innovative companies—— 

Mr. STEARNS. I’ll accept your statement, yes, some of them are 

in financial risk. I want to go back to what a lot of people are saying, that who could predict these problems with the Chinese market. During an interview with committee staff, your committee 

staff, the former Department of Energy chief financial officer, 

Isokowitz, said that the department should have validated assumptions about the Chinese market before they went ahead with these 

loans. Were you aware of his remarks on this? 

Mr. CHU. No, I’m not aware of those remarks, but certainly we 

were validating what the Chinese were doing. That’s why we had 

extensive, both inside and outside, and what the market—— 

Mr. STEARNS. He distinctly said your office did not validate any 

of the market’s assumptions about the Chinese market. That’s 

what he said. He’s the Department of Energy chief financial officer. 

That’s his opinion. Do you disagree with what he’s saying? 

Mr. CHU. Well, I would have to look at what his statement was 

in the full context, and so I can’t really comment. 

Mr. STEARNS. Well, in full context, he basically said that you 

guys did not, your office did not look and validate any assumptions 

about the Chinese market. 

Mr. CHU. He could have been talking, for example, about the 

ability to sell in China. I don’t really know. Again, I would have 

to look at the full context of that—— 

Mr. STEARNS. OK. 

Mr. CHU [continuing]. That remark. 

Mr. STEARNS. He also cautioned that, he went on to caution that 

he felt when you deal with a commodity, you should have—that 

should have sent up red flags immediately because commodity 

prices have a tendency to fluctuate, which you would agree. For example, the Department of Energy had a terrible experience in 

1980s with the Synthetic Fuels Corporation, which was undercut 

by a flawed assumption about the continued rise in oil prices. 

Given the concerns cited by this CFO and the Department of Energy’s experience with the Synthetic Fuels Corporation, didn’t the department err in failing to validate assumptions about the conditions of the Chinese market before it approved this Solyndra? 

Mr. CHU. If you look back at the history of how solar prices were 

developing and fluctuating, there was a constant decrease in the 

price over—— 

Mr. STEARNS. No, I understand what your opinion is, but the 

point I’m making is, I don’t see the Department of Energy doing 

what Mr. Isokowitz said, and he validates you did not do it, so 

that’s my—now let me just close here before my time runs out. 

81 

You’ve been here this morning and this afternoon; lots of times 

you’ve said you were unaware or you were aware, but sort of anytime anything came up, you had sort of an ambivalent statement. 

We talked about the August 2009 email predicting Solyndra would 

go, be out of cash in September 2011; you knew about that, but you 

didn’t seem to know about that. The PriceWaterhouseCoopers concerns about Solyndra, you didn’t seem to be real concerned or 

weren’t aware of it. The White House emailing your chief of staff 

regarding their concerns with the PriceWaterhouseCoopers report, 

you didn’t seem to know too much about your chief of staff’s awareness of that. Request to hold off announcement of the DOE loan 

and request by your agency to Solyndra to hold off announcing layoffs until after the midterm election, you don’t have any recollection of this. 

So what I’m saying is throughout all of this, you seem to have 

an unawareness, which goes to what I think my last question is, 

we have an email from February 2010 from Dan Carol, who is a 

former chief energy adviser to the President in his campaign. Are 

you aware of his email? 

Mr. CHU. I became aware of it. 

Mr. STEARNS. So you weren’t—you became aware of it when it 

hit the press. He stated you should be replaced because of incompetence. He felt, based upon what I just told you, you didn’t seem 

to have an awareness of any of these very major issues here which 

we’re bringing up, and that’s why Dan Carol said you should be replaced, so I guess my comment is, what would you say to Dan 

Carol today? 

Mr. CHU. First, let me go back to your previous statements. I 

tried to explain to you, I’ll try to explain again, about the cash flow 

issue and the building up of the Fab 2 plant. I was aware of it, and 

what was happening is that there was 1 month in a particular 

model, there would be an issue, but subsequent months, it would 

go into the black, and as I stated previously, experience has borne 

out that in fact there was no issue in building the Fab 2 plant, and 

so I never said I was unaware in terms of what that issue was because it was being sometimes conflated with the cash flow problems later on with the parent company. 

Mr. STEARNS. My time has expired. 

The gentlelady from Colorado. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

Now, obviously, Mr. Secretary, we’re all concerned about the failure of this Solyndra situation because the taxpayers are out almost 

half a billion dollars, and I heard what you had said about the initial loan. I mean, it sounds to me like the DOE was trying to administer this correctly in that originally the loan application was 

made under the Bush administration, the committee came back 

and said they needed more market data. That data was obtained, 

the guarantee was made. Then, because of market conditions, the 

company was about to go into bankruptcy before the factory was 

built, and a decision was made to restructure the loan and to subordinate the government’s interests. That’s pretty much of a summary, correct? 

Mr. CHU. That’s correct. 

82 

Ms. DEGETTE. And a lot of us are very unhappy with the idea 

that the taxpayers were subordinated to the private investors. In 

your opinion, was there anything else that could have been done, 

or did the department explore any alternatives to subordinating 

that interest to the private investors’ interest? 

Mr. CHU. Yes. It was the opinion of our loan specialist that certainly the private investors were not willing to put in added equity 

unless they had certain conditions met, and so it was, as described 

to me and during our discussions in making this decision, it was 

clear if we said, all right, if we don’t allow this, then the company 

would go bankrupt, and again, the discussion after clearing the 

legal hurdle and being told by my general counsel that it was permissible and legal, then the discussion focused on what would be 

in the best taxpayer interests to get the most recovery from—— 

Ms. DEGETTE. Right, so I got that. So you were involved in those 

conversations—— 

Mr. CHU. Yes. 

Ms. DEGETTE [continuing]. About should the taxpayers take a 

secondary position or not, right? 

Mr. CHU. I was certainly—— 

Ms. DEGETTE. And you were pretty well convinced that if you 

didn’t make that concession, then Solyndra would go into bankruptcy and the chances of recovering that money would be greatly 

lessened or zero, right? 

Mr. CHU. That’s right. 

Ms. DEGETTE. OK. Now, so, I mean, we can argue about whether 

we agree or disagree with that decision, but that was the rationale. 

It seemed like it was a prudent rationale at the time, correct? 

Mr. CHU. Correct. 

Ms. DEGETTE. So here’s my question. The DOE has the Loan 

Programs Office, you’re administering three different loan programs, and we’ve been talking about them, the Section 1703, the 

1705, and then the technology vehicles manufacturing program. 

So my question is, it follows a little bit on what the chairman 

was saying, are any of the loans that are currently out there in 

those three programs in a situation where it looks like they are 

about to fail and someone’s coming in and asking for restructuring 

right now? 

Mr. CHU. Right now, no. 

Ms. DEGETTE. OK. Do you expect that—— 

Mr. CHU. I mean, there’s Solyndra, and there’s the flywheel. 

Ms. DEGETTE. Right, right, yes, and those are the two. And 

that’s out of how many loans? 

Mr. CHU. Something like 38 loans. 

Ms. DEGETTE. Thirty-eight loans. And of those 38—so of the 

36—— 

Mr. CHU. And 28, yes—It’s 1705, 28; ATVM, 5; and 5 in 1703. 

Ms. DEGETTE. OK, about 38 loans. 

Mr. CHU. 33 loans—— 

Ms. DEGETTE. So, of the rest of the loans besides, those two, the 

Solyndra and the other, do you foresee market—and I should say, 

does your staff who report to you foresee market conditions changing so those loans are going to go into a default type of a situation? 

83 

Mr. CHU. Well, again, the majority of our loans were loans where 

you install something like a wind farm or a solar farm; you have 

a power purchase agreement. That means the utility company has 

a contract, we will buy your power at a certain price. 

Ms. DEGETTE. OK. 

Mr. CHU. And those loans, we feel, are going to be very safe. 

Ms. DEGETTE. Solid, those are solid. 

Mr. CHU. Those are solid loans. 

Ms. DEGETTE. Now of those loans, how many jobs have been created by those companies? 

Mr. CHU. Well, so far there is something like 44,000 jobs created 

by our loans, and we expect—and these are direct jobs, these are 

construction jobs; they’re manufacturing jobs, and discounting some 

of the supply chain, so 44,000. We expect it to go over 60,000. 

Ms. DEGETTE. And, you know, you’ve had a lot of time now over 

the last recent months after the failure of Solyndra to reflect on 

this as Secretary of Energy, and this is something we’re trying to 

reflect on, on this committee, and even my friend from Texas I see 

down at the end has said he supports solar energy, and he supports 

supporting solar energy. What can we do and what can you do to 

improve the administration and the approval of these loans to 

maximize our stewardship of the taxpayer money while at the 

same time promoting the idea of development of alternative energy? 

Mr. CHU. Well, actually, there are several people, not only Mr. 

Barton, but several people on both sides of the aisle view the support of the solar industry in the United States as important and 

the renewable industry as important, and so I—— 

Ms. DEGETTE. So what can we do to better our stewardship—— 

Mr. CHU. Right, right. 

Ms. DEGETTE [continuing]. Of the taxpayers’ money while furthering—— 

Mr. CHU. Well, certainly we have done many of these things, and 

we’re going to go into a heightened part. Of the loans we have now 

given out but where they have not been disbursed, we will have to 

watch very closely change in market conditions and the conditions 

of the company, and so we have already begun to undertake that. 

Again, it’s very important that decisions going forward on how to 

disburse the loans be made not only by the people who originated 

the loans but by people independent of them because it’s a very 

natural thing if you give birth to a loan, you might have predisposed to want it to succeed, and so we have already done that. 

We’ve set up an independent office within the loan program to 

monitor. We have experts as we—experts in the Department of Energy outside the loan program, but experts in a particular field, 

whether it be solar or wind, to actually assist in understanding the 

market conditions and what—where this company’s business plan 

sits within the competitive fields. 

Ms. DEGETTE. Mr. Chairman—Mr. Secretary, I would ask if you 

would supplement your testimony today within 30 days and provide this committee with a summary of the changes—— 

Mr. CHU. I would be delighted. 

Ms. DEGETTE [continuing]. That you’ve done internally to improve your oversight and administration. 

84 

Mr. CHU. I would be delighted. 

Ms. DEGETTE. Thank you very much. 

Mr. STEARNS. Thank you. The gentlelady’s time has expired. 

The gentleman from Nebraska, Mr. Terry, is recognized for—— 

Mr. TERRY. Mr. Barton. 

Mr. STEARNS. Oh, I’m sorry, Mr. Barton. I’m sorry. 

Mr. Barton is recognized for 5 minutes. 

Mr. BARTON. Thank you, and thank you, Secretary Chu, for 

again agreeing to testify voluntarily. That’s not something you absolutely had to do. 

I want to state before I ask my questions, I’ve been asked half 

a dozen times today whether I think you should resign, and I said 

every time that I don’t think you should resign. I do think you’re 

a man of integrity. I think you’re trying to do your job as the best 

that you can. 

I also happen to believe that it’s possible you’re being set up to 

be the fall guy. There’s some memos and some emails that have 

been leaked that you may have to go, and I’m sure you’re aware 

of that. 

I do think, though, that you’re culpable for the subordination decision, and I want to focus on that in this round. 

I have a timeline that’s been prepared by majority staff, and we 

will share it with the minority, and we’ll put it in the record. I’m 

going to go through this very quickly. If there’s anything on this 

timeline that you fundamentally think is wrong, I wish you would 

flag it for me. This deals with the issue of subordination. The reason subordination is key is because, one, we have the law that says 

you can’t subordinate. If you don’t subordinate this loan guarantee 

and Solyndra goes bankrupt, the taxpayers are first in line to be 

repaid if there’s anything that they can be repaid with, and 

Solyndra is in bankruptcy, but they do have assets. 

Mr. STEARNS. Will the gentleman suspend for one thing? Would 

you like to see a chronology of what he’s talking about? 

Mr. CHU. Sure. 

Mr. STEARNS. Is that possible, Mr. Barton? 

Mr. BARTON. Yes, if we can make a copy. Do you have a copy, 

and can we get a copy? 

Could we suspend the clock while we’re doing this? I don’t want 

my time to be—— 

Mr. STEARNS. We’ve suspended it, Mr. Barton. 

Mr. BARTON. All right. 

Mr. STEARNS. Make a copy and then give it to the ranking member and myself so we’ll be able to follow this as closely as possible. 

Mr. BARTON. OK. So I won’t say anything while we’re in suspense here. 

Mr. STEARNS. Well, just so everybody’s on the same page here. 

Ms. DEGETTE. It’s OK, I won’t—— 

Mr. BARTON. I don’t want to play unfairly. 

Mr. STEARNS. Well, does the ranking member want us to continue to go on? 

Mr. BARTON. This won’t take but 2 or 3 minutes. 

Mr. STEARNS. Continue, we’ll put you back on the clock. 

Mr. BARTON. All right. Well, the subordination is important because if there is no subordination and a company goes bankrupt, 

85 

which Solyndra did, then the taxpayers get repaid first, and there 

is some value in Solyndra, even though it’s in bankruptcy. 

If you subordinate the loan guarantee, then the taxpayers go to 

the end of the line, and it’s very unlikely once you pay the private 

sector creditors, that there’s going to be money left to pay Solyndra. 

On December the 6th and December the 7th, and this is the 

memo that we just prepared, that we presented you with, DOE and 

Solyndra negotiated a restructuring agreement. On December the 

7th, and this is 2010, the subordination of the loan is put on the 

table. On December the 8th, there is an email from Susan Richardson, the chief counsel of the loan program at DOE, requesting a 

meeting as soon as possible to brief Scott Harris, who is the DOE 

general counsel, on a serious problem with Solyndra. This is about 

the subordination which DOE has now offered to do. 

On December the 10th, the DOE lead negotiator circulates a 

DOE summary to the DOE staff that includes subordination, OK? 

That’s in December. December the 22nd, OMB asks for DOE’s written analysis of subordination. 

On January the 3rd, OMB again asks for a written legal analysis 

of subordination. On January the 3rd, the outside counsel for Department of Energy, Morrison & Foerster, sends two draft documents to DOE on the legal analysis of subordination in which they 

say, state that it cannot be done. On January the 6th, OMB again 

asks for DOE’s written legal analysis of subordination. On January 

the 13th, Susan Richardson, the chief counsel of the Loan Programs Office, begins to draft her own legal memo on subordination, 

which she ultimately gives to you. On January the 20th, Susan 

Richardson sends a copy of her draft legal memo to OMB. 

On February the 10th, the Treasury Department emails Susan 

Richardson at DOE to discuss subordination, and the Treasury Department is of the—it doesn’t say this here, but the Treasury Department is of the opinion that you cannot subordinate the loan. 

And finally, Mr. Secretary, on February the 22nd, you signed the 

action memo modifying restructuring the loan that does allow for 

subordination. 

So, instead of you making a decision and then they negotiate 

subordination, your staff at DOE agrees to subordination, and then 

draft a convoluted legal opinion that they get you to sign that basically covers their rear. 

Now, do you have any disagreement with anything in this 

timeline? 

Mr. CHU. Well, sir, your characterization—let me make a few 

statements. First, we were not going—the first $75 million of new 

money invested by the equity holders was ahead of us, but then 

after that, we were sharing in the pay back of the loan, so we were 

not, quote, going to the back of the line. 

The OMB, when it saw what was being prepared and the legal 

opinions within the Department of Energy, did not object to this 

position, and believe me, the OMB is not shy to objecting if they 

disagree with anything we or any other agency does. 

Finally, Treasury was not offering a legal opinion. They were 

suggesting that we could check with Department of Justice, but 

under the guise of the—under the statute, you check with the Department of Justice if the terms of the loan change, especially if 

86 

they are decreased, and the taxpayers—the terms of the agreement 

are changed. And so our general counsel and the counsel of the 

loan program said that this was within the confines of the original 

agreement. Therefore, we need not go to the Department of Justice. 

Mr. BARTON. Well, my time has expired, but last question. Knowing what you know now, if you were presented a document to subordinate the Solyndra loan, would you still agree to subordinate? 

Mr. CHU. Well, I think what we would need to do—let’s take a 

step back, and if—— 

Mr. STEARNS. Mr. Secretary, I think that’s a yes or no question. 

Mr. BARTON. I’ll let him answer it however he wants, but it’s a 

straight-up Texas question. 

Mr. CHU. Well, we stand by—I think we still agree from the General Counsel’s Office and the loan program office that it was within 

the bounds of this. This would be a last ditch thing. Again, if 

should there be a loan that goes in trouble in the future, one wants 

to recover as much of the taxpayer money as possible. If you do 

pull the plug and if should there be a distress situation and you 

do pull the plug, then you have to make the decision: If you go into 

bankruptcy, what assets can be recovered; if you go forward what— 

with new capital in order to weather the storm, should there be a 

situation like that. 

Mr. BARTON. But the law clearly states you can’t subordinate? 

Mr. STEARNS. Well, I think that’s what Mr. Barton is saying. 

Mr. CHU. I think the law—— 

Mr. BARTON. Yes. I want to put into the record officially the 

timeline that I just gave the Secretary. 

Mr. STEARNS. OK. So ordered. Is that—if there’s no objection? 

Ms. DEGETTE. No. 

[The information follows:] 

87 


76267.017

08/2006 

12/2006 

08/1/2007 

10/2007 

OS/2008 

08/2008 

11/2008 

12/2008 

01/05/2009 

01/09/2009 

01/13/2009 

01/20/2009 

01/26/2009 

02/09/2009 

02/17/2009 

Solyndra Chronology 

DOE issues first solicitation for loan guarantee applications 

Solyndra files initial application for DOE loan guarantee 

DOE Loan Programs Office hired its first federal employee 

DOE invites 16 of the 143 loan guarantee applicants to file a 

full application; Solyndra is one of the 16. 

Solyndra submits full application to DOE, due diligence begins 

DOE deems Solyndra's application complete 

DOE contracts with independent consultants to do formal due 

diligence of Solyndra deal 

DOE staff raises questions about how financial health of 

Solyndra parent company will affect DOE project 

First draft of the independent engineer's report analyzing 

Solyndra's technology is submitted 

The Credit Committee votes against offering a conditional 

commitment to Solyndra, noting that the "number of issues 

unresolved makes a recommendation for approval premature 

at this time," and remanded the project to the Loan Programs 

Office for "further development of information." Credit 

Committee also notes "questions regarding the nature and 

strength of the parent guarantee for the completion of the 

project," and concerns about Solyndra's ability to scale-up 

production. 

A member of that the Credit Committee sends an email stating 

that "[a]fter canvassing the committee, it was the unanimous 

decision not to engage in further discussions with Solyndra at 

this time."1 

President Obama is inaugurated 

A DOE staff member sent an email stating that "we are 

approaching the beginning of the approval process for Solyndra 

again," and goes on to list the credit questions that remain 

unresolved in the deal. 

The DOE stimulus advisor states that Solyndra is the "litmus 

test for the loan guarantee program's ability to fund good 

projects quickly." 

The American Recovery and Reinvestment Act of 2009 becomes 

law. 

January 13,2009, emml between DOE staff regarding "Solyndra Mecting " 
88 


76267.018

02/26/2009 

03/05/2009 

03/05/2009 

03/06/2009 

03/07/2009 

03/07/2009 

03/10/2009 

03/12/2009 

03/ 17 /2009 

03/20/2009 

08/l1/2009 

08/19/2009 

08/20/2009 

Solyndra Chronology 

DOE staff identifies eight issues to address in independent 

engineer's report. 

The first draft of the independent market report on Solyndra is 

submitted to DOE. 

DOE staff discusses Solyndra event, and notes "I need to send 

to [Secretary Chu's Chief of Staff] the significance of the cvent 

so he can send to the WH." 

DOE officials schedule the Credit Committee and Credit Review 

Board meetings for March 12 and March 17,2009, to approve 

a conditional commitmcnt to Solyndra. 

Recovery Act updates distributed at OMS mention possibility 

of President Obama announcing loan guarantee to Solyndra on 

March 19,2009 (this ultimately did not happen). 

Ronald I\Jain, then/ Chief of Staff to Vice Presidcnt Joe Biden, 

sends an email to OMB staff and asked "[clan we chat on 

Monday about the DOE flag in here on Solyndra .... If you 

guys think this is a bad idea, I need to unwind the WW 

QUICKLY." 

The DOE Secretary's Chief of Staff and DOE CFO discuss 

"great interest" on part of White House in potential Solyndra 

announcement. 

Second Solyndra Credit Committee meets and approves the 

offer of a conditional commitment to Solyndra. 

The DOE Credit Review Board approves conditional 

commitment to Solyndra. 

DOE announces Solyndra loan guarantee. 

A special assistant to White House Chief of Staff Rahm 

Emanuel emails OMB and DOE staff and asked "[aJs the 

closing of the Solyndra deal nears, we want to think about the 

potential announcement value in this. We know that the 

conditional agreement was alrcady announced in March. That 

said, the VP will be in California in early September, and want 

to see if it's worth doing something here." 

DOE staff notes "major outstanding issuc .... The issue of 

working capital. " The DOE staff mcmber notes that the 

financial model shows the project would run out of cash in 

September 2011. 

Email from DOE staff member stating that the "issue of 

working capital remains unresolved .... This is a liquidity 

issue." The DOE staff member asks "how we can advance a 

2 
89 


76267.019

08/25/2009 

08/27/2009 

08/28/2009 

08/31/2009 

Solyndra Chronology 

project that hasn't funded working capital rcquirements and 

that generates a working capital shortfall of $50 [million] when 

working capital assumptions are entered into the model?" 

DOE provides a briefing to OMB about the Solyndra loan 

guarantee. OMB begins asking questions about the deal 

and reviewing the crcdit subsidy score for the deal. 

Thc special assistant to the White House Chief of Staff 

emails DOE to inform them that "we would want the VP [to] 

satellite into the event on 9/4. It's the same day the 

unemployment numbers come out, and we'd want to use 

this as an example where the Recovery Act is helping create 

new high tech jobs." 

DOE staff emails OMB staff to to "confirm whether there are 

any issues regarding a closing on Sept. 3 for a Sept. 4 VP 

event on Solyndra? This implies we will need to wrap up 

our review/approval by Sept. 1 .... " 

An OMB staff mcmber notes that "[g]iven the time prcssure 

we are under to sign-off on Solyndra, wc don't have time to 

change the [financial] modeI."2 The senior staff member 

replied that "[a]s long as we make it crystal clear to DOE 

that this is only in thc interest of time, and that therc's no 

precedent set, then I'm okay with it. But wc also need to 

make sure they don't jam us on latcr deals so there isn't 

time to negotiate those, too." 

A White House spokesperson reaches out to number of DOE 

and White House staff about the OMB timcline, and asks 

for a "quick rundown of what final step this is that OMS 

would be clearing? We just want to make sure wc can be as 

helpful as possible in ensuring this gets done for you on 

timcline." 

A DOE staff member tells Whitc House staff that "OMB is fully 

aware of the [September 4J timeline. 

DOE staff notcs that Solyndra announcement was originally 

schcduled for September 8 with an appearancc by President 

Obama, but now scheduled for September 4 with satellite 

appearance by Vice President Biden. 

Special Assistant to White House Chief of Staff asks 

whether "there is anything we can help speed along on OMB 

side."3 

OMB asks for Solyndra announcement to be postponed, 

~ August 27, 2009. email bcnvt..f.11 OMB staff regarding ~Flnal Solyndra Credit Subsid'{ Cost." 

\ !\ugust 31 2009, email between DOE and OMB 

3 
90 


76267.020

09/01/2009 

09/04/2009 

03/2010 

OS/26/2010 

06/2010 

07/2010 

11/03/2010 

Solyndra Chronology 

noting that OMS "should have full review with all hands on 

dcck to make sure we get it right." 

OMS staff emails White House staff and statcs that OMS 

has had to do "rushed approvals on a couple of occasions 

(and we are worried about Solyndra at the end of the week). 

We would prefer to have sufficient time to do our due 

diligence reviews and have thc approval set the date for the 

announcement rather than the other way around." 

OMS notches down the Solyndra credit rating, to reflect 

greater risk fo guarantee due to lack of firm performance data 

on the Solyndra panels and "the weakening world market 

prices for solar generally." 

Solyndra loan guarantee finalized and announced. Secretary 

Chu attends ground breaking event in California; Vice President 

Biden makes speech via satellite. 

Solyndra auditor, PricewaterhouseCoopers, states in the 

company's S-J amcnded that the "Company had suffered 

recurring losses from operations, negative cash flows since 

inception and has a net stockholder's deficit that, among other 

concerns, raise substantial doubt about its ability to continue 

as a going concern." 

President Obama visited Solyndra's manufacturing facilities 

and proclaimed that "the true engine of eeonomic growth will 

always be companies like Solyndra." 

Solyndra caneelled a $300 million Initial public Offering (IPO). 

Instead, to raise capital, the company issues $175 million of 

convertible promissory notes to various investors. 

The Government Accountability Office found that "DOE's 

implantation of the program has favored some applicants and 

disadvantaged others in a number of ways." With rcgard to due 

diligence, GAO found that "in at least five of the ten cases in 

which DOE made eonditional commitments, it did so before 

obtaining all of the final reports from external reviewers, 

allowing those applicants to receive conditional commitments 

before incurring expenses that other applicants were required 

to pay." GAO, Department of Energy: Further Actions are 

Needed to Improve DOE's Ability to Evaluate and Implement the 

Loan Guarantee Program, GAO-IO-627 (Washington, DC: ,July 

2010) 

SoIyndra announced that it was shutting down one 

manufacturing facility and laying off 135 temporary employees 

and approximately 40 full-time employees. 

4 
91 


76267.021

12/2010-

02/2010 

01/02/2011 

01/04/2011 

02/23/2011 

07/18/2011 

Late 07/2011 

08/30/2011 

08/31/2011 

09/06/2011 

09/08/2011 

Solyndra Chronology 

DOE, Solyndra, and two of its investors, Argonaut Venture 

Capital and Madrone Capitol Partners, negotiated the terms 

and conditions of an agreement to restructure the Solyndra 

loan guarantee. Throughout this process, DOE consulted with 

OMB about the proposed terms and conditions of this 

arrangement. 

OMB staff questions whether immediate liquidation would 

result in better recoveries to the government than 

restructuring the deal. 

An email between OMB Staff regarding "RE: Solyndra memo: 

COMMENTS BY 1 :00 PLEASE" noted that "[wjhile the company 

may avoid default with a restructuring, there is also a good 

chance it will not. ... At that point, additional funds would 

have been put at risk, recoveries may be lower, and questions 

will bc asked .... " 

DOE finalizes loan restructuring with Solyndra and lead 

investor, Argonaut 

During meetings the week of July 18, 2011, Solyndra CEO 

Brian Harrison and other representatives of Solyndra claimed 

that Solyndra's financial condition was improving, and that 

Solyndra's revenues were growing. 

Solyndra tells DOE that it will restate projected earnings; 

investors tell DOE they will not inject additional $75 million in 

capital under current terms and conditions of t'estructuring 

agreement. 

DOE informed Solyndra that a second restructuring was not 

feasible. The Solyndra board met shortly after, and voted to 

announce its bankruptcy. 

Solyndra announces bankruptcy. 

Solyndra, Inc. files for bankruptcy. 

Federal Bureau of Investigation (FBI) agents, acting together 

with agents from the DOE Office of Inspector General (OIG), 

executed search warrants on Solyndra's headquarters in 

Fremont, California. 

5 
92 

Mr. CHU. But the law clearly states that we cannot subordinate 

at the time of origination of the loan. 

Mr. STEARNS. The time of the gentleman has expired, but out of 

courtesy to the gentleman, you’ve indicated that the Secretary is 

culpable, do you think, in your opinion, that the law is broken? 

Mr. BARTON. If you’re asking me the question, yes, sir, I think 

he broke the law. 

Mr. STEARNS. OK. I think that’s what I want to make clear that 

with your line of questioning, I think that’s what you’re saying, the 

law is broken, and it’s an illegal act is what you’re saying. 

Mr. BARTON. That’s what I’m—that’s my opinion. 

Mr. STEARNS. Well, that’s what I want to hear. 

All right, the gentleman from Nebraska, you’re recognized for 5 

minutes. 

Mr. TERRY. Thank you, and I understand that the—sorry, I’m— 

can we break for a second? 

Ms. DEGETTE. I want to see what this says. 

Mr. STEARNS. We’ll put you back to 5. 

Mr. TERRY. I was distracted. 

Mr. STEARNS. Mr. Terry, I have the capability of giving you another 5 seconds. 

Mr. TERRY. What’s that? 

Mr. STEARNS. I have the capability of giving you another 5 seconds. 

Mr. TERRY. Oh, 5 seconds. Well, I felt like I was stammering a 

lot longer. 

Dr. Chu, on January 13, 2009, before you were confirmed and 

sworn in or undertook your duties, there was a memo that from the 

credit committee—well, it wasn’t a memo. It was an email stating, 

quote, after canvassing the committee, it was the unanimous decision not to engage further discussions with Solyndra at that time. 

Are you aware of that email? 

Mr. CHU. Yes, I am aware of it now. 

Mr. TERRY. A couple things that I want to clear up just from 

my—because I’m confused. 

Mr. CHU. Sir, could I interrupt just a second? The decision not 

to engage with Solyndra, that there was no more information they 

could give us, and we were doing—so we disengaged in order to do 

further due diligence further to understand what the market was 

and get independent eyes on the program and what the loan was 

about. 

Mr. TERRY. OK. Well, then we can go—you’re diverting me from 

where I’m going, but I’ll just state for the record, then, on January 

26th, that DOE staff sent another email saying that we’re approaching the beginning of the approval process for Solyndra. It 

seems interesting that in 13 days, you’ve got the credit committee 

saying we’re shutting this file down with a not to engage in further 

discussions, and then 13 days later, it seems like it’s full steam 

ahead. 

But I’m concerned about the Dow Jones news wires on December 

11, 2009. You were quoted, we’ve been told that it’s imminent that 

they’re—Solyndra—going to announce this, and that the loan is 

theirs as long as they get the additional capital that’s required by 

statute. Then following, or on that date, a DOE employee from the 

93 

loan program emailed, quote, no idea where Dr. Chu’s info on the 

equity raise is coming from, but the conclusion that, quote, the loan 

is theirs, end quote, doesn’t help our negotiation. 

So the question here is, where did you get the information that 

the equity loan or the equity is imminent and that the loan is 

theirs? Those are two separate questions. 

Mr. CHU. First, I would—I was being informed about the 

progress of the loan through Matt Rogers, who was a special assistant reported to me on the Recovery Act. The issue there, I believe, 

was that the career employee—what the Department of Energy 

tries to do is to get as favorable a bargain or an agreement that 

protects the assets of the—— 

Mr. TERRY. Where did you get the information, that was what 

the employee—— 

Mr. CHU. From Matt Rogers. 

Mr. TERRY. From Matt Rogers. Does Matt Rogers report and 

communicate to the White House during this time period? 

Mr. CHU. No, he reports to me. 

Mr. TERRY. So where would Matt Rogers get the information that 

the equity is forthcoming and that they will get the loan? 

Mr. CHU. My understanding, since he was in charge of assisting 

in the Recovery Act in the Department of Energy, that was his role 

in the Department of Energy, as a special assistant to me, he was 

certainly in communication with the loan people. 

Mr. TERRY. So his understanding that the loan, that they will get 

the loan, came from you? 

Mr. CHU. No, no. 

Mr. TERRY. To Matt Rogers. 

Mr. CHU. It goes the opposite. 

Mr. TERRY. This seems to be a little circular. He’s the one supposed to be telling you, but I can’t figure out who’s telling Matt 

Rogers—— 

Mr. CHU. Exactly. 

Mr. TERRY [continuing]. That they’re going to get the loan and 

that they have the equity? 

Mr. CHU. No, no, excuse me. Matt Rogers is overseeing the Recovery Act, which included the loan program. I was not communicating directly with the people in the loan program. I communicated with Matt Rogers, who then talks to people in the loan program. 

Mr. TERRY. So that it was the people in the loan program that 

told Matt Rogers that the equity is coming and they will get the 

loan? 

Mr. CHU. Well, I’m not—it’s the people in the loan program—I 

think my—again, what is happening is this person in the loan, who 

is—the career folk in the loan program are always trying to get the 

best position possible for the Federal Government. 

Mr. TERRY. I’m not sure that answers the question, but my time 

is up. 

Mr. STEARNS. The gentleman’s time has expired. 

The gentleman from Pennsylvania, Mr. Murphy, is recognized for 

5 minutes. 

Mr. MURPHY. Thank you, Mr. Chairman. 

94 

Mr. Secretary, on June 27th of this year, you were briefed in advance of your meeting with President Obama by advisers on 

Solyndra. Were you specifically briefed about the company’s financial health and were you told the company was on a path to bankruptcy at that time? 

Mr. CHU. When was the date again? 

Mr. MURPHY. June 27, 2001, before you met with—— 

Mr. CHU. 2011? 

Mr. MURPHY. Of 2011, yes, before you met with the President, 

sir, were you briefed about the financial problems of the company 

on a path to bankruptcy? 

Mr. CHU. I certain—by around that time, I was certainly aware 

of the fact that—— 

Mr. MURPHY. They were going to go bankrupt? 

Mr. CHU. That they were—well, that they were in deep trouble. 

Mr. MURPHY. Did you speak with the President about that time 

about the status of Solyndra’s financial problems. 

Mr. CHU. No, I didn’t. When you meet with the President, it’s not 

about a particular transaction. It was actually a much higher level 

discussion about—— 

Mr. MURPHY. I appreciate that. Let me ask a little bit more, 

then. 

Mr. Secretary, when Solyndra came to DOE in the fall of 2010 

and explained it was running out of cash, did DOE consider at anytime just letting the company go bankrupt? 

Mr. CHU. I think this is always something that we consider if it 

looks that—— 

Mr. MURPHY. So that was an option? That was an option? 

Mr. CHU. It is—every time we’re disbursing funds, if a company, 

if any company looks like it has a high probability of going into 

bankruptcy, you—one goes into another mode where you say, what 

will be the best pay for—— 

Mr. MURPHY. Right. As the law said, the original 2005 bill said 

that you shouldn’t be giving loans to companies that appear they 

can’t pay back the principal and interest, you’re aware of that, that 

part? 

Mr. CHU. Absolutely. 

Mr. MURPHY. OK. Now, yet you made a decision, even though 

you’re aware that’s an option, just let them go bankrupt, you made 

a decision to move forward anyway? 

Mr. CHU. Sorry—— 

Mr. MURPHY. Was there a specific wording in any law that says 

you don’t have to follow the law that says you can’t give the money 

if they can’t make it? 

Mr. CHU. If you’re talking about in the original loan, we made 

a decision to fund Solyndra. The credit subsidy score would reflect 

the probability of the loan. 

Mr. MURPHY. I understand, but you can’t give the money if 

they’re not going to pay it back. 

Mr. CHU. Pardon? 

Mr. MURPHY. Yes, but the law says you can’t give them money 

if they’re not going to pay it back, and I’m asking is there some 

law you’re citing that gave you permission to override the law that 

says you don’t have to—— 

95 

Mr. CHU. We’re not—we weren’t going against the law. The law 

said—— 

Mr. MURPHY. Well, I hope—sir, I’m asking if you can cite something for me and get back to us to show us where in the law it says 

you don’t have to pay attention to the law? That’s what I want to 

know. Sir, let me ask you this. 

Mr. CHU. We paid very close attention to the law. The law says 

that we can only make a loan where there’s a likelihood of being 

paid back. 

Mr. MURPHY. I understand, but it sounds like you’re saying a 

subjective decision was here—— 

Mr. CHU. No. 

Mr. MURPHY. Based upon things you’re citing about China and 

solar power, et cetera. But let me ask about this. 

So you testified, quote, I approved restructuring of the loan guaranteed to give taxpayers the best chance of recovery; you just made 

a decision here. Did you weigh in with Jonathan Silver and tell 

him to restructure the loan? 

Mr. CHU. No. 

Mr. MURPHY. Now, on September 14th, I asked Mr. Silver during 

our hearing about the decision to restructure. I said, and I quote, 

did the Secretary of Energy have anything to do with this decision? 

And he said, not to my knowledge. So my question is, Silver says 

you were not, you say you were involved with the decision, who’s 

telling the truth here? 

Mr. CHU. Sorry, the decision to restructure was something the 

loan program developed and brought to me for approval, and so 

that’s the precise nature of what was going on. 

Going back to making a loan and thinking that there is a high 

chance of recovery or a reasonable prospect of recovery, which is 

what the law states, I have to say that given the credit subsidy 

risk, the loan loss reserve for this particular loan was 7.8 percent. 

That’s roughly speaking, it gives us 7.8 percent probability that the 

loan will get into trouble. 

Mr. MURPHY. 7.8 percent. 

Mr. CHU. 7.8 percent, so that’s a high likelihood—— 

Mr. MURPHY. We have Treasury, OMB, people from Solyndra, 

and people from the White House who said the government is a 

crappy venture capitalist, so that sounds like a number of people 

are sending information on to you, but we have established in my 

previous question of you, I’m not sure that even your chief of staff 

has told you about meetings that were taking place. 

Now, sir, you’re a scientist and I’m also trained in science, and 

one of the things that we are trained in is do not avoid, in fact seek 

out information which may contradict your paradigms and your 

premises, that’s important, that’s how science moves forward in 

this. But here you’re aware now the Treasury Department suggests 

that DOE get a legal opinion on the restructuring of this loan, and 

you’re aware that other Federal agencies are recommending this, 

but now what puzzles me, sir, is it sounds like you’ve acknowledged 

that this is a subjective decision for other reasons, even though the 

law says you can’t give money if they can’t pay it back, and with 

this subjective decision and with your background in science, and 

even though staff around you knew this, you’re saying that you 

96 

didn’t have this information or you didn’t seek out this information 

to make that decision? I don’t understand what goes into subjective 

decision then. 

Mr. CHU. First let me go back to the determination if the OMB, 

which is very independent of us, makes a credit subsidy determination and comes up with 7.8 percent, that’s effectively saying—— 

Mr. MURPHY. But I’m saying the Treasury said you should have 

consulted—— 

Mr. CHU. Oh, you’re—— 

Mr. MURPHY. Get a legal opinion on the subordination. 

Mr. CHU [continuing]. Citing two issues, one is when we make 

the loan in the first place, and we would not make a loan if there 

was not a reasonable chance of being paid back. 

Mr. MURPHY. Sir, but other people are telling you that there’s a 

strong chance you won’t get paid back, even a memo that says this 

company is going to go bankrupt, the liquidity is gone by September 2011, and that’s when they did. That’s more than a 7.8 percent chance. My concern is that with this, you had a lot of information coming at you. Even though the law says you cannot give 

money if they’re not going to pay it back, but you made a subjective 

decision which I think runs against the law. 

I yield back. 

Mr. STEARNS. The gentleman’s time has expired. Just caution all 

members, I think votes are coming up. I would like to get through 

the second round, and so I’m going to have to hold all of you to 

your 5 minutes. 

Mr. Waxman. 

OK, I’ll take the next one. Mr. Waxman will take it later. 

Dr. Burgess is recognized for 5 minutes. 

Mr. BURGESS. I thank the chairman. 

Mr. Secretary, again, thank you for your indulgence today. I’m 

going to ask you a series of questions that pertain to tabs 32, 34, 

and 35 in your binder, those are a series of emails, and I’m just 

telling you that for reference. I’ll give you the background information. 

First off, there was the inability to proceed with the IPO from 

Solyndra, and Chris Gronet, former CEO of Solyndra, suggested 

that they go to the Bank of Washington. I guess that means the 

Federal Government. 

Mr. CHU. Excuse me, I’ve lost my train of thought because I was 

looking for tabs 32, 34, and 35. I don’t seem to have them. 

Mr. BURGESS. We’ll get them to you. The tabs themselves—I’ll 

give you the information. But so Bob Peck was contacted by Secretary Silver, Bob Peck being the commissioner of public buildings 

of the GSA, connecting him with the CEO, former CEO of 

Solyndra, Chris Gronet, asking him to meet with Solyndra, Silver, 

Secretary Silver said he would personally appreciate it. Now, did 

you approve of that exchange? 

Ms. DEGETTE. Mr. Chairman, I would ask that the Secretary be 

given these documents—— 

Mr. BURGESS. The Secretary has the documents. 

Ms. DEGETTE [continuing]. Before he’s expected to answer. 

Mr. STEARNS. The tab was pointed out to the Secretary, the staff 

has shown it, so—— 

97 

Mr. CHU. OK. 

Mr. STEARNS. Continue Dr. Burgess. 

Mr. CHU. It turns out to be tab A, so let me catch up. And it was 

not 32, 34, and 35. 

Mr. STEARNS. All right, I understand. 

Mr. CHU. So now, sir, can you continue with the question? 

Mr. BURGESS. Here’s the deal. Secretary Silver connected Chris 

Gronet from former CEO of Solyndra with Bob Peck, the commissioner of public buildings of the General Services Administration. 

They’ve lost the ability to do the IPO. They want to come to the 

Bank of Washington. So was it appropriate for Secretary Silver to 

connect those two entities, the CEO of Solyndra and the head of 

the General Services Administration public buildings? 

Mr. CHU. Well, this is the first time I’ve been made aware of 

this—I’ve seen this email, and so—— 

Mr. BURGESS. Well, I was going to ask you, did you speak with 

anyone at General Services Administration or Department of Defense—— 

Mr. CHU. No. 

Mr. BURGESS [continuing]. About purchasing Solyndra panels. 

Mr. CHU. Did I? No. 

Mr. BURGESS. And did you speak to anyone at the White House 

about this? 

Mr. CHU. No. 

Mr. BURGESS. OK. Then, following, on August 10th, Tom Baruch, 

the former member of one of the venture capitalists and an investor in Solyndra, emailed one of his colleagues, quote, getting business from Uncle Sam is a principal element of Solyndra’s energy 

strategy. When President Obama visited Solyndra, Chris Gronet 

spoke very openly to the President about the need for installation 

of Solyndra’s rooftop solar on U.S. Government buildings. I heard 

the President actually promise Chris that he would look into it 

when he returned to Washington. 

Do you know about these conversations and do you know of any 

follow-up conversation that was then contained within that? 

Mr. CHU. No, I didn’t know about that conversation, and certainly the President—— 

Mr. BURGESS. Can you see why the committee would be interested in the follow—if that conversation occurred and the followup? 

Mr. CHU. Well, certainly, first, the President didn’t talk to me 

about Solyndra regarding government installations, things of that 

nature, and I was not aware of the then CEO of the company 

Solyndra talking to the President regarding he felt the need to 

have government buildings install his panels. I was not aware of 

that. 

Mr. BURGESS. OK, so there was—you were aware, then, that 

the—— 

Mr. CHU. I was not aware of that conversation. 

Mr. BURGESS. But you were aware that there was at least a business model to pursue the funding from the Bank of Washington 

and getting a government purchase of these panels? 

Mr. CHU. No. These details of these 38 loan transactions are— 

I am not aware of. What I view my job is to do is to set in the DeVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
98 

partment of Energy those measures that guarantee that we make 

the best judgments possible when we decide that we make a loan 

and that it has a probability of being paid back. 

Mr. BURGESS. I appreciate that. I’ll stipulate that you had the 

best of intentions. I just want to follow up on what Mr. Barton 

ended his questioning. I mean, it was his opinion that the part of 

the Energy Policy Act that prevented subordination was, in fact, 

violated, and that is my opinion as well, and I rather suspect that’s 

a fairly broadly held opinion across from sea to shining sea today. 

So given that fact, do you feel you owe it to your boss a discussion 

with him in light of the fact that it appears I may have broken the 

law? 

Mr. CHU. No, I—— 

Mr. BURGESS. That you should not continue in your employment? 

Mr. CHU. Respectfully, our legal staff, our General Counsel’s Office, Susan Richardson, others, the OMB looked at what our decision, our pending decision would be, did not object to it, and so I 

would say I would rather take the opposite opinion, that when you 

have independent people looking at this loan outside the Department of Energy as well as a very thorough discussion within the 

Department of Energy, it is not—— 

Mr. BURGESS. But if you had the opportunity to make the same 

decision again today, say, with Beacon, you wouldn’t make it, 

would you? 

Mr. CHU. Well, what—let me step back and say that, again, 

should—— 

Mr. STEARNS. The gentleman’s time has expired, but you can 

complete your answer. 

Mr. CHU. OK, thank you. The issue is, should there be a stress 

in a loan going forward. We—I would love to work with this committee and with Congress in how to guarantee that we can recover 

as much as possible. 

Mr. STEARNS. OK. 

The gentleman from California, Mr. Waxman, is recognized for 5 

minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Well, on that last point, if you don’t have the flexibility to deal 

with a loan that you want repaid, you’re just going to pull the rug 

out, and then the money’s lost for sure. So sometimes allowing the 

subordination will hopefully save the situation. There ought to be 

that flexibility. 

Mr. CHU. You need some flexibility once a loan has become 

stressed, and I agree absolutely with you, and this happens all the 

time in the private sector, and to protect the taxpayer interests, 

you need some flexibility to guarantee as much pay back as possible. 

Mr. WAXMAN. Well, the Republicans have accused you of acting 

illegally in subordinating the loan, but I just don’t think that’s a 

case they can sustain. Your general counsel signed off on the subordination, and when we asked a former general counsel of her opinion, general counsel at the Department of Energy, her opinion, she 

agreed it was lawful. 

One of my colleagues earlier said, well we ought to change the 

law, that’s what we thought we were doing. That’s a good lesson 

99 

for Members of Congress to take heart. If you think you know what 

you’re doing, you better be sure you’ve done it because that isn’t 

what the law provides. 

The Republicans accused you of granting the Solyndra loan to 

benefit a campaign donor, George Kaiser, but the record before this 

committee shows you acted on the merits. Steve Iskowitz, a Bush 

appointee, who was your chief financial officer, said the process 

was never compromised. David Frantz, who was a career official, 

who was also the director of the loan office, told us he did not even 

know who Mr. Kaiser was. Matt Rogers, who was your senior adviser on these loans, told us he had no idea Mr. Kaiser had given 

any political contributions and his name never came up. You told 

us today that you also did not know Mr. Kaiser had contributed to 

President Obama until you read about it in the newspapers after 

the fact. 

So that should put to rest that allegation, that you were influenced by political considerations. 

The only other allegation that remains is that someone may have 

asked Solyndra to delay announcing a plant closure for a few days 

until after the 2010 election. Now, I don’t condone this action if it’s 

true, but let’s keep this in perspective: Asking Solyndra to delay its 

announcement did not put any taxpayer dollars at risk. It didn’t 

change Solyndra’s business decisions. It had nothing to do with any 

of the loan guarantee decisions. It’s all that our committee has 

found after reviewing hundreds of thousands of pages of documents 

and interviewing countless witnesses, and it’s really small potatoes. 

Now, you’ve been here this whole day, and you’ve been very 

forthright in answering a lot of questions, and there’s been a lot 

of posturing by the Republicans who think this is a scandal. We 

have lost the money, it’s unfortunate, but there’s no scandal there, 

there’s nothing there. 

I want to put this in perspective, Dr. Chu. You’ve been trying to 

move our Nation to a clean energy economy, and that’s essential 

to protect American families from fires and droughts and floods 

and other extreme weather that climate change will bring, and it’s 

essential to our future economic growth. As you’ve repeatedly said, 

we want to be selling the clean energy technologies of the future, 

not buying them from the Chinese. 

Now, on the other side, my Republican colleagues on this committee have been trying to block these efforts every step of the way. 

Republicans in Congress and their allies in the coal and oil industry oppose efforts to put a price on carbon pollution. They oppose 

funding research into new clean energy technologies. They oppose 

investments in clean energy companies, which, like Solyndra, 

would produce new power, but we hope, unlike Solyndra, will be 

successful. 

You’re on the right side of this debate, and I think you are on 

the right side of history. The Republicans are on the wrong side, 

and I think what they’re doing is leading us astray. But my message to my colleagues is to stop dancing on Solyndra’s grave. You’re 

trying to—they’re trying to manufacture a scandal where there is 

none. This is a distraction from the work that we should be doing. 

What Congress ought to be spending its time doing is trying to 

get Americans jobs and back to work and get the economy moving 

100 

again. What Congress should be doing in energy policy is to encourage development of new energy sources so that we don’t have to 

rely on oil and coal and nuclear so we can have a more diversified 

portfolio, we can be more independent as a Nation, we can produce 

greater economic benefit, and we can stop the terrible consequences 

of global warming. 

So I thank you for all that you’ve done. I do not see that you’ve 

done anything wrong. If anything, you’re trying to do exactly the 

right thing, and I commend you for it. 

Mr. STEARNS. Thank you. 

The gentleman’s time has expired. 

Mr. WAXMAN. Did you want to respond? 

Mr. STEARNS. Sure, yes, go ahead. 

Mr. CHU. Can I make a comment? 

Mr. STEARNS. Sure, absolutely. Go ahead. 

Mr. CHU. First, let me just say, thank you for those comments. 

Many, many years ago, it seems forever now, I had left Stanford 

University to head the directorship of Lawrence Berkeley Lab because I felt that we were running—if we continued—we in the 

United States and the world, if we continued on this path, we 

would, there will be serious risks in climate change, and then as 

I got into this and began to encourage the folks at Lawrence Berkeley Lab to look at renewable energy, I began to also see an incredible economic opportunity that is in the direct sweet spot of the 

best that America has to offer, our research and development and 

our entrepreneurial system and the ability to manufacture things 

like high tech—— 

Mr. STEARNS. Mr. Secretary, I need you to wrap up. We’ve got 

a vote, and we also want to get a couple members in. 

Mr. CHU. So I would agree with you, this has a lot to do with 

America’s economic prosperity and future as well as the legacy we 

leave to our children. 

Mr. WAXMAN. Thank you. 

Mr. STEARNS. The gentlelady from Tennessee is recognized for 5 

minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

And I have to tell you, Mr. Secretary, it’s really troublesome to 

me the number of times I’ve heard you say today that this is the 

first time you’ve been made aware of something or that you know 

something now, you didn’t know it then, so it leads me to believe 

that maybe you had some staff that was kind of keeping you out 

of the loop on some decisions. 

Let me ask you this: Did anyone from DOE talk to anyone from 

the White House about restructuring or subordination? Was there 

any communication between DOE and the White House about the 

restructuring and the subordination of that loan? 

Mr. CHU. Certainly at the time that we were discussing this, I 

was aware of no communication whatsoever with the White House. 

Mrs. BLACKBURN. Are you aware of any communication now? 

Mr. CHU. I was made aware of it as of yesterday. 

Mrs. BLACKBURN. That there was communication between DOE 

and the White House on the restructuring and the subordination? 

Mr. CHU. Well, there are some communications, again, about the 

restructuring. This is something which is the responsibility of the 

101 

Department of Energy, and again, we were looking out for the taxpayers. 

Mrs. BLACKBURN. Would you like to provide us with the information of who that communication was between? 

Mr. CHU. Yes, I will. 

Mrs. BLACKBURN. Thank you. 

Did the White House approve of or sign off on in any way, did 

they approve of or sign off on the restructuring and the subordination of this loan? 

Mr. CHU. Again, my understanding is that this was within the 

responsibility of the Department of Energy, it was our responsibility within the interpretation—— 

Mrs. BLACKBURN. Mr. Secretary, let me ask it another way. If 

you all had communication and the White House was made aware 

that you were going to subordinate this loan, then—— 

Mr. CHU. Oh, absolutely—— 

Mrs. BLACKBURN. Then did they sign off on this? 

Mr. CHU. Well, as I said before, the OMB looked, knew what we 

were doing, and they went ahead and said, they said—they did not 

say, no, you cannot do this. 

Mrs. BLACKBURN. Anybody in the White House other than OMB? 

Mr. CHU. Other than OMB concerning what? 

Mrs. BLACKBURN. The subordination or the restructuring. 

Mr. CHU. There may have been other opinions, and we can get 

that information back to you, but I’m saying—— 

Mrs. BLACKBURN. I would like to know the names of anyone in 

the White House that was involved in that process. 

Mr. CHU. Right. 

Mrs. BLACKBURN. Let’s go back to the board observer. Did you 

approve the board observer, or did anyone from the White House 

or the Vice President’s Office, did anyone else have input into who 

that board observer would be? 

Mr. CHU. I didn’t approve of the choice of the board observer. 

Mrs. BLACKBURN. Who approved the choice? 

Mr. CHU. I would imagine it was part of the loan program and 

Jonathan Silver. 

Mrs. BLACKBURN. OK. Could you provide that information to me? 

Mr. CHU. Sure. 

Mrs. BLACKBURN. OK. Did that board observer report to you on 

the interactions and the conversations and the contents of the 

meetings? 

Mr. CHU. No, that board observer was there. It’s an observer so 

that we could have a closer eye on the events that were happening 

in Solyndra. 

Mrs. BLACKBURN. Correct, OK. 

Mr. CHU. As part of our due diligence in moving forward with 

the loan. 

Mrs. BLACKBURN. Sir, you did not appoint them until after you 

had restructured that loan, that was my understanding. 

Mr. CHU. That was part of the condition of restructuring, that we 

needed—— 

Mrs. BLACKBURN. OK. Now who did they report to of their interactions? 

102 

Mr. CHU. I would say that the board observer would be reporting 

to the loan program. 

Mrs. BLACKBURN. To the loan program, to Mr. Silver? 

Mr. CHU. Well, I can get back to you on exactly, but—— 

Mrs. BLACKBURN. OK. That would be great. Did the board observer inform you or anyone at DOE of the impending bankruptcy 

filing? 

Mrs. BLACKBURN. The—well, as I said, the board observer doesn’t 

report to me; he reports to someone in the loan program. And certainly as the events rapidly changed, both the board observer and 

the board of Solyndra were notified of a rapidly changing condition 

by the management of Solyndra and—— 

Mrs. BLACKBURN. Did anyone from DOE report to either the loan 

program, Treasury, OMB, the White House or DOJ that there 

would be an impending bankruptcy filing from Solyndra? 

Mr. CHU. I think by that time, this is very late in the game, 

when, especially when Solyndra the company in a board call meeting said that they’re making different projections of when they 

would go into the black. 

Mrs. BLACKBURN. OK. Well, I find it—and I think you need to 

realize our frustration with having people from DOE or from 

Solyndra come up here as late as July and saying things were fine 

and then to know that there was a board observer that had been 

approved by DOE that was sitting in on those meetings that may 

know, may have known that things were not going well, and yet 

we were being given different information. I see a certain amount 

of—well, let me just say that is very troublesome to me, and I 

would hope that it is very troublesome to you. 

Mr. CHU. Well, my—as I’ve been made aware of this, both, as I 

said before, the board observer with the board were equally surprised, and the fact that we have a board observer and the board 

itself being surprised that very suddenly the projections of the company Solyndra to the board—— 

Mrs. BLACKBURN. Then who was choosing to keep us all in the 

dark? 

Mr. CHU. Well, look, I’m not going to speculate on that. I’m only 

just saying that both the board and the board observer learned 

about these events together. 

Mr. WAXMAN. Point of order, Mr. Chairman. 

Mr. STEARNS. Yes, point of order. 

Mr. WAXMAN. Mr. Chairman, the Secretary has been here for 

over 4 hours—— 

Mr. STEARNS. I think you have got a good point there. 

Mr. WAXMAN. We have a vote on the House floor that is going 

to take us 45 minutes. 

Mr. STEARNS. I agree. All right, the gentlelady’s time—— 

Mr. WAXMAN. Just a minute, Mr. Chairman. 

Mr. STEARNS. Sure. 

Mr. WAXMAN. The Secretary has been here. I think it’s abusive 

to have the Secretary, any Cabinet-level Secretary here and then 

make him wait another 45 minutes to have members ask a second 

round. There’s no entitlement to a second round of questioning. 

Mr. STEARNS. All right. 

103 

Mr. WAXMAN. And I think we ought to let the witness go about 

his job. 

Mr. STEARNS. All right. 

Mr. WAXMAN. And adjourn this meeting. 

Mr. STEARNS. All right, I appreciate your opinion. 

The gentlelady’s time has expired, and I think you finished answering her question. 

We want to complete the second round for those members that 

are interested, so, Mr. Secretary, we are going to take a half-hour 

break, come back at 2:45. 

Mr. WAXMAN. Mr. Chairman, I move the committee do now adjourn. 

Mr. STEARNS. The gentleman has a motion on the floor that the 

committee adjourn. 

Is there objection? 

Mr. SCALISE. Objection. 

Mrs. BLACKBURN. Objection. 

Mr. STEARNS. Objection. So we’ll call the roll. Is that correct? 

While we’re waiting for the clerk, Mr. Secretary, can we, if we adjourn for 2:45 and come back, could you—— 

Mr. WAXMAN. I guess the question to the Secretary, it’s up to 

you, but it seems to me you’ve done more than you could possibly 

do to answer every question. The questions are getting to be quite 

repetitive, and I don’t think it’s fair to the Secretary. 

Mr. STEARNS. OK, that’s your opinion. 

Mr. Secretary, we have a few members who want to come back 

right after, it would be less than a half hour. Can you stay for 

that? 

Ms. DEGETTE. No, it won’t be. 

Mr. Chairman, it’s going to be 45 minutes. 

Mr. STEARNS. Are you willing to come back or stay for a second 

round? 

Mr. WAXMAN. Mr. Chairman, is the Secretary willing to respond 

in writing to those members that have additional questions? 

Mr. STEARNS. No, I think we have a hearing here, we want to 

continue. 

Are you receptive to 30 minutes? 

Mr. CHU. Mr. Chairman, certainly, you know, I really have nothing to hide, but I think Mr. Waxman is correct; these questions are 

going over and over and over again of old territory. 

Mr. STEARNS. Oh, I understand. 

Mr. CHU. If they want to continue that—— 

Mr. STEARNS. Well, I think we have about—— 

Mr. SCALISE. Mr. Chairman, I have some questions that haven’t 

been asked, unlike some who had the opportunity to have a second 

round, I haven’t. I would appreciate that opportunity. 

Mr. STEARNS. Normally in an oversight committee, we have at 

least two rounds, so I’m asking you to consider—— 

Ms. DEGETTE. No. 

Mr. STEARNS [continuing]. To come back or just to delay for another less than 30 minutes, we’ll be back and we have three or four 

members that will finish up and then we’ll wrap up. So with your 

indulgence, would that be OK? Could you accept that? Good, we’ll 

do that. 

104 

Mr. WAXMAN. Well, Mr. Chairman, I don’t—you are again being 

abusive of the witness. 

Mr. STEARNS. We have a motion on the floor, but as I understand 

it—— 

Mr. WAXMAN. Is this the only thing you have to do today, Mr. 

Secretary? 

Mr. CHU. No, I have other, I have other business, of course. 

Ms. DEGETTE. Mr. Chairman—— 

Mr. WAXMAN. So you’ve been asked about all these issues. 

Ms. DEGETTE. As a compromise, I would like to suggest a compromise. 

Mr. STEARNS. OK. 

Ms. DEGETTE. The compromise I would like to suggest is that we 

release the Secretary no later than 3:30 this afternoon. So we can 

go vote, we can come back. 

Mr. STEARNS. I think that’s reasonable. 

Ms. DEGETTE. Thank you, let’s do that. 

Mr. STEARNS. Let’s do that. We’ll do that. 

And as I understand this motion to adjourn, and we object to it, 

I think is—— 

Mr. WAXMAN. Mr. Chairman, I’ll withdraw the motion. 

Mr. STEARNS. OK. So we’re going to adjourn—it’s temporary adjourn, and—recess, we’re going to temporarily recess, and we’ll be 

back here in less than 30 minutes at 2:45, and we’ll try to get you 

out of here at 3:30. 

[Recess.] 

Mr. STEARNS. The subcommittee will come to order, and we will 

resume our second round of questioning. 

And the gentleman from California is recognized for 5 minutes. 

Mr. Secretary, are you ready? 

Mr. CHU. Yes, I am. 

Mr. STEARNS. Thank you for coming back and offering us the opportunity. 

Mr. Bilbray, you are recognized for 5 minutes. 

Mr. BILBRAY. Thank you. 

For the record, Mr. Secretary, I supported you when you were 

appointed, and I support you now. I think you have the greatest 

potential to fulfill the promise of the Energy Department that has 

been so lacking for so long, and because I feel that you have a basis 

in science, not in politics. So I just wanted to say that for the 

record. 

I do have a concern, though, as I say that, that foot for foot, 

square foot by square foot, you think that the three basic divisions 

of photovoltaics are created equal. Because there must be some information out there that is not available to the general public. You 

know, there are distinct advantages, historically, with poly and 

mono over thin film, not just in its initial performance but in its 

longevity. 

And that is a big reason why I was very suspect when I saw 

Solyndra propose a 20-year warranty on a technology that has only 

been able to really deliver a 4- or 5-year guarantee. And you may 

not agree, but I think you would understand why I would have 

those concerns. 

105 

Mr. CHU. Well, if you would allow me to explain, if you look at 

the thin-film technologies, there are two thin-film technologies— 

cad telluride, what we refer to as CIGS—and how does it stack up 

against both single crystal silicon and polycrystalline silicon. 

Mr. BILBRAY. Well, let me just stop and say, you still say that 

you think the three are equal and that there is not—the thin film 

was not a more risky venture as opposed to the other two? 

Mr. CHU. I think that thin film has great promise. And this is 

the reason why General Electric today is investing in a solar—— 

Mr. BILBRAY. OK. I understand General Electric. We also keep 

referring to China, and you know exactly where they have laid 

their bets. 

My biggest thing is that I worry that the way this moved was 

moved not by criminal intent but through naivete or wishful thinking that all solar energy was created equally and that anything 

green must be good. And I think we have seen the mistake of that 

with the application 15 years ago of ethanol, and now we have seen 

the problems that that has created, both environmentally and economically. And my concern was this naive, almost religious approach that if it is green, it must be good and it is going to work 

out. 

But that aside, you know, my concern is that when we approach 

the technologies, was the concept that because the Chinese weren’t 

going at this that we could have a quantum leap in technology that 

is so far ahead of where we have been before, that the Chinese 

would be left behind because of our research, and this breakthrough would make a technology that they had basically left behind themselves, weren’t willing to invest in, that we could jump 

ahead of the Chinese at that time? 

Mr. CHU. If you would allow me to finish, what I am trying to 

say here is that in the thin-film technology, like cad telluride, there 

are certain results of efficiency in the laboratory of companies and 

then there are certain production efficiencies. When they started in 

production, they were getting roughly 11 percent efficiency. Silicon 

was higher; silicon was roughly 14 or 15 percent efficiency. They 

both have—so what you had in silicon is, you had less, what I 

would call, headroom to improve the technology. 

Now, since we have started in cad telluride, as an example, companies are now achieving results and beginning to go into production where they are expecting something on the scale of 14 percent 

efficiency. That is a huge improvement—— 

Mr. BILBRAY. I am sorry to interrupt. But, historically, the advantage of thin film was a lower cost even though it was, like, 15 

to 20 percent less efficient initially and had a higher degrading 

level in the first year of application. 

Mr. CHU. Well, what is happening is, it is certainly much lower 

cost, and in the instance of cad telluride it is actually beginning to 

rapidly approach the efficiency of silicon. And so this is a good 

thing. This—— 

Mr. BILBRAY. When you say ‘‘rapidly approaching,’’ wait a 

minute, you know, we are looking at 20 percent historically. We 

have closed that to 10 percent, 5 percent? 

Mr. CHU. The dominant silicon being sold today is what is called 

poly silicon, and—— 

106 

Mr. BILBRAY. Right. 

Mr. CHU [continuing]. That is roughly about 15 percent efficiency. And, as I said, cad telluride started at 11 percent, and they 

are making great advances in the efficiency. And so—— 

Mr. BILBRAY. OK. Getting back to the—you were thinking, 

though, that this would be a bet to be able to have a quantum leap 

so we could jump over where the Chinese were going? 

Mr. CHU. They—sorry. We weren’t making bets. There were companies that were investing in this and applied for a loan. And we 

think, going forward, that cad telluride, some of these thin-film 

technologies, can be very competitive. 

Mr. BILBRAY. OK. I just need to interrupt because of my time. 

Because my concern is this issue, that we can jump so far ahead 

that we will be able to—production, when we are paying twice the 

price for electricity as China, when they can get the permits, when 

they have the access. You know, we talk about wind energy. They 

have 98 percent of the rare earth, and we haven’t opened up our 

public lands for rare earth so we could produce it domestically, so 

we would have to buy the rare earth because of the permanent 

magnet technology. All of these things are tied together. 

And I would like to see the Energy Department be able to talk 

to our colleagues; that if they want to see wind generation, then 

they have to change regulations to allow access to rare earth. If 

they want to talk about these technologies being made available, 

they have to be able to make it legal for us to produce it competitively. 

My only problem is, if we make this quantum leap, we spend all 

the taxpayers’ money to develop the technology, the Chinese will 

take that technology and outproduce us because of our government 

regulation obstructionism. 

I yield back. 

Mr. STEARNS. The gentleman’s time has expired. 

And I recognize the gentleman from Georgia for 5 minutes. 

Mr. GINGREY. Dr. Chu, Mr. Secretary, I want to associate myself 

with the initial remarks my colleague from California just made in 

regard to you being in the right position at the right time. 

You know, I do question, though, your judgment in regard to the 

restructuring of the loan. I feel that that essentially was throwing 

good money after bad. I think the decision should have been made 

to cut our losses, advance no further loan proceeds to the company, 

and try to recover as much of the $530 million under a structured 

bankruptcy sale of assets for the taxpayer. 

You know, in fact, the investors that were coming behind with 

the $75 million, I am sure many of those were involved in the original billion-dollar investment to start the company up, and so they 

were in the same kind of position. 

But be that as it may, I just think that maybe the advice from 

the Justice Department over the question of whether or not it was 

legal to restructure and put the taxpayer in a secondary position, 

you would have gotten the right answer, and that would have 

avoided that trap. 

The ranking member of the overall committee said earlier before 

we broke that, you know, it is time quit dancing on the grave of 

Solyndra, and, you know, we are talking about small potatoes, it 

107 

is a non-issue. In fact, the President, himself, was quoted as saying, well, hey, you win some, you lose some. I made a football analogy in my first round of questions, and you win some, you lose 

some in football. But in a situation like this, you know, you don’t 

lose $535 million and maybe win a $15 million investment. The 

balance is just not there. And, quite honestly, half a billion dollars, 

to most of us, is not small potatoes. 

Let me just ask you a few questions in the remaining time that 

I have left. And this is about the issue of the second loan guarantee 

application, so-called Fab 3. I am not sure many of us even realized 

until here lately that there was the possibility of Solyndra getting 

yet another loan. 

When were you first made aware of Solyndra’s pursuit of a second loan guarantee? 

Mr. CHU. Recently. But, just for the record, when we have an announcement of application for loans, companies apply for a loan. 

That doesn’t mean the company was going to get a loan. And, in 

fact—— 

Mr. GINGREY. Well, Mr. Secretary, I understand that. Of course, 

in January of 2010, executives from Solyndra appear to have met 

with DOE officials, including Mr. Jonathan Silver, gone now, and 

Matt Rogers, on several occasions to discuss the idea. And you were 

aware of those meetings—were you aware of those meetings? 

Mr. CHU. I believe I was aware of an application for a third fab 

plant, but that really, as you know, progressed nowhere. 

Mr. GINGREY. Right. Right. So is it safe to say that you did have 

conversations with Jonathan Silver and/or Matt Rogers before or 

after these meetings regarding the second loan? 

Mr. CHU. No. In an—I am not informed of applications for all 

loans. There are many, many applications. When I am brought in 

is when it comes time to approve the loan, because that is my responsibility. Many applications go into the Department and then 

the loan people determine that they are not going get a loan. 

Mr. GINGREY. Yes. Well, here again, some of the other folks, the 

band of brothers that you fell in with, inadvertently I guess we 

could say. 

According to one Solyndra executive, on February 9th, another 

meeting with Solyndra executives, Jonathan Silver appeared to acknowledge that they would, quote, ‘‘likely move to the due diligence 

stage when he directly engaged in a discussion of the potential political challenges that a second Solyndra loan guarantee would 

present.’’ And that is the end of his quote. 

He then asked for Solyndra’s assistance in crafting answers to 

four questions that he anticipated receiving about this second loan 

guarantee. One of these questions was why DOE should give additional loan guarantees to a company that had not yet achieved significant milestones of success with the first loan. 

Did Jonathan Silver ever present to you reasons why he thinks 

Solyndra should get a second loan guarantee, when there are, as 

you point out, a lot of other companies desperate wanting—renewable energy companies, with good plans, wanting to have a first 

bite at the apple, and here he was sort of pushing for Solyndra to 

get a second bite of the apple? What did he say to you? 

108 

Mr. CHU. Well, I am not sure he was pushing to get a second bite 

of the apple. What I do know is that this did not come before me 

to the point where there was serious consideration to give Solyndra 

the second loan. 

Mr. GINGREY. And they subsequently did not get that second 

loan. 

Mr. CHU. We did not. 

Mr. GINGREY. Right. Thank you, Mr. Secretary. 

And, Mr. Chairman, I will yield back. 

Mr. STEARNS. The gentleman’s time has expired. 

The gentleman from Louisiana, Mr. Scalise, is recognized for 5 

minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate you letting 

us have a second round of questions. 

And I disagree with the comment you made earlier, that a lot of 

these are redundant questions that are being asked. Because, 

frankly, I think there a lot of questions that have been asked that 

we haven’t been able to get answers to. 

In fact, when the chairman, Mr. Stearns, at the beginning of the 

second round, asked you some very specific questions about other 

loans out there, what other loans are in trouble, I am surprised 

that you can’t give an answer to that question. 

Can you get us, this committee, an answer to that question of 

what other loans are in trouble right now? 

Mr. CHU. As I said before, we watch all the loans. We, in learning from the experience of Solyndra, we are now watching the 

loans at a minimum of every month and sometimes weekly. 

But—— 

Mr. SCALISE. So can you tell, if you are watching them weekly, 

how many are in trouble? Obviously you are watching them weekly. There are a lot more out there.How many are in trouble right 

now? 

If you are watching them, you have to know. It is either none or 

some number in between none and the total number that are still 

out there. 

Mr. CHU. I—— 

Mr. SCALISE. What is that answer? 

Mr. CHU. What, that—— 

Mr. SCALISE. I don’t think that is an unreasonable question, Mr. 

Secretary. How many loans that you are watching—you are watching them weekly—how many loans are in trouble that are still outstanding? 

Mr. CHU. Again, we watch—— 

Mr. SCALISE. A number. I am asking you for a number. 

Mr. CHU. All right. We have two loans that are in trouble, 

Solyndra and Beacon. 

Mr. SCALISE. Well, they went bankrupt. Those aren’t—what 

other ones are in trouble besides those two? Is it just those two? 

Mr. CHU. No, I—we would be glad to look at and tell you our procedures and give you, not in this forum—but we would be glad to 

work with you and—— 

Mr. SCALISE. Well, a public forum. I mean, it ought to be—there 

has to be transparency in what is going on here. We are trying to 

get to the facts, and we have been having a hard time getting those 

109 

answers. So I would appreciate if you would get the committee that 

information on what loans are in trouble, starting with Solyndra 

and Beacon, if there are any others. 

When we talk about the subordination—and I know it is going 

to come back to this a few times because I still don’t think this 

issue is resolved. And, frankly, you know, I disagree with you, and, 

obviously, a lot of us on this committee disagree with your interpretation. I more share the concerns of another part of the Obama administration, in Treasury, where they said the Justice Department 

ought to be involved. You chose not to get involved with the Justice 

Department. 

I am asking for the Justice Department to get involved. And, 

frankly, what I would like to see is for the Justice Department to 

challenge, right now, to challenge the subordination of the taxpayer. Because, frankly, it is the only way that we have a shot at 

getting that first $75 million of taxpayer money back. 

Mr. STEARNS. Would the gentleman yield just for a second? 

Mr. SCALISE. I would yield. 

Mr. STEARNS. I think he is asking a very legitimate question. He 

is asking you not the company names; he is just asking the number. 

And staff has advised me we sent a letter some time ago asking 

for a list of all the companies, and we have not got a reply yet. So 

I think the gentleman’s question of ‘‘what is the number’’ is a legitimate question. 

If you are looking at it weekly, can you tell—— 

Mr. CHU. We believe that most of the loans are in good shape. 

We would be glad to talk about this with you and tell you what 

process we have in place. We have given you a lot of company confidential information. You have respected that confidentiality; we 

appreciate that. We would be willing to continue do that. 

Mr. STEARNS. We are not asking for the names. 

Ms. DEGETTE. Would the gentleman yield? 

Mr. STEARNS. All he is asking for—as I understand, Mr. Scalise, 

you are asking for just the number. 

Mr. SCALISE. A number is all I ask for right now. And, obviously, 

we would like to follow up once we see a number. But, you know, 

maybe the number is just two; maybe it is just Solyndra and Beacon. But if it is more than Solyndra and Beacon, then clearly we 

would want to look more into that. 

Ms. DEGETTE. Will the gentleman from Louisiana yield? 

Mr. SCALISE. I would be happy to. 

Ms. DEGETTE. Thank you. 

Mr. Secretary, is part of your reticence in saying how many companies you think might be in trouble or which ones they are in this 

public forum this concern about proprietary information? 

Mr. CHU. There is always concern that we would have, as you 

would understand. But in terms—because we will tell you what we 

know of the companies and how we found out about it in detail, but 

not in a public forum. 

Ms. DEGETTE. So—— 

Mr. CHU. But we believe—I will say that we believe the majority 

of the portfolio seems to be in good shape. 

Ms. DEGETTE. So, Mr.—— 

110 

Mr. CHU. In fact, a large majority. 

Ms. DEGETTE. So I would suggest—I think that is a legitimate 

concern. You don’t want to—we have already been contacted, for 

example, by a company that is actually in Mr. Gardener’s district, 

and they are concerned, because of the adverse publicity around 

the Solyndra loan, that it is hurting their ability to get capital and 

financing, and they are an ongoing company. 

So perhaps we could get—we could get a number—we could try 

to get a number, but then any additional—— 

Mr. SCALISE. Right. And that was the gist. Reclaiming my time, 

I never asked for any specific names, but, clearly, I would like the 

numbers. 

But then the next question I have regards going back to the restructuring. You know, I want to see the Justice Department go 

back and challenge the legality of the restructuring, whether or not 

the taxpayer should have been subordinated. Because that gives us 

the best chance to protect taxpayer money. 

Would you agree that the Department of Justice should go and 

challenge that? 

Mr. CHU. As I said, we have gone through this in great detail 

with our lawyers within the Department of Energy. This went 

to—— 

Mr. SCALISE. And ignored other legal opinions that contradicted 

it. 

Mr. CHU. No. 

Mr. SCALISE. Including the Treasury. 

Mr. CHU. The Treasury, as I said before, did not offer a legal 

opinion. They did not say that—— 

Mr. SCALISE. This is a letter from Treasury. I would imagine you 

have seen it. It said that you all should go to the Department of 

Justice before you do this. I mean, I don’t know if you want to call 

that a legal opinion. You have attorneys telling you, go to the Department of Justice before you do this, and you didn’t do that. Now, 

whether it is a legal opinion or just a personal opinion, it was sent 

on their stationery, it was sent in their email form, on a government email, so I would imagine it is in their official capacity. 

But let’s just say, right now—and, you know, I don’t want 

names—are there any loans that you are currently considering restructuring that are in your portfolio right now? 

Mr. CHU. I think I have answered that before. But we are—before us, no loans that we are considering—— 

Mr. SCALISE. I would hope, if any did come before you, you would 

absolutely not subordinate the taxpayer. That is a whole other 

issue. 

But when we go back to some of the other things that were going 

on around you—and you gave testimony that you weren’t aware of 

those, some of the things that were very political in nature: you 

know, in your department, encouraging people to—encouraging 

Solyndra to delay firing people. Again, they weren’t concerned, in 

anything I have seen, that 1,100 people were going to lose their job; 

they just wanted to make sure it happened after the election. And 

it did happen after the election, so, obviously, the folks in your 

agency were listened to. 

111 

Are you going to do the due diligence to go and find out who did 

that and hold them accountable? And what kind of things would 

you do to hold them accountable? 

Mr. CHU. Well, we certainly will, as I said before, investigate actually the facts in this matter and take appropriate actions as we 

find out what actually happened. 

Mr. SCALISE. And I would hope you would share that with our 

committee. Would you be willing to do that? 

Mr. CHU. Yes. 

Mr. SCALISE. Now, a final question, because I see I am running 

out of time. 

The President, himself, has described this—when we talked 

about the loan program early off, he was asked and he said, basically, he said, we place bets. Now, would you view this as betting? 

Because, I mean, clearly, there are a lot of other loans out there. 

There are $4.7 billion of loans that went out on the last day of this 

loan program. Just on that last day $4.7 billion went out. 

Knowing all of the problems now that happened with Solyndra— 

and that was the very first one that went bust—have you changed 

any processes? When you, on that last day—I would imagine you 

approved all of those. So how many loans were approved on that 

last day, accumulating to $4.7 billion? And did you use a different 

methodology, a different formula to assess whether or not those 

were bets, as the President said, that were good for the taxpayer 

or not, or did you use the same process that failed for Solyndra? 

Mr. CHU. Well, let me step back and tell you about the last several months of the loan program, the 1705 loan program. 

There were, I think in May or June, roughly May of this year, 

we told many of the loan applicants there was no time to complete 

due diligence and that we are sorry, even though some of these applications were being considered and before us for a year or more. 

And so, at that time, we said, we cannot have the time to do due 

diligence. 

On the last of the loans, there were many of the loans where we 

also felt on those last days we could not make the deadline and do 

the due diligence. And so what we were deciding was which ones 

can we complete the due diligence. Under no circumstances was 

anyone ever in the loan program trying to rush it by cutting corners, not doing the due diligence. 

And so what happened is, you used the maximum time possible. 

There were another set of loans that we were working with companies that we did not—we were not able to complete our due diligence, and those loans were not made. 

Mr. SCALISE. But the specific question I asked you was—— 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. SCALISE [continuing]. How many loans were approved on the 

last day, and did you use the same process that you used under 

Solyndra for that $4.7 billion package? 

Mr. CHU. As you know, we have a very rigorous process in 

our—— 

Mr. SCALISE. How many? And yes or no? 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. CHU. Well, I believe I agree with you that there were four, 

and there were a number of loans that were not—and the last day, 

112 

we said, we are sorry, to those companies, we cannot complete 

these loans. So under no circumstances were we rushing. 

Mr. STEARNS. All right. Thank you, Mr. Scalise. 

Mr. SCALISE. And did you use the same process? 

Mr. STEARNS. And the gentleman from Virginia—— 

Mr. SCALISE. He won’t answer that question. I am just asking if 

he can answer that question. 

Mr. STEARNS. The gentleman from Virginia is recognized. 

Mr. SCALISE. Did you use the same process as under Solyndra for those last $4.7 billion of loans? 

Mr. CHU. Well, actually, I would imagine, as time goes on, our 

processes were being strengthened. As we get better at doing these 

things, we were actually improving the processes, just as we will 

continually improve the process in looking at how the loans are 

going forward in the disbursements. This is a process where we 

would hope to have continuous improvement, and—— 

Mr. STEARNS. All right. The gentleman from Virginia is recognized for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Secretary Chu, can you tell me, do you know what the value of 

the building that Solyndra owns, the one that was built, do you 

know what the value of that is, as far as the bankruptcy court is 

concerned, or what the sales price might be? 

Mr. CHU. No, I don’t. 

Mr. GRIFFITH. All right. And here is my concern. Eight to 11 

months ago, when you were making the decision to subordinate, 

you said that you thought it was better, instead of calling it quits 

in December and not giving them the additional $95 million, and 

instead of subordinating—or, you all made the decision you were 

going to subordinate because you thought it would put the taxpayers in a better position. 

The problem is, you told me earlier you didn’t know the value of 

the intellectual property and the patents that the company might 

own. You don’t know the value of the building. If you don’t know 

those things in a fire sale or in a situation like this, how can you 

make a determination just 8 to 11 months ago that it was in the 

taxpayers’ best interest to subordinate? I think it is a rhetorical 

question because I don’t know that you can answer that. 

And let me move on to the next question that I have, because we 

also talked earlier—Mr. Barton brought it up first, and then I 

brought it up—this legal analysis by Morrison & Foerster. And all 

we have is the draft. And I don’t think that you have intentionally 

misled the committee, but I think that there may never have been 

a legal opinion from Morrison & Foerster on this, a written legal 

opinion. 

Do you know if there was actually a written legal opinion made? 

Mr. CHU. I do know that there was an email, a determination by 

Morrison & Foerster of what—and they concurred with us in an 

email, in a final email, saying that this was a reasonable interpretation of the law, and they concurred with it. 

Mr. GRIFFITH. Because I don’t believe we have seen that. And so, 

if you could provide that email for us, I would greatly appreciate 

it, because we just haven’t seen it. And so, you know, we have a 

draft that says—it has a whole section entitled ‘‘You Can’t SubordiVerDate Aug 31 2005 15:19 Jun 07, 2013 Jkt 037690 PO 00000 Frm 00118 Fmt 6633 Sfmt 6633 F:\112-10~2\112-10~1 WAYNE
113 

nate,’’ basically. It says subordination is not allowed. So that is of 

great concern. 

And if all there was was an email and there originally was going 

to be a full legal memo, can you find out why there was not a full 

legal memorandum done from Morrison & Foerster in regard to the 

subordination issue? Can you do that for us? 

Mr. CHU. Yes. Well—— 

Mr. GRIFFITH. And let me say that the reason that I question 

this is that you have referred to it a number of times today, but 

it appears that you, you know, relied on maybe some casual communication with them but never got the formal opinion, even 

though one was started. And it appears you relied significantly and 

exclusively on your own folks. 

But a lot of times, you know, when you are trying to make an 

important decision, just as when you are making an important decision for your children, you consult other people before you decide, 

OK, are they too young to have a new car or what about that cell 

phone. And, in this case, you have acknowledged that you were 

making a very significant decision on the subordination of this 

loan, and yet you didn’t consult with Justice, you didn’t pay attention to other folks, OMB and Treasury. 

And it appears—I mean, if my kids did that to me and that is 

what they were saying, ‘‘Well, we didn’t check’’—it appears that the 

Department of Energy adopted the policy of, well, it is better to ask 

for forgiveness than to make sure we get the answer right in the 

first place because we are afraid they will come back and say we 

can’t do it. 

And it is true that without that subordination you knew that this 

company would go bankrupt last December. Isn’t that true? 

Mr. CHU. Well, let me first step back and tell you what I know 

of the interactions with Morrison & Foerster. 

There was an initial email that said, we have to step back and 

look at this. And then there was a final determination by Morrison 

& Foerster in an email that was sent to us that said, the determination made by the counsel’s office in the—— 

Mr. GRIFFITH. Did you not see their full draft, which was pages 

long, in which one section said—it highlighted and flagged that 

subordination was not allowed? You didn’t see that? All you saw 

were a couple little brief emails? 

Mr. CHU. No. What I said is that certainly the subordination of 

the initial loan was not allowed, and they made that very clear. 

But in the end, the final email—— 

Mr. GRIFFITH. Let’s get to that point, then. I understand what 

you are saying. And if there is something more than that, we would 

like to have it. And if I could have that email. 

Here is my problem with that. At the beginning, you know, the 

initiation of the loan, if you read the memorandum—did you read 

the Susan Richardson memorandum? 

Mr. CHU. Yes. 

Mr. GRIFFITH. OK. If you read that and you read it closely, including the footnote, I believe it is the second footnote in that 

memorandum, you will see that the conclusion was that we can do 

it—we don’t have to have an excuse of default; we can do it at any 

time subsequent to the original closing of the loan. 

114 

And so I ask you—because you are a very bright man, much 

brighter than I am; you know, I know you didn’t leave your brain 

at the door—I ask you if it makes sense to you that Congress 

would pass a bill that says at 10 o’clock in the morning you can’t 

subordinate the loan to anybody else, but after eating lunch and reflecting on it, at 2 o’clock in the afternoon of that very same day, 

you legally could subordinate the loan. Because that is the opinion 

that Susan Richardson puts forward, if you take it to its natural 

conclusion, and particularly when you look at that footnote. 

Does that make sense to you, as a thinking, intelligent man? 

Mr. CHU. As a thinking, intelligent man, it was very clear that, 

at the time of the origination of the loan, we could not subordinate—we did not subordinate. 

Mr. GRIFFITH. But 2 hours later, based on the opinion that you 

are relying on today and that you have relied on this whole time, 

you could have. Do you really think that makes sense, that that 

would have been Congress’ intent? 

Mr. CHU. Well, if you mean by ‘‘2 hours later’’ you mean—— 

Mr. GRIFFITH. I mean 4 hours later, but 2 hours later is the 

same. I am just giving you an example, that you ate lunch and you 

reflected on it and you had a new opinion. 

Mr. CHU. Well, then when the loan became stressed and in trouble—— 

Mr. GRIFFITH. But there was nothing in the Richardson opinion, 

am I not correct—I am correct, but I will just tell you—there is 

nothing in there that says it had to be stressed. In fact, they talked 

about that and said it didn’t have to be stressed, that you could do 

it at any time that you wanted to once the original loan had taken 

place, which means you could circumvent the entire law based on 

the reading of the law that your department decided to take. 

And I submit to you that, as a thinking, intelligent man, if you 

weren’t sitting here on the hot seat today, you would have to admit 

that that does not make sense and, clearly, what you all did violated the intent of Congress and, I believe, the letter of the law, 

as well. 

Thank you. I yield back my time. 

Mr. STEARNS. The gentleman yields back his time. 

We offer the gentleman from Illinois 5 minutes. 

Mr. BARTON. Mr. Chairman, before you—could I ask unanimous 

consent to speak out of order just for 1 minute to read this email, 

which apparently is the email that they are—— 

Mr. STEARNS. By unanimous consent, so ordered. 

Ms. DEGETTE. Which email is it? 

Mr. BARTON. It is the email that Secretary Chu is referring to, 

where he alleges that Morrison—— 

Ms. DEGETTE. What is the date on it? 

Mr. BARTON. It is dated January the 13th, 2011. It is from 

Panagiotis Bayz to Frederick Jenney. 

May I read that? 

Mr. STEARNS. Sure. How long is it going to take? 

Mr. BARTON. Thirty seconds. 

Mr. STEARNS. OK, go ahead. 

Mr. BARTON. It is very quick. 

115 

It says, ‘‘Rick, red line to the prior version of the memo attached. 

The only substantive comment’’—this is relating to the memo that 

the Department of Energy has sent for their comments—‘‘is that 

19(c)(4) discussion. This reads a bit tortured, so I added a note for 

Ken to consider deleting.’’ Here is the key phrase: ‘‘Otherwise, I 

think it makes the best case possible based on a reasonable interpretation, supported by the restructuring policy arguments.’’ 

That does not say that it is legal. It says it makes the best case 

possible based on a reasonable interpretation. And, apparently, 

that is what the Secretary is relying on to say that the internal Department of Energy memo is OK. 

Mr. STEARNS. Thank you. 

And the gentleman from Illinois for 5 minutes. Go ahead. 

Mr. Secretary, you wanted to say—well, go ahead, Mr. Secretary. 

By unanimous consent, go ahead. 

Mr. CHU. I think the email from Morrison & Foerster said that 

it was a reasonable interpretation. Is that not correct? 

Ms. DEGETTE. Yes. 

Mr. Chairman, I ask unanimous consent to put that email in the 

record so it is clear. 

And it does, in fact, say that, Mr. Secretary. 

Mr. STEARNS. But just because it is reasonable does not mean it 

is the correct interpretation. You would agree with that? 

Mr. CHU. It was a reasonable interpretation of the law—— 

Ms. DEGETTE. It says ‘‘reasonable interpretation.’’ 

Mr. STEARNS. Well, the long and short of it, we have had this discussion, and it appears that you have your opinion, and of course 

we have ours. 

Ms. DEGETTE. Mr. Chairman, I renew my request to put this 

document in the record. 

Mr. STEARNS. Sure. By unanimous consent. 

Mr. BARTON. Yes. I want it in the record. 

Mr. STEARNS. Mr. Barton is asking for unanimous consent to put 

it in the record. And it will be put in the record. 

Mr. BARTON. I concur with Ms. DeGette. 

[The email follows:] 

116 


76267.022

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ICItrlJIHIfecta borrowerI. 
117 


76267.023

157 

TlQUbltld Asset lelld I'fvIrIIm: TARP has made _ .. dJan&el1n temll bvth thlOUih IeIlsiIltlDn and 

adl'llrllslrl1t1ve dO,., SIIdI.u dlarwes that dowI!d TAI\P redplentl ttl pre-pay equity \nYestme~ mnellCled 

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1II1II anatherTrUsury prDITIm. BecaIlA theSe tenn.aff8aedthe~ OMBworted closely wIttITl"nsuIyto 

revtew In each clrcUmstam:e and make B detennlnatlon whether I &!wen .CIIon constItvIIKI, rnodlftartIon or B 

WDrt~ and !hit the dIanps were ap\ll"DPlfltelv capturad In the cast ast\mIItes.. 

Nt ~ SlablIlriJttGn Ioard Lo81\ &ulraIItHrl ThIs prosram WBI estIbllsheclllloltly Iller 2OD1, to 

pnoWIBBlllstilnce tothealrllna Industry. Overthe CIDUI1e of tills prognIlII, OMB mil the Air Transportation 

. Stabilization Board worbd cIoseIvtD lIetemllnethe nature of certain adIDnslndudlns restruc:tw1J& 11!-

amortImtIonf, and reflnancInII (whether rnodIIIcatIDns Dr wort-outs), and estfmate the com assodIled wfth 

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cost. end borrower faes.for modified Ioaos when! the re-amor1h:8IIDn ~ result In a COlI. A borrower may 

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h 

~ 

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dlltllnnlned II~' mocBfIcatIDlllInd should be h'eIItI!d aa:onI.I,.,.,.. 
118 


76267.024

158 

FOIA established OMB authorftles end responslblllly for Implementiltlon, lndudlng OWI1I&ht owr 

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tie , GovemmentDf • 

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apIIdes 

moved forward wtth wort~ elreldy QptuTed In buenll8 c:DSt estiml18s, or mocIltIcIIttons for thase 

pnllJllM tlllt did nat OSII1Ie sud! actions. In Other cues, the AdmInlstmJDn raquastad new authority 

to fund \tI8 0'lSbI of easlna \etms fur ICatrlnHffected bDnowI!fs. 

n-oubIId AIIet RelIef PrcIpam: TARP hat made SIMI"I dlarce-1n terms both t/v'OuaII \epIlIt!on and 

admInIstratJve actioN, sudlll cNf'1'8I that ,1broIIed TARP l'ICIpIents to' pre-pay equity Investments, 

amended eIIsIIIIfty ~ reIaxIld J1!IIUIrements 1:11 benefit troubled bomIwers, or alkMtni 

redp\erns to J'1!ftnance Into another Tl1!IISUry PfOII"IITI. BeCIusa these tenns affacted 1he CDSt, OMI 

worbd dosefy with TnliJIIIIY to revII!w In each dn::umstance end melle I determination whettler I Pen 
119 


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159 

action Q;)nstltuted • modlfIcIItion or a work-out, and that the dlal\ll!S were appropriately c:aptlnd In 

the cost estimate$. . . . 

AIr TnlMportatIon ~ Board Laan GuItIatIIes: lhls pr1'JII'8III was established shorttr aft&!' 

2001. 1u prwlde assIstallCl to the all1\ne 1ndIIstI'y. ~r ihe course gf this pr1)8I'Im. OMi _!he AIr 

Trall'p)rtatlon S1ablllntlon Board worked dOse., to dl1ermlne ttle ruiture of QlrtaIn adlons IndudInI 

restl'\IctUrtna. re-emortiz:atlons, 1I~ ~ftnandn8 (wfIe1IIer modlflaJtfoN Dr WOIit-outsl, and estimate the 

costs assod8ted with these chB~ 

USDA IIUn!4 IJlmtIeI ServIce L8an Exl8nSIons: A statutmy chan&e madlfted tile JII'OImII, by allowlns 

eligible bo~ to extend their loan terms ~d that the borrower paid 8 fH til aM!!' anv chan&e 

In cost assoeIa1ed """II 8Xlentllils ttl. IDm. OMII and USDA worked doRIy til dewlop the model usa! 

to determine ltie cost. end ~r fees for macllfIed IDens wlllntte nHmortlmtlon wDUk! ~ In I 

determine that Itt own beneflts do nat outwelaf! the required fee. 

Department of~~tt4 ... 1It4~5tllIII~~;"~" Prapam; The Oepartment of CDmmette 

approVed several lIIarantee I8raement IIIII!r a few yan, 

Indudq red I",nee, Commerce and OMB YIOf\eIf 

topther on the 

Deparunent of PrcIp'Im: When It became Bpparent!hat 

B faUure In V,Ns pruces$1ad tIlsertous/y lnadeq\1i1t8 housIna for 0111 bon-ower, VA counsel determInad 

that It fell within 1M autflorfDtlon fbrVA III fund O1lIcaIImp/N!l'l!entS to the property thruup the . 

hnc" account. BecaUIB thIs.actlon fell ollbida of the baseline cashfIawI and resulted In I cost to thI 

__ OM .. _.... ~ ....... _. r 1 , 

'ri\l \I V~ 
120 

Mr. STEARNS. And, Mr. Illinois, you are on. 

Mr. KINZINGER. ‘‘Mr. Illinois.’’ Thank you. 

Thank you, Mr. Secretary. Obviously, when we deal with this 

amount of money, it is important to get all these questions out. 

And we appreciate you being here. We appreciate your service. And 

thank you for coming before us today. 

Let me ask you—and I know you have addressed it already, to 

an extent, but I want to ask you, did the stimulus deadlines accelerate the review of Solyndra’s case, specifically? The deadlines put 

in by the stimulus, did it accelerate the review of the case? 

Mr. CHU. No, it did not. You know, from the time of the completed application to the time we closed on the loan, it was about 

980 days. I would not consider that—— 

Mr. KINZINGER. OK. Because in congressional testimony dated 

March 19th, 2009, DOE stimulus advisor Matt Rogers stated that 

you ‘‘directed us to accelerate the process significantly and deliver 

the first loans in a matter of months, while maintaining the appropriate oversight and due diligence.’’ 

Did you direct the loan programs officer to speed up the process? 

Mr. CHU. Yes. We wanted very much—so that the loans would 

not all be taking 980 days. That is correct. 

Mr. KINZINGER. But you didn’t—so you wanted it sped up after 

the acceleration of the—or, after the Solyndra loan, is what you are 

saying. 

Mr. CHU. No. As I said, when I was before Congress in the confirmation hearing, there was on both sides of aisle much concern 

that the loan program was not getting the loans out. Again, the 

economy was in free-fall. Hundreds of thousands of jobs were being 

lost each month. And it was considered by both sides of the aisle 

that this loan program was an effective way of getting capital and 

helping that capital be invested in energy projects, renewable energy and those things. 

And so, it was the concern—and, as said, nearly 500 letters from 

Members of Congress on both sides of the aisle, saying—— 

Mr. KINZINGER. OK. Thank you. 

And, in January of 2009, DOE documents show that the Loan 

Programs Office credit policy group listed 14 outstanding issues 

that needed to be resolved on the Solyndra deal, including analyzing the parents’ working capital needs and evaluating the parents’ funding requirements and financial health. A market report 

for Solyndra had yet to be submitted. One staff member reviewing 

the engineering reports listed eight different questions about its 

findings, including about Solyndra’s plans to scale up production. 

Yet, on March 17th, DOE offered a conditional commitment to 

Solyndra, just a few weeks later. So you are telling me that DOE 

was able to resolve, in that short amount of time, all 14 credit policy issues? 

Mr. CHU. I think if you are talking about these issues in the beginning of January versus March—and we resolved many of those 

issues when we offered our conditional commitment, then these— 

before the loan disbursements start, that the company will have to 

resolve all issues. And that is what a conditional commitment 

means: There will be additional conditions before we actually disburse any funds. 

121 

Mr. KINZINGER. Let me ask you also, too, being as how this is 

all, you know, stimulus-related, stimulus-financed, how would you 

define the concept of shovel-ready projects? And do you think we 

realized those goals? 

Mr. CHU. I think what we were looking for, what Congress was 

looking for, what the administration was looking for, were those 

projects that could put Americans back to work in a very, very desperate time. And I think many of the loans—for example, if you 

consider the Ford loan—— 

Mr. KINZINGER. Right. 

Mr. CHU [continuing]. Which we think is a big success, saving 

some 30,000-plus jobs and—— 

Mr. KINZINGER. So ‘‘shovel-ready’’ is, even at the cost of million 

of dollars a job, putting people back to work? 

Mr. CHU. No. As very clearly stated in the law and clearly state 

in what we do, we wanted to make sure that there is a reasonable 

chance of payback. And in all our loans going forward, that is—— 

Mr. KINZINGER. Thank you. 

Mr. CHU. And that probability of being paid back is reflected in 

credit subsidy scores. 

Mr. KINZINGER. OK. Thank you. 

And with my time left, I would like to yield my remaining time 

to Dr. Burgess from Texas. 

Mr. BURGESS. And I thank Mr. Illinois for yielding. 

Secretary, again, your indulgence today is commendable. Like 

other members of the committee, we all stipulate that you are 

probably the smartest man in town, and that is why some of this 

is so baffling to us. 

One of the things that grabbed a lot of headlines a few weeks ago 

was the amount of money spent on legal bills by Solyndra and, by 

implication, the fact that there were big loans going to this company that was money that we were paying for Solyndra’s legal 

bills. And I think the figure given was $2.4 million spent in the 2– 

1/2 years of Solyndra’s tortured existence. 

You are following the loans very carefully now, you are looking 

at things weekly, you are looking at balance sheets and expenditures and burn rates. Is this number of dollars for legal fees that 

Solyndra went through, is that unusual in this portfolio? 

Mr. CHU. I can’t actually speak to that. But, certainly, one 

doesn’t want—you know, I can’t actually address why Solyndra was 

spending those amounts of funds on legal matters and legal bills. 

Mr. BURGESS. There was a man on your staff whose wife worked 

for the law firm—— 

Mr. CHU. Right. 

Mr. BURGESS. [continuing]. That was representing Solyndra. 

That, obviously, gets some attention. 

You know, I mean, here is the thing. At the end of this day, you 

are the Secretary of Energy. You are the holder of the Nation’s nuclear secrets. You are the civilian manager of the Nation’s nuclear 

arsenal. And many of these decisions that were made in this loan 

guarantee program seem to be almost the kind of decisions you 

would expect a riverboat gambler to make. 

I really ask, again, that you talk to your employer—— 

122 

Ms. DEGETTE. Mr. Chairman? The gentleman’s time has expired, 

and he is badgering the witness. I would ask that you suspend this 

hearing. 

Mr. BURGESS [continuing]. You talk to the President, and you 

need to have that honest conversation with him. 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. Secretary, we are done. And, as we agreed upon in the committee, we have 3:30 in mind to end. 

I want to ask the ranking gentlelady from Colorado if she has 

any concluding comments, and then I have just a very short concluding comment. 

Ms. DEGETTE. Mr. Chairman, I just want to thank the Secretary 

for coming. 

As I said in my opening statement, I have been on this subcommittee for 15 years. I don’t believe that I have ever seen a Secretary, a Cabinet Secretary, of either party in any of the three administrations I have served under patiently give us so much time. 

And so I just want to thank you. It helps us begin to understand 

the basis for this loan program, what we can do. And I hope that 

we can work with you to improve this program in the future so 

that we can support solar energy. 

Thank you. 

Mr. STEARNS. I thank the gentlelady. 

And, by unanimous consent, I would put the document binder in 

our record. 

So ordered. 

[The information follows:] 

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I 

17 

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19 

Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

The Solyndra Failure: Views from DOE Secretary Cllu 

DESCRIPTION 

Xconomy Article, The Solar Hype Cycle: !JOII 'I Lei The SUII Go Down Oil :1,fe, 

,_t\1ark Modzelewski" , --

Internal DOE Staff Email: Subject: Fw: USA Today Article on Rooftop Soil 

Systems 

Internal DOE StatTEmail: R E: Solyndra Analysis 

Meeting Memorandum to Secretary Chu, Location: Secretary's Office IO:15amI 0:45am 

Wall Street Journal Article, 'We 'I'e GallO Do This' Energy Secrelarv ell" Plans 

Rapid Care/iil Spendi"', 

Internal DOE StatTEmail: Subject: Fw: ACTIONS: Loan Program 

Internal DOl' Staff Email: Subject: FW: RW Beck!Solyndra Rcport 

Internal DOE Staff Email: Re: Update: Solyndra 

Internal DOE Staff Email: Subject: RE: Loan announcement" 

CREDIT COMMITTEE PAPER: REQUEST FOR LOAN GUARANTEE 

APPROVAL, Project: Solyndra Fab 2, LLC, Loan Number 1013 (FY06 

Solicitation) 

Energy.gov Article, Ohama Adminislralion Offers 5535 Millioll Loall Gliaralllee 

10 So/l'ndra, file 

Energy,gov Article, Ohillnu dmini"mll,n Qlfo:,S59 Million in ('ondifion, 

Loan Guarantees' /0 Beacon POH'cr alld Nordic rVindpo\vcr, JIlC. 

Internal DOE Staff Email: Subject: RE Solyndra 

Internal DOE StalTEmail: Subject: FW: Solyndra: Responses to Credit Analysis 

Q~lestions 

Internal DOE Stall Frnail: Subject: RF: Solyndra Update 

- .. -.~ .. ~--.-

Argonaut/Solyncira Email From: Chris Gronc-t To: Steve Mitchell Email: 

Subject: Fab 3 and l\YTimcs,eorn: Solar Panel tariff May Further Strain U,S,-

China Trade 

1\ VI-HCEC-0008975 

Energy.gov Article, Energy Departmcllt Announcej' New Private Sec/or 

Partnership 10 Accelerate Renewahle Energv Projects 

I Independent Market Consultant's Report: Solyndra Fab 2 Manufacturing 

Facility, RW Beck 

ArgonautiSolyndra Email: From Chris Grone! T( Ken Levit Subject: Fw: DOE 

meeting 

A' 

I DATE 

I 08!041O'si 

011l3!09 

4:36 PM 

01126109 

5:15 PM 

Oll30/09 

02106109 I 

0211210~~ 8:11 AM 

02/27109 

11:36AM 

0311()!O9 

9:06 AM 

0311 0/09 

9:15 AM 

03/11/09 

03120109 I 

12:00 AM 

07/02/09 

12:00 AM 

08/20!O9 

12:30 AM 

08120;09 

3:27 PM 

08/27109 

4:39 PM 

10/01/09 

11:31 PM 

10/07109 

12:00 AM 

04/27109 

01/18/10 

3:02AM 
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liii~g,onuut Email: Fro,;; Steve Mitchell T~: George KaTs·er SUbject: Fw: 02/11/l0 : 

I Sueeessllli meeting with Jonathan Silver Attachments: 20 I 0-02-09 Jonmhan 2: lOAM I 

i--- S i 1 ver-SolynJra Update.pd f A VI-IIC EC:--:-::-O'-'0-c-5-c-6-,,2,--02=:-=-,0~4=:::-:-:::-----------t----;0:-:_'-::12:-:7:C1'-:-1 0:::-11 Argonaut Internal Email: To: Ken Levit Subject: Re: KPMG '. 

21 AVI-HCEC-0056_.,17'6;-:--6-----;-;-::------:; 2:00 PM 

22 I ~lteTIlal DOr·Staff Email: From:J()~ati;·~nSilver.To: Stcve Spnlner, Matt 03/0411 0 I 

i--____ ~gers, Rod OConnor Subject RE: loans we're takinjLeredit for tomorrow 1.56 P:\~ 

23 I Argonaut Email: From George Kaiser to Steve Mitchell Ce: Ken Levit Subjcct: 03i06i1 0 I 

REi A VI-HCEC-0055570-1 12:39 AM 

24 Internal OMB Staff Email: Subject: RE: Solyndra 04/191[0 I 

~ 5:371':\1 1 Internal Argonaut Email: Subject: Solyndra Update-More Important to Read than 05;08/10 

A VI-HCrC-0056462-6 7 2:02 AM 

26 DOE & White House Email: To Ronald Klain: Subject: FW: Wanted to share OS/24/10 

some concerns about the President's visit to Solyndra: Please kecp eonlidential- 10:05AM 

wi! t vou send to ron 

27 Internal Argonaut Email: From Chris Gronet: To Steve Mitchell Subject RE:RE 06/17/10 

6:52 PM 

28 

29 

30 

31 

31//\ 

33iB 

J41C 

35/D 

36/10 

38i(J 

39/J-l 

-lOll 

41/J 

A VI-IICEC::003007Q:.72 ... =-::-:-:-:~~ __ Argonaut Ema, S;;bjeet: RE:RE: next steps A VI-HCEC-0030022-24 

Argonaut Email: A VJ-HCEC-0030025 

Intel ,al Argonaut Email: Subject: Rc:Rc: Solyndra.Jpg 

Intcrnal Argonaut Email: To: Steve Mitchell From: Ken Levit Subject Re: Rc: 

Solyndrajpg 

A VI-HCEC-0030002-03 

Internal Argonaut Email: From: Steve Mitchell, Subject: FW: Meetings for the 

week of July 19 Attachments: imageOO J .jpg 

AVI-HCEC-0024859-61 

'National Review Article, Pland Gore: The hot blog, Till1e to /fII'l.!sfiga((? the 

DOE and So/,.,,"ra, Greg Pollowitz 

Argo""ut & Solyndra Email: Cc: Brian Harrison: Steve Mitchell Subject: Re: 

Rc: NCPV lIotline - August 10,20]0 

A VI-JlCEC-003315J 

Argonaut Email: To: Steve Mitchell: Subject: FW: FW White House Meeting 

06122110 

5:33 PM 

06/22/10 

5:58 PM 

06/25!10 

9:25 PM 

06/25/10 

9:29 PM 

07/17110 I 1:35 AM , 

08/03/10 -1 10:15 AM : 

8110/10 

7:46PM 

9/18 110 

_ .. _____ . ____________________ ._1:~8_·o·4,,8PM 

DOE Staff& Solyndra Email: I{c: 10:13:10 I' 

10:31 AM 

Memorandum hw the President, From: Carol Bro\vner, Ron Klain, Larry 

Summers, Sub"eet: Renc\vabk Energv Loan Guarantees and Grants 

I DOE Email to Carol M. Browner Subject: RE: Internal announcement 

Internal Argonaut Email: Subject: Solyndra Conference Call A VI-HerC0024488 

Internal Argonaut Email.From:SteveMitehell.To: Ken Levit; George Kaiser 

. _SubjectOne nlOfC Do[)eonl1lc;l idea A VI-HCr:C-OOI772'i_. ___ ~_. ___ _ 

Internal Argonaut Email, To Ken Levit Suhject: Re: did they do layoffs'.' A VIIICEC-0024099-0055665 

10/25/1 0 I 

10/26/10 

5:32 PM 

10/27110 

7:26 AM 

10/3011 0 

2:40 AM I 

10/30110 

4:26 AM 
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~[ AI~gonaut E~,a'ii:~oll1: Kenlevit:Subjcct: RE: GKFF Portt(llio Updat~ 

11°'29/1 O. A VI-HCFC-0055663-65 

10/3011 0 

R:58 PM 

Argonaut Emuil, From: George Kaiser, To: Steve Mitchell, cc Ken Levit 11/07/10 , 

Subject: RE:RE:.:.~tional RevieY"blog, A VE-llCE,C-002S00::,:0..:-0"'1_,--___ .+ 51 :13/"774P/-MI'-()- I, 

Argonaut Email,From: George Kaiser, To: Steve MitchelLCc: Ken Levit _ 1 

Suhjeet: RE: Solyndra Update 2:56 PM I A VI-HCEC-0056720-23 

45/Mc Argonaut Email.FromSteveMitchell.To: George Kaiser Ce: Ken Levit Subject: 

Re: Solynclra Update 

1-----:--::-c--+:.: A..:. V.:.'-""HCEC-0024446-0024450 

46/N Argonaut EmaiL From Steve Mitchell,To: George Kaiser, Cc: Kcn Levit 

IlI24il 0 

8:00 PM 

12103/10 I 

Subject: FW: Department of Energy Meeting Monday, December 6, 10:07 PM 

1--",=--\ ",ttaehment" DOE Mtg Dec(),pdf A VI-IlCEC -005666Q:i>8_--,-_c--c-'C"....,-_--j __ ,,_ 

47iO Argonaut email, From David Prend To Steve Mitchell, Subject: Re: Re: Solyndra 12Ii)6i'J 

48iP 

491Q 

50/R 

1-- 51/S 

52/T 

5:liU 

54!V 

55/W 

56/XYZ 

57 

Proposal A V'-HCEC 0028653-55 5:57 PM 

Tnternal OMB StalTEmail: Subject: Fw: Solyndra liquidity crisis 12i081l0 

4:42PM 

Argonaut Email, To: George Kaiser Subject: RE: DOE negotiations regarding I 2/oRli 0 

Solyndra A VT-HCEC-002482-89 8:46 PM 

Tnternal DOE Stafr Email. Subject: Summary of Key flusiness Terms. 12/10/10 

I Attachments: SUlllmary ofSolyndra key flusiness Terms and Conditions,docx 4:02 PM 

DOEiSolyndra Project: Materials for Restrueturinu Analysis 1/3/l1 

DOEiSolyndra Project: Contractual and Legal Ana"'ILY:,::sic:s"'CCC ________ +...:Ic.!3"'/.:I,OI--l 

DOE - OMfl Staff Email: Subject: Re: Solyndra Follow Up 1/4/11 

Internal OMI3 Staff Email: Subject: Re: Solyndra Memo: COMME;-';TS BY 1:00 

PLEASE 

Internal OMB Staff Email: Subject: Re: Solyndra 

Internal OMB Staff Email: Re: Solyndra 

Internal OMB Staff Email: Subject: Re: Solyndra optics 

10:22 AM I 

114!~-¥J! 2:20PM 

1/11/11 

3:43PM: 

Iii II! I ! 

i

' 4:44PM 

1/31111 ! 

Internal OMB Staff Email: Subject: Re: Solyndra ntoe for Jeff [sic 1 -------- ~~;~ I 

7:01 PM 

1-",5;-;9:--1-,D;,-=0-=Ec.M"c' ~emorandum ill]' the Secretary: Silver, J to .. Sec",tary 2i1S/II 

I

I 60 Internal DOE Staff Email: Subject: Re: Solyndra 2/22/11-

4:59 PM 

>I 'c-In_t_cr_n_a."I~D"()"E~,~S_ta,,ftc-·Ecc:_nl_a--:il_:=T_O_:'7'Jo_n_a"th_a_n'CS~i~I\_'e_rR_e_:-=so_lc-y_n~d_ra ______________ ---j---,~2/~2~2-,-/1~1~ r c- 8:20 PM 

I 

62 Internal DOE Staff Email: To: Jonathan Sily'Cf Re: Solyndra 2122111 

8:45PM 

I 63 I Internal DOE Staff Email: Re: Treatment of Solyndra Restructuring 2/2311 J 

, I 3:33 AM 

~--I: USATODA Y: "Opposing view: 'Perrect storm' s-a'-n7'k"Sc-oC'IY-',-,d"r'Ca'7', "by-'-=D-a-nici 911311 I 

Poncmnn 
126 


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r 

-~~ergy .gov Article, Fj~l~hhack: longressional pressure to Accelerate Loan 

I Pro'.!,ram 

67 ' Memorandum for the General Counsel From: Susan S. Richardson, Chief 

Counsel, Loan Programs Office Subject: Solyndra Restructuring 

68 Internal DOE StatrEmail: SUbject: Meeting with XXXX Solyndra 

69 Internal OMB Staff Email: Subject: FW: Solyndra Update 

70 Solvndra (:\-1areh 16,2(10) S-I (Amended) 

71 Internal OMB Staff Email: Subject: Re: DOE Loan Guarantees status update 

72 DOE - Treasury Stafr Email: Subject: Solyndra 

021l5!1l I 

l2i08i20 10 i 

3:24 PM 

08'3l!09 

I 4:50 PM 

0311611 0 

06123110 

9:32 AM 

02i\ 0111 

i--=::---t-:---c-;::-=- _ _ ---.' __ -= ___ +-:=2c::0:;:5-:P:,:,Mo':--I 

n Jnternal DOE Staff Email: Subject: CRB Presentation Attachments: Three 12115/08 

Highest Priorities l2.l6.0S.doc Importance: High II: 19 AM 

74 Internal DOE StatlEmail: Subject: RE: Solyndra: Responses to Credit Analysis 08/20/09 

Questions 4:35 PM 

75 DOE -OMB stafremail, Subject: RE: Treatment ofSolyndra restructuring 02/23/11 : 

r-~~-~~~-~---~~~-~~--------------'- _~3~~: 76 DOE Loan Programs Office Power Point January 

77 

78 

Letter From Mary Ann Sullivan, Hogan Lovells To: Henry A. Waxman Re: 

Energy Policy Act oL2Q.~_Seetion 1702 Interpretation 

Internal OMB StafTEmail Suhjeet: RE: Solyndra 

2011 

II! I 0/11 

09/02/0R 

2:54 PM 
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76267.031

The Solar Hype Cycle: Don't Let The Sun Go Down On Me I Xconomy 

SIMPLY CONNECTED. 

Mark Modzelew~k'8/4/08 

The other day the Boston Globe had a piece on solar technology 

coming of age in which Caftech chemistry professO( Nathllfl Lewis. 

slated; "We're not in a hype cycle .. ,lf you go to Silicon VaUey and 

around Rou1e 126, e .... eryone and their brother who used to make 

computer chips are now trying to mak.e thin-film solar cells: 

Dr. Lewis seems to ignore that he gleefully !;lave a le:dbook definition 

of a hype cycle. And an out-of-(;on\rol hype cycle is literally what we're 

in when it comes to solar energy 

There are dozens of sepaf""dte subsectors of research, deve!-opment 

and production that fa!! under the solar energy banner. I am going to 

skip passlVe sojar, SOlar water healel1l and solar thermel (whk:h! 

actually like) and cut right to tlle solar energy sector most encumbered 

with hype, technical issues, mad money, and conflicts WIth reailtypholovoltaics. 

Pholovoltaics (PVs) c:onvert sunlight direc~y into electricity. Basica!fy, 

they are those ugly glass boxes you see over at the Porter Square 

PlaZa in Cambridge. Production of photovoltaic cells has been 

doubling every two yeal"$, since 2002. making it the fastestllfOWifl9 

energy technology sector in the world. 

PVs break down for the most part into cryslalline silicon PV, inorganic 

thin fifm, multi-junction PV, and organic and Gralzel PV sYl!ltems. In a 

nutshell, you have the old, thk:k, expen~ive one-s and newer, thinner, 

cheaper, often flexible ones. The issues making them problema~c as 

en energy solution are that PYs cost too much to make, Install, and 

maintaifl---Qh, end they also only wo!1l; when the sun is out. 

To the cost issue of PVs, you hear 11 Icrl abovt companie-s worldng 

toward "price parity" and "grid parity"-Le. a cost per megawatt on II 

par with electricity from fossil fuels--bul near1y any number you see in 

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experiments into durable solar panels thilt can be mass-produced cost effectively. Miasole, for instance, 

has been getting e to 10 percent efficiency in the lab but only 4 percent or so In 8 man-production form. 

Once you account for Installation, maintenance, and repair costs for homes and business--which often 

add more thiln 50 percent to the base cost of PV panel!l--lt's clear that PV solar is never going to be costeffective as a replacement baseload pOWersO<1rc6 

So it you were to go the A! Gore route of building a national, grid-replacing, nwga solar farm In Nevada, 

we'd aU go broke and die. It's an inconvenient truth (ouch!) that besJdes destroying 5 mHlion aerea. of land 

(about sev@ntim@s thlt size of Rhode Island; wait until the environmentalist hear aboutthatl) and another 

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solar farm large enough to meet U.S. power needs-and we'd still have to keep the current energy grid up 

and running end fllitd~ to go for the two-thirds of the time when the sun isn't dcing its Job. 

!n addition, though solar has this reputation of being a green technology, the reality is thai PVs are full of 

gross pollulants, gnal1y residues and nasty chemicals.. Making PVs requires toxic heavy metals such as 

lead, mercury and cadmium-and throw in silicon tetrachloride to boot Then there's the mining operations 

needed to get many of the materials And lor good measure, don'1 forget that PVs are made in factories. 

The piant at Suntech, one of the world's biggest PV makers, is powered by a coal plant. Oh, the dalicious 

irony 

On lop of all of this, thtt PV industry is lruly dependent on subsidies. The government now pays 30 percent 

of the cost to busmesses to Invest in solar to meel theif energy needs. For consumers, there's e Fed@ral 

lax credit of $2000 for your renewable energy system (50Jar or wind) after rebates. States throw in a hearty 

heJpin9 of additional incentives, as in the case of California, which offers e substdy for residential soJ.ar of 

as much as $2.50 per installed wan, dependmg on a system's expected performance 

Even with all those sUDsicli@s, and even with oil at $140 a barrel, and even when you add in the fadera! and 

state taxes on od production, sofar 5tH! doesn't reach break-even With fossil fuels, except in some start~up's 

PowerPomt presentatIOn 

UNDER\I\oRITERS AND PARTNERS 

~s KAUFFMAN "t"TUII.""'~"~ 

biog@n id@c . 

II[)VERT!SEMENT 

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The Solar Hype Cycle: Don't Let The Sun vo Down Un Me I Xconomy 

VVorst of all, this hype is bad for the environment FOCIJsing so much on PVs meanslhat we're mavin!;! 

Investment doHars away from other clean energy technologies that have much more potenliBl. I otten hear 

folks at clean energy forums state that tile United States needs to emulate Germany by creating more 

incanti've!! to build PV farmll. V'itlat's not mentioned is \hat it takas six yearllo for II German PV plant 10 

generate the amount of power vsed to make the PV call. 

So PV solar C01;ls too much, isn'l exactly green, isn't as good as daimed, and depends on government 

lIUpport, \Nha\ else can be wrong with it? In ... eators-and their bad habit crt creatIng Impossible 

B)(pectations, stoking the fires of hype, and innating B huge bubble \hat could pop atony time. 

Lers start with thin film PV maker First Solar, Which ill up &omethlng lik.e 900% since Its IPO. The company 

IS sporting a $20 billion market cap arter $19G.9 million in revenues for the first three months of the year. 

Think about that for a second, We aren't talking an online Of &oftware play. We are talking a compllny 

producing a phySical good. This little bit ot ... atuatton lunacy has triggered a VC reedin-g frenzy on simHar 

solar plays with NanoSolar and Mlasohii .already ha ... ing valuations of well over $1 bribon before $elling 

much of anything. 

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Atl told last year, VC investments in solar power (and almos! aU of it In PVs) reaChed around $1.36 billion, 

up from $400 million in 2005. The bulk of those investments went into backing vanous thin·film 

technoiogielO-S5 in 2007 alone. More than 100 thin·film companies are vying for a slice of the marlo:et, 

according to a recent Lux Research raport, which forecast that thin-film solar WIIj occupy 2B percent of the 

$oIar market by 2012, As the report noted, "This exceptional rate of growth demonstrates that VC fifms 

believe solar!s far from its peak." Gaia I1elp ue, (Dillclosure: I am a co-tournlerof Lux Aeseart:h and a 

sl1areholder. However, I no longer have any operational or oversight role with the company. ) 

Most Papular Stories 

And with all the investment focus going to solar power, an interesting 5ituation has developedovercapacity. ln a cjsssic "who'd a thunk: we are entering a prolonged period in which PV supply is 

outpacing demand. Lower barriers to entry wi!! contribute to lower production prices end Iow-er margins. 

This l\Jm of events won't likely last forever, but do you really want to be inv8"5ting in one of the 1M-plus 

new entrants in a market that is already prodUCing more than the marlo:et can handle? 

This is a good time to note that 110 VC~backed companies even tPOed in the second quarter. Furthermore, 

the 8verage size of the solar IPOs that have occurred has been dropping since 2005. Solar equipment 

maker GT S~ar, a pretty $oIid company \tIat makes equipment for manufacturing PV cel1$, went publiC last 

week. end fei! 1l.6 percent in its first day of trading and continued to taU over 20 percent more. 

And here is the potential really bad news10r investo~ Some big players in private equity and on the 

research side have hypothesized lI1at the price of PV solar cells is about to plummet so quickly \tiel 

manufactureJ1i will entar a netherwond where they are making enough to keep the lights on but not enough 

to maka a tormidable profit That's going to make shareholders and potential shareholderfl really happy 

It's also going to give birth to a wtlole new foreign energy "boogieman" as China becomes the dominant 

solar player in e way thai dwarfs OPEC's role in aU. IJVilh its centr:alized manufacturing base, the Chinese 

can walt out any marlo:et downturns and worlo: with small margins in B way public U.S. CQmpanies can't. 

They Will gradually gain control of the PV mallie! in much the same way that the Japanase took over the 

small battery sector a couple decades ago 

So as you can teU, PVs as an investment area really bum me out. ! don't find Ihe technology aU Ihat thrilling 

either. PVs will certainly be a piece of the global energy puzzle, but win have nothing like the role of ~al, 

oil, hydroelectric. nuclear, and aven other green technologle$.. If you're looking for Ii sure winner in thiB 

cf'OV{ded men of e field .. good luck O"e spin of Ihe roulette whool seems like a safer bet for cleantech 

investors lI1ese days 

Next up. I continue my enarky remarks on $.everal other 9reen energy tachno1ogie., and eventually get 

around to saying which ones lilke 

Markjusl helped found a Somerville·based steaM c/eantech start-up wflich recently spun out of Harvard, 

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From: 

Sent: 

ro: 

Subject: 

Tuesday, January 13, 2009 4:36 PM 

Fw: USA Today Article an Rooftop Solar Systems 

Sent: Tue Jan 13 14:10:33 2009 

subject: RE: USA Today Article an Rooftop Solar Systems 

_, Thanks. It serves serves to bolster o~r argume_t for a market analysis at this time. 

-

Message--·--

To All-There is an article an page 1B of today's USA Today news paper an the "Glut of roof 

top solar systems. It 

Af-ter canvassing the committee it was "the unanimous decision not to engage in further 

discussions with Solyndra at this time. 

-

135 
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3 
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From: 

Sent: 

To: 

,;:c: 

SUbJect: 

-

#8 

As wa ara approaching the beginning of the approval pro"e.s for Solyndra again, 1 wanted to highlight the questions 

below that remain outstanding. In order to move forward with the "redit review of this project, I will need the responses to 

the quesUons below. Please let me know when the responses are ready. Delay in getting these responses will delay our 

ability to review the project and to meet the target deadline we have sel 

As an additional note, j want to ensure that these concerns are addressed in the negotiations occuring Friday with 

Solyndra. As a practical matter, it would be ackward to finalize negotiations with the applicant and then to go back to 

them with additional requests for information. I want to ensure that the specific concerns Credit Policy and Credit 

Committee have indicated are reflected in the negotiated terms. 

Please send your responses to the questions below at your earliest convenience. 

Thanks. 

From: 

~:~t: Wednesd"b Januag Ol; 2009 5:12 PM 

<;ubjed: Solyndra Analysis 

:mportance: High 

All, 

Below is a status of information requests Credit Policy has made regarding Solyndra. Each of these three emails was intended to 

provide constructive feedback to move this process forWard. To-date, I have not received a response to most of these requests. 

Also attached is Credit Policy's presentation for OMB. This analysis Wa!l run based on information received as ofJanuary 4 and does 

not reflect any subsequent submissions. 

We have not run the credit subsidy range pending receipt of information requested below. At this point, I believe we have two 

optioM: 

1) Provide the initial estimate provided to the applicant 1219 stating that it has not been updated to reflect the LGPO's due diligence 

and underwriting assumptions. 

2) Run the calculation based on the amortization'we received today and Credit Policy's ratings wi.th the caveat that this is subject to 

change based on new/additional information as well as the new Term Sheet propO:!lw. 

I suggest we discuss as soon as possible. I have not released any infonmation to OMS as was originally scheduled for 

today. I am scheduled to brief OMS tomorrow. 

Thanks. 

"lecember IS, 2008 Email 

The credit analysis of the Solyndra project may benefit from the following considerations. These Sl"e grouped into several categories 

122 
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based on how they fit within the Program's undenvriting approval and disbursement procedures. 

Credit Analysis Considerations: The credit analysis of Solyndra may benefit from the follow~g considerations: 

~vn1uation of Parent Financial Health: The interdependency of the proposed project with its corporate parent. Solyndra Inc., presents 

""hallenges in the credit analysis. In one sense, Sol)ndra Inc. is a key COUIlterparty to the project. However. the multiple relationships 

w-ith the project make the parent and the project affiliate entities within a single business entetprise. Therefore, the financial health of 

the parent corporation should be evaluated over the life ofilie project It may be worthwhile to simply model project and the parent as 

a combined integrated enterprise. Thi3 would allow for the LGPO's consideration of working capital (inventory, accounts receivable 

accounts payable. etc.) requn-ements. SG&A expenses, ongoing capital improvements, and outstanding and planned debt issuances. • 

This presentation could complement the project-{)riented model. which provides a good indication of the contributioa of the project to 

the parent's overall financial health. However. analyzing the project model aJone would provide an incomplete picture of the overall 

creditworthiness of the guaranteed obligation. In short, a financial disruption at the parent level could directly affett the project's 

receipt of revenues on a timely basis and the abiliry of the project to maintain un~terrupted operations. 

STATUS:· 

Discussed but not addressed. 

Calculation of Debt Service Coverage: The calculation of debt service coverage sbould include working capital movements and cash 

taxes. The specific calculation is comistent with LGPO Policy. 

EBITDA 

PIus/minw 

Plus/minus 

Minus 

Divided by 

}TATUS: 

Changes in working capitlil 

Cash taxes paid 

Non~discretionary capital expenditures 

Debt Service 

Addressed in 117109 financial metria 

Presentation of Project P)an ofFinancc: The current model calculates draw requirements· based on BBnDA, capital expenditures and 

working capital movements. In this calculation, Eligt"le Project Costs are camingled with ineligible project cost9 (e.g., R&D). It 

would be helpful to obtain Ii detailed sources and uses offund3 statemcnt that sets forth the eligtble project costs md correspondin.g 

sources of debt and equity, 

STATUS: 

Not Teoeived, but ,imilar issue raised by DOE OGC 

Interest Capitalization Period: 'The specific terms of the guaranteed obligation need to be defined. Specifically, whether or not the 

applicant will utilize a 36-month interest capitalization period (versus 24) should be identified. The LGPO's anwysis and credit 

subsidy estimate will be based on the maximum term afforded under the Loan Guarantee Agreement 

STATUS: 

Similar .. sue raised by DOE OGC. Credit Policy .. a .. uming. 30 month con.tructlon period with Inter .. t paid current 

based on latest amortization 5cbedule. However, clarification is needed (rom the Term Sheet Credit Folicy will use the 

maIimum term aerorded UDder the Guarantee for it's finaJ analysis. 

';omtruction Completion COII1IWnnent: The construction completion commitment from the parent organization needs to be defined. 

STATUS: 

lZ3 
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Not clarified, but issue di9cussed in LGPO meeting. Impact OD Credit Rating, if any, should be determined. 

Applicant Mitigation Strategies: The engineering report identifies some contingency plans that the applicant has in mind for the ClGS 

ortice:s.s. 11:ti3 mitigation strategy a9 well as others should be articulated by the appli~t and the associated costs should be identified . 

• dditionally, the results oftbe FAD 1 facility should be documented at this. time and reviewed by the LGPO's independent engineer. 

lbe results of this facility represent an important piece of information for the LGPO and credit rating agencies to consider as they 

move forward in their analysis. 

STATUS: 

Not addressed. 

December 31. 2008 Email 

Project Sponsor Risk: Your risk rating indicates that the company ha.9 recently closed on a $350 million convertible issuance. 

Have we received an. updated balance sheet thatre.t1ect.s the company's current cash balances? What is oUI expectation ofcasb 

balances as of financial close? Can you share the results of your Lexis~Nexi5 research with Credit Policy? 

Status: 

Received updated balance sheet 

Received LeXis-Nexis research conducted to date 

Information related to timing of F AB 2 .equity raise received on 117/09. Additional information is needed regsrdjng parent 

funding requirements through completion of FAD 2 project. 

Technology Risk: Has the Applicant provided a schedule of milestones related to the FAll-l fucility7 The "standby financial 

resources" attribute indicates that concern over completion support adequacy may be addressed through recourse to equity holder. Is 

this related to the completion support facility? Wliat is the LOPO'9 p09ition on this? 

fie concern over the C1GS scale-up has been identified. as the mos:t significant risk to the project ramp. Both the Applicant engineer's 

.• port and the existing draft of the lE's report suggest that the Applicant hBs a contingency plan for providing additional ClOS 

deposition output capability if needed. Do we have an idea of the cost associated. with "this plan? 

Status: 

Fab 1 status report received on In/09. Specific FAB 1 milestoD~ not received 

Specific documentation rega.rding the availabUity or adequacy of the standby resources not received. 

CIGS disposition contingency plan articulated in IE's report. Cost associated with the additional ClGS tool nat reteived. 

Cost estimate should indode potentIa) delay effecb. 

Capital Structure: What is the Applicant's plan for reising the requited equity investment in the project?· Will the Applicant 

have sufficient casb on hand to :fund the required project equity investment 8.9 well as funding other casb needs related to ineligible 

project costs and ongoing working capital needs of the parent CorporatioD? 

Status: 

SpecifiCi on sizing and timing of equity raise Dot received. 

Information/analysis regarding worldng capital Deeds of pareDt uot received. 

Mark.t Risk: The Risk Rating reference. a Navigant Consulting stUdy published in April 2008. Has this study been made available to 

the LGPO? If so, is it in Edoes? Could you share "the diligence findings of product off-takers? 

Status: . 

Response regarding April 1008 Navigant study not recd~ed 

Off~taker dUJgence findings not received 

Project Completion Risk: Have the basic temu of the Equipment Supply Agreement been defined? How do .. the Applicant 

ropose to address issues related to delivery oftaols and equipmeht'1 

Statw: 

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To: 

From: 

Meeting with: 

Location: 

Meeting Date: 

Open to Press: 

MEETING MEMORANDUM 

Secretary Chu 

Secretary's Office 

January 30, 2009 

1 Yes 

Time: 

[ X J No 

10:15 am-1O:45 am 
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'We've Got to Do This' - WSJ.com#printMode Page 1 of 5 

FOLLOW WSJ ELECTION COVERAGE: 

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mE WAIL SI'REEI' JOURNAL. 

POLITICS FEBRUARY 6 2009 

'We've Got to Do This' 

Energy Secretary Chu Plans Rapid, Careful Spending 

The nation's new energy secretary, Steven Chu, talked Friday with The Wall Street Journal's Stephen Power, 

about what he's doing to make sure the billions of dollars headed his department's way for energy efficiency and 

renewable power projects don't get wasted or tied up in red tape, a common problem at the Department of Energy 

in recent years. Below, see edited excerpts. 

STEVEN CHU 

The Wan Street JoumaJ: It looks like your agency is about to get somewhere in 

the area of $35 billion to $40 biUion under the stimulus bill making its way through 

Congress. Right now you're the only person at the Department of Energy in a Senate 

-confirmed position. How wen equipped is your agency right now to wisely and 

quickly spend all the money it's about to get? 

Steven Chu: I'm the only confirmed position but there's a chief of staff, there are 

advisers to me personally that are not Senate-confirmed positions that are coming 

on board as soon as the internal vetting process is done. So 1 think a number of key 

advisers that report directly to me are the only real way I see of getting this going in 

a rapid way. Just one person can't do it... 

WSJ; But this is a huge amount of money -- it's bigger than your annua1 budget and 

it's for all these new areas and new programs. And we know DOE in the past has had 

trouble moving quickly, like with loan guarantees. < 

Mr. Chu: There's one key adviser we're trying to get as quickly as possible specifically on the economic recovery 

package. I've been speaking with the Department of Agriculture. [Secretary of Agriculture] Tom Vilsack has been 

very, very helpful. He's come over here. He's had some loans that have gotten out, including actually investments 

in bio-fuels energy companies. They seem to have at least at first blush a better track record of getting it out 

quickly, We're trying to find out what they did, how they did it '" We're going to be exploring the idea of detailing 

some of his people to come over here and put them next to our people and say, 'This is the pace we expect, not 

three years, but five months." 

We've got to do this and we've got to do it in a way that has not been done at the Department of Energy ... 

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'We've Got to Do This' - WSJ.com#printMode 

We're looking at what are asserted to be general counsel concerns that could slow things up. We're looking 

everywhere -- very, very deeply. 

Page 2 of 5 

Essentially, a third of my attention is focused on how to get it done in months and not in years ... , If someone in 

the Department of Energy tells me, "Oh, you have to do this, you have to do that, there are legal impediments and 

things like that," you go to another agency and find they've done it more quicldy. It's a matter of getting the 

money out quickly and making sure you do due diligence .... 

I think this is solvable. And not only solvable -- we've got to do it. OthefW"ise it's just going to be a bust. Ifwe take 

two years to get the loans out, that's not what the country needs. We've got to get it out much more quickly than 

that. 

WSJ: What's your metric? What percentage of money has to get out in what time frame? 

Mr. Chu: To really stimulate the economy and help the U.S. recover from this dire situation we're in, my feeling 

is, a substantial fraction, a majority of it .,. you're starting to cut checks within half a year to a year. 

WSJ: So you'd like to be cutting checks within a year to half a year '" with most of the money? 

Mr. Chu: Yes, Now, there are things in the pipeline now. And so we're trying to get those things out in a month. 

We're essential1y going back to the people who have been doing this ... They gave us a scenario for an accelerated 

,., it's been in the pipeline literally for over a year ." These are loans to energy companies, They gave us an 

accelerated scenario, maybe five months. We're saying, !lTeH us what you need to do in order to get them out in 

four weeks," Because it's in the pipeline. These are loans from the 2005 [Energy Policy Act]. Appropriated in 

2006, and still no money is out the door. And here we are at the beginning of 2009. 

WSJ: VVhat are some of the bureaucratic obstacles or procedural obstacles that have slowed the department from 

getting those loans out? 

Mr. Chu: One thing is we have a very conservative legal department. They feel that in order to be quote fair to all 

applicants, you have to wait and give a period of time where all applications come in and then you begin to vet the 

applications ... Many agencies including competitively bid science agencies ... you take these rolling applications 

and you have a baseline of the quality you know so if a loan guarantee program has been going on for several 

years .. ' you have a good feel for the quality. So you don't have to wait for all of them to come in before you start 

triaging them, "These are the ones we are look at seriously. these are the ones that are non starters ... ," 

I'm not convinced that the level or documentation that's been asked ror is required ... It might be too much. So 

we're going to have to look at that. We look at best business practices in the private sector. Ifthere's a huge 

difference btw practices in the private sector, you don't want to be issuing bad loans ... you figure out how is it 

that commercial entities can do this and import those best business practices .. , 

It means you have to go into gory detail: "VVhat is it your requiring, why do you think you need this?H ... 

I have my advisers actually going down rolling up their sleeves and asking, "OK, what is it that you're requiring? 

Js thiS really necessary?" 

WSJ: Is there an example of something you've discovered in your reviews of something [the] DOE was requiring 

that you think is excessive? 

Mr. Chu: No. We've had in this office about three or four meetings. But you don't actually find out things in this 

office. So I now have my advisers actually going dO\-lll1, rolling up their sleeves and saying, "OK, let's look at every 

detail. '" What is it that you're requiring? Is this necessary?" 

There's another thing -- helping companies really talk with a potential applicant. And what we can do that, I 

believe, is completely fair is that [with] every single applicant, we just say, "We are here to help you put forward 

the best application possible" ". instead of saying, "We can't help anybody," There are two ways to be fair: You 

help everybody or you help no one. So I'm looking at how we can give advice. 

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Let's say you're a company, and yOll want to come to the Department of Energy. Well, you may not know what is 

really required. So you might submit something, and we can look at it and say, "Nope, go bacK, this is not what we 

need. We need much more than this," Or maybe in the uncertainty, you might be generating more than we really 

need. I'd think we'd get a Web site up to help people. So it's all publicly disclosed. Everything. Sort of a help Hne, 

jfyou wiH. We're going to look at whether that is possible. I believe it is ... 

WSJ: How many people are you going to have to hireto administer this law? 

Mr. Chu: Administer the law? 

WSJ: To help you just implement it to get it done. The accountants, the risk analysis people, tracking the money. 

How many peop1e are we talking about that this agency is going to have to hire? 

Mr. Chu: Well, we're going to probably have to get them detailed from other agencies ... We -will look for talent 

across all the agencies ... Because, quite frankly, we can't hire the people fast enough because of [human 

resources] rules. So we need detaiJees. Either detaiJees, or we hire people from the outside. Again, detailees, 

consultants. But there's no way we can get money out the door by going through nonnal hiring processes. 

WSJ: So how many people are you looking to bring into the agency? 

Mr. Chu; I can't say now. Again, we're only ... 

WSJ: Thousands? 

Mr. Chu: No. We don't need thousands. Come on ... I don't think you ne€d thousands. A lot of these loans, some 

ofthe loan applications I've seen are in big hunks of money. The nuclear, this is in the $5 billion range. Eighteen 

point five billion, and peopJe are talking about three loans. The synopsis of the loans I've seen" in innovative green 

energy they're in the hundred-million dollar range. They're in big hunks of money. Now, jfwe were doling them 

out in less than million-dollar pieces, that would require a lot more people. 

WSJ: V'lhat are the areas of the bill and DOE where you're looking and thinking, "OK, that's where I've really got 

to zero in on"? 

Mr. Cho: Loan guarantees and getting money to the states. These are green energy projects within states.rve 

met with a group of them, 15 or 20 of them a couple of days ago. We're trying to figure out, "OK, which ones, if we 

get the money to you, how can you get it out the door?" Are there [National Environmental Po1icy Act] 

requirements that...nil slow things up? VVhat's shovel ready? What's good to go? We're putting the word out: 

Bring us back what you can personally guarantee to us is really going to be ready. We cut you a check, you cut 

them a check These are things like weatherization, things of that nature ... 

WSJ: VVhat percentage of the roughly $37 billion dollars do you want {to be] spent by [the] DOE within a certain 

amount of time? 

Mr. Chu: I would ~ay I would like, you know, round numbers, about half of it to be spent. This would be an 

ambitious goal, half of it to be spent in a year. That would be a good target, I think. 

WSJ: And that means being spent by {the] DOE. But does that mean getting to the people who actually are going 

to need it? 

Mr. Chut That's why we're putting the states on notice. 'Hey, guys, tell us .. _ so there's no delay,' 

WSJ: And what are they telling you they need you to do to do it? 

Mr. Chu: They haven't gotten back to us ... 

WSJ: Is there any risk that in setting such aggressive goals for spending money in a certain period of time that 

you're going to wind up wasting money in some areas? 

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Mr. Chu; There's always a risk. But the protection against that is not to require more documentation. The 

protection is to get really good people to ask the right questions, to do a real evaluation. There are two ways of 

doing this: You can ask the right questions, and you can get people who are good at this sort of economic project 

management, who are experienced in "how do you smell something that doesn't look like it's going to fly?" or the 

financial business plan or basis ofthc company. 

WSJ: Good questions, not necessarily more questions. 

Mr. Chu: Exactly. 

WSJ; But where are yOll getting those people? 

Mr. Chu: Private sector .. ' There arc a lot ofpeop\e out there who realize the condition we're in the United 

States, both with the energy issues and the economic stimulus issues. You can get really good people to come in 

for half a year or two years, and say this is your service to your country. 

WSJ: Any interesting places you're recruiting from? 

Mr. Chu: We're going to have announcements. 

WSJ: I know you say you have advisers, but if you're the only Senate-confirmed appointee, that means that 

you're the only person who can testify for your agency before Congress? 

Mr. Chu: That's right. 

WSJ: So isn't that a bit of a challenge? 

Mr. Chu: Yes and no. What happens is, there are a core of people 1 think at the Department of Energy who want 

to be led. who really want to do the right thing. There's another core who's used to the old way of doing 

things. But remember, there's -- well, like Rod O'Connor, my chief of staff. He has the exact same feelings I do. So 

those are not Senate-con finned people. But they report directly to me. These nre people I'm going to be seeing for 

a couple of hours every day. That's the only way we can get this thing going. It's going to take a couple of months 

to get through Senate confirmation. So we have to rewrite the rules. 

WSJ: Sens. Feinstein and Snowe have asked you to establish a timeline for issuing loans under the Advanced 

Technology Vehicles Manufacturing Incentive Program. Are you prepared to do so? 

Mr. Chu: We're working on it '" 

WSJ: So arc you ready to give a timeline? 

Mr. Chu: We can probably get a timeline out in a week or two. I mean, we're trying to understand, why the heck 

did it take so long before? Are there examples of it taking far less? We're working very hard to find out where in 

the commercial sector, where else in government, can you get responsible loans, responsible investments quickly. 

WSJ: 'The senators have also complained that [the] DOE's interim, final rule for this program erroneously 

defined the "base year" of this program as 2005. instead of the year a retooled factory re-opens. They say [the] 

DOE's "error could allow autornakers to receive subsidized loans for mere compliance with [the Corporate 

Average Fuel Economy] regulations, which would violate Congress's intent and squander government resources," 

Is their concern valid, and if so, how do you plan to address it? 

Mr. Chu: I can't speak to that at the moment. That's a technicality 

WSJ: Do you have any concern that an these responsibilities you're about to be tasked with are going to distract 

[the] DOE from its focus on cutting-edge science and maintaining nuclear weapons and cleaning up former 

weapons facilities? 

http://online.wsj.com/article/SBI23393841471357455.html 11115/2011 
145 


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'We've Got to Do This' - WSJ.com#printMode Page 5 of5 

Mr. Chu: No, I'm not concerned. I have a high bandwidth ... Actually, I like it because it's a good reason to get 

into the heads of the folks who work in this building ... that we're going to go into a new era where you can get a 

level of dedication. We can bring in new people that have this real sense of urgency. It's a good thing ,., It can be 

the example of a new DOE. 

Copyright 2011 Dow Jone, & Company, Inc. An Rights Reserved 

This copy is tor your personsl, non-commercial use only Distribution and use of this material are governed by our Subscriber Agreement and by 

copynght law, For non-personal use Of to order multiple copie!l, please contact Dow Jones Reprints at 1·600·643-0006 or "151t 

www dJreprints com 

http://online.wsj.com/article/SBI23393841471357455.htrnl 11115/2011 
146 


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Document 

6 
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76267.050

From: 

To: 

Cc:: 

Subject; 

Ollte: 

Fyi 

Thu 

Subject: RE: ACTIONS: Loan Program 

thank you for these notes. the nepa disdosure Issue looks resolved. in the solyndra conversation, it is 

very important that the parties be able to dose today on the matters at hand and move to the next 

stage. so, havlng someone In the room who can comm~ the department in real time Is quite important 

to ensure the cycle time for decision-making can be short and they do nol have to carry any issues 

over night. The team would like to be able to metaphorically lock the door arid not come out until there 

is an agreement. This loan represents a litmus test for the loan guarantee program's abil~ to fund 

good projects quickly. Thank you for your prompt and timely support on this matter. Regards,. 

0211112009 03:07 PM 

Subject RE:: ACTIONS: \.Dan Program 

-

NEPA: This afternoon this office ccncluded that divulging the amount of loan 

guarantee being sought was not required in NEPA documents. This conclusion is 

ccnsistent with the views expressed by the LGPO. 

SOLYNDRA: (1) I understand that there will be GC participation intomorrow's 

meeting with the sponsor. I will be pleased to be available on an immediate basis 

to this office's representative should that be necessary to address any open issues. 
148 


76267.051

(2) I do not know anything about the "IP language." Perhaps .o.can 

enlighten me. 

Thanks, 

-

11, 2009 3:37 PM 

-

To followup my earlier email today, below are three 

attention for Title XVII. I might add that we invited 

to discuss these items and no one from GC that if we are 

going to deal with these matters expeditiously, that GC is present and prepared to 

handle these issues. I appreciate your attention to this priority effort. 

Thanks, 

-

1. GC needs to decide whether language divulging the amount of loan guarantee 

being requested by applicants should be included in NEPA docum.e.nts •• ,m.is issue is 

currently delaying NEPA processing of the Solyndra,_ and _ 

projects.) lGPO is against the idea as we see this a~ess confidential 

information. Attached is lGPO memo providing our arguments which was given to 

GC in early December. We understand that a meeting Is being held among all the 

GC parties today to resolve the matter. 

Solyndra 

1. GC must be represented at the upcoming conference call with the sponsor. A 

critical meeting is tomorrow (Thursday) afternoon. Whoever attends for GC must 

have the authority to close on issues or have immediate access to someone who 

can. Anything less will significantly delay negotiatlons. 

2. GC still needs to opine on IP language. 

+====~~======~====~=========~==~~===~====------=============+ 
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76267.052

This message may contain confidential and/or privileged 

information. If you are not the addressee or authorized to receive this for the addressee, you must not use, copy, 

disclose or take any actioA based on this message or any information herein. If you have received this message in 

error, please advise the sender imnediately by reply e-mail 

and delete this message. Thank you for your cooperation. 

+-----===-=--==-====~-=~=-=======-======================+ 
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Document 

7 
151 


76267.054

From: 

To: 

Subject: FW: _SOlyndra Report 

Da~ Friday, February 27, 2009 11:36:50 AM 

-

_wants you 10 handle this from _by forwarding it (minus numbers 1 and 8) to and 

requesting their response. Say thal~ were questions raised by LGPO's engineer. 

Thanks. 

-

From: _ 

Senc Thursday, February 26,2009 11:02 AM 

TO'_ 

Report 

--Some points to consider after reviewing the "Independent Engineer's Report: 

Solyndra F AB 2 Manufacturing Facility Final Draft" (February 2, 2009). 

I. Concm that construction contracts sbould include recommendation of the "Geotechnical 

Report". Solyndra should demonstrate how the CH2M Hill PDR and Geotechnical Report 

recommendations are resolved or addressed. A crosswalk would be helpful. 

2. A discussion of the raw material supply chain availability is desired. For example, 

Solyndra's propriety and unique processes to vapor deposit the copper/indium/gallium, 

diselenide (eIGS) may be depend on availability of materials just recently applied to PVs. 

CIGS is also proposed for flexible PV cells. Is Solyndra in competition for CIGS and other 

feed stock materials? 

3. Solyndra refers to "bare glass" tubes. Are these commonly available glass or specialized 

glass products. How are these warranted against damage? Long-term life cycle test results 

from IDS production would be desirable. 

4. No quality control industrial standards such as ISO 9000 are cited. Details regarding 

quality control as applied to the proprietary front end processes would increase confidence in 

meeting manufacturing goals. A robust quality control program would support warranty or 

life-cycle claims for PV tubes manufactured by Solyndra. 

5. Of key concerns are approaches to scale up from the IDS production rates to Fab 2 

facility production rates. Molybdenum back content and CrGs' application scale up are 

proposed by reducing thickness. For these critical photovoltaic items, has Solyndra analyzed 

long-term life-cycle and performance impacts of reducing thickness? Consider also that 
152 


76267.055

eIOS are sensitive to environmental conditions. 

6. Three-scale up options are proposed for eIGS vapor applications. Decision points for 

when to adopt an option and the cost and schedule impacts are desirable. 

7. Efficiency reviews should be submitted and reviewed. Achieving 44 to 48 percent 

increases in production rate for molybdenum back content and eIOS vapor deposition are 

challenging goals. 

8. Further discussion and data on reliability, products, life-cycle performance and warranty 

would be helpful. 

-
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Document 

8 
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~'iiiii==------ ;~~t , mwn 00. 10: 200UfSCM 

SUbjeel, Re: Update: Solyndra 

Talked to them yesterday and they are excited for potus to do the event. Regards, _ 

_ • do we know if this 1s stUI a potus event? Last time I spoke w • he was not sure. 

-

Great result well negOtiated .... and _ cait you also work w this •• to ' 

prepare a short' memo for the whitehouse folks on what an announcement could look 11k. on the 

'l!1th. We w~ll want to try to get to crb on friday to mak" sure that we have enough tillM! for 

the wh folks; Solyndra w111 be happy they bUnked when potus arrives. Great work. R"S8rdS, 

-

Sent:' Tue Mar 18 99:28:36 2009 

Subject: Update: 'Solyndra 

Gang, 

Just spoke with __ Solyndra bUnked. Congrats I 

\27 
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_, pIs followup with ••••• so we can expeditiously .,ove f(]ro..ard to the Credit 

Committee and CRB. 

Well done 

-

128 
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Document 

9 
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~.:=;:=---- ~:~t: ! WP'S' Me! 10 20099:15 M1 

Sub!""t: RE: Loan announcement? 

There is still strong interest ••• that is great news and great work. When does the CRa meet? 

----·ariRinal Messa'e ..... 

From: 

sen;.-rch 10,2009 

To: 

Cc: 

Subject: Loan announcement? 

- 8:38 AM 

Is there still an interest in a loan announcement March 19th? 

I ask because we successfully wrapped up intense negotiations yesterday for a conditional 

commitment with 5olyndra. There's still much paperwork to complete and wanted to check how 

hard we need to press. 

-

126 
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Document 

10 
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CREDIT COMMITTEE PAPER 

REQUEST FOR LOAN GUARANTEE APPROVAL 

PROJECT: So\yndra Fab 2, LLC 

LOAN NUMBER: 1013 (FY06 Solicitation) 

~: March 11, 2009 

Redacted Version - All exemptions fall under b5 
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LGPO CLEARANCE 

Origination Team Members, LGPO 

_ Program Manager, Origination, LOPO 

_ Senior Investment Officer, Origination, LOPO 

_ Senior Investment Officer, Origination, LGPO 

_ Director, Origination:, LOPO 

Project: Solyndra (1013) 

Oats: March 11,2009 

Credit CommIttee Paper 

Request for Loan Guarantee Approval 

Credit Paper 

SolYlwa 

Page 2 
161 


76267.064

PROJECT REPORT 

TABLE OF CONTENTS 

C«dit Paper 

SolYlldra 

PROJECI' AND LOAN SUMMARY SHEET ............................................... ~ ............ ~ ............ ~ ........ _ ...... 5 

EXECUTIVE SUMMARY ........................................................................................................... : ............... 6 

SUMMARY OF TERM SHEET ........................................................................................ 1 

OVERVIEW ... __ ... _ ..................................................................................................................................... 8 

PROJECT EUGfBIUTY .......... : .................................................................................................................. 8 

INNOVATIVE TECHNOLOGY .................................................................................................................. 9 

TECHNICAL INFORMATION •.••.••.•. _ ..................................................................................................... 9 

INDEPENDENT ENGINEER'S REPORT ................................................................................................ 10 

ST AIDS OF F.NVIR.ONMENTAL REVIEW ........................................................................................... 10 

BUSINESS PLAN ........................................................... _ .......................................................................... 10 

PRICING AND VOLUME - EXISTING CONTRACTS ......................................................................... 12 

MARKET ANALYSIS ................................................................................................................................. 12 

FINANCING PLAN ............................................. -. ..................................................................... ; ............... 17 

FINANCIAL MODEL AND SENSlTlVlTY A..,..ALYSfS ........................................................................ 1!1 

KEY RISKS & MlTIGANTS ................................................................................................. _ .................. 20 

APPLICANT INFORl\'lA TION .................................................................................................................. 23 

MANAGEMENT TEAM ............................................................................................................................. 23 

BACKGROUND AND LEGAL STRUCTURE ......................................................................................... 24 

ORGANIZA nON ....................................................................................................................................... ~ 24 

GOVERNMENT SUPPORTJPERMITS .................................................................................................... 24 

CREDIT ASSESSM:ENTI CREDIT HISTORY ........................................................................................ 24 

Project: Solyndra (1013) 

Date: March 11. 2.009 

Credit Committee Paper 

Request for Loan Guarantee Approval Page 3 
162 


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AITACBMENTS 

Compliance Checklist 

Proposed Tenn Sheet 

Equity Financing Plan 

Financial StstementB 

Independent Engineer's Report 

Independent Market Report 

LGPO Credit Analysis Documents 

Amortization Schedule 

Equity I Debt Contribution Schedule 

Management Team 

Stress Testing I Financial Scenarios 

NEP A Compliance Documents 

Tab 2 

Tab3 

Tab 4 

Tab 5 

Tab 6 

Tab 7 

Tab 8 

Tab 9 

Tab 10 

Tab II 

Tab 12 

Back Pocket 

Project: Solyndra (1013) 

Date: March ii, 2009 

Credit Commltme Paper 

Request for Loan Guarantee Approval 

Credit Paper 

SolyndrD 

Page 4 
163 


76267.066

Project Solyodra (1Q13) 

Cata: March 11, 2009 

Cred1t Committee Paper 

Request for Loan Guaral1tea Approval 

Credit Paper 

Solynba 

Pago 5 
164 


76267.067

Credit Paper 

Solyndra 

Solyndra Inc. ("Solyndra" or "Sponsor") has developed an innovative technology involving the use of tllin·film 

ClGS, • semiconductur material" to transform glass tubes into fimctional photovollaic ("PY") modules. Forty of 

these modules are fabricated into a solar panel that bas a number of advantages over traditional solar panels. The 

cylindrical tube gathers light from all directions, resulting in a higher PV conversion efficiency than competing thin 

film t<cbnologi"". The Solyndra PV panels arc lighter weight, provide a lower wind profile and are less expensive 

to install than other solar panels available on the market. Solyndra's proprietary design and configuration i. now 

ready for large-""ale commercial implementation -. taking the technology from tbe lab to the market. 

Solyndra is currently in the lalter slages of completing its initial 113 MW production line ("Fab l"), and is now in the 

ramp-up and technology optimization phase. The company intends to ultimately construct a larger facility ("Fab2") 

that will eventually consist of six production lines essentially identical to Fabl. Solyndra bas applied for a loan 

guarantee from LGPO for a total of $535 million to finance the first tMcc production lines ofFab2. 

Upon completion, Fab2 PV output would reduce the emissions from traditional power souroes, including: 245 

million metric tons of carbon dioxide, 1 million metric tollS of sulfur dioxide and 380 thousand metric tons of 

nitrogen mudes. 

The Sponsor is managed by a highly-e"Perienced team of teclurical and financial prof<ssionals, and has engaged 

top-line engineering, construction, legal and financial advisors in developing its plan. for the Proj':ct. The Sponsor 

has raised $750 million doUars in support of its operations to date, mostly from well-financed venture-capital firms, 

demonstrating the ability to raise the private equity needed to capitalize the Project. The Sponsor will be required to 

provide an additional $198 million of equity at financial close. 

As mitigation of the risks as.ociated with any ramp-up of new technology to commercial scale, the Fab2 project will 

'have the benefit of the Sponsor's e"Perience in developing and operating its F,abi proouctinn line which 115es the 

same processes, tool'l and line-configuration. To date, over 20,000 Fab 1 panels have been produced and sold, at 

specifications, efficiencies and throughputs nearing the steady-state production levels projected for the Fab2 

production. 

The LGPO recommends the approval of this Pro~ect's application and the 

issuance of a Conditional Commitment to execute the requested loan guarantee, 

subject to the Terms and ConditWns accompanying this submission. 

Project: Solyndra (1013) 

Date: March 11, 2009 

CredIt Committee Paper 

Roquest for Loan Guarantee Approval Pago 8 
165 


76267.068

Project Solyndra (1013) 

Date: Match 11. 2009 

SUMMARY OF TERMS & CONDITIONS 

Credit Committee Paper 

Request for Loan Guarantee Approval 

Credit Piper 

Solyndra 

Page 1 
166 


76267.069

Overview 

Credit Paper 

Solyndra 

Solyndra is proposing to construct and 0l?erate a thin-film, solar photovoltaic panel fabrication facility in Fremont, 

CA. When completed, Solyndra's Fab2 facility will produce ready-to-install PV panels capable of producing 420 

Megawatts of electricity. The production capacity will be constructed, installed and financed in two phases. The 

company has approached the LOPO to finance Phase 1 of Pab2 (the "Project") which would comprise 2LO Mw 

(approximately I million panels per year). 

The Project will include the conStruction of a 650,000 square fool "fronl end" manufacturing huililing. the purchase 

and installation of the initial three production lines and the retrofitting of a 300,000 square foot "baclc end" assembly 

building (which will be leased). The first of three production lines is scheduled to begin operation in late 2010. The 

proposed site for the front end manufacturing building is a 30 acre parcel of land :4 mile from Solyndra's 

headquarters. Solyndra bas selected CH2M IDLL a. the engineering contractor. CH2M HILL will provide overall 

management for the engineering and design of the Fab2 facility. 

Solyndra is negotiating the construction agreement with Rudolph and Sletten, Inc., a leader in California 

construction, and will complete the construction contract prior to loan closing. The contract will be on a Guaranteed 

Maximum Price basis, with incentives. 

The Project will manufacture a thin film photovoHaic (PV) panet that provi~ inherently clean, greenhouse gas 

emission-free electrical energy production. Use of Solyndra Fab2 panel. to generate electricity will avoid the air 

pollntants or anthropogenic emission. of greenhouse ga"es tlmt are traditionally geru:raled by fossil fuel-based 

electricity sources, which have been linked to human-induced global climate change. 

Solyndra intends to rapidly penetrate the co=ercial rooftop market, with sales being driven by its differentiated 

and ccS\~ffectiye product. The increased capacity of Fab2 will be necessary to meet its currentLy contracted 

prodnction requirements and to provide sufficient capacity to further diversify its customer b""e m the US and 

overseas. 

Solyndra is currently producing full-size PV panels utilizing its module desi~ panel. from their Fahl Facility, and 

has achieved certification on th"-Se panels from both IEC and UL standards. Solyndra began installing the highvolume Fahl production line in 2007. Fabl is projected to have a capacity of 113 MW per year of panels and is 

currently undergoing commissioning and qualification. Solyndra plans to replicate its Fabl technology, 

manufacturing knowledge and production infrastructure into the design of Fab2. 

Project Eligibility 

The Project meets all statutory requirements set forth in Title XVII of the Energy Policy Act of 2005, specifically, 

Section 1703 which defines an "eligible project", The project (I) avoids, reduces, or .equeslers air pollutants or 

anthropogenic emissions of greenhouse gases. The full anticipated project (phase 1 and Phase 2 of Fah2). if 

implemented at the scale proposed will avoid 245 million metric tons of carbon dioxide, 1 million metric tons of 

sulfur dioxide and 380 thousand metric tons of nitrogen oxides); and (2) emploYS new or signiiicantly improved 

technologies "" compared to commercial teChnologies in service in the United States at the time the guarantee is 

issued. Under subsection (b) Categories, the project is. "renewable energy systcm." 

Project: Solyndra (1013) 

Data: March 11.2009 

Credit Committee Paper 

Request for Loan Guarantee Approval Page 8 
167 


76267.070

Innovative Te.clmology 

Credit Paper 

Solyndra 

The Sponsor has developed a unique, bigh performance, photovoltaic panel designed to solve some of the most 

challenging installation problems forPV systems on commercial rooftops. Solyndra's novel cylindrical cell design 

enables improved collection of aU available light and do not require costly tracking or tilt mounting hardware. 

Solyndra'! PV panels greatly simplify and lower the cost of mounting, allowing tighter module packing (even over 

rooftop obstacles), arc impervious 10 moisture and allow lower temperature operation. SoJyndra's panels are low 

weight and allow wind to flow through the modules (essentially eliminating wind loading). 1bis unique design is 

self-baU3l!tiog and enables the installation of PV systems on lighter duty roofs not currently suitable for PV panels. 

COllStruction Plans 

The Fab2 facility, when completed, will consist of a 650,000 square foot front end manufacturing building and • 

300,000 square foot bacle end assembly building. It is anticipated that the front end building will eventually support 

six production lines capable of producing an aggregale of 420 megawatts per y= of solar panels. This project 

(phase 1 ofFab2) encompasses only three production lines. 

Solyndra Fab2'. Back End manufacturing activity will be housed in one or more leased building •. 

Solyndra anticipates contracting with Rudolph and Sletten to provide general contractor services for Fab2 Phase 1 

construction. Final' ex.ecution of this contract will be a Condition Prece&nt to financial closing On the loan 

guarantee. Studios Architecture was retained for master planning and Hathaway Dinwiddie Construction Company 

("HDCC") for pre-<:onstruction service. related to Solyndra Fab2'! Front End facility. The Applicant, Studios 

Architecture and HDCC have a pre-existing relationship established for worle performed on the Applicam', 

corporate headquarters in Fremont, CA. 

The proposed project design method for Solyndra Fab2 will be a traditional ''Design, Negotiate and Build" method 

with a design assist process for the mechBnical, plumbing, process piping, electrical and controls systems. 

The Sponsor will employ a bonus strategy with the General Contractor. Instead of negotiating liquidated damages, 

the Applicant wi!! establish key milestone dates for the project and establish goals for saving> on the GWlranteed 

Maximum Price budget and meeting the expectations for quality of work. If tbe General Contractor and their 

subcontractors meet all the established goals, they will be p.ud a bonus. 

Solyndra has designed and built proprietary manufacturing process equipment for their Fab t production line. 

Solyndra will duplicate this technology for Fab2, and will be responsible for manufacturing and installing • 

significant portion of the line equipment for Fab2. They have a dedicated equipment division to address this 

challenge. 

ProJect: Solyndra (1013) 

Oaoo: March 11, 2009 

CredIt Commltt •• Paper 

Request for Loan Guaranooe Approval Paga9 
168 


76267.071

Independent Engineer'. Report 

Credit Paper 

SolYlldr. 

The DOE', independent engineer for this project i. RW Beck, which submitted its final report February 27, 2009. 

The full report is attached in Tab 6. RWBeck's fundamental conclusions include: 

The Operations and Maintenance of the Project facilily will be performed by a separate corporate enlity, owned and 

controlled by Solyndra, lnc. . 

Statu, .fEuvironmental Review 

The DOE NEP A review process 

So(yndra'. novel PV design offers several operational advantages including "air·flow" gaps which eliminate wind 

loading, low·weight and the ability for modules to be in.<taUed over roof obstructions and closer to skyligbts without 

penetration of the rooftop. In summary, Soly.dra'. PV panels are de5igned to provide more energy per rooftop and 

a 40% reduction in balance of S)'5tero costs (mounting and installation ,elated costs). Solyndra bundles the mounts 

and related accessories with its PV panels: To the knowledge of the RW Beck, no other PV panel manufacturer 

includes mounts in its pricing. The average delivered price of Solyodra's panels on a dollar per kWh basis is 

competitive to wafer silicon PV panels and First Solar'. thin film CdTe PV panels. 

Project: Solyndra (1013) 

Date: March 11,2009 

Credit Commltta. Paper 

Request for Loan Guarantee Approval Page 10 
169 


76267.072

Credit Paper 

So/p.dro 

Solyndra is focusing primarily on the large-scale commercial rooftop market (e.g., manufacturing and big-box 

retail). It will not target the building owners directly, but rather will sell its product to "integrators" who will install 

and connect the PV panels, oden as a part of the installation of a new or retrofitted roof (tying-in well with 

increasing regulatory requirements for installation of reflective white roof membranes or other energy.-dD.ciency 

equipment), and often in conjunction with other parties who are positioned to talce advantage of variollS tax credits 

and accounting incentives. 

Solyndra'. existing customer base is diversified into US, European and (lIO-far-limited) Asian markets (through its 

multi-national mitigating the risk of regulatory, FX and economic changes. The Navigant market 

mW~sfum . 

So\yndra Advantages 

Solyndra uses a hollow glass tube as the substrate and hermetically seals this tube in a larger pro!cctive outer glass 

tube (creating the module) while adding an "Optical Coupling Agenr~ (OPA) between the tubes to increase the 

amount of light incident on the PV module. Forty modules are then fabricated into. deployable PV array or panel. 

Solyndra has identified the following advantages of its technology strategy, compared to its competitors in rooftop 

applications: 

Efficiency. Utilization of a material with a higher PV conversion efficiency than competing thin·film PV 

technologies (I.e., a-Si and CdTe). An extremely thin "active layer" of ClGS can be deposited onto a 

sub9trate via a number of deposition technologies, allowing for rroured material usage compared to singleand multi-crystalline silicon PV technologies. OGS cells in the laboratory bave reached a lrigher cell 

efficiency (20 percent) compared to other thin fi.lm technologies (a-Si and edTe). 

Encapsulation. Novel hermetic encapsulation technology. This eliminates the chance for water diffusion 

into the cell. which' can cause reliability problems over the lifetime of the product. It aLso allows for the use 

of the optical coupling agent, which traps additional light, resulting in higher energy output for each 

module. 

~. The cylindrical shape of Solyndra cells has a number of advantages. The omni-facial cylindrical 

cell geometry optimizes the coUection of available direct, diffuse and reflected sunlight. Because the sun 

sees the same cell geometry throughout the day, an omni-facial cell is inherenlly self-tracking for collection 

of direct light without any additional tracking hardware; diffuse light is collected from all angles . .Reflected 

light is also efficiently collected by the downward-facing area of the cell. This additional light collection 

aL<;.o results in increased. energy output per module. 

The unique geometry of Solyncira'. panels also allows for a higher energy density per rooftop, as panels 

can be placed with less concem for panel-tn-panel shading (no need for tilt) and the panel. can be placed 

closer to obstructions. This enables larger system sales per rooftop, resulting ill pot<:rrtially higher gross 

margins for installers. The novel PV panel design provides a combination of lighter w:cight, lower wind 

profile, and better collection of available light in rooftop applications compared to competing PV 

technologies. 

Balance of System Costs. The unique form factor of Solyndra's PV panel all.ows for a reduced installation 

cost compared 10 other PV technologies. The horizontal mounting and free air-flow, self-ballasting panel 

construction greatly simplify the requirements for mounting hardware. The mounting structure is 

lightweight, inexpensive, non-penetrating and easy to install. The simple mounts can be quickly attached 

and then the panels can be set down on the rooftop. No additional ballast or mounting hardware is needed 

to secure the panels to Ihe rooftop. According to Solyndra, tbe greatly simplified mounting hardware and 

ProJec1: Solyndra (1013) 

Date: March 11,2009 

Credit Commlltae Paper 

Request for Loan Guarantee Approval Pagett 
170 


76267.073

Credlt Paper 

Soly"dra 

rWuctiOQ in required labor, along wit~ other system-level benefits, enable a reduction in BOS cost of over 

40 percent compared to mounts for standard PV modules. Solyndra PV systems are faster and less costly to 

install than conventional PV systems, resulting in lower design and installation, labor costs. 

Pricing and Volume - Exilting Contracts 

Contracted Panel Price ($!watt) 

Phoenix Solar 

SPI 

Gecko Logic 

Carlisle 

Weighted Avg Panel Price 

Fab2 Panel Price Assumption 

Volume Under Contract {MWI 

< Phoenix Solar 

SPI 

Gecko Logic 

Carlisle 

Total 

Fab10utput 

Fab2 Output 

Total 

Project: Solyndra (1013) 

Oat,,: March 11, 7009 

Credit Committee Paper 

Request for loan Guarantee Approval Page 12 
171 


76267.074

Credit Paper 

Solyndra 

£n European markets the deal structure i. simpler, but the driving issue remains the same: .~~IJ!II!I"~~ 

Again, R W Beck hag 

concluded that this is possible in certain moulc:ets (and the number ofmoulc:ets is growing): 

Project: Solyndra (1013) 

Oate: March 11, 2009 

Credit Committee Papar 

Request for Loan Guarantee Approval Page 13 
172 


76267.075

Credit Paper 

Solyndra 

RW Beck has made individual analysis of several ofSolyndra's target market jurisdictions in the US and in Europe. 

For detail, we ",fer to the attached Draft Report orth. Independent Market Consultant. The fundamental analysis 

applies to each of these markets 

From the Market Consultant's Report, a graphic analysis of the general concept follows: 

US Market Mechanism: RPS 

Project: Solyndra (1013) 

Date: March 11, 2009 

Credit Committe. Paper 

Request for Loan Guarantee Approval Page 14 
173 


76267.076

European Market Mecbanlsm: FIT 

[mtall.tion Yean 1010 - 2016 

PrIces by llHt.n.tion Vear (SlkWhl 

Credit Paper 

Solyndro 

First Solar, a leading manufacturer ofPV panels, has introduced thin-film CdT. PV panels which operate at greater 

than 9 percent efficiency, with competitive pricing and availability for commercial rooftop and large-scale utility, 

ground-mounted systems. The cost to make CdT. PV modules have recently reached under $1 per W p. according to 

First Solar. CdTe panels are rigid product.. fabricated on low-cost, soda-lime glass substrates. Cdre panels will 

have a relatively high balance of system cost compared to the Solyndra panels, due to the mounliIlg requircmenls. 

Roonop installations, due to the limited amount of spac., usually end up using higher efficiency pMels, including 

those manufactured with wafer silicon and eIGS, rather than the type sold by First Solar. 

Solyndra specifically reported that it does not intend to compete in land/ground spplications, and 

Project: Salyndra (1013) 

Date: March 11,2009 

CredIt Committe. Pap., 

Request for Loan GUarantee Approval Page'S 
174 


76267.077

t :ilt .. II' IU. 

RW Beek Mnrket Analysis 

Retail System COgt Comparison 

(stW,) 

R W Beck analysis of the marlrets that So!yndra competes ill has concluded that: 

Project. Solyndra (1013) 

Date: March 11. 2009 

C",dlt Commitlea Paper 

Request for loan Guarantee Approval 

CredIt Paper 

SolymJra 

Page 16 
175 


76267.078

Overview 

Uses Of Fund.: 

F acilitics Capex: 

Front End 

Back End 

Contingency 

Equipment Capex: 

Line 1 

Line2 

Line 3 

Contingency 

Real Estate 

Interest during Cons. 

Other Costs 

Total Costs 

Sources Of Funds: 

Senior Debt (DOE): 

Equity - Cash: 

Total Uses 

Funding Structnre: 

LGPO % of Sen. Debt: 

Source of Funds: 

Project: Solyndra (1013) 

Date: March 11. 2009 

Credit Committee Paper 

Request for loan Guarantee Approval 

Credit Paper 

Solyndra 

Page 17 
176 


76267.079

Financial Model and Seruitivlly AruLlym 

Credit Paper 

Solyndra 

Solyndra's baM case financial projections are included in Tab 12. The following summarizes the results of the base 

case projections, as well as the sensitivity analysis for tl:iree scenarios. 

Base C •• e ADaly";,, 

The Base Case analysis uses data and projections from the Project's business model and a comprebensive 

compilation of inputs used for its business p\!!IIIIing purposes. 

The Base Case uses the following key assumptions: 

Given these production and market assumptions, the Project expects to achieve gross margins 

=ching full production, against revenues This cash 

Performance approaching Base Case assumptions would provide •••••••••••••••• 

Project Solyndra (lD13., 

Data: March 11, 2009 

Credit Commltte. Paper 

Request lor Loan Guarantee Approval Page 18 
177 


76267.080

Downside Ca .. - Output Decre ... ed by 10% 

Key Assumptions: 

Note tbat in this scenario the 

Stressed Ca •• 

This scenario assumes ••••••••••••••••••••••• 

Under this stress, debt service ",mains over •••••••••••••••••• 

Project: Solyndra (1013) 

Data: March 11, 2009 

CredIt Committee Paper 

Request for Loan Guarantee Approval 

Credit Paper 

So/yndra 

Page1S 
178 


76267.081

Minimum Coverage Case 

This scenario stresses tho model such ths! the •••••••••• 

Under this hypothetical, 

This artificial scenario demonstrates 

Key Riok. & MItigant! 

Market Riok 

CreditPapec 

SO/Yllilra 

Solyndra faces a number of risks to its operations, however the most importan! risk category pertains to Market 

Risk. In this Case, Market Risk can be broken down into severn! sub-categories of risk: 

ProJed: Solyndra (1013) 

Date: March 11. 2009 

Credit Committee Paper 

Requeet for loan Guarantee Approva' Page 20 
179 


76267.082

The R W Beck analysis has commented on the foUowing specific market risks: 

Scale Up Risk 

Project: Solyndra (1013) 

Date: March 11, 2009 

Credit Committee Paper 

Request for Loan Guarantee Approval 

Credit Paper 

Sol),lIdra 

Page 21 
180 


76267.083

800/0 

70% 

60% 

950% 

w 

; 40% 

:J 

u 300/0 

20% 

10% 

0% 

Solyndra Fab2 Manufacturing Facility 

Five-month Cumulative Trend for ILDS I Fabl Line 

CUM YIELD BY WEEK (4 Week Roiling Average) 

Project: Solyndr. (1013) 

Date: March 11, 2009 

Credit Committee Paper 

Request for Loan Guarantee Approval 

Credlt PIper 

Solyndra 

Paga22 
181 


76267.084

Manllgement Team 

Credlt Paper 

Solyndra 

Solyndra has ossembled a senior management team with considernble corporate experience in designing, 

coru.1rUcting, and ramping up large scale manufacturing facilities. The Company also bas a core expertise in 

designing specialty tooling equipment that is utilized in its production process. Solyndra currently employs 

approximately 750 full time and contract individllll!s, most of whien an: engineering resources focused on the 

technical development of the Company" products and manufacturing process. Solyndra is led by the seasoned 

management team described below: 

.;. Dr. Chris Gronet. Solyndm'. principal inventor, Founder and Chief Executive Officer, was previously a 

senior executive at Applied Material. for 11 years, a leading semiconductor equipment manufacturer. Dr. 

Grond i. intimatdy involved in the day to day operatioIl9 of the Company including monitoring and 

contributing to product design. process innovations, and manufacturing ramp. Dr. Gronet balds over 20 

U.S. patents in thin fllm and rdated technologie •. Dr. Gronet eamed a Ph.D. in semiconductor processing 

and a Bachelor of Science degree in II\lIteriai. science, both from Stanford University . 

• :- Bill Stover. Chief Financial Officer. Mr. Stover was most recently Chief Financial Officer at Micron 

Technology, Inc., a manufacturer of semiconductor devices. Prior to joining Micron, Mr. Stover was an 

audit manager with. Coopers & Lybrand . 

• :. Beo Bierman. Vice President of Tecbnology in charge of day to day at Fab 1 operations, bas more than 20 

yearn of semiconductor manufacturing and fabrication equipment experience at Applied Materials and 

LAM Research. 

.;. Dr. Kelly TromOl!. Vice President of Marketing and Business Development, has more than 20 years 

experience in the semiconductor industry most recently as the Vice President of Marketing at ReVera, a 

provider of metrology used to monitor and control films and critical layers deployed in the semiconductor 

manufacturing process. 

In addition to significant management fI:SOurces, Solyndra is also able to draw on the technical expertise of certain 

Directors on its Board. Dr. Jame. Gibbons, Director. was the former Dean of Engineering of Stanford University 

and foUnder of Sera Solar. Dr. DIllI Maydan, Director, was President of Applied Materials from 1994 to 2003 and 

previously spent 13 years ill Bell Labs. Dr. Gibbons and Dr. Maydan are IlCtively involved in the technical oversight 

of the Company's technology development and manufacturing capacity expansion. 

The majority of the management team and technical staff bave extensive experience in process equipment design and fabrication, high·technology system. integration, CIGS thin films and high-volume bard wsk manufacturing. 

The Applicant has assembled .. Board of Directors with direct experience in both thin film materials science research 

and developrnent, as well as the design and manufacture of thin film production machinery. In addition, members of 

·the Board have outstanding records of success in guiding the development of numerous high-technology concerns, 

with a particular emphasis on renewable energy. 

Relative to other thin film PV manufacturers, the Applicant has a substantial advantage due to its in-house 

equipment integration and manufacturing expertise for high-volume thin film production. The management team has 

developed considerable direct experience in the equipmenl design, manufacture and production of its unique 

cylindrical ClGS-based PV systems that it gained through design and development of the Applicant's original 

"mini" In-Line Development System (ILDS) and its full production scale Fab 1. 

Project: Solyndra (1013) 

Date: March 11, 2009 

Credit Committee Paper 

A.equest for loan Guarantee Approval Page 23 
182 


76267.085

Backgro(md and Legal Structure 

Credit Paper 

Solyndra 

Solyndra Fab2, LLC, (the "Borrower" Or ''Project'') i •• wholly-oWned subsidiary of the parent, Solyndra, Inc. The 

Borrower is • special purpose entity that has been formed solely for the purpose of constructing, financing, oWnIDg 

and operating the Project. The Sponsor was incorporated in 200S in the stale of Delaware and currently owns 100% 

of the capital ~tock of the Project. Solyndra, Inc. is a privately-held company whose voting ownership is held by 

venture capital firms and individuals (employees and management). 

Organization 

Solyndra, Inc. is the Applicant to the Loan Guarantee Program and is the Sponsor for the Solyndra Fab2 project 

Solyndra, Inc. has two subsidiaries including Solyndra Fab2, LLC (the legal entity representing SolyndIa Fab2) and 

Solyndra Fab I, LLC. The Parent owns 100% of the capital stock of its subsidiaries. Solyndra Fab I, LLC currently 

serves no operational purpose. It was established at a time wllen the Applicant anticipated a corporate structure that 

legally separated each fabrication facility. 

Government Supp<lrtiPermi(s 

Solyndra feb 1. Ltc (Wholy-ownodl 

The Project is not recciving any direct financial support from the US government, the State of California, County of 

Alameda or City of Fremont. The Sponsor will receive all necessary federal, state and local permits to begin 

construction of tlJe Fab2 facility by loan closing. The Applicant has excdlent relationships with administrative 

personnel in the City of Fremont, including permitting and inspection personnel. These relationships have allowed 

rapid processing of building permits and other related applications in the past. 

Credit Assessment/CredIt Illitory . 

The initial Preliminary Credit Assessmenl was submitted hy Fitch on August 27. 2008 and assessed the credit as • 

B+. 

A credit history dated as of June 4, 2008 for the Applicant as prepared by Dun & Bradstreet. Inc. shows: 

D&B Rating lR3 

This credit rating was ..,.-igned because ofD&B's assessment or the company's financial ratios and its cash flow. 

Rating: lR3 (IR indicates 10 or more employees) 

Composite credit appraisal: 3 is fair 

Applicant Statement 

The Applicant has allested that, based on the Project information provided to the LOPO for consideration of 

extending a loan guarantee, th"t there is a reasonable prospect that the Guaranteed Obligation will be paid on time 

and in full (including interest) from project cash flow according to the terms proposed in the Application. 

Project: Solyndra (1013) 

Dale: March 11, 2D09 

Cradlt Committee Papar 

R_quest for Loan Guarantee I\.pproval Page 24 
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11 
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Obama Administration Offers $535 Million Loan Guarantee to Solyndra, Inc. I Departme... Page 1 of2 

Obama Administration Offers $535 Million Loan 

Guarantee to Solyndra, Inc. 

March 20. 20:)9 - 1Z.00am 

Wuhlngton, DC· Energy SClcretary Sleven Chu today offered a $535 million klan guarantee: for 

Soiyndra, Inc to support the company's construction of a commerci!ll·scale manufacturing plant for 

Its propnetary ~lJndncal solar pholovoJtalc panels. TM company expects 10 create 1housands of 

new jobs- In the U.S. wile deploYIl"l9 its solar panels 610'0$$ the U.S. and around the world 

''Tnls !nlitlslme-ntls part of PreSident Obama's aggressive strat~y 10 put Ame:w:ans back to work 

and reoduce OlIr dllpendence on foreign all b~ developing clean, renewable sources of energy," 

Secretary Ghu said. "\IIIe can create millions of new, good paying jobs that can1 be aUl3alJH:ed 

Instead of rely!ng on Imports from other C(lUntne3 to meel our energy neects, we'lf rely 011 America's 

innovation, Amance's resources, and AmenCo/l's workers,~ 

Secretary Chu IS. mOVlnQ aggressively 10 accelerate important Oepartment of Energy myestments 

that can ereate lobs and transform the way America uses and prudUC::8S energy_ Tn!$ aHows the 

Department of Energy to offer Its firlOlloan guarantee within the first two months ot the Obama 

Admimstraiion ThiS loan guarantee will be supported through the President's Amencan Recovery 

and Reinvestment Act, which provlOes lens of billtons of dolJars in loan guarantae authority to bUild 

anewgreanenergyeconomy 

So!yndra's pho!ovoMalc syslems are designed to proVide the lowest lnstaJlI3d cosl and the highest 

solar electriclly output on commerCial, Industnal and Ins!rtutlOl1al rool tops. I'o11lch are a ... ast 

underul!hzed resoufcefor the dtsttibuteO generation ofelean e!ec1f1city, So!yndra's propnetary 

deSign transforms glass. tubes mto tugh per1orman~ photovot\aic panels Which are Simple and 

InexpensIve to inste!! By replacing power generateO from fos:!IiI fuel sources, the electric!ty 

procluead from the solar panels w:!! reduce emissions of greenhouse gases 

eased in Fremont, CA, Solyndra i:!l currenl!y ramping up production In lis Inilial manufacluring 

faell/hes. Once finalized, the DOE loan guarantee will enable the company to build ana operate ilS 

manufadunng processes at full commercia! scale 

Solyndraestimaleslhal 

• The const)lJcllOn of this comp!e)( WI)! employ appro)(jmately 3.000 people. 

RELATED ARTICLES 

Vlca Pre&ldent Blder'l Announces 

Finalized $535 Million Loa!'! 

GUarantee for Sotyndra 

Obama Adm!nl3tratlon Offol'S $59 

MilHon In Conditional Loan 

Guarantees to 8eacon Power and 

Nordic W!r'ldpo ...... er, Inc. 

PreSident Obama Announce:!! Loan 

GUllranti!les to Construct New Nuclear 

Power Reactori In Georyla 

ht1p:llenergy.gov/articleslobama-administration-offers-535-million-Ioan-guarantee-solynd ... 11116/2011 
185 


76267.088

Obama Administration Offers $535 Million Loan Guarantee to Solyndra, Inc. I Departme... Page 20f2 

• The aper;:ltlon of the f<leillty will create over 1,000 jabs in the United States 

• The insta!!ation of these panelswiliereate hundreds ofaddrtional):Obs in Ihe Unitad stales 

• The commen::iahz;:ltion of this technology is axptlded to then be duplicated in mlJltiple other 

manu!act(Jringfacilit!8S 

Secretary ChlJ is offering the loan guarantee by 5i~ning a "conditional commitment" today, following 

approval this week by the Oepartment 01 Energy's Credl! Review Board Just as home buyers who 

have been approved for a loan are required to moo! certain conditions before closing, the 

conditional commitment will require Solyndra to meet an equity commitment as wen as other 

CO(lditlons prior to closing Today's !lellan signals the Department's inlent to move forward on 

Solyndra's application for $535 mlllion loan guarantee provided the compar'ly meelS its obligations 

Before offering a conditional commitment DOE takes Significant steps to ensure risks are properly 

mitigeled for each project pri()( \0 approval for closing of a ioan guarantee. The Department 

perfonns d~e dri1gence on aU projects, illC!udlng a thorough investigation and analysIs of each 

project's flnanClal. technical and legal slreng!lu and WElaknesses. In addition to the underwnUng and 

due diligence process, each prOject 15 r&Vlewed In consultation With independent cons~ttant5. 

Secretary Chu initially sel a target to halle the first cOr'lditlonal commitments oul by May • three 

months Into hiS tenure· but today's announcement significantly outpaces ltIal aggressive tlmellne. 

Secretary Chu credrled the Depa"'menl's loan ~am lor their wor)( acce!era!tng th& process toorrer 

thiS conditional ccmmitmenl in less thBn tw"o months, damonstratlflg the power 01 teamwork and the 

speed at ..... hich the Departmenl can operate when bame(s to succeS.!i are removed 

Media c;antillc;t(s): 

(202)58&4940 

http://energy.gov/articles/obama-administration-offers-535-million-loan-guarantee-solynd. .. 11116/20 II 
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Document 

12 
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Obama Administration Offers $59 Million in Conditional Loan Guarantees to Beac(m Po... Page I of 2 

Energy efficiency audits help businesses compete. 

See how Industrial Assessment Centers are saving 

companies money in your state: 

Enter your llpcooe 

Obama Administration Offers $59 Million in Conditional 

Loan Guarantees to Beacon Power and Nordic 

Windpower, Inc. 

July2,200g·1200am 

WASHIN:GTON:, DC - Secretary Steven ehu today announced $59 million in coMihonalloan 

guarantees from 1he Deplu1men\ of Energy for Nordic \Nindpower, USA. and Beacon Power Nordic 

WlndpoYl"ef has !;leen offered '16 million 10 support the expansion of Its assembly planl in Pocatello, 

Id$ho. to produce its one megawatt wind turbine. Beacon Power, an energy storage company, has 

i;lel:m oNer8'd $43 mUlion to suppor1 the ~n$\n.lclion 01 its 20 megawatt flywheel energy storage 

plant In Stephentown, New York that will help ensure the reliable delivery of renewable energy to 

the efectricilygnd. 

As staled by Secretary Chu, "These projecls represent the innovative tecimologieslhal will he!!) 

Amenca reduce ils dependence on fossil fuels and flghl c!!mate change," ...mile moving the nation 

closer to maebog President Obama's goal of doubling renewable power 

These are the second end third conditlOf1a\ commitments fOf loan guarantees made by the Obama 

administration. In March, the Depart'1lenl made its first conditionalloBn guarantee for $535 million 

to Solyndra, Inc, Whlch plans \0 construct a manufacturing plElnt 10 bnng Jts cutting-edge solar 

technology to the commerc!tli market. Silcretary Chu has made It the pnonty of the Department to 

streamline ths losn guarantee process by simpHf}lmg paperwork requirements and proViding 

additional resources to process appllcAhons The loan guarantees announced today Will be 

suppol1od through the 2009 American Recovery and Reinvestment Act 

,""ordle Wlndpowef, USA 

NordiC Windpower, USA was offered a condltiona! commitment for $16 mHUOI1 to support the tooling 

ani.J commercial-scale up of Its assembly plant ln Pocatello, Idaho. NordiC's propnEltary one 

megawatt wind turbine uses two blades and a patented teeter-hub technology iha! dampens loads, 

ftlsutting ill a lightweight turbine at teast 10% less cosUy to manufacture, instal!, operate and 

ma1ntam than competmg systems 

The Nordic ..... ind turbine represents SIgnificantly improved technology which enables the turbine 

blades to nex at the hub, pal1ially diSSipating the (tccentric loads, or turbulent winds, Defore they 

reach the drive (rain This makes Nordic's turbines more reliable and enables them to achieve 

structural lnlegnty at a lower cost than more fi'<lld designs 

RELATED ARTICLES 

Pffilllident Obama Announces Loan 

Guarantees to Construct New Nucht!H 

Power Reactors In Georg!a 

Department of Ene-rgy Offers $245 

MIllion Condlt!onal Loan Guarantee to 

Red River Environmental Products 

Fact Sheet: The Department of 

Energy's LOilll Program!! 

http://energy.gov/articles/obama-administration-offers-59-million-conditional-Ioan-guara... 11116/2011 
188 


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Obama Administration Offers $59 Million in Conditional Loan Guarantees to Beacon Po... Page 2 of2 

al'l'Oilffl!l a conditional commitment for $<13 mlliioo 8eacon Power designs and develops adyanced 

products -and services to support morl! stable, rellabJe 8I1d emclent god operation. The IMn 

guarantee will support the cQI'lstrudion of Beacon's 20 megawatt "ywheel energy storage plant in 

Stephentown, New yo~ that WI!! help ensure the reliable delivery ofrenewat!le energy to the 

elec1ricity gnd. Beacon's inno\lalille Ily-Nheet system, the core component of the 20 mttg9wan p!ant, 

is specifically optimized 10 perform frequency regulalion on utility grids by absorbing and 

discharging eMrgy 10 maintain the consistency and re!iab1lity oflhe electric grid 

Beacon's 20 megawatt power plant projec:l will inlroduce a newly developed, not yet commercial 

technology to provide frequency regulation $ervices to increase tl1e nation's use of renewable 

energy and help reduce greenhouse gas emissions 

Medracontact(sJ: 

(202) 58S-4940 

http://energy.gov/articles/obama-administration-offers-59-million-conditional-loan-guara... 1111612011 
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13 
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from: 

To: 

SUbject: 

Date: Thursday, August 20, 2009 12:30:18 AM 

This sounds like an issue needing immediate attention. Certainly, We can1 meet with OMB untillhls Is 

addressed. 

_ called to get a status check from me. Do I need to raise this with him? 

-

• Thanks for following up yesterday on Solyndra. I think we were able to close out a 

number of issues. I appreciate the work Solyndra did on this yesterday evening 

regarding the financial model and construction milestones. 

I'm concerned, however, that we still have a major 0King issue. The attached 

model represents the Base Case that was utilized by nd the project team. In 

this version, all working capital assumptions were elimma ed, suggesting that Fab2 

will hold no NR; inventory or NP balances. While debt coverage is robust under 

stress conditions, the project cash balance goes to $62,000.00 In September' 2011. 

Under the assumption that a small amount of cash is tied up in wo~king capital, the 

project will face a funding shortfall. Even one day of NR results in a negative cash 

balance, for example. 

The issue of working capital assumptions has been a major issue repeatedly raised 

since December. Furthermore, the assumption of no working capital at the project 

company is inconsistent with the model we looked at just yesterday and the project 

team 'due diligence update'. We are now two days away from the schecjuled OMB 

presentation and, having received some information, we seem to have a major 

issue, We need to figure out how to resolve ASAP. 

In addition to the critical issue above, we have a number of other modeling issUes' 

that need to be addressed. For example, as stated yesterday, property taxes don't 

seem to appear in the model. We should also revise the income tax assumption to 

match the PWC assessment. 

I suggest we conve~ming to figure out how we are going to address. 

I have to meet with~rst thing, but suggest 10:30. 

Does that work for everyone? 

Thanks. 
191 


76267.094

Fram: 

To: 

$ubJ~ct: 

Date: 

• 

m·: ~Res~po~ns~ .. ~to~Crlod~~~AA~a1~Y'~I'~QIUestilll'olns·· Thursday, August 20, 2009 3:27:59 'PM . 

Thah[cs for requesting the additlonal informatlon. I would like your analysis of the materials presented. 

In order to move this forward, I think we have the following next steps: 

1. I will look at the property tax Informatlon agaInst the Issue raised by RW Beck In January. 

2. We can adjust the income tax assumption to 30%. The result should be de minim us, but we 

should use that assumption from PWC. 

3. The Issue of Worklng capltal remaIns unresolved. FIrst, It seems dear that the cost overrun 

equity commitment would support cost overruns and'inellglble pnoject costs. However, the Issue ~ 

cash balances, not cost. _ seems to agree that·the model runs out of cash In Sept. 201]. even 

In the base case without any stress. This Is a liquidity Issue. Secondly, given the implicatlollS 

above, It Is difficult to assume In a default scenario that any other entity would be able to assume 

management of the project company without any woridnll capital. As a practical matter, this Is not 

feaSible and leads to qlleStions of ability to run the pl'Oject company as a stand alone 'entity. Flnaltr, 

how can we' advance a project that hasn't funded worldng capital requirements nor seems to have any 

provision for funding working capital reqUirements and that generafes a worklng capltal'shortfa.U of 

$SOM when worklng capital assumptions are entered Into the model? This, Is a serious issue we need to 

resolve as 'a credit matter. It also simply won't stand up to review by oversight bodies. Are there 

prolilSlon In the agreements that proVide access to woridng capital provided by the parent (e~g.,! 

. liquIdity facility)? I don't think the cost overrun commitment accompllsl:ies this, but perhaps an inter· 

company line of credit WOUld. 

4. We stili' co riot have a lender case. In order to move forward; i have gone ahead and built 

one. I will send It under separate cover. I need you to conftrm it and to Indude It In the due 

diligence update. Moving forward, the, deal team needs to provtde this case. Notwithstanding the 

worklng captal Issue above, the. lender case supports the conclusions you've made and addresses the, 

LGPO policy requirement of having a lender case. 

Thanks. 

~ubJect: 

cc:~~~, Solyndra: Responses to Analysis Questions 

-

In response to questions related to the credit analysis of the Solyndra Fab i project, we have prepared 

the responses below. 

The current Sotyndra Fab 2 Base Case Proje!i!cns have changed sInce the original model was presented, 
192 


76267.095

Document 

14 
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76267.096

From: 

To: 

S"bj~ct: 

Date: Thursday, August 20, 2009 3:27:59 PM 

• Thahl<s for requesting the· additional Information. I would like your analysis of the materials presented. 

In order to move this forward, I think we have the followlng next steps: 

1. I will look at the property tax Information against the Issue raised ~n January. 

2. We can adjust the Income tax assumption ~The result should be de minim us, but we should use that assumption from pwe. 

3. The issue of WarRIng capital remains unresolved. Rrst, it seems dear that the cost overrun 

equity ~ommltment ~pport cost ovelTUns and· Ineligible project costs. However, the Issue Is 

cash balances, not cost. _ seems to agree that the model nuns out of cash In Sept. 2011 even 

In the base case without any stress. This Is a liquidity Issue. Secondly, giVen the Implications 

above, It Is difficult to assume In a default scenario that any other entity would be able to assume 

management of the project company without any working capital. As a practtcal matter, this Is not 

feasible and leads to qllestlons of ability to nun the project company as a stand alone entity. Rnally, 

how can we advance a project that hasn't funded worl:lng capital requirements nor seems to have any 

provision for funding worl<lng capital requirements and tpat generates a working capital shortfall of 

$50M when working capital assumptions are entered Into the model? This Is a serious issue we need to 

resolve asa coedit matter. It also simply won't stand up to revfew by oversight bodies. Are there 

provtslon In the agreements that provide access to worldng capital provtded by the parent (e.g., a 

liquidity facility)? I don't think the cost overnun commitment acccmpllstJes this, but perhaps an Intercompany line of credit would. 

4. We stili" cfo riot have a lender case. In order to move forwarcf, t have gone ahead and built 

one. I will send It under separate cover. I need you to confirm It and to Include It In the due 

diligence update. Movtng forward, the deal team needs to provide this case. Notwithstanding the 

working captal Issue above, the. lender case supports the condusions you've made and addresses the 

LGPO policy requirement of havtng a lender case. 

Thanks. 

Questions 

• In response to questlons related to the credit analysiS of the Solyndra Fab 2 project, we have prepared 

the responses below. 

The current Solyndra Fab 2 Base case Projections have changed since· the original model was presented, 
194 


76267.097

and the DOE Loan Orlginatlon revlewed the updated model. The 

terms of the Project Sales purchase 100% of the output of the 

Project as It comes off the manufacturing line;' hence, "Inventory" Is now assumed to be zero. 

consequently, working capital requirements for the project are modest, and for modeling purposes the 

Accounts Receivable and Accounts Payable are set at a net zero. 

Solyndra Is informed that testing the Base case under stress conditions results in essentially nil cash at 

Fab 2 In September 2011, and any assumption of a delay in collecting Accounts Receivable from 

Solyndra would be an unbwdgeted cash drain on the Solyndra Fab 2 Project, potentially resulting In a 

cost overrun. This analysiS Is correct assuming that the Project has not otherwise come in under budget 

elsewhere and that none of the Project's budgeted contingency was available to pay for this cost 

ovemJn. However, It should be noted that September 2011 falls well before Fab 2 has achieved 

"Project Completion," which Is forecast to occur In April 2012. Project Completion as defined by the 

Common Agreement Indudes factors related to Physical Completion, Operational Completion and 

Anandal Completion. 

DOE bargained for a 100% Solyndra, Inc. guarantee. to pay for any cost overruns beyond the $733 

million Project Cost prior to Project Completion, and further requires Solyndra, Inc. to pre-fund a 

restricted cash account of $30 million to cov~r any potential cost overruns. The Base case Projedlons 

show· that Fab 2 will have accumulated apprOximately $123 million of cash at the time of Project 

Completion when Solyndra, Inc.'s guarantee would be released. Of the $123 million of cash at Fab 2, 

approximately $50 million funds the full Debt Ser:vlce Reserve Account. No cash dMdends can be made 

until certain milestones are achieved after Project Completion, which assures the Ifquldlty of the Project. 

Sotyndra believes that It has included all of the Project CoSts that It reasonably anticipates in the $733 

million budget. 

Additionally, conSidering. the magnitude of the Import ofFab 2 to Solyndril, Inc.'s bUSiness and the 

substantial equity commitment made by Solyndra, Inc. to the Project, there exist tremendous incentives 

for Sotyndra, Inc. to ensure a sua:essful Project. 

Solyndra has modeled a 2.5% Income tax rate for Solyndra Fab 2 so that the Project can pay for the 

income tax that Its activities engender. 

Sotyndra believes that It will pay a 25% effectiVe Income tax rate on a consolidated basis for its 

worldwide operations, and Solyndra assumes this rate In all of its forecasts. At the request of DOE, 

Solyndra's auditors, PricewaterhouseCoopers provided an opinion dated August 5, 

2009 that states that a range of 24%-30% was appropriate for Solyndra, Inc., which Solyndra believes 

substantiates Its estimate of 25%. Due to the operating losses forecast for Solyndra Fab 2 during its 

Initial ramp of commerdal production, the Base Case Projectlons Indicate that Fab 2 will not have a tax 

liability until Its NOL's have been exhausted in June 2012. The Base case Projectlons as submitted to 

DOE are fully-functional, and changing theJncome tax rate from Solyndra's estimate of 25% to the 

hlgh~end of the reasoni;lble range (30%) as Indicated by PwC reveals only a modest Impact ~ the 

Project cash balances at Fab 2 In June 2012 are forecast to be apprOximately $136 million, indudlrtg 

an approXImately $60 mlilipn debt service reserve account. Any change to the Income tax rate has no 

material Impact on 

the Project's liquidity. The Impact of a 30% income tax rate 

ass\Jmption Is· only seen In a minor reduction of 0.1 to the Debt Service Coverage Ratios, as noted 

below 

At the lowest Debt Service Coverage Ratios period calculated for the year 2015, the Base case 

Projections show that only $81 million of the FFB loans remain outstanding and Fab 2 will have 

generated In excess of $500 million of cash. A liquidation of Fab 2 at the end of 2015 would generate 

substantially more than. $81 million (according to the analysis performed by Frt:ch Rating). At this low 
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point, Fab 2 is forecast to generate 160% of the required cash to make debt payments. Hence, 

Solyndra condudes that DOE enjoys a very secune position at this point In time even with a 30% 

Income tax rate. While Solyndra believes that a 25% Income tax rate is appropriate; a summary analysis 

of the effects of a 30% Income tax rate Is attached ,for DOE's consideration. 

The Base Case Projections indude all property taxes., The property tax is combined with a number of 

Fadrrt:fes-nelated expenses in the worksheet named "Model Assumptions" In the Base case Projections. 

A scan of Row 146 reveals episodic spikes In Fadllties costs, which correlate to the underlying property 

tax assumptions. A copy of the detailed line item assumptlons that comprise !he Fadlltles budget is 

attached for DOE's consideration. Spedflc line items nelated to property tax are highlighted In'green 

color (please see Rows 102, 105, 

106 and 134 in the "Facilities Budget" file). A summary review of this Facilltles Budget wo~heetWlll 

review that property tax Is mOdeled in significant detail. 

Please contact me to discuss any questions you may have related to the foregoing. Thank you. 

Regards, 

.. 

• *.******.*****.*~.*.**** ••• * •• * 

-

SOL YNDRA, INC. 

4nOO Kato Road 

Fremont, CA 94538 

www.solyndra.com 

this e-mail and any accompanying attachments contain Information that Is confidential to Soiyn<:lta, 

Inc.<br> The Information 15 Intended solely for the use of the Individual to whom it Is 

addressed. < br>Any review, disdosure, copying, distribution, or use of this e-mail communication by 

others Is strictly prohlbited:<br>If you are not the Intended redplent, please notify us Immedl~tely by 

netuming this message to the sender and delete all coples.<br> Thank you for your cooperation. 
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Document 

15 
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From: 

Sent: 

To: 

Ce: 

SUbJect: 

Hello folks -

Wrapping up some loose ends froll our call today: 

1. T1ming - We've made SOlIe adjustnlents to our schedule and it now looks like the VP's 

window of availability is 12:98 PM ET - 12:45 PM ET. That would put us at • 9:98 AM PT event 

start with vP portion around 9:15 AM PT. Does that work on the CA end? 

2. <»Ie Approval - Can someone provide a quick rundown of .. hat find step this is that 

0118 would be clearing? We just want to make sure >Ie can be as helpful as possible in 

ensuring this gets done for you on theUne. We were thinking all a-\B clearance was to be 

finished this week en - but perhaps there 15 • final step we hadn't conddered? 

3. Browner/WH Attendee -_ can you took a look at this part? 

4. Notification Timel1ne - Teall! DOE .,111 draft up • proposal for Congressional/elected, 

com.nvestor and Piess not1fication for discussion. Noting that I' .. connecting Sudafl 

and wi tl> and re: electeds. 

S. VP Side/Satellite - vP will do this frot!! the White House - TBD whether there 15 a press pool in there or .,e just make the feed available - but no aUdience. 101.'11 go back to 

WHCA to let them know this is a BO and connect with approprhte OVP and DOE folks to begin 

"",rking through the cost and logistical detail •• 

Anything I've missed? 

-

132 
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ev"ryone - thanks for your paU"nce as we nailed this down her". 

be a VPOTUS ov"nt after all - and it would n""d to be on 

l:t~~:d!~I!'t:~~ a good visit out there and things look feesible from a logistical I: much more to discuss. Shall w" hop on a call tomorrow to discuss furth"rl 

1:88 PM? If that works, will circulate number. 

good. POlUS on the tth was what we were goins for, but that's looking unlikely. With 

porus unlikely, we wanted to give this to the VPOTUS, and 4th was looking best. 

to discuss tomorrow. 

l:I'm; : ,., • , 

y P t 

hey all - lets talk about this, as of last Friday the POlUS was set to satellite 1n and the 

event has been moved to th .. 8th. 

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Where did you see Solyndra was on the 4th? ~ed about the dates you hav"- .... nt to make sure we' re all on the same page. You, _and I should probably disc~;;-:r,en tomorrow I 5 event is over. 

Adi, I am looping in_ Thanks. 

Program Advisor Recovery Act Tealll U.S. Depar1:lllent of Energy 

We are thinking (technical logistics allOWing) that we would want the VP can satellite into 

the event on 9/4 (next Friday). It's the sallie day unemploYlllent nUlllbers come out, and" we'd 

want to !l.e this as an example where the Recovery Act 15 helping create new high tech jobs. 

Does that work Tor you guys? Were you guys going to send Sec. chu or sllleone else to CAl We 

are discuss,lng the possibllity of sending 5OOIeone from here (e.g. Carol) out there a. well. 

let rae know if 9/4 sounds ok. let III! know what DoE would be thinkin8 of doing with the 

Secretary or otherwise. Don't need a fomal event memo In a Nsh, but just want to start 

planning things if this sounds generally ok. Glad to do a quick call with whomever. Thanks, 

134 
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Steve 

From: Chris 

Sent: Thursday, 

To: Steve Mitchell 

Subject: Fab 3 and NYTimes.com: Solar Panel Tariff May Further Strain U.S.·China Trade 

Hi Steve, 

Attached FYI. 

The Bank of Washington continues to help us! 

.and I talked about the following for Fab J in the U.S. (the "Tuls." package): 

1. State and local incentives (grants~ subsidies, land, taxes, labor, training, utilities, fee and pennit waivers, etc.) 

2. 1705 DOE Loan (or bank guarantee) 

3. DOE 30% manufacturing equipment tax credits 

4. Continue to leverage Exlm for foreign projects because of high U.S.·content (this is a huge advantage for us .. we will be the 

largest U.S.-content solar panel manufacturer in the world very soon) 

We think it makes sense to do a study, put together a book, and present it as part of the 1705 application. 1705 implementation is on 

hold for now as they figure out some issues, but it is coming soon. 

Target is to have LOT or framework documents complete by mid-20l0, 

.and_are visiting after the board meeting on Oct. 22 to discuss the Fab 3 option in Abu-Dhabi. 

Appreciate your thoughts/feedback. 

Chris Gronet 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0008975 
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CEO 

Soiyndra, lnc, 

47700 Kato Road 

From: emai!this@ms3.lga2.nytimes.com [mailto:emailthiS@mS3.1ga2.nytjmes.COm]OnBehalfo_ 

Sent: Thursday, October 01, 2009 9:12 PM 

To: Chris Gronet 

Subject: NYTimes.com: Solar Panel Tariff May Further Strain U.S.~China Trade 

<http://www,nytimes.comJ> <http://www.nytirnes.com/adxlbin/adx_click.html?type=goto&opzn&page=www.nytimes.com/yr/mo/d 

ay/business&pos=TopRightEmailThi5&sn2~fbf225e8Ie97c 73 8b&sn I ~7an fc701f9fl10bb8&camp~foxsearch2009 . emailtools _10 II 078b _ nyt5 &ad~ameli. _ b _ 88x 

31 &goto=http%3A %2F%2Fwww%2Efoxsearch!ight%2Ecom%2Famelia> 

This page was sent to you 

Message from sender: 

Chinese panels imported into the U.S. now need to pay a 2.5% duty ... John Scott 

BUSINESS I GLOBAL BUSINESS I October 01, 2009 

Solar Panel Tariff May Further Strain U.S.-China Trade 

<http://www nytimes.comJ2009/1 DID l/businessiglobaVO I tariff.htrnl?emc-etal > 

By KEITH BRADSHER 

New tariffs on solar panels imported to the United States corne as paneJ manufacturers are losing money, in part because of fierce 

competition from China. 

Advertisement 

Adam The story of two strangers. one a little stranger than the other. Starring Hugh Dancy and Rose Byrne. Now Playing in select 

theaters. 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0008976 
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Click here to view trailer 

<http://www ,nytimes,com/adxlbiniadx _click.html?type=goto&opzn&page=www ,nytimes,comlyr/mo/daylbusinesS&pos'··Center I &sn 

2 - bfS fl83 c/45e6e 13 8&sn I =72813 a5 a1fd2a0b4&camp= foxsearchl009 _ email!ools _1011 078gnyt5&ad=Adam _120x60 .. L nowpJaying&goto=hnp:llwww,foxsearchlight.comladam> 

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l&sn2=bf5fl83c/4 5 e6e 138&,n 1 =72813 a5a1fdla0b4&camjl"'fox,earch2009 _ emailtools_l 0 11 078gnyt5&ad= Adam._120x60 JL nowpJaying&goto=http://www,foxsearchlight.comladam> 

CopYT1ght 2009 <http;lIwww.nvtimes.comlrefi.membercenterlhelp/copvright.htrnl> The New York Times Company 

<http://www.nytco.coml> I Privacy Policy <hrtp:/lwww.nytimes.com/rcfJmembercenterlhelp/privacy.htmJ> 

This e-mail and any accompanying attachments contain information that is confidential to Solyndra, Inc. 

The infonnation is intended solely for the use of the individual to whom it is addressed. 

Any review, disclosure, copying, distribution, or usc of this e-mail communication by others is strictly prohibited. 

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CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0008977 
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Document 

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Energy Department Announces New Private Sector Partnership to Accelerate Renewable '" Page 1 of2 

Energy Department Announces New Private Sector 

Partnership to Accelerate Renewable Energy Projects 

Oc1oberl,200Q·12 OOom 

Wuhington DC -_ U S Energy Secretary Ste ... en Chu today annoui'lced the Depanmenl of Energy 

(DOE) will provide up to $750 million In funding from the Arnencan Recovery Mel Reinvestment Act 

to help accelerate the development of CQnventlonal renewable energy generation projecu ThiS 

funding will cover the cosl of loan guarantees which could support as much as $4 to 6 billion in 

lending to eligible projects, and the Depanment wi!! IIWrte private sector participation to accelerate 

the finanCing otthese renewable energy projects 

To this encl, Ins Departmer.t announced the creation Of its new financiallnsi!tutlon Partne~hip 

Program (FIPP), a slreamlinecl set of standards da~ilgned to expedite DOE's loan guarantee 

underwriting process and leverage priva1e sedor expeni3e and caprtal for the efficient and prudent 

funding ofeilglole proJeds 

"A renewable energy economY)5 ,.Iru .. appo!'1u.,rly to ereale new Jobs, reinvigorate America's 

competitiveness and support the preSident's goal of doubling renewable energy in the Un\1eQ 

Stales," S81d Secretary Cnu "American innovation can be the calalysllhat jump stans a new c~an 

energy lndustnal Revolution" 

The Recove!)' Act created a new Section 1705 under Tille XVII of the Energy Potlcy Act of 2005 

(Tille XVll) for [he rapio deployment of renewable energ,. projecb and related manufacturing 

faCilities, electriC power fransmlsSlon projects and leading edge blofuets projects. that commence 

conSI~chon before September 30,2011 

This first SOlicitation under the new program WI!! seek. loan guarBJItee applications for CQnventlonal 

renewable energy generation projects, sucl1 8S wind, solar, blomsss, geothermal and hydropower 

Pas! so!lcl1atlons for renewable energy generation prnjec!s ha"c focused on loan guarantee 

applications uStng new 01' tnno"911"e tecnnologlas not In ganeral use in the marketplace, 

The goal of FIPP is to leverall8 the human and finanCial capital of pri"a!e sector1inanclal tnSlllu110ns 

by QC03leraHng the loan epplicatlon procaJiS W'hi\e balarlClng nSK between DOE and pflVate sector 

pannefs part!cipatlng In the program 

RELATED ARTICLES 

Oepartment at Energy FlnllltZQIi 

Partial Guarllntee for $8S2 ""!!lIar'! 

LOiln to Support Callfomla 

Concentrating Solar Power Plant 

Working with the Private Sector to 

Achieve a Ciean Energy Economy 

Secretary Chu, Sonator ReId, Rep, 

Berkley Announce Condltlonal 

Commitment for Loan Guarantee to 

Fotowatlo Solar ProJect !\lear La" 

Vegas, Ne"ad.a 

http://energy.gov/artie!es/energy-department-announces-new-private-sector-partnership-a. .. 1 1115/20 I I 
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Energy Department Announces New Private Sector Partnership to Accelerate Renewable ... Page 2 of2 

Under Ihis first flPP salicrtatlon. proposed borrowers and project sponsors do not apply directly to 

DOE but Instead work WIll'! fmBJlclal in$1ltutlons satisfying the qualifications af an eligible lemler 

IIwtllch may apply directly 10 DOE to Bccess a loan guarantee Tile solicitation invites applications 

from eligible lenders for parMI. risk-shanng loan guarantee, Irom DOE. The gU~'lrantea percentage 

WIll ~no moral/le" BD% oflha maximum aggregate pnncip;!land inlerest during a loan term, aM 

the pl'oject debl must abtain 8 credit ratmg of <It leas! 'B8' or an equiva!ent with a nationally 

recognized credit raling agency 

This sohcltal!on marKS trle elghtn round of lOolicllations Issuer:! by the Department's loan G(larantea 

Program since its Inception 

Read more mformiJIion on tnis soUcrtation lind Ine. Departmenfs Loan Guarantee Program 

Enltr<OlY lind Climate- Stakeha\tlerS Briefing (PDF) 

MedIa conlact{s): 

(202)586-4940 

http://energy.gov/articJes/energy-department-announces-new-private-sector-partnership-a... 11115/2011 
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[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLy] 
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INDEPENDENT MARKET CONSULTANT'S REPORT 

SOLYNDRA FAB 2 MANUFACTURING FACILITY 

TABLE OF CONTENTS 

INTRODUCTION ............................................................................................................................................................ 1 

REGULATORY BACKGROUND ........................................................................................ "'''''''''''''''''''''''''''''''''''''''' 3 

THE SOLYNDRA BUSINESS PLAN """".""""".""""""""""."."""."" .. """.""".""""""""""."." ......................... 6 

Market for Solyndra PV Panels ............................................................................................. "'"'''''''''''''''''''''''''''''''''' 6 

Europe ................................................................................................................................. " ................................... 7 

Germany ..................................................... , ......................................................................................................... 8 

Spain ..................................................................................................................................................................... 8 

France """"".".""""""""" .. """"""""""""""."""."" .. """."""."""" ................................................................. 9 

Greece ................................................................................................................................................................. 10 

United States ................................................................. " ....................................................................................... 10 

Competitors ................................................................................................................................................................ 17 

Wafer-Silicon and Thin-Film PV ........................................................................................................................... 17 

Other Renewable Energy Sources .......................................................................................................................... 18 

Solyndra Competitive Advantages ............................................................................................................................. 18 

Efficiency ............................................................................................................................................................... 19 

Balance of System Cost ......................................................................................................................................... 19 

Panel Geometry ...................................................................................................................................................... 19 

Comparison to CdTelFirst Solar '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' .................................. 19 

Comparison to Ground Installations ...................................................................................................................... 20 

SalesIMarketing Strategy ......................................................................................................... : ................................. 20 

Marketing Stafi' ...................................................................................................................................................... 20 

Marketing Approach .: ................................................................................................................. '''' ...................... 20 

Sales Channels ....................................................................................................................................................... 21 

Existing Contracts ....................................................................................... ,' ......................................... : ................ 22 

Revenue and Test Installations ............................................................................................................................... 22 

Additional Markets ................................................................................................................................................ 23 

Summary ................................................................................................................................................................ 23 

LEVELIZED COST ANALySES ............................................................................................................................... 24 

Comparison to Grid Pric .. in Key U.S. Markets ..................................... , .................................................................. 24 

Background Information ........................................................................................................................................ 24 

Methodology ........... '''''' ......................................................................................................................................... 25 

ASsumptioDS ........................................................................................................................................................... 26 

Peak Retail Commercial Electricity Prices ......................................................................................................... 26 

Components of Retail System Price ................................................................................................................... 26 

State and U.S. Federal Solar Incentives .............................................................................................................. 26 

Financial and Tax Strocture ........................................... "' ................ " ................................................................ 27 

Power Generation Yields .................................................................................................................................... 27 

Operation and Maintenance and Other Costs ....... " ............................................................................................ 28 

Replacement Inverter Reserve ............................................................................................................................ 28 

Power Purchase Agreement ................................................................................................................................ 28 

Levelized Cost Comparison ........................................................ " ......................................................................... 28 

Comparison to Feed-In Tariff Rates in Key European Markets ................................................................................. 29 

Background Information .............. ""'"'''''''''''' ....................................................................................................... 29 

Methodology ".".".""."."."" .. """" .. """.""." ..................................................................................................... 30 
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INDEPENDENT MARKET CONSULTANT'S REPORT 

SOLYNDRA FAB 2 MANUFACTURING FACILITY 

TABLE OF CONTENTS 

(continued) 

Assumptions ........................................................................................................................................................... 30 

FIT Rates ......................................................................................................................... , .................................. 30 

Components of Retail System Price ................................................................................................................... 30 

Financial and Tax Structure ................................................................................................................................ 31 

Exchange Rate .................................................................................................................................................... 31 

Power Generation Yields .................................................................................................................................... 31 

Operation and Maintenance and Other Costs ..................................................................................................... 32 

Replacement Inverter Reserve ............................................................................................................................ 32 

Co~~~~:~t~~~~r~~~~~nR~~i .. s~~;;·Pri~~·:::::::::::::::::::::::::::::::::::::::::::::::::::::::'::::::::::::::::::::::::::::::::::::::::::::;; INPUTS TO SOLYNDRA PRO FORMA .................................................................................................................. 36 

Projected Pricing ........................................................................................................................................................ 36 

Projected Financial Ratios .......................................................................................................................................... 37 

Summary ................................................................................................................................................................... :37 

PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS ..................................................................................... 37 

CONCLUSIONS ........................................................................................................................................................... 38 

COflYright 10 2009 R. w: Beck, Inc. 

All Righr.r Reserved 

ii 
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39 

Respectfully submitted, 

R. W. BECK, INC. 
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INDEPENDENT MARKET CONSULTANT'S 

REPORT 

SOLYNDRA FAB 2 MANUFACTURING FACILITY 
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Document 

19 
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From: 

Sent: 

To: 

SubJect: 

Was hoping to give you some better feedback but still soft. 

~---- OrIginal Messa:1e.--.--.-••••••••• From: Chris Gronet I 

To: Steve Mitchell 

Sent: Sun Jan 17 20:53:52 2010 

Subject: RE: DOE meeting 

Overall positive but nothing definite. We need to get in front of Silver again asap, and I am working on this directly. 

I can provide more color tomorrow afternoon if you have time to talk. I am open 12-1 or 2~3 or later in the evening. 

Gaffney accepted our offer today and will start Jan 25. More details shortly. 

Chris Gronet 

CEO 

Solyndra, Inc. 

47700 Kato Road 

-----Original Messagew----

From: Steve Mitchell ........... .

Sent: Sunday, January 17, 20106:47 PM 

To: Chris Gronet 

Subject: DOE meeting 

Chris, 

I'm curious how the meeting With_turned out. Any update? 

Steve 

This ewmail and any accompanying attachments contain information that is confidential to Solyndra, Inc.<br>The 

information is intended solely for the use of the individual to whom it is addressed,<br>Any review, disclosure, copying, 

distribution, or use of this ewmail communication by others is strictly prohibited.<br>!f you are not the intended 

recipient, please notify us immediately by returning this message to the sender and delete all copies.<br>Thank you for 

your cooperation. 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0056297 
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Document 

20 
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From: Steve Mitchell 

Sent: Thursday, February 11, 2010 2:10 AM 

To: 

Cc: 

SubJect: I 

Attachments: 2010-02-09 Jonathan Silver - Solyndra Update.pdf 

George, 

This sounds as if the meeting with the DOE went as a well as we could have hoped for. 

Steve 

II I •• ~ 

-- --- - - - - ---- ----------- - --- -- -

sent: Wed Feb 10 19:41:432010 

Subject: Successful meeting with Jonathan Silver 

Hi All, 

Please find below report regarding our meeting with Jonathan Silver yesterday. It was successful; 

he received and processed our messages and played them back. But we don't have a firm answer on the Phase 

2 application. The snow prevented Jonathan from meeting with his staff before our meeting (the DOE offices 

were closed, but he was there), so he could not provide any detailed updates. The next hurdle is to be accepted 

for the start of diligence. We all felt positive by the end of the meeting that we would cross this hurdle in the 

next two weeks, and there was discussion about using the same diligence partners to minimize time and 

overhead. After that, the challenge will be the calendar, There are a number of applications ahead of us that 

are scheduled for action by CRB and OMB. 

Other notes: 

1. Quote from Jonathan regarding our Fab 2 Phase 2 project: itA May groundbreaking is not out of the 

question." The context here is that groundbreaking means closure of the loan, implying that the 

guarantee could come much sooner. 

2. He may seek our help in Congressional hearings to support his messages for the LGP (next hearing in 

two weeks). 

3. He was impressed that we have developed a U.S. supply chain which not only creates more U.S. jobs and 

economic stimulus but also protects our IP. 

4. I beHeve we now have an open line of communication. His last email: "Glad we could get together. ! 

appreciated the update, You have made admirable progress. I look forward to staying in touch,'" 

S. We are not the only company seeking a second loan guarantee. 

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Best regards, 

Chris Gronet 

CEO 

Solyndra, Inc. 

47700 Kato Road 

Frorr" ••••• 

We (inc!uding_an~ had an encouraging meeting yesterday with jonathan Silver. As you 

know, the snowy weather on ~t has effectively shut down the US Government, and our meeting 

scheduled for Wednesday at DOE was in jeopardy. FortunatelYI we were able to reach jonathan in his office, 

and he agreed to meet us yesterday at our hotel. 

Jonathan is a smart, no~nonsense businessman with a clear mandate to execute successful loan guarantee 

transactions using a traditional project finance approach. That said, he is acutely sensitive to the political 

ramifications of any LGPO action, and this pressure colored all of his comments. 

We were successful in establishing our key themes, and Jonathan was repeating them to us by the end of the 

session: strong management, great execution, significant market and market penetration, mature technology, 

capacity to close quickly on Phase 2, capacity to create jobs, one of DOE's winners. A copy of the presentation 

we used is attached. Not attached are a time-lapse video of the Fab 2 Front End construction and an aerial tour 

video of our manufacturing comple)(. These Images had a powerful impact on Jonathan, and he acknowledged 

that Solyndra is frequently cited as a success story for DOE. 

We had a lengthy discussion surrounding the issue of access to capital from sources other than DOE. He was 

particularly interested to hear why the debt markets are closed for companies of our type because that question 

is put to him with frequency by various constituents, some of whom apparently suggest that the capital markets 

have thawed, 

Because DOE was closed today, Jonathan's staff did not have the opportunity to provide an advance briefing 

related to our Phase 2 application status. Nevertheless, Jonathan appeared to acknowledge that we will likely 

move to the due diligence stage when he directly engaged in a discussion of the potential political challenges 

that a second Solyndra loan guarantee would present. Rather than challenge the merits of our application, he 

moved on to think through the political implications of a second loan guarantee. Jonathan asked us for 

assistance in crafting the messages in response to four questions that he anticipated from his various 

constituents: 

1. As a policy matter, why should DOE give additional loan guarantees to companies that had previously 

received them 7 

2, As a policy matter, why should DOE give additional loan guarantees to companies that have not yet 

achieved significant milestones of success with their first loan? 

3, If a company that seeks a second loan guarantee has a compelling value creation story and substantially 

mitigated downside risk, why does it not have access to traditional forms of capital? 

4. Why should DOE move quickly to approve a second loan guarantee application when many other 

applicants across technologies have yet to receive their first? 

Jonathan was able to provide responses to each question based on the content of our presentation and our 

discussion; however} he asked us to repackage the content to e)(pressly address these four questions, He is 

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clearly preparing his responses to DOE'S CRS (Credit Review Board), Congress, OMS, the Treasury, and other 

entitles that have influence. Jonathan is smart enough to know that he will succeed by getting ahead of any 

negative reaction. We think it as a positive sign that he's asking us to partner with him to help address those 

that would challenge the approval of a Phase 2 loan guarantee and any second loan guarantees offered to other 

applicants. 

Jonathan did say that above all other political matters, the creation of jobs is currently of paramount importance 

to many of his constituents, He appreciated that we have the capability to immediately create thousands of jobs 

with Phase 2. 

This e-mall and ilny accompanying attachments contain information that is confidential to 

Solyndra, Inc. 

The l.nformation is intended solely for the use of the individual to whom it is addressed. 

Any review, disclosure, copying, di stribution, or use of th.is e-mail com:lIunication by 

ot.hers .is strict] y prohibited. 

If you are not the intended recipient, please notify us immediately by re"':urning this 

message to the sender and delete al L copies, 

Thank you for your cooperation. 

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From: 

Sent: 

To: 

Subject: 

That's awesomel Gel US a doe loan 

Soturdoy, February 27, 2010 2:00 PM 

Ken levit 

Re: KPMG 

j;;;;;.: -_ •. _ .......... __ ........ _ ..... _ ........ _---.................................... _. __ ................... _._ ...... " ...... _-._ ..... -._ .... . 

To: SlI!ve Mltx:IleII 

Sent: Sat Feb Xl 07:55:17 2010 

SUbJect: Re: KPMG 

They about ha<lan orgasm In Blden's oIIIce WIlen we menUoned ~ndra. 

From: 

TD: Ken LeYit 

Sent: Sat Feb Xl 07:49:07 2010 

SUbject: Re: ICPMG 

We've be .. bean aetUnou.eni' 

From: 

To: steve MIIdleli 

Sent: Sat Feb 27 05:46:15 2010 SUbject: Fw: ICPMG 

numbers. Tbey .rewortdng on SO""" bOl asking Ibr money but I .... just 

know. Th8l1>"1C8SS Is ro"",," to me 

I. sluff going cn? I got 8 report yestenlay from • lobbytst 81 capital that was 8 bit saewy about quality )oba act cI1angaa. 

Curlcus. 

---

Sent: sat, Feb 27, 20106:30 am 

Subject: Re: KPMG 

Thanks. We mOl with ARM Recovery Team In Blden'. ofllC&-lhey seemed to love our Brady Project-also aU big rana or 

Sclyndra. 

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IIIII~------------------- From: Silver, Jonathan 

Sent: 

To: ,.' •••• 1111 •••••••• Spinner, Steve; Rogers, Matt; 

Subject: Re: loan; we're taking credit for tomorrow 

You are right • •••••• 1 

Jonathan Silver 

Executive Director 

Loan programs 

U.s. Department of Energy 

----~or1 inal Message ----- From: 

To: Silver, Jonathan; _ •••••• Spinner, Steve; Rogers, 

Matt; OConnor, Rod 

Sent: Thu Mar 04 13:05:07 2010 

Subj ect: loans we're taking credit for tomorrow 

50 we're all on the same page. The 51 ppt for tomorrow will take credit for the following 12 

loans! 

4 autos 

solyndra 

Lemme know ASAP if you feel differently on_ 

-
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From: 

Sent: George Kaiser~~~!I!!I!I!!I!I!!I~ •• To: 

Cc: 

Subject: 

Saturday, March 06, 2010 12:39 AM 

Steve Mitchell jliii.ii •••••••••• Ken Levit 

RE: 

Sounds good. I assume that we would not move ahead with the offering until we have formal 

DOE approval or would you issue while you are under due diligence? 

BTW, a couple of weeks ago when Ken and I were visiting with a group of Administration folks in 

DC who are in charge of the Stimulus process (White House, not DOE) and Solyndra came up, 

every one of them responded simultaneously about their thorough knowledge of the Solyndra 

story, suggesting it was one of their prime poster children. 

From: Steve Mitchell 

Sent: Friday, March 05, 20103:39 PM 

Cc:,~ TO:.G.eoil~~e~~~5.eir""""""""""I' I 'Ken Levit' 

Subject: FW: 

GeQrge, 

Chris Gronet had a good call with Jonathan Silver 01 the DOE today. Apparently our application has been caught up with 

several other groups who were also wanting a second bite at the DOE loan guaranty apple. This started a policy 

discussion as to whether a company should be able to get a second loan. Jonathan Sliver championed the cause that 

they should and he has just this week apparently won that banle. He would not say that we are the first one that will be 

considered but he all but did - he conceded that we are the only company to have actually closed and funded on our loan 

and most of the other companies still have no revenues. He has asked for another call for next wed or thur but said he 

will not have an answer then but that he is hoping to release an answer with a couple or weeks. To be dear, then 

~answer" we are looking for is that the DOE will then proceed on formal due diligence and toward a teon sheet - so not 

definitive that we get the loan guaranty but broadly (including and others close to the ODE process) seen 

as a very positive sign as it Is the same diligence that the DOE conducted on the front end of the lab (same engineering 

leams and the environmental- which was the single largest gating ~em last time - is already done on the entire 

sight). So it appears things are headed in the right direction and Chu is apparently staying involved in Solyndra's 

application and continues to talk up the company as a success story. 

Please let me know if you have any questions. 

Steve 

From: Chris Gro~~t<~oo,oiioo~,o~OO~O~",~,",o".iiii'ii"ii'''ii""ii'''ii'Mii''ii'ii'iI' 0" 00""" 

Sent: Friday, March 05, 2010 2:37 PM 

To: Steve Mitchell 

Subject: 

Hi Steve, 

Jonathan Silver was very positive but didn't have a definite answer on diligence yet. We will talk again next Thurs. 

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Chris Gronet 

CEO 

Solyndra, Inc. 

47700 Kato Road 

Fremont, CA 94538 USA 

-

This e-mail and any accompanying attachments contain information that is confidential to 

Solyndra, Inc. 

The information is intended solely for'the use of the individual to whom it is addressed. 

Any review~ disclosure, copying, distribution, or use of this e-mail communication by 

others is strictly prohibited. 

If you are not the intended recipient l please notify us immediately by returning this 

message to the sender and delete all copies. 

Thank you for your cooperation. 

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385 

. 

~-..~==~-------- Sll/lt: 5:37PM 

To: 

SubJect: 

I reviewed the documents DOE sent, which stat& that the. project continues to be 5uctessful 

and :In accordance with the business plan, despite the parent's recent financial audit. DOE 

.ei!lllS to separate the parent from the project in tertlls of risk monitoring, but I think tha 

deal is structured in a way that does not suppaI'!: that view. 

1. The parent is the prime equipment supplier and Sole purchaser for the project's output. 

2. Althoujh the parent has pledged full construction completion support, the cash account is to be funded during construction. The deteriorating financial status of the parent 

could impact the ability to fund the construction completion account and increase 

canplortion risk for the project. 

Could you please send me your thoughts on this? 

Please see DOE's mon1toring repel'!: on solyndra. 

X·'ll read this afternoon. Perhaps we can share thoughts later today/tomorrow morning after we 

have a chance to read. 

M per your request. 
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From: 

Sent: 

To: 

Co: 

Subject: 

Solyndra Update 

Gentlemen - I apologize for the multiple emails but given the length and the issues discussed I decided to separate the 

emails for Solyndra and_into two. 

To put it bluntly our poster child of private equity is acting up something fierce, The past five months have witnessed a 

tremendous competitive headwind for the company coupled with some severe management mistakes. Cutting to the chase 

- we will not be going public during 2010 and our longer tenn business plan looks to be somewhat in jeopardy. I am 

sorry to deliver this bad news, it's been sudden and unexpected but I'll attempt to sununarize the issues and go forward 

plan. 

Over the last six months the average selling price for solar panel. globally has plummeted due to Chinese "dumping" 

which is really a combination of their breaking the cost barrier nobody thought they could and generous govt subsidies. 

Solyndra's business model has been predicated on maintaining a premium to traditional solar, and we have maintained 

that - but as the competitors price has fallen so has ours despite our maintaining a premium price. At the same time our 

CEO has been very slow to react, and on the sales side has harmed our large customer relationships with his unwillingness 

to find a Couple this with continued issues speeding production and yo~ have a brutal combination that 

leads to a capital hole we did not expect in addition to the e wanted to raise in an IPO to 

fund the next DOE loan two. It's the funding gap, coupled with the freefall in seUing prices that have the 

bankers saying we can't go public and we shouldn't sell the company. Rather than go into even more detail, after my 

comments I have attached two email. from Steve doing a good job explaining the situation and the solutions we are 

working towards. for those interested in all the dirty laundry. The punch line is that if all goes according to the 

recalculated plan we will be asked to put more $' s into the company along with other insiders in order to bridge us to an 

IPO. The DOE loan, despite these issues, is still on track for October and should be flexible enough to allow for a 2011 

!PO. 

Clearly my key considerations have been understanding what went wrong, whether we have a handle on it (credible plan) 

and helping with the strategic decision around what path to go down next. To his credit_has been very 

communicative during this crisis review process and I am sitting in on the board discussions, the Calls with bankers, and 

discussions with~e board was very slow to recognize the problem - but the reaction has been swift as soon as 

the problems we~red. 

most of the last five weeks in Fremont at the company. Along with the board member from_and 

basically running the company now that Chris Gronet the CEO has been compromised with the board. 

Because of the huge time commitment_is making (rightly so) he, _ and I sat down yesterday and went through 

his other companies to see where there might be people time needed while he is occupied. The good news, in contrast to 

_ most of Steve's companies are managed in conjunction . of his 

companies are in a sales process. I'll be spending more time . 

will help fill in some of the other spaces. 

Obviously the surprise downward tum here is unexpected and unfortunate and I am sorry to have to relay this to you 

especially given how well things had been going. I think there is still a plan here to getting a solid return out of Solyndra 

for ourselves (and our friends and family shares alongside us) but we have pushed out any significant positive event until 

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2011 and perhaps 2012. The go forward plan is under discussion everyday and we hope to have a solid option for 

discussion next week. 

As always I am happy to talk about any aspect of this. 

-Email's (rom~oday and a week ago: 

-

As discussed earlier today, advised 

that Solyndra cannot 

light of size of capital 

(viability capital - not is specifically 

tough right now, our ASP drop needs to show stability (we've dropped 

prices fro~an in Q4 09,_last quarter to_wan this quarter - we weren't reflective of the market the last 6 months but 

they fecI strongly we need to show 1his decline curve flattening out 

through Q3 of this year), and it would be very helpful to have the DOE 

approval for phase 2 in hand prior to an !PO as well. 

We have made many operational changes to the business that are taking 

hold and I beHeve have positioned the company to accomplish its revised 

plan of record. More importantly, we have asked the management tearn 

(and they have done so) to draw up a realistically conservative plan of 

record that they believe they will not miss. The three large components 

of Solyndra's business are watt per panel, average sales price and 

utilization. 

36cmlrninute line speed of our prior plan which adds anothet;jiil ••• million in capital need. Under our new of record we also project 

Solyndrats panel to price in 2013 a previous 

_and the panel power to vorsu'-

and to be produced speed versus the Ii" •• ;;. speed - these projections produce a profitable yet less 

- so ultimatciy a less valuable business in 2013 

(2013 is tho year in which crystalline panol pricing should reach its 

lowest possible level according to almost all analysts). Although these 

changes don't seem large, the operational leverage of solyndra's Fab 2 

are incredible as output, asp and watt's per panel all fall right to the 

bonom line. 

The company will have a cash need beginning in July of this year and the 

vast majority of its capital need is within the next 12 months 

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_ We are working to raise or to bring 

in a strategic partner, however, we don't believe we will be able to 

bring in a strategic partner within the timeframe necessary to fix the 

company's balance sheet in the short term. Accordingly. we are 

suggesting an internal round of_w-a-bifurcated 

valuation ~ if the company can ~from a 

strategic (or internally) by Sept 1 then this round is priced as a 

pre~IPO round with various IRR hurdles depending on when the company 

goes public (probably 25% in 12 months, 40% from 12 to 24 months and 55% 

from 24 to 36 months)(we will also require the F round that was raised 

last year to reprice from pre-money toiil~i!I._ pre~money since the Fls preference is probably in the money even if we 

sold the company in a fire sale today. Alternatively, if we don~ raise 

the strategic capital then the no round" would re~price at a very 

dilutive valuation (we are still working on this but we are talking 

a~e new money CO~_g into the greater of 80% of the company or 

a ~RR in an IPO or liquidation preference in a sale event), 

Our primary intent is to properly reward new capital for the risk and 

lower ultimate value of the company as well as to highly incent existing 

investors to write a check in this new round. 

We are still working on the aod the framework in 

which we would additional capital but I 

wanted to get you we have been meeting with 

regularly on this) an current situation. I will have 

another email with a more fleshed out transaction in the next 3 or 4 

days for your questions and comments prior to discussing beyond our 

group and 

Please let me know what questions and comments you may have. I will be 

back at Solyndra's office the last part of next week. 

-

-----iiiifiri 'na1 Mess e ---- From: 

To: 

Sent: Sun Apr 25 21:52:32 2010 

Subject: 

As discussed, Solyndra is fueing an unexpected increase in its projected 

capital needs to get to cash flow break even. I have been out at the 

company for the last two weeks and am headed back out tmrw morning as 

welL Under the business we had under for the last 

year the company 

portion ofFab 2 ~l;;~cl;i •• i. cash producer. As 

the company is now somewhere betweeniiiijj'I'ii!e~~~; phase 2 equity) - the difference in capital 

phase 2 occurs, panel pricing assumptions and watt per panel performance 

between now and 2012. 

The miss was driven by four issues set out below in relation to their 

3 

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level of magnitude of impact on the company: 

I) Chinese panel pricing: the Chinese are essentially dumping panels on 

the world market (apparently the WTO may bring charges but certainly 

that won~ happen in a time that matters). The Chinese government has 

provided its three leading panel producers with essentially unlimited 

zero cost capital which has enabled them to completely vertically 

integrate and grind panel cost to a point that no one (analysts, 

competitors and us included) believed crystaline silicon could reach. 

As a result, Solyndra's price curve is declining at a fuster than 

expected pace. This has forced the company to revise their price 

targets through 2013 and is the primary contributor to the projected 

capital shortfall. Important to note that Gronet was unwilling to 

accept that the market was forcing a lower price - he reacted 

unilaterally by forcing his sales people to maintain high pricing in 

spite of customers' pleas to IIhelp them outU - this attitude worked when 

Solyndra was on ltalIocationll during our ramp period and customers were 

very interested in trying out the panels. Unfortunately, Gronet over 

played his hand with these customers and burned a lot of bridges and 

started seIling to lower tiered customers who would pay the higher price 

but as you know this comes at a price to the company as these customers 

can~ meet our rapidly growing supply and are a lower credit risk as 

well. 

2) De-rate of Solyndra's panel power: Solyndra had taken what turns out 

to be an aggressive rating of its panel power. As a result, many of our 

early customers were not getting the projected electricity generation 

they had expected. Our distributors were also over selling the product 

by assuming better than existed conditions for sites they were selling -

also leading to lower than anticipated power production. This lead to 

disgruntled customers which could have been easily rectified by shipping 

additional panes for installation or a small rebate to reflect actual 

power production. Unfortunately. Gronet again took a unilateral stance 

and over the objections of his sales and marketing folks to argue with 

customers over their data set or power readings .. Gronet clearly never 

learned the !1 customer is always righttl slogan (some of the stories I've 

learned border on moronic). This culminated in our production and sales 

peeple (as part of a larger mutiny by the entire cxecutive team to 

disclose all of this to the board which occurred two weeks ago and you 

and I have discussed) demanding Solyndra "de-rate" its panel by 3.5%. 

This effectively lowers revenues by 3.5% across the board - we will make 

up this panel power but we anticipated the increase in panel power to be 

an increase in revenue generation, nat a catch up to where we were. 

3) Timing of DOE: Across the board management does believe we will get 

the DOE approval for phase 2, but the government does things in its own 

time line, The delay in the second phase pushes revenue generation from 

phase 2 off on a day for day basis. This also effects our cash needs as 

all of our equipment division and some of our overhead gets a1located to 

the project and is covercd by the loan ~ this is not occurring until we 

close the loan and in the interim the company must fully fund these 

teams which impacts cash needs in the short term. 

4) 30cm line speed: The company continues (0 run the Fab al30cm line 

speed. They can run the Fab at 36cm but they get far shorter runs which 

results in more downtime. This doesn't have an enormous impact on 

4 

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output but it does have some impact. The company feels certain it can 

overcome these issues, but they have run virtually no R&D in the past 

12 months as they have been racing to produce commercial product to ramp 

revenues. 

Surprisingly, almost all of the responsibility for this rests with Chris 

Gronet ~ he was very slow in recognizing the magnitude of China's 

actions in the industry and when he did see the issue he decreased 

transparency to the board and made several bad decisions in a row, oyer 

the objections of his entire management team - primarily around pricing, 

customer service and worst of all he left his channel strategy, low load 

white rooftops, and started selling to whatever company would meet his 

high pricing requirement which drove the company away from its core 

customer base. China's big moves became apparent to the industry 

between November and February so we probably could not have know about 

some oftrus until March, however, it took a full mutiny by management 

to bring this to the board's attention and to enable the company to 

start facing its reality and start moving constructively to address the 

situation. 

I do believe we are implementing many poSitive changes to get the 

company where it needs to be were at the company 

last week with me and have a good understanding of many of the issues as 

well, In short, Gronet probably would not have survived this in a 

normal situation but with an IPO in the near tenn, his close 

relationship with the DOE and the fact that he is the founder and the 

face of the company it is not practical to make any higb level changes 

in the short term. Having said that, assunting the company does get 

public I would be surprised if he isn~ moved to the chairman role 

within 9 to 15 months (his confidence is shaken and I believe he started 

managing out of fear - I'm not sure he would fight a new hire once the 

situation is stabilized). In the near term he will be focusing on the 

lPO, the DOE, technology development, government relations (especially 

with the US government w he has star power in DC and we need our 

government to step up if at all possible) and to be the face of the 

company. Operationally we have made a couple of changes that we believe 

our very positive ~ we have moved technology under Ben Bierman (he 

already has and fab and we moved all 

Tho5 

importantly they will run the day to day of the company 

including sales, marketing, customer relations and pricing which have 

proven to be areas Chris has just failed in. At the end of the day, wc 

gave Chris an enonnous amount of credit because he kept succeeding and 

failed to see when the founder/inventor was left behind by his company. 

We are in the process of fmalizing a revised business plan but it 

appears we will be projecting a capital need to break even of app. _ 

_ which is on the low end of the outlook we were prOvided a couple 

of weeks back. We will present this plan 10 

_ at the end of this week with the intention of gomg publIc In 

the very near term (June) and hope to raise We 

will have to go out on a Fab 2 phase I only business plan with the DOE 

and phase 2 as implicit upside in the plan. As a result, we have 

5 

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dramatically revised our valuation expectations from_I!I ___ • 

pre-money to_(and would probably take the company 

public at __ In the event the company gets the 

phase 2 DOE approval, it will need another app. • r of equity. 

We are anticipating that the bankers will push us to provide a solution 

for that capital need as it is assumed we will get the DOE loan and the 

!PO could suffer greatly from fear of a secondary offering in the short 

term and the resulting dilution (or potential !PO investors could sit on 

the side line and wait to see if we get the DOE loan knowing they can 

get an allocation then). We are anticipating a shareholder loan that 

goes into effect if certain covenants are met ~ the big ones being the 

!PO and the DOE loan approval. This loan would be in the $200 million 

range and we anticipate it being very expensive for the current 

shareholders (we are trying to get it done on a pro-rata basis by all 

maior shareholders to show support for the company). 

I apologize that all of this is coming down at the end of what has felt 

like a very good deal for some time, but please know that we are 100% 

focused on making this work and I do believe there is still a lot of 

value we can extract from our investment - it just may take more time. 

I will continue to update you as things evolve. 

-

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26 
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"9114 

~I....-~,,~----~--- Sent: 0 10:05 AM 

To: 

Subject: some concerns about the Prnldenfs vlsH to Solyndl1l: Please keep corlftdl.n~al-wflll you .end to ron 

I talked to lIatt as well. The shaM: tel'll! problem is very understandable. The longer t.r/ll 

w1th Europe such a large share of their .. arket could be problematic. But,.s you note, that 

is what risk is obout. 

·····Origin.l Mess.ge·"'·I~I!I!IIII •••••• From: Roger., Matt [mailto 

sent·ti:iMoiin~da~Yi' iMaiY~2~4'il2010 10:03 AM TO:._ • Subject: FW: W 

k.ep confident a 

Here'. the 1 

President'. visit to Solyndra: Please 

DepaM:ment of Energy 

••• •• Or181nal IIessage····. 

From: Kl.in, Ronald A. [m.ilto:.~I11 ••••••••• Sent: Monday, May 24, 2019 10: 

~~: OConnor, Rodj Rogers, Matt 

Subject: RE: wanted to share s 

keep confidential··will you se d 

Thanks! This looks fine to me 

51 DViS1t to Solyndra: Ple.se 

·····orig1nol Mess.ge---·· •• Iii ......... .. From: OConnor, Rod ["aUto: 

thngfl 

Sent: Mondoy, May 24, 2010 9:56 All 

To, KIdn, Ronald A. 

Subject: fW: Wanted to share some concerns 

keep confidentiol··will you send to ron 

about the President's visit to solyndra: Pleas. 

Ron· 

8ottom line is that we believe the company is okay 1n the medlum term, but will need s_ 

help of one kind or .nother down the road, I know t.lked through the go1ng concern issue last week. ",.tt's summ.ry is below. We ore putting together t.lking polnt. on 

this which I will send over·let me know if you need more . 

•• ·-·Orlgln.l Message-·_·-

From: Rogers, Matt Sent: Mond.y, May 24, 2010 9:17 AM 

To: OConnor, Rod 

37 
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Cc: Hurlbut, Brandon 

Subject: RE: Wanted to shara some concerns about the President's visit to Solyndra: Please 

keep confidential--will you send to ron 

The "going concern" letter is standard for conpanies pre-IPO. The letter says in short that 

the company needs more capital to keep going long-ter., which is why they are planning to tap 

the public markets. We will see these with all the pre-IPO companies that we fund and is not a general concern. 

There are three, related economic concerns that are lmpor1:ant. The price for solar panels 

has fallen significantly as the cost of silicon has fallen, reducing the margin that Solyndra can eam. in addition, the European market for their product (2/3 exported to Europe) Is 

weak with the financial 1ssues in Europe, especially in Spain. They have been counting on an 

energy bill to pass, including a renewable energy standard to ensure adequate US market s1ze. 

The good news is that the loans that we made ere allowing the company to increase revenues 

and reduce production costs significantly, them remain competitive in a tough market. 

If Europe goes and we don't see an here, they will face issues in the 18-24 

month window, into the fall with their new facilities 

on line. 

~cllllll"le"ll"t'IUon U.S. Department of Energy 

--·--Original ""ssage----- .~!!I •••••••••• From: Klain, Ronald A. [mallto~. 

Sent: Monday, May 24, 28111 8:38 AM 

~~~~~E:~~n~E~e~o~~r!ha~t;~ ce~Ia Can you guys look at this ASAP n ge 

-----Or181n01 Me .. ·se----- 1 From: Jarrett, valerie 

Sent: Monday, May 24, 2010 6: 1 

To: Klain, Ronald A. . Subject: Fw: Wanted to share some c cerns 'a ut the 

keep confidential 

As you know, a Going Concern letter is not good. Thought5? 

.---- original Me.s.a.ge ••• -•.•..•••••• From: Steve Westly ,~. 

To: Jarrett, Valerie 

rSit to Solyndra: Please 

Please 

Sent: i'\on May 24 03:18:53 2010 Subject: Wanted to share 50me concerns about the President' 5 visit to Solyndra: Please keep 

confidential 

Valerie: 

38 
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Congratulations on the historic progress the administration has made on health care and 

f1nancial reform. 

~'ro exc1ted to have the president in San Francisco Tuesday night, and I'm lool<ing fONard 

to seeing h1m at the dinner for Senator Boxer at the Getty's home. 

A number of us are concerned that the president is visiting Solyndra. The press has reported 

that the company has had to restate earnings--and there 15 an increas1ng concern about tile 

company because their auditors, Coopers and Lybrand, have issued a "going concern" letter 

(See below). Many of us believe the company's cost structure will make it difficult for them 

to survive long term. The company is burning through capital at a rate of over Ue.e II per 

month from Ql-Q3 according to it. own S-l fil1ng--and over $28 million a month including op 

ex and cap ex. This is a very large red flag. 

A number of their executives are looking for opportuni Ues at other solar companies, and 

we've heard that the bankers listed on the 5-1 • do not plan to 

move forward with the IPO: 

Cou Id you perh want to help ",""fdttl1l! 

press, If it' 

about unreali 

hits the wall, 

Lastly. 

Thanks •. 

in CIGS related companies. 

"In fact their auditors priceWaterhouse Coopers, have just issued what' 5 known as • "going· 

concern" opinion about the company,' 

Silicon Valley Frontlines 

In-the-Trenches Consulting to Startup and Emerging-Growth Companies 

solyndra's IPO - Not a "GOing Concern", But Hoping It's a Big Success! 

As I've noted before, there are many companies now in the backlog of IPO' 5 filed but not yet 

completed. One of them, the cleantech company Solyndra, is worth taking a closer look at 

because of its rather unique characteristics. Th1s high-profile solar panel business has 

raised a whopping $961 milllon in venture financing since it began and has been in 

J9 
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regis"tration since mid-December last year. U's looking to raise about $3ee mlll10n from the 

public offering. Sound 11ke a lot? Well, yes, but they need a lotI 

Since lntroducing it' 5 unique cylindrical components and related panels Solyndra has grown 

revenues from zero in 2001 to $6 1II11110n ln 200S and to $lee m11lion in 2889 - astonishing 

growth but for the unfortunate fact that it still costs the company a lot more to make the 

panels than they can sell them for. For that $leem in 2ee9 revenues it cost them $162m to 

manufacture the, product - and then another $115m to develop, market, sell and cover 

overheads. So for those at home keeping score they spent $217m to produce that $leam in 

revenues, It's still better - relatlvely speaking - "than the $228m they spent in 200S to 

produce just that $6m in revenues .... , 

TIlis ls not a typical busine55, even for the somet1l11es-extreme Valle¥1 Here's a company whose 

products are clearly state-of-the-art but where, after raising and spending almost a billion 

dollars, the true economics of producing and selling them are yet to materialize. In fact 

their auditors' doc Waterhouse Coo rs, have US~ 1ssued what's known .s • "golng concern" 

opinion about so, all companies looking to go public via 

an IPO have to f I th the SEC which has to include three 

years worth of d 0 s along with an additional two years of 

sumary financ al n has been around that long. As part of 

those statome s a cally saying that those statements fairly 

represent the i ItTi' the business. 

While this op1 ldri 1 the auditors are required to do some 

procedures to e t t b e as a "golng concern" in the future as a viable stand-alone bUSiness. The typical' approach - and rule of thumb - 15 that it is is a 

going concern if it has enough cash on hand to run the business for twelve months from the 

date of the audit oplnion (in essence, the date the auditors sign off on the period they just 

audited). The audltors won't be able to assume future additional financing (including the 

IPO) because that may not happen. Nor can they assume some rapid growth or improvement in the 

business that suddenly makes it caSh-flow positive. The IIIOst likely thing is that it 

continues .s it just left off i o~ f a at some of those numbers. 

In the year ended January 2, 2 P 1 m ing its daily operating 

actlvities (baslcally the loss t ne r e product plus its operating 

expenses and various other adj t nt). al I> s production facUities and 

make other capital investments ic d a So there's almost $350m • 

millon J - of cash consumed 1n e e •• 

How did they finance that, bee e e n.y f Well, they rahed $336m in venture flnancing (part of the $961Jii I lIIentio ed abov len included converting so •• existing loans into equity (an ownershlp stake), and took on an addttional $140m in debt. 

That debt is worth looking at - its money they have borrowed agalnst a $S3Sm loan focUity 

guaranteed by the Department of Energy and ls money Calling from the Federal government's 

economic stimulus and recovery commltments. It has to be used for the building of Solyndra's 

second production plant ln the VOlley (those of you who regularly travel on Hlghway 8S8 ln 

Fremont wl11 see the first plant right by the eastern side of the road) and which Solyndra 

itself must finance at least 27% on its own in addition to the DOE guaranteed loan5. 

At the end of 2809 where did all this leave the company? Well, it had $Sem cash in the bank' 

(i t also had $151m of further cash on tha balance sheat, but that cash is restrlcted and 

can't be used for regular operations). And the customers who bought the Sleam ln products 

still owed It $34m in remalning payments for them, Against that it owed $185m in current 

liabilities (payments for product costs, purchases, etc) and $140m in long term debt (the 
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h"IB 

money borrowed above). Not 'exactly a lot of net cash on hand to pay the existing bills and 

then run the 2010 operations. 

When you look at all the numbers, and you add to that the complexity of the business, the 

risk factors (their 5-1 lists 24 pages of theml) in the technology and the marketplace, then 

on a pure business analysis you have to agree with the auditors - they are not a going 

concern. It's also not unusual for a Silicon Valley •• rly stage company (and it is still very 

early in the development of this technology and it's market) to be in this position. In fact, 

that's exactly why they need an IPO - to raise the ~oney for growth and to get to cash flow 

positive froll operations. But its pretty unusual for a company to take the step they just did 

- publishing an open letter to their customers and suppliers to explain why, in their view, 

this 1s not a problem. 

To take a closer look at their SEC filing, click here. 

I'm rooting for tiliS campany. It's in the forefront of developing new energy solutions we desperately need. They claim that "by the end of 2012, we will be able to deliver 

photovoltaic systems that produce electricity on cOOllll!rcial rooftops at rates tllat are competitive wi t t i key markets on a non-subsidized basis". 

I'd love to S t in the Valley. Many of those people are 

in manufactur llat number will increase with their second 

plant and fur ind of business the Valley needs, and 

needs to be s echnology • 

Still, a lot • bets to pull this offl 

Posted by Phi in Cleantech 

41 
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Document 

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From: 

Sent: 

To: 

Subject: 

Chris Gronet 

Thursday, June 17, 2010 6:52 PM 

Steve Mitchell 

RE: RE: next steps 

We (the exec com) are closed on goy't relations reporting into _ _ s disappointed but is willing to work with 

this structure. 

Also closed on asking ~o taking on the acting role for while we conduct the search and consider 

him forthe role as well). 

Chris Gronet 

CEO 

Solyndra, Inc. 

47700 Kato Road 

_SA 

From: ........................... .. Senr Thlrsdar, June 17, 20109:07 AM To: Chris Gronet 

Sub ect: w: next steps 

Let's discuss. The white house offer to help may cut this short but it could be done in conjunction. 

~~~ ..... -................ -.............. -.......................................................... -................................... -............... ~ ................................. .. 

Sent: Thu Jun 17 06:19:55 2010 

Subject: RE: next steps 

Steve, have reviewed the materials sent over by.and we've also done a bit of additional diligence on our side. The 

CDA Investments are powerful and I think will provide significant credibility and urgency to the need for the US 

government to step into deeper support for the broader industry, as well as directly to Solyndra. 

The CDA investments, as well as the other external factors you and "have mentioned that are threatening company 

viability, in my view require direct and aggressive engagement with Washington. Advise the following steps: 

1. Substantiation. We need to substantiate and crystallize the significance of the CDA investments to both 

Solyndra and the broader industry. We need to be tight In defining the extent to which the CDA investments are 

upping the stakes on domestic industry and putting immediate pressure on Solyndra's viability - and how the 

CDA action represents only the most recent step in an ongoing pattern that, if not reversed by some type of US 

action, will leave the US without a competitive position in this space shortly. 

2. Outreach. Once we've got a handle on task 1, authorize us (McBee) to perform quiet and surgical outreach with 

both company supporters and thought leaders on Capitol Hill and in the Administration to lay the groundwork 

for a broader assault by the company. We can test the narrative, socialize leaders in Washington to the 

consequences of inaction, and create some appetite to move out with a fix. 

3. Define the fix. We need to define "the ask" - is it Solyndra-specific (a DOD framework agreement) or industry 

wide (incentives, mandates, etc) or both? I think at some level it has to be a combination as, again, weIll be 

most successful if we position this as an industry problem for which Solyndra, as a frontier company, is the 

1 

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bellwether and is taking the initial and at present most acute pain. We should perform task 3 in conjunction 

with task 2, but I do not believe that the company should go to the Hill with a specific ask until we have 

conditioned the environment in advance. Our advance work will also yield useful feedback that will allow us to 

zero in on a fix that is supportable. 

4. Engagement. Assuming we have fully substantiated our arguments re task 1, get the right level of response as 

part of task 2, and have identified the fix outlined in task 3, we will need company officials to engage the US 

government directly to articulate the problem, raise the stakes around lack of inaction, and advance a solution 

that allows the industry- and in the near term Solyndra - to stay competitive in the face of global competitive 

pressure. 

My advice is to move quickly on this - to get items 1-3 at a minimum done during the month of July before Congress 

adjourns (and Washington effectively shuts down) for the month long August congressional recess. 

Key on our side is to make sure that we fully establish/protect your credibility as It relates to what will effectively be 

your opening (and probably closing) argument- that the company's viability is threatened primarily (entirely) because 

of aggressive and persistent action by the Chinese government. Most Importantly is that Solyndra, as the industry 

leader represents only the first domino, and that unless the US government up's its response to anti~competitive 

Chinese maneuvers, the entirety of the innovative/domestic solar manufacturers will be strangled in their crib. 

All of that requires us to articulate specifically how the company is being undercut in the market. It's worth noting in 

this context that there is a lot of chatter in the beltway (fanned by your domestic competitors) around your cost 

structure, which is also something we'l! need to discuss and address. 

Below are example questions designed to help pull together evidence in support of our position and to hopefully make 

the point that a consortium of US manufacturers is likely facing similar issues. The point we want to drive is that while 

Solyndra may be first to be impacted because we are further along, unless the federal government steps up, the US will 

be without a competitive position in this space shortly. 

What is the current market share of the Chinese manufacturers (Trina, Suntech) in those markets in which 

Solyndra and its first-moving US competitors currently partiCipate (US, EU specifically)? 

o Data back to Q1 2009 would be most useful to demonstrate the Chinese's recent entry and expanding 

market share 

What is Solyndra's manufacturing cost trajectory over the next 18-24 months? 

o (If available) How does this curve compare with the Chinese (Trina, Suntech) and domestic competitors 

possibly facing similar price pressure? 

What is the variance between assumptions included in the company's LGP application/S-1 filing and current 

real-world pricing? 

How much, if at all, has the European debt issue affected Solyndra sales into the EU (currently their largest share 

of commercial sales)? 

o Has Solyndra and/or other US manufacturers registered foreign-currency exchange losses on par with 

the Chinese? 

If you're down for this plan, I will get a team on it right away (to include myself). I'm prepared to play hard here and I 

think you should also - key is to make sure we've got our facts in order as I think communicating the implications of the 

CDA investments and Solyndra's vulnerability as a result has the potential to be explosive particularly given the 

trajectory of the energy pOlicy discussion in Washington over the past severa! wks. We need to come correct out of the 

blocks -

Thoughts?? 

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-

Anything we need to be talking about? 

• 

From:·~~~"~"II" __ ~~1I1I1I1I1I1I1I sen.t:IIMlLolnliida~y.,~JUiine 14, 2010 7:39 AM 

To:"", 

Ce: Support Staff 

Subject: next steps 

_based on the info _has sent over 11m doing a bit of quiet outreach in an effort to provide best alternatives re 

next steps. 

Advise that we cancel our call today and Instead let me come back to you in the next couple of days via mail about how 

we might proceed after we've had some discussions on the Hill. I can follow up wi you directly after the email to 

discuss. OK wi you? 

This e-mail and any accompanying attach:rnents contain information that i5 confidential to 

Solyndra, Inc. 

The information is intended solely for the use of the individual to whom it is addressed. 

Any review, disclosure, copying, distribution, or use of this e-mail communication by 

others is strictly proh.ibited. 

If you are not the intended recipient, please notify us immediately by returning this 

message to the sender and delete all copies. 

Thank you for your cooperation. 

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From: 

Sent 

To: 

Subject: 

Tuesday, June 22, 2010 5:33 PM 

RE: RE: next steps 

Hey _-just checking back with you per below - know you have a ton of balls in the air. 

Bottom line is that if you are comfortable with the below approach I think we_can run wi things and use you 

and company leadership very surgically recognizing your time pressures. Just need general buy off on approach and a 

bit of substantiation as outlined below and we can sprint. Let me know how you want to play itFrom: 1111" •• ~:~t: Thurm June 17, 2010 7:20 AM 

Subject: RE: next steps 

_ have reviewed the materials sent overt_and we've also done a bit of additional diligence on our side. The 

CDA investments are powerful and I think will provide significant credibility and urgency to the need for the US 

government to step into deeper support for the broader industry, as well as directly to Solyndra. 

The CDA investments, as well as the other external factors you and_have mentioned that are threatening company 

viability, in my view require direct and aggressive engagement with Washington. Advise the following steps: 

1. SubstantIation. We need to substantiate and crystallize the significance of the CDA investments to both 

Solyndra and the broader industry. We need to be tight in defining the extent to which the CDA investments are 

upping the stakes on domestic industry and putting immediate pressure on Solyndra's viability - and how the 

CDA action represents only the most recent step in an ongoing pattern that, if not reversed by some type of US 

action, will !eave the US without a competitive position in this space shortly. 

2. Outreach. Once we've got a handle on task I, authorize us (McBee) to perform quiet and surgical outreach with 

both company supporters and thought leaders on Capitol Hill and in the Administration to lay the groundwork 

for a broader assault by the company. We can test the narrative, socialize leaders in Washington to the 

consequences of inaction, and create some appetite to move out with a fix. 

3. Denne the fix. We need to define "the ask" -Is it Solyndra-specific (a DOD framework agreement) or industry 

wide (incentives, mandates, etc) or both? I think at some level it has to be a combination as, again, we'll be 

most successful if we position this as an industry problem for which Solyndra, as a frontier company, is the 

beilwether and is taking the initial and at present most acute pain, We should perform task 3 in conjunction 

with task 2, but I do not believe that the company should go to the Hill with a specific ask until we have 

conditioned the environment in advance. Our advance work will also yield useful feedback that will allow us to 

zero in on a fix that is supportable. 

4. Engagement. lAssuming we have fully substantiated our arguments re task 1, get the right level of response as 

part of task 2, and have identified the fix outlined in task 3/ we will need company officials to engage the US 

government directly to articulate the problem, raise the stakes around lack of inaction, and advance a solution 

that allows the industry - and in the near term Solyndra -to stay competitive in the face of global competitive 

pressure. 

My advice is to move quickly on this -to get items 1-3 at a minimum done during the month of July before Congress 

adjourns (and Washington effectively shuts down) for the month long August congressional recess. 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0030022 
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Key on our side is to make sure that we fully establish/protect your credibility as it relates to what will effectively be 

your opening (and probably closing) argument-that the company's viability is threatened primarily (entirely) because 

of aggressive and perSistent action by the Chinese government. Most importantly is that Solyndra, as the industry 

leader represents only the first domino, and that unless the US government up's its response to anti-competittve 

Chinese maneuvers, the entirety ofthe innovative/domestic solar manufacturers will be strangled in their crib. 

All of that requires us to articulate specifically how the company is being undercut in the market. It's worth noting in 

this context that there Is a lot of chatter in the beltway (fanned by your domestic competitors) around your cost 

structure, which is also something we'll need to discuss and address. 

Below are example questions designed to help pull together evidence in support of our position and to hopefully make 

the point that a consortium of US manufacturers is likely facing similar issues. The point we want to drive is that while 

Solyndra may be first to be impacted because we are further along, unless the federal government steps up, the US will 

be without a competitive position in this space shortly. 

What is the current market share of the Chinese manufacturers (Trina, Suntech) in those markets in which 

Solyndra and its first-moving US competitors currently participate (US, EU specifically)? 

o Data back to Q12oo9 would be most useful to demonstrate the Chinese's recent entry and expanding 

market share 

What is Solyndra's manufacturing cost trajectory over the next 18-24 months? 

o (If available) How does this curve compare with the Chinese (Trina, Suntech) and domestic competitors 

possibly facing 'similar price pressure? 

What Is the variance between assumptions included in the company's LGP application/S-l filing and current 

real-world pricing? 

How much, if at all, has the European debt issue affected Solyndra sales into the EU (currently their largest share 

of commercial sales)? 

o Has Solyndra and/or other US manufacturers registered foreign-currency exchange losses on par with 

the Chinese? 

If you're down for this plan,l will get a team on it right away (to include myself). I'm prepared to play hard here and I 

think you should also - key is to make sure we've got our facts in order as I think communicating the implications of the 

CDA investments and Solyndra's vulnerability as a result has the potential to be explosive particularly given the 

trajectory of the energy policy discussion in Washington over the past several wks. We need to come correct out of the 

blocks -

Thoughts?? 

~~~.~;~£~S~nes~d,ay, Lne i6. 20W Hi PM 

TO:'!!' 

ee: Support Staff 

Subject: RE: next steps 

-

Anything we need to be talking about? 

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- "" "'" MMw.~_~~" '''~''~''~~'~''V~".~ .. W ~y~v,~, ,~~~,·c. ~w. __ 

Sent: From:.~~~,,~""""'~~IIIIIIIIIIII" Monday, June 14, 2010 7:39 AM 

To: Steve Mitchell 

Ce: Support Staff 

Subject: next steps 

_ based on the info "ha~ sent over I'm doing a bit of quiet outreach in an effort to provide best alternatives re 

next steps. 

Advise that we cancel our call today and instead let me come back to you In thE> next couple of days via mail about how 

we might proceed after we've had some discussions on the Hill. I can follow up wi you directly after the email to 

discuss. OK wi you? 

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From: 

Sent: 

To: 

Attachments: 

-

TueSday, June 22, 2010 5:58 PM 

image003Jpg 

I am in Washington, DC where I briefly had a chance to touch base wlth _ 

_ wants to get some of his people briefed in order to get started to put together 

some asks from our favorite Senators in Congress and the White House. His primary 

briefing requirement is to get a better handle on the issue of Solyndra's product costs. 

He expects to be questioned on the subject of our cost structure because of what Is in 

the rumor mill In DC. 

_knows you are juggling a lot of priorities and is sensitive to not taking up a lot of 

your time. He Just needs a little upfront investment before letting his people loose on 

the "asks". Overall, the level of interest in Washington is very high due to the situation 

in the Gulf. 

_was just getting on a plane to California. Perhaps you will be able to catch each 

other this week. He did say he is coming back to California in each of the next two 

weeks. 

Best, 

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From: 

Sent: 

To: 

Subject: 

Not bad. 

Sent: Frl Jun 25 16:25:46 2010 

Subject: Re: solyndra.jpg 

Please do. How is~n this? 

Friday, June 25, 2010 9:25 PM 

Re: Re: solyndraJpg 

-----iiIiIfiii-ri inal Messa e ---~­

From: 

To: 

Sent: Frl Jun 25 16:22:182010 

Subject: Re: solyndra.jpg 

We could work on that. 

Sent: Fri Jun 25 16:23:01 2010 

Subject: Re: solyndra.jpg 

Get them to buy our panels. All they have to do Is do some US content type of requirements for DOD procurement. 

----~iililfiii-ri inal Messa e-----

From: 

To: 

Sent: Frl Jun 25 16:17:43 2010 

Subject: Re: solyndra.jpg 

Seriously. I can only imagine. Issue came up in Harry Reid staff meeting too. Wild. 

Sent: Frl Jun 25 16:15:10 2010 

Subject: Re: solyndra.jpg 

Ugh. Trust me. I feel it. 

---.. Original Message -----

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Sent: Fri Jun 25 16:10:34 2010 

Subject: solyndra,jpg 

This picture is hanging in the White House, in the stair well in the West Wing, Gosh,.,no pressure. 

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From: 

Sent: 

To: 

Subject: 

He's a bit pessimistic on the loan. 

Ken Levit .I!!II!II!I!!I~~!I! Friday, June 25, 2010 9:29 PM 

Steve Mitchell 

Re: Re: ,0lyndraJpg 

He know, you're doing everything humanly imaginable. 

We should get that dod thing enacted into law If there's an energy bill. Is Solyndra working It? 

---- Original Message.-.-.--•••••• From: Steve Mitchell. 

To: Ken Levit 

Sent: Fri Jun 25 16:25:462010 

Subject: Re: solyndra.jpg 

Please do. How Is George on this? 

---- Original Me.ss.a.gie.-.--•••• From: Ken levit~ • 

To: Steve Mitchell 

Sent: Fri Jun 25 16:22:18 2010 

Subject: Re: solyndra.jpg 

We could work on that. 

---- Original Messageo.-.--.-•••••• From: Steve Mitchell. 

To: Ken Levit 

Sent: Fri Jun 25 16:23:01 2010 

Subject: Re: solyndra.jpg 

Get them to buy our panels. All they have to do is do some US content type of requirements for. DOD procurement. 

Original Me.ss~aigie.--.--.-••• From: Ken levit~ 

To: Steve Mitchell 

Sent: Fri Jun 25 16:17:43 2010 

Subject: Re: solyndra.jpg 

Seriously. I can only imagine. Issue came up in Harry Reid staff meeting too. Wild. 

----- Original Message.-.--.-•••••• From: Steve Mitchell 

To: Ken Levit 

Sent: Fri Jun 25 16:15:10 2010 

Subject: Re: solyndra.Jpg 

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Ugh. Trust me. I feel it . 

••••• Original Message •.••• 

From: Ken Levlt_ .............. t To: Steve Mitchell; I ,eorge Kaiser 

Sent: Fri Jun 2516:10:34 2010 

Subject: solyndra.jpg 

This picture is hanging in the White House, in the stair well in the West Wing. Gosh ... no pressure. 

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From: 

Sent: 

To: 

Subject: 

Attachments: 

Steve Mitchell on behalf of 

Saturday, July 17, 2010 1:35 AM 

FW: Meetings for the week of July 19 

image001Jp'g 

From: <"" N.>,,".' Chris .~~w"'·'~=''''~i'''''''~'''lwl''N.'''''I.w''''I''I'''I'''~.'1·'h'I'··I··I···~I·.·· Gronet. ••• Sent: Thursday, July 15, 2010 7:55 PM 

To: Steve Mitchell 

Subject: RE: Meetings for the week of July 19 

Tried your cell earlier. 

Yes, lots of catch up, Meeting with GSA is now set for next Wed •................. i11 attend, I 

am hosting some French dignitaries on the same day. 

We have 4 sales VPs in training on Monday (Including_ 

We have good candidates coming in for 2 more segment leads (REITs, GH) assuming •••••• ontinues with 

Utilities, 

I spoke with this afternoon, He is stili thinking things over and plans to talk to _n the morning. 

was in again today to meet with .and. _likes him, believes he is a strategic thinker, but 

wonders if he can execute a strategy. Two references came back '"average", So we will continue a worldwide search 

with • 

••••• .,'ave searches going for Proj Dev and Proj Finance leads. 

Chris Gronet 

CEO 

Soiyndra, Inc. 

47700 Kala Road 

From: Steve Mitchell ••••••••• Sent: Thursday, July 15,2010 1:01 PM 

To: Chris Gronet 

Subject: RE: Meetings for the week of July 19 

He better be! How on earth have we not been a part of these projects from the beginning? lots of catch up to do 

here. Let's get all over it. 

F~~~:·Ch;i;G;;;~~t·········F··YTI········ 

Sent: Thursday, July 15, 2010 2:49 PM 

To: Steve Mitchell 

Subject: FW: Meetings for the week of July 19 

FYI below, 260 green projects in process for U.S. gov't buildings. 

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Jonathan Silver is trying to help . 

•••••• our VP Gov1t Procurement, started last week, and 1 think he will be a star. 

Chris Gronet 

CEO 

Solyndra, Inc. 

47700 Kato Road 

Fremont, CA 94538 USA 

-

From: Silver, Jonathan.''''''''' ••••••• July 15, 2010 7:23 AM 

Chris Gronet 

-.;.p.I.d.g<JV; @gsa.gOV; •• l9J§lgsa.gov; ••• \jJgsa.gov the week of July 19 

-

Thanks for your note. You and your team are doing amazing thingsl 

I am copying Chris Gronet here. Chris is the CEO of Solyndra and I know your two teams will have a lot to 

discuss. 

Best, 

Jonathan 

Jonathan Silver 

Executive Director 

Loan Programs 

US Department of Energy 

1000 Independence Avenue, S.W. 

washi~5 Phone: 

email: 

F;~~:~g~.g;i;;;~IIt;:~gSa.gov] 

Sent: Thursday, July 15, 2010 10:20 AM 

To: Silver, Jonathan ••••• Ce: \jJgsa.gov; illgsa,gov; ••• lill1!lgsa,gov; illgsa,gov 

Subject: Re: Meetings for the week of July 19 

Jonathan: nice to hear from you. I'd heard you were at DOE. 

We're installing a lot of solar, not to mention green roofs, efficient heating and cooling, etc. You probably know we got 

$5.58 in Recovery Act funds mostly to upgrade and green our buildings; we have about 260 projects going. 

Would be better for these people to meet our hands-on green project management people. I'll try to arrange. Can you 

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give me a point of contact for the Solyndra people and we'll contact them directly. 

"Sliver, Jonathan" ••••••••• 

071141201003:0114 PM 

-

Hope this finds you well. 

To ~sa.gov-•• lI'eg ...... g02l!V> 

e, 

Subject Meetings for the week of July 19 

As you may know, I am running the loan programs at the Department of Energy. We are responsible for the government's 

investments In all fonms of clean energy: wind, solar, nuclear and the like. Very interesting, 

One of our loan guarantee recipients is a company called Solyndrs. They received a $500 million loan guarantee from us 

to build a state of the art manufacturing plant in California. Solyndra makes an advanced solar roof top array for large 

commercial facilities and is now installed in locations all over the United states and Europe, 

Members of management will be In DC next week and would like to come talk w~h you about government buildings. 

Would you be willing to meet brtefty with them? More on them below, 

I would personally appreCiate it. 

Many thanks, 

Jonathan 

Jonathan Silver 

Executive Director 

Loan Programs 

US Department of Energy 

1000 Independence Avenue, S.W. 

Wash ..... ·n ton DC 20585 

Phone: 

email: 

'I!""":~~~~~vice President, Corporate Development and General Counsel, and_Director of Government 

would like to meet with you on July 21 or 22 to discuss policies that will Increase government and military 

deployment of US-made solar panels. Solyndra manufactures 100% of its solar panels at its Fremont, California 

headquarters. Solyndra has one factory nearing full production, and received a $535 million loan guarantee from the Energy 

Department to build a second factory in Fremont, That factory will produce 250 megawatts of solar panels per year, and will begin 

produclrlg panels later this year, Solyndra currently employs 1000 people In Fremont; through its US~centered supply chain It draws 

materials from businesses in 20 states, creating hundreds of jobs throughout the country, Its second factory will create an additional 

1000 jobs In Fremont and with its US suppliers, Solyndra's solar panels are comprised of a series of cylindrical glass tubes, They are 

ideal for 10w~load, large, flat roofs and perform optimally with a cool-roof, white roof membrane. Solyndra is one of the very few 

solar panel manufacturers reaching large~scale production in the US. The company would like to work with you to promote poliCies 

that Increase the use of solar energy technology throughout the government, and especially within the mltitary, as a key driver to 

grow a domestic solar panel market for US manufacturers. Specific policy objectives would include extending Buy American Act 

requirements to energy supply contracts pursuant to power purchase agreements, and repl1catlng the significalit green building and 

solar requirements In place for new Marine Corp construction throughout the military, 

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Time to Investigate the DOE and Solyndra - National Review Online Page 1 of2 

NATIONAL REVIEW ONLINE www.natlonalreview.com PRINT 

Planet Gore 

The hot blog, 

ABOUT I ARCHIVE I E-MAIL I LOG IN TO COMMENT 

Time to Investigate the DOE and Solyndra 

By Greg Pollowitz 

Posted on August 03,201010:15 AM 

Solyndra, the solar panel manufacturer that was awarded over $500 million in taxpayer-funded loan 

guarantees, is in serious trouble. Last week they pulled their IPO and replaced their CEO and 

founder with an Intel executive who has no experience in the solar industry. 

An excerpt from the San Jose Mercury News piece linked above: 

Solyndra has received $535 million in federal loan guarantees and $970 million in an array of 

equity financing, primarily from venture capitalists, 

The difficulties at So!yndra raise questions about why President 8araek Obama's administration 

spent considerable taxpayer dollars to buoy a company that has begun to list. 

'Solyndra made some miscalculations, the venture capitalists miscalculated, Energy Secretary 

Steven Chu miscalculated, and ultimately the Obama administration miscalculated," Wesoff said, 

Bull. They didn't "miscalculate." The evidence was right in front of their noses when they made the 

investment, as I pointed out in March 2009. Here's the key question I asked back then: 

4, Goldman Sachs downgraded the solar industry last year. Barrons reports from October 

2008: 

Solar stocks are trading sharply lower this morning after Goldman Sachs analyst 

Michael Molnar declared he has become cautious on the solar group, ~as less generous 

subsidies combined with a wave of supply pose a real risk," 

Molnar assens in a research note that the risk of oversupply in the solar market "will soon 

become a reality as considerably less generous demand subsidies take hold just as a 

wave of supply and tight financing hit the market." He thinks that "liberal subsidies of the 

past in markets like Germany and Spain are unlikely to be replicated in the future givne 

fears of their ultimate cost in a bad world economy." 

http://www.nationalreview.comiblogs/prinV242328 10/20/201 I 
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Time to Investigate the DOE and Solyndra - National Review Online Page 2 of2 

As supply increases, he contends, prices will have to "adjust strongly downward to 

generate demand," He thinks that trend will lead to be!ow~consensus estimates for 

module manufacturers and compressed valuations for stocks in the sector. 

Since Goldman was advising Solyndra on this project, did anyone in Chu's Department of 

Energy question why taxpayers are guaranteeing the debt on a new solar plant for a market that 

Goldman's own analysts have downgraded? Has President Obama's election changed 

Goldman's view on alternative energy to the point that it is now recommending the sector? 

I called it a "bailout" of Solyndra then and I stand by that. Except it was a bailout with no strings 

attached. It is an investment that should not have been made with our money, Chu should make 

public all due-diligence materials he and his department reviewed, including e-mails and copies of 

the numerous contracts Solyndra has signed with potential buyers, so the public can see how this 

Solyndra bailout happened. 

PERMAUNK 

http://www.nationalreview.comlblogs/printi242328 1012012011 
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From: 

Sent: 

To: 

Cc: 

Subject: 

- Brian Harrison; Steve Mitchell 

RE: RE: NCPV Hotline - August 10, 2010 

Getting business from Uncle Sam is a principal element of Solyndra's channel strategy. When Obama visited Solyndra in 

June, 2010, Chris Gronet .poke very openly to Obama about the need for installation of Solyndra's rooftop solar on U.S. 

government buildings. I heard Obama actually promise Chris that he would look into it when he returned to Washington. 

The point is that the government has to pay for energy no matter what. The capital funding to deploy a lot of rooftop 

solar on government buildings (say $300million) just falls off the table in Washington anyway. 

solar deployed as a cost parity play with the 

"IlIIIiea.s.iliY.dieP.I.o.y"more than 1 million people to this • a member of the Campaign 

Cabinet of together DOE, 001 and other agencies, we 

should be able to get a lot of Solyndra's rooftop solar deployed throughout the U.S government building/energy 

infrastructure. I'd like to get a storyline together with Solyndra to make a case for the U.S. Government adoption of 

Solyndra's product capability. We need to do a better job of telling our story in Washington especially as relates to the 

threat of competition from China, Inc. 1 am stunned by the lack of knowledge of our representatives in Washington 

about China's plans to "dump" pcSi solar in the U.S. market. This has been confirmed by Solyndra's Washington lobbyist, 

Best. 

-~~-~~Original Message-----

Subject: Fw: NCPV Hotline ~ August 10, Z010 

-

Note that pot a 15 MW order at an Air Force base. Frankly I'm surprised, as those sites tend to be relatively 

unconstrained on space and so_is unlikely to be the low bidder. I wonder jf 'buy American' rules held sway 

here. If 50, fTlight So!yndra prioritize federal government business, where it could have an 'unfair advantage'? 

They may already be doing this, but jf it's in fact an effective strategy, perhaps they ought to elevate its priority to the 

top. (No currency risk nor credit riskl eitherl). Do they have a salesperson who is specifically dedicated to gov't 

business? (Which, as you know, is a different animal than commercial sales), 

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From: 

Sent: 

To: 

Subject: 

Attachments: 

.. 

Saturday. September 18. 2010 8:48 PM 

Steve Mitchell 

FW: FW: White House Meeting 

image004Jpg 

Notwithstanding the two attached requests/offers, I never even got the courtesy of a 

response. So, I assume they don't want my help. 

i will be at the White House helping some of our other portfoliO companies this coming 

week. 

Can you give me any guidance about what is going on? I am happy to try you via cell 

phone whenever it works for you, if you prefer. 

Best, 

- ="::::'~~""~' 09, 2010 10:34 PM 

-

I will be back in Washington, DC on September 21 and 22, 2010. If I do schedule a 

meeting at the White House, are there some specific agenda items I can pursue on 

behalf of Solyndra? I am sure the subject of Solyndra will come up in any event. Please 

give me your guidance. 

Best, 

-From:J!!III~~. Sent: Friday, Septembsr 03 2010 2:50 PM 

To: Bnan Hamson; •••• 11II 

Subject: FW: 

Let me know when and if I can get a message to him in the WHouse. 

Founder & ManaGing Diredor 

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From: Recos'~~~.II!I!!I""" ~~t: Friday: September 03, 2010 11:05 AM 

Subject: 

HeY.it's Rahm- great seeing you the other day, apologies that it was so short. If you are ever in OC please let me 

know. 

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Is there a scheduled meeting time on Friday? Place? 

On Tue, Oct 12,2010 at 4:34 PM, •••••••••••••••••• wrote: 

Hi All: 

Are there any preliminary questions that you have for onward transmission to the tearn at Solyndra? I would 

like to send some questions over with the objective of scheduling a call for tomorrow afternoon so that the time 

on Friday can be used most efficiently. My proposal would be for a call immediately following the internal 

meeting tomorrow afternoon or maybe before. 

-

From: 

To: ••••• 

Date: 

SUbject: RE: Solyndra advance materials 

-Good morning. In addition to the Adobe pdf file transmitted last evening, I'm attaching for your review our detail 

business model Please confirm that you have bun able to receive and open tbese materials. Let me know Uyou would like to 

set up a confeTence caU in advance of our meeting on Frida.y. 

BiUStover 

SVP,CFO 

From: Bill Stover 

Sent: Monday, October 11, 20lO 11:27 PM 
311 


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-

Consistent with your discussion with Brian Harrison last Friday, I run enclosing various 

materials that summarize the revised business plan Solyndra recommended to its Board of Directors late 

last week. As Brian indicated on the phone call, our situation has changed quite dramatically. There are 

essential matters of assistance that we will be discussing with your team in person this coming Friday. 

As background for the materials and our discussions, I thought it appropriate to provide an overview of 

the situation, what's changed, and essential gove=ental assistance. 

Situation - With the arrival of Brian Harrison, neWly-appointed President and CEO, the company 

undertook a comprehensive review of all elements of operations, industry conditions, and the state of 

our market development. The assessment largely concluded that manufacturing operations and the build 

out ofFab 2 were proceeding consistent with plan. However, industry competition was acknowledged 

to be as severe as presumed and demand creation for Solyndra's unique photo voltaic solution was 

deemed to be proceeding noticeably behind plan. 

In the last weeks of the company's 3rd fiscal quarter (ended Oct 2nd), management determined 

that sales were likely to fall meaningfully short of forecast and that finished goods inventory would 

accumulate. The implications of lack of sell-through are quite significant, most directly on liquidity, but 

also as it relates to completing the company's private capital raise. We notified our investment bank of 

the 3r<1 quarter results, and received a quick determination that we would not be able to complete our 

private raise prior to year end as we had previously anticipated. The immediate implication of slower 

demand creation for our panels, and the inability to tap private capital markets is that the company will 

run out of the cash necessary to sustain operations in the first quarter of2011. Without access 10 FFB 

loanjimds in October, November and December for work that has been completed, Solyndra would run 

out of cash in November. 

Our last business plan projected a very rapid build out of Fab 2; essentially tripling capacity in 

a year. Without assurance of demand for the rapidly scaling production capacity, and without firm 

commitments for an incremental $300 Million of capital, the company was forced to consider various 

adjusted business plans. The objectives of these alternative analysis were to I) minimize cash required 

while allowing time to stimulate demand, 2) accomplish the build out ofFab 2 Phase 1 and ensure debt 

service, and 3) position the company for longer term growth and value creation for all stakeholders. We 

will be prepared to discuss other plans with you, but believe the plan with a high confidence for success 

is the "Consolidation Plan" noted below. Two additional alternatives for which the Board was briefed 

were the continued rapid growth plan which required more capital than is readily accessible in the short 
312 


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term, and a liquidation path should the company be Wlable to timely secure necessary partnering with 

multiple constituents, including DOE. 

Consolidation Plan - The accompanying plan fundamentally changes the course of completing the Fab 

2 Phase 1 capacity by redeploying existing Solyndra Fab 1 tools. Instead of Solyndra spending 

incremental capital to finish the tool build of certain of the remaining tools for lines 2 and 3, Solyndra 

will physically shut down manufacturing in Fab lover the course of several months, and move 

production tools into Fab 2. Such consolidation of operations allows Solyndra to most efficiently 

operate manufacturing. For the next two quarters, total production is lower which better matches near 

term production with market demand. Solyndra's cash requirements for labor and materials are 

meaningfully reduced. Under the Consolidation Plan, Solyndra will employ approximately 200 fewer 

people than we do today. 

Assistance - We expect that the Consolidatioll Plan will allow us to optimize operations, raise 

additional capital, service our debt and successfully build our business, albeit at a more moderate scale. 

Detailed in the attached materiaLs are two slides describing specific loan accommodations which are 

essential to making this Consolidation Plan work. For clarity, I note several: 

Continued access to the remaining FFB loan funds and restricted cash accoWlt in concert 

with completion of the full Phase I production capacity 

Delay in principal and interest payment schedule by one year 

No further interest payments until commencement of principal repayment 

Extension of the loan maturity to December 2019 (increase loan from 7 to 10 years) 

Removal of the requirement for $30 Million cost overrun reserve account 

To the extent changes alter the credit subsidy cost, such incremental costs are satisfied 

through DOE budget 

We have briefed our Board of Directors, key shareholders and noteholders regarding concessions 

that may be required by DOE to secure DOE's commitment to support the Consolidation Plan, 

including: 

Commitment to a fully-funded plan [$150 Million] 

First priority security interest in all Solyndra, Inc. assets, including intellectual property 
313 


76267.216

Solyndra, Inc. guarantee ofFab 2 indebtedness 

Please fmd attached a .pdf summary of the Consolidation Plan which incorporates all of the loan 

modifications proposed above. 

Thank you tremendously for your investment oftime and resources on these matters. Our team 

is available Tuesday between 12:00 pm - 2:00 pm Eastern time to brief you further on the materials. 

Additionally, we've set aside all of Wednesday to be responsive to your queries once you have had an 

opportunity to review the materials. Thursday will be a travel day for meetings in your offices on 

Friday. 

Bill Stover 

SVP, CFO 

This e-mail and any accompanying attachments contain information that is confidential to 

Solyndra, Inc. 

The information is intended solely for the use of the individual to whom it is addressed. 

Any review, disclosure, copying, distribution, or use of this e-mail communication by 

others is strictly prohibited. 

If you are not the intended recipient, please notify us immediately by returning this 

message to the sender and delete all copies. 

Thank you fOl:" your cooperat.ion. 

"Silver, Jonathan" 

Subject: Solyndra advance materials 

-
314 


76267.217

Consistent with your discussion with Brian Harrison last Friday, I am enclosing various materials that 

sununarize the revised business plan Solyndra recommended to its Board of Directors late last week. As Brian 

indicated on the phone call, our situation has changed quite dramatically. There are essential matters of 

assistance that we will be discussing with your team in person this coming Friday. As background for the 

materials and our discussions, I thought it appropriate to provide an overview of the situation, what's changed, 

and essential governmental assistance. 

Situation - With the arrival of Brian Harrison, newly-appointed President and CEO, the company undertook a 

comprehensive review of all elements of operations, industry conditions, and the state of our market 

development. The assessment largely concluded that manufacturing operations and the build out ofFab 2 were 

proceeding consistent with plan. However, industry competition was acknowledged to be as severe as 

presumed and demand creation for Solyndra's unique photovoltaic solution was deemed to be proceeding 

noticeably behind plan. 

In the last weeks of the company's 3'd fiscal quarter (ended Oct 2nd), management determined that 

sales were likely to fall meaningfully short of forecast and that finished goods inventory would accumulate. 

The implications of lack of sell-through are quite significant, most directly on liquidity, but also as it relates to 

completing the company's private capital raise. We notified our investment bank of the 3

rd quarter results, and 

received a quick determination that we would not be able to complete OJIT private raise prior to year end as we 

had previously anticipated. The immediate implication of slower demand creation for our panels, and the 

inability to tap private capital markets is that the company will nm out of the cash necessary to sustain 

operations in the first quarter of2011. Without access to FFB loanfimds in October, November and December 

for work that has been completed. Solyndra would run out of cash in November. 

Our last business plan projected a very rapid build out of Fab 2; essentially tripling capacity in a year. 

Without assurance of demand for the rapidly scaling production capacity, and without firm commitments for an 

incremental $300 Million of capital, the company was forced to consider various adjusted business plans. The 

objectives of these alternative analysis were to I) minimize cash required while allowing time to stimulate 

demand, 2) accomplish the build out of Fab 2 Phase I and ensure debt service, and 3) position the company for 

longer term growth and value creation for all stakeholders. We will be prepared to discuss other plans with 

you, but believe the plan with a high confidence for success is the "Consolidation Plan" noted below. Two 

additional alternatives for which the Board was briefed were the continued rapid growth plan which required 

more capital than is readily accessible in the short term, and a liquidation path should the company be unable to 

timely secure necessary partnering with multiple constituents, including DOE. 

Consolidation Plan - The accompanying plan fundamentally changes the course of completing the Fab 2 Phase 

1 capacity by redeploying existing Solyndra Fab I tools. Instead of Solyndra spending incremental capital to 

finish the tool build of certain of the remaining tools for lines 2 and 3, Solyndra will physically shut down 

manufacturing in Fab lover the course of several months, and move production tools into Fab 2. Such 

consolidation of operations allows Solyndra to most efficiently operate manufacturing, For the next two 

quarters, total production is lower which better matches near term production with market demand. Solyndra's 

cash requirements for labor and materials are meaningfully reduced. Under the Consolidation Plan, Solyndra 

will employ approximately 200 fewer people than we do today. 
315 


76267.218

Assistance - We expect that the Consolidation Plan will allow us to optimize operations, raise additional 

capital, service our debt and successfully build our business, albeit at a more moderate scale. Detailed in the 

attached materials are two slides describing specific loan accommodations which are essential to making this 

Consolidation Plan work. For clarity, I note several: 

Continued access to the remaining FFB loan funds and restricted cash account in concert with 

completion of the full Phase 1 production capacity 

Delay in principal and interest payment schedule by one year 

No further interest payments untilcornmencement of principal repayment 

Extension of the loan maturity to December 2019 (increase loan from 7 to 10 years) 

Removal of the requirement for $30 Million cost overrun reserve account 

To the extent cbanges alter the credit subsidy cost, sucb incremental costs are satisfied through DOE 

budget 

We have briefed our Board of Directors, key shareholders and noteholders regarding concessions that 

may be required by DOE to secure DOE's commitment to support the Consolidation Plan, including: 

Commitment to a fully-funded plan [$150 Million] 

First priority security interest in all Solyndra, Inc. assets, including intellectual property 

Solyndra, Inc. guarantee ofFab 2 indebtedness 

Please find attached a .pdf summary of the Consolidation Plan which incorporates all of the loan 

modifications proposed above. 

Thank you tremendously for your investment of time and resources on these matters. Our team is 

available Tuesday between 12:00 pm - 2:00 pm Eastern time to brief you further on the materials. Additionally, 

we've set aside all of Wednesday to be responsive to your queries once you have had an opportunity to review 

the materials. Thursday will be a travel day for meetings in your offices on Friday. 
316 


76267.219

Bill Stover 

SVP, CFO 

This e-mail and any accompanying attachments contain information that is confidential to 

Solyndra, Inc. 

The information is intended solely for the use of the individual to whem it is addressed. 

Any review, disclosure, copying/ distribution, or use of this e-mail cOII1ID.unication by 

others is strictly prohibited. 

If you are not the intended recipient, please notify us immediately by returning this 

message to the sender and delete all copies. 

Thank you for your cooperation. 
317 


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BRI.EFING MEMO 

THE WI fITE HOUSE 

Washington 

October 25, 2010 

MEMORANDUM FOR TIIE PRESIDENT 

FROM: CAROL BROWNER 

RONKLATN 

LARRY SUMMERS 

SUBJECT: Renewable Energy Loan Guarantees and GrAnts 

Your advisors seek your direction on implementing the energy loan guarantee.program. 

Three ncar-teml risks characterize this program: rescission of non-obligated funds; criticism 

from Hill supporters and stakeholders for slow implementation; and making commitments to 

projects that would have happened anyway and thus fail to advance your clean energy 

agenda. [n considering these risks, tlle Department of Energy supports a process that would 

limit OMS and Treasury review, OMB and Treasury support tlle establishment of clear 

policy principles for project review, I'ecognizing that this may pose a risk that some program 

funds may not be obligated by the program's September 30, 2011 Stlnset date, We also 

believe you should consider working with Congress to reprognllu loan g\larantee f1mcls for an 

extension orlhe Recovery Act's renewable grant program during the lame duck tax extenders 

debate, An expanded EDB, including Secretary Chu, will provide 1111 opportunity \0 discuss 

the options described below with you tomorrow, 

[)]SCUSSION 

Dackground 

Tbe Recovery Act created two new progrllms 10 promote cleployment of renewable power: 

the 1705 energy loan guarantee program and the I ()03 grant in lieu of tax credit progmlU. 

7705 Energy Loan Guarantee Pl'ogmlil: The Recovery Act appropriated about $6 billion to 

enable the government to pay ror the credit subsidies associated with loan guarantees for 

renewable energy (and related) projects. The credit subsidy can be thought of as the 

premium that Il1Ust be pllid for the insurance the goverJU11ent provides in guafHntccing the 

loan for a project. This program was lntended to address concerns about tightening credit 

markets for rellcwnble projects. It represents <1 modificaiion of the existing i 70J loan 

gW\J1ll1tee program, which SHPPOfts innovntivc \eclmologics and covers renewables, l111cleur, 

and adVfl!1Ced fossil. To date, the 1703 progrlilll has no! received approprintiol1s for credit 
319 


76267.222

subsidies, thus requiring project developers to plly the government for the credit subsidy and 

thereby limiting the interest in the 1703 program among smalll'enewable developers.' 

1603 Granll'rogram: Renewablcs developers moy opt to convert the existing renewable 

investment tax credit, equal to 30 percent of II project's investment cost, into a grant. Before 

the financial crisis, reneWRble developers often partnered with large finllllcials that had 

sizable taxable income and could lise tax credits, i.e., provide "tax cquity." This program 

addresses conccrns about the capacity of the tax equity market fDr renewRbles through 20 I O. 

Doubling Rcnc1Vabfe Power Goal: Based on these Recovery Act programs, the 

Administration set a goal (0 double renewable power generation within three years. In 2009, 

the wind industry enjoyed its best year ever with nearly 10,000 megawatts of new installed 

capacity. Lawrence Berkley National Lob estimated that nearly one-quarter of this capacity 

would not have beell built in the obsencc of the 1603 grant program. The 1705 loan 

guamntee program did not close filly deals 011 renewable gencration in 2009. 

SlIm/l/ary 0/1705 LO([11 Guerranlee Program ((lid J 603 Gralll Progr((111 (fhl"ougfl Ocrober 25) 

Starr 

Determination of Receipt 

TypicHllengtb of review 

Program sunset date 

Total llurnber of projects 

(c1oscd/conditiolllll fot 1705) 

Number of willd power projects 

Number of solar power projects 

Nlllllbcr of geothermal power Ilrojects 

Number of biomass power projects 

Number of other technology projects 

Numher of slnles with suppot1cd 

projects 

Total capacity installed (M\\!) 

Total investment supported 

1705 Loan Guarantee 1603 Grant 

100·200 FTE 

DOE staff and contractors 

Discrctionary, renccting deat 

cbnmctcristics and 

negotiations with sponsor 

6+ months 

September JO, 2011 

4/8 

!Il 

012 

III 

0;0 

2/4 

4/6 

..,qO j -1,600 

$\."2 billion / $7.611illion 

5 Treasu ry FTEs n Ild 

15 DOE FTEs 

Stul\dardizcd, subject to 

eligible tcclmology 

entering into service 

4·6 weeks 

December J 1,2010 

3,851 

20} 

3,571 

2J 

25 

29 

·1& phl~ DC ond PI{ 

-8,600 

--$18,2 bill;Ol' 

Notc: Project sponsors for ~II power gcnemtion pr~jects \lnde~' the 1705 p!Ogr~!11I~;;'e indicated thot 

they intend 10 claim H 1603 gmn! once they enter into service. 
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Estimated Benefits of 1705 and 1603 to Renell'ables Developers: The combined effect of 

1603 and 1705 lowers the cost of a new wind farm by IlbOUI 55% and solar technologies by 

about half relative to a no-subsidy case (sec appendix table 1). Renewables' intermittency 

problem limits the deployment of these technologies, which could be remedied by installing 

back-tip capacity (likely increases the cost by 2 to 4¢IkWh). Past experience wilh the wind 

tax credit suggests thllt the J 603 grant and the associated tax credits could have !l significant 

impact all new wind capacity. Appendix figurc I shows (ill shoded regions) the halt to new 

investment during the three times the wind tax credit expired since 1999. 

Loan Gllamnlee Pipeline and Process: After receiving an application, DOE conducts 

extensive due diligence work on the technological, financial, credit, lega!, contractual, 

environmental, and operational aspects of each project. This due diligence can take months 

to complete lind often results in significant changes to the original trllTlsaction slmctme to 

mitigate identified risks. Tn addition to negotiating with the project sponsors, DOE also 

engages in a back-and-forth with OMB and Treasury, in pm1icular after the deal pnckage has 

been submitted for review. OMD review of DOE projects bas averaged 28 calendar days 

since September 2009, and 17·business days fOl' the 1 closing nnd 3 conditional commitments 

DOE has transmitted between August I and October 15 of this year. DOE notes thnt the 

buck lind forth conSllmes a significant alllount of staff time, thereby making it challenging to 

move several transactions forward simultaneously. Policy review by Treosury nnd the Whitt! 

House lms occasionally extended the amount oftime A project is under review beyond the 

time takcn by OMB to score a credit subsidy. Lns! wcek, DOE conducted nn intemgency 

prcview of five projects, with the expectation that 1Il0st of these cOlild reach the conditionnl 

commitment stage within the next 4-8 weeks unller the current review system. DOE 

corrently hns 35 projects in due diligence, and expects a significant number of-new 

applications when two project solicitations close in the next few weeks. Since loan guarantce 

fililds can only be obligated at closing, contHtionnl commitments wilt need to occur in thc 

tirst quarter of20 I J in order to close by September 3D, 2011. 

Legislative ImpJicRtions 

The Administration's ~pproach to the renewable loan guarantee program ane! grauts has 

implicUlions for legislative Activity, lncluding the FY2011 appropriations (House mark is $0, 

Senate mark is $380 million [or energy 10UIl g1liHlln{Ce credit MIO$idics); tilt W:-; <:I\\cntlcrs bill 

III which some Members would like to extend the 1603 grant; alld the FY20! 2 budget. 

Risl{s Chllrac/crizillg the LOHn GUlInmtec I'rogrRlll 

Rescission Risk: The 1705 loan guaralltee program hilS been scaled back to abo1lt $2.5 billion 

after n;progrmnming for Cash-far-Clunkers (May 2009) and thc slate <lid plll'kage (August 

2010). There hus been recent interest in rescinding unobligated Recovery Act balances to pay 

for other programs. DOE has obHgnted about 2.5% oftbc $2.5 billion in the 1705 program 

appropriations. An additional 9 projects Imvc receivcci 1705 comlitioJlul commitments, and if 

DOE cio,es these deals, the total obligations would he about $500 - $900 millioll. 
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Cong/'essional Risk: Failing to make progress on rcncwables loan gU(lHlOteco could upset the 

Hill (Sen. Bingaman, Speaker Pelosi), as wcll as renewables stakeholders, and draw criticism 

orthe White House, which has been singled out as a roadblock on post loan guarantees. 

Rconolll/c Risk: OMB and Treasury, which have statutory obligations to review 1705 loan 

guarantees, have raiscd implemcntation questions, including: "double dipping" - the total 

govertuncnt subsidy for loan gtJat'{m!ee recipients, which have exceeded 60%; "skin ill the 

game" - the relativcly small privl1te eq\lity (as low as 10%) developers pllt into projects; anel 

non-incremental investment - some loon guarantee projects would appcar likely to move 

forw!ll'd wituou! the credit support offered by 1705 (including thosc projects that already 

exist and for which the loan guarantee simply provides a means for refinancing). See the 

appendix for nn illustration of these issues with the Shepherds Flat project. 

Energy Loan GuarAntee Progl'am Options 

Option 1: Limit OMS and Treasury Oversight Role 

In the current review process, after working with project sponsors for 6 to 18 months, DOE 

submits projec1s for revicw of the crcdit subsidy for conditional commitments and policy 

rcview by OMB and Treasury. DOE would prefer to eliminate the deal-by-deal review and 

instead have OMB and Treasury plRY roles akin to what they do for othcr credit programs, 

sneh as OPIC and Ex-1m Bank. It should be noted, however, that OPIC and Ex·lm credit 

pt'ogmms have a long track record; OMB was more involved in the review of these programs 

in their carly yr:ars; and they have boards with representation by other Federal agencies, 

including Treasury, Ihat review and approve alimajoJ' projects. DOE would make initi~l 

credit subsidy estimates at the conditional commitment stage, and OMB would only review 

and approve of the credit subsidy lIsed at the time of closing on a dcal. 

Pros 

Cons 

Some Members of Congress may appluud this effOli, ifit results in a meaningful 

increase in the rate of granting conditional cOlllmitments to energy projects. 

Still exposes 1705 program to rescission risk until DOE can move tlu'ough lts pipeline 

n lot more conditional commitments -- up IQ twice as many ill the next few months as 

have beenlllade ill first 20 months of the program. 

OMB believes tlwt this npproach will not remedy the challenge of an insufticiem 

llumber or financially lind technically viable projects in the 1705 pipeline. 

The cconomic risks will not Iikdy be nddrcssed. 

Option 2: r-,·lllke t\)~J!'Oces$. Work BeneT by baal)\ishing ClenrPolicv l'rinci~ 

Tre!lsu)'y (md OMB believe that cicar policy principles - and associnted metrics for 

cvnluiltiol1 should be developed for the energy 10lln guarantee pl'Clgram. These principles 

would be nppliccll0 <ll! projt'cts auel address issues like doubling dipping, skin ill tbe g~me, 

~nd fllCremcl1taiit)' of investment (including refinancing). Those proposed loan guarantee 

projects that have satisfnctory measures under each of Uw key policy pl'illcipks would then 

be expedited through review. Those that do nul would require more extensive policy review 
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and possible rejection. It is important to recognize that under such an approach, there is 11 

risk thut not £III of the 1705 appropdation of $2.5 billion will be obligated by the program's 

sunset of ~epteJllber 30, 20 II. 

Pros 

• Ensures the economic integrity of government support for renewables. 

Cons 

Exposes the program to rescission risk t!u'ough September 30, 2011. 

• Some Members of Congress mny criticize tllis effort to Limit the Application ofthc 

loan gllllrlllltee progmlll. The White I louse will bCRr this criticislll. 

Oplion J: ReprOb'l'Um J 705 Fl1119.iJoLan E;<t~g,iloJ}. of L{i9.:L9x@1J'xog,IalA 

The 1603 grunt program expires on December 31, although the associated tax credits that 

could be conve11ed into grants ltnder this program do not sunset until December 31,2012. A 

2-yeRr extension of the 1603 grant program through the sunset of the associated tax credits 

has a $2.5 billion tax score. The Administration could work with Congress during the lame 

duck on the tax extenders bill to reprogram the 1705 funds to pay for the 1603 extension. As 

a variant of this option, the funds could be reprogrammed to support other clean energy 

priorities, sLlch ~s the 48C clean energy mmmtRcturing t!lX credit. 

Pros 

Cons 

Moves funds to the 1603 program that has been much more effective in promoting 

renewable energy, and likely to have a more significant impact on renewable energy 

investment in 20 II nnd 2012. 

Reduces economic risks and the rescission risks iden1ified above. 

Sen. Bingaman, who views 1705 as "his prob'l'Om," would strongly oppose. 

Could gignol the foilure of a Recovery Act progmm that has been fCilturcd 

prominently by the Administration. 

The rcprogramming Cff0l1 entails the risk tb1lt Congrcs~ !lccepts the 1705 rescission 

but fails to deliver the 1603 extcnsion. 

Option 4: Streamline ancl Accelerate OMElI Trcasurv Reviews with Project Prioritization 

OVP supports !In option Ihnt falls in possihle middle ground between option., l unci 2. Tlli:; 

approach would creme 011 expedited deal rCI'icw process, wiliie l1lll doing awuy with Trcllsmy 

nnci O'vlB reviews nltogether. One option to be c.xplol·cd would be to nssign higher credit 

subsidy scores in order to reach fiister agrecmcnt on the government's risk rolcrancc and 10 

more quickly utilize the $2.5 billion in npproprimcd funds. In addition, this approach COl!ld 

prioritize dl:llis with morl: Cnvorable policy charucleristics (e.g .. deals wilh lower tolal 

government subsidies). This option would prevcnllbe holding of' the loan guaralllce program 

to 11 lUore rigorous policy standard in awarding slimulus funds than other Recovery Act 

programs. The fOCllS would be on spending all remaining funds while muinlalllHlg the 

llcccssm'Y risk avoidance and priorilizing policy isslles where possible. 
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Pros: 

• Purties with equities, including Hill members !1Ild industry groups, would view the 

Aciministmtion as supporting tI program that they have spent political capital 

defending. 

• This would be an attempt to fix a broken process, as opposed to n complcte and 

unexpected overhaul which could engender criticism, 

Cons: 

• DOE, OMB, and Treasury have tried to relleh common grollnd on which to execute 

the program to date, and success hils beel! limited. 

In order to spend the remaining budget authority, tbe policy principles may he so lax 

that tIlis option may resemble Option 1 in practice. 

'. 
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AJlpendix Table 1: Cost of Generating Power rl'OIll New Capacity Investment by 

..l~~hnology Type, ¢IkWh 

Natural Gas Wind Solar TIlctmal ------------------ ---------------- No Subsidy Cost 7.3 &.8 23.2 

Cost with 1603 7.3 6.7 16.0 

Cos! with 1603 lind 1705 7.3 4.0 12.6 

Source: DOE Energy ~~~~~~~~~------------------ Inforlnation Administration 2010. 

Appendix Figure 1: U.S. Wind Capllcity Additions and I'e"!ods of No Wind Ti1x Credit 

(shaded), 1999-2007 

1800 

1600 

1400 

f 1200 

1000 

£0 800 

~ 600 

400 

200 

o· 

Source: Melcalf2009 using DOE l:-Jiergy Information Administration data. 
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Appendix: Shepherds Flat Loan GuarRntee 

'nlC Shepherds Flat loan guarantee illustrates same of/he economic and pllblic policy issues 

raised by OMB nnd Treasury. Shcpherds Flat is an 845-megawatt wind farm proposed for 

Oregon. This $1,9 billion project would consist of 338 OE wind turbines man\!f~etured in 

SOllth Carolina and Floridll lind, UpOI1 completion; it would represent the largest Willd farm in 

the country, The sponsor's equity is about 11% of the project costs, and would genemte an 

estimated return on equity of 30%. 

Double dipping: The total govcllUllent subsidies are about $1.2 billion. 

Subsidy Type ·,-----A-:--pp-l-·O-x'C'"ilTIll-teAmollnt 

______ ~(~nl~il~li~ 

Federal 1603 grant (cql;al to ]0% investment tax credit) $500 

Stale tax credits $18 

Accelerated depreciutiotl on Federal and State taxes $200 

Valuc of loan guarantee $300 

Premium paid t(jr power from state renewable electricity standard:.....-__ .,..$220 

Total $f;23& 

Skill in the game: The government would provide a significant subsidy (65+%), while 

tbe sponsor would provide little skin in the game (equity about 10%). 

lion-incremental investment: This project would likely move without the Joan 

guarantee. The economics are favorable for wind investment given tax crcdits and 

state rencwable energy standards. GE signaled through Hill staff Ihnt it considered 

going to the private lllarket for financing out offrllstl'ation with the review process. 

The return on equity is high (30%) becallse of lax credits, grants, and selling power nt 

above-market rutes, which suggests that the altern~tive of pri vale finallcing would not 

make the project financially nOll-viable. 

• Carbon reduction benefit.!!: Jfthis wind power displaced power generated from 

sources with the nvcrage C'Altifomin carbon intcnsi ty, it would result in nhollt [8 

million fewer tons of C02 emissions throllgh 2033. Carbon reductions would have 10 

be vnllted at lleudy $130 per Ion C02 for the climate benefiJs to equn! the subsidies 

(more thnn 6 times the primary estimate used by the government in evnlualing mks). 
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20105:32 PM 

'Brtl'Mler, Carol M.' 

RE: Intemal announcement 

Left you a VM on your cell . 

.. ---------iiiiiij-_iliiiiiiiiliiiiiiiiiiiii --.. -----------.-------------.. - From: Browner, carol M'_II!III 

25, 2010 5:30 PM 

What Is the announcement? 

~::;::-ner, caRli M.I Kialn, Roni-' Sent: Tua Oct 26 17:19:592010 

Subject: PH: Intemal announcement 

Let me know If you want to dieculiS. 

From: Silver, Jonathan 

1!!!!!f PM 

Fyi 

We should discuss in the morning. 

Jonathan Silver 

ElII!Cutlve Director 

Loan Programs 

U.S. Department of Energy 

From: 

To: Silver, Jonathan 

Sent: Mon Oct 25 21:38:'192010 

Subject: Fw: Intemal announcement 

FYI. 

-
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-

I hope that your muting preparation with your inter-ogency colleagues and Goldmon is going 

well. The reason for this note is to make you aware that 50lyndra has received some press 

inquiries about rumors of problems (one of them with quite accurate informotion) and we have 

received in bound calfs from potential financial investors. Both of these data points indicate 

the story is starting to leak outside 50lyndra. It is our view inside 50lyndra that while not 

desirable from DOE perspective we need to internally announce to emplayees and with one 

selected press member on thurSday of this week, October Z8. It is aur belief that it is better 

for all parties to get in front of the story and cantrol the messaging rather than get behind the 

story and an the defensive. So, I would like to go forward with the internal communication on 

Thursday, October Z8. There will be no mention of the DOE. 

Additionally, the meeting with Secretary Chu was a very goad one. I did not have an opportunity 

to speak with him privately. 

Regards, Brian This e-mail and any accompanying attachMents contain intornation that is confidential to 

Solyndra, Inc. 

The information is intended solely for the use of the individual to whom. it ia addressed • 

.;./ .... Any review, disclosure, C!opying-. distribution, or ule of thia e-mail communication by 

others is strictly prohibited. 

1:£ you are not the intended recipient, please notify us immediately by returning- this message to tbe sender and. ,delete ail copies. 

Thank you for your cooperation. 

10 
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From: 

Sent: 

To: 

Ce: 

Subject: 

- ~0107:26AM 

___ Ken Levit 

Solyndra Conference Call 

held a conference call this morning with existing Investors to provide an update on discussions with the DOE and the 

fundraise process. Below Is a summary of my notes from the call: 

with DOE 

officials visited Solyndra's facilities last week as part of their diligence in connection with restructuring the loan terms. 

The officials toured the production facilities and conducted meetings with Solyndra's management team. 80% ofthe 

discussion was focused on Solyndra's sales and marketing plan and how the DOE could underwrite SOlyndr.'s projected 

sales volume. The DOE originally asked to see signed purchase orders, but management explained that there is nothing 

concrete - just a compilation of anecdotal evidence that Solyndra will be able to increase sales volumes through Its new 

sales methods/channels. 

is planning to draw on the DOE loan in November and December. Management stated that DOE officials have Indicated 

the November draw should be approved, but It is likely they will need to see equity committed to the company prior to 

the December draw. It sounds like the DOE is primarily focused on not looking bad, and If they continue to fund while 

equity holders are unwilling to commit, they could look bad. 

Process 

DOE has a meeting with Goldman Sachs tomorrow to discuss the probability of fundraise success_ Management thinks 

GS will tell the DOE that most the Industrial companies are not Interested (aside from Bosch which has requested more 

information), and they are just beginning to contact financial Investors. I think this meeting could potentially prompt the 

DOE to ask for Some commitment from investors prior to the November funding. 

Layoffs 

discussed their tlmollne for announcing layoffs. They currently expect to tell suppliers/customers/POtential investors on 

Oct 27 and employees/press on Oct 28 (this Thursday). The DOE has requested a delay until after the election (without 

mentioning the election), but management believes they need to communicate as quickly as possible as rumors are 

rampant and many employees have left (Sept'lD employee churn was equal to total 2009 employee churn). 

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From: 

Sent: 

To: 

Subject: 

Ken, 

Steve Mitchell 

Saturday, October 30, 2010 2:40 AM 

Ken levit; George Kaiser 

RE: One more DoD contact idea 

lei's discuss Imrw and yel Arnold la!!2!!li. wHh the ,;girt guys al Solyndra. We are also working with •••• Iwo slar 

general (retired) and and _are helping to arrange something with _ 

I will send an update soon but the bottom line Is tIlat the DOE continues 10 be cooperallve and have Indicated that they 

will fund the November draw on our loan (app. $40 million) but have not committed to December yet. They did push very 

hard for us to hold our announcemenl of tile consolidation to employees and vendo~ 10 Nov. 3rd ", oddly they dldn' give • 

reason for Ihat dale. 

SIeve 

,. ·····'.,· .. ········· .. ii··~··><~·· .. ~· .. i····~· .. ·.·'··~·· .. i ..·i' .... · . ·.····."'·i .. ·i·· ... ······· .. ···· .... ,. ......... , ......... ,., ..................... , .................... " .................................................. ~ ................... , ........ -. From: Ken levlt~ 

Sent: FriIO/29/2010 1:29 AM 

To: Steve Mlt!:hell; GEorge Kaiser 

Subject: One more DoD contact idea 

_tonight gave me. great idea, to call and possibly enlist who worked fOT_forever, __ 

office fOT ten yean;, bas run numerous study board for DoD, gives half his time to.re DoD and consult, ~ hal!. He really i, a 

legendary .xpert 00 DoD and super-close to various of the O:lIIgrcssionaJ and WH expert,. It', • good idea._would help moke 

the intto. 

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From: 

Sent: 

To: Ken Levit 

Subject: Re: did they do layoff51 

No announcement till after elections at doe request 

From: Ken Levit 

To:jj~ill!I'- Sent: Fri Oct 29 17:21:072010 

SUbJect: did they do layoffs? 

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From: Ken Levit 

Sent: 30, 2010 6:56 PM 

To: 

Subject: Update 10/29/10 

Kind of a biS bummer. 

Sen From:JII!"'IJ!~'" __ : October 30 201 3'4 PM 

To: Ken levit 

Cc: 

Subject: GKFF Portfolio Update 10/29/10 

Solyndra 

Fundraise Update - Solyndra Is stili in need of approxtmately $150mm of outside equity capital by the end of the year. To 

date, the general level of Interest from outside Investors has been low wIllch is signaling that raising outside funds by the 

end of the year will be tough. Goldman has been unsuccesslul gelnlng traction with larye induslrlal companies (wlih the 

exception of Bosch and GE who have requested more Information but do not appear overly sertous). Goldman began 

discussions with traditional private equity funds eanler this week and three firms, General AUantic, Warbury Pincus, and 

SilverLeke, have indicated interest. Solyndra also Intends to contact other solar companies in the near future, but we 

cannot say with confidence that they win show any more Interest than the investors contacted to date. 

DOE Loan Restructunng - Solyndra management has had a series of meetings with the DOE over the past couple of 

weeks to discuss restructuring the existing DOE loan agreement. H appears that the DOE is willing to accommodate 

Solyndra's asks, but they appear to be concemed about 'ooklng bad" n they conlinue to fund Solyndra while (1) equtty 

owners don~ support the company or (2) Solyndra faUs to execute on their business plan. Solyndra plans to draw 

additional funds from the DOE In November and December, so tt is critical to have their approval to maintain adequate 

liquidity. W~h respect to addttionalloan draws, management believes the November funding is effectively approved, but 

the December funding could be held up W the DOE feeis uncomfonable about the prospects of additional capital. Tho 

DOE Is also holding meeUngs with Goldman In order to understand the probebilities of a successful fundraise. This 

meeling could potentially impact the DOE's decision to allow the November or December fundings. 

DOE officials visled Solyndra's faciliUes last week as part oltheir diligence in connection wnh restructuring the loan 

tonms. The officials toured the production facilHies and conducted meetings with Solyndra's management team. 80% of 

I 

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the discussion was focused on Solyndra's seles and marXeling plan and how the DOE could undelWrtte Solyndra's 

projected seles volume, The DOE originally asked to see signed purchase oruelS, bul management explained that there 

Is nothing concrete· just a compilallon of anecdotal evidence that Solyndra will be able to increase sales volume. through 

its new sales methods/channels, 

Layoff Announcement· Management discussed their tlmeline for announcing layoffs, They recently decided to delay the 

announcement date from 10128 until 11/3 per the DOE's request, Management is eager to announce the company's 

revised plans beceuse rumors are rampant and employee chum Is Incresslng substantially (Sept'10 employee chum was 

equal to lotel2oo9 employee chum), The current plan Is 10 layoff about lOa part·lime factory worXelS and 50 full lime 

fadory worXers On connection wRh the consolidation of Fab 1 Into Fab 2), In approximately 6 months, management plans 

to lay-off another so. 1 00 R&D focused employees, 

Next week we will send an update on lhe fundralsing progress with the financial sponsors mentioned, 

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From: 

Sent: 

To: 

Cc: 

SubJect: 

George Kaiser 

Sunday, November 07,20105:37 PM 

Steve Mitchell 

RE: RE: National Review blog 

Yeah but the other issue is how we/they prepare themselves for Congressional investigation of 

the loan award by DOE. 

From: Steve Mitchell 

Sent: Sunday, November 07, 2010 11:34 AM 

To: .G.eo.rigejiiKa.is.e.r. Ce: 

Subject: Re: National Review blog 

Thanks. Saw it this morning. Things are going much better at the company and the DOE has been working to help us be 

successful-I'm sure this will limit the DOE's ability to act like a render instead of a government bureaucracy, 

From: George Kaiser 

Sent: Sunday, November 07,201011:29 AM 

To: Steve Mitchell 

Subject: FW: National Review blog 

From: Ken Levit 

Sent: Sunday, November 07, 2010 10:52 AM 

To: George Kaiser 

Subject: Re: National Review blog 

Faster than I expected but it's a near certainty that this will be a House Investigation. Bummer. The company will be 

distracted by this. They are gOing to need a federal strategy--offense and defense. 

From: George Kaiser 

To: Ken Levit 

Sent: Sun Nov 07 10:47:492010 

Subject: National Review blog 

Time to Subpoena the D.D.E. over Solynrlra 

Saturday, November 6th, 2010 

National Review Online, by Greg Pollowitz Posted By: Stannenter- Sat, 06 Nov 2010 10:20:02 GMT Hot Air: 

The Obama administration made Solyndra, a solar'power manufacturing company, a symbol of its "green jobs" 

push in the Porkulus program, Bar.ck Obama himself toured the factory, as did Barbara Boxer. Taxpayers 

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ended up sinking $535 million into building Solyndra a new facility that promised to add jobs in the 

clean'energy sector. (Snip) In other words, we invested $535 million into a company that apparently couldn't 

compete on a price basis with its foreign competition. 

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From: 

Sent: 

George Kaise, ••••••••• 

Wednesday, November 24, 2010 2:56 PM 

To: 

Cc: Steve Mitchell ,,~~ ••••••••••••••••• I 

_Kenlevit 

Subject: RE: Solyndra Update 

Would financial investors feel better if they were rendered parri pasu with the DOE on either 

total or future advances? Would DOE do that to gain a financial investment? The collateral is 

not worth a tremendous amount anyway. 

From: Steve Mitchell 

Sent: Tuesday, November 23, 2010 8:19 PM 

•••••••••••••••••••••••••••••• 'Ken lev~'; 

George, 

I had a good call wIth Brian Harrison and Bill Stover yesterday and wanted to send an update on the company's current 

situation. 

Sales & Marketing: The company should sell between 12.5 and 15 MWs this quarter -12.5MWs would be below plan 

but would occur by choice as Brian has refused to sell into German distribution at low ball prices (if we don't sell it this 

quarter he believes we can move it next quarter), The dormant inventory in distributors hands has been worked down 

by Solyndra's sales team - this was app. 6MWs last quarter and this quarter which gives us a market run rate of between 

18 to 20MWs. Pricing has held up and should be around $2.40 for the quarter. The most dramatic change is Brian's 

growing confidence that we can meet the capacity ramp in 2011. He and (our new head of marketing) 

indicated that the change in market dynamics for our product over the last 3 months has been significant - he attributes 

this to the integrators understanding our product's application better (and valuing it) and the implementation of 

forward pricing so the integrator and end user feel they can design in a Solyndra solution to be installed 6 to 9 months 

out. The communication around shutting Fab 1 and consolidating operations into Fab 2 was apparently handled very 

well with customers and suppliers and the fall out there has been negligible. I asked Brian the direct question on his 

belief that the c:ompany can dri .... e demand to meet the 03 capacity step up to 35MWs and he did not guaranty it but he 

does believe it is achievable, Brian indicated that $olyndra's greenhouse solution is building momentum but he does not 

expect to see much in the way of sales unti! 02 - the feed-In-tariff in Italy is very good for our greenhouse application. 

We have had a few good wins that Brian believes are indicative'of our value proposition starting to resonate - under the 

CA renewable energy standards utilities must develop owned renewable energy production as well as buy power from 

3,d party producers (requirements are for 50/50 self~generated to purchased energy production). lad 

committed to bring online a 7MW installation to be installed on one of its own distribution centers (ProLogis owns the 

building - you may recall we have a 16MW installation with them next year). was installing crystalline 

silicon panels until they realized the roof was more load challen ed than it had original thought - turns out Solyndra 

panels are the only panel that can 0 on this roof. ailed in somewhat of a panic and Brian is 95% certain 

we will instaH this project in Brian stated that more and more of these types of situations are 

occurring and that he believes momentum is starting to build. 

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_asked to come out to Fremont to see our facilities as more integrators were starting to pitch Solvndra 

products a~has highly engineered rooftops with sky lights. This is years in the making unfortunately, but the 

meeting went very well and ~fficia!s spent about 3.5 hours with Brian. There were some early discussions 

about _buying from Solyndra directly and then outsourcing the installation. 

! realize much of the sales report is anecdotal. The key question that outside investors, the DOE and current investors 

are asking is can Solyndra develop the channels and create demand to meet the ramp up in capacity that occurs in 

2011. I, and others, are talking to the company weekly to try and gauge this and will start speaking with customers again 

soon - but the inputs are primarily anecdotal sales evidence -the size of transactions, where they are occurring, new 

customers designing us in (for instance_was refusing to quote Solyndra panels in September and through_ 

and_efforts they look to be a significant partner going forward) and forward looking orders. ~ssured me 

that we would not know factually significantly more in November or December than we did in September or October 

about Solyndra's abllity to move 2011 output, but that the company would have a much better "feel" for it. He asserts 

that moving the capacity wlll not be without its challenges but that he is feeling much better about our prospects. 

Operations: Output for the quarter is on track from a volume pe.~:ve, however, we dld have a low watt per panel 

output week earlier this month~att panels ended up being att panels) which lowered our output from a 

power production standpoint. This was the result of poor quality moli (source metal) target that has been 

rectified. ~as budgeted for production in the 4th quarter, however this include'-of output from Fab 2 

which we will sacrific.e if the manufacturing ta)( credit comes to fruition. The company will start taking Fab 1 machines 

down 1n mid-December and should start installing them in Fab 2 in mid-February. Solyndra did receive _in the 

form of Cal. Manufacturing Ta)( Credit, however, this was not upside to our business plan as we e)(pected to receive this. 

Although the consolidation message went well with customers and suppliers, the consolidation is just one more event of 

volatilltythat is unnerving Solyndra's employees and attrition is becoming an issue. The company has lost an average of 

30 employees each of the last 4 months. Some of these would have been lost to the RIF anyway, however, several of 

them were employees that are part of the long term success of the technology, Apparently the job market in Silicon 

Valley is very hot right now and the employees we are losing are the primary bread winner in their household and the 

uncertainty of Solyndra's viability is forcing the decision to move on. The company is implementing a retention package 

for app. 100 key employees that will in cent them to stay through the next 6 to 9 months which is a critical transition 

period - if the company fai!s to SEcure financing this is moot. 

Financing: As you know, originally approached about 30 strategic investors to lead the 

of equity capital that_ revised plan calls for to reach cash flow breakeven (this requires not only the 

but the requested concessions from the DOE as we!!), The strategic investors have all passed. This was not surprising 

and beyon~none of the strategic investors engaged in any mEaningful way - this is just way outside of the 

risk/return parameters for these investors. 

We have now reached out to a better response from this group. Eight financial 

groups have opted to take meetings. I the only one to pass after the initial meeting -they were 

lnitlally very e)(cited about the opportunity, however, they passed for the following stated reasons 1) they already have a 

failed CIGS investment in their fund and there is an emotional/mental block to investing in another CIGS player, 2) 

concern over future pricing declines beyond $2.00 per watt which would require an additional capital raise and 3} fear 

that the brand is hampered by the pulled !PO and negative press which will be a drag on the company's ability to meet 

its sales targets. Tough but honest feedback. 

has meetings scheduled with~~~IIIII~!I back out to Solyndra to reengage On the 

i ••••• as actively ellgaged in diligenceon cape)( costs for future growth (a valid concern) and to what extent can the cape)( per 

watt be reduced in future fabrication facilities (_team has several ex_guys). 

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The three primary questions that are being asked are 1) can the company drive demand to meet 2nd half of 2011 

capacity expansion, 2) can the company continue to cut costs (this is getting the most favorable results) and 3) how does 

a new investor make the economics work. The first two issues are apparently fairly understood by the potential 

investors as their interest level has increased the 3ft! question is receiving more focus. Basically they are indicating that 

with of DOE debt and of convertible debt {the june Joan) even assuming the prior rounds of A 

through F are wiped out It is tough for them to of returns they want to see on this type of 

investment. Assuming Solyndra hits its plan Ebitda in 2014 and assuming it trades 1.iii., peers than the company has an enterprise value of DOE debt leaves 

If the new money converts on an equal basis with our convertible debt it will own equity X 

• equates to of equity value for the new investors or_ However, So!yndra will have 

reached its full manufacturing capacity by 2014 and a valid argument can be made that without growth prospects the 

company wHl be valued at_Ebitda or will have to raise additional capita! (i.e. dilution) to reach a greater 

valuation multiple. At a~Ebitda multiple the enterprise value is min debt resulting in 

a equity value - this results in in equity value for new investors and invested capital. With 

the execution risk, historical failure to hit plans on budget and the reality of Chinese competition the interested 

investors are making the argument that they need·better economics. Nobody has submitted a term sheet or detailed an 

outline of a deal, however,_is telling us that interested investors are making the ca.se that the DOE is going to 

have to equitize a portion of its debt or more likely need to haircut the debt b_or.and that the subordinated 

debt will need to take a haircut or sit behind liquidation preferences. .and management continue to work with 

all parties and hopefully we will receive some indications of interest soon. 

DOE: As you know, we reached out to the DOE in late September early October to discuss our revised business plan that 

included consolidating Fab 1 and Fab 2 operations, the need to raise an additional ~nd the need to alter the 

terms of our loan agreement with the DOE. DOE funded the company's October d~prior to our 

meeting in DC and following that meeting funded another for November. Key to the company's viability and 

assumption underlying the need Is that DOE will contInue to fund under the funding schedule out!1ned in 

the loan agreement, Our concern has been that they will withhold funding to try and force investors to contribute 

additional capital now. In our meeting in DC the DOE asked specifically to Argonaut's willingness to fund additional 

equity capital. I made it very clear that although we believe in the technology and have been incredibly supportive to 

date, the company needs a new investor with a strong balance sheet for it to effectively move forward, In the event 

that we are able to see real progress in cost cutting and demand creation and the company secures a strong lead 

investor that we are very open to making an additional investment (but I was very clear that we were not intendingto 

save the day or underwrite the entire amount). At the time the DOE officials seemed okay with that response, however, 

as fund raising has been slow (in their minds, not mine as I never thought anyone would make an investment decision 

until January/February as the more time that passes the more vision they have as it relates to Fab 2 ramp up risk and 

demand creation) they seem to be getting increasingly nervous about continuing to fund the loan, 

The DOE has had discussions With ••• t1 ••• and myself over the past two days, They directly asked Argonaut 

if we would fund a portion of their loan in Decembt":r which I declined to ~o. They indicated that since this "crisis" 

occurred they are the only group funding the company and that they needed to be able to show their superiors and the 

OMB that the DOE is not the only group supporting Solyndra. I very politely pointed out that the crisis occurred with a 

.price decline from foreign competition and that we reached out to the DOE in April/Mayas soon as we learned of 

the revenue deficiencies facing the company and that the current investor group made a loan/equity 

contribution to the company over the past 6 months (the last payment of which was made on Oct, 1st) and that those 

dollars are behind the DOE's in the capital stack. This pOint seemed to very much resonate with them and in some ways 

they appear to be looking to us to give them the arguments to make so they could continue funding the loan, To 

reiterate the point, it is critical to Solyndra'5 survival that the DOE continue to fund the loan - if the DOE choses to 

withhold a draw on Dec 10th or Jan 10th it will shut the company down without financial intervention. 

I spent a good amount of time with and Bill Stover today discussing the possibility that DOE would 

elect not to continue funding under the loan agreement, None of them see that as a realistlc outcome over the next 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0056722 
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two or three months {I'm less optimistic as J have no faith in my understanding (or anyone's for that matter) of the 

pushes and pulls driving decision making in Washington (Le. do it now during a lame duck congress, do it now and have 

two years behind them before a new presidential election, get it funded and keep it alive past the next election, 

etc.). The DOE has funded app. of a and to pull the plug without us being materially outside of 

our covenants and effectively shut the company down while we are in the middle of fund raising, in Goldman's belief, 

causes more problems than it solves, In any event, the 10th of each month will be critical through February-the funding 

amounts fall off dramatically at that point. Assuming the DOE continues to fund loan draws the company has until 

February before it needs to raise capital (there is a lot of sensitivity around receivables and payables that could make 

this late January or early March), This could be e)(tended by 30 to 50 days if Solyndra qualifies for the ful!_ 

manufacturing tax credits. 

It isn't really an issue to be fleshed out in this email but under the terms of our subordinated debt we have a first lien 

security interest in everything Solyndra owns including Fab 1 and the intellectual property (excluding Fab 2), We are 

taking the time to understand the ramifications of an event in which the DOE decides to stop funding and what a Fab 1 

only business plan would look like. This is obviously not an option we would want to pursue unless forced into it but I've 

asked the questions as to how much capital it would take to reach cash flow positive and what is expected Ebitda and 

cash flow at full capacity (which is approximatel~and in revenues). This route would only be taken 

if we were left with no other option (and it penciled out as an option we would want to pursue versus liquidation) and it 

would require a pre~packaged bankruptcy. 

I've attached the financial metrics to the consolidation plan that was presented to the DOE. The password is sunshine 

(no caps), Please note the SG&A and Depreciation in 2011 are inflated bV as a result of the write off of Fab 

1 facilities -they negate each other in the Ebitda line. 

Please let us know if what questions or comments you may have, 

Steve 

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DOCUMENT 

MC 
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From: 

Sent: 

Steve Mitchell .~.~~~"on behalf of •••••• 

To: Kaiser 

Co: 

Subject: 

_who is our day to day below Jonathan Silver, belleves~an do everything we have asked of.ithout Chu's 

signature. We have yet to directly ask for a haircut on the debt. When I discussed that the concept was coming up with 

this concept.said it was something .could not do, but _didnlt say if Chu or some other organization (congress, 

etc) would be required for such a change. We have been working with management to draw up strawman structures 

that may work - we have tried a!1 sorts of variations that didn~tdiscount he debt but bifurcated a portion behind a new 

investment liquidation preference. indication is that would probably not be enough for a new investor and 

that they would require a haircut on the senior debt. 

From:~" •• ~. Sent: Wednesday, November 24, 2010 08:51 AM 

_. 

To: George Kaiser; iiSiteiivieiM.itic.hie.1! •••••••••••••••••••• Ken Levit 

Subject: RE: Solyndra Update 

And have we gotten any clarity on what the DOE is "allowed" to do without significant additional govt approvals? Last 

time we talked about this I thought they were not allowed to reduce the debt outstanding or accept equity for debt 

outstanding without a lot of hoops and hearings? 

From: George Kaiser [mailto'''''''''!!II~!III''. Sent: Wednesday, November 24, 2010 8:45 AM 

~1I~1I1I1I1I1I1I1I1I1I1I •••• IIII.IIIIIIIIIIIIIIIIIIIKenL~it 

What about DOD (and other governmental entity) sales efforts? Do the DOE people focus at all 

on how a Buy American plan could be a win win win for them and do they have any influence? 

_~,~'-" •••••••••••••••••••••••••• I'~:en Levit' 

Here is a reply all without the attachment if your email was blocked since the attachment is password protected. 

From: Steve Mitchel! 

Sent: Tuesday, November 23,20108:19 PM 

TD:IiGlelol~leIKaiiiSierlllllllllllllllllllllllllllllllllllllllllllllllllllllllllll Cc: I 'Ken Levit'; 

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Steve Mitchell 

Subject: Solyndra Update 

George, 

I had a good call with Brian Harrison and Bill Stover yesterday and wanted to send an update on the company's current 

situation. 

Sales & Marketing: The company should sell betwee_nd_this quarter -_would be below plan 

but would occur by choice as Brian has refused to sell into German distribution at low ball prices (If we don't sell It this 

quarter he believes we can move it next quarter). The dormant inventory In distributors hands has been worked down 

i

b.Yis.o.ly.n.d.rai's,sales team - this was app._last quarter and this quarter which gives us a market run rate of between 

Pricing has held up and should be around_for the quarter. The most dramatic change is Brian's 

growing confidence that we can meet the capacity ramp in 2011. He and our new head of mark.eting) 

indicated that the change in market dynamics for our product over the last 3 months has been significant- he attributes 

this to the integrators understanding our product's application better (and valuing it) and the implementation of 

forward pricing so the integrator and end user feel they can design in a Solyndra solution to be installed 6 to 9 months 

out. The communication around shutting Fab 1 and consolidating operations into Fab 2 was apparently handled very 

well with customers and suppliers and the fall out there has been negligible. I asked Brian the direct question on his 

belief that the company can drive demand to meet the Q3 capacity step up to_and he did not guaranty It but he 

does believe it is achievable. Brian indicated that Solyndra's greenhouse solution is building momentum but he does not 

expect to see much in the way of sales until Q2 - the feed-In-tariff in Italy is very good for our greenhouse application. 

We have had a few good wins that Brian believes are indicative of our value proposition starting to resonate - under the 

CA renewable energy standards utilities must develop owned renewable energy production as well as 

3rd party producers (requirements are for SO/50 self-generated to purchased energy . 

committed to bring onHne a. installation to be installed on one of its own distribution centers the 

building - you may recall we have a 16MW installation with them next year). was installing crystalline 

silicon panels until they realized the roof was more load challenged than it had original thought - turns out Solyndra 

panels are the only panel that can go on this roof. ailed in somewhat of a panic and Brian is 95% certain 

we will install this project in Q1 at Brian stated that more and more of these types of situations are 

occurring and that he believes momentum is starting to build. 

_asked to come out to Fremont to see our facilities as more integrators Were starting to pitch Soiyndra 

products as_ has highly engineered rooftops with sky lights. This Is years in the making unfortunately, but the 

meeting went very well and Wal-Mart officials spent about 3.5 hours with Brian. There were some early discussions 

about_buying from Solyndra directly and then outsourcing the installation. 

I realize much of the sales report is anecdotal. The key question that outside investors, the DOE and current investors 

are asking is can Solyndra develop the channels and create demand to meet the ramp up in capacity that occurs in 

2011. I, and others, are talking to the company weekly to try and gauge this and will start speaking with customers again 

soon - but the inputs are primarJly anecdotal sales evidence - the size of transactions, where they are occurring, new 

customers designing us in (for instance_was refUSing to quote Solyndra panels in September and through Brian 

and _efforts they look to be a significant partner going forward) and forward looking orders. Brian assured me 

that we would not know factually Significantly more in November or December than we did in September or October 

about Solyndra's ability to move 2011 output, but that the company would have a much better "feel" for it. He asserts 

that moving the capacity will not be without its challenges but that he is feeling much better about our prospects. 

Operations: Output for the quarter is on track from a volume perspectivel however, we did have a low watt per panel 

output week earlier this month _panels ended up being _panels) which lowered our output from a 

power production standpoint. This was the result of poor quality moll (source metal) target that has been 

rectified. 16.1MWs was budgeted for production in the 4'" quarter, however this includes_of output from Fab 2 

which we will sacrifice if the manufacturing tax credit comes to fruition. The company will start taking Fab 1 machines 

2 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0024447 
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down in mid-December and should start installing them in Fab 2 in mid-February. Solyndra did receive_ in the 

form of Cal. Manufacturing Tax Credit, however, this was not upside to our business plan as we expected to receive this. 

Although the consolidation message went well with customers and suppliers, the consolidation is just one more event of 

volatility that is unnerving Solyndra's employees and attrition is becoming an issue. The company has lost an average of 

30 employees each of the last 4 months. Some of these would have been lost to the RIF anyway, however, several of 

them were employees that are part of the long term success of the technology. Apparently the job market in Silicon 

Valley is very hot right now and the employees we are losing are the primary bread winner in their household and the 

uncertainty of Solyndra's viability is forcing the decision to move on. The company is implementing a retention package 

for app. 100 key employees that will incent them to stay through the next 6 to 9 months which is a critical transition 

period - if the company fails to secure financing this is moot. 

Financing: As you know originally approached about 30 strategic investors to lead the 

of equity capital that Brian's revised plan calls for to reach cash flow breakeven (this requires not only 

but the requested concessions from the DOE as welt). The strategic investors have all passed. This was not surprising 

and beyond GE none of the strategiC investors engaged in any meaningful way - this is Just way outside of the 

risk/return parameters for these investors. 

We have now reached out to financial investors and we have had a better response from this group. Eight financial 

groups have opted to take meetings. is the only one to pass after the initial meeting - they were 

initially very excited about the opportunity, however, they passed for the following stated reasons 1) they already have a 

failed CIGS investment in their fund and there is an emotional/mental block to investing in another CIGS player, 2) 

concern over future pricing declines beyond which would require an additional capital raise and 3) fear 

that the brand is hampered by the pulled IPO and negative press which will be a drag on the company's ability to meet 

its sales targets. Tough but honest feedback. 

The ~has met has meetings scheduled with ••••••• 

and _recently decided to reengage) back out to Solyndra to reengage on the 

opportuniil and management describe actively engaged in diligenceapparentl is hammering on capex costs for future growth (a valid concern) and to what extent can the capex per 

watt be reduced in future fabrication facilities (TPG's team has several ex Flextronics guys). 

The three primary questions that are being asked are 1) can the company drive demand to meet 2

nd half of 2011 

capacity expansion, 2) can the company continue to cut costs (this is getting the most favorable results) and 3) how does 

a new investor make the economics work. The first two issues are apparently fairly understood by the potential 

investors as their interest level has increased the 3m question is receiving more focus. Basically they are indicating that 

with of DOE debt and of convertible debt (the june loan) even assuming the prior rounds of A 

through F are wiped out it is tough for them to see the types of returns they want to see on this type of 

investment. Assuming Solyndra hits its plan of_of Eb!tda in 2014 and assuming it 

peers than the company has an enterprise valu~ of DOE debt leaves 

its 

equity value, If the new money converts on an equal basis with our convertible debt it will o~n app. equity X 

••• illilllequates to • of equity value for the new investors or However/ Solyndra will have 

reached its full manufacturing capacity by 2014 and a valid argument can be made that without growth prospects the 

company will be valued at_ Ebitda or will have to raise to reach a greater 

valuation multiple. At a_Ebitda multiple the enterprise debt resulting in 

a equity value - this results in in equity new capital. With 

the execution risk, historical failure to hit plans on budget and the reality of Chinese competition the interested 

investors are making the argument that they need better economics. Nobody has submitted a term sheet or detailed an 

outline of a deal, however_is telling us that interested investors are making the case that the DOE is going to 

have to equitize a portion of its debt or more likely need to haircut the debt by • and that the subordinated 

debt will need to take a haircut or sit behind liquidation preferences. Goldman and management continue to work with 

all parties and hopefully we will receive some indications of interest soon, 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0024448 
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DOE: As you know, we reached out to the DOE in late September early October to discuss our revised business plan that 

induded consolidating Fab 1 and Fab 2 operations, the need to raise an additional and the need to alter the 

terms of our loan agreement with the DOE. DOE funded the company's October draw of app. 'rior to our 

meeting in DC and ' funded another_for November. Key to the company's viability and 

assumption underlying the is that DOE will continue to fund under the funding schedule outlined in 

the loan agreement. Our concern has been that they will withhold funding to try and force investors to contribute 

additional capital now. In our meeting in DC the DOE asked specifically to Argonau~s willingness to fund additional 

equity capital. I made it very clear that although we believe in the technology and have been incredibly supportive to 

date, the company needs a new investor with a strong balance sheet for it to effectively move forward. In the event 

that we are able to see real progress in cost cutting and demand creation and the company secures a strong lead 

investor that we are very open to making an additional investment (but I was very clear that we were not intending to 

save the day or underwrite the entire amount). At the time the DOE officials seemed okay with that response/ however, 

as fund raising has been slow (in their minds/ not mine as I never thought anyone would make an investment decision 

until January/February as the more time that passes the more vision they have as it relates to Fab 2 ramp up risk and 

demand creation) they seem to be getting increasingly nervous about continuing to fund the loan. 

The DOE has had discussions with Goldman, Madrone and myself over the past two days. They directly asked Argonaut 

if we would fund a portion of their loan in December which I declined to do. They indicated that since this "crisisH 

occurred they are the only group funding the company and that they needed to be able to show their superiors and the 

OMB that the DOE is not the only group supporting Solyndra. I very politely pointed out that the crisis occurred with a 

50% price decline from foreign competition and that we reached out to the DOE in April/Mayas soon as we learned of 

the revenue deficiencies facing th~ company and that the current investor group made a $175 million loan/equity 

contribution to the company over the past 6 months (the last payment of which was made on Oct, 1rt) and that those 

dollars are behind the DOE's in the capital stack. This point seemed to very much resonate with them and in some ways 

they appear to be looking to us to give them the arguments to make so they could continue funding the loan, To 

reiterate the point, it is critical to 50lyndra's survival that the DOE continue to fund the loan - jf the DOE choses to 

withhold a draw on Dec 10th or Jan 10th it will shut the company down without financial intervention. 

I spent a good amount of time with today discussing the possibility that DOE would 

elect not to continue funding under the loan agreement. None of them see that as a realistic outcome over the next 

two or three months (I'm less optimistic as I have no faith in my understanding (or anyone's for that matter) of the 

pushes and pulls driving decision making in Washington (Le. do it now during a lame duck congress, do it now and have 

two years behind them before a new presidential election, get it funded and keep it alive past the next election, 

etc.). The DOE has funded app. I II and to pull the plug without us being materially outside of 

our covenants and effectively shut the company down while we are in the middle of fund raising, in belief, 

causes more problems than it solves. In any event, the 10" of each month will be critical through February- the funding 

amounts fall off dramatically at that point. Assuming the DOE continues to fund loan draws the company has until 

F~bruary before it needs to raise capital (there is a lot of sensitivity around receivables and payables that iico.ulldlm.ak.e. 

this late January or early March). This could be extended bV 30 to 60 days jf Solyndra qualifies for the fun. 

manufacturing tax credits. 

It isn't really an issue to be fleshed out in this email but under the terms of our subordinated debt we have a first lien 

security interest in everything Solyndra owns including Fab 1 and the intellectual property (excluding Fab 2). We are 

taking the time to understand the ramifications of an event in which the DOE decides to stop funding and what a Fab 1 

only business plan wou'ld look like. This is obviously not an option we would want to pursue unless forced into it but I've 

asked the questions as to how much capital it would take to reach cash flow positive and what is expected Ebitda and 

cash flow at full capacity (which is approximately-'nd in revenues). This route would only be taken 

if we were left with no other option (and it penciled out as an option we would want to pursue versus liquidation) and it 

would require a pre-packaged bankruptcy. 

CONFIDENT/ALAND PROPRIETARY AVI-HCEC-0024449 
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I've attached the financial metrics to the consolidation plan that was presented to the DOE. The password is _ 

_ Please note the SG&A and Depreciation in 2011 are inflated by as a result of the write off of Fab 

1 facilities - they negate each other in the Ebitda line, 

Please let us know if what questions or comments you may have. 

Steve 

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DOCUMENT 

N 
354 


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From: 

Sent: 

Steve Milchell ••••••• 

Friday, December 03, 2010 10:07 PM 

To: 

Cc: _,Kai .. ser..-•••••••••• 

_Kenlevil 

Subject: 

Attachments: 

DOE proposal 

FW: Dept of Energy Meeting Monday, December 6 

DOE Mtg Dec 6.pdf 

From: Bill Stover (mailto~'''''''I!!1~ ••• 

senit:iiF.ri~da~ylil' iDeciie~m~beiir 03, 20107:16 AM 

Ce: To:~ Brian Harrison; •• Steve Mitchell;!! ~~~~~~~ •••••••••••• II 

Subject: Dept of Energy Meeting Monday, December 6 

Good Morning~ •• 11!1 

Thank you for making your team available for our meeting on Monday. Our gathering on 

Monday, and subsequent days as necessary, is a critical opportunity to forge a common 

ground for structuring a solution that works for the Dept of Energy, the Company, and our 

investors. 

As myself, Steve Mitchell and lIiII 

be in attendance. of Steve's senior analysts, will also be 

joining. Given the nature of our and the urgency of moving forward timely, 

Jonathan Silver's availability to join discussions is essential. 

As requested, I've attached an outline reflecting the Company's and our existing 

investors' perspective. We recognize there are very tough challenges noted therein for all 

constituents, but are optimistic that we can find common ground to move forward. 

I will give you a call this morning. 

W. G. "Bill" Stover, Jr. 

CFO 

This e-mail and any accompanying attachments contain information that is confidential to 

Solyndra, Inc. 

The information is intended solely for the use of the individual to whom it is addressed. 

Any reView, disclosure, copying, distribution, or use of this e-mail communication by 

others is oS trictly prohibi ted. 

If you are not the intended recipientl please notify us immediately by returning this 

message to the sender and delete all copies. 

Thank you for your cooperation. 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0056660 
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Timing/Urgency 

-Without access to FFB loan, the Company will be unable to pay 

obligations in December 

Preserve 1,000 Solyndra jobs and U.S. supplier 

infrastructure spending of $150 Million annually 

Avoid the Alternative 

--Absent a viable funding path, the Company must move forward w

a bankruptcy filing in December 

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Situation Assessment 

Company's perspective: 

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operations ($150 Million per plan) 

--"Securing capital from new investors is not possible within the 

relevant time horizon 

Dept. of Energy's perspective: 

--"Complete F ab 2 

---Achieve sustainable operating state; fully service FFB loan 

-Debt to equity conversion is not possible 

" 'Incremental investor capital must be committed as a condition fo

continued FFB/DOE loan draws 

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Situation Assessment 

Existing Investors' perspective: 

. Have demonstrated commitment to the business through most 

recent onvertible debt infusion _funded 

recently as Sept 23) 

____ equity invested is gone; equity investors resigned to 

zero recovery 

. Each existing investor will evaluate incremental funding as a fres

investment decision wholly on its merits 

.. Terms of any new investment must: 

Be in context of fully funded plan 

Have liquidation rights to allow recovery of new capital 

76267.262

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of incremental capital to be secured throug

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Summary of Revised Proposal 

Loan Amount: increase loan amount by in tot

Convertible Debt: _new de 

, Seniority: Increased loan amount and new convertible debt pari passu, an

senior to all other indebtedness 

Security Interest: expanded to include a first priority security interest in al

assets of Solyndra, Inc. including intellectual property 

Guarantee: Complete and unconditional guarantee of all Fab 2 obligations 

including the Indebtedness by Solyndra, Inc. 

Loan Maturity: extended to December 15. 2020 

Amortization Schedule: Tranche 1 amortizing over term 

through December 2020 

Interest forbearance until December 15, 2013; beginning of principal & interest 

amortization schedule 

Bal/oon Payment: Tranche 2 

accumulation due December 2020 

and its related interest 

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Summary of Revised Proposal, cont. 

of Cost Overrun Account: Removal of obligation to pre-fund 

cost overruns 

Advance Schedule: Continued draws to full extent of loan total 

Credit Subsidy Cost Payments: To the extent that the modifications set o

in this Term Sheet result in an additional Credit Subsidy Cost payment, DO

will use funds allocated under Section 1705 of Title XVII to fund those 

payments 

Anticipated Physical and Operational Completion: extended to 

December 31,2013 

Debt Service Reserve Ratio: needs to be modified in concert with 

adjusted business plan 

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(J1 

m m m 

CD 

Summary of New Convertible Debt 

Amount:_ 

Option: Right, at the election of the Cornpany and new investors, to increa

convertible debt financing by $50,000,000 (aggregate $100 Million) on sam

terms 

Interest Rate: accruing through maturity 

Conversion: =al at holders discretion; conversion ratio and/or premoney valuation to be determined 

, Maturity: December 15, 2015 

Liquidation Preference: Pari passu with incremental $100 Million of IIIiiI

loan funding, and senior to existing _ FFB loan and existing _ 

_ convertible notes 

.. .. 
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From: 

Sent: David Prend •• 111l1li' ••••• 

Monday, December 06, 2010 5:57 PM 

To: Steve Mitchell 

Subject: Re: Re: Solyndra Proposal 

The seniority is clearly on the table. Maybe you can get enough from DOE to make the deal attractive to a new 

investor? Clearly we need to take this to the White House ifnecessary ... 

Sent from my iPhone 

On Dec 6, 2010, at 9:45 AM, "Steve Mitchell" ••••••• lwrote: 

I have zero dollars for this or almost anything. 

From: David Prend III ••••••••••• 

Sent: Monday, December 06, 2010 11:44 AM 

To: Steve Mitchell 

Subject: Re: Solyndra Proposal 

It is a start.. Pari passu is at least on the table .. 

Sent from my iPhone 

On Dec 6,2010, at 9:35 AM, "Steve Mitchell" ••••••• lwrote: 

From: ~.IIiIlllIli •• 

Sent: Sunday, December 05, 2010 08:33 PM 

To: Steve Mitchell 

Subject: RE: Fwd: Solyndra Proposal 

Counter includes all-=.min from existing investors;_of it in the form 

of senior secured, pari passu to of DOE's debt (which includes the remaining 

_of the_. The from existing investors funded pro rata with the 

remaining draw schedule. The remaining_to come from existing investors in the 

form of convertible debt which sits below the existing _convertible and will also 

fund with the remaining draw schedule. Above funding from existing investors a 

condition precedent for the December advance. DOE's incremental funding comes 

solely in the form of a principal & interest holiday that adds_to the loan amount. 

From: Steve Mitchell 

Sent: Sunday: December OS, 2010 7:50 PM 

To: 

Subject: Fw: Fwd: Solyndra Proposal 

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Haven't reviewed. 

I just received this as landed in Denver. For those on the ground in DC, we can 

gather at Hyatt Regency breakfast at 8:00 before heading to MoFo at 9:00. Joint 

session still scheduled for noon. 

We will be modeling the attached yet tonight. 

Begin forwarded message: 

FroIl\:JlII~II"""""""""1I1I1I1I1I1I1I1I1I1II Date: December 5, 2010 3:17:31 PMMST 

To: '''bill.stovel I 

Subject: Fw: Solyndra Proposal 

Bill. 

My apologies for the delay in getting this to you. 

Hope to see you tomorrow. 

-

To: 

Sent: Dec 2010 

Subject: Solyndra Proposal 

This electronic message transmission cantain, infarmatlon that may be confidential ar privileged. The Information is intended to. be far the 

use ofthe indMdlJal or entity named above. If you are not the imended recipient, be aware that any disc;:!osure, copYln~, distribution or U$~ of 

the contents of this farmation is prohibited. If you have received this electronic tram.mission in error, please notify us by telephone (617-912· 

1420) or by electronic mail fpostmas1er@rockportcap.com) Immediately. 

2 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0028654 
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This electronic messsga traMmisslon contains information that may be I;onlidential or privileged. The information is intended to be for the Lise of the individual or 

entity named above. If you are not the intended recipient, be aware that any disclosure, copying, distribution or use oftne contents of this formation Is prohibited. If 

you have received this electronic transmission in error, pleue notify us by tet~phone (617-912-1420) or by electronic mal! <OostmlllSter@rockportcap.com) 

immedhitely. 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0028655 
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DOCUMENT 

P 
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hg,S58 

~~~ Sent: ~y, 

.. 

December ~~------- 08, 2010 4:42 PM To: ___ 

Subject: Fw: So~ndra liquidity crisis 

FYI--

To: 

Sent: 

~ Wed Dec 08 16:32:58 2010 

Subject: Fw: SoIyndra liquidity crisis 

DOE has shared 

~lynd~ln:e::~~~:~:~!~:~~:~:~~~~~:~~~~~~~~,~~~~~!! precipitate a m.ltdi,w" Th.".", ',Id COB tomorrow 11 Solyndra will meet this deadline_ 

DOE has Indicated to ~lyndra thatthevwlll not disburse the next SCheduled loa~.nt (expected this Friday) 

unless two ofSolyndra's main C'-Irrent investors commit to making an additional_equity Investment before 

then, This Investment Is onlv half ofthe .mo t called fa bV Solynd 's nsolfdatlon plan. but efforts tnusfar ta "Ise 

equity from strategic: and f1nanclallnv < 

Ifinvestors.do not commltthese fun 

various suppliers soon thereafter. T 

bankruptcy_ Iflnvestors commit the 

Including extending thE! current loan t 0 

DOse an or 

2909 

ndra mav detault on obligations 10 

e the company into 

Involve significant changes 

tentlally discounting tile value of 
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DOCUMENT 

Q 
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From: 

Sent: ===,v 8:46 PM 

To: 

Subject: 

Unless there is some agreement (or in the case of tax liabilities, law) giving them priortty, they are no different than any 

other shareholderlcreditor. 

From: George Kaiser 

~~~t: wednesday: December 08; 2010 9:47 AM 

Subject: RE: DOE negatiatons regarding solyndra 

Can the government be crammed down in a bankruptcy court? 

From 

Sent: To: George Kaiser; !!!!!!~:~~! 9:36 AM 

Subject: RE: OOE regarding solyndra 

I can do that, though I may not have all my questions answered (I have the key questions answered, but I have raised a 

couple of alternative approaches and do not yet know the viabilijy of them.) 

From: George Kaiser 

~~~t: Wednesday: December 08; 20109:28 AM 

Subject: RE: DOE negatiatans regarding solyndra 

Can both of you do 1:00 today if I move my_meeting a little earlier? 

"'.w'.w'=~'~'~.I .. I .. I'~I .• '~=.'~.'~~.m~"'~~"""W''''''N'''''~~.,."~~"~~~~_~_~,~_~"~~,~""""v~""",,,,,,,,,,,,,c,",,,.,w,,,,,.~.w.~""~·~~W.VA'·A~."'"",,,,",",W~"V",,,"""""'·' 

From:. 

Sent: Wednesday; December 08; 20109:14 AM 

To: George Kaiser; 

Subject: Re: DOE negatiatans regarding salyndra 

I can do 1:00. 

From: George Kaiser 

Sent: Wednesday; December 08; 2010 07:50 AM 

To: 

Subject: RE: DOE negatiatons regarding solyndra 

.your availability? 

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From: ••••• 

Sent: Tuesday, December 07; 20101:08 PM 

To: George Kaiser; I • I 

Subject: Re: DOE negotlatons regarding selyndra 

wasn't sure whether you wanted all of us there but I'd like to attend if so; 

If so - Ken and 1 are scheduled for my quarterly investment meeting with the trustees from 2. to 5 Thursday. I can try to 

change the meeting or perhaps we could meet at Ipm and I'll push them back to 230 or 37 

OK - 3:00; 

From: •••• 

Sent: Tuesday, December 07, 2010 11:24 AM 

CC:II!. TO:~G.eo ... ro~e~K_al~se~r.i'St.e.v.ej,M~lt~ch.e~I!~"II"~1I I 1111111111111111111111111111111 Subject: RE: DOE negotlatons regarding solyndra 

I have a bank cal! at 2:00; Sandy put 3:00 on my calendar. 

2:00 Thursday? 

That would be the key (your last parenthetical comment). 

From: George Kaiser 

Sent: Tuesday, December 07, 2010 11:06 AM 

Ce:.!! TO:jS~re~V~e,M,It.Ch~e"II~~~~~~~~~~~ •••••••••••••••••• 1II 

Subject: RE: DOE negotiatons regarding solyndra 

I would go a long way to preserve the NOLs.I want to talk about this before I leave town 

(by Thursday night); If you want a stall plan, Steve, you could make our decision subject to our 

CONFIDENTIAL AND PROPRIETARY AVI-HCEC-0024283 
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better understanding of whether the NOLs can conceivably be preserved in a semi-liquidation 

(that is, somehow maintaining the line of business and avoiding change of control). 

From: Steve Mitchell 

Sent: Tuesday, December 07, 2010 10:30 AM 

~~: GiOIae 2W 

Subject: Re: DOE negatiatons regarding solyndra 

We and the DOE loan fundings (both the 75 and their 95)would be reset to the revised business plan so they could~ 

create a loan covenant crisis again jf the company doesn't meet its revised plan (this is a Brian Harrison plan, not a _ 

_ plan). 

This would be a fully funded plan and by the end of the year the company should be cash positive. It is a tight plan as it 

relates to cash and meeting the capacity ramp in Q3 and Q4 are critical to this success. 

But we would not anticipating a need for additional cash· if we do need additional cash it would be a working capital 

need (or we completely blew the plan). 

As for the manufacturing tax credit - they are now very aware of the importance of this to Solyndra. The cannot agree to 

lobby for our behalf but indicate they are trying to be helpful. We are currently hearing that this (and many other 

refundable credits) have been in and out ofthe current bill a couple of times over the last 48 hours. I don'lthlnk they 

can have a meaningful impact on this as it is now a very political part of the entire tax discussion that is way above the 

DOE discussions. 

OddlYI this structure appears to preserve So!yndra's NOLs as well. This needs to be confirmed but is an app .••••• 

number and would be very helpful for future cash flows. 

From: George Kaiser 

Sent: Tuesday, December 07,201010:09 AM 

To: Steve Mitchell •••••••••••••••••••••••••••••••• -. Subject: RE: DOE negotiatons regarding solyndra 

Yeah, I realized that. I'd go in pari pasu but that is probably not a deal killer. They would have 

no ability to create another funding crisis on the rest of the loan because of covenant 

violations? This would get both of us through deadlines until June 30? What chance is there to 

realize cash breakeven by then? Can they help on the manufacturing tax definition, now that 

they have a vested interest? 

From: Steve Mitchell 

Sent: Tuesday, December 07, 2010 10:06 AM 

As currently described - yes. But we have not communicated this to the DOE yet so we could ask for pari passu with their 

75 and 95. We would be taking equity upside with our 75 that they would not receive· which was the rational for being 

junior to their new capital. We would still amortize ahead of their already funded debt. 

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From: George Kaiser 

Sent: Tuesday, December 07, 2010 10:03 AM a.--------- Subject: RE: DOE negotiatons regarding solyndra 

So, the new "on our side would be subordinate to the ne~on the DOE side? 

From: Steve Mitchell 

Sent: Tuesday, December 07, 20109:59 AM 

George, 

We've had quite a bit of internal discussions and some back and forth with the DOE since last night. My prior email was 

more of an update and I would like to request authority to make an offer to the DOE today that would fully fund 

Solyndra's go forward plan and revise the DOE loan. 1 don't think providing lOW to keep the DOE funding 

makes sense at this hour, This amount only gets us through February and we won't raise additional capital in that time 

period. It also enforces the DOE's thought that we will continue to fund the company. 

We would like to propose that the DOE increase Its loan by this late last night and don't know 

if it is possible at this hour) and Argonaut and Madrone i (SO/50) to fully fund 

the business on a go forward basis. We have consistently told the DOE we the entire to fund the 

business and we won't invest in anything short of a fully funded plan. The D~plus the additional • 

• will be the senior secured debt of Solyndra. The argonaut/madrone~e subordinated to the senior 

loan but senior to the remaining of DOE loan (which will have the discounted 15 year term characteristics I 

described last night). The convertible debt will convert into equity and our ne.will have equity purchase rights in 

some form for a large share of the ownership as well. 

This gives the company the best opportunity to execute on its business plan as they can stop fundraising and 

communicate to the marketplace that they are fully funded. I expect our commitment of could be lowered 

by other investor's participation should we choose to do so, Jamie and the Madrone group have approved this plan. I 

have talked with and he is okay to move forward subject to my discussion with you for your feedback one way 

or another. 

I don't know the odds of the DOE agreeing to do this -I put them around 50/50. If we make this proposal the best case 

scenario for this week is that the DOE's agrees to try and get the loan increase approved, funds Thursday's loan draw 

and we wait to hear in December whether they can increase the loan. If they donlt increase the loan we would not be 

obligated to fund any additional capital. Please let me know if you are okay with us making this proposal. 

Thanks 

Steve 

From: Steve Mitchell 

Sent: Monday, December 06, 2010 08:26 PM 

_Ce o •. : Gear e Kaiser ••••••••••••••••••••• I Steve Mitchell; 

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Subject: DOE negotiatens regarding soiyndra 

George, 

As you know, Jonathan and I are in DC along with the Solyndra management team trying to work out tennns to the DOE 

loan that would enable the company to raise money (internally or externally) and_kee the DOE on its current funding 

schedule. Last week we requested that the DOE increase the size of its loan by and current investors would 

potentially provide an additional_of equity to fully fund the anticipated a reach cash How break 

even. The DOE has been adamant that they cannot statutOrily amend the loan to provide additional capital and a new 

loan would be completed by June at the earliest and would not occur in the current DC environment. With that framework 

we sat down today to try and find some common ground. I have been very upfront that the likelihood of reaching a deal 

this week was low and that if the DOE dacides not to fund on Friday that we understand the ramifications (Le. we move 

towand a liquidation scenario). We have also conSistently stated that we would not fund into a plan that was not fully 

funded. 

One of the primary concerns that potential investors have cited when passing on Solyndra has baen that they would 

be investing behind of the DOE loan. To ba clear, they are also very concerned about the company's 

capacity ramp in the second half of 2011 (and the channel development that needs to occur to meet this increase in 

output), the cost reduction roadmap forthe product, the Chinese competition remaining rational actors reganding pricing 

(Le. maintaining a gross margin) and that additional capacity expansion would need to be based on a lower cap-ex model 

than we currently have for growth. To the extent we can work out terms with the DOE (which will require some additional 

capital commitment by Argonaut and Madrone), it is my opinion that tt will be very difficult to attract a new invastor in the 

timeframe in which the capital noeds to be raised and we will face letting the company go under or funding it ourselves 

along with Madrone. 

As mentioned above, the DOE can not (und more capital than the original loan called for _remains to be 

drawn), however, as of today they have shown a willingness to be very creative to incent"iidiiliiiiiiaapital 

investment. However, their opening requirement for funding any incremental loan draws was that current investors 

commit an additional this week (funded pro rata with the future loan draws). This is something I have pushed 

back on but it is clear that if we want to rec~nal capital from the DOE that we will need to make a commrtment of 

some amount of capital - I have discussed _with of Madrone and this Is a number he is 

comfortable committing to on a 50/50 basis with Argonaut at this time but no more (the unfortunate reality is that none of 

the other investment groups can make a commitment in any way close to this schedule so any new dollars should end up 

owning the company). 

We were far apart from the DOE on our asks - I have been pushing them to haircut their loan by which they 

will not (cannot) politically get done and they would rather have the fallout from a bankrupt investment than appearto 

enrich others by discounting the loan to its potentially current value and let us make outsized returns in an upside scenario 

_the lead negotiator forthe DOE) understands"hould discount the loan to increase the odds of a return of 

some portion of capital and _response is in the US government environment it is impossible for herto accomplish 

this. _has engaged with me on a discount to a greater extent than on an increase in the loan amount (which is 

consistently dead on arrival), however, she states that it is not a possibility (though it could be a walk away request in my 

mind). 

In light orthe distance between our respective positions we agreed to work on a framework ofterrns that could potentially 

get done recognizing that f would have to secure a committment from you, Madrone and other 

investors. I have aUached the framework that was distributed tonight to the DOE and our group. The terms are basically 

8S follows: Current investors would commit to an additional of capital this week and would contribute an 

additional_into a fully funded plan ~n other wands, the company would only have to raise_of outside 

capital to have a fully funded plan); the DOE would i its remaining $95 million of loan draws; the $150 

million of new investor capital and the to ba funded up the senior secured debt of Solyndra _ 

(secured by Fab 1, Fab 2, IP and corporate); the be subordinated to the newly funded 

_senior deW and would be discounted to accrete back up to over a 15 year 

tennn. The convertible debt . be converted into app. 80% ownership of the 

common equity_ For making the new senior would receive warrants in the common-

(or some fonnn of preferred) for a majority of this should be yet but not a large concern for the 

DOE as it is bahind their loans (but to be ciear, rata along with the remaining _of 

DOE loan draws - this is designed to de-risk this the event the 

manufacluring tax credit this would reduce the amount dollar by 

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Please note that we have some open pOints on this - we orooosed a balloon payment on the _subordinated 

note and the DOE is asking for some amortization - per quarter beginning in 201~ bE" 

payment was inserted but not agreed to. The DOE indicated that they would need an additional fimn commitment of _ 

_ orthey would not pay the January or February draws - I was adamantthatthis was a non-starter and that we 

would only commit to funding the~committment into a fully funded plan. The_will get the company 

through the end of February and _gets the company through the end of the 2nd quarter. At that time we should 

have a good idea on sales traction and could possibly raise outside capital, however, I put very little faith on r .. · . 

additional capital in 2011 from outside investors and I put no faith in raising outside capital priorto February. 

_shares my concerns that it will be very difficutt to bring In additional equity capital as the company has just been out 

in the marketplace too long (pre-IPO convert, IPO filing, current raise) and it has gotten long in the tooth for potential 

investors: 

We are expected to meet with the DOE again at10am tmrw morning. Each group is going back to superiors / investment 

committee, etc to detemnine if these temns are even in the realm of possibility for getting a deal done. To be clear, the. 

would need to be spilt 50/50 from Argonaut and Madrone but would not get the company far enough along to have 

a serious chance of raising addttional capital g.e. unless the tax credtt comes through we will need to contnbute additional 

capital or let the company go and be _ _ deeper In the hole). However, the new ca ital is at a much more 

secure level in temns of return in a liquidation scenario (I don't think in a disaster the entire of proposed senior 

debt gets paid back, but at the end of February it would be app. an Incremental of DOE capital and our. 

and this would most likely be recovered in a liqudation scenario). 

If the DOE requires more than an additional_commillment to continue funding through February I would not 

recommend moving fOT'Nard, However, with the senior loan position alongside the DOE it is getting more interesting to 

give the company the additional runway to play out its channel devlopment and grow under Brian's leadership. I know this 

is a short time frame and we don't necesarily have to reach an agreement with the DOE tmrw but we definitely need some 

fainy concrete direction within a couple of days. I wish you had met Brian and had a direct update on Solyndra's 

operations from management as they can do a much better job conveying where the company is (as you know it is a big 

ship that is lurning slowly but they do feel it is getting turned around in the right direction). Please let me know if you have 

any questions, comments or suggestions or if you would like to have a call with me and management at around 8am or 

8:30am CST priorto our meeting with the DOE. At a minimum I will step out of the DOE meeting and update you on their 

feedback. At some point our negotiations will break down or I will request authorization of some amount of capital to 

commit (most likely $12.5 million) to be funded in January. Obviously this is a moving process and 1 will keep you and the 

rest of the team in the loop as much as possible. 

Steve 

Attached is our response, can you please circulate to the rest of your team. 

Thanks. 

Ben 5chwartz 

VP, Deputy Genera! Counsel 

.. 

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This e-mail and any accompanying attachments contain information that is confidential to 

Solyndra, Inc, 

The information is intended solely for the use of the individual to whom it is addressed. 

Any review, disclosure, copying', distribution, or use of this e-mail communication by 

others is strictly prohibited. 

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If you are not the intended recipient, please notify us immediately by returning this 

message to the sender and delete all copies. 

Thank you for your cooperation. 

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DOCUMENT 

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~II-=;:---- ient: 20104:02 PM 

i'o:' 

SubJect: Key Business Terms 

Attachments: Summary of Solyndra Key Business Tenms and Conditions. doC)( 

Director 

Portfolio Management 

Loan Guarantee Program Office 

US Department of Energy 

lBBB Independence Avenue SW 

Washington, DC 20585 
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Solyndra 

Summary of Key Bu~lness Terms and Conditions 

The restructuring will co'nsist of Senior Debt of up to and Senior Second Position Oebt of •••• 

The December Advance Is contingent on: 

I. Pro-rata funding by the current investors up to an aBliregate of ••••• 

Ii. A guarantee from Solyndra, Inc. covering all obligations of Fab 2; and 

iii. A finalized term sheet executed by Solyndra and its Existing Investors. 

The plan Is to reach flnandal close in 4-6 weeks. 

SENIOR DEBT: _9 vear fac!!1tv 

Tranche A: of new Investor Debt (Argonaut/Madrone/&istinglnvestors) 

Interest: Ubor plus 600 basis points reducing to~ffective December 2012. 

Funding Date:, Pro-rata with DOE debt beginning In January. 

lIqulditv Rights: Payment priority from proceeds In event of. liquidation before Initial scheduled prlncipal 

payment date (March, 2013). 

Tranche B: ••••• Of DOE/FFB financing (IncIUd!nl~I ••• lyet to be funded) 

Coliateral (Tranche A and Bl: (1) all equity interests and assets in Fab 2 LLC (Including IP, all equipment, 

agreements, etc.); and (2) all assets in Solyndra, Inc. (Tranche A only) 

Payment Terms (Tranche A and al; (1) Initial principal payment: March, 2013; (2) Equal quarterly principal 

payments oyer 16 quarters; (3) Flnal maturity: December, 2016; (4) PIK Interest period: through December, 2012; 

(5) Cash sweep as discussed below; and (6) All prepayments without penalty. 

Tranche C: Up to an addltlonall •••• lof. new Investor Debt 

Parl-passu and same collateral and terms as Tranche A. but no priority payment from proceeds In the event of 

liquidation before Initial scheduled principal payment date, or as to be negotiated by new lenders and 

acceptable to DOE/FFB. 

Previously funded UOE/FFB debt and Existing Investor Convertible Debt ....... m be 

discounted using an OlD structure: ••••• POE/FEB Debt: initial print;lpal amount accreting to ENenly 

on a quarterly basis over a 12 year period. 

Initial principal amount •••••• accreting to 

on a quarterly basis over a 15 year period. 

o 

Tenor 12 years 15 yea .. 

Prlnol at Da.menu 24 quarters bellnnlna Man:h, 2017 36quarters beBlnnlng Maron 2017 

Flnalmaturltv December, '2022 December, 2025 

PIK Interest period ThrouRh December 2014 Through Dec:embor 20lS 

Mandatory Redemption Onc;e total balances In cenaTn accounts exceeds 125" ~ 

of outstanding balance 

Option.1 prepayment Original principal and accrued Interest: None 

Payment Event of Oenult All fUture accretions brought forward if uncured All future accretions brought fOrward if uncured 

payment def>ult payment defau~ 
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Collateral Packalte' 

Current Packal!e 

Building and land 

~ 

Leashold Interests 

limited use of license for Solvndra technology up to 

the production output of Fab 2 

Proposed PackaRe 

Building and land 

~ 

Leashpld Interests 

Intellectual property 

fab 1 and assOciated equipment 

Supplv .• ales. and other ooeratlng agreements 

Personnel . 

limited !!Uarantee of Solyndra. Inc. 

AI! assets of Solyndra. Inc. have been transferred to fab 

2 llC. 
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DOE/SOLYNDRA PROJECT 

Materials for Restructuring Analysis 

[Updated: 01-03-11] 

(Items in blue have been added to or otherwise addressed in memorandum] 

[Items in red need not be addressed in memorandum) 

(see Table of Contents at end) 

FFB NOTE PuRCHASE AGREEMENT 

Rights and Agreements of the Secretary and FFB 

Section 11.1 Rights and Agreements related to EnfOrcement. 

11.1.1 Secretary's Authority. 

In consideration of the Secretary's Guarantee relating to the Note that has been purchased by 

FFB under this Agreement, the Secretary shall have the sole authority (vis-a-vis FFB), in the 

case ofa default by the Borrower under such Note or the occurrence of an Event of Dcfault 

under the Security Instruments, in respect of acceleration of such Note, the exercise of other 

available remedies, and the disposition of sums or property recovered. [Note Purchase 

Agreement, §II.I.I] 

11.1.2 Acknowledgment of Security Interest. 

FFB acknowledges that the Borrower has, through the execution of the Security Instnunents, 

pledged and granted a security interest to the "Collateral Agent," for the benefit of the "Secured 

Parties"(as those terms are defined in the Common Agreement) in certain property of the 

Borrower to secure the payment and performance of certain obligations owed to the Secretary 

under, inler alia, the Security Instruments. [Note Purchase Agreement, § 11.1.2] 

11.1.3 FFB Cooperation. 

FFB shall cooperate with the Secretary to enable the Secretary to exercise and enforce the 

Secretary's rights and remedies under this Agreement, the Program Financing Agreement, the 

Note, and the Security Instruments, including, when reasonably requested by the Secretary, 

executing and delivering to the Secretary instruments, agreements, and other documents prepared 

by or for the Department for FFB's execution. [Note Purchase Agreement, §11.1.3] 

Section 11.2 Secretary's Right to Purchase Advances or the Note. 

Notwithstanding the provisions of the Note, the Borrower acknowledges that, under the teons of 

the Program Financing Agreement, the Secretary may purchase from FFB all or any portion of 

any Advance that has been made under the Note, or may purchase from FFB the Note in its 

entirety, in the same manner, at the same price, and subject to the same limitations as shall be 

dc-626269 
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applicable, under the terms of the Note, to a prepayment by the Borrower of all or any portion of 

any Advance made under the Note, or a prepayment by the Borrower of the Note in its entirety, 

as the case may be. [Note Purchase Agreement, § 11.2] 

Definitions 

"Security Instruments" shall have the meaning specified in Schedule I to this Agreement. 

"Security Instruments" means, collectively, (i) the Common Agreement, and (ii) the "Security 

Documents" (as that term is defmed in the Common Agreement), as such agreements and 

documents may be amended, supplemented, and restated from time to time in accordance with 

their respective terms. [Note Purchase Agreement Schedule I, Item 3] 

Purchase Commitment 

Subject to the terms and conditions of this Agreement, FFB agrees to purchase the Note that is 

offered by the Borrower to FFB for purchase under this Agreement. [Note Purchase Agreement 

Article 2] 

Interest 

Section 7.6 Interest Rate Applicable to Advances. 

The rate of interest applicable to each Advance made under the Note shall be established as 

provided in paragraph 6 of the Note. [Note Purchase Agreement §7.6] 

Billing by FFB 

Section 9.1 Billing Statements to the Borrower, the Department, and the Loan Servicer. 

FFB shall prepare a billing statement for the am~unts owed to FFB on each Advance that is 

made under the Note purchased under this Agreement, and shall deliver each such billing 

statement to the Borrower, the Department, and the Loan Servicer, [Note Purchase Agreement 

§9.I] 

9.3.2 Agreement. 

The Borrower agrees that any and all determinations made by FFB shall be conclusive and 

binding upon the Borrower with respect to: 

(a) the amount of accrued interest owed on the Note determined using this rounding 

methodology; and 

(b) the amount of any equal principal installment payment due and payable on the Note 

determined using this methodology. [Note Purchase Agreement §9.3.2] 

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Each amount that becomes due and owing on the Note purchased under this Agreement shall be 

paid when and as due, as provided in the Note. [Note Purchase Agreement Article 10] 

Miscellaneous 

Section 13.6 Rights Confined to Parties. 

Nothing expressed or implied herein is intended or shall be construed to confer upon, or to give 

to, any Person other than FFB, the Borrower, and the Secretary, and their respective successors 

and permitted assigns, any right, remedy or claim under or by reason of this Agreement or of any 

term, covenant or condition hereof, and all of the terms, covenants, conditions, promises, and 

agreements contained herein shall be for the sole and exclusive benefit ofFFB, the Borrower, 

and the Secretary, and their respective successors and permitted assigns. [Note Purchase 

Agreement §13.6] 

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FFB PROMISSORY NOTE 

Computation of Interest on Each Advance. 

(a) Subject to paragraphs 12 and 15 of this Note, interest on the outstanding principal of each 

Advance shall accrue from the date on which the respective Advance is made to the date on 

which such principal is due. [FFB Promissory Note §6] 

Payment of Interest; Payment Dates; Payment Borrowings Permitted to Pay Accrued 

Interest before the First Principal Payment Date. 

(a) Interest accrued on the outstanding principal balance of each Advance shall be due and 

payable on each of the particular dates specified on page I of this Note as "Payment Dates" (each 

such date being a "Payment Date"), beginning on the first Payment Date to occur after the date 

on which such Advance is made, up through and including the Maturity Date. 

(b) On any Payment Date to occur before the "First Principal Payment Date" (as that term is 

defmed in paragraph 8 of this Note), the Borrower shall be permitted to borrow all or a portion of 

the amount of accrued interest due and payable on such Payment Date for each Advance made 

before the First Principal Payment Date (each such borrowing being a "Payment Borrowing"), by 

causing to be delivered to FFB an Advance Request, together with written notification of the 

Secretary's approval thereof, not later than the third Business Day before the date specified in 

such Advance Request as the date for such Advance for a Payment Borrowing, specifying the 

principal amount to be borrowed, in which event FFB shall, subject to the terms and conditions 

of the Note Purchase Agreement, make an Advance, by an internal transfer of funds on the books 

of the United States Department of the Treasury, for the account of the Borrower in the amount 

specified in the respective Advance Request, and shall apply such amount to the payment of the 

accrued interest. In the case of each Payment Borrowing, FFB shall establish an interest rate for 

the respective Payment Borrowing in accordance with the principles of paragraph 6(c) of this 

Note, which rate shall apply from the date on which the Advance is made. [FFB Promissory 

Note §7] 

~. 

A fee to cover expenses and contingencies, assessed by FFB pursuant to section 6( c) of the FFB 

Act, shall accrue on the outstanding principal amount of each Advance from the date on which 

the respective Advance is made to the date on which the principal amount of such Advance is 

due. The fee on each Advance shall be equal to three-eighths of one percent (0.375%) per 

armum of the unpaid principal balance of such Advance. The fee on each Advance shall be 

computed in the same marmer as accrued interest is computed under paragraph 6(b) of this Note, 

and shall be due and payable at the same times as accrued interest is due and payable under 

paragraph 7 of this Note (adjusted as provided in paragraph 10 of this Note if a Payment Date is 

not a Business Day). The fee on each Advance shall be credited to the Secretary as required by 

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section 505(c) of the Federal Credit Reform Act of 1990, as amended (codified at 2 U.S.C. 

§ 661d(c». [FFB Promissory Note §9) 

Manner of Making Payments. 

(a) For so long as FFB is the Holder of this Note, each payment under this Note shall be paid 

in immediately available funds by electronic funds transfer to the account of the United States 

Treasury (for credit to the subaccount of the Secretary) maintained at the Federal Reserve Bank 

of New York in the manner described below: 

U.S. Treasury Department 

ABA No. 0210-3000-4 

TREAS NYC/CTRfBNF=D 89000001 

OBI=Dept of Energy Loan # (Solyndra Fab 2 LLC) 

provided, however, that a payment made in the manner described above shall not discharge any 

portion of a payment obligation under this Note, or be applied as provided in paragraph 14 of this 

Note, until the payment has been received and credited to the subaccount ofFFB (within the 

account of the United States Treasury maintained at the Federal Reserve Bank of New York) 

specified by FFB in a written notice to the Secretary, or to such other account as may be 

specified from time to time by FFB in a written notice to the Secretary. [FFB Promissory Note 

§11] 

Secretary's Guarantee or Note. 

Upon execution of the guarantee set forth at the end of this Note (the "Guarantee"), the payment 

by the Borrower of all amounts due and payable under this Note, When and as due, shall be 

guaranteed by the United States of America, acting through the Secretary, pursuant to Title XVII 

of the Energy Policy Act of2005, as amended (42 U.S.C. § 16511 ~ g:g.). In consideration of 

the Guarantee, the Borrower promises to the Secretary to make all payments due under this Note 

when and as due. [FFB Promissory Note §20] 

Security Instruments. 

This Note is one of several notes permitted to be executed and delivered by, and is entitled to the 

benefits and security of, the "Security Instruments" (as defined in the Note Purchase Agreement), 

whereby the Borrower pledged and granted a security interest in certain property of the 

Borrower, described therein, to secure the payment of and performance of certain obligations 

owed to the Secretary, as set forth in the Security Instruments. For purposes of the Security 

Instruments, in consideration of the undertakings by the Secretary set forth in the Program 

Financing Agreement, the Note Purchase Agreement, and the Guarantee, the Secretary shall be 

considered to be, and shall have the rights, powers, privileges, and remedies of, the Holder of 

this Note. [FFB Promissory Note §21] 

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Guarantee Payments; Reimbursement. 

If the Secretary makes any payment, pursuant to the Guarantee, of any amount due and payable 

under this Note, each and every such payment so made shall be deemed to be a payment 

hereunder; provided, however, that no payment by the Secretary pursuant to the Guarantee shall 

be considered a payment for purposes of detennining the existence of a failure by the Borrower 

to perfonn its obligation to the Secretary to make all payments under this Note when and as due. 

The Secretary shall have any rights by way of subrogation, agreement or otherwise which arise 

as a result of such payment pursuant to the Guarantee and as provided in the particular agreement 

specified on page I of this Note as the "Common Agreement" between the Borrower and the 

United States of America, acting through the Secretary, to evidence the Borrower's obligation to 

reimburse the Secretary for payment made by the Secretary pursuant to the Guarantee. [FFB 

Promissory Note §22] 

Default and Enforcement. 

(a) In case ofa default by the Borrower under this Note or the occurrence of an "Event of 

Default" (as defined in the Security Instruments), then, in consideration of the obligation of the 

Secretary under the Guarantee, the Secretary, in the name of the Secretary or the United States of 

America, shall have all rights, powers, privileges, and remedies of the Holder of this Note, in 

accordance with the tenns of this Note and the Security Instruments, including, without 

limitation, the right to (i) enforce or collect all or any part of the obligation of the Borrower 

under this Note or arising as a result of the Guarantee; (ii) accelerate (as provided in paragraph 

24); (iii) compromise or otherwise negotiate with the Borrower; (iv) bring suit against or 

foreclose upon any or aU of the security interests granted by the Borrower; and (v) to file proofs 

of claim or any other document in any bankruptcy, insolvency, or other judicial proceeding, and 

to vote such proofs of claim. [FFB Promissory Note §23(a)] 

(b) The Borrower acknowledges that FFB has agreed in the Note Purchase Agreement that, 

in consideration of the Guarantee, the Secretary shall have the sole authority (vis-A-vis FFB), in 

the case of a default by the Borrower under this Note or the occurrence of an Event of Default 

under the Security Instruments, in respect of acceleration (as provided in paragraph 24), the 

exercise of other remedies available hereunder or under the Note Purchase Agreement, and the 

disposition of sums or property recovered. [FFB Promissory Note §23(b)] 

Acceleration. 

Upon the occurrence and continuation of a default by the Borrower under this Note or an Event 

of Default under the Security Instruments, the Secretary, pursuant to the Security Instruments, 

may declare the entire unpaid principal amount of this Note, all interest thereon, and all other 

amounts payable under this Note, and upon such declaration such amounts shall become, due and 

payable to the Secretary, under the circumstances described, and in the manner and with the 

effect provided, in the Security Instruments. [FFB Promissory Note §24] 

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COMMON AGREEMENT 

All payments due under the DOE Credit Facility shall be made by the Borrower pursuant to the 

terms of the DOE Credit Facility Documents and the Collateral Agency Agreement. The 

Collateral Agent shall apply each payment received by it in accordance with the Collateral 

Agency Agreement; provided, however, that, notwithstanding any instructions to the contrary in 

the FFB Note, for purposes of administering payments to FFB, the Borrower shall remit such 

payments directly to an account designated by the Loan Servicer for payment to FFB. [3.1.1] 

Interest Account and Interest Computations. 

In accordance with Section 609.10(e)(I) of the Applicable Regulations, interest shall accrue on 

the unpaid principal amount of each DOE-Guaranteed Loan from the date such DOE·Guaranteed 

Loan is disbursed to the Collateral Agent or otherwise disbursed or deemed disbursed pursuant to 

the DOE Credit Facility Documents, to the date such DOE-Guaranteed Loan is paid in full, at a 

rate per annum relating thereto as specified in the DOE Credit Facility Documents. The 

Borrower hereby authorizes each Credit Party to record in an account or accounts maintained by 

such Credit Party on its books (A) the interest rates applicable to all DOE·Guaranteed Loans, 

(B) the interest periods for each DOE· Guaranteed Loan outstanding, (C) the date and amount of 

each princip~ and interest payment on each DOE· Guaranteed Loan outstanding, and (D) such 

other information as such Credit Party may determine is necessary for the computation of interest 

payable by the Borrower hereunder. The Borrower agrees that all computations of interest by a 

Credit Party pursuant to this Section 3.2.1 shall, in the absence of manifest error, be prima facie 

evidence of the amount thereof. All computations of interest shall be made as set forth in the 

relevant DOE Credit Facility Documents. [3.2.1] 

Interest Payment Dates. 

Subject to the terms of the DOE Credit Facility, the Borrower shall pay accrued interest on the 

outstanding principal amount of each DOE·Guaranteed Loan on each Quarterly Payment Date, 

on prepayment (to the extent thereot), and at maturity (whether by acceleration or otherwise). 

[Common Agreement §3.2.2] 

Representations 

The Borrower makes all of the following representations and warranties to and in favor of each 

Credit Party as of (i) the Common Agreement Date, (ii) the Financial Closing Date, (iii) each 

Periodic Approval Date, (iv) each Advance Date, and (v) the Project Completion Date, except as 

such representations and warranties relate to an earlier date, and all of these representations and 

warranties shall survive the Financial Closing Date. [Common Agreement Article 5] 

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Covenants 

The Borrower covenants and agrees that until the date all Secured Obligations (other than 

inchoate indemnity obligations) are paid in full and the DOE Credit Facility Coriunitment has 

terminated, unless the Loan Servicer waives compliance in writing: [Common Agreement 

Article 6] 

Events of Default 

Remedies (or Events of Default. 

Upon the occurrence and during the continuance of an Event of Default, the Credit Parties may, 

without further notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind, all such notices and demands 

being waived (to the extent permitted by Governmental Rules), exercise any or all rights and 

remedies at law or in equity (in any combination or order that the Credit Parties, may elect), 

including, without limitation or prejudice to the Credit Parties' other rights and remedies, the 

following: [Common Agreement §8.2] 

(i) (A) refuse, and the Collateral Agent or any Credit Party shall not be obligated, 

to make or guarantee any further Advances or any payments from any Project Account or any 

Account Proceeds or other funds held by the Collateral Agent by or on behalf of the Borrower, 

and (8) suspend or terminate the DOE Credit Facility Commitment; 

(ii) take those actions necessary to perfect and maintain the Liens of the Security 

Documents; 

(iii)declare and make all sums of outstanding principal and accrued but unpaid 

interest remaining under this Common Agreement and the other Loan Documents together with 

all unpaid fees, Periodic Expenses and charges due hereunder or under any other Loan 

Document, payable on demand or immediately due and payable, whe~eupon such amounts shall 

immediately mature and become due and payable; 

(iv)enter into possession of the Project (or any portion thereof) and perform any 

and all work and labor necessary to complete the Project (or any portion thereof) or to operate 

and maintain the Project (or any portion thereof), or otherwise foreclose upon or take possession 

of any Collateral Security and all sums expended by any such Person in so doing, together with 

interest on such amount at the Late Charge Rate, shall be repaid by the Borrower to such Person 

upon demand and shall be secured by the Security Documents, notwithstanding that such 

expenditures may, together with the aggregate amount of Advances under the DOE Credit 

Facility, exceed the amount of the total DOE Credit Facility Commitment; 

(v) set off and apply such amounts to the satisfaction of the Secured Obligations 

under all of the Loan Documents, including (A) all monies on deposit in any Project Account, 

(8) any Account Proceeds, (C) any amounts paid under the Equity Funding Agreement or the 

Sponsor Support Agreement including any Reserve Letters of Credit issued thereunder, or 

(D) any other moneys of the Borrower on deposit with the Collateral Agent or any Credit Party; 

(vi)prior to the Project Completion Date, require the Sponsor to make an 

Accelerated Equity Contribution in an amount equal to the lesser of: (A) the balance of the 

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76267.294

undrawn Base Equity Commitment and aU amounts of the Overrun Equity Commitment, and 

(B) the outstanding amount of the Secured Obligations at such time; 

(vii) cure defaults; 

(viii) proceed to protect and enforce its rights and remedies by appropriate 

proceedings, whether for damages or the specific performance of any provision of this Common 

Agreement or any other Transaction Document, or in aid of the exercise of any power granted in 

this Cornmon Agreement or any other Transaction Document, or by law, or proceed to enforce 

the payment of any amount due and payable; and 

(ix)exercise any and all rights and remedies available to it under any of the 

Transaction Documents with respect to the Project, the Borrower, the Sponsor, the Equity 

Owners and any other Project Participant and under the Collateral Security or otherwise under 

Governmental Rules; and 

(x) in accordance with Section 609.1 0(e)(4) of the Applicable Regulations, take 

such other actions as DOE may reasonably require to provide for the care, preservation, 

protection, and maintenance of all Collateral so as to enable the United States to achieve 

maximum recovery upon default by Borrower on the DOE-Guaranteed Loans. 

Agents 

A()poinlment of Agents. 

In cOlUlection with the Project, each Credit Party hereby appoints, and by its signature below, 

each such Agent accepts such appointment: 

(b) the Collateral Agent to act as Collateral Agent and authorizes it to exercise such 

rights, powers, authorities and discretions as are specifically delegated to the Collateral Agent by 

the terms of this Common Agreement and the other Loan Documents, together with all such 

rights, powers, authorities and discretions as are reasonably incidental thereto. [Cornmon 

Agreement §9.l(b») 

Reimbursement Agreement 

Reimbursement Obligation. 

If the Borrower defaults in any payment due to FFB under the DOE-Guaranteed Loan or 

otherwise under any FFB Funding Document, and as a result of such payment default by the 

Borrower, DOE becomes obligated to make any payments to FFB pursuant to the DOE 

Guarantee (a "DOE Guarantee Payment"), the Borrower shall become immediately obligated to 

reimburse DOE in an amount (the "DOE Guarantee Payment Amount") equal to the sum of 

(i) all DOE Guarantee Payments paid by DOE to FFB, and (ii) all costs or expenses incurred by 

DOE in connection therewith, whether by payment to FFB or otherwise. [Common Agreement 

§IO.l) 

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Payments and Computations. 

Interest. 

The Borrower shall pay to DOE an amount (the "Borrower Reimbursement Obligations") equal 

to the sum of (i) the DOE Guarantee Payment Amount, and (ii) interest on DOE Guarantee 

Payment Amount from the date the DOE Guarantee Payment was paid or incurred by DOE 

under the DOE Guarantee until payment in full by the Borrower to DOE of the DOE Guarantee 

Payment Amount, at a rate of interest equal to the rate of interest in effect under the FFB Note 

Purchase Agreement with respect to Overdue Amounts at the time of the payment default by the 

Borrower. [Common Agreement §lO.2.1] 

Method of Payment. 

The Borrower shall make each payment with respect to Borrower Reimbursement Obligations 

hereunder (a "Borrower Reimbursement Payment"), irrespective of any right of counterclaim or 

set-off, in Dollars and in immediately available funds on or before the fifth Business Day 

following a written demand by DOE to the Borrower indicating the DOE Guarantee Payment 

Amount and the date it was paid or incurred by DOE, by wire transfer to the following account, 

or to such other account as may be specified by DOE from time to time: [Common Agreement. 

§1O.2.2] 

Taxes. 

U.S. Treasury Department 

ABA No. 0210-3000-4 TREASNYC/CTRlBNF",D89000001 

OBI=LGPO Loan No. 1013 - Guarantee Reimbursement 

All Borrower Reimbursement Payments by the Borrower hereunder shall be made in accordance 

with Section 3.1.2. [Common Agreement § 1 0.2.3] 

Calculations. 

All computations of interest or fees under this Common Agreement shall be made by the Loan 

Servicer, on the same basis as payments under the FFB Note Purchase Agreement. [Common 

Agreement § 1 0.2.4] 

Determinations. 

Each determination of an amount of interest or fees payable hereunder by the Loan Servicer shall 

be conclusive and binding for all purposes, absent manifest error. [Common Agreement § 10.2.5] 

Obligations Absolute. 

To the fullest extent permitted by law, the Borrower Reimbursement Obligations are absolute, 

irrevocable and unconditional, and shall be paid strictly in accordance with the terms of this 

Common Agreement under all circumstances whatsoever, including without limitation the 

following circumstances, whether or not with notice to or the consent of the Borrower: 

(i) the occurrence, {)r the failure by DOE or any other Secured Party or any other 

Person to give notice to the Borrower of the occurrence, of any Event of Default or Potential 

Default under this Common Agreement or any default under any of the other LQan Documents; 

(ii) the extension of the time for performance of any obligations, covenants or 

agreements of any Person under or arising out of any of the Loan Documents; 

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(iii)the existence of any claim set-off, cOWlterclaim, defense or other rights of any 

kind or nature which (A) the Borrower, DOE or any other Person may have at any time against 

FFB or any transferee, or (B) the Borrower or any other Person may have at any time against 

DOE, whether in connection with the Loan Documents, the transactions contemplated therein or 

any unrelated transactions; 

(iv)any failure, omission or delay on the part of (A) DOE to assert a defense to a 

DOE Guarantee Payment Amount under the DOE Guarantee or to otherwise contest the DOE 

Guarantee, or (B) DOE or any other Secured Party or the Borrower to enforce, assert or exercise 

any other right, power or remedy conferred by this Common Agreement or any of the Loan 

Documents; 

(v) the taking or the omission on the part of DOE or any other Secured Party or 

the Borrower of any other actions referred to in any of the Loan Documents; 

(vi)the compromise, settlement, release, modification, amendment (whether 

material or otherwise) or termination of any or all of the obligations, conditions, covenants or 

agreements of any Person in respect of any of the Loan Documents; 

(vii) any amendment or waiver of the payment, performance or observance of 

any of the obligations, conditions, covenants or agreements of any Person contained in any of the 

Loan Documents; 

(viii) the exchange, surrender, substitution or modification of any security for 

any of the Loan Documents; 

(ix)any disability, incapacity or lack of powers, authority or legal personality of or 

dissolution or change in the status of the Borrower or any other Person; 

(x) any release, irregularity, invalidity, illegality, lack of genuineness, 

Wlenforceability or modification affecting this Common Agreement, the DOE Guarantee, the 

FFB Funding Documents, or the other Loan Documents, or the transactions contemplated hereby 

or thereby; 

(xi)the voluntary or inyoluntary liquidation, dissolution, sale or other disposition 

of all or substantially all the assets of, the marshaling of assets and liabilities, receivership, 

insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, 

composition with creditors or readjustment of, or other similar proceedings which affect the 

Borrower or any other Person party to any of the Loan Documents; 

(xii) the release or discharge by operation oflaw of the Borrower from the 

performance or observance or any obligation, covenant or agreement contained in any of the 

Loan Documents; 

(xiii) any statement or any other document presented under the DOE Guarantee 

proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein 

being untrue or inaccurate in any respect whatsoever; 

(xiv) any determination by a court or arbitrator, or any settlement of a disputed 

claim by any party hereto or other Person, relating to this Common Agreement, the DOE 

Guarantee, the DOE Credit Facility Agreement, or the other Loan Documents, or the transactions 

contemplated hereby or thereby; or 

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76267.297

(xv) any other circumstance or happening whatsoever, whether or not similar to 

any of the foregoing. [Common Agreement § 1 0.3] 

Security. 

Borrower Reimbursement Obligations Secured 

The parties expressly acknowledge that the Collateral Security pledged under the Security 

Documents is pledged to secure payment by the Borrower of the Borrower Reimbursement 

Obligations. [Common Agreement §10.4.1] 

Actions. 

The Borrower expressly acknowledges that DOE is free to litigate, settle or otherwise satisfy or 

discharge its obligation with respect to any DOE Guarantee Payment Amount, and take any 

action under the Security Documents or otherwise with respect to the Collateral Security, as it 

may from time to time deem appropriate, and any failure by DOE to advise, notify, or consult 

with the Borrower shall not be a defense to, or in any way diminish, discharge or derogate from 

the Borrower Reimbursement Obligations hereunder. [Common Agreement § 10.4.2] 

DOE Rights. 

Rights Cumulative. 

DOE's right to reimbursement provided for in this Article 10 shall be in addition to, and not in 

limitation of, any other claims, rights or remedies of subrogation, reimbursement, contribution, 

exoneration or indemnification or similar claims, rights or remedies, whether arising under 

contract, by statute, or otherwise that DOE may have from time to time. [Common Agreement 

§10.5.1] 

Subrogation. 

Without limiting the generality of Section 10.5.1, in accordance with Section 609.1 O( e )(2) of the 

Applicable Regulations, upon any DOE Guarantee Payment DOE shall be subrogated to the 

rights of FFB or any subsequent holder of the DOE-Guaranteed Loan, including all related Liens 

and Collateral, and has superior rights in and to the property acquired from the recipient of the 

payment as provided in §609.15 of the Applicable Regulations. [Common Agreement §10.5.2] 

Further Assurances. 

The Borrower shall cooperate with DOE in connection with the exercise of any of its rights 

under this Article 10 and agrees, promptly upon request by DOE or the Loan Servicer, to 

execute, acknowledge and deliver all further instruments and documents, and take all such 

further acts as DOE or the Loan Servicer may reasonably request from time to time in order to 

carry out the purposes of this Article 10 or to enable DOE to exercise and enforce its rights and 

remedies hereunder. [Common Agreement § 10.6J 

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COMMON AGREEMENT DEFINITIONS 

"Secured Parties" DOE and the Collateral Agent, as their respective interests may appear. 

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SECRETARY'S GUARANTEE 

[The DOE Guarantee reads in its entirety as follows:] 

The United States of America, acting through the Secretary of Energy ("Secretary"), hereby 

guarantees to the Federal Financing Bank, its successors and assigns ("FFB"), all payments of 

principal, interest, premium (if any), and late charges (if any), when and as due in accordance 

with the terms of the note dated September 3,2009, issued by SOL YNDRA FAB 2 LLC (the 

"Borrower") payable to FFB in the maximum principal amount of $535,000,000, to which this 

Secretary's Guarantee is attached (such note being the "Note"), with interest on the principal until 

paid, irrespective of (i) acceleration of such payments under the terms of the Note, or (ii) receipt 

by the Secretary of any sums or property from its enforcement of its remedies for the Borrower's 

default. [DOE Guarantee, paragraph I] 

The obligation of the United States of America to pay amounts due and payable under this 

Secretary's Guarantee when such amounts become due and payable in accordance with its terms, 

constitutes the absolute obligation of the United States of America, against which no offset may 

be made by the United States of America in discharge of its obligation to make these payments 

and for which the full faith and credit of the United States of America are pledged. [DOE 

Guarantee, paragraph 2] 

This Secretary I s Guarantee is issued pursuant to Title XVII of the Energy Policy Act of2005, as 

amended (42 U.S.C. § 16511J;! gg.), section 6 of the Federal Financing Bank Act ofl973 

(12 U.S.C. § 2285), and the Note Purchase Agreement dated as of September 2, 2009, among 

FFB, the Borrower, and the Secretary. [DOE Guarantee, paragraph 3] 

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RESTRUCTURING TERM SHEET 

Solyndra 

Proposed Key Business Terms and Conditions 

Structural Consideration: All assets of Solyndra Inc. (including Intellectual property) to be 

moved into Fab 2 LLC. Net Operating Losses currently at Solyndra, Inc. to remain at Solyndra, 

Inc. Solyndra, Inc. to provide a guaranty of the DOE Guaranteed Loan to be released upon entry 

into definitive documentation. 

Senior Debt· $300 million: 

Tranche A: 

• $75 million at interest rate of 3-month UBOR plus 600 basis points [with warrant 

coverage pursuant to a to be determined structure acceptable to DOE] (reducing to 3-

month USOR plus 200 basis points effective December 2012) 

o To be underwritten by Argonaut/Madrone 

• Subject to DOE/FFS funding of remaining undisbursed amount of the DOE 

Guaranteed Loan (approximately $95 million) subject to CP's noted below 

Pro-rata funding with the DOE from and after December 9, 2010 

{provided, however, that fundings in December, 2010 may be deferred 

until date of January funding by DOE/FFB (which is anticipated to be 

January 10, 2011) upon a written commitment by Argonaut/Madrone to 

fund the full Tranche A) 

• First out in the event of a liquidation event prior to initial scheduled principal payment 

date (March, 2013) 

• Coli ateral: 

o Equity interests in Fab 2 LLC and all assets of Fab 2 LLC, including all intellectual 

property, equipment, agreements, etc. ("Operating Company Collateral") 

o All assets of Solyndra, Inc. {I.e. NOLI ("Holding Company Collaterar') 

• Solyndra, Inc. shall implement charter restrictions, rights plans or take other similar 

actions reasonably requested by the Tranche A holders to ensure that it does not 

suffer a change in ownership for purposes of Section 382 of the Internal Revenue 

Code. 

Tranche B: 

,. $150 million at interest rate of 2.5% 

• To be provided by DOE/FFB (includes undisbursed amount of the DOE Guaranteed Loan 

(approximately $95 million)) 

• Collateral: 

o Equity interests in Fab 2 LLC and Operating Company Collateral 

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76267.301

Tranche C: 

Up to an additional $75 million senior debt financing permitted pari passu with Tranche A and 

B. Collateral and terms as stated on Tranche A above (except Tranche C will not receive a first 

out position in the event of a liquidation event prior to initial scheduled principal payment 

date), or as to be negotiated by new lenders and acceptable to DOE/FFB. 

Payment terms - Tranches A, Band C (if applicable): 

o Initial prinCipal payment: March,2013 

o Equal quarterly principal payments over 16 quarters 

o Final maturity: December, 2016 

o PIK interest period: Through December, 2012 

o Cash sweep as discussed below under Waterfall 

o All prepayments without penalty 

Senior Second Position Debt: 

• $385 million DOE/FFB financing (represents amounts previously funded) 

o OlD to accomplish the following: 

• $270 million initial principal amount, accreting to $385 million evenly on a 

quarterly basis over a 12 year period 

• $175 million existing Convertible Debt 

o 010 to accomplish the following: 

• $80 million initial principal amount, accreting to $175 million evenly on a 

quarterly basis over a 15 year period 

• $385 million OOE/FFB and $175 million existing Convertible Debt secured on a pari 

passu basis in equity interests in Fab 2 LLC and Operating Company Collateral 

• Payment terms 

o DOE/FFB OlD 

o Principal payments: 24 quarters beginning March, 2017; sculpted so that there 

is no bullet payment due 

o Final maturity: December, 2022 

o PIK Interest period: Through December, 2014 

o Mandatory redemption requirements: 

• Once total balances in Debt Service Reserve and the Excess Cash Retention 

Account exceeds 125% of outstanding balance of the OOE/FFB 010 

o Optional prepayment 

• Only with payment of fully accreted balance of the of the DOE/HB 010 

o Upon an event of default, all future accretions will be brought forward (ie. The 

amount outstanding will be equal to the original face amount less all principal 

repayments up to the default date) 

• Existing Convertible Debt 010: 

16 

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76267.302

o Principal payments: 36 quarters beginning March, 2017; sculpted so that there 

is no bullet payment due 

o Final maturity: December, 2025 

o PIK interest period: Through December, 2015 

o Mandatory redemption requirements: 

• Once total balances in Debt Service Reserve and Excess Cash Retention 

Account exceeds 125% of outstanding balance and only after the DOE/FFB 

OlD facility is fully repaid 

o Optional prepayment 

• Only with settlement of payment of fully accreted balance of Convertible 

Debt and all accrued and unpaid interest 

Restrictions on Solyndra, Inc. and Fab 2 LlC (Without consent of DOE): 

• No investment in business activities outside of those directly in support of Fab 2 

production and sales 

• No dividends to shareholders 

• No use of IP outside ofthe current project 

• No issuance of debt (except for Tranche C as provided for above) 

• Other usual and customary restrictions 

CPs for December Advance:, Usual and customary, plus the following: 

• As provided for the in the letter to which this term sheet is attached 

• Construction and equipment supply plan consistent with projections acceptable to DOE 

and the IE 

CPs to Further DOE Advances: 

• Construction progress consistent with the construction plan 

• Operational spending within a range (tbd) of agreed budget 

• Progress on market development to be agreed upon consistent with plan 

• Monthly funding by Tranche A investors into the Liquidity Reserve Account equal to a 

pro-rata share of each respective DOE/FFB funding to be funded contemporaneously 

with each such DOE/FFB funding 

• No MAE (to be defined consistent with agreed upon operating plan) 

Other usual and customary 

Events of Default for Senior Debt: 

• Cash Balance of Borrower falls below $5,000,000 

• Other usual and customary 

Cashflow Waterfall: 

All revenues paid to Borrower into a Revenue Account held by a Collateral Agent. All cash to be 

held in accounts noted below by the Collateral Agent (except for O&M account), with transfers 

17 

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76267.303

pursuant to certificates reviewed and approved by DOE on a monthly basis into the following 

accounts in the following priority: 

First, an amount sufficient to pay budgeted operations and maintenance costs due 

or reasonably expected to become due within the next month funded into the O&M 

Account; 

• Second, an amount equal to 1/3 of the amount necessary to fund the Debt Service 

due in the next quarterly period funded into the Debt Service Account; 

Third, an amount equal to the Debt Service Reserve requirement up to a maximum 

of the next six months of Debt Service (not covered by the Debt Service Account) 

into the Debt Service Reserve Account; 

• Fourth, commencing upon Project Completion, an amount sufficient to replenish the 

liquidity Reserve Account such that the account balance is maintained equal to a 

maximum of $40 million into the liquidity Reserve Account 

• Fifth, commencing upon Project Completion an amount equal to finance capital 

expenditures approved by the IE into the CapEx Reserve Account; 

• Sixth, 60% of any excess amount to be used to reduce outstanding indebtedness 

beginning in March 2013 (pro rata among Senior Debt (Tranches A, Band C) for as 

long as any such Senior Debt is outstanding) 

• Seventh, all remaining cash into the Excess Cash Retention Account 

Other Indebtedness 

• None 

Governance: 

• DOE/FFB Board observation rights until full repayment of the 010 facility 

• Intercreditor Agreement: To be discussed 

Solyndra.2010.12.12.1657.kcc.v.l 

18 

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DOE STATUTE AND REGULATIONS 

[Based on Statute and Regulations Updated 03-30-10] 

[Statute in Dark Blue, USCS current through PL 111-12, approved March 30, 2009] 

[Final Regulations in Dark Red, Federal Register, Vol. 72, No. 204, October 23, 2007 and 

amended in Federal Register, Vol. 73, No.8, January II, 2009 and Federal Register, Vol. 74, 

No. 232, December 4, 2009] 

[Public Comments on the Notice of Public Rulemaking in Dark Green, 

with DOE's Responses in connection with Notice of Public Rulemaking in Green, Federal 

Register, Vol. 72, No. 204, 10-23-07] 

Definitions 

§165 JJ. Definitions 

[Codification 0/ Section 1701} 

In this title [42 USCS §§1651 I et seq.]: 

(5) Obligation. The term "obligation" means the loan or other debt obligation that is guaranteed 

under this section. 1 

1i609.2 Definitions. 

Guaranteed Obligatioi means any loan or other debt obligation of the Borrower for an Eligible 

Project for which DOE guarantees all or any part of the payment of principal and interest 

under a Loan Guarantee Agreement entered into pursuant to the Act. 

Defaults 

§16512. Terms and conditions 

[Codification a/Section 1702} 

1 See also definition of "Guaranteed Obligation" at §609.2 of Final Regulations. 

2 See also 42 uses §16511(5). 

19 

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76267.305

(g) Defaults. 

(1) Payment by Secretary. 

(A) In general. If a borrower defaults on the obligation (as defined in regulations 

promulgated by the Secretary and specified in the guarantee contract), the holder of the 

guarantee shall have the right to demand payment of the unpaid amount from the Secretary.3 

[§1702(g)(1)(A)] 

(B) Payment required. Within such period as may be specified in the guarantee or related 

agreements, the Secretary shall pay to the holder of the guarantee the unpaid interest on, and 

unpaid principal of the obligation as to which the borrower has defaulted, unless the Secretary 

fmds that there was no default by the borrower in the payment of interest or principal or that the 

default has been remedied.4 [§ 1702(g)( 1 )(B)] 

(C) Forbearance. Nothing in this subsection precludes any forbearance by the holder of the 

obligation for the benefit of the borrower which may be agreed upon by the partiess to the 

obligation and approved by the Secretary. 5 [§1702(g)(1)(C)] 

(2) Subrogation. 

(A) In general. If the Secretary makes a payment under paragraph (1), the Secretary shall be 

subrogated to the rights of the recipient of the payment as specified in the guarantee or related 

agreements 

7 including, where appropriate, the authority (notwithstanding any other provision of 

law) to--

(i) complete, maintain, operate, lease, or otherwise dispose of any property acquired 

pursuant to such guarantee or related agreements; 8 or 

(ii) permit the borrower, pursuant to an agreement with the Secretary, to continue to pursue 

the purposes of the project if the Secretary determines this to be in the public interest. 9 

(B) Superiority of rights. The rights of the Secretary, with respect to any property acquired 

pursuant to a guarantee or related agreements, shall be superior to the rights of any other person 

with respect to the property.10 

3 

4 

5 

5 

7 

8 

9 

See ~lso §§609.15(a)-(e) of Final Regulations. 

See also §609.15(f) of Final Regulations. 

Consider whether DOE could pay a fee for forbearance. [M&F Comment January 2009] 

See also §609.15( d) of Fin. I Regulations. 

Seealso §§609.10(e)(2) and 609.15(g) of Final Regulations. 

Seealso §609.15(j) of Final Regulations. 

See also §609.13(b) of Final Regulatio~s. 

20 

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76267.306

(C) Terms and conditions. A guarantee agreement shall include such detailed terms and 

conditions as the Secretary determines appropriate to--

(i) protect the interests of the United States in the case of default; and 

(ii) have available all tbe patents and technology necessary for any person selected, 

including the Secretary, to complete and operate the project. 11 

(3) Payment of principal and interest by Secretary. With respect to any obligation guaranteed 

under this section, the Secretary may enter into a contract to pay, and pay, holders of the 

obligation, for and on behalf of the borrower, from funds appropriated for that purpose, the 

principal and interest payments which become due and payable on the unpaid balance of the 

obligation if the Secretary finds that--

(A) (i) the borrower is unable to meet the payments and is not in defaultl2; 

(ii) it is in the public interest to permit the borrower to continue to pursue the purposes of 

the project;13 and 

(iii) the probable net benefit to the Federal Government in payini the principal and interest 

will be greater than that which would result in the event of a default; 1 

(B) the amount of the payment that the Secretary is authorized to pay shall be no greater than 

the amount of principal and interest that the borrower is obligated to pay under the agreement 

being guaranteed;1S and 

(C) the borrower agrees to reimburse the Secretary for the payment (including interest) on 

terms and conditions that are satisfactory to the Secretary. 16 [§ 1702(g)(3)J 

(4) Action by Attorney General. 

(A) Notification. If the borrower defaults on an obligation, the Secretary shall notify the 

Attorney General of the default.17 

10 

11 

12 

13 

14 

15 

16 

17 

See also §609.15(g) of Final Regulations. 

See also §609.10(d)(11) of Final Regulations. Protection of intellectual property is 

an important element of the program. [M&F Comment January 2009] 

See also §609.13(a)(1) of Final Regulations. 

See also §609.13(b) of Final Regulations. 

Seealso §609.13(c) of Final Regulations. 

See also §609J 13(d) of Final Regulations. 

Seealso §609.13(e) of Final Regulations. 

See also §609.15(c) of Final Regulations. 

21 

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76267.307

(B) Recovery. On notification, the Attorney General shall take such action as is appropriate 

to recover the unpaid principal and interest due from--

(i) such assets of the defaulting borrower as are associated with the obligation; 19 or 

(ii) any other security pledged to secure the obligation.19 

§609.15 Default, demand. payment, and collateral liquidation. 20 

(a) In the event that the Borrower has defaulted in the making of required payments of 

principal or interest on any portion of a Guaranteed Obligation, and such default has not 

been cured within the period of grace provided in the Loan Guarantee Agreement and/or the 

Loan Agreement, the Eligible Lender or other Holder, or nominee or trustee empowered to 

act for the Eligible Lender or other Holder (referred to in this section collectively as "Holder"), 

may make written demand upon the Secretary for payment pursuant to the provisions of the Loan 

Guarantee Agreement. [Regulations §609.15(a)] 

Cb) In the event that the Borrower is in default as a result of a breach of one or more of the terms 

and conditions of the Loan Guarantee Agreement, note, mortgage, Loan Agreement, or other 

contractual obligations related to the transaction, other than the Borrower's obligation to pay 

principal or interest on the Guaranteed Obligation, as provided in paragraph Ca) of this section, 

the Holder will not be entitled to make demand for payment pursuant to the Loan Guarantee 

Agreement, unless the Secretary agrees in writing that such default has materially affected 

the rights of the parties, and finds that the Holder should be entitled to receive payment 

pursuant to the Loan Guarantee Agreement.21 [Regulations §609.15(b)] 

(c) In the event that the Borrower has defaulted as described in paragraph (a) of this section and 

such default is not cured during the grace period provided in the Loan Guarantee Agreement, the 

Secretary shall notify the U.S. Attorney General and may cause the principal amount of all 

Guaranteed Obligations, together with accrued interest thereon, and all amounts owed to the 

United States by Borrower pursuant to the Loan Guarantee Agreement, to become 

immediately due and payable by giving the Borrower written notice to such effect (without 

the need for consent or other action on the part of the Holders of the Guaranteed Obligations). In 

the event the Borrower is in default as described in paragraph (b) of this section, where the 

Secretary determines in writing that such a default bas materially affected the rights of the 

parties, the Borrower shall be given the period of grace provided in the Loan Guarantee 

19 

19 

20 

21 

See also §609.15(i) of Final Regulations. 

See also §609.15(j) of Final Regulations. 

See also 42 uses §16512(g)(1)(A), for §609.15(a)-(e) hereof. 

[Sjection 609.15(b) is not intended and should not be read to preclude demands for failure to pay 

principal and interest where there has been a default other than a payment default A nonpayment default can become a payment default if such default is not cured within the time 

specified in the Loan Guarantee Agreement and the debt is accelerated and thus causes the 

entire amount of the loan to become immediately due and payable. (DOE Response) (60132) 

22 

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76267.308

Agreement to cure such default. If the default is not cured during the period of grace, the 

Secretary may cause the principal amount of all Guaranteed Obligations, together with accrued 

interest thereon, and all amounts owed to the United States by Borrower pursuant to the Loan 

Guarantee Agreement, to become immediately due and payable by giving the Borrower 

written notice to such effect (without any need for consent or other action on the part of the 

Holders of the Guaranteed Obligations).22 [Regulations §609.l5(c)] 

(d) No provision of this regulation shall be construed to preclude forbearance by the Holder with 

the consent of the Secretary for the benefit of the Borrower.23 [Regulations §609.l5(d)] 

(e) Upon the making of demand for payment as provided in paragraph (a) or (b) of this 

section, the Holder shall provide, in conjunction with such demand or immediately thereafter, at 

the request of the Secretary, the supporting documentation specified in the Loan Guarantee 

Agreement and any other supporting documentation as may reasonably be required to 

justify such demand. [Regulations §609 .I5( e)] 

(f) Payment as required by the Loan Guarantee Agreement of the Guaranteed Obligation 

shall be made 60 days after receipt by the Secretary of written demand for payment, provided 

that the demand complies with the terms of the Loan Guarantee Agreement. The Loan 

Guarantee Agreement shall provide that interest shall accrue to the Holder at the rate 

stated in the Loan Guarantee Agreement until the Guaranteed Obligation has been fully paid by 

the Federal government. [Regulations §609.15(f)] 

(g) The Loan Guarantee Agreement shall provide that, upon payment of the Guaranteed 

Obligations, the Secretary shall be subrogated to the rights of the Holders and shall have superior 

rights in and to the property acquired from the Holders. The Holder shall transfer and assign 

to the Secretary all rights held by the Holder of the Guaranteed Obligation. Such assignment 

shall include all related liens, security, and collateral rights to the extent held by the 

Holder.24 [Regulations §609.l5(g)] 

22 

23 

24 

See also 42 uses §16512(g)(4)(A). 

See also 42 uses §16512(g)(2)(C). 

See also 42 uses §§16512(g)(2)(A)-(B). 

DOE today adopts the same interpretation of Title XVII as it adopted in regard to nearly 

identical language in section 19(9)(2) of the Alternative Fuels Act Thus, DOE interprets 

the language in Title XVII as requiring a first lien on all project assets, but as allowing DOE 

to treat assets pledged to secure a project loan that are not project assets the same as project 

assets. Consistent with the regulations concerning the disposition of proceeds from the sale 

of assets pursuant to the Alternative Fuels Act (section 796(f) and (k», ... where DOE only 

guarantees a portion of a Guaranteed Obligation, the Secretary may enter into inter-creditor or 

other arrangements to share the proceeds from the sale of project collateral with lenders or other 

holders of the non-guaranteed portion of the Guaranteed Obligation, DOE may, at the 

discretion of the Secretary, share the proceeds from the sale of collateral. DOE is limited, 

however, to no greater than a pro rata share for the non-guaranteed Holder, However, in cases 

where DOE guarantees 100 percent of a loan, the loan must be issued to and funded by the 

Federal Financing Bank. In those circumstances, DOE will have a first lien priority on project 

23 

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76267.309

(h) Where the Loan Guarantee Agreement so provides, the Eligible Lender or other Holder, or 

other servicer, as appropriate, and the Secretary may jointly agree to a plan of liquidation of 

the assets pledged to secure the Guaranteed Obligation. [Regulations §609.l5(h)} 

(i) Where payment of the Guaranteed Obligation has been made and the Eligible Lender or 

other Holder or other servicer has not undertaken a plan of liquidation, the Secretary, in 

accordance with the rights received through subrogation and acting through the U.S. 

Attorney General, may seek to foreclose on the collateral assets andlor take such other 

legal action as necessary for the protection of the Govemment.25 [Regulations §609.15(i)] 

G) If the Secretary is awarded title to collateral assets pursuant to a foreclosure proceeding, the 

Secretary may take action to complete, maintain, operate, or lease the project facilities, or 

otherwise dispose of any property acquired pursuant to the Loan Guarantee Agreement or take 

any other necessary action which the Secretary deems appropriate, in order that the original 

goals and objectives of the project will, to the extent possible, be realized.26 [Regulations 

§609.15(j)] 

(k) In addition to foreclosure and sale of collateral pursuant thereto, the U.S. Attorney General 

shall take appropriate action in accordance with rights contained in the Loan Guarantee 

Agreement to recover costs incurred by the Government as a result of the defaulted loan or 

other defaulted obligation. Any recovery so received by the U.S. Attorney General on 

behalf of the Government shall be applied in the following manner: First to the expenses 

incurred by the U.S. Attorney General and DOE in effecting such recovery; second, to 

reimbursement of any amounts paid by DOE as a result of the defaulted obligation; third, to 

any amounts owed to DOE under related principal and interest assistance contracts; and fourth, 

to any other(60145) lawful claims held by the Government on such process: Any sums 

remaining after full payment of the foregoing shall be available for the benefit of other 

parties lawfully entitled to claim them. 2 

7 [Regulations §609.15(k)] 

(1) If there was a partial guarantee of the Guaranteed Obligation by DOE, the remaining 

funds received as a result of the liquidation of project assets may, if so agreed in advance, 

be applied as follows: 

(I) First, to the payment of reasonable and customary fees and expenses incurred in the 

liquidation; and 

(2) Second, distributed among the Holders of the debt on no greater than a pro rata share 

basis. [Regulations §609.15(1)] 

(m) No action taken by the Eligible Lender or other Holder or other servicer in the 

liquidation of any pledged assets will affect the rights of any party, including the Secretary, 

25 

25 

27 

assets pledged as collateral and all other debt for the project at issue must be subordinate to the 

Guaranteed Obligation. [DOE Response] [60124-5) 

See also 42 uses §16512(g)(4)(B)(i). 

See also 42 uses §§16512(g)(2)(A)(i) and 15612(g)(4)(B)(ii). 

See also 42 uses §16512(h)(1). 

24 

dc·626269 
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76267.310

having an interest in the loan or other debt obligations, to pursue, jointly or severally, to the 

extent provided in the Loan Guarantee Agreement, legal action against the Borrower or other 

liable parties, for any deficiencies owing on the balance of the Guaranteed Obligations or other 

debt obligations after application of the proceeds received upon liquidation. [Regulations 

§609.15(m)] 

(n) In the event that the Secretary considers it necessary or desirable to protect or further the 

interest of the United States in connection with the liquidation of collateral or recovery of 

deficiencies due under the loan, the Secretary will take such action as may be appropriate under 

the circumstances. [Regulations §609.l5(n)] 

(0) Nothing in this part precludes the Secretary from purchasing the Holder's interest in 

the project upon liquidation. [Regulations §609.l5(0)] 

Subordination 

§16512. Terms and conditions 

[Codification a/Section 1702J 

(d) Repayment. 

(3) Subordination. The obligation shall be subject to the condition that the obligation is not 

subordinate to other financing. 2 

8 

§609.10 Loan Guarantee Agreement. 

(d) Prior to the execution by DOE ofa Loan Guarantee Agreement, DOE must ensure that 

the following requirements and conditions, which must be specified in the Loan Guarantee 

Agreement,29 are satisfied: 

(13) Any Guaranteed Obligation is not subordinate30 to any loan or other debt obligation and is 

28 

29 

30 

Seealso §609.10(d)(13) of Final Regulations. 

Note the requirement that these terms be specified in the Loan Guarantee Agreement. Note also 

that some are representations, some are covenants, some are conditions precedent, and some are 

terms of the loan guarantee. [M&F Comment April 2009] 

The phrase "not subordinate" allows for pari passu semor loans. 

25 

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76267.311

in a first lien position on all assets of the project and all additional collateral pledged as security 

for the Guaranteed Obligations and other project debt;31 

B. Financial Structure Issues 

The Act imposes certain limitations on the financial structure of proposed projects, including 

that a loan guarantee "shall not exceed an amount equal to 80 percent of the project cost 

of the facility that is the subject of the guarantee as estimated at the time at which the guarantee 

is issued." (42 U.S.C. 16S12(c)) Section 1702(g)(2)(B) of the Act further requires that "with 

respect to any property acquired pursuant to a guarantee or related agreements, [DOE's 

rights] shall be superior to the rights of any other person with respect to the property." In the 

NOPR, the Department interpreted this statutory provision to require that DOE possess a first 

lien priority in the assets of the project and other assets pledged as security, and stated that 

because DOE believed it is not permitted by Title XVII to adopt a pari passu security 

structure, Holders of the non-guaranteed portion of a loan or debt instrument supported by a 

Title XVII guarantee would have a subordinate claim to DOE in the event of default. 

According to IP Morgan Securities, Inc. (JP Morgan) it is unclear how lenders would fund the 

non-guaranteed portions of a partially guaranteed loan on which stripping was prohibited 

since banks rarely lend for tenures beyond eight to ten years, parti<;ularly when the debt is 

subordinated. IP Morgan further stated that an expectation that lenders would maintain the 

non-guaranteed portions for the life of such loans is unrealistic, and that by taking a second lien 

interest, a lender's participation is tantamount to an equity investment. (JP Morgan at I). 

It is customary and common practice in project financing for multiple lenders to enter into 

a pari passu structure with respect to assets pledged as collateral to secure debt. If such a 

structure were employed for the Title XVII program, DOE, pursuant to its Loan Guarantee 

Agreement, and lenders that held non-guaranteed debt, could share proportionately in the 

proceeds from the sale ofproject assets pledged as collateral if there were a default and the 

collateral was sold. In the NOPR, DOE interpreted Title XVII's requirement that DOE have a 

superior right to project assets pledged as collateral to prohibit pari passu structures, and as 

requiring all other lenders to be subordinate to DOE. 

In the preamble to the final rule implementing section 19(9)(2) of the Alternative Fuels Act 

and in response to arguments by commenter's concerning the issue of pari passu sharing of 

the project collateral, DOE stated as follows: 

31 

Subsection 796.1 I (a)(9) of the proposed regulation required that the guaranteed 

loan not be subordinate to any other loan for the project and that the guaranteed 

loan be in a first lien position with respect to assets of the project and other 

See also 42 uses §16512(d)(3). This language is tracked in the OGC Form Term Sheet. [M&F 

Comment April 2009] 

26 

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76267.312

collateral which are pledged as security for repayment of the [60125J guaranteed 

loan. DOE construes the Act to requite this, and that only with regard to assets 

not directly related to the project, but which may be pledged as collateral, may a 

less than first lien position be acceptable to DOE. 

(45 FR 15468, 15471). 

DOE today adopts the same interpretation of Title XVII as it adopted in regard to nearly 

identical language in section 19(9)(2) of the Alternative Fuels Act. Thus. DOE interprets 

the language in Title XVII as requiring a first lien on all project assets, but as allowing DOE 

to treat assets pledged to secure a project loan that are not project assets the same as project 

assets. Consistent with the regulations concerning the disposition of proceeds from the sale 

of assets pursuant to the Alternative Fuels Act (section 796(j) and (Ie)), section 609.15 of 

today's final rule also provides that where DOE only guarantees a portion of a Guaranteed 

Obligation, the Secretary may enter into inter-creditor or other arrangements to share the 

proceeds from the sale of project collateral with lenders or other holders of the non-guaranteed 

portion of the Guaranteed Obligation. DOE may, at the discretion of the Secretary. share 

the proceeds from the sale of collateral. DOE is limited, however, to no greater than a pro rata 

share for the non-guaranteed Holder. However, in cases where DOE guarantees 100 percent of 

a loan, the loan must be issued to andfunded by the Federal Financing Bank In those 

circumstances, DOE will have afirst lien priority on project assets pledged as collateral and all 

other debt for the project at issue must be subordinate to the Guaranteed Obligation. 

27 

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76267.313

OMB CIRCULARS 

The provision to look at in the circular is the definition of Modification, particularly para. 3, and the 

definition of Work Out 

OMB Circular A-II 

(b) Claim payment means a payment made to private lenders when a guaranteed loan defaults. 

[OMB Circular A-ll, Section 185, Page 6] 

(m) Loan guarantee means any guarantee, insurance, or other pledge with respect to the 

payment of all or a part of the principal or interest on any debt obligation of a non-Federal 

borrower to a non-Federal lender, except for the insurance of deposits, shares, or other 

withdrawable accounts in financial institutions. Loans that are financed by the FFB pursuant to 

agency loan guarantee authority are treated as direct loans rather than loan guarantees. [OMB 

Circular A-II, Section 185, Page 9] 

(n) Loan guarantee commitment means a binding agreement by a Federal agency to make a loar 

guarantee when specified conditions are fulfilled by the borrower, the lender, or any other party 

to the guarantee agreement. [OMB Circular A-II, Section 185, Page 9J 

(0) Loan guarantee subsidy cost means the estimated long-term cost to the Government of a 

loan guarantee, calculated on a net present value basis, excluding administrative costs. 

Specifically, the cost of a loan guarantee is the net present value, at the time when the guaranteed 

loan is disbursed by the lender, of the following estimated cash flows: 

• Payments by the Government to cover defaults and delinquencies, interest subsidies, and 

other requirements; and 

• Payments to the Government, including origination and other fees, penalties, and 

recoveries . 

• 

These estimated cash flows include the effects of expected Government actions and the exercise 

by the guaranteed lender or the borrower of an option included in the loan guarantee contract. 

[OMB Circular A-II, Section 185, Page 9J 

(P) Loan terms are those terms made explicit in the contract between the U.S. Government and 

the borrower or in the federally guaranteed contract between a private lender and the borrower. 

These assumptions are forecast in the formulation subsidy cost estimate but are known at the 

time of loan origination. They may include: the interest rate charged on loans, the extent of a 

guarantee, fees, repayment terms, collateral held, and other factors such as grace periods. [OMB 

Circular A-II, Section 185, Page 9J 

(r) Modification means a Government action that (1) differs from actions assumed in the 

baseline estimate of cash flows and (2) changes the estimated cost of an outstanding direct loan 

(or direct loan obligation) or an outstanding loan guarantee (or loan guarantee commitment). 

The modification may be (10) for a single loan or loan guarantee as well as a group; it may be 

28 

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76267.314

any size; and it may affect pre-l 992 direct loans and loan guarantees or post-I 991 direct loans 

or loan guarantees. New legislation that alters the baseline cash flow estimate for a loan or group 

of loans always results in a modification. A Government action may change the cost directly by 

altering the terms of existing contracts, selling loan assets (with or without recourse) or 

converting guaranteed loans to direct loans by purchasing them from a private lender. It also 

may change the cost indirectly by legislatively changing the way in which a portfolio of direct 

loans or guaranteed loans is administered. Examples of changes in the terms of existing loan 

contracts are forgiveness, forbearance, interest rate reductions, extensions of maturity, and 

prepayments without penalty. Examples of changes in loan administration are new methods of 

debt collection, such as using tax reftmds to repay loans and restrictions on debt collections. If 

the baseline cost estimate does not assume an action, and the cost would be increased or 

decreased as a result of that action, the action is a modification. [OMB Circular A-II, 

Section ISS, Page 9-10] 

Modifications do not include a Government action that is assumed in the baseline cost estimate, 

as long as the assumption is documented and has been approved by OMB. For example, 

modifications would not include routine administrative workouts (see section ISS.3(ab)) of 

troubled loans or loans in imminent default. They also would not include a borrower's or the 

Government's exercise of an option that is permitted within the terms of an existing contract, 

such as a borrower prepaying the loan. The baseline subsidy estimate must include all 

anticipated actions by the Government, lenders, and borrowers that are permissible under current 

law and that affect the cash flow. Subsequently, if the cost estimate of an action by the 

borrower, lender, or the Government differs from what is anticipated in the documented baseline 

subsidy estimate, then the difference in cost is included in a reestimate. Assumptions underlying 

the subsidy estimates must be documented to assist in determining whether an action is a 

modification or a reestimate. [OMB Circular A-II, Section 185, Page 10] 

Modifications do not include additional disbursements to borrowers that increase the amount of 

an outstanding direct loan or an outstanding loan guarantee. These are treated as new direct 

loans or loan guarantees in the amount of the additional disbursement. [OMB Circular A-II, 

Section 185, Page 10] 

There are situations where it is not clear whether a Government action constitutes a modification 

or a reestimate. These situations should be judged on a case-by-case basis by OMB in 

consultation with the agency. They could include actions by the Government that are not 

addressed in existing contracts, management changes that are within an agency's existing specific 

authority for the loan program, and broad changes in agency policy (e.g., loan sale policy). In 

general, if the possibility of the action was explicitly included in the cash flows for the baseline 

subsidy estimate, and this can be documented, it would most likely be a reestimate. If not, it 

would most 'likely be a modification. [OMB Circular A-II, Section ISS, Page 10] 

Modifications produce a one-time change in the subsidy cost of outstanding direct loans and loan 

guarantees. The effect of the Government action on the subsidy cost of direct loan obligations 

and loan guarantee commitments made after the date of the modification, if there is any effect, is 

not a modification. Instead, the effects are incorporated in the initial cost estimates for 

29 

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subsequent direct loan obligations and loan guarantee commitments. [OMB Circular A-II, 

Section 185, Page 10] 

(s) Modification cost means the difference between the estimate of the net present value of the 

remaining cash flows assumed for the direct loan or loan guarantee contract before and after the 

modification. The estimate of the remaining cash flows before the modification must be the 

same as assumed in the baseline for the most recent Presic\ent's budget. The estimate of the 

remaining cash flows after the modification must be the pre-modification cash flows adjusted 

solely to reflect the effects of the modification. [OMB Circular A-II, Section 185, Page 10] 

An outstanding direct loan (or direct loan obligation) or loan guarantee (or loan guarantee 

commitment) cannot be modified in a manner that increases its cost, unless budget authority for 

the additional cost has been provided in advance in an appropriations act. If the modification is 

mandated in legislation, the legislation itself provides the budget authority to incur a subsidy cost 

obligation (whether explicitly stated or not). [OMB Circular A-ll, Section 185, Page 10] 

(ab) Work-outs mean plans that offer options short of default or foreclosure for resolving 

troubled loans or loans in imminent default, such as deferring or forgiving principal or interest, 

reducing the borrower's interest rate, extending the loan maturity, or postponing collection 

action. Work -outs are expected to minimize the cost to the Government of resolving troubled 

loans or loans in imminent default. They should only be utilized if it is likely that the borrower 

will be able to repay under the terms of the workout and if the cost of the work-out is less than 

the cost of default or foreclosure. For post-1991 direct loans and loan guarantees, the expected 

effects of work-outs on cash flow are included in the original estimate of the subsidy cost. 

Therefore, to the extent that the effects of work-outs on cash flow are the same as originally 

estimated, they do not alter the subsidy cost. If the effects on cash flow are more or less than the 

original estimate, the differences are included in reestimates of the subsidy and are not a 

modification. [OMB Circular A-II, Section 185, Page 12] 

185.6 How do I calculate reestimates? 

(a) General. 

Subsidy reestimates are made on direct loans and loan guarantees that have been disbursed. 

They are recorded in the current year column of the budget. (For example, the subsidy for direct 

or guaranteed loans disbursed during 2010 would be reestimated during 2011 and would be 

recorded in the 2011 column of the FY 2012 BUdget.) A closing reestimate should be made once 

all the loans in the cohort have been repaid or written off. [OMB Circular A-II, Section 185, 

Page 15] 

Two different types ofreestimates are made: 

• Interest rate reestimates, for differences between discount rate assumptions at the time of 

formulation (the same assumption is used at the time of obligation or commitment) and 

the actual interest rate(s) for the year(s) of disbursement; and 

30 

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• Technical reestimates, for changes in technical assumptions. [OMB Circular A-II, 

Section 185, Page 15] 

Technical reestimates of the subsidy cost of a cohort of direct loans or loan guarantees must be 

made after the close of each fiscal year as long as the loans are outstanding, unless a different 

plan is approved by the OMB representative with primary budget responsibility for the credit 

account. The different plan might be with regard to the time when reestimates are made within 

the year or the frequency of reestimates. If the plan allows reestimates to be made less 

frequently than every year, it should require reestimates to be made for any year when anyone of 

the following four conditions is met: 

(1) When required based on periodic schedules established in coordination with OMB, 

consistent with the unique attributes of each program (e.g., initially every two years after the 

cohort !las been substantially disbursed, then every five years); 

(2) When a major change in actual versus projected activity is detected (e.g., a loan that is 

large relative to the size of the portfolio goes into default or prepays substantially earlier than 

expected); 

(3) When a material difference is detected through monitoring triggers developed in 

coordination with OMB. The triggers would focus on major data elements (e.g., total 

projected versus total actual cohort collections) rather than in-depth individual cohort 

analysis. Agencies should focus on a few major loan elements recognizing there are different 

key elements applicable to each program and different reporting problems; and 

(4) When a cohort is being closed out. [OMB Circular A-I1, Section 185, Page 16] 

Technical reestimates are made for all changes in assumptions other than interest rates. This 

type of reestimate compares the subsidy estimate that already includes any reestimate for actual 

interest rates with a reestimated subsidy using updated technical information (for defaults, fees, 

recoveries, etc.) as well as actual interest rates. [OMB Circular A-II, Section 185, Page 16] 

The purpose of technical reestimates is to adjust the subsidy estimate for differences between the 

original projection of cash flows (as estimated at obligation) and the amount and timing of cash. 

flows that are expected based on actual experience, new forecasts about future economic 

conditions, and other events and improvements in the methods used to estimate future cash 

flows. Because actual cash flows are experienced every year and the ability to forecast future 

years also changes, this reestimate must be done after the end of every fiscal year as long as any 

loans are outstanding (except as provided above). [OMB Circular A-II, Section 185, Page 16] 

Reestimates must be made separately for each cohort. If a cohort is divided into risk categories, 

each risk category within a cohort must be reestimated separately. The reestimate will then be 

compared with the previous estimate. For this purpose, all details of the previous subsidy 

estimates by risk category should be retained in program records. [OMB Circular A-II, 

Section 185, Page 16] 

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185.7 How do I calculate and record modifications? 

When a direct loan or loan guarantee is modified, the subsidy cost of the modification must be 

calculated. The subsidy cost calculation will indicate whether the Government action changes 

the subsidy cost. If there is no change in cost, there will be no budgetary effect, and nothing 

needs to be recorded in the budget. If the modification will increase or decrease the cost, the 

budgetary effect must be recorded as described under modification cost increases/decreases 

below. Additional transfers to or from the financing account will be required; with the type of 

transfer depending on whether the modification affects pre-1992 or post-l 991 direct loans and 

loan guarantees. These additional transfers are described in a separate subsection below. [OMB 

Circular A-ll, Section 185, Page 19] 

The subsidy cost of the modification is the difference between the estimate of the net present 

value of the remaining cash flows for the direct loan or loan guarantee before and after the 

modification. The estimate of remaining cash flows before modification must be the same as 

assumed in the baseline for the most recent President's budget. The estimate of remaining cash 

flows after modification must be the premodification cash flows adjusted solely to reflect the 

effects of the modification. [OMB Circular A-II, Section 185, Page 19] 

OMB Circular A-129 

[Nothing of note for now ... ] 

[EXTRA: LIST OF DOCUMENTS] 

Loan Documents 

Loan Documents 

1. Common Agreement (including Definitions, Exhibits & Disclosure Letter) 

2. FFB Program Financing Agreement 

3. FFB Note Purchase Agreement 

4. FFB Promissory Note 

5. DOE Guarantee 

6. Collateral Agency Agreement 

7. Equity Funding Agreement 

8. Sponsor Support Agreement 

Security Documents 

9. Deed o/Trust 

32 

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10. Environmental Indemnity Agreement 

11. Security Agreement 

12. Account Control Agreement 

13. Equity Pledge Agreement 

14. Direct Agreements 

33 

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[ADD) 

Table of Contents 

FFB NOTE PURCHASE AGREEMENT ................................................................................................................. 1 

RJGHTS AND AGREEMENTS OF THE SECRETARY AND FFB ...................................................... ~ ................................. 1 

DEFlNITlONS .............................................................................................................................................................. 2 

PURCHASE COMMITMENT .......................................................................................................................................... 2 

INTEREST ................................................................................................................................................................... 2 

BILLING BYFFB ........................................................................................................................................................ 2 

MISCELLANEOUS ....................................................................................................................................................... 3 

FFB PROMISSORY NOTE ....................................................................................................................................... 4 

COMPUTATION OF INTEREST ON EACH ADV ANCE ..................................................................................................... 4 

PAYMENT OF INTEREST; PAYMENT DATES; PAYMENT BORROWINGS PERMITTED TO PAY ACCRUED INTEREST 

BEFORE THE FIRST PRINCIPAL PAYMENT DATE ................................................ , ............................. , ......... , ................ 4 

FEE ........... , ................................................................................................................................................................ 4 

MANNER OF MAKING FA YMENTS .............................................................................................................................. 5 

SECRETARy'S GUARANTEE OF NOTE ........... , ................................................................... , ......................................... 5 

SECURITY INSTRUMENTS ........................................................................................................................................... 5 

GUARANTEE PAYMENTS; REIMBURSEMENT .............................. ) ............................................................................... 6 

DEFAULT AND ENFORCEMENT ................................................................................................................................... 6 

ACCELERATION ............................................................. " .......................................................................................... 6 

COMMON AGREEMENT ........................................................................................................................................ 7 

EVENTS OF DEFAULT ................................................................................................................................................. 8 

AGENTS ............. : ........................................................................................................ , ...................... , ....................... 9 

REIMBURSEMENT AGREEMENT ................................................................................................................................. 9 

COMMON AGREEMENT DEFINITIONS ........................................................................................................... ]3 

SECRETARY'S GUARANTEE ............................................................................................................................... 14 

RESTRUCTURING TERM SHEET ....................................................................................................................... 15 

DOE STATUTE AND REGULATJONS ................................................................................................................. 19 

DEFINITlONS ............................................................................................................................................................ 19 

DEFAULTS ............................................................................................................................................................... 19 

SUBORDINATION ..................................................................................................................................................... 25 

OMB CIRCULARS ................................................................................................................................................... 28 

OMB CIRCULAR A·11 ............................................................................................................................................. 28 

OMB CIRCULAR A·129 ........................................................................................................................................... 32 

[EXTRA: LIST OF DOCUMENTS) ....................................................................................................................... 32 

LoAN DOCUMENTS .... , .......................................................................................................................................... , .. 32 

[ADDJ ......................................................................................................................................................................... 34 

34 

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DOCUMENT 

T 
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I. BACKGROUND 

DOE/SOL YNDRA RESTRUCTURING 

Contractual and Legal Analysis 

[Rough Draft: 01-03-11] 

(see Table o/Contents at end) 

[Briefly describe circumstances and need for restructuring] 

II. EXISTING LOAN STRUCTURE 

A. DOE-Guaranteed Loans and Advances 

1. DOE has guaranteed an FFB Loan in the principal amount 0($535,000,000 

a. The DOE-Guaranteed Loan is from FFB to the Borrower (Fab 2) in the principal 

amount of up to $535,000,000. 

b. The tenns of the FFB loans (i.e., the DOE-Guaranteed Loans) are set forth in a 

Note Purchase Agreement among the Borrower, DOE and FFB. 

c. FFB also holds a single "grid-style" Promissory Note, which covers Advances 

made from time to time (generally monthly). 

2. Advances o(the DOE-Guaranteed Loan are made monthly in accordance with the 

conditions precedent set forth in the Common Agreement 

a. Advances of the loan are made (generally monthly) in accordance with the 

provisions of the Note Purchase Agreement (which sets forth basic FFB funding 

mechanics). 

b. Detailed conditions precedent to each Advance, designed to protect the DOE's 

credit exposure, are set forth in the Common Agreement. 

B. Repayment of Principal and Interest 

1. Interest on the DOE-Guaranteed Loan is payable quarterly 

a. Interest is due and payable on the 15th day of each February, May, August and 

November (the "Quarterly Payment Dates"), beginning immediately on the first 

Quarterly Payment Date after an Advance is made, up through and including the 

Maturity Date. (FFB Promissory Note LJ 

b. Interest is payable during tqe construction period by means of "Payment 

Borrowings", which are Advances of the DOE-Guaranteed Loans in the required 

amount of interest. [FFB Promissory Note §.-l 

c. On and after the First Principal Payment Date, interest is paid in cash from 

revenues generated from operations. [FFB Promissory Note §--.J 

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2. Principal ofthe DOE-Guaranteed Loan is payable quarterlv. beginning May 15, 2012 

a, Principal is payable in 18 equal quarterly payments on the Quarterly Payment 

Dates beginning on May 15, 2012, and thereafter on the 15th day of February, 

May, August and November of each year until August 15,2016, [FFB 

Promissory Note §-.-1 

C. Collateral Security Package 

1. All assets oUk Borrower. as well as Solyndra, Inc. 's equity interests in the Borrower. 

are pledged as collateral security (or the Borrower's payment obligations 

a. All Borrower Assets Pledged, All assets of the Borrower are pledged as collateral 

security for the Guaranteed Loans. 

b. All Equity Interests Pledged. All Equity Interests in the Borrower (100% held 

directly by the Sponsor as the sole Equity Owner) are pledged as collateral 

security for the Guaranteed Loans. 

2. All security is pledged for DOE's benefit, not FFB's 

a. The Note purchase Agreement provides that "FFB acknowledges that the 

Borrower has, through the execution of the Security Instruments, pledged and 

granted a security interest to the "Collateral Agent," for the benefit of the 

"Secured Parties" (as those tenns are defined in the Common Agreement,) in 

certain property of the Borrower to secure the payment and perfonnance of 

certain obligations owed to the Secretary under, inter alia, the Security 

Instruments." [Note Purchase Agreement, § 11.1.2) 

3. FFB is not a Secured Party under the Loan Documents 

a. The Common Agreement defmes "Secured Parties" as DOE and the Collateral 

Agent, as their respective interests may appear. 

4. Upon a default by the Borrower under the FFB Promissory Note or an Event of Default 

under the Common Agreement and the Security Documents. DOE has the sole authority 

(vis-a-vis FFB) in respect of acceleration o(the FFB Promissory Note and realization on 

collateral. 

a. The Note Purchase Agreement provides 

dc-626445 

"In consideration of the Secretary's Guarantee relating to the Note that has been 

purchased by FFB under this Agreement, the Secretary shall have the sole 

authority (vis-a-vis FFB), in the case of a default by the Borrower under such 

Note or the occurrence of an Event of Default under the Security Instruments, in 

respect of acceleration of such Note, the exercise of other available remedies, and 

2 
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the disposition of sums or property recovered. [Note Purchase Agreement" 

§ll.1.l]l 

b. "Security Instruments" is defined to mean, "collectively, (i) the Common 

Agreement, and (ii) the "Security Documents" (as that term is defined in the 

Common Agreement), as such agreements and documents may be amended, 

supplemented, and restated from time to time in accordance with their respective 

terms." [Note Purchase Agreement Schedule I, Item 3] 

D. DOE Guarantee 

1. DOE's guarantee is issued under Title XVII and references the Federal Financing Bank 

Act 

a. The DOE Guarantee provides that 

"This Secretary's Guarantee is issued pursuant to Title XVII of the Energy Policy 

Act of 2005, as amended (42U.S.C. § 1651ll<!~.), section 6 of the Federal 

Financing Bank Act of 1973 (12 U. S.C. § 2285), and the Note Purchase 

Agreement dated as of September 2, 2009, among FFB, the Borrower, and the 

Secretary." [DOE Guarantee, paragraph 3] 

b. The DOE Guarantee is a full faith & credit obligations of the U.S. government: 

"The obligation of the United States of America to pay amounts due and payable 

under this Secretary's Guarantee when such amounts become due and payable in 

accordance with its terms, constitutes the absolute obligation of the United States 

of America, against which no offset may be made by the United States of 

America in discharge of its obligation to make these payments and for which the 

full faith and credit of the United States of America are pledged." [DOE 

Guarantee, paragraph 2] 

2. DOE guarantees all payments ofprincipal, interest. premium. and late charges. when 

and ru due in accordance with the FFB Promissory Note 

1 

a The DOE Guarantee guarantees 

"all payments of principal, interest, premium (if any), and late charges (if any), 

when and as due in accordance with the terms of the note dated September 3, 

2009, issued by SOL YNDRA FAB 2 LLC (the "Borrower") payable to FFB in 

the maximum principal amount of $535,000,000, to which this Secretary's 

Guarantee is attached (such note being the "Note"), with interest on the principal 

until paid, irrespective of (i) acceleration of such payments under the terms of the 

Note, or (ii) receipt by the Secretary of any sums or property from its enforcement 

of its remedies for the Borrower's default." [DOE Guarantee, paragraph 1] 

See similar language in Section 23(b) of the FFB Promissory Note 

3 

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76267.324

b. The FFB Promissory Note provides 

Upon execution of the guarantee set forth at the end ofthis Note (the 

"Guarantee"), the payment by the Borrower of all amounts due and payable under 

this Note, when and as due, shall be guaranteed by the United States of America, 

acting through the Secretary, pursuant to Title XVII of the Energy Policy Act of 

2005, as amended C42 U.S.C. § 16511 ~ ~.). In consideration of the Guarantee, 

the Borrower promises to the Secretary to make all payments due under this Note 

when and as due. [FFB Promissory Note §20] 

E. Guarantee Payments 

1. Absent a payment default. FFB has no right to demand any action from DOE 

a The Applicable Regulations provide: 

"In the event that the Borrower is in default as a result of a breach of one or more 

of the terms and conditions of the Loan Guarantee Agreement, note, mortgage, 

Loan Agreement, or other contractual obligations related to the transaction, other 

than the Borrower's obligation to pay principal or interest on the 

Guaranteed Obligation, as provided in paragraph (a) of this section, the Holder 

will not be entitled to make demand for payment pursuant to the Loan Guarantee 

Agreement, unless the Secretary agrees in writing that such default has 

materially affected the rights of the parties, and finds that the Holder 

should be entitled to receive payment pursuant to the Loan Guarantee 

Agreement." [Regulations §609.15(b)] 

2. If the Borrower detau/ts, FFB's recourse is to demand payment under the DOE 

Guarantee 

2 

a. The Act provides: 

"CA) In general. If a borrower defaults on the obligation (as defmed in regulations 

promulgated by the Secretary and specified in the guarantee contract), the holder 

of the guarantee shall have the right to demand payment of the unpaid amount 

from the Secretary.,,2 [§ 1702Cg)(I)(A)] 

b. The Act provides: 

nCB) Payment required. Within such period as may be specified in the guarantee 

or related agreements, the Secretary shall pay to the holder of the guarantee the 

unpaid interest on, and unpaid principal of the obligation as to which the borrower 

has defaulted, unless the Secretary finds that there was no default by the borrower 

See also §§609.15(a)-(e) of Final Regulations. 

4 

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76267.325

in the payment of interest or principal or that the default has been remedied. ,,3 

[§ 1702(g)(1)(B)] 

c. The Applicable Regulations provide: 

(a) In the event that the Borrower has defaulted in the making of required 

payments of principal or interest on any portion of a Guaranteed 

Obligation, and such default bas not been cured within the period of grace 

provided in the Loan Guarantee Agreement and/or the Loan Agreement, the 

Eligible Lender or other Holder, or nominee or trustee empowered to act for the 

Eligible Lender or other Holder (referred to in this section collectively as 

"Holder"), may make written demand upon the Secretary for payment pursuant 

to the provisions of the Loan Guarantee Agreement. [Regulations §609.15(a)] 

F. DOE's Rights Under the FFB Promissory Note 

1. DOE has all o(FFB's rights, powers, privileges, and remedies as Holder ofthe FFB 

Promissory NOle 

3 

a.. The FFB Promissory Note provides: 

"This Note is , .. ent.itled to the benefits and security of, the "Security 

Instruments" (as defined in the Note Purchase Agreement), whereby the Borrower 

pledged and granted a security interest in certain property of the Borrower, 

described therein, to secure the payment of and performance of certain obligations 

owed to the Secretary, as set forth in the Security Instruments. For purposes of 

the Security Instruments, in consideration of the undertakings by the Secretary set 

forth in the Program Financing Agreement, the Note Purchase Agreement, and the 

Guarantee, the Secretary shall be considered to be, and shall have the rights, 

powers, privileges, and remedies of, the Holder of this Note." [FFB Promissory 

Note §21] 

b. The FFB Promissory Note provides: 

"In case of a default by the Borrower under this Note or the occurrence of an 

"Event of Default" (as defmed in the Security Instruments), then, in consideration 

of the obligation of the Secretary under the Guarantee, the Secretary, in the name 

of the Secretary or the United States of America, shall have all rights, powers, 

privileges, and remedies of the Holder of this Note, in accordance with the terrns 

of this Note and the Security Instruments, including, without limitation, the right 

to (i) enforce or collect all or any part of the obligation of the Borrower under this 

Note or arising as a result of the Guarantee; (li) accelerate (as provided in 

paragraph 24); (iii) compromise or otherwise negotiate with the Borrower; 

(iv) bring suit against or foreclose upon any or all ofthe security interests granted 

Seealso §609.15(f) of Final Regulations. 

5 

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76267.326

by the Borrower; and (v) to file proofs of claim or any other document in any 

bankruptcy, insolvency, or other judicial proceeding, and to vote such proofs of 

claim." [FFB Promissory Note §23(a)J 

c. See definition of "Security Instruments", above 

2. DOE payments discharge FFB's rights. but not Borrower's. under the Promissory Note 

a. The FFB Promissory Note provides: 

"If the Secretary makes any payment, pursuant to the Guarantee, of any amount 

due and payable under this Note, each and every such payment so made shall be 

deemed to be a payment hereunder; provided, however, that no payment by the 

Secretary pursuant to the Guarantee shall be considered a payment for purposes of 

determining the existence of a failure by the Borrower to perfonn its obligation to 

the Secretary to make all payments under this Note when and as due. [FFB 

Promissory Note §22] 

G. Reimbursement Obligations 

1. The Borrower is currently contractually obligated to reimburse DOE with respect to 

DOE guarantee payments. 

a. The Common Agreement provides: 

"The Borrower shall pay to DOE an amount (the "Borrower Reimbursement 

Obligations") equal to the sum of (i) the DOE Guarantee Payment Amount, and 

(ii) interest on DOE Guarantee Payment Amount ... " [Common Agreement 

§IO.2.1] 

b. The FFB Promissory Note provides: 

The Secretary shall have any rights by way of subrogation, agreement or 

otherwise which arise as a result of such payment pursuant to the Guarantee and 

as provided in the particular agreement specified on page 1 of this Note as the 

"Common Agreement" betWeen the Borrower and the United States of America, 

acting through the Secretary, to evidence the Borrower's obligation to reimburse 

the Secretary for payment made by the Secretary pursuant to the Guarantee." 

[FFB Promissory Note §22] 

2. The Borrower's contractual reimbursement obligation is in addition to DOE's 

subrogation rights upon making DOE guarantee payments. 

a. The Applicable Regulations provide: 

dc-626445 

"The Loan Guarantee Agreement shall provide that, upon payment of the 

Guaranteed Obligations, the Secretary shall be subrogated to the rights of the 

Holders and shall have superior rights in and to the property acquired from 

the Holders. The Holder shall transfer and assign to the Secretary all rights 

held by the Holder of the Guaranteed Obligation. Such assignment shall include 

6 
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76267.327

all related liens, security, and collateral rights to the extent held by the 

Holder.,,4 [Regulations §609.15(g)] 

b. The Common Agreement provides: 

"DOE's right to reimbursement provided for in thiS Article 10 shall be in addition 

to, and not in limitation of, any other claims, rights or remedies of subrogation, 

reimbursement, contribution, exoneration or indemnification or similar claims, 

rights or remedies, whether arising under contract, by statute, or otherwise that 

DOE may have from time to time." [Common Agreement §IO.5.l] 

c. The Common Agreement provides: 

"Without limiting the generality of Section 10.5.1 , in accordance with Section 

609.IO(e)(2) of the Applicable Regulations, upon any DOE Guarantee Payment 

DOE shall be subrogated to the rights ofFFB or any subsequent holder of the 

DOE-Guaranteed Loan, including all related Liens and Collateral, and has 

superior rights in and to the property acquired from the recipient of the payment 

as provided in §609.IS of the Applicable Regulations." [Common Agreement 

§IO.S.2] 

3. The Collateral Securitvpledged under the Security Documents is pledged to secure the 

Borrower Reimbursement Obligations 

4 

a. The Common Agreement provides that 

"The parties expressly acknowledge that the Collateral Security pledged under the 

Security Documents is pledged to secure payment by the Borrower of the 

Borrower Reimbursement Obligations. [Common Agreement §IO.4.I]" 

See aIso 42 uses §§16512(g)(2)(A)-(B). 

DOE today adopts the same interpretation of Title XVII as it adopted in regard to nearly 

identical language in section 19(9)(2) of the Alternative Fuels Act. Thus, DOE interprets 

the language in Title XVII as requiring a first lien on all project assets, but as allowing OOE 

to treat assets pledged to secure a project loan that are not project assets the same as project 

assets. Consistent with the regulations concenring the disposition of proceeds from the sale 

of assets pursuant to the Alternative Fuels Act (section 796(f) and (k)), ... where DOE only 

guarantees a portion of a Guaranteed Obligation, the Secretary may enter into inter-creditor or 

other arrangements to share the proceeds from the sale of project collateral with lenders or other 

holders of the non-guaranteed portion of the Guaranteed Obligation. DOE may, at the 

discretion of the Secretary, share the proceeds from the sale of collateral. DOE is limited, 

however, to no greater than a pro rata share for the non-guaranteed Holder. However, in cases 

where DOE guarantees 100 percent of a loan, the loan must be issued to and funded by the 

Federal Financing Bank. In those circumstances, DOE will have a first lien priority on project 

assets pledged as collateral and all other debt for the project at issue must be subordinate to the 

Guaranteed Obligation. [DOE Response] 160124-5) 

7 

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76267.328

b. The Common Agreement defines 

"Borrower Reimbursement Obligations" to be "the sum of (i) the DOE Guarantee 

Payment Amount, and (ii) interest on DOE Guarantee Payment Amount from the 

date the DOE Guarantee Payment was paid or incurred by DOE under the DOE 

Guarantee until payment in full by the Borrower to DOE of the DOE Guarantee 

Payment Amount, at a rate of interest equal to the rate of interest in effect under 

the FFB Note Purchase Agreement with respect to Overdue Amounts at the time 

of the payment default by the Borrower." [Common Agreement §1O.2.1J . 

c. The Common Agreement defines 

"DOE Guarantee Payment Amount" as an amount "equal to the sum of (i) all 

DOE Guarantee Payments paid by DOE to FFB, and (ii) all costs or expenses 

incurred by DOE in connection therewith, whether by payment to FFB or 

otherwise." [Common Agreement § I 0.1] 

H. Administration of DOE-Guaranteed Loan 

1. Billing by FFB 

FFB prepares a billing statement for all amounts owed to FFB with respect to each Advance 

made under the Note and delivers each billing statement to the Borrower and DOE. [FFB Note 

Purchase Agreement, §9.1] 

I. Agreed Funds Flow 

[add] 

J. Provision in Act for DOE Payment of Principal and Interest 

1. The Act provides that DOE may enter into a contract to pay principal and interest to 

holders. 

5 

a. The Act provides: 

" (3) Payment of principal and interest by Secretary. With respect to any 

obligation guaranteed under this section, the Secretary may enter into a contract to 

pay, and pay, holders of the obligation, for and on behalf of the borrower, from 

funds appropriated for that purpose, the principal and interest payments which 

become due and payable on the unpaid balance of the obligation if the Secretary 

finds that--

(A) (i) the borrower is unable to meet the payments and is not in defaultS; 

(ii) it is in the public interest to permit the borrower to continue to pursue 

See also §609.13(a)(1) of Final Regulations. 

8 

dc-626445 
426 


76267.329

the purposes of the project; 6 and 

(iii) the probable net benefit to the Federal Government in paying the 

principal and interest will be greater than that which would result in the event of a 

default;? 

(B) the amount of the payment that the Secretary is authorized to pay shall be 

no greater than the amount of principal and interest that the borrower is obligated 

to pay under the agreement being guaranteed; 8 and 

(C) the borrower agrees to reimburse the Secretary for the payment (including 

interest) on terms and conditions that are satisfactory to the Secretary.,,9 

[§ 1702(g)(3)] 

b. The Applicable Regulations provide: 

[add later] 

2. There is no need (or DOE to enter into such a contract, since DOE has already 

guaranteed 100% o[the loan to FFB. 

a. This provision was likely added to allow for 100% guarantee coverage of troubled 

loans originally structured as 80% or 90% coverage. 

3. As a (allback this provision would allow DOE to make payments to the FFB in the 

current situation, ifthere were any doubt as to DOE's authority to do so. 

a. These provisions by their tenus apply to guaranteed obligations 

[Discuss this] 

K. DOE Right to Purchase Note from FFB 

1. The Note Purchase Agreement provides that DOE may purchase individual advances or 

the FFB Promissory Note (rom FFB. 

6 

? 

8 

a. the Note Purchase Agreement provides 

"Notwithstanding the provisions of the Note, the Borrower acknowledges that, 

under the terms of the Program Financing Agreement, the Secretary may purchase 

from FFB all or any portion of any Advance that has been made under the Note, 

or may purchase from FFB the Note in its entirety, in the same manner, at the 

same price, and subject to the same limitations as shall be applicable, under the 

See also §609.13(b) of Final Regulations. 

See also §609.13(c) of Final Regulations. 

See also §609.13(d) of Final Regulations. 

Seealso §609.13(e) of Final Regulations. 

9 

dc·626445 
427 


76267.330

terms of the Note, to a prepayment by the Borrower of all or any portion of any 

Advance made under the Note, or a prepayment by the Borrower of the Note in its 

entirety, as the case may be." [Note Purchase Agreement, § 11.2] 

b. Note that this gives DOE a right to purchase amounts payment-by payment. 

III. RESTRUCTURING GOALS AND ISSUES 

A. Tranche A and Tranche C Loans are to be Senior to Tranche B and Tranche D 

1. Tranche A debt is to have a priority return (or two years, and thereafier be pari passu 

with Tranche B, and senior to Tranche D 

a. The Restructuring Term Sheet provides that Tranche A shall be 

"First out in the event of a liquidation event prior to initial scheduled principal 

payment date (March, 2013)" 

2. Tranche C debt is to be pari passu with Tranche B, and senior to Tranche D 

a. The Restructuring Term Sheet provides that Tranche C shall be 

"[in an amount] up to an additional $75 million senior debt financing permitted 

pari passu with Tranche A and B. Collateral and terms as stated on Tranche A 

above (except Tranche C will not receive a first out position in the event of a 

liquidation event prior to initial scheduled principal payment date)" 

3. Tranche A and Tranche C debt is to have same collateral as Tranche B and Tranche D 

a. The Restructuring Term Sheet provides that the collateral security for Tranche A 

is 

"Equity interests in Fab 2 LLC and all assets ofFab 2 LLC, includiqg all 

intellectual property, equipment, agreements, etc.'" 

B. Subordination of DOE·Guaranteed Loans is Prohibited 

1. The Act and the Applicable Regulations prohibit subordination of the DOE-Guaranteed 

Loans 

10 

a. The Act provides: 

H(d) Repayment. ,., (3) Subordination. The obligation shall be subject to the 

condition that the obligation is not subordinate to other financing. ,,10 [Act 

§1702(d)(3)] 

b. The Applicable Regulations provide: 

Seealso §609.10(d)(13) of Final Regulations. 

10 

dc-626445 
428 


76267.331

(d) Prior to the execution by DOE of a Loan Guarantee Agreement, DOE 

must ensure that the following requirements and conditions, which must be 

specified in the Loan Guarantee Agreement, are satisfied: ... 

(13) Any Guaranteed Obligation is not subordinate to any loan or other debt 

obligation and is in a first lien position on all assets of the project and all 

additional collateral pledged as security for the Guaranteed Obligations and other 

project debt;ll [Applicable Regulations §609.10(d)(3)] 

2. The definition of "obligations" is limited to the DOE·guaranteed obligations 

a. The Act provides: 

In this title [42 uses §§1651 1 et seq.] . .. (5) Obligation. The term "obligation" 

means the loan or other debt obligation that is guaranteed under this section. 12 

[Act §1701(5)] 

b. The Applicable Regulations provide: 

Guaranteed Obligation 13 means any loan or other debt obligation of the 

Borrower for an Eligible Project for which DOE guarantees all or any part of 

the payment of principal and interest under a Loan Guarantee Agreement entered 

into pursuant to the Act. [Applicable Regulations §609.2] 

3. There does not seem to be any restriction on subordination of Borrower reimbursement 

obligations to DOE 

[Discuss] 

C. Forbearance 

1. The Act and the Applicable Regulations allow for forbearance for the benefit of the 

Borrower 

11 

12 

13 

14 

a. The Act provides: 

(C) Forbearance. Nothing in this subsection precludes any forbearance by the 

holder of the obligation for the benefit of the borrower which may be agreed upon 

by the parties to the obligation and approved by the Secretary. 14 

[§ l702(g)(1 )(C)] 

See also 42 uses §16512(d)(3). 

See also definition of "Guaranteed Obligation" at §609.2 of Final Regulations. 

See also 42 uses §1651l(5). 

See also §609.15(d) of Final R~gulations. 

II 

dc-626445 
429 


76267.332

b. The Applicable Regulations provide: 

(d) No provision of this regulation shall be construed to preclude forbearance by 

the Holder with the consent of the Secretary for the benefit of the Borrower. IS 

[Applicable Regulations §609.15(d)] 

IV. PROPOSED NEW STRUCTURE 

A. Borrower Payments to Collateral Agent 

1. Tranche A would be funded as, and Tranche E would be converted into. Fab 2 

Indebtedness. 

a. The Tranche A lenders (and, if they subscribe to the deal, the Tranche C lenders) 

would agree to fund their loan under the tenns of the relevant Note Purchase 

Agreements and the Common Agreement. 

b. Fab 2 will become liable on the existing Tranche E debt 

2. The Tranche B & Tranche D payments will run directly to DOE, and will together 

embody the secured reimbursement obligations now in Article 10 of the Common 

Agreement 

3. All Borrower payment priority would be addressed in the lntercreditor Agreement. 

a. The priority of the payments to the lenders would be adjusted as per the terms of 

the Intercreditor Agreement. 

b. All Fab 2 payments will be run through the Collateral Agent to ensure proper 

allocation. 

B. No Change to DOE Payments to FFB 

1. Existing Fab 2 Indebtedness pavable to FFB (Tranche B and Tranche D) would be lefl 

undisturbed. 

2. 

15 

a. The Borrower will remain liable on the existing Tranche B and Tranche D 

indebtedness, and the contractual arrangements with FFB will be left undisturbed. 

b. However, Fab 2 will make all payments with respect to Tranche B and Tranche D 

to the Collateral Agent for payment to DOE, as described below. 

FFB would haye no role in the restructuring. because the Borrower's and DOE's 

obligations would be unchanged. 

a. FFB would not be a party to the Intercreditor Agreement and would otherwise not 

be a party to the restructUring documents. 

See also 42 uses §16512(g)(2)(C). 

12 

dc-626445 
430 


76267.333

b. DOE [would acknowledge that it will] make payments to FFB under the DOE 

guaranty in accordance with the terms of the existing amortization schedule under 

the FFB Promissory Note so that the expected payment stream to FFB would not 

be disturbed. 

C. Effect of DOE Payments in advance of Borrower reimbursements 

1. DOE payments will be made in advance of Borrower reimbursements 

a. The total principal amount of DOE payments to FFB ("DOE Payments") will 

equal the total principal amount of the Borrower's payments to DOE ("Borrower 

Payments") 

b. However, the principal portion of DOE Payments will be due in advance of the 

coresponding principal portion of Borrower Payments. 

c. As a result of the timing difference, because a larger principal amount will be 

outstanding on the Borrower Payment than on the DOE Payments, it is likely that 

the total interest amount due to DOE will be greater than the interest paid by DOE 

toFFB 

2. DOE is maldng debt service payments to FFB as Loan Servicer; to the extent the 

Borrower does not make a corresponding payment. those debt service payments become 

guarantee payments. 

[Discuss] 

3. Changes to reimbursement arrangements could be deemed to constitute farbearance bv 

DOE. 

a. Fab 2 would acknowledge its obligation to pay DOE (via the Collateral Agent) for 

its own account in respect of Tranche B & D payments made by DOE under the 

DOE Guarantee, and in exchange DOE would agree to accept repayment under 

the modified interest rate, amortization schedule and related terms of the 

restructured debt as per the term sheet. 

b. This could be accomplished by either (i) entering into a Reimbursement 

Agreement, or (ii) amending the existing reimbursement obligations in the 

Common Agreement. 

4. Borrower payments 0/1 Tranches B & D will be credited dollar-far-dollar to reduce the 

Borrower's obligations under the FFB Note. 

a. The payments on Tranches B & D will be credited dollar-for-dollar to reduce the 

Borrower's obligations under the FFB Promissory Note. 

D. Security Interests 

1. Existing Security Agreements would not be substantially modified, and alI colIateral 

would remain pledged to DOE 

a. The existing security agreements in favor of DOE (including both (x) the existing 

deeds of trust and the personal property security agreements, and (y) the pledge 

13 

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76267.334

by Solyndra, Inc. of its membership interests in Fab 2) would not be substantially 

modified except: 

(i) certain modifications to specific covenants, representations and remedies 

provisions will be made to take into account the new collateral that will be subject 

to the security interests in favor of DOE and all the other lenders in respect of the 

intelJectual property, equipment and other assets being sold or contributed by 

Solyndra, Inc. to Fab 2; and 

(ii) [to the extent that the granting clause in favor of DOE covers indebtedness in 

addition to the principal, interest and indemnity payments, etc. owing under the 

existing loan documents, the granting clause would be modified so that there 

would be no lien securing additional debt]. 

2. Other Lenders would enter into new security agreements. 

The Tranche A lenders and the Tranche E lenders would enter into a new set of security 

documents (including new personal property security agreements, deeds of trust and membership 

pledges) to secure obligations owing to each of them by Fab 2. These would be substantially the 

same as the collateral documents running in favor of DOE, as amended. 

3. DOE and all other Lenders would be secured bv the same collateral. 

As a result of the foregoing, all of the Tranche A, Tranche B, Tranche C (if funded), Tranche 0 

and Tranche E Debt would be secured by a perfected security interest in and lien on the same 

collateral (being all the assets of and membership interests in Fab 2). 

4. The Collateral Agent would act as collateral agent (or all ofthe lenders. 

Pursuant to the terms of the Intereredito'r Agreement, U.S. Bank would agree to act as collateral 

agent for all of the lenders. In addition, U.S. Bank would agree that, notwithstanding the fact 

that under the terms of the existing deeds of trust and personal property security agreements in 

favor of DOE, U. S. Bank is acting as collateral agent solely for the benefit ofOOE, the 

provisions of the Intercreditor Agreement would supersede those so that any exercise of 

remedies by U.S. Bank and any distribution of proceeds by U.S. Bank would always be 

consistent with the terms of the Intercreditor Agreement. 

5. All lien priority would be addressed in the Intercreditor Agreement. 

The priority of the liens of the lenders would be adjusted as per the terms of the Intercreditor 

Agreement. 

E. Prepayments 

[address prepayment mechanics] 

14 

dc-62644S 
432 


76267.335

v. TREATMENT OF NEW STRUCTURE UNDER OMB RULES 

A. Modifications Under OMB FCRA Rules 

1. [(the proposed changes to the transaction structure are tkemed a "modification", 

additional budget authority must be provided 

a. OMB Circular A-II provides: 

"An outstanding direct loan (or direct loan obligation) or loan guarantee (or loan 

guarantee commitment) cannot be modified in a manner that increases its cost, 

unless budget authority for the additional cost has been provided in advance in an 

appropriations act. If the modification is mandated in legislation, the legislation 

itself provides the budget authority to incur a subsidy cost obligation (whether 

explicitly stated or not)." [OMB Circular A-It, Section 185, Page 10] 

b. [Discuss implications] 

2. Changes in the terms o(an existing loan. fOrbearance, interest rate reductions. and 

extensions of maturity all constitute modifications 

a. OMB Circular A-II provides: 

"(r) Modification means a Government action that (I) differs from actions 

assumed in the baseline estimate of cash flows and (2) changes the estimated cost 

of an outstanding direct loan (or direct loan obligation) or an outstanding loan 

guarantee (or loan guarantee commitinent). . .. A Govenunent action may 

change the cost directly by altering the terms of existing contracts, selling loan 

assets (with or without recourse) or converting guaranteed loans to direct loans by 

purchasing them from a private lender. .,. Examples of changes in the terms of 

existing loan contracts are forgiveness, forbearance, interest rate reductions, 

extensions of maturity, and prepayments without penalty. . .. If the baseline cost 

estimate does not assume an action, and the cost would be increased or decreased 

as a result of that action, the action is a modification." [OMB Circular A-II, 

Section 185, Page 9-IOJ 

b. OMB Circular A-ll provides: 

dc-626445 

"Modifications do not include a Government action that is assumed in the 

baseline cost estimate, as long as the assumption is documented and has been 

approved by OMB. For example, modifications would not include routine 

administrative workouts (see section 185.3(ab» of troubled loans or loans in 

imminent default. ... The baseline subsidy estimate must include all anticipated 

actions by the Govenunent, lenders, and borrowers that are permissible under 

current law and that affect the cash flow. Subsequently, if the cost estimate of an 

action by the borrower, lender, or the Govenunent differs from what is anticipated 

in the documented baseline subsidy estimate, then the difference in cost is 

included in a reestimate. Assumptions underlying the subsidy estimates must be 

IS 
433 


76267.336

docwnented to assist in determining whether an action is a modification or a 

reestimate." [OMB Circular A-II, Section 185, Page 10] 

c. OMB Circular A-II provides: 

"There are situations where it is not clear whether a Government action 

constitutes a modification or a reestimate. These situations should be judged on a 

case-by-case basis by OMB in consultation with the agency. They could include 

actions by the Government that are not addressed in existing contracts, 

management changes that are within an agency's existing specific authority for the 

loan program, and broad changes in agency policy (e.g., loan sale policy). In 

general, if the possibility of the action was explicitly included in the cash flows 

for the baseline subsidy estimate, and this can be docwnented, it would most 

likely be a reestimate. If not, it would most likely be a modification." [OMB 

Circular A-II, Section L85, Page 10] 

d. OMB CircuLar A-II provides: 

"Modifications produce a one-time change in the subsidy cost of outstanding 

direct loans and loan guarantees. The effect of the Government action on the 

subsidy cost of direct loan obligations and loan guarantee commitments made 

after the date of the modification, if there is any effect, is not a modification. 

Instead, the effects are incorporated in the initial cost estimates for subsequent 

direct loan obligations and loan guarantee commitments." [OMB Circular A-II, 

Section 185, Page 10] 

B. Workouts Under OMB Rullo'S 

1. lethe proposed changes to the transaction structure are deemed to be a "Work-out". 

there is no change to subsidy cost. 

a. OMB Circular A-I L provides: 

dc-626445 

"( ab) Work-outs mean plans that offer options short of default or foreclosure for 

resolving troubled loans or Loans in imminent default, such as deferring or 

forgiving principal or interest, reducing the borrower's interest rate, extending the 

loan maturity, or postponing collection action. Work-outs are expected to 

minimize the cost to the Government of resolving troubled loans or loans in 

imminent default. They should only be utilized if it is likely that the borrower 

will be able to repay under the terms of the workout and if the cost of the workout is less than the cost of default or foreclosure. For post-1991 direct loans and 

loan guarantees, the expected effects of work-outs on cash flow are included in 

the original estimate of the subsidy cost. Therefore, to the extent that the effects 

of work-outs on cash flow are the same as originally estimated, they do not alter 

the subsidy cost. If the effects on cash flow are more or less than the original 

estimate, the differences are included in reestimates of the subsidy and are not a 

modification." [OMB Circular A-II, Section 185, Page 12] 

16 
434 


76267.337

Vi. IADDJ 

17 

dc-626445 
435 


76267.338

DOCUMENT 

U 
436 


76267.339

.-From: 

To: 

Sent: 

-

m= ruw' 3m W22~ SubJect FW: Solyndra follow up 

aelow Is the email I mentioned yesterday from two weeks ago when we asked DOE for their legal opinion on the 

subordInation question. I have not received a response to thIs. 

As I noted yesterday, I.'so think we should haVe DOE submit .omethlr!& In wrttlng w~h their determination that this 

restructurtng Is a work·out, In addition to the questions we sent ~esterday on ,ubordination and IP. As It stands, 

the PPTthey sent sUl!8ests they believe. Solyndra default Is imminent (cash running out by Jan lOll-although at the 

parent level, not the project level), and their recovery analysis document explains that they believe the rertructurlng 

co uld achieve higher recovertes. But we may wantthem to explicitly stete their view this should be a work-outforthe 

record. 

.. 

!I(I"nclfstl'uct:ure valuation, cument assets) can change 

it makes ..,nse to send them a couple 

Thank you very much for taklng the tIme to walk us throu h the details ofthellroposed restructurtng on the call . 

yesterday. Could you plea.e provide . h E' I I , and the vlew yo'u e.plamed 

yesterday that the flrst payment prete n s not constitute effective 

subordination of the DOE loan? 

Fro~m;·' •• '."'I ............ tr1~-t--·------·-.. ··-· se~21t 2010 1:05 PM 

To 

Cc 

SUbject: RE: follow up 

Find attached the recovery analysis as promised. 

Director 

Portfolio Management 

Loan Guarantee Program Office 
437 


76267.340

.1 will get back to you tomorrow._ 

-I understan~ls out today. I also believe you'll be looking at some, if not all, of these questions so I wanted to go 

ahead and io~is over to you. We are trying to work through the proposed Solyndra restructuring and had a few 

clarifying questions (see email ar~·r 0 ~lke a 100k7 I understand DOE wants to execute the revised loan agreement January s t n back to us quickly is appreciated. 

Thanks again for your help. Let k q I nSja 

In addition to the email below: 

1. What IS the DOE approva process for changes to loan agreements (i.e., who approves such changes)7 Was 

there a Credit Committee or Credit Review Board to review the proposal? Who ultimately is authorizing the 

revisions? is there an associated action mem07 Although we have a good sense of the approval process for new 

ioans, we are not clear on the approval pr~cess fOAChan~gt those loans. 

2. Why was the January 10 date select]rfe e u iN ~. i ~documents? Are there Implications ifthese 

change, are postponed7 

~=;=;==! -~------ From: :r Mrrrz muz 03,201112:07 PM 

Subject: Solyndra 

-

Happy New Yearl I wanted to follow up on a couple of questions related to the proposed Solyndra revisions. 

1) Has DOE counsel opined on whether the proposal conforms with 1702 d(3) olthe authorizing statute? i've 

provided the language below for reference. Could you send me DOE counsel's opinion on this question so that 

we can follow up with our folks? 

(3) 5UBORDINATION.-The obligation shall be subject to the condition that the 

obligation 1s not subordinate to other finanCing. 

2) Also, since the Term Sheet explicitly included aUlnteUectual property, licenses, general intangibles and goodwill 

in the collateral package (item 20.v), I was somewhat confused as to how the IP was pledged to another 

2314 
438 


76267.341

investor. At what point was that lien entered Into? Was DOE aware of that lien prior to closing? Also, how does 

this conform with 1702 C il of the statute: 

(C) TERMS AND CONDITIONS.-A guarantee agreement 

shall include such detailed terms and conditions as the 

Secretary determines appropriate to-

(i) protect the interests of the United States in 

the case of default 

2315 
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76267.342

;--..:::::;;_. __ ._ .. _-----_ .... _--_ ... 

-

Thanks again for the call earllerth!s week. I wanted to follow up on ODE's legal views on the issue of subordination. Do 

you have something you could go ahead and send over? 

Also, could you send over the legal definition of 'workout' that DOE is using in this analysis? 

Thanks again. 

I would strongly prefer to keep this ~s small a group as possible. I thought this would be an informal 

discussion with you. 

2:30 it is. We can use the dial in number beiow. Our GC folks will be jOinlng_ UST may also join since 

they have been in previous discussions. 

BRIDGE NUMBER: 

CONFEREE PASSCODE: _ 

Works for me 

Loan Guarantee Program 

U.S. Department of Energy 

1000 Independence Menue SW 

~~~mm~~ 

1558 
440 


76267.343

&: • ••••• I .... : 

p gp 9 gyg 

12:41 PM 

Ok by me-_ 

Se_a From: ••••••••••••••••••• anua 04,201112:13 PM 

To: 

Cc: 

Subject: RE: Solyndra 

Could we do 2:30 instead? 

• 

_ Would you be available to speak to ken and me at 3 PM today? Thnx 

Thanks. And to clarify my question on the IP, ..... ·.,.,...,JO ..... illclul!e,!J,lil.!P,I!ntangibles, and .Goodwill in the collateral 

package. Was this changed in the final documentalion or were there changes at a point? I'm confused as to how 

DOE did nol have the IP given the Tenm Sheet language. 

~ ....... .-----~--

Sent: Mon Jan 03 22:42:33 2011 

Subject: Re: Solyndra 

_ I will get back to you tomorrow .• 

1559 
441 


76267.344

Sent: Mon Jan 03 21:24:45 2011 

Subject: RE: SOlyndra 

.. 

I understand_Is out today. I also believe you'll be looking at some, If not all, of these questions so I wanted to go 

ahead and fo~is over to you. We are trying to work through the proposed Solyndra restructuring and had a few 

clarifying questions (see email and additions below). Could you take a look? I understand DOE wants to execute the 

revised loan agreementJanuary 10, so your assistance in getting back to us quickly Is appreciated. 

Thanks again for your help. Let me know if you have any questions. 

In addition to the email below: 

1. What Is the DOE approval process for changes to loan agreements (Le., who approves such changes)? Was 

there a Credit Committee or Credit Review Board to review the proposal? Who ultimately is authorizing the 

revisions? Is there an associated action memo? Although we have a good sense of the approval process for new 

toans, we are not clear on the approval process for changes to those loans. 

2. Why was the January 10 date selected for executing the revised loan documents? Are there implications ifthese 

changes are postponed? 

I! 

-

Happy New Yearl I wanted to follow up on a CIUP o~u~tlons re~a ed to re proposed Solyndra revisions. 

1) Has DOE counsel opined on whether t r p c it ~! d(3) of the authorizing statute? I've provided the language below for refer . C 5 n m counsel's opinion on this question so that 

we can follow up with our folks? 

(3) 5UBOROINATION,-The 1 a 0 S 01 u ect to the condition that the 

obligation is not subordinate to other financing. 

2) Also, since the Term Sheet explicitly included all intellectual property, licenses, general Intangibles and goodwill 

tn the collate rat package (item 20.v), I was somewhat confused as to how the IP was pledged to another 

investor. At what point was. that lien entered into 7 Was DOE aware of that lien prior to closing,? Also, how does 

this conform with 1702 C II of the statute: 

(C) TERMS AND CONDITIONS.-A guarantee agreement 

shall include such detailed terms and conditions as the 

Secretary determines appropriate ta-

(i) protect the interests of the United States in 

the case of default, and 

(E) haVOl.avallable ·'aJ.'l th~.pat'mta and t~chnol"'()gy 

necessary foZ:a,,,,Y~.iiir§an:.~~iiet!teid) in~11l.di:n9 tn.! s'ec~etary, tc! dOmplett! ,andop·eT"a!:~· 'th'il'PrOj.~ct. . 

1560 
442 


76267.345

DOCUMENT 

V 
443 


76267.346

146 

.... ---------------------------- From: 

Sent: 

To: 

Subject: 

That's the question I have and what I need to confirm with DOE. I 

From:_ 

Sent: fues1t:Z 04, 2011 2:19 PM 

~jedl IE: Iy a mem_$ too tilWhy is the cost for building and land so much lower J\OW-- $60 vs $380 in Fitch 8/09 analysis? 

Gan't we Just say; 

~ 

EstImated recoveries today; $319M 

Claims: DOE 1" priority 

Expected loss: $460-319= $141M Joss 

Restructured 

Most OptImIstic DOE analysis: $300 

Subtract S75M 1" priority 

Available: $225M 

thlls a bad idea. 

Claims: Pari-passu with $7SM ($lS0M+$75M ~ $225M) ~ $150M recovery for DOE. 

Expected .loss: $3SSM principle plus deferred interest 

rYe added a little module to the recovery Excel sheet_circulated yesterday that tries to get at • and _ 

questions about what the 'return on' or Impact of DOe's additional $75m is vs. the Investors. 

2245 
444 


76267.347

147 

J:\CREDmEnergy\Title 17\Solynd!jlIOctober i010lSolyndra !,lguldatloo Comparison v2.xW 

It's imperfect, but I think the main message Is thai even based on DOE's assumptions, putting the remaining $75rn ofthe 

DOE loan In10 Solyndra at this point only seems to improl'l! recoveries by about $87 million. Whlle this is a 110% 

improvement In recovenes I~ DOE's view; the "return" would be around 16% on the additional $75m. But the qUesdon 

Is whether the additional absolute return ($12m) Is worth puttlng an addltional $75m in taxpayer dollars at risk. 

Using Kelly's analysis, the additlQnal $75m results In a 200% loss to the government. 

Unfortunately, I don't have enough info now to assess the 'return' to the investors ofthelr $75m. At first glance, their 

seniority seems to get them their $75m back .'nd protect them from losing any more money, but it doesn't seem likely 

that they'd get much else back, assuming their recoveries on the second tranche for both DOE and Investors are minimal 

lalthough minimalls berter than zero for investors). 

I know we're under constraints to keep the memo to l-page (or close), but think that the following blurb that • put 

;~~~~~!~I!~~~~Om a past mOdfflcatfon!OOWOrkout~~T~·sel~ Wforthmlncorporating into the memo before t.he 

I think this Is a better framing, and allows s diet rd pi n Isn't really an option. 

Ba,kground on why this is a modiflcatlon a t. 

There are two major differences between II at 0 -q , rst, he primary purpose of workouts is cost 

aVOidance, not the provision of additional s t t ,e w , believe that the proposed restructuring 

would result in a cost to the USG, not a savings. Second, the effects of workouts on cash flow subsidy (ost can be 

estImated for a portfolio of new Joans or guarantees proposed In the President's budget or Included In the baseline, and 

therefor. these effects are required to be included in the'expected cash flows ofthe Initial subsidy estimate. Any 

differences between the estimated workout and the actual workout are captured In a reestimate and covered with 

permanent jndefin~e authority under FCRA. 

,.~----.-------. -'----", ... ---.-------,-------,--... -'----.,~ ..... ----~ 

BY 1:00 PLEASE 

Credit crew comments are In the attached, layered on. (We were already halfwavthrough when .opened the 

document, and didn't want to lose time). 
445 


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148 

I don't know that the last option Is a viable one (require DOE to change terms), since OMS does not have authority to 

make decisions for the agency; we only have authority overthe costs under FCRA, and coordination responsibilltfes. 

One option might be to strike the third option, and work It into the first option (modification) as a pro that ~ would be 

captured In the cost if this is found legal, and a con on the second (work-<lut), as we would need to engage on the legal 

and policy issues either Way. 

·fn,m=----~--

Sent: Tuesday, January 04, 201112:36 PM 

To: Subject: .. ~~~~~iI"~~~~~~~~~~"1I RE: Salyndra memo: COMMENTS BY 1:00 PlEASE 

A few comments/questions attached. 

mdi .... at3:30." Please send me any edits by 1:00. 
446 


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DOCUMENT 

W 
447 


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From: 

Sent 

To: 

Sublect: 

U.S ."'Z 11 in 't 5M 

RE: Solyndra 

I don't recall that this was the intent of the revisions to the Rule. 

~!"~ft!~!~Q~!'~~rt:t the legal basis for a refinandng ~; Q lowing analysis, which I asked them and t e form of a prel1m:1nary draft of part of 

e ary and 1»1&. They will alSO .be reachIng r expected values analysis that addresses 

eetlg request· for sometime tomorrow so we 

DOE's theory I 51 w , hat it does not (as we had thought) rely on a specific detel'lllination that this Is a workout scenario under A-l1 and FCRA. Based on the 

present tense language and structure of the proviSion, they read the no subordination 

language as applying only at the time DOE makes the original guarantee, and not as a restriction on refinancing do"," the road that DOE believes is necessary to serve the 

government's interests. They argue that the provis10n is set forth in a section roJating to 

the creation of the loan docu ts and not a lat 5 tion re Brdins defaults that they 

believe to govern financial /l do is supported sOOlewhat by a 211119 -revision of their regulat 0 1 ey Indicate that the later 

section relates to the post-tl 5 rovision deals with 

"threshold" requIrements at t om line position to be that 

Congress did not clearly and he ability of a guarantor to addre .. financial dlstress dow reasonable Nethods to . protect the interests of the U 1 t (a purpose they point out 

is set forth 1n the defaults 1s.is a well racognized 

situation for agreeing to $U 0 e to oO'ey, they noted that had 

the company filed for bankruptcy 'as it was about to, the ankruptcy laws would have provided 

for new flnancins to be entitled to a senior position. (I have asked them for some information on the legislative history of the predecessor provision to th1s statute, but we don't expect it will shed any more light on the question.) 

They agree that we need to understand the answers to _. 5 questlons ln order to ensure 

that their analysis is reasonable, and the1r folks will be reaching out to her. 

1517 
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DOCUMENT 

XYZ 
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Page 195 

From: 

Sent: 

To: 

Subject: ro· jF71:JJ 1111,." r:r 'Soynra 

And that Congress had no intent to govern the prOgram with the statute. 

I think that' 5 rlght. 

n that just because subordination is 

c n't do it later, even if it costs money? 

ubordination on any loan, at any time, for 

I 

From:]I ••••• " 

TO:] sen·~·~I!~~~~~"Mliiililliii"lIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlI ~ubject: RE: Solyndra 

I think there are 8 couple ttf points here: 

1. Had 'the company' filed fo 

loan is with the project campa 

taken action under the technic 

DOE' 5 debt would not have been 5 

2. The statute and regulations 

there was threat ttf bankruptcy i 111 

AG. 

parent company. DOE' s lIIOt:e. DOE could have 

kruptcy and therefore, 

ebt at the parent level. a payment default. If 

hey have consulted with the 

I spoke today to and about' the lesa1 basis for a refinancing 

that includes subordination. They provided the following analysis, which I asked them and 

they have agreed to provide to us in wr1ting, in the form ttf 8 preliminary draft of part ttf 

the presentation they plan to provide to the Secretary and OMa. They will al.o be reaching out to _ to provide a revised version of their expected values analysis that addresses 

the questions she has outlined. I'll circulate a meeting request for sometime tomorrow so we 

can discuss next steps. 

1596 
450 


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DOE's theory is similar to what we expected, 'except that it does not (as we had thought) rely 

on a specific deteT'lllination that this is a workout scenario under A-l1 and FCRA. Based on the 

present tense language and structure of the provision. they, read the no subordination 

language as applying only at the time DOE makes the original guarantee; and not as a 

restriction on refinancing down the road that COE believes is necessary to serve the 

government's interests. They argue that the prevision is set fortn in a section rel,aUng to the creation of the loan documents. and not in a later section regarding defaults that they 

believe to govern financial distress down the road, This argument is supported somewhat by a 2eeg rev15ion of their regulations in other respects, in which they, indicate t~at the later 

section relates to the post-closing default scenario While this provision deals Idth 

"threshold" requirement. at the loan stage. I believe their bottom 11ne pOSition to be that 

Congress did not clearly and expressly deprive tne Secretary of the ability of a guarantor to 

address financial distress down the road by adopting commercially reasonable methods to protect the interests of the United States in the event of default (a purpose they point out 

is set forth in the default section). As a demonstration tht this is a well recognized 

situation for a8reeing to subordination in order to attract new money, they noted that nad 

the company filed for bankruptcy as it was about to, the bankruptcy laws would have provided 

for new financin to be entitied to a senior position. (I have asked them for some 

information on p essor provision to this statute, but we 

don't expect 1 u stion.) 

They agree th 

that their an 

1597 
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Document 

57 
452 


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~~ Sent: -.31,20111:39PM .. ~~------~- To: 

Cc: 

Subject: ra optics 

Although the dedsfo" has already been ma~e for OMS not to play an active role In detennlnlng what to do with 

Solyndra, the Dlrector/S-l meeting tomorrow mIght present an opportunIty to flag to DOE at the hIghest level the stakes 

involved, for the Secretary to do as he sees lit (and be fully Infonned and accountable for the decision). Although optics 

are generally out of our lane, It may be worthwhile for the Director to privately make this point to the secretary: 

Given the PR and policy attention Solyndra has received since 2009, the optics of a Solyndra default will be ~d 

whenever It occurs. While the company muy avoid default with a restructuring, there Is also a good chance It will not. !f 

S 

n ra s prospects mayhave hit home to.n Friday. 

713 
453 


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Document 

58 
454 


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From: 

S~nt: 

To: 

Subject: 

Looks good to me 

TO:'--'I ~ •••• Sent: Thu Feb 03 18:58:30 2011 

Subject: RE: Solyndra ntoe for Jeff 

One small but Important change below. ---..._._--_ .. _--- Fro~:!!!!II!! 

Sent: Thursda 

To: 

Subject: RE: Solyndra ntoe for 

See revisio ns. 

mID~~I~~ Solyndra update: The DOE cre e v 5 I 5 

, modification sfnce under thefr read of Circular A-11, 

it would be considered a worko I I t. Last week they were talking about It being fn 

technical default, which is true, but fn this call, they were adamant that the borrower Is In Imminent default, and thus fs 

not a modification. They will send us the subsidy estimate cash flows tomorrow so our team can take a look. We will 

meet next week so that we can come to agooement on the restructuring issues and have a template for modifications v •. 

workouts fn the future. 

Comments? 

Solyndra update: The DOE crew does not want to do a modification sfnce they would not have to If the loan Is In 

Imminent defauft. La.t week they were talking about It being In technical default. It appears that they would take the 

harder llne, than the modification. They will send us cash flows tomorrow so our team can take a look and estimate the 

modiflcation. We will meet next week so that we can come to agreement on the restructuring fssues and have a 

template. 
455 


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from; 

To: 

Subjec:l1 

DatI!: -

RE: Solynd .. 

Thursdav, February 101 2011 6:06:56 PM 

Frances, I'd be happy to join, if you don't mind. It may be educational for me .... 

-

Thanks for your quick response. Do you have some time tomorrow around 10:00AM7 

.. 

I believe there is a gross misunderstanding of the outcome of the negotiated restructuring of the 

Solyndra obligation to DOE. Could you give me a call to dl5OJSS. Thanks. 

-

Director, 

Portfolio Management Division 

loan Programs Office 

US Department of Energy 

1000 Independence Avenue SW 

Wa:shlrlgton, DC 205B5 

Dea_ 

Treasury staff has learned from the Office of Management and Budget that the Department of Energy 15 

dose to implementing a set of adjustments to the Solyndra Loan Guarantee Agreement in response to 

Solyndra's finandal condition, We understand that these adjustments may Indude subordination of 

Solyndra's $535 million reimbursement obligation to DOE and possibly the forgiveness of Interest. 

Unless DOE has other authOrities, these adjustments may require approval of the Department of Justice 

0110362 
456 


76267.359

pursuant to 31 USC 3711 and 31 CFR Part 902. Unless other authorities eXist, this statute rests with 

DOl the authority to accept the compromise of a daim of the U.S. Government in those Instances 

where the prindpal balance of a debt exceeds $100,000. Let me know if you need the name of a 

contact at 001. 

Will you be referrfng the contemplated adjustment to DOlor are there other authorities that DOE Is 

using to compromise this debt? 

Please let us know If the FFB can be of any assistance as you move forward. If you need to modify any 

FFB agreements, please let me know. 

-

000363 
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Document 

59 
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Department of Energy 

Washington, DC 20585 

February 18, 2011 

EXEC- 2011-001822 

MEMORANDUM FOR THE SECRETARY 

FROM: 

SUBJECT: 

JONATHAN M. SILVER 

EXECUTIVE DIRECTOR THE LOAN PR~F1CE 

FRANCES NWACHUK JI/I:fJ? 

DIRECTOR OF POR~ NAGE ENT, LOAN PROGRAMS 

OFFICE 

ACTION: Concurrence for the U.S. Department of Energy ("Q,QI") 

to modify that Common Agreement dated September 2,2009 (the 

"Original Common Agreement") by and among Solyndra Fab 2LLC 

(the "Borrower"), DOE and U.S. Bank National Association (the 

"Collateral Agent") 

ISSUE: Whether to (a) restructure Borrower's reimbursement obligations to DOE 

pursuant to the Original Common Agreement, and (b) as part of the restructuring, 

subordinate certain of Borrower's reimbursement obligations to DOE to the providers of 

distressed debt funding. 

BACKGROUND: Borrower is developing a thin-film solar photovoltaic manufacturing 

facility in Fremont, California (the "Prolect"). Borrower obtained a $535,000,000 loan 

(the "FFB Loan") from the Federal Financing Bank (the "FFB") to provide construction 

financing for the Project and DOE guaranteed repayment of the HB Loan pursuant to a 

guarantee Issued September 2,2009 (the "Guarantee"). The terms and conditions upon 

which DOE issued the Guarantee are set forth in the Original Common Agreement and 

include, among other things, (a) the Borrower's contractual obligation to reimburse DOE 

for guarantee payments made by DOE, and (b) remedies if Borrower defaults on such 

reimbursement obligations. 

Several events of default relating to financial requirements have occurred under the 

Original Common Agreement. The Borrower has provided to DOE a restructured 

business plan and model, including restructured terms of payment of the Borrower's 

reimbursement obligations to DOE and new cash infusions from third party investors. 

The Loan Programs Office has reviewed and analyzed the Borrower's restructured 

business plan and model and has determined that there is a reasonable prospect that 

the Borrower will be able to make the restructured payments, as and when such 

payments became due under the restructured business plan and model. The Loan 
459 


76267.362

Programs Office has carefully considered the circumstances leading to the Borrower's 

default and all reasonable responses to such default, including foreclosure on the 

collateral securing the Borrower's reimbursement obligations under the Original 

Common Agreement. Based on the Loan Programs Office's review of the Borrower's 

restructured business plan and model and DOE's responses to the Borrower's default, 

the Loan Programs Office has determined that restructuring the Borrower's 

reimbursement obligations to DOE as described below will yield the highest probable 

net benefit to the DOE by minimizing the DOE's loss on the Guaranteed Loan. 

The Borrower's restructured business plan and model (the "Restructuring") contains the 

following elements; 

The Restructuring contains the following elements; 

(a) DOE's collateral package will be enhanced, as all assets of the Borrowers 

parent and its affiliates will be transferred to the Borrower and thereafter secure the 

Borrower's obligations to DOE and Third Party Lenders (defined below); 

(b) The Borrower will obtain additional funding under a $75 million note 

("Tranche A") issued to third party lenders, and will issue a $175 million note ("Tranche 

g'l to certain third-party lenders that previously funded that amount to the Borrower's 

parent (collectively with the holders ofTranche A, the "Third-Party Lenders"); 

(c) The Borrowers existing $535 million reimbursement obligation to DOE 

will be amended tocomprise a $150 million reimbursement obligation ("Tranche B") 

and a $385 million reimbursement obligation ("Tranche 0"); 

(d) The Borrower will have the right to borrow an additional $75 million 

("Tranche C") from the Third-Party Lenders on specified terms and conditions; 

(e) Tranches A, Band C (the "Senior Facilities"), will constitute senior secured 

facilities on a pari passu basis in lien and payment priority, except that, for the first 2 

years after dosing of the restructuring, Tranche A (a new $75 million loan) will have 

payment priority from the proceeds of a foreclosure (if any) on the collateral securing 

the Borrower's payment obligations; 

(f) Tranches 0 and E (the "Subordinate Facilities") will constitute 

subordinate secured facilities, secured on a pari passu basis, but with DOE's Tranche D 

having payment priority; 

(g) The Senior Facilities will have certain lien and payment priority over the 

Subordinate Facilities; and 
460 


76267.363

(h) Interest on each ofthe Senior and Subordinate Facilities will be 

capitalized for limited periods. 

In order to effectuate the Restructuring DOE, the Borrower, the Collateral Agent and 

certain other parties would enter into an Amended and Restated Common Agreement 

(the "Restructured Common Agreement") and the documents and instruments specified 

therein (the "Restructuring Documents"). 

The Chief Counsel of the Loan Programs Office has reviewed the terms of the proposed 

restructuring, including the proposed subordination of certain of the Borrower's 

reimbursement obligations to DOE, and in consultation with the Office of the General 

Counsel has determined that the subordination is permissible under Title XVII ofthe 

Energy Policy Act of 2005. 

Accordingly, the Loan Programs Office requests that you make the following approvals, 

ratifications, and authorizations: 

1) Authorize the Executive Director of the Loan Programs Office, the Chief 

Operating Officer ofthe Loan Programs Office, and the Director ofthe Loan 

Guarantee Origination Division, Loan Programs Office, and the Director, 

Portfolio Management Division, Loan Programs Office (including any person 

acting as such Executive Director or Chief Operating Officer or Director), acting 

together or individually, (the "Delegates") to enter in the Restructuring 

Documents; 

2) Authorize the Delegates to execute and deliver all ofthe Restructuring 

Documents to which DOE is a party and all other agreements, certificates, and 

Instruments as ar.e·necessary or appropriate in connection with the issuance and 

administration of the Guarantee, all In form and substance satisfactory to such 

Delegate; 

3) Authorize the Delegates to administer (including by executing and delivering 

other agreements, certificates and instruments) the Guarantee, the 

Restructuring Documents, and all other agreements, certificates, and 

instruments as are necessary or appropriate in connection with the Guarantee. 

URGENCY: Authority to execute loan documents is needed for the closing of the 

transaction which is scheduled to occur on or about February 18, 2011. 
461 


76267.364

RECOMMENDATION: That the Secretary approve each of the determinations, 

"t1fl"t1on~hOd"tiO",,.. forth ,bo", 

APPROVE : (!J ~APPROVED: ____ DATE: FEB 2 2 2011 

CONCURRENCE: 

-:s:Er~S" Scott Blake Harris 

General Counsel 
462 


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Document 

60 
463 


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From: 

To: 

Cc 

Subject' 

Da\Jo, 

Ok tlmx 

TuesdaV, FEbruary 22, 2011 4:59:00 PM 

20113:32 PM 

Below is a planned draft of an email to • 

We are done with review of the documentation for the SoIyndra restructuring and are prepared to 

close. All parties are in possession of the execution copies of the documents. Where are you in your 

process? 

-

Director, 

Portfolio Management Division 

Loan Programs OffIce 

US Department of Energy 

1000 Independence Avenue SoN 

Washington, DC 20585 
464 


76267.367

Document 

61 
465 


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from: 

To: 

Cc:: 

SubJ_ 

Date: TuesdaV, FebnJ.'Y 22. 20U 8:20:01 PM 

I have sent emalls and placed calls to • as recent as this evening. Our most recent conversation 

concluded that a modification scoring was not required and we provided, as agreed, an early reestimate under the assumption that a restructuring was the only reasonable classification of the 

process that we have undergone with Solyndra. 

I Intend to follow up again first thing tomorrow moming. 

-

Subject: Re: Solyndra 

Didn~ know I was expected to do that. Thought you all had resolved It. 

Jonathan Silver 

Executive Director 

Loan Programs 

U ,5. Department of Energy 

Subject: Soiyndra 

Jonathan - Have you or someone at a senior DOE level confirmed (with OMB) that the 

restructuring is a "workout" and not a "modification"? 

Loan Guarantee Program 

U,S. Department of Energy 

1000 Independence Avenue SW 
466 


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Document 

62 
467 


76267.370

From; 

To: 

CC 

Subjecb 

Date, 

.. 

Tuesday, 

Re: SOlyndr. 

Februa!y 22, 

--

20118:45:04 PM 

Did_have any follow up conversatlons? 

Subject: Re: Solyndra 

Didn't know I was expected to do that. Thought you all had resolved it. 

Jonathan Sliver 

Executive Director 

Loan Programs 

U.S. Department of Energy 

SUbJect: Solyndra 

Jonathan - Have you or someone at a senior DOE level confirmed (with OMS) that the 

restructuring is a "workout" and not a "modification"? 

-

Loan Guarantee Program 

U.S. Department of Energy 

1000 Independence Avenue SW 
468 


76267.371

Document 

63 
469 


76267.372

Thankyoullllllil 

Thank you for working with us to better understand the details ofthe Solyndra restructuring. Based on the information 

you have provided to support DOE's stated position that Solyndra is in "imminent default" and DOE's analysis that the 

restructuring would leave DOE In a better position if the borrower does ultimately default, OMB has determined that the 

restructuring constitutes a workout, rather than a modification, under OMB Circular A·l1, Section 185. 

In the future, to the extent that u 

demonstrate that the borrower 

produce a better return to the 

to qualify as a workout, rather t a. 

Thanks again. 

Regards, 

229 

I or other DOE financlngs, DOE will be required to 

vide reasonable analysis that any actions taken will 

sst«Ped in the baseline cashflows in order for the action 
470 


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Document 

64 
471 


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Importance: High 

Are you available to join me in briefing 5-1 at 9:30 - in advance of his mtg with POTUS. Topics will likely include: 

-

Solyndra (current status - in light 01 yesterday's WashPo article). 

Thanks. 

-

15 
472 


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Document 

65 
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USATODAY.com 

News MOnfy Yol-ltllfe 

Jc(nU&A raOAY 

SlQn"'18"c~m.u"'am"e" 

N"",,*: ClJfT1munltl~$! E(lucatilIJ'T I NlltlDn I MHllIlry I Politics I Religion I Qf'fbeat I Wn1'1ing'lon I Wol'1" I Opinion I YDur Lit, 

1iHIiI==: 

Opposing view: 'Perfectstonn' sank Solyndra V;" .. y"m.yb. i", .. ,t.dln 

8')1 Dani('1 Prmeman Up<'~U:(I""'312011 a C~ PM 

" " The International Energy Agency projects that solar power will grow steadily, producing 

nearly a quarter of the world's electricity within four decades. Conservatively, that 

means more than $3 trillion worth of solar panels will need to be manufactured - a vast 

economic and employment opportunity to be seized by companies that succeed in this 

sector. 

Ac{s by Google 

OUR VIEW: Should Uncle Sam play venture capitalist? 

Our competitors know this, and are playing to win. 

Winning WIll require substantial investments, Last year, 

for example, the Chine Development Bank offered more 

than $30 billion in financing to Chinese solar 

manufacturers, about 20 times more than U S,-oacked 

loans to solar manufactureJ1l. 

Unfortunately, expanding production has coincided with short·term softening demand, a 

product of the bankmg crisis in Europe and its wider economic effects, The combination 

has had a dramatic effect on the pnce of solar cells, which has plummeted 42% in the past 

nine months. This has taken a serious toU on solar manufacturers everywhere, induding 

t/1eU,S 

This month, Solyndra , a California-based company, flied for bankruptcy. Solyndra had 

been named one of the world's 50 most Innovative companie'S ana reported sales grolHlh 

of 40% to $140 million last year. In 200e, the company applied for a federal loan 

guarantee, It underwent years of ngorous internal and external reView before being 

approved - before the perfect stOnTl of deteriorating market conditions. 

Govemment support has an important role to play in developing new industries and 

emerging technologies, where private finanang is not sufficiently available to support 

mvestment at commercial scale. 

USA TODAY OPINION 

AboU1EdltorlalslOllb.iltfl 

OD.n'On"(l I!.<.pres${!(l Irl USA TOD.",,-Y'$ 

edltonals ~re tleqdea by ,ts Editorial Ooare. II 

demOllraph'~llvandl<lf,Oloil!C.al1y<.llva($e 

group Ihal IS 9.ep<lrate trom USA TODAY·;) 

Mostedl\o'lal$arell=mpar,,&dtlyM 

OPPD1l4flg VIew - iI un>!:il.!e USA TODAY 

r(,;lurclt1al!J!iow$'eadors(oreeel1 

conclUSions ba~ed on tlcHh $Kles alan. 

argumenlral!lt!rlhanlijst!heEdJlo".,l 

BoardspolOtoivtcl'/ 

energy race 

VVhen it comes to dean energy, we have a choice to 

maKe. We can compete!n the global marketplacecreating American jobs and selling American productsor we can buy the technologies of tomorrow from abroad. 

HistOrically, our government has supported emerging 

mdustries, from transcontinental railroads to aviation to 

the microchip These investments strengthened our 

nation and leveraged the pnvate investments that drove 

our prosperity. In that spirit our loan programs are today 

supporting a diverse portfolio of more than 40 companies 

that plan to employ 60,000 Americans and give us a 

chance to compete and succeed !n the global clean 

Now is not the time to stop investing in our nation's future. 

def1l,fu,n ~pon""UQ~'n. 

I"rotnl!!1100C0J?y 

,'lnowslDrm 

NOfl..QPECgovls 

to relo8$C 0,1 lo 

oroPl'wces 

OV(,(51w,S2' 

TVs 

~ 

$59,9!'; 

;, * ;, 

BECAUSE THERE'S 

NOTHING 

SMALL 

-ABOUTSUPPORTING 

-·-YOURCOMMUNITY. 

M[)stPopular 

Stories 

Rt'port: PenIlStat9!;Oilchliilyshll"tald .. 

Bullot hit White House Wind[)w 

58 m&mbers of Congr~ss among "",e-altny 1'1, 

18kindll'rg,utel'l Slul:hmt'll killed in China •• , 

Misconceptions mak,e SOli ~bl..l&e ol'fendel""$, .• 

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.,Tlboola 

Morllvldeo. 

http://www. usatoday .comlnews/opinionlstory/2011-09-13/So1yndra-solar-bankruptcy/503... 11/16/20 II 
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Flashback: Congressional Pressure to Accelerate Loan Program I Department of Energy Page 1 of2 

Home»KeyF:acts:So-lyndraSDlar 

FLASHBACK: CONGRESSIONAL PRESSURE TO ACCELERATE LOAN PROGRAM 

V.'ttile some In Congress Bnd tI1e medl[;l eire now alleging that Department of Energy Nshe<j the applicatlOfl, as far back as 2007 and as recently a-s July 2010. Republicans in 

Cangr&$-S were complainmg about Inc slow pace of re~lewlng and approving loan applications, In fact, durlng Secretary Chu's 2009 conlirmalion nearings, Republicans !f1 the 

Senate pressed Secretary Chu to ma~e accelerating t\1e loan program a priority 

April 2007 -- Representative JOt" Sanan CiiII!lS for "Renewed Commitment to M.IIk(l This Progr.am Move Forward," "I am glad 10 hear .... e a.re here to lalk about what I 

conSider to be a very important part of the Energy Policy AC1. ilhink 111$ central to {lur discussions about climate change and reducmQ C02 ~mlSsions. The "ery purp<lse of 

the loan iiluarantee program!s to tlridge the gap behlo'een the capitsl new allemaii ... e energy projects need to get bUilt .and the amount ~hat in'Jestors are actually willing to 

ilwesll:md pl,ll their own capital at risk So thiS IS a program that we need to get moving I hope that thIS hei3ring facilitates some clear thinking and some fe-emphaSIS and 

renewed commitment to make this program move forward,"· Rep, Joe Barton IHeallng before the House CQf11mlt1e6 on Ene~y and Com~erc:e Subcommll1ee on Energy and 

A!rOuall!y on (he Implemen1ation of EPACT 2005 Loan Guarenlee Programs by!he Departmem of Energy, April 24, 2oo7} 

Apnl2007 - Represontatlve Dennis Hastert: "Get This Loan Guarantee Program Operatlona! $oon," WBut the boftom line is Ihatwe need 10 ge1 this klan gUa(Mlee 

program operatIOnal soon Congress intendEld I~ ha"e tflese lQiilCls guaranteed at a ful! BO percent oflhe project cos!, not to eo p~rcenl of 80 percent that we are now hearing 

some SPln ThiS full fln3:1Clng IS essentJal for the future of energy mnovallon In thiS country, TllIe XVII proVides the loan guarantees to get newlechnology like cleen coa!. 

carbon capture and sequestration. and the neK!. generatlon nuclear and ethanol O!'l the ground I1Jnnll'lg and mto the markel. Not only do these technologies improve our 

energy security, hut they Will also Improve our en~lfonment But again, to get there, we need new technology: Ihal IS why t~le XVI! IS so important Property operated", the IUle 

XVII ~an guarantees =uk:l tmng these new tachnol09'6S to marKet With benefits that all Americans are carll.lIn 10 rea!lle." - Rep. DenniS HaslenlHearlng before l1'1e House 

Commit1ee on Energy and Commerce Subconvmtlee on Energy and A.lr Qual!\y on Ihe Implemenlalion or EPACT 2005 loan Guarantee Programs by the Department of 

Energy, Apn124. 2oo7J 

Chu Confirmation Hearing: Senator Burr Compla!ns about "Too MSITY Hurdles" to L.oan Applicants. "Just recently Progress Energy in North Carolina announced rwo 

new plants In Fionda thaI they would construct, and they made the statement that they thinK that they 'MU seek to do these Without DOE loan guaralltees because they had 

IlJn Into 10.0 many hurdles with the program One, it has been siow10 gsl up and runmng and Slructura!ly In place NoW, aU ora sudden. we afe hearing compames that t&11o; 

about !IIS problematic to ~o Illal roule, We are on a time line thaI from a reliability standpoint, we have 10 start ccnstruetion and we have to do it 50011 Do you sup-pori the 

loan ~uarantee program, No 1?"· Sen Richard Burr (Hearing to Consider the Nomif)lltion 01 Steven ehu to be Secrel131)' Energy. Senate Committee on Energy and Natura! 

ResOllrces, January 13. 2009, hnp.flwww.gpo.gov{fdsyslpkgfCI-fRG.111sMrg4725l!htmtlCHRG.111shrg47153.htm] 

Chu Confirmation Hearing: Senator Burr Cans Pace of loan Program "Very Frustrating!' "You have been asked about the loan program. rha! really needs 10 mo~e 

forward It is just very fruslrating to see rt be delayed as II IS" - Sen. Ri~h'Hd Burr [Hearing 10 Consi<ler the Nomlns/lon of SI!tven ClUJ \0 be Se.:;reLary Energy, Sa-natl'! 

Commrttee on Ener{lY and Natural Resou(.@s,January 13, 2000. hnp:lrwww.gpo.govl1d1;ysfpkgICHRG.111!1.hrg47253fhtmIlCHRG.111shrg47253.htm} 

July 20.10 Budget Hearing - Representativil M!ke Simpson (R·IO) Complains thst JU!lt 6·/0 of Loans C!osed. "As you know. ! am a big supporter of Ihe loan guarantee 

program and ~!ieve diS an important tool 10 enable energy projects to access credit markets dunng a time when credit is extremely hard 10 oblaln j understand thai Iha 

Recovery Act inCluded $4 billion II'l appropriations for loan guarantees for renewable energy projects, 'Nhlch I believe prOVides you wrth $32-$35 billion in additional authorrty, 

of whIch only 6% has been commr11ed, cO(feCl?~ Rep. Mike Slmps¢11 !Hearing before Ihe House Comrn;t\ee on the Budget, Questions Submmed by Congressman Mike 

Simpson. July 14. 201a) 

httD:flener~v.~ovfkev-facts-solvndra-solarfflashback-congressional-Dressure-accelerate-Io... 11114/2011 
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Flashback: Congressional Pressure to Accelerate Loan Program I Department of Energy Page 2 of2 

July 2010 Budget HearIng - Rep",sentatlve Simpson (R.le); "Get the Money Out thE! Door QUickly to Rapidly Create Jobs." "As I understand iI.lhe goal onne ARRAI fundmg pai1ieularly IS to get the money out Ihe door quiGkly to rapjdly create jobs, and I am e~remely concerned thal very little of that funding has gone out. Are there an 

InsuffiCient number of qualified projechs applying? Could you ~Iene ax-pla!n wtly ODE has been unable to obll~ate thase funds more rapidly?"· Rep. Mike Simpson {Heering 

before the Hoose Cammrtlea on the Budget Questions SubmfttecJ by Congressman mr"'e Simpson, July 14, 20101 

http://energy.govlkey-facts-solyndra-so larfflashback -congressional-pressure-accelerate-Io ... 11114120 11 
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Document 

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MEMORANDUM FOR THE GENERAL COUNSEL 

FROM: 

SUBJECT: 

DATE: 

FACTS: 

SUSAN S. RICHARDSON 

CHIEF COUNSEL 

LOAN PROGRAMS OFFICE 

SOL YNDRA RESTRUCTURING 

FEBRUARY 15,2011 

The Department of Energy ("DOE") has issued a guarantee (the "Guarantee") of 

repayment by Solyndra Fab 2, LLC (the "Borrower") of a $535 million loan (the 

"Guaranteed Loan") made by the Federal Financing Bank. The proceeds of the 

Guaranteed Loan are being used to finance the construction of a solar photovoltaic 

..Cl!Y'.l-pancL..fabrkawm faci]jt~ated in FremonLCalifomia (the ..5>rqject"). 

Construction of the Project is scheduled to be complete on or about June 30, 2011. 

The Guarantee and related documents obligate DOE to make scheduled payments of 

principal and interest on the Guaranteed Loan if the Borrower fails to make those 

payments. DOE and the Borrower have entered into a Common Agreement (the "Loan 

GUarantee Agreement") that contains the terms and conditions pursuant to which DOE 

issued the Guarantee and includes, among other things (a) the Borrower's contractual 

obligation to reimburse DOE for guarantee payments made by DOE, which obligation is 

secured by a first lien on the Borrower's assets and (b) customary remedies for default on 

the Borrower's obligations under the Loan Guarantee Agreement. These rights are in 

addition to DOE's rights of subrogation under applicable law. 

A default relating to a financial requirement has occurred under the Loan Guarantee 

Agreement. When that default occurred, on December 1, 2010, $95 million of the 

Guaranteed Loan Commitment remained to be advanced. DOE has considered the 

circumstances leading to the Borrower's default and all reasonable responses to the 

default, including foreclosure on its collateral. Based on the analysis of the Director, 

Portfolio Management Division of the Loan Programs Office ("Director, PMD"), DOE 

'has determined that a restructuring of the Borrower's obligations under the Loan 

Guarantee Agreement (the "Restructuring") will yield the highest probable net benefit to 

the Federal Government by minimizing the Federal Government's potential loss on the 

Guaranteed Loan. In light of the financial analysis, and the parties' agreement to 

negotiate in good faith the defmitive Restructuring documentation, DOE has continued to 

permit advances under the Guaranteed Loan, enabling Project construction to continue 

pending closing of the Restructuring. Absent continued funding of the Guaranteed Loan, 
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the Borrower has indicated that it would file for reorganization under Chapter 11 of the 

Bankruptcy Code or liquidation under Chapter 7 of the Bankrupcty Code, impeding or 

preventing Project completion. Given the Borrower's limited operations in the PV space, 

the Director, PMD believes that a Chapter 11 filing would likely lead to a liquidation. 

The Restructuring contains the following elements: 

(a) DOE's collateral package will be enhanced, as all assets of the Borrower's 

pal:CJlt and its affiliates will be transferred to the Borrower and thereafter secure the 

Borrower's obligations to DOE and Third Party Lenders (defined below); 

(b) The Borrower will obtain additional funding under a $75 million note 

("Tranche A") issued to third party lenders, and will issue a $175 million note ("Tranche 

E") to certain third-party lenders that previously funded that amount to the Borrower's 

parent (coHectively with the holders of Tranche A, the "Third-Party Lenders"); 

(c) The Borrower's existing $535 million reimbursement obligation to DOE 

will be amended to comprise a $150 million reimbursement obligation ("Tranche B") and 

a $385 million reimbursement obligation ("Tranche D''); 

W--The- ~75-mi-IH6fl 

("Tranche C") from the Third-Party Lenders on specified terms and conditions; 

(e) Tranches A, B and C (the "Senior Facilities"), will constitute senior 

secured facilities on a pari passu basis in lien and payment priority, except that, for the 

first 2 years after closing of the restructuring, Tranche A (a new $75 million loan) will 

have payment priority from the proceeds of a foreclosure (if any) on the collateral 

securing the Borrower's payment obligations; 

(f) Tranches D and E (the "Subordinate Facilities") will constitute 

subordinate secured facilities, secured on a pari passu basis, but with DOE's Tranche D 

having payment priority; 

(g) The Senior Facilities will have certain lien and payment priority over the 

Subordinate Facilities; and 

(h) Interest on each of the Senior and Subordinate Facilities will be 

capitalized for limited periods. 

Therefore, under the Restructuring (i) for the first two years following closing of the 

Restructuring, the Borrower's reimbursement obligations to DOE for Tranches B and D 

($535 million principal amount, in aggregate) will be subordinate in payment priority to 

the Borrower's obligations to the Third-Party Lenders for Tranche A ($75 million 

principal amount) in a liquidation only, and (ii) the Borrower's reimbursement 

obligations to DOE for Tranche D ($385 million principal amount) will be subordinate in 

2 
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lien and payment priority to the Borrower's obligations to the Third-Party Lenders for 

Tranches A and C ($150 million principal amount in new loans) until repayment in full. 

ISSUE: 

Whether the proposed subordination of certain of the Borrower's reimbursement 

obligations to DOE is consistent with Subsection l702( d)(3) of Title XVII. Subsection 

1702( d)(3) provides that "[t]he [guaranteed] obligation shall be subject to the condition 

that the obligation is not subordinate to other financing". 

SHORT ANSWER: 

Thm proposed subordination is permitted under Title XVII. The subordination condition 

contained in Subsection 1702(dX3) is, by its terms, applicable only as a condition 

precedent to the issuance of a loan guarantee. It is not a continuing obligation or 

restriction on the authority of the Secretary; and subordination in the context of the 

proposed Restructuring will further the express statutory intent that the Secretary seek to 

maximize the prospects of repayment of borrowers' obligations (as well as the 

technology and job preservation goals of Title XVTI). 

ANAlYSIS: 

Title XVII 

Title XVII of the Energy Policy Act of 2005, as amended, (42 U.S.C. 16511-16514) 

("Title XVII") authorizes DOE to make loan guarantees for specified categories of 

energy projects in accordance with Section 1702 (Terms and Conditions). As set forth in 

the Preamble to the original Final Rule issued under Title XVII, one of the principal goals 

of the guarantee program authorized by Section 1703 of Title XVII is to encourage the 

commercial use in the United States of new or significantly improved energy-related 

technologies. (See "Summary".) One of the principal goals of the American 

Reinvestment and Recovery Act of 2009, P.L. 111-5, which added Section 1705 to Title 

XVII, is to preserve and create jobs and promote economic recovery. (Section 3(a)(I ).) 

The Guarantee qualified under both Sections 1705 and 1703. It was issued under 

Section 1705, but the Borrower was required, as a matter of policy and by contract, to 

comply with Section 1703 and the Final Rule. The policies of both 1703 and 1705 are 

furthered by the Guarantee transaction and the proposed Restructuring. 

Section 1702 

In setting out the terms and conditions for loan guarantees, Section 1702 is organized to 

reflect the life cycle of loan guarantees, from origination to default to foreclosure on 

collateral. More particularly, Section 1702 is subdivided roughly as follows: 

Subsections 1702(b) - (f) set forth threshold requirements for the issuance of loan 

guarantees; 

3 
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• Subsection 1702(g) sets forth the rights and obligations of DOE and the holders of a 

guaranteed loan in the event of default; and 

Subsections 1702(h) and (i) relate to DOE's ongoing administration of the loan 

guarantee program. 

Section J702(bJ - (f) - Loan Origination Provisions 

Subsections 1702(b)-(f) relate to the issuance of loan guarantees. While only Section 

1702(d)(3) is directly at issue, it is worth noting that each of Sections 1702(b) (Specific 

Appropriation or Contribution). (c) (Amount). (e) (Interest Rate) and (f) (Term) describe 

either predicates to the issuance of a loan guarantee or characteristics of the debt that 

must, expressly or implicitly, be satisfied at the time of issuance. 

Section 1702( d) (Repayment) has three sUbparts. including subpart (3). Read together, 

they require the Secretary to determine, prior to issuance of a loan guarantee, that there is 

a reasonable prospect of repayment of the loan; that the aggregate available funding is 

sufficient to achieve project completion; and that the guaranteed obligation is not 

subordinate to other financing. 

],..h.eJ~SjlIjn:m.elli!l_ oLtbe!Le_sJ.l.b.~c1iQJlLr.l:.fle!{La_CQIJgw.si.Q.Il.IlLiD~ntlhaLgUar~d 

loans be structured at the outset to maximize the probability that the project will reach 

completion and the debt will be repaid in accordance with its tenns (as well as ensuring 

the funding of adequate reserves against default). 

Section 1702(g) - Rights of DOE and the Holder ofa Loan Guarantee After a Default 

Subsection 1702(g) addresses events and circumstances that may occur after issuance of a 

loan guarantee, setting out the authority and obligations of DOE and the holder upon a 

default of the guaranteed loan. Read together, the provisions express an. intention to 

afford to the Secretary, in a distressed situation, broad authority to take action that will 

protect and maximize the interests of the United States. That authority ranges from 

agreement to forbearance for the benefit of the borrower (Section 1702(g)(1 )(e» to the 

authority, after payment under the loan guarantee, to elect either to take cOl)troi of the 

project or to permit the borrower to continue to pursue the purposes of the project if that 

is in the public interest (Section 1702(g)(2)(A». 

The Subordination Restriction in Section 1702(d)(3) Is a Condition Precedent to the 

Issuance of a Loan Guarantee and Not a Continuing ObUgation Restricting 

Restructuring Options 

Subsection 1702(d)(3) provides that"[t]he [guaranteed] obligation shall be subject to the 

condition that the obligation is not subordinate to other financing." 

Both by reason of its placement within the statutory scheme, and the plain meaning of the 

words, we read Section 1702(d)(3) as a condition precedent to the issuance of the loan 

guarantee. We do not believe it can reasonably be read either as a requirement that the 

4 
482 


76267.385

guaranteed loan may never be subordinated, or as a restriction on the authority of the 

Secretary following the issuance of a loan guarantee. Commercial loans routinely are 

subject to conditions precedent that must be satisfied prior to the advance of funds by the 

lender. Once such a condition precedent has been satisfied (or waived), it has no 

continuing legal effect. By its plain meaning, and in the context of customary 

commercial practice, the word "condition" in Subsection 1702(d)(3) can logically be read 

as such a condition precedent to issuance of a guaranteed loan. This reading' of the 

provision is reinforced by the use of the word "is," which we view as confirming the 

intent that the condition be satisfied at a single point in time. l 

In addition to the plain meaning of the words, and their placement in the statute, we 

believe our reading is consistent with the policies embodied in the statute. Beyond the 

relatively few explicit terms and conditions that must be satisfied in connection with the 

issuance of a guarantee, Section 1702 gives the Secretary broad authority to determine 

the terms and conditions of loan guarantees. It also provides (or rights and powers that 

are designed to ensure both flexibility and superior legal authority in the case of a 

distressed loan. Emphasizing the impOrtance of Secretarial discretion, Subsection 

1702(g)(2)(C) provides that the loan guarantee agreement "shall contain such detailed 

terms and conditions as the Secretary determines appropriate to protect the United States 

in a default." (Emphasis added.) 

A continuing prohibition on subordination would, in our view, be inconsistent with the 

statutory scheme as it would preclude the use of a common restructuring strategy for a 

financially distressed borrower. Investors are unlikely to make an equity investment in a 

distressed company on commercially acceptable terms. Accordingly, a loan restructuring 

is the typical means of obtaining additional funding for a distressed company. A 

fundamental principle of restructuring is that new loans have payment and lien priority 

over existing loans - without such priority, few, if any, lenders would be willing to 

extend a loan in distressed circumstances. Accordingly, in a situation where a financially 

troubled borrower needs fresh capital to ensure its survival, a senior creditor typically is 

1 It is worth noting that Section 19 of the Federal Nonnuclear Energy Research and Development 

Act of 1974 (42 USC 5919). which created a predecessor DOE loan guarantee program entitled 

"Loan Guarantees for Alternative Fuel Demonstration Facilities" contained similar, but not 

identical, subordination language. Section 19(c)(4) of that act provides that n(c) [t]he 

Administrator ... shall guarantee or make a commitment to guarantee any obligation ... only if .... (4) 

the obligation is subject to the condition that it not be subordinated to any other financing." In 

context (including the use of the word condition). we read the predecessor language as having the 

same effect as the Title XVII provision. However, the words "not be subordinated" arguably 

could be more susceptible to an interpretation that they have continuing effect. While not 

dispositive, the change to "is not subordinate" suggests an intent to clarify the language in a 

manner that reinforces our reading. 

5 
483 


76267.386

faced with a choice of providing an additional loan itself, subordinating to a lender that 

provides the needed capital and proceeding either to foreclosure o.r a bankruptcy filing. 

CONCLUSION: 

On the current facts, the Loan Programs Office has detennined that the proposed 

restructuring offers the best prospect of eventual repayment in full of the Borrower's 

obligations under the Loan Guarantee Agreement, and is demonstrably preferable to a 

liquidation of the Borrower. In light of that detennination, we conclude that the proposed 

subordination of the Borrower's obligations to DOE is consistent with both the text and 

the purposes of Title XVII. Indeed, a refusal to amend the Loan Guarantee Agreement to 

effect the proposed Restructuring, which likely would lead to a Chapter 11 filing by the 

Borrower and possible liquidation, could be considered inconsistent with both the 

specific mandate of Section 1702(g)(2)(C) (to include in the guarantee agreement terms 

and conditions appropriate to protect the interests of the United States in the case of 

default) and the overall scheme of Title XVII, which gives the Secretary the authority and 

tools necessary to protect the interests of the United States and to maximize the prospect 

of repayment of guaranteed loans. Moreover, by maximizing the prospect that the 

Borrower will complete the Project and continue as a going concern, the proposed 

Restructuring furthers the statutory policies of promoting the commercialization of 

innovative energy technologies and preserving jobs 1 

2 A question has been raised as to where the line should be drawn between origination and 

financial default in determining whether subordination may be agreed to under under Title XVII. 

We do not believe it is necessary (or appropriate) to draw such a line in this memorandum. We 

do believe, however, that it is consistent with the statutory scheme to conclude that the Secretary 

has the authority to make such a determination in connection with specific loan guarantee 

transactions, consistent witli the statutory putposes of fostering the commercialization of 

innovative energy technologies and preserving jobs, while protecting the interests of the United 

States and seeking to maximize the prospects of repayment of guaranteed obligations. 

6 
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Document 

68 
485 


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From: 

-1ent: 

1'0: 

Cc: 

SUbJect: 

Yes. 

Loan' Guarantee Prograll Office 

US Department of Energy 

1008 Independence Avenue SW 

Washington, DC 20585 

From: 

Sen 

To: 

':c: 

• ••• '.0:11 • ~ PM 

.,ubject: RE: Meeting with _solyndra 

Can you' guys do th1s1 If not I will go on III)' own and try td set up larger group later. 

Just talked to him. He can do it at 3:38. 

To: 

Cc: 

Subject: Meeting ~ith 

IlIpOrtance: Hi8h 

2810 2:51 PM 

_ We have a serious problem at 50lyndra and need to brief _ as ~B5 possible. 

"CoiiIiI""::ou::y:ou:s:et:.u~p~a meeting with the folks on this .-mall (plus, I aS5U'" _ would Nant •• in the meeting). Thank you 

Chief Counsel, Office of loan PrDBrams 
486 


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Document 

69 
487 


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From: 

Sent: 

To: 

Cc: 

Subject: --== FW; Solyndm Update 

_: we should dlsctlssthls with you early tomorrow morning. 

From: i . --_._--_. 

Sent ... Monda Au us! 31, 2009 4:27 PM To: _________ _ 

Cc: _ 

Subject: RE: Solyndra Update 

50lyndra claims to have a pricing advantage based on performance and lower costs of 

market, installation (sometimes referred t 5 ~il'~t developments in the solar in particular, pricing pre , . f wafer plants scheduled to come on line (and that also mayor (I e t d P • ee articles below), raise 

conCerns about how strong 501yndra w 1 ce of riSing competition. If 

the engineering claims can be back i 1 t consistent with claims, I 

think we would accept DOE' 5 CSC; b t m sid e Mance is not quite up to the 

engineering claims, in which. caSe t t n tc e edit rating down (or viewed 

conversely J increase our @~t1mate 

See: 

China Racing Ahead of U.S. in the Drive to Go Solar 

http://ltMt!.nvtimes.cOm/2009/BSI25/business/energyenvi ronment/2S solar. html? scp=l&sg=sola r%29china&st=cse 

And 

Chinese Solar Firm Revises Price Remark 

http://_.nvtimes . com/2009/0S/27/business/energyenvi ronment/27panel. html 1$cp=3&Sg=5 ola r%20china&st=cse 

and . 

As Prices. Slump. Solar Industry Suffers 

http://greeninc.blogs • n¥times. com/2009/08/13/as-prices-slump-solar-industrvsuffers/? scp=6&sg=solar%29china&st-cse 

More Sun for Less: Solar Panels Drop in Price 

http://_.nvtlme$. com/2009/0aI27/business/energy- . 

!:,!vironment/2 7 solar. html ?scp-6&sg=solar%20energy&st=cse 
488 


76267.391

-----Original Message-- u - From: 1IIIi. ____ _ 

sent.:.Milo~nd~a~y.,~A~uligu~stlI . • 31, 2009 3:S9 PM To; ~ 

Subject: FW:. Solyndra Update 

What should we tell_ on our review status? 

2009 3:23 PM 

FW·: Solyndra Update 

-.-

As you glJ}'s may know, the VP is set to make a Solyndra announcement qn Friday. We know that 

OMB and DoE are still ~ 

in the process (if th 

there is anything we 

their latest thoughts ab u 

final list of questio s 

Can you let us know w 

process? 

• 

n lIt ssues, and wanted to see where that was. . II \I DoE fn speeding along, or conversely if 

\I n t e side) . Below is an email from DoE on 

a d 1 think they are still waiting on t·he 

. a w hej will need to respond. 

t ", ',,, ~ "."""" '" ... ,,"" ,,,"~ 

the 

:'.:':,~ Friday event, 

.. fl~ but 

li,. 

this 

m," 

OMS piece nat IDI 

being final. OO~L. ,~.,m" m fly '" ~ Our conCern on the press end is that this leaks out before the OMB portion is cooked - if 

there is any way to accelerate, would give a lot of peace of mind/flexibiUty on that front. 

The final step will be the loan clOSing which will happen on Thursday regardless - but lIlY 

understanding is that that· s pretty much a given - it' 5 the leaking out before OMB is 

finished that could leave us in an awkward place. 

Subject: RE: Solyndra Update 
489 


76267.392

On the OMB side, from our Credit Policy Director 

"We still have one outstanding question _ our initial meeting Tuesday (DOE has not 

responded--r need more information from_and Solyndra). 

We have also not received the final set of questions/issues from OMS to which DOE will need 

to respond. After OMB review, and any changes are made to the credit subsidy cash flows, OMB 

would essentially pre-approve that calculation (formal approval comes in the fom of· the . 

apportionment which occurs after S2 or 51 approve cOllVllltment of the loan amount and subsidy 

rate) ... 

OMB is fully aware of the Frld'ay timeline: The DOE team is hoping to receive the final OMB 

questions/issues today so that they can be quickly reviewed/responded in full so that we can 

complete the outstanding process requirements. 

-
490 


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Document 

70 
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76267.394

S-I I dsl.htm REGISTRATION STATEMENT ON FORM S-I 

Table of Contents 

As filed with the Securities and Exchange Commission on December 18, 2009 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

Delaware 

(State or other jurisdiction of 

incorporation or organization) 

FORM 5-1 

REGISTRATION STATEMENT 

Under 

The Securities Act of 1933 

50lyndra, Inc. (Exact name of Registrant as specified in its charter) 

3614 

{Primary Standard Industrial 

Classification Code Number} 

47700 Kata Road 

Fremont, California 94538 

510440·2400 

41-2115583 

(I.R.S. Employer 

Identification Number) 

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) 

Dr. Christian M. Granet 

Chief Executive OffIcer 

Solyndra. Inc, 47700 Kata Road 

Fremont, California 94538 

510440·2400 

(Name, address, including zjp code, and telephone number, including area code, of agent for service) 

John A. Fore 

Michael S. Ruuell 

Wilson Sonslnl Goodrich & Rosati 

Professional Corporation 

650 Page Mill Road 

Palo Alto, California 94304 

Telephone: 650-493~9300 

Facsimile: 650-493·6811 

Copies to: 

Benjamin H. Schwartz 

Acting General Counnl 

Solyndra. Inc. 

47700 Kata Road 

Fremont, California 94538 

Telephone: 510-440·2400 

Facsimile: 51Q....44D-.2625 

Patrick A. Pohlen 

Andrew S. WIlliamson 

latham & Watkins lLP 

140 Sc:ott Drive 

Menlo Park. California 94025 

Telephone: 650-328-4600 

Facslmlle: 650-463·2600 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date ofth!s Registration 

Statement. 

If any of the securities being registered on this Form are to be offered on a delayed or continuous baSis pursuant to Rule 415 under the Securities 

Act of 1933, check the following box. 0 

If this Form is filed to register additlonal securities for an offering pursuant to Rule 462(b) under the Securities Act, please checl<. the following box 

and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 0 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities 

Act registration statement number of the earlier effective registration statement for tna same offering. 0 

If this Form is a post-effective amendment filed pursuant to Rule 462(d} under the Securities Act. check the following box and list the Securities 

Act registration statement number of the eartier effective registration statement for the same offering. 0 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non~acGelerated filer, or e sma Iter reporting 

company. See the definitions of -large accelerated filer," ~accelerElted filer" and ·smaller reporting company" in Rule 12b-2 of the Exchange Act. 

Large accelerated mer 0 Accelerated filer 0 Non-accelerated Iller IBl (Do not check if a smaUer reporting company) Smaller reporting company 0 

CALCULATION OF REGISTRATION FEE 

Title of Each Class of Proposed Maximum Amount of 

http://www.sec.gov/Archives/edgar/data/I443115/000119312509255919/ds1.htm 11/22/2011 
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76267.395

Securities to be Re istered A re ate Offer!n Price 1 Re lstratlon Fee 

Common Stock, $0,00001 ar value $300,000,000 $16740 

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(0) under the Securities Act of 1933. Includes 

offering price of shares that Ihe underwriters have the right to purchase to cover over~aIlDtments, if any. 

The Registrant hll!ntby amends this Registration Statement on slJch date or dates as may be necessary to dll!lay its effective date until 

the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in 

accordance with Section S(al of the SecuriHes Act of 1933 or until the Registration Statement shall become effective on such date 86 the 

Commission acting pursuant to saId Section B{a) may determine. 

http://www,sec,gov/ Archives/edgar/data/1443115/000119312509255919/dsl ,htrn 1112212011 
493 


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Table orCon!en!s 

The information in this prospectus is not complete and may be changed. We may not sell these securities 

until the registration statement filed with the Securities and Exchange Commission is effective. This 

prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any 

jurisdiction where the offer or sale is not permitted. 

PROSPECTUS (Subject to Completion) 

Issued December 18, 2009 

Shares 

SOLYNDRA, INC. 

COMMON STOCK 

Solyndra, Inc. is offering shares of its common stock. This is our initial public offering and no public 

market currently exists for our shares. We anticipate that the initial public offering price will be between $ and 

$ per share. 

We have applied to have our common stock approved for listing on under the symbol "SOL Y." 

Investing in our common stock involves risks. See "Risk Factors" beginning on page 11. 

Per Share 

Total 

PRICE $ A SHARE 

Price to Public 

$ 

$ 

We have granted the underwriters the right to purchase up to an additional 

cover over-allotments. 

Underwriting 

Discounts and 

Commissions 

$ 

$ 

Proceeds to 

Solyndra 

$ 

$ 

shares of common stock to 

Argonaut Ventures I, L.L.C., or Argonaut, which together with its affiliates beneficially owns approximately 

35.7% of our outstanding common stock on an as-converted basis, has the right to purchase from us up to 15% of 

the aggregate number of shares offered in this offering at the initial price to the public, but is under no obligation to 

purchase any shares. Any shares purchased by Argonaut will be purchased directly from us and will not be a part of 

the underwritten offering. Steven R. Mitchell, a member of our board of directors, is a managing director of the 

manager of Argonaut. 

The Securities and Exchange Commission and state securities regulators have not approved or 

disapproved these securities or determined if this prospectus is truthful or complete. Any representation to 

the contrary is a criminal offense. 

The underwriters expect to deliver the shares to purchasers on ,2010. 

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.2010 

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Cylindrical Photovoltaic Modules 

Enhance light Collection 

Dlroot SwtIDght 

Wind Blows Through Solyndra Panels 

Enabling low-Cost Installation without 

Attachments or Penetrations 

Solyndra 

Solyndra 

Our Product Is a Panel, with 40 Modules 

Spaced Apart, and Mounts 

Flat Plata Panels Typically Require 

Expensive Attachments or Ballast 

-

~....: .... -- "" . -i."!:.-.:-

':,::;;:" ,"'~ 

--- --

IAnventional Flat Plale Panels 

Conventional Flat Plate Paneis 

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Commercial Rooftops Represent a Vast and Underutilized 

Opportunity for the Generation of Solar Electricity 

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Prospectus Summary 

Risk Factors 

TABLE OF CONTENTS 

Special Note Regarding Forward-Looking Statements and Industrv Data 

Use of Proceeds 

Dividend Policy 

Capitalization 

Dilution 

~d Historical Financial Data 

Management's Discussion and Analysis of Financial Condition and Results of Operations 

Industry Background 

Business 

Description of Material Indebtedness 

Management 

Certain Relationships and Related Partv Transactions 

Principal Stockholders 

Description of Capital Stock 

Shares Eligible For Future Sale 

Material United States Tax Considerations for Non-U.S. Holders of Common Stock 

Underwriting 

Legal Matters 

Experts 

Where You Can Find Additional Information 

Index to Consolidated Financial Statements 

~ 

1 

11 

34 

35 

35 

36 

38 

40 

42 

66 

72 

88 

91 

113 

125 

129 

134 

137 

141 

145 

145 

145 

F-1 

You should rely only on the information contained in this prospectus and in any free writing prospectus we 

may authorize to be delivered or made available to you. We have not authorized anyone to provide you with 

information different from that contained in this prospectus or any such free writing prospectus. We are offering to 

sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are 

permitted. The information in this prospectus may only be accurate as of the date on the front cover of this 

prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. 

Until ,2010 (25 days after the commencement of this offering), all dealers that buy, sell or 

trade shares of our common stock, whether or not participating in this offering, may be required to deliver a 

prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus 

when acting as underwriters and with respect to their unsoid allotments or subscriptions. 

For investors outside the United States: Neither we nor any of the underwriters have done anything that would 

permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is 

required, other than in the United States. Persons outside the United States who come into possession of this 

prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of 

common stock and the distribution of this prospectus outside of the United States. 

The term "Solyndra," a stylized "Solyndra," the Solyndra "0", "Omnifacial" and the term "The New Shape of 

Solar" and other trademarks or service marks of Solyndra, Inc. appearing in this prospectus are the property of 

Solyndra, Inc. This prospectus contains additional trade names, trademarks and service marks of other companies. 

We do not intend our use or display of other companies' trade names, trademarks or service marks to imply 

relationships with, or endorsement or sponsorship of us by, these other companies. 

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PROSPECTUS SUMMARY 

This summary highlights information described elsewhere in this prospectus but does not contain all of the 

information needed for making an investment decision. Therefore read this entire prospectus carefully, 

especially the "Risk Factors" section beginning on page 11 and our consolidated financial statements and the 

related notes appearing elsewhere in this prospectus, before making an investment decision. 

Overview 

Commercial rooftops represent a vast and underutilized resource for the generation of solar electricity. We 

have pioneered a photo voltaic system featuring proprietary cylindrical modules that we believe can enable the 

lowest cost of electricity on commercial rooftops by delivering the lowest total system costs per walt and the 

highest kilowatt hour production per rooftop for typical installations. We are able to significantly reduce the cost 

of installation, which is a substantial component of the total system cost, by eliminating expensive mounting 

hardware and significantly reducing the amount of labor required when mounting conventional flat plate 

photovoltaic systems. We believe that the differentiated benefits of our photo voltaic systems, together with our 

planned expansion of production, manufacturing process improvements and product enhancements, will enable 

us by 2012 to deliver photovoltaic systems for commercial rooftops that produce electricity at rates that are 

competitive with the retail price of electricity in key markets on a non-subsidized basis. 

Our photovoltaic systems, which are comprised of panels and mounts, enhance sunlight collection by 

capturing direct, diffuse and reflected sunlight across a 360-degree photovoltaic surface. Unlike conventional 

panels that typically need to be tilted to achieve effective energy generation, the cylindrical shape of our 

modules allows our systems to achieve effective energy generation when mounted horizontally. Horizontal 

mounting al/ows our panels to be spaced significantly closer together than conventiona1 panels on a typical 

rooftop, thereby enabling greater rooftop coverage and enhanced energy production over the system's lifetime. 

The cylindrical shape allows modules to be spaced apart within our panels so that wind can blow through our 

panels, thus eliminating the need for the expensive mounting hardware and bal/ast typically required to secure 

conventional fiat plate panels against uplift from the wind. As a result, our customers can achieve significantly 

reduced labor, hardware, design and other balance of system costs, which account for a substantial portion of 

the total installed cost of a conventional fiat plate photovoitaic system, while maximizing the amount of electricity 

generated for a typical rooftop installation. 

We commenced commercial shipments of our photovoltaic systems in July 2008 and have increased our 

sales volume and revenue every quarter since that date. We sold 17.2 megawatts, or MW, of panels in the nine 

months ended October 3, 2009, compared to 1.6 MW for the fiscal year ended January 3, 2009. For the nine 

months ended October 3, 2009, our revenue was $58.8 million, compared to $6.0 million for the fiscal year 

ended January 3,2009. Our panels have been deployed in over 100 commercial instal/ations internationally and 

across the United States. We primarily sel/ our photovoitaic systems to value-added resellers, including system 

integrators and roofing materials manufacturers, which resell our systems to various system owners, including 

third-party investors, enterprises such as manufacturers, wholesaler-distributors and big-box retailers, 

government entities and utility companies. Our customers include Alwitra GmbH, Carlisle Syntec Incorporated, 

Geckologic GmbH, Phoenix Solar AG, Premier Solar Systems Pvt Ltd .. Solar Power, Inc., Sunconnex B.v., Sun 

System S.p.A. and USE Umwelt Sonne Energie GmbH. As of the date of this prospectus, we have framework 

agreements with system integrators and roofing materials manufacturers outlining general terms for the delivery 

of up to 865 MW of our photovoltaic systems by the end 2013. 

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We manufacture our solar panels in a highly automated plant where we perform all operations required to 

process commodity materials into the final product. We intend to significantly expand our production capacity 

through a combination of additional production facilities and equipment, manufacturing process improvements 

and product enhancements in order to reduce our per-watt production costs and meet demand for our systems. 

Our firs! manufacturing facility, which we refer to as Fab 1, had an annualized production run rate of 45 MW 

during our fiscal month ended December 5, 2009. We are in the process of expanding our production capacity 

at Fab 1 and expect to reach an annualized production run rate of 110 MW by the fourth fiscal quarter of 2010, 

assuming achievement of minimum product development objectives and planned manufacturing process 

improvements. We are further expanding our production capacity with the addition of a second manufacturing 

facility, which we refer to as Fab 2. We are in the construction stage of the first of two planned phases for Fab 2, 

which we refer to as Phase I. We expect Phase I to have an annualized production run rate of 250 MW by the 

end of the first half of 2012, assuming achievement of minimum product development objectives and planned 

manufacturing process improvements. We expect the first production output from Phase I to occur in the first 

quarter of 2011. We are funding the costs of Phase I with the proceeds of a prior equity financing and a $535 

million loan facility guaranteed by the U.S. Department of Energy, or the DOE. Borrowings under this facility 

mature in 2016 and accrue interest at a rate per annum fixed at the time of disbursement and equal to the sum 

of a treasury rate index plus 37.5 basis points (2.838% as of October 3, 2009). This loan facility was the first 

guaranteed by the DOE under its loan guarantee program for innovative clean technologies. 

We intend to use the proceeds of this offering to finance a portion of the costs of the second phase of 

Fab 2, which we refer to as Phase II. We believe that Phase II represents a significant opportunity to further 

expand our production capacity and reduce our costs of manufacturing. When the construction and production 

ramp of both phases of Fab 2 are complete, we expect Fab 2 to have an annualized production run rate of 500 

MW, assuming achievement of minimum product development objectives and planned manufacturing process 

improvements. We estimate that the costs for Phase II will be approximately $642 million, which amount 

includes building expansion and improvements, manufacturing equipment, certain sales, marketing and other 

start-up costs, and a contingency reserve of approximately $53 million. On September 11,2009, we applied for 

a second loan guarantee from the DOE, in the amount of approximately $469 million, to partially fund Phase II. 

If we are unable to obtain the DOE guaranteed loan in whole or in part, we intend to fund any financing shortfall 

with some combination of the proceeds of this offering, cash flows from operations, debt financing and 

additional equity financing. 

Commercial Rooftop Photovoltaie Market Opportunity 

Based on market data from Navigant Consulting, Freedonia Group and Ecofys, we estimate that there are 

approximately 11 billion square meters of commercial rooftop area worldwide. Commercial rooftop systems are 

installed where power is consumed, which avoids the significant transmission capital expenditures associated 

with centralized electricity generation systems, reduces transmission congestion during periods of peak demand 

and reduces the energy losses to the end users associated with transmission and distribution of electricity from 

centralized large-scale electric plants. According to the National Renewable Energy Laboratory, or NREL, 

cumulative rooftop photovoltaic system installations in the United States alone are projected to grow from 733 

MW in 2007 to 7,492 MW in 2015, representing a compound annual growth rate of 34%. 

In the commercial rooftop solar market, several key factors influence what type of photovoltaic system will 

be used. First, system owners, such as third-party investors and enterprises that purchase photovoltaic systems 

to install on their own rooftops, generally seek the highest return possible from a photovoitaic system. The 

highest return is achieved by minimizing the levelized cost of electricity 

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per kilowatt hour, or LCOE, which is the ratio of a system's total life cycle cost to its total lifetime energy output. 

Second, building owners typically seek to limit rooftop impact in order to comply with a rooftop's warranty 

requirements and structural limitations. Third, system integrators, which often have significant influence on 

purchase decisions, are motivated by their desire to enhance their own productivity and perform more project 

installations in a given year, 

The commercial rooftop photovoltaic market to date primarily has consisted of flat plate panels using 

crystalline silicon or thin film technologies, which we refer to as conventional panels. These conventional 

approaches present several fundamental challenges which have, to date, increased the cost of commercial 

rooftop photovoltaic systems and limited the addressable market. These challenges include: 

Light collection. Conventional panels typically need to be tilted using expensive mounting hardware 

to improve the capture of direct light, creating shadows that can reduce and, in some cases, shut down 

the output of neighboring panels, Therefore, conventional panels typically are widely spaced to avoid 

shading other panels, reducing the surface area that can be covered by this type of rooftop photovoltaic 

system. 

Orientation. Conventional panels typically need to be oriented on a directional axis such as NorthSouth for optimal performance, which often differs from the directional axis of the building and its 

rooftop, further limiting rooftop coverage and reducing total energy production per rooftop. 

Installation Time and Cost. Installing conventional panels on commercial rooftops typically takes 

weeks to complete and requires the use of expensive mounting hardware, involving steps such as 

rooftop preparation and penetration, assembly of mounting racks and installation of panels at the correct 

tilt and axis orientation. 

Wind. Conventional photovoltaic systems typically require ballast or penetrating rooftop attachments 

to counter uplift from wind. The weight of the panels, ballast and mounting system may exceed the 

weight limitations of many commercial rooftops. 

These factors have limited the penetration of the addressable commercial rooftop market by manufacturers of 

conventional panels, as photovoltaic system owners have struggled to minimize LCOE and preserve the 

integrity of building rooftops, while system integrators have struggled to minimize the cost and time to install 

systems. 

Our Solution 

We believe that our photovoltaic systems address many of the challenges facing system owners and 

system integrators that have limited the penetration of the commercial rooftop market in the past. Specifically, 

our solution is designed to reduce LCOE and preserve the integrity of building rooftops, while redUCing the cost 

and time to install systems. Key benefits of our photovoltaic systems include: 

• Low levelized cost of electricity. We believe that our photovo!taic systems will allow system owners 

to achieve the lowest LeGE by delivering low installed costs, increased energy output and low lifetime 

costs for typical commercial rooftop installations. Our unique product design helps our system owners 

minimize installed cost per watt by offering significant savings on balance of system costs, including 

labor. Our photovoltaic systems are also designed to generate significantly more solar electricity per 

rooftop than conventional panel photovoitaic systems, as our system design enables greater rooftop 

coverage and the highest energy production per rooftop over the system lifetime for typical installations. 

This increased electricity production per rooftop also has 

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the benefit of spreading fixed costs for certain operational and maintenance expenses over a larger 

system, resulting in a lower lifetime operations and maintenance cost per kilowatt hour. Our design 

provides benefits relating to lifetime roof replacement and repair costs, where the speed with which our 

systems can be removed and then reinstalled reduces the amount of electricity that is lost due to 

downtime. 

Minimal impact to building rooftop. Our photovoltaic systems minimize rooftop impact by avoiding 

rooftop penetrations associated with conventional panel photovoitaic systems. Our photovoltaic systems 

also weigh less than conventional panel photovoltaic systems, enabling the installation of our 

photovoitaic systems on rooftops that would not otherwise support the weight of a conventional panel 

photovoltaic system. 

Significant installation benefits. Our photovoltaic systems can be installed more quickly and more 

cost-effectively than conventional panel photovoltaic systems. Due to the relative ease of installation of 

our systems, we believe that system integrators, roofing materials manufacturers and the 

subcontractors that they employ to install our photovoltaic systems will be able to significantly increase 

the productivity of their workforces, enabling them to perform more installations in a given year with 

fewer labor expenditures. Further, because our rooftop coverage benefits enable greater power 

generation per rooftop, we believe that system integrators and roofing materials manufacturers 

generally can generate more revenue per project by installing our systems. 

Our Strategy 

Our goal is to deliver by 2012 photovoltaic systems for commercial rooftops that are competitive with the 

retail price of electricity in key markets on a non-subsidized basis. We believe that the achievement of this goal 

in any given market will result in substantial additional demand for our photovoltaic systems in that market. We 

intend to continue to pursue the following strategies to achieve this goal: 

Expand production capacity. In order to meet expected demand for our systems, we intend to 

significantly expand our production capacity through the expansion of capacity at Fab 1 and the addition 

of Fab 2, as well as through manufacturing process improvements and product enhancements. 

Reduce per-watt manufacturing costs. We intend to continue to reduce our per-watt manufacturing 

costs by expanding capacity and increasing the throughput of our production lines, improving yields and 

raising nameplate panel power ratings. 

Target key customers. We currently allocate the sale of the majority of our photovoltaic systems to a 

select number of value-added resellers with broad geographic reach and the capacity to purchase large 

volumes of our systems. In addition, we plan to continue to strategically target the sale of our 

photovoltaic systems to value-added resellers tor which we believe we offer the most differentiated 

value proposition. 

Expand roofing materials manufacturer sales channel. We plan to develop additional strategic 

relationships with leading global manufacturers of reflective roofing materials, thereby expanding an 

important sales channel for our photovoltaic systems. Our systems are easy for roofers to install and, 

when installed together with a new, reflective "cool" roof, can provide a unique combination of building 

energy efficiency and solar electriCity production. 

Support customer project financing. We intend to support customer project financing by 

strategically aligning our products with key government programs that provide financial incentives, 

export credit and project finance. 

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Continue to explore new markets where we can leverage our innovative product offering. We 

plan to continue to explore new geographies and product applications where we believe our product 

offers a compelling value proposition. For example, we are exploring the integration of our products into 

the top of sheltered horticulture structures, such as greenhouses used in large-scale commercial 

agriculture. 

Corporate Information 

Our company was incorporated in Delaware in May 2005 as Gronet Technologies, Inc. In January 2006, 

our company was renamed Solyndra, Inc. Our principal executive offices are located at 47700 Kato Road, 

Fremont, California 94538, and our telephone number is 510-440-2400. Our website address is 

lNWW.solyndra.com. Information contained on our website is not incorporated by reference into this prospectus, 

and you should not consider information contained on our website to be part of this prospectus. 

Except where the context requires otherwise, we use the terms the "Company," "Solyndra," "we," "us" and 

"our" in this prospectus to refer to Solyndra, Inc., a Delaware corporation, and, where appropriate, its 

subsidiaries. 

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THE OFFERING 

Common stock offered by us shares (or shares if the underwriters 

exercise their over-allotment option in full). 

Common stock to be outstanding after this offering shares (or shares if the underwriters 

exercise their over-allotment option in full). 

Use of proceeds We estimate that our net proceeds from the sale of the 

common stock that we are offering will be approximately 

Proposed 

Risk factors 

symbol 

$ million, assuming an initial public offering price 

of $ per share, which is the midpoint of the range 

listed on the cover page of this prospectus, and after 

deducting estimated underwriting discounts and 

commissions and estimated offering expenses payable by 

us. We intend to use the net proceeds to us from this 

offering to fund costs of Phase II of Fab 2 and any 

remaining balance for general corporate purposes, 

including working capital, repayment of amounts, if any, 

drawn under our revolving loan facility with Argonaut 

Ventures I, L.L.C., or Argonaut, and additional capital 

expenditures. We may also use a portion of our net 

proceeds to fund acquisitions of complementary 

businesses, products or technologies. See the "Use of 

Proceeds· section of this prospectus for more information. 

"SOL)'" 

See the "Risk Factors" section beginning on page 11 of 

this prospectus for a discussion of factors that you should 

carefully consider before deciding to invest in our 

common stock. 

Argonaut, which together with its affiliates beneficially owns approximately 35.7% of our outstanding 

common stock on an as-converted basis, has the right to purchase from us up to 15% of the aggregate number 

of shares offered in this offering at the initial price to the public, but is under no obligation to purchase any 

shares. Any shares purchased by Argonaut will be purchased directly from us and will not be a part of the 

underwritten offering. Steven R. Mitchell, a member of our board of directors, is a managing director of the 

manager of Argonaut. 

The number of shares of common stock that will be outstanding after this offering is based on 241,333,149 

number of shares outstanding at October 3, 2009, and excludes: 

25,316,966 shares of common stock issuable upon the exercise of options outstanding at October 3, 

2009, at a weighted-average exercise price of $1.66 per share; 

26,638,290 shares of common stock issuable upon the exercise of warrants outstanding at October 3, 

2009, at a weighted-average exercise price of $5.99 per share; and 

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6,196,679 shares of our common stock reserved for future issuance under our 2005 Amended and 

Restated Equity Incentive Plan. 

Unless otherwise indicated, all information in this prospectus assumes: 

an initial public offering price of $ 

coyer page of this prospectus; 

per share, which is the midpOint of the range listed on the 

the conversion of all outstanding shares of preferred stock into an aggregate of 226,527,933 shares of 

common stock and the related conversion of all outstanding preferred stock warrants to common stock 

warrants upon the closing of this offering; 

no exercise by the underwriters of theirright to purchase up to shares of common stock from us 

to cover over-allotments; and 

the filing of our amended and restated certificate of incorporation upon the closing of this offering. 

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SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA 

The following table presents a summary of our historical financial and operating data for the periods and at 

the dates indicated. The consolidated statements of operations data for the fiscal years ended December 30, 

2006, December 29, 2007 and January 3, 2009 are derived from our audited consolidated financial statements 

included elsewhere in this prospectus. The consolidated statements of operations data for the nine months 

ended September 27, 2008 and October 3, 2009 and the consolidated balance sheet data as of October 3, 

2009 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. 

We have prepared the unaudited consolidated financial data on the same basis as the audited consolidated 

financial statements and, in our opinion, included all adjustments, consisting only of normal recurring 

adjustments, necessary for a fair presentation of the information set forth therein. We use the other operating 

data presented to help us evaluate growth trends, establish budgets, ensure the effectiveness of our sales and 

marketing efforts and assess operational efficiencies. Our historical financial and operating results for any prior 

period are not necessarily indicative of results to be expected in any future period, and our results for any 

interim period are not necessarily indicative of results for a full fiscal year. 

The information presented below should be read in conjunction with "Management's Discussion and 

Analysis of Financial Condition and Results of Operations" and our audited and unaudited consolidated financial 

statements and related notes, each included elsewhere in this prospectus. 

Fiscal Years Ended Nine Months Ended 

~ 

December 30, December 29, January 3, September 27. October 3, 

(in 

2007 

thousands, except 

2009 

per share data) 

2008 ~ 

Consolidated Statements of Operations 

Data: 

Revenue $ - $ $ 6,005 $ 1,501 $ 58,814 

Cost of revenue( 1) 44,435 21,395 108,321 

Gross profit/(Ioss) (38,430) (19,894) (49,507) 

Research and development(1) 19,927 85,859 125,499 93,425 61,632 

Sales and marketing(1) 574 2,677 4,838 3,276 5,905 

General and administrative(1) 5,829 23,279 21,221 16,805 10,633 

Asset impairment charges ____ ~ 31,610 

loss from operations (26,330) (111,815) (221,598) (165,010) (127,677) 

Interest expense (494) (6,906) (12,444) (10,770) (807) 

Interest income 1,184 2,829 1,870 1,742 131 

OtherincomeJ(expense),net 

Net loss 

~) 

$ (27,172) 

~ 

$ (114,128) 

---1.Ql 

$(232,065) $ (179,848) 

(5,810) ~ 

$(119,761) 

Deemed dividend on preferred stock ________ - (10,452) =-=== Net 1055 attributable to common stockholders $ (27,172) $ (114,128) $(242,517) $ (179,848) $(119,761) 

Net loss per share (basic and diluted)(2) $ (6.69) $ (16.55) $ (23.85) $ (18.33) $ (9.48) 

Weighted-average common shares (basic and 

diluted)(2) 4,063 6,898 10,167 

Pro forma loss per share (basic and diluted)(2) ~) 

9,810 12,629 

s==(OTo) 

Weighted-average common shares used in 

pro forma calculations (basic and diluted) 

(2) 

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Consolidated Balance Sheet Data: 

Cash, cash equivalents and short-term investments 

Restricted cash(5) 

Working capital 

Property, plant and equipment, net 

Total assets 

Total long-term debt 

Redeemable convertible preferred stock 

Total stockholders' equity (deficit) 

Other Operating Data: 

Megawatts produced(S) 

Megawatts sold(7) 

Annualized production run rate (in megawatts)(8) 

Average nameplate panel power rating (in watts)(9) 

(1) Includes stock-based compensation as follows: 

Fiscal Years Ended 

$ 45,307 

165,400 

8,085 

303,502 

589,519 

21,380 

961,315 

(482,650) 

Fiscal 

Year Ended 

~ 

January 3, 

1.8 

1.S 

7.8 

164 

As of October J, 2009 

Pro Forma(J) 

(In thousands) 

$ 45,367 

165,400 

8,145 

303,502 

589,579 

21,380 

479,466 

Pro Forma As Adjusted(4) 

$ 

Nine Months Ended 

September 27. October 3, 

2008 ~ 

0.6 

0.4 

4.1 

160 

Nine Months Ended 

17.9 

17.2 

40.2 

178 

December 30. December 29, January 3, September 27, October 3. 

Cost of revenue 

Research and 

development 

Sales and marketing 

General and 

administrative 

Total 

~~ 

$ 

26 

2 

___ 8_4 

$ 112 

$ 

118 

7 

100 

$ 225 

2009 

(in~) 

$ 564 

1,744 

131 

~ 

~ 

2008 ~ 

212 $ 1,266 

992 2,485 

54 305 

808 1,402 

$ 2,OS6 $ 5,458 

(2) See Note 17 to the Notes to Consolidated Financial Statements for an explanation of the method used to 

calculate basic and diluted net shares used to calculate net loss per share and pro forma loss per share. 

(3) Reflects (i) the conversion of all outstanding shares of preferred stock into 226,527,933 shares of common 

stock and the related conversion of all outstanding preferred stock warrants to common stock warrants 

upon the closing of this offerin9; and (Ii) the repayment of a note by a stockholder. 

(4) Reflects the pro forma adjustments described in (3) above and the sale of shares of our common 

stock by us in this offering at an assumed initial public offering price of $ per share (the midpoint of 

the price range set forth on the cover page of this prospectus), after deductin9 the estimated underwritin9 

discounts and commissions and estimated offering expenses payable by us in connection with the 

offering. A $1.00 increase or decrease in the assumed initial public offering price of $ per share of 

common stock would increase or decrease cash, cash equivalents and short-term investments by 

$ million, working capital by $ million, total assets by $ million and total 

stockholders' equity (deficit) by $ million, assuming the number of 

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shares offered by us, as shown on the cover of this prospectus, remains the same and after deducting the 

estimated underwriting discounts and commissions and estimated offering expenses payable by us in 

connection with the offering_ The pro forma as adjusted information discussed above is illustrative only 

and will adjust based on the actual public offering price and other terms of this offering determined at 

pricing. 

(5) As of October 3, 2009, restricted cash consists of certificates of deposit held by a bank as collateral for 

outstanding letters of credit Restricted cash also included $160_0 million of cash deposited in a bank 

account in connection with the DOE guaranteed loan facility_ Pursuant to the terms of our DOE 

guaranteed loan facility, use of cash held in this account is limited to funding the costs of Phase I of Fab 2. 

(6) Megawatts produced equals the aggregate nameplate panel power ratings of panels we produced during 

the period presented_ Nameplate panel power rating is expressed in watts per panel and represents the 

watt-peak capacity of photovoltaic panels measured under standard test conditions for our panels_ 

(7) Megawatts sold equals the aggregate nameplate panel power ratings of panels we sold during the period 

presented. 

(8) Annualized production run rate is expressed in megawatts and equals the aggregate nameplate panel 

power ratings of the panels we produced in our most recent fiscal month within the period presented, 

multiplied by 12_ 

(9) Average nameplate panel power rating is expressed in watts and equals the megawatts produced during 

the period presented divided by the number of panels produced during that period_ 

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RISK FACTORS 

An investment in our common stock involves a high degree of risk. You should carefully consider the fol/owing 

information, together with the other information in this prospectus, before deciding whether to buy shares of our 

common stock. If eny of the fol/owing risks occur, our business, financial condition and results of operations could 

be materially and adversely affected, the trading price of our common stock could decline and you may lose aI/ or a 

pan of your investment. 

Risks Related to Our Business 

Our future success depends on our ability to increase our production capacity by completing expansion of 

our first manufacturing facility, developing additional manufacturing facilities, Including our second 

manufacturing facility, and increasing our production throughput and yield. 

Our future success depends on our ability to significantly increase our production capacity through facility 

expansion and increased production throughput and yield in a cost-effective and efficient manner, mainly through 

the expansion of our first manufacturing facility, which we refer to as Fab 1, and through construction of additional 

manufacturing facilities, including our second manufacturing facility, which we refer to as Fab 2. Our ability to 

complete the expansion of Fab 1 and the planning, construction and equipping of both phases of Fab 2 and 

additional manufacturing facilities in the future are subject to significant risk and uncertainty, including: 

the build-out of the first phase of Fab 2, which we refer to as Phase I. is being financed by a U.S. 

Department of Energy, or the DOE, guaranteed loan facility, which requires us to remain in compliance with 

numerous financial and operational covenants in order to draw funds under this loan facility, compliance 

with some of which are beyond our control; 

the build-out of any manufacturing facilities will be subject to the risks inherent in the development and 

construction of new facilities, including risks of delays and cost overruns as a result of a number of factors, 

many of which may be out of our control, such as delays in government approvals, burdensome permit 

conditions and delays in the delivery of manufacturing equipment and subsystems that we manufacture or obtain from suppliers; 

we may be unable to achieve the production throughput and yields necessary to achieve our target 

annualized production run rate at our current and future manufacturing facilities; 

the additional capital needed in order to finance the costs of constructing and equipping the second phase 

of Fab 2, which we refer to as Phase II, and any additional facilities, including the $469 million DOE loan 

guarantee for which we have applied, may not be available on reasonable terms, or at all; 

• our custom-built equipment may take longer and cost more to engineer and build than expected and may 

never operate as required to meet our production plans; 

we may be required to depend on third-party relationships in the development and operation of additional 

production capacity, which may subject us to risks that such third parties do not fulfill their obligations to us 

under our arrangements with them; and 

• we may fail to execute our expansion plans effectively. 

If we are unable to successfully complete expansion of Fab 1 and develop, construct and successfully operate 

Fab 2 and any additional manufacturing facilities in the future, we may be unable to scale our business to the extent 

necessary to improve our results of operations and achieve profitability. Moreover, even if we are successful in 

continuing to expand our production capacity as planned, we may not be able to generate customer demand for our 

photovoltaic systems at the increased production levels and may not be able to generate sufficient revenue to 

achieve or maintain profitability. As we build additional manufacturing facilities, our fixed costs will increase. If the 

demand for our systems or our production 

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output decreases, we may not be able to spread a significant amount of our fixed costs over the production volume, 

thereby increasing our per unit fixed cost, which would have a negative impact on our financial condition and results 

of operations. 

Our business is based on a new technology. and if our photovoltaic systems or manufacturing processes 

fail to achieve the performance and cost metrics that we expect. we may be unable to develop demand for 

our systems and generate sufficient revenue to support our operations. 

Our use of copper indium gallium diselenide, or GIGS, thin film technology on a cylindrical module is a new 

technology in commercial scale production. As a result of our use of this new technology, we may experience 

significant challenges as we seek to expand our production capacity and output and scale our operations to support 

large-scale commercial manufacturing of photovoltaic systems. The manufacture of our solar modules is a highly 

complex process and minor deviations in the manufacturing process can cause substantial decreases in yield or 

throughput and, in some cases, cause production to be suspended or yield no output. Our business plan and longterm growth strategy assume that we will be able to achieve certain milestones and metrics in terms of throughput, 

uniformity of cell efficiencies, yield, encapsulation, packaging, cost and other production parameters in order to 

achieve our targeted production capacity. For example, our ability to expand from our current annualized production 

run rate at Fab 1, which was 45 MW during our fiscal month ended December 5, 2009, to our estimated 110 MW 

annualized production run rate by the fourth fiscal quarter of 2010, depends on our ability to achieve certain 

minimum product development objectives and planned manufacturing process improvements. We cannot assure 

you that we will achieve these product development objectives, process improvements or other milestones or 

metrics or that our technology will prove to be commercially viable. If we are unable to achieve our targets on time 

and within our planned budget, then we may not be able to generate adequate demand for our systems, and our 

business, financial condition and results of operations could be harmed. Even if we are able to achieve our target 

metrics as we expand the production capacity at Fab 1, we may be unable to replicate these metrics in Fab 2 or in 

other facilities in the future. If we are unable to replicate our production facilities and achieve and sustain improved 

operating metrics as we expand our production facilities, our production capacity could be substantially constrained, 

our manufacturing costs per watt could increase, and we could lose customers, any of which could harm our 

business, financial condition and results of operations. 

Further, we may experience operational problems with our technology after its commercial introduction that 

could adversely impact our revenue or delay or prevent us from becoming profitable. We only commenced field 

testing of our first solar modules in August 2006 and, to date, Fab 1 has produced less than 30 MW of output. As a 

result, our thin film technology and photovoltaic systems do not have a sufficient operating history to confirm how 

they will perform over their estimated 25-year useful life. For example, although the hermetic seal that we use on our 

solar modules has been subjected to extensive testing by us, if it does not perform as expected, the GIGS thin film 

material used in our solar modules could be subject to moisture degradation, which would decrease the reliability 

and performance of our solar panels. In addition, under real-wand operating conditions, a typical photovoltaic 

system operates outside of standard test conditions for much of the time, and the conversion efficiencies of solar 

panels generally decrease when operating outside standard test conditions. Real-world conditions that can affect 

lifetime electricity output include the location and design of a photovoltaic system, insolation, soiling and weather 

conditions such as temperature and snow. If our thin film technology and photovoltaic systems perform below 

expectations or have unexpected reliability problems, we may be unable to gain or retain customers and could face 

substantial penalties and warranty expense. 

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We have incurred significant net losses since our Inception and our ability to achieve or sustain a positive 

gross margin and profitability depends on our ability to significantly increase our production capacity and 

reduce our manufacturing cost per watt faster than our average selling prices decrease. 

We have incurred significant net losses since our inception, including a net loss of $27.2 million in 2006, 

$114.1 million in 2007, $232.1 million in 2008 and $119.8 million in the first nine months of fiscal 2009, and we had 

an accumulated deficit of $505.0 million at October 3, 2009. We expect to continue to incur significant operating and 

net losses and negative cash flow from operations for the foreseeable future. Moreover, we expect that average 

selling prices of our photovoltaic systems will continue to decline until we offer OUr products at a price per watt that is 

comparable to conventional energy sources and alternative distributed generation technologies. The success of our 

business depends on our ability to significantly increase our production capacity, including the build-out of Phase I of 

Fab 2, and significantly reduce our manufacturing cost per watt. If we fail to achieve these objectives and reduce our 

manufacturing cost per watt faster than our average selling prices decrease, our business will be materially 

adversely impacted. 

We will need to raise significant additional capital in order to continue to grow our business and fund our 

operations, 

We will need to raise significant additional capital to fund our planned expansion of our manufacturing facilities 

and to grow our business. We do not know what forms of financing, if any, will be available to us for this planned 

expansion. If financing is not available on acceptable terms, if and when needed, our ability to fund our operations, 

further develop and expand our manufacturing operations and sales and marketing functions, develop and enhance 

our products, respond to unanticipated events, or otherwise respond to competitive pressures would be significantly 

limited. In any such event, our business, financial condition and results of operations could be harmed, and we may 

be unable to continue our operations. 

In particular, a key component of our expansion plan is the construction and build-out of Fab 2. We estimate 

that the cost, which is comprised of the total capital required for the land, buildings, improvements, manufacturing 

equipment and certain sales, marketing and other start-up costs, for Phase I and Phase II of Fab 2 will total 

approximately $1.38 billion. Although we have already secured funding for Phase I with a DOE guaranteed loan 

facility and a prior round of equity financing, we still need financing for Phase II. We estimate the cost of Phase II will 

be approximately $642 million. On September 11, 2009, we applied for a second loan guarantee from the DOE, in 

the amount of approximately $469 million, to partially fund Phase II. If our application is approved, we intend to fund 

Phase II with the proceeds from the loan and this offering. Although the DOE detenmined on November 4, 2009 that 

our initial application was complete, and we submitted the second part of the application on November 17, 2009, 

there is no guarantee that the DOE will approve our application in the full amount requested or at all. 

Even if the DOE determines to offer a loan guarantee for Phase II, we will have to negotiate the terms and 

conditions of the loan guarantee with the DOE and the underlying loan with the Federal Financing Bank. 

Accordingly. we cannot assure you of the timing for closing the planned financing for Phase II, and such financing 

may not be available at the time we would like to commence construction. Any delays in the approval of our 

application or the negotiation of the guarantee and undenying loan could have a material adverse impact on our 

ability to complete Phase II in a timely manner and would increase the ultimate construction costs for Phase II. 

If we do not receive a guaranteed loan under this program of approximately $469 million, we intend to fund 

any financing shortfall with some combination of the proceeds of this offering, cash flow from operations, debt 

financing and additional equity financing. These funding sources, however, may not be available in sufficient 

amounts at the time needed, or on favorable terms to us, for the construction 

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of Phase II. If we are not able to complete Fab 2 as planned, we may not be able to grow our business, realize the 

benefits of economies of scale or satisfy our customer requirements. If we are requirec to raise additional capital 

through future equity issuances, our existing equity holders could experience substantial dilution. If we are required 

to raise additional debt financing, we may be subject to restrictive covenants that may limit our ability to conduct our 

business. 

Our photovoftaic systems may not achieve broader market acceptance, which would prevent us from 

increasing our revenue and market share. 

The initial price of our solar panels is significantly higher than the initial price of solar panels with the same 

nameplate panel power rating offered by the majority of our competitors. As a result, certain system owners who 

focus more on the up-front price of solar panels than on achieving the lowest levelized cost of electricity per kilowatt 

hour, or LCOE, which is the ratio of a system's total life cycle cost to its total lifetime energy output, may clnoose the 

product offerings of those competitors that have a lower initial panel purchase price. If we fail to effectively 

demonstrate to system owners the LCOE value proposition of our systems, we may fail to achieve broader market 

acceptance of our systems, which would have an adverse impact on our ability to increase our revenue, gain market 

share and achieve and sustain profitability. 

Our ability to achieve broader market acceptance for our photovoltaic systems will be impactec by a number of 

other factors, including: 

whether system owners will adopt our CIGS thin film technology in a cylindrical module, which is a new 

technology with a limited history with respect to reliability and performance; 

whether system owners will be willing to purchase photovoltaic systems with an expected 25-year lifespan 

from us given our limited operating history; 

• the ability of prospective system owners to obtain long-term financing for our photovoltaic systems on 

acceptable terms or at all; 

our ability to produce photovoltaic systems that compete favorably against other photovoltaic systems on 

the basis of price, quality and performance; 

our ability to produce photovoltaic systems that compete favorably against conventional energy sources and 

alternative distributed generation technologies, such as wind and biomass, on the basis of price, quality and 

performance; and 

our ability to develop and maintain successful relationships with our customers and suppliers. 

Our financial condition and results of operations are likely to fluctuate in future periods. 

Our financial condition and results of operations have fluctuated significantly in the past and may continue to 

fluctuate from quarter to quarter in the future due to a variety of factors, many of which are beyond our control, 

including: 

fluctuations in currency exchange rates relative to the U.S. dollar, given that a majority of our revenue is 

currently denominated in Euro; 

the timing of shipments, which may depend on many factors such as availability of inventory and logistics or 

product quality or performance issues; 

the ability of our customers to pay the purchase price for our systems in a timely fashion; 

delays or cancellations of photovoltaic installations, including as a result of our customers' inability to obtain 

financing; 

fluctuations in our research and development expense, inctuding periodiC increases associated with the preproduction qualification of additional tools as we expand our production capacity; 

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delays or greater than anticipated expenses associated with the construction of Fab 2; 

weaker than anticipated demand for our photovoitaic systems due to changes in government subsidies and 

policies supporting renewable energy or other factors; 

seasonal trends and construction cycles of photovoltaic systems; 

unanticipated expenses associated with changes in governmental regulations and environmental, health 

and safety requirements; and 

general market conditions. 

Fluctuations in our operating results from period to period could cause our stock price to decline, give rise to 

short-term liquidity issues and may impact our ability to achieve and maintain profitability or cause other 

unanticipated issues. 

Our limited operating history makes it difficult to evaluate our current business and future prospects. 

We have only been in existence since 2005, and much of our growth has occurred in recent periods. Fab 1 

has only been producing commercial quantities of our photovoltaic systems since July 2008 and we only recently 

began construction of Phase I of Fab 2. Our limited operating history makes it difficult to evaluate our current 

business and our future prospects. We have encountered and will continue to encounter risks and difficulties 

frequently experienced by growing companies in rapidly changing industries. including increased expenses as we 

continue to grow our business. If we do not manage these risks and overcome these difficulties successfully, our 

business will suffer. 

Our efforts to achieve broader market acceptance for our photovoltaic systems and to expand beyond our 

existing markets may never succeed, which would adversely impact our ability to generate additional revenue or 

become profitable. Therefore, our recent growth trajectory may not provide an accurate representation of the market 

dynamics we may be exposed to in the future, making it difficult to evaluate our future prospects. 

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling 

our obligations. 

As of October 3, 2009, our total indebtedness was approximately $21.4 million and we anticipate incurring a 

total of $535 million under the DOE guaranteed loan facility by the time we have completed Phase I of Fab 2. We 

currently estimate that the construction of Phase" of Fab 2 will cost approximately $642 million, and we anticipate 

that we will incur a significant amount of additional indebtedness to finance a portion of Phase II. If we undertake 

additional expansion beyond Fab 2, we anticipate that we may incur significant additional indebtedness. Our 

substantial indebtedness could have important consequences, including: 

requiring us to generate a significant amount of cash flow from operations to service the payment of 

principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our 

operations, capital expenditures and future business opportunities; 

limiting our ability to obtain additional financing for working capital, capital expenditures, debt service 

requirements, acquisitions and general corporate or other purposes; 

increasing our vulnerability to general economic and industry conditions that may adversely affect our ability 

to repay any indebtedness and comply with applicable covenants, including financial covenants contained in 

our DOE guaranteed loan facility; and 

limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage 

compared to our competitors who have greater capital resources. 

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If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced 

to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our 

indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled 

debt service obligations. Failure to pay our indebtedness on time would constitute an event of default under the 

agreements governing our indebtedness, which would allow our lenders to accelerate the obligations and seek other 

remedies against us. 

We will need to meet certain funding conditions in order to draw funds under our $535 million DOE 

guaranteed loan facility and we are also subject to a number of affirmative, negative and financial 

covenants under this facility. 

The financing agreements with the Federal Financing Bank and the DOE governing our $535 million loan 

facility require us to meet certain funding conditions related to the development and construction of Phase I and 

specific performance milestones related to Fab 1. Our failure to meet any of these conditions to funding could result 

in our inability to access funds under this loan facility. 

In addition, our DOE guaranteed loan facility contains various affinmative, negative and financial covenants. 

The failure to comply with any of these covenants, or the occurrence of a change of control of us, would result in a 

default under this loan facility. If a default occurs, all of the outstanding obligations under this loan facility could 

become immediately due and payable and could result in a default and acceleration of any other outstanding debt. 

The existence of such a default could also preclude us from borrowing any remaining unfunded portion of the DOE 

guaranteed loan facility, and the DOE could exercise its remedies under the financing agreements governing the 

loan facility, including foreclosing on the assets of Phase I and requiring us to contribute the full amount of our $198 

million equity contribution to the extent that such equity contribution has not yet been applied to the cost of 

developing and constructing Phase I. A default under this loan facility, which could result from events beyond our 

control, if not cured or waived, would have a material adverse effect on us. 

There are significant risks associated with the planning, construction and completion of Fab 2. which may 

cause budget overruns or delays in the completion of the project. 

The scheduled completion dates for Fab 2 and the budgeted costs necessary to complete construction 

assume that there are no material unforeseen or unexpected difficulties or delays. Construction, equipment or 

staffing problems or difficulties in Obtaining financing or any of the requisite licenses, permits or authorizations from 

regulatory authorities could delay the construction or commencement of operations or otherwise affect the design 

and features of Fab 2. Such delays or other unexpected difficulties could involve additional costs and result in a 

delay in the scheduled expansion of Fab 2. Failure to complete Fab 2 within budget or on schedule may hanm our 

financial condition and results of operations. 

If we have any cost overruns in connection with the development and construction of Phase I and we do not 

generate positive future cash flow sufficient to fund those cost overruns, we may need to raise additional 

capital in order to meet our obligations. 

Phase I has an estimated cost of $733 million, including a contingency reserve of approximately $65 million, 

which we intend to fund with the proceeds of our $535 million DOE guaranteed loan facility and with $198 million of 

the proceeds of a previously completed private placement of our preferred stock. To the extent that the development 

and cost of construction of Phase I exceeds $733 million, we will be obligated to fund any such excess costs until 

the requirements of project completion have been satisfied. In addiUon, we have an obligation starting in our fourth 

fiscal quarter of 201 0 to establish an additional $30 million reserve for cost overruns. As a result, if we do not have 

sufficient funds or cash 

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flow to fund this $30 million reserve or any other excess costs, we will be required to raise additional capital to meet 

our obligations and to complete the construction of Phase I. Any such financing may not be available on acceptable 

terms, or at all, if and when needed. 

If potential purchasers of our photovoltaic systems are unable to secure financing on acceptable terms, we 

could experience a reduction in the demand for our photovoltaic systems. 

Many purchasers of photovoltaic systems depend on debt financing to purchase a system. The limited use of 

CIGS thin film technologies at commercial scale, coupled with our limited operating history. could result in lenders 

refusing to provide the financing necessary to purchase our photovoltaic systems on favorable terms, or at all. 

Moreover, even if lenders are willing to finance the purchase of our photovoltaic systems. an increase in interest 

rates could make it difficult for owners to secure the financing necessary to purchase a photovoltaic system on 

favorable terms. or at all. In addition, we believe that a significant percentage of owners purchase photovoltaic 

systems as an investment. funding the initial capital expenditure through a combination of equity and debt. 

Difficulties in obtaining financing for our photovoltaic systems on favorable terms, or increases in interest rates, 

could lower an investor's return on investment in our photovoltaic system. or make altemative photovoltaic systems 

or other investments more attractive relative to our photovoltaic systems, Any of these events could result in 

reduced demand for our systems. which could have a material adverse effect on our financial condition and results 

of operations, 

A drop in the retail price of electricity derived from the utility grid or from alternative energy sources, or our 

inability to deliver photovoltaic systems that compete with the price of retail electricity on a non-subsidized 

basis, may harm our business, financial condition and results of operations. 

We believe that a customer's decision to purchase our photovoltaic systems is to a significant degree driven 

by the relative cost of electricity generated by our systems compared to the applicable retail price of electricity from 

the utility grid and the cost of other renewable energy sources, including photovoltaic electricity delivered by our 

competitors, Decreases in the retail prices of electricity from the utility grid or from other renewable energy sources 

would make it more difficult for our photovoltaic systems to be competitive and could harm our business, financial 

condition and results of operations, The approval of the construction of a significant number of power generation 

plants, including nuclear, coal. natural gas or power plants utilizing other renewable energy technologies, and the 

approval of the construction of additional electric transmission and distribution lines, could reduce the price of 

electricity, thereby making the purchase of our systems less economically attractive, The ability of energy 

conservation technologies and public initiatives to reduce electricity consumption could also lead to a reduction in 

the price of electricity, which would also undermine the attractiveness of photovoltaic systems, Moreover, 

technological developments by our competitors in the solar power industry could allow them to offer customers 

electricity at costs lower than those that can be achieved from our photovoltaic systems, which could result in 

reduced demand for our systems. 

In addition, we may be unable to deliver photovoltaic systems for the commercial rooftop market that produce 

electricity at rates that are competitive with the price of retail electricity on a non-subsidized basis. If this were to 

occur, we will remain at a competitive disadvantage with other electricity providers and may be unable to attract new 

customers or retain existing customers, which could harm our business, financial condition and results of operations. 

The reduction or elimination of government subsidies and economic incentives for on-grid solar electricity 

applications could reduce demand for photovoltaic systems and harm our business. 

The market for on-grid applications, where solar power is used to supplement a customer's electricity 

purchased from the utility network or sold to a utility under tariff, depends in large part on the 

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availability and size of government and economic incentives that vary by geographic market. Because our sales are 

into the on-grid market, the reduction, elimination or expiration of government subsidies and economic incentives for 

on-grid solar electricity may result in the diminished competitiveness of solar electricity relative to conventional and 

non-solar renewable sources of electricity, and could harm the growth of the solar electricity industry and our 

business. 

Today, the cost of solar power exceeds retail electricity rates, As a result, federal, state and local government 

bodies in many countries, most notably Canada, France, Germany, Greece, Italy, Japan, Portugal, South Korea, 

Spain and the United States, have provided incentives in the form of feed-in tariffs, rebates, tax credits and other 

incentives to end users, distributors, system integrators and manufacturers of photovoltaic systems to promote the 

use of solar electricity in on-grid applications and to reduce dependency on other forms of energy. Many of these 

government incentives expire, phase out over time, terminate upon the exhaustion of the allocated funding or 

require renewal by the applicable authority. Reductions in, or eliminations or expirations of, govemmental incentives 

could result in decreased demand for and lower revenue from our photovoltaic systems. 

For example, Germany has been a strong supporter of photovoltaic products and systems. However, the 

German Renewable Energy Law, or the EEG, was modified as of January 1, 2009 by the German govemment and 

feed-in tariffs were significantly reduced compared with the former legislation, German subsidies decline at a rate of 

between 8.0% and 10.0%, based on the type of photovoltaic system, instead of between 5.0% and 6.5% per year 

prior to the effective date of the amendment to the EEG. The rate of decrease is subject to change based upon the 

overall market growth. The next review of German feed-in tariffs is scheduled for 2012. However, an earlier 

adjustment is possible following the recent election of a new government. If the German government reduces or 

eliminates the subsidies under the EEG, demand for photovoltaic products could significantly decline in Germany. 

The U.S. government has adopted various incentives, including a 30% federal investment tax credit available 

to businesses in the United States for the installation of photovoltaic systems. In October 2008, the U.S. Congress 

extended the 30% federal investment tax credit for both residential and commercial solar installations for eight 

years, through December 31, 2016. In early 2009, legislation was enacted that creates a new program, through the 

Department of the Treasury, which provides grants equal to 30% of the cost of solar installations that are placed in 

service during 2009 and 2010 or that begin construction prior to January 1, 2011 and are placed in service by 

January 1, 2017. This grant is available in lieu of receiving the 30% federal investment tax credit and, unlike the 

30% federal investment tax credit, can be currently utilized even if the recipient does not have federal income tax 

liability. Although the current legislative and regulatory environment in the United States provides Significant 

incentives for the adoption of solar photovoltaic electricity, changes in these laws or regulations could have a 

significant adverse impact on the solar photovoltaic industry and our business. 

Curren~y, an advantageous regulatory policy in certain states allows customers to interconnect their 

photovoltaic systems to the utility grid and offset their electricity purchases with excess solar electricity generation, 

which is known as net metering. In the absence of net metering regulation, utilities may purchase excess solar 

electricity at a reduced rate or not at all, thereby diminishing photovoltaic system economics for the system owner. 

Our ability to sell photovoltaic systems may be adversely impacted by the failure to expand net metering regulations 

in states which have implemented it, the failure to adopt net metering where it is not currently in place, or any 

limitation in the number of customer interconnections that utilities are required to allow. Net metering and other 

operational policies in California or other markets could also limit the amount of photovoltaic systems installed there. 

Belgium has several incentive schemes that vary by region, scope and subsidy mechanisms. For example, the 

Flanders region of Belgium utilizes green certificate remunerations, which in 2009 allowed photovoltaic system 

owners rebates of 450 Euros/MWh per year for 20 years, with no size limit on projects. These green certificates also 

allow the photovoltaic system owner to consume or sell the 

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electricity generated by the photovoltaic system. In 2010, the payment terms for these green certificates will drop to 

350 Euros/MWh, and will drop by an additional 20 Euros every year going forward. As these green certificate 

subsidies and other similar subsidies decline in Belgium, demand could decline and revenue from this region could 

decline. 

In Ontario, Canada, a new feed-in-tariff program was introduced in September 2009 and replaced the 

Renewable Energy Standard Offer Program as the primary subsidy program for future renewable energy projects. In 

order to participate in the Ontario feed-in-tariff program, certain provisions relating to minimum required domestic 

content and land use restrictions for solar installations must be satisfied. As these rules are currently written, we 

satisfy the initial domestic content requirements but may be unable to fully satisfy such rules (in particular domestic 

content requirement rules that are currently scheduled to take effect at the end of 2010) and thus qualify for the 

Ontario feed-in-tariff. In the event the Ontario domestic content rules are not sufficiently modified, our ability to 

participate in the Ontario feed-in-tariff program for future projects will be substantially reduced and possibly 

eliminated, and thus our ability to pursue an expansion strategy in Ontario, Canada would be adversely affected. 

Most of our manufacturing equipment is customized, and either we manufacture the equipment ourselves 

or provide our designs to third-party equipment manufacturers. If we are unable to manufacture our 

equipment for the costs we have budgeted or if our manufacturing equipment fails, we could experience 

cost overruns, delays in our expansion plans or disruptions in production and may be unable to satisfy 

customer demand. 

Most of our manufacturing equipment is customized for our production facilities based on designs or 

specifications that we use either to manufacture the equipment ourselves or provide to third-party equipment 

manufacturers. As we scale our equipment manufacturing operations, we may be unable to build the equipment for 

the costs that we have budgeted, which could result in incremental costs. In addition, the equipment that we have 

built so far and that we intend to continue building has a limited operating history and could fail to perform to 

specifications or have a shorter than expected operating life. In such cases, we may be forced to redesign, repair or 

replace this equipment earlier than anticipated which would result in incremental and unexpected equipment costs 

that could be substantial. If any piece of equipment fails or is damaged, production throughout a facility could be 

interrupted, and we could be unable to produce enough photovoltaic systems to satisfy customer demand, which in 

turn could lead to loss of market share and damage to our reputation and customer relationships. 

Our sales are based on purchase orders with our customers, both under the terms offramework 

agreements and on a standalone basis. If customers choose not to place purchase orders for our 

photovoltaic systems, it would reduce our net sales, which could lead to excess inventory and unabsorbed 

overhead costs. In addition, we may be forced to lower our prices to generate sales, which would negatively 

affect our operating results. 

Sales to our customers are made on a purchase order basis, both under the terms of framework agreements 

and on a standalone basis. Our existing framework agreements set forth volume and price expectations over a 

number of years, but they generally do not result in a firm purchase commitment until a purchase order is issued. 

The timing of placing these orders and the amounts of these orders are often at our customers' discretion and our 

ability to convert the preliminary volume expectations contained in our framework agreements into revenue will 

depend on a number of factors, including the financial condition of our customers and the availability of capital to 

finance solar projects as well as government subsidy programs for our photovoltaic systems. If our customers 

cancel, reduce, postpone or fail to make anticipated orders, it would result in the delay or loss of expected sales 

without allowing us sufficient time to reduce, or delay the incurrence of, our corresponding inventory and operating 

expenses. Moreover, to reduce our excess inventory, we may be forced to lower the selling prices of our 

ph010voltaic systems, which would result in lower revenue and have an adverse impact on our operating results. 

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Problems with product delivery delays or performance could subject us to substantial penalties under our 

customer agreements, which could harm our business and results of operations. 

Our customers may require protections in the form of price reductions, rescheduling of deliveries and similar 

arrangements that allow them to require us to deliver additional solar panels or reimburse them for losses they 

suffer as a result of our late delivery or failure to meet agreed upon performance specifications. Delays in delivery of 

our photovoltaic systems, unexpected performance problems in electricity generation or other events could cause us 

to fail to meet these contractual commitments, resulting in unanticipated revenue and eamings losses and financial 

penalties. Failure to meet these commitments could be caused by delays in obtaining necessary materials used in 

our production process, defects in material or workmanship or unexpected problems in our manufacturing process. 

The occurrence of any of these events could harm our business and results of operations. 

Problems with product quality or product performance may cause us to incur warranty expenses and may 

damage our market reputation and cause our revenue to decline. 

Consistent with standard practice in the solar industry, the duration of our photovoltaic system warranties is 

lengthy. We provide a limited warranty for defects in materials and workmanship of our panels under normal use 

and service conditions for five years following the installation of our photovoltaic systems. We also warrant to the 

owner of our photovoltaic systems that panels, when installed in accordance with our agreed-upon specifications, 

will have a minimum peak power output under standard test conditions of at least 90% of their initial nameplate 

panel power rating during the first 10 years following their installation and a minimum peak power output under 

standard test conditions of at least 80% of their initial nameplate panel power rating during the following 15 years. 

Due to the long warranty period, we bear the risk of warranty claims long after we have shipped product and 

recognized revenue. 

Because of the limited operating history of our photovoltaic systems, we have been required to make 

assumptions and apply judgments, based on acceleratad life cycle tesling conducted to measure performance and 

reliability, regarding a number of factors, including our antiCipated rate of warranty claims, the durability and 

reliability of our systems and the performance of our hermetic seal in isolating our active solar cell materials from 

moisture. Our assumptions could prove to be materially different from the actual performance of our systems, 

causing us to incur substantial expense to repair Of replace defective photovoltaic systems in the future. Any 

widespread product failures may damage our market reputation and cause our revenue to decline. 

We may be unable to sustain our growth or manage the expansion of our operations effectively and 

implement effective controls and procedures. 

We have only been in existence since 2005, and much of our growth has occurred in recent periods. We 

intend to continue to expand our business significantly, including through the expansion of the production capacity at 

Fab 1 and the development and construction of Fab 2. To manage the expansion of our operations, we will be 

required to improve our operational and financial systems, procedures and controls and expand, train and manage 

our growing employee base. OUf management will also be reqUired to maintain and expand our relationships with 

customers, suppliers and other third parties and attract new customers and suppliers, as well as to manage multiple 

locations. In addition, our current and planned operations. personnel, systems and internal procedures and controls 

might be inadequate to support our future growth, which would require us to make additional investment in our 

infrastructure. We may not be able to successfully improve our information and control systems to a level necessary 

to manage our growth, and we may discover deficiencies in existing systems and controls that we may not be able 

to remediate in an efficient or timely manner. If we cannot sustain our growth or manage our growth effectively, we 

may be unable to take advantage of market opportunities, execute our 

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business strategies or respond to competitive pressures, and our business, financial condition and results of 

operations could be harmed. Moreover, we will need to enhance and improve our existing internal control over 

financial reporting, particularly as we transition from a private to a public company. If we are unable to establish and 

maintain effective internal controls, our ability to accurately and timely report our financial position, results of 

operations or cash flows could be impaired, which could result in restatements of our consolidated financial 

statements or other material effects on our business, reputation, financial condition, results of operations or liquidity. 

Our dependence on third-party suppliers for raw materials used in our photovoltalc systems could increase 

our manufacturing costs. 

We may enter into long-term contracts with suppliers in order to ensure adequate supply of certain of the raw 

materials used in our photovoltaic systems. For example, we have negotiated a multi-year, binding contract directly 

with a glass supplier for the glass utilized in manufacturing our photovoltaic systems. Under these supply 

agreements, we may be required to purchase a specified quantity of materials at fixed prices, in some cases subject 

to upward inflation-related adjustments over a period of several years. We also may be required to make substantial 

prepayments to suppliers against future deliveries. These types of "take or pay" agreements allow suppliers to 

invoice us for a percentage of the full purchase price of materials we are under contract to purchase each year, 

whether or not we actually order the required volume. If for any reason we fail to order the required annual volume 

under these types of agreements or similar agreements, the resulting monetary damages could harm our business 

and results of operations. Additionally, long-term contractual commitments also expose us to specific counterparty 

risk, which can be magnified when dealing with suppliers without a long, stable production and financial history. For 

example, if one or more of our contractual counterparties is unable or unwilling to provide us with the contracted 

amount of materials, we could be required to obtain those materials in the spot market, which could be unavailable 

at that time, or only available at prices in excess of our contracted prices. In addition, in the event any such supplier 

experiences financial difficulties, it may be difficult or impossible, or may require substantial time and expense, for 

us to recover any or all of our prepayments. 

If we fail to manage distribution of our products properly, or if our value-added resellers' financial condition 

or operations weaken, our revenue could be adversely affected. 

We market and sell our photovoltaic systems directly through value-added resellers, such as large system 

integrators and roofing materials manufacturers. In order for us to maintain or increase our revenue, we must 

effectively manage our relationships with value-added resellers. 

Several factors could result in disruption of or changes in our distribution model, which could materially harm 

our revenue, including the following: 

we do not have exclusive arrangements with our value-added resellers, which may lead them to offer 

competing products that could reduce our sales; 

our value-added resellers may demand that we absorb a greater share of the risks that their customers may 

ask them to bear, for example by seeking to return products if they are unable to complete projects with the 

ultimate system owners or obtain long-term financing; and 

our value-added resellers may have insufficient financial resources and may not be able to withstand 

changes and challenges in business conditions. 

In addition, we depend on our value-added resellers to comply with applicable regulatory requirements in the 

jurisdictions in which they operate. Their failure to do so could have a material adverse effect on our business, and 

subject us to sanctions by the applicable governmental authority. 

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If we are unable to maintain our existing relationships and develop new relationships with value-added 

resellers, our revenue may be impacted negatively. 

We allocate the sale of our photovoltaic systems to key value-added resellers that we believe will allow us to 

maximize revenue in the future, even if the price at which such sales occur is not the highest price we could 

currently obtain. We believe that these value-added resellers are in.dustry leaders that will offer us expanded access 

to segments of the commercial rooftop market. There is intense competition for relationships with value-added 

resellers, and even if we can establish these relationships, such relationships may not generate significant revenue 

or may not continue to be in effect for any specific period of time. Although we have previously allocated sales of our 

photovoltaic systems to these value-added resellers, we cannot assure you that sales to these value-added 

resellers will increase in the future commensurate with the expected increases in our production capacity. If these 

relationships fail to materialize as expected, we could suffer delays in product deployment, our revenue could fail to 

grow or even decrease, and we could fail to achieve widespread adoption of our photovoltaic systems. 

We intend to continue to pursue business relationships with key value-added resellers to accelerate the sale 

and marketing of our photovoltaic systems. To the extent that we are unsuccessful in developing new relationships 

or maintaining our existing relationships, our future revenue and operating results could be impacted negatively. 

We are exposed to the credit risk of some of our customers, as well as credit exposures in weakened 

markets, wihich could adversely impact our financial condition and operating results. 

Most of our sales to customers are on credit, with typical payment terms ranging from 30 to 60 days. We 

expect demand for customer financing to continue. During periods of economic downturn in the global economy, our 

exposure to credit risks from our customers increases. Although we have programs in place to monitor and mitigate 

the associated risks, such programs may not be effective in reducing our credit risks. In the event of non-payment 

by one or mOre of our customers, our business could be materially adversely affected. Additionally, to the extent that 

the recent turmoil in the credit markets makes it more difficult for customers to obtain credit, our product sales could 

be adversely impacted, which in turn could have a material adverse impact on OUr financial condition and operating 

results. 

We face intense competition. 

The solar electricity and renewable energy industries are both highly competitive and continually evolving as 

participants strive to distinguish themselves within their markets and compete with the larger electric power industry. 

We believe that our main sources of competition are crystalline silicon photovoltaic systems manufacturers and 

other thin film photovoltaic systems manufacturers. 

Within the solar industry, we face competition from crystalline silicon photovoltaic cell and panel 

manufacturers, including BP Solar International Inc., General Electric Company, Sanyo North America Corporation, 

Sharp Electronics Corporation, SolarWorld AG, SunPower Corporation, Yingli Green Energy Holding Company 

Limited and Suntech Power Holdings Co., Ltd. The thin film component of the industry is largely made up of a broad 

mix of technology platforms at various stages of development, and consists of a large and growing number of 

medium- and small-sized companies. Competition from thin film photovoltaic system manufacturers includes First 

Solar, Inc. and United Solar Ovonic, LLC, and several crystalline silicon manufacturers who are developing thin film 

technologies. In addition, several emerging companies are pursuing a variety of methods to make CIGS-based thin 

film solar products and possibly compete in the commercial rooftop segment. These companies include AVANCIS 

GmbH & Co. KG, Honda Soltec Co., Ltd., MiaSo"" NanoSolar, Inc., Showa Shell Solar KK. and Wurth Solar 

GmbH & Co. We may also race competition from semiconductor equipment manufacturers, semiconductor 

manufacturers or their customers, several of which have already entered the solar photovoltaic market. 

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Some of our existing and potential competitors have substantially greater financial, technical, manufacturing 

and other resources than we do. The greater size of some of our competitors may provide them with a competitive 

advantage because they can realize economies of scale and purchase certain raw materials at lower prices. As a 

result of their greater size, some of our competitors may be able to devote more resources to the research, 

development, promotion and sale of their products or respond more quickly to evolving industry standards and 

changes in mar1<et conditions than we can. A number of our competitors also have greater brand name recognition, 

more established distribution networks and larger customer bases. In addition, a number of our competitors have 

well-established relationships with our current and potential customers and have extensive knowledge of our target 

markets. 

As photovoltaic system manufacturers expand their operations and the supply of silicon increases, the 

corresponding Increase in the global supply of solar photovoltaic products may cause substantial 

downward pressure on the prices of photovoltaic systems, resulting in lower revenue. 

Even if demand for photovoltaic systems continues to grow. the rapid expansion plans of many photovoltaic 

systems manufacturers could create periods where photovoltaic system supply exceeds demand. In addition, we 

believe that the significant increase in the supply, and the resulting significant decrease in cost, of silicon will result 

in substantial reductions in the manufacturing cost of crystalline silicon based photovoltaic systems and lead to 

pricing pressures on photovoltaic systems and potential oversupply. 

If confronted with such downward pricing pressures, our competitors could decide to reduce the sales price of 

their photovoltaic systems, even below their manufacturing cost, to generate sales. As a result, we might be forced 

to reduce the sales prices of our systems, which, absent a commensurate increase in our manufacturing efficiency 

and production output or decrease in our manufacturing costs, could result in lower revenue, harm our financial 

condition and results of operations and prevent us from achieving profitability. 

The success of our business depends on the continuing contributions of our key personnel and our ability 

to attract and retain new qualified employees in a competitive labor market. 

We have attracted a highly skilled management team and specialized workforce, including scientists, 

engineers, researchers and manufacturing and marketing professionals. If we were to lose the services of any of our 

executive officers or key employees, particularly Dr. Christian Gronet, our founder and Chief Executive Officer, our 

business could be harmed. With the exception of Dr. Gronet, we do not carry key person life insurance on any of our 

senior management or other key personnel. 

Our future success depends, to a significant extent, on our ability to attract, train and retain technical 

personnel. Recruiting and retaining capable personnel, particularly those with expertise in the solar power industry, 

thin film technology, CIGS and manufacturing processes. is vital to our success. Competition for personnel is 

intense, and qualified technical personnel are likely to remain a limited resource for the foreseeable future. Locating 

candidates with the appropriate qualifications can be costly and difficult. We may not be able to hire the necessary 

personnel to implement our business strategy given our anticipated hiring needs, or we may need to provide higher 

compensation or more training to our personnel than we currently anticipate. Moreover, any employee, including our 

officers, can terminate his or her relationship with us at any time. If we are unable to replace critical employees in a 

timely manner, or at all, our business may suffer. 

If we fail to protect our intellectual property rights adequately, our competitive position may be undermined. 

Our ability to compete effectively against competing solar power technologies will depend, in part, on our 

ability to protect our current and future proprietary technology, product designs and 

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manufacturing processes by obtaining, maintaining and enforcing our intellectual property rights through a 

combination of patents, copyrights, trademarks and trade secrets and also through unfair competition laws. We may 

not be able to obtain, maintain or enforce adequately our intellectual property and may need to defend against 

infringement or misappropriation claims, either of which could materially harm our business and prospects. We face 

numerous risks relating to our intellectual property rights, including: 

our pending U.S. and foreign patent applications may not result in issued patents, and the claims in our 

issued patents may not be sufficiently broad to prevent others from developing or using technology similar 

to ours or in developing, using, manufacturing, marketing or selling products similar to ours; 

given the costs of obtaining patents, we may choose not to file patent applications or not to maintain issued 

patents for certain innovations that later turn out to be important, or we may choose not to obtain foreign 

patent protection at all or in certain foreign countries, which later turn out to be important markets for us; 

we have no issued patents in any foreign jurisdictions and, even if our pending or future patent applications 

result in the issuance of foreign patents, the laws of some foreign jurisdictions do not protect intellectual 

property rights to the same extent as laws in the United States, and we may encounter difficulties in 

protecting and defending our rights in such foreign jurisdictions; 

our patents and other intellectual property rights may not be sufficient to deter infringement or 

misappropriation of our intellectual property rights by others; 

third parties may design around our patented technologies, independently develop substantially equivalent 

proprietary information, products and techniques or otherwise gain access to our proprietary information; 

third parties may seek to challenge or invalidate our patents, and if they are successful, the claims in our 

patents may be narrowed or our patents may be invalidated or rendered unenforceable; 

we may have to participate in proceedings such as interference, cancellation or opposition, before the U.S. 

Patent and Trademark Office, or before foreign patent and trademark offices, with respect to our patents, 

patent applications, trademarks or trademark applications or those of others, and these actions may result in 

substantial costs to us as well as a diversion of management attention; 

we may need to enforce Our intellectual property rights against third parties for infringement or 

misappropriation or defend our intellectual property rights through lawsuits, which can result in significant 

costs and diversion of management resources, and we may not be successful in those lawsuits or obtain 

adequate remedies for any infringement or misappropriation that occurs; 

while we rely on trade secret protection to protect our interests in proprietary know-how and processes for 

which patents are difficult to obtain or enforce, we may not be able to protect our trade secrets adequately; 

and 

the contractual provisions on which we rely to protect our trade secrets and proprietary information, such as 

our confidentiality and non-disclosure agreements with our employees, consultants and other third parties, 

may be breached, and our trade secrets and proprietary information may be disclosed to competitors, 

strategiC third parties and the public, or others may independently develop technology equivalent to our 

trade secrets and proprietary information. 

We may be exposed to Infringement or misappropriation claims by third parties, which, if determined 

adversely to us, could cause us to pay significant damage awards or prohibit us from the manufacture and 

sale of our photovoltaic systems or the use of our technology. 

In recent years, there has been Significant litigation involving patents and other intellectual property rights in 

many technology-related industries. There may be patents or patent applications in the United 

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States or other countries that are pertinent to our systems or business of which we are not aware. The technology 

that we incorporate into and use to develop and manufacture our current and future products may be subject to 

claims that they infringe the patents or proprietary rights of others. The success of our business will depend on our 

ability to develop new technologies without infringing or misappropriating the proprietary rights of others. Third 

parties may allege that we infringe patents, trademarks or copyrights, or that we have misappropriated trade 

secrets, and they could have significantly more resources to devote to any resulting enforcement actions. These 

allegations could result in significant costs and diversion of the attention of management. 

If a claim were brought against us, and we are found to infringe a third party's intellectual property rights, we 

could be required to pay substantial damages, including treble damages if it is determined that we have willfully 

infringed such rights, or be enjoined from using the technology deemed to be infringing or using, making or selling 

products deemed to be infringing. If we have supplied infringing products or technology to any of our customers, we 

may be obligated to indemnify those customers for damages they may be required to pay to the patent holder and 

for any losses they may sustain as a result of the infringement. In addition, we may need to attempt to license the 

intellectual property rights from the patent holder or spend time and money to design around or avoid the intellectual 

property. Any such license may not be available on reasonable terms, or at all, and our efforts to design around or 

avoid the intellectual property may be unsuccessful. Regardless of the outcome, litigation can be very costly and 

can divert management's efforts. Protracted litigation could also result in our customers or potential customers 

deferring or limiting their purchase or use of our systems until resolution of such litigation. An adverse determination 

may subject us to significant liabilities and disrupt our business. 

Existing regulations and changes to such regulations concerning the electric utility industry may present 

technical, regulatory and economic barriers to the purchase and use of photovoltaic systems. which may 

significantly reduce demand for our photovoltaic systems. 

The market for electricity generation products is heavily influenced by federal, state, local and foreign 

government regulations and policies concerning the electric umity industry, as well as internal policies and 

regulations promulgated by electric utilities. These regulations and policies often relate to electricity pricing and 

technical interconnection of customer-owned electricity generation. In the United States and in a number of other 

countries, these regulations and policies are being modified and may continue to be modified. Customer purchases 

of, or further investment in the research and development of, alternative energy sources, including photovoltaic 

technology. could be deterred by these regulations and policies, which could result in a significant reduction in the 

potential demand for our photovoltaic systems. For example, utility companies commonly charge fees to larger, 

industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric 

grid for back-up purposes. These fees could increase the cost to our customers of using our systems and make 

them less desirable, thereby harming our business, prospects, financial condition and results of operations. In 

addition, electriCity generated by photovoltaic systems mostly competes with expensive peak-hour electricity from 

the electric grid, rather than the less expensive average price of electricity. Modifications to the peak hour pricing 

policies of utilities, such as to a flat rate, would require photovoltaic systems to achieve lower prices in order to 

compete with the price of electricity from the electric grid. 

Our photovoltaic systems and their installation will be subject to oversight and regUlation in accordance with 

national, state and local laws and ordinances relating to building codes, safety, environmental protection, utility 

interconnection and metering and related matters. It is difficult to track the requirements of individual governmental 

authorities and design equipment to comply with the varying standards. Any new government regulations or utility 

policies pertaining to our systems may result in significant additional expenses to us and our customers and 

distributors and their customers and, as a result, could cause a significant reduction in demand for our systems. 

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Compliance with environmental regulations can be expensive, and noncompliance with these regulations 

may result in potentially significant monetary damages and penalties and adverse publicity. 

Our operations involve the use, handling, generation, processing, storage, transportalion and disposal of 

hazardous materials and are subject to extensive environmental laws and regulations at the national, state, local 

and international level. Such environmental laws and regulations include those governing the discharge of pollutants 

into the air and water, the use, management and disposal of hazardous materials and wastes, the cleanup of 

contaminated sites and occupational health and safety. We have incurred, and will continue to incur, costs in 

complying with these laws and regulations. Any failure by us to control the use of or generation of, limit exposure to, 

or to restrict adequately the discharge or disposal of, hazardous substances or wastes or to otherwise comply with 

the complex, technical environmental laws and regulations governing our activities could subject us to potentially 

significant monetary damages and penalties, criminal proceedings, third·party property damage or personal injury 

claims, natural resource damage claims, cleanup costs or other costs, or restrictions or suspensions of our business 

operations. In addition, under some foreign, federal and state statutes and regulations governing liability for releases 

of hazardous substances or wastes to the environment, a governmental agency or private party may seek recovery 

of response costs or damages from generators of the hazardous substances or operators of property where 

releases of hazardous substances have occurred or are ongoing, even if such party was not responsible for the 

release or otherwise at fault. Also, federal, state or international environmental laws and regUlations may ban or 

restrict the availability and use of certain hazardous or toxic raw materials, such as cadmium, that are or may be 

used in producing our systems, or placing on the market products that contain certain hazardous or toxic materials 

in concentrations or amounts that exceed allowable limits, and substitute materials may be more costly or 

unsatisfactory in performance, Federal, state or international environmental laws and regulations may require us in 

the future to collect our products from system owners for recycling or disposal at the end of their life cycle and the 

costs associated with such product take-back requirements could be material to our financial condition or results of 

operations. While we are not aware of any outstanding, material environmental claims, liabilities or obligations, 

future developments such as the implementation of new, more stringent laws and regulations, more aggressive 

enforcement poliCies, or the discovery of unknown environmental conditions associated with our current or past 

operations or properties may require expenditures that could harm our business, financial condition or results of 

operations, Any noncompliance with or incurrence of liability under environmental laws may subject us to adverse 

publicity, damage our reputation and compeUtive position and adversely affect sales of our systems. 

Compliance with occupational safety and health requirements and best practices can be costly, and 

noncompliance with such requirements may result in potentially significant monetary penalties and adverse 

publicity, 

Our manufacturing operations and research and development activities involve the use of mechanical 

equipment and hazardous chemicals, which involve a risk of potential injury to our employees. These operations are 

subject to regulation under the U,S, Occupational Safety and Health Act. If we fail to comply with these regulations, 

or if an employee injury occurs, we may be required to pay substantial penalties, incur significant capital 

expenditures, suspend or limit production or cease operations. Also, any such violations, employoe injuries or failure 

to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive 

position and adversely affect sales of our systems. 

Product liability claims against us could result In adverse publicity and potentially significant monetary 

damages. 

Like other retailers, distributors and manufacturers of products that are used by consumers, we face an 

inherent risk of exposure to product liability claims in the event that the use of the photovoltaic systems we sell 

results in injury to consumers or our customers, Because our photovoltaic systems are 

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electricity producing devices, it is possible that consumers or our customers could be injured or killed by our 

systems, whether by product malfunctions, defects, improper installation or other causes. In addition, since we have 

a limited operating history and the products we are selling incorporate new technologies and use new installation 

methods, we cannot predict whether or not product liability claims will be brought against us in the future or the 

effect of any resulting adverse publicity on our business. We rely on our general liability insurance to cover product 

liability claims and have not obtained separate product liability insurance. The successful assertion of product 

liability claims against us could result in potentially significant monetary damages, and if our insurance protection is 

inadequate to cover these claims, we could be required to make significant payments. Also, any product liability 

claims and any adverse outcomes with respect thereto may subject us to adverse publicity, damage our reputation 

and competitive position and adversely affect sales of our systems. 

We have significant international activities, which subject us to a number of risks. 

We expect that revenue from customers outside of the United States will continue to represent a substantial 

portion of our total revenue for the foreseeable future, and we may seek to establish manufacturing facilities in 

international locations. Risks inherent to international operations include the following: 

multiple, confiicting and changing laws and regulations, including export and import restrictions, tax laws 

and regulations, environmental regulations, labor laws and other government requirements, approvals, 

permits and licenses; 

difficulties in enforcing agreements in foreign legal systems; 

difficulties and costs in staffing and managing foreign operations; 

difficulties and costs in recruiting and retaining individuals skilled in international business operations; 

financial risks, such as longer sales and payment cycles and greater difficulty collecting accounts 

receivable; 

fluctuations in currency exchange rates relative to the U.S. dollar; 

inability to obtain, maintain or enforce intellectual property rights; 

changes in genera! economic and political conditions in the countries in which we operate, including 

changes in government incentives relating to solar electricity; 

• risk of nationalization of private enterprises; and 

• political and economic instability, including wars, acts of terrorism, political unrest, boycotts, curtailments of 

trade and other business restrictions. 

Doing business in foreign markets requires us to be able to respond to rapid changes in market conditions in 

these countries. The success of our business will depend, in part, on our ability to succeed in differing legal, 

regulatory. economic, social and political environments. We may not be able to develop and implement policies and 

strategies that will be effective in each location where we do business. 

Fluctuations in foreign currency exchange rates could decrease our revenue or increase our expenses. 

We expect that a SUbstantial portion of our total revenue for the foreseeable future will be generated outside 

the United States. We presently have currency exposure arising from both sales and purchases denominated in 

foreign currencies. For example, for the nine months ended October 3, 2009, 66% of our revenue was denominated 

in Euro and our revenue benefited from a strong Euro. We are exposed to the risk of a decrease in the value of 

these foreign currencies relative to the U.S. dollar, which would 

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decrease our total revenue. Changes in exchange rates between foreign currencies and the U.S. dollar may harm 

our operating results. For example, if these foreign currencies appreciate against the U.S. dollar, it will make it more 

expensive in terms of U.S. dollars to purchase inventory or pay expenses with foreign currencies. In addifton, 

currency devaluation can result in a loss to us if we hold deposits of that currency. An increase in the value of the 

U.S. dollar relative to foreign currencies could make our systems more expensive for our international customers, 

which we typically expect to purchase our photovoltaic systems in U.S. dollars, than locally manufactured products, 

thus potentially leading to a reduction in our sales. Furthermore, many of our competitors are foreign companies that 

could benefit from such a currency fluctuation, making it more difficult for us to compete with those companies. The 

forward contracts we from time to time use to protect against the foreign currency exchange rate risk inherent in our 

equipment purchases denominated in currencies other than the U,S. dollar may not adequately cover our exposure. 

Our ability to use our net operating losses to offset future taxable income may be subject to certain 

limitations. 

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue 

Code, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its prechange net operating losses, or NOLs, to offset future taxable income. Our existing NOLs may be subject to 

limitations arising from previous ownership changes, and if we undergo an ownership change in connection with or 

after this offering, our ability to utilize NOLs could be further limited by Section 382 of the Internal Revenue Code. 

Future changes in our stock ownership, some of which are beyond our control, could result in an ownership change 

under Section 382 of the Internal Revenue Code. Furthermore, our ability to uftlize NOLs of any companies that we 

may acquire in the future may be subject to limitations. For these reasons, in the event we experienced a change of 

control, we may not be able to utilize a material portion of the NOLs reflected on our balance sheet, even if we attain 

profitability. 

Our business could be adversely affected by seasonal trends and construction cycles. 

We may be subject to industry-specific seasonal fluctuations in the future, particularly in climates that 

experience colder weather during the winter months, such as Belgium, Canada, Germany and the United States. 

There are various reasons for seasonality fluctuations, mostly related to economic incentives and weather patterns. 

For example, in European countries with feed-in tariffs, the construction of photovoltaic systems may be 

concentrated during the second half of the calendar year, largely due to the annual reduction of the applicable 

minimum feed-in tariff and the fact that the coldest winter months are January through March. In the United States, 

customers will sometimes make purchasing decisions towards the end of the year in order to take advantage of tax 

credits or for budgetary reasons. In addition, construction levels are typically slower in colder months. Accordingly, 

our business and quarterly results of operations could be affected by seasonal fluctuations in the future. 

Our headquarters and other facilities are located in an active earthquake zone, and an earthquake or other 

types of natural disasters or reSOUrce shortages could disrupt and harm our results of operations. 

We conduct our operations in the San Francisco Bay Area in an active earthquake zone, In addition, California 

from time to time has experienced shortages of water, electric power and natural gas. The occurrence of a natural 

disaster, such as an earthquake, drought, flood or localized extended outages of critical utilities or transportation 

systems, or any critical resource shortages, could cause a Significant interruption in our business, damage or 

destroy our facilities, manufacturing equipment or inventory and cause us to incur significant costs, any of which 

could harm our business, financial condition and results of operations. The insurance we maintain against fires, 

earthquakes and other natural disasters may not be adequate to cover our losses in any particular case. 

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Registration Statement on Form S-I Page 38 of211 

Table of Contents 

Risks Related to This Offering and to Our Common Stock 

Our share price may be volatile and you may be unable to sell your shares at or above the initial public 

offering price. 

The initial public offering price for our shares will be determined by negotiations between uS and 

representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. The 

market price of shares of our common stock could be subject to wide fiuctuations in response to many risk factors 

listed in this section, and others beyond our control, including: 

delays or other changes in our expansion plans; 

actual or anticipated fiuctuations in our financial condition and operating results; 

our cash and short-term investment position; 

actual or anticipated fiuctuations in our growth rate relative to our competitors; 

actual or anticipated fiuctuatlons in our competitors' operating results or changes in their growth rate; 

announcements of technological innovations or new products by us or our competitors; 

adverse announcements regarding product performance; 

reductions in the retail price of electricity; 

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or 

capital commitments; 

additions or losses of customers; 

additions or departures of key personnel; 

competition from existing products or new products that may emerge; 

the failure of securities analysts to cover our common stock after this offering or updates or changes in 

financial estimates or recommendations by securities analysts; 

the inability to meet the financial estimates of securities analysts who follow our common stock; 

fiuctuations in the valuation of companies perceived by investors to be comparable to us; 

disputes or other developments related to our intellectual property rights, including litigation, and our ability 

to obtain and maintain patent protection for our technologies; 

changes in laws, regulations and policies applicable to our business and products, particularly those relating 

to government incentives for on-grid solar electricity applications; 

• announcement or expectation of additional financing efforts; 

sales of our common stock by us or our stockholders; 

share price and volume fiuC\uations attributable to inconsistent trading volume levels of our shares; 

general market conditions in our industry and the indus1ries of our customers; and 

• general economic and market conditions. 

Furthermore, the stock markets have experienced extreme price and volume fiuctuations that have affected 

and continue to affect the manket prices of equity securities of many companies. These fiuctuations often have been 

unrelated or disproportionate to the operating performance of those companies. These broad market and industry 

fluctuations, as well as general economic, political and 

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Table of Contents 

market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively 

impact the market price of shares of our common stock. If the market price of shares of our common stock after this 

offering does not exceed the initial public offering price, you may not realize any return on your investment in us and 

may lose some or all of your investment. In the past, companies that have experienced volatility in the market price 

of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in 

Ihe future. Securities litigation against us could result in sUbstantial costs and divert our management's attention 

from other business concerns, which could seriously harm our business. 

No public market currently exists for our common stock, and an active trading market may not develop or 

be sustained following this offering. 

Prior to this offering, there has been no public market for our common stock. Although we have applied to 

have our common stock listed on , an active public trading market for our common stock may not develop or, 

if it develops, may not be sustained after this offering. The lack of an active market may impair your ability to sell 

your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active 

market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise 

capital to continue to fund operations and may impair our ability to acquire other companies or technologies by using 

our shares as consideration. 

Public investors will experience immediate and substantial dilution as a result of this offering. 

The initial public offering price will be substantially higher than the net tangible book value per share of shares 

of our common stock immediately following this offering. Therefore, if you purchase common stock in this offering, 

you will experience immediate and substantial dilution of your investment. Based upon the issuance and sale 

of shares of common stock by us at an assumed initial public offering price of $ per share (the 

midpoint of the price range set forth on the cover page of this prospectus), you will incur immediate dilution of 

approximately $ in the net tangible book value per share if you purchase shares of our common stock in this 

offering. 

We also have approximately outstanding stock options and warrants to purchase common stock with 

exercise prices that are below the assumed initial public offering price of the common slack. To the extent that these 

options and warrants are exercised, you will experience further dilution. For further information, see the ~Dilution" 

section of this prospectus. 

A Significant portion of our total outstanding shares of common stock is restricted from immediate resale 

but may be sold into the market in the near future. This could cause the market price of our common stock 

to drop significantly. 

Sales of a substantial number of shares of our common stock in the public market could occur at any time 

following this offering. subject to certain securities law restrictions and the terms of contractual lock-up agreements. 

Sales of shares of our common stock, or the perception in the market that the holders of a large number of shares of 

common stock intend to sell shares, could reduce the market price of our common stock. After this offering, we will 

have outstanding shares of common stock. Of these shares, if Argonaut Ventures I:L.L.C., or Argonaut, 

were to purchase all of the shares it has the right to purchase, shares are or will be currently 

restricted from transfer under securities laws or pursuant to lock-Up agreements described in the "Underwriting" and 

"Certain Relationships and Related Party Transactions" sections of this prospectus. but will be able to be resold 

after the offering as described in the "Shares Eligible for Future Sale" section of this prospectus. As of October 3, 

2009, our three largest stockholders beneficially own 56.9% of our outstanding common stock, as calculated on an 

as-converted basis. If one or more of them were to sell a substantial portion of the shares they hold, the market 

price of our common stock could decline. 

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Table of Contents 

Moreover, after this offering, holders of an aggregate of shares of our common stock will have rights, 

subject to certain conditions, to require us to file registration statements covering their shares or to include their 

shares in registration statements that we may file for ourselves or other stockholders. If such rights are exercised, 

once we register these shares, they can be freely sold in the public market, subject, if applicable, to the lock-up 

agreements described in the "Underwriting" section of this prospectus. 

After this offering, we intend to register approximately shares of common stock that we have issued or 

may issue under our equity plans. Once we register these shares, they can be freely sold in the public market upon 

issuance and once vested, subject, if applicable, to the lock-up agreements described in the "Underwriting" section 

of this prospectus. 

If securities or industry analysts do not publish research or publish misleading or unfavorable research 

about our business, our stock price and trading volume could decline. 

The trading market for our common stock will depend in part on the research and reports that securities or 

industry analysts pUblish about us or our business. If no or few securities or indUstry analysts commence coverage 

of our company, the trading price and liquidity for our stock could be negatively impacted. In the event we obtain 

securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our stock or 

publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or 

more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our 

stock could decrease, which could cause our stock price or trading volume to decline. 

Our directors, officers and principal stockholders will continue to have substantial control over us after this 

offering, which may limit our stockholders' ability to influence corporate matters and delay or prevent a 

third party from acquiring control over us. 

Upon completion of this offering, if Argonaut were to purchase all of the shares it has the right to 

purchase, our directors, officers and existing stockholders who hold at least 5% of our stock will beneficially own, in 

the aggregate, approximately % of our outstanding common stock, compared to % represented by the shares 

sold in this offering, assuming no exercise of the underwriters' over-allotment option. As of October 3, 2009, our 

three largest stockholders beneficially own 56.9% of our outstanding common stock, as calculated on an asconverted basis. As a result, these stockholders will be able to exercise infiuence over all matters requiring 

stockholder approval, including the election of directors and approval of corporate transactions, such as a merger or 

other sale of our company or its assets. This concentration of ownership will limit your ability to infiuence corporate 

matters and could delay or prevent a third party from acquiring control over us. For information regarding the 

ownership of our outstanding stock by our executive officers and directors and their affiliates, please see the section 

titled "Principal Stockholders." 

If Argonaut purchases all of the shares that it has the right to purchase, it would reduce the available public 

fJoat for our shares. 

Argonaut, which together with its affiliates beneficially owns approximately 35.7% of our outstanding common 

stock on an as-converted basis, has the right to purchase from us up to 15% of the aggregate number of shares 

offered in this offering at the initial price to the public, but is under no obligation to purchase any shares. If Argonaut 

were to purchase all of these shares, Argonaut would beneficially own approximately % of our outstanding 

common stock after this offering and our directors, officers and existing stockholders who hold at least 5% of our 

stock would beneficially own, in the aggregate, approximately % of our outstanding common stock after this 

offering, based on shares of common stock outstanding after this offering, assuming no exercise of the 

underwriters over-allotment option. 

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Table of Contents 

If Argonaut purchases all or a portion of the shares it has the right to purchase, such purchase would reduce 

the available public fioat for our shares because Argonaut would be restricted from selling the shares by restrictions 

under applicable securities laws and contractual lock-up provisions. As a result, any purchase of shares by Argonaut 

may reduce the liquidity of our common stock relative to what it would have been had these shares been purchased 

by investors that were not affiliated with us. 

We will incur increased costs and our management will face increased demands as a result of operating as 

a public company_ 

We have never operated as a public company. As a public company, we will incur significant legal, accounting 

and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or the 

Sarbanes-Oxley Act, as well as related rules implemented by the U.S. Securities and Exchange Commission, or the 

SEC, and , impose various requirements on public companies. Our management and other personnel will 

need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations 

will increase our legal and financial compliance costs and will make some activities more time-consuming and 

costly. For example, we expect these rules and regulations to make it more expensive for us to maintain director 

and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to 

serve on our board of director or as our executive officers. 

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control 

over financial reporting and disclosure controls and procedures. In particular, we must perform system and process 

evaluation and testing of our internal control over financial reporting to allow management and our independent 

registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as 

required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 will require that we incur 

substantial accounting expense and expend significant management time on compliance-related issues. We will 

need to hire additional accounting and financial staff with appropriate public company experience and technical 

accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely 

manner, our stock price could decline, and we could face sanctions, delisting or investigations by , or 

other material effects on our business, reputation, results of operations, financial condition or liquidity. 

Our management will have broad discretion over the use of the proceeds we receive in this offering and 

might not apply the proceeds in ways that increase the value of your investment. 

Our management will have broad discretion to use the net proceeds from this offering, and you will be relying 

on the judgment of our management regarding the application of these proceeds. Our management might not apply 

the net proceeds of this offering in ways that increase the value of your investment. We intend to use the net 

proceeds from this offering to fund costs of Phase II of Fab 2 and any remaining balance for general corporate 

purposes, including for working capital, repayment of amounts, if any, drawn under our existing revolving loan facility 

with Argonaut and additional capital expenditures. We may also use a portion of our net proceeds to fund 

acquisitions of complementary businesses, products or technologies. We have not allocated these net proceeds for 

any specific purposes. OUf management might not be able to yield a significant return, if any, on any investment of 

these net proceeds. You will not have the opportunity to influence our decisions on how the net proceeds from this 

offering are used. 

Because we do not intend to pay dividends on our common stock, stockholders will benefit from an 

investment in our common stock only if it appreciates in value. 

We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain 

our future earnings, if any, to support our operations and to finance the growth and 

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Table of Contents 

development of our business and do not expect to pay cash dividends in the foreseeable future. As a result, the 

success of an investment in our common stock will depend upon appreciation in the value of our common stock.. 

There is no guarantee that our common stock will appreciate in value or even maintain its current price. Investors 

seeking cash dividends should not invest in our common stock. 

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a 

change in control of our company and may affect the trading price of our common stock. 

Our amended and restated certificate of incorporation and bylaws to be effective upon the closing of this 

offering will contain provisions that could have the effect of rendering more difficult or discouraging an acquisition 

deemed undesirable by our board of directors. Our corporate governance documents will include the following 

provisions: 

authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other 

rights superior to our common stock; 

limiting the liability of, and providing indemnification to, our directors and officers; 

limiting the ability of our stockholders to call and bring business before special meetings and to take action 

by written consent in lieu of a meeting; 

requiring advance notice of stockholder proposals for business to be conducted at meetings of our 

stockholders and for nominations of candidates for election to our board of directors; 

establishing a classified board of directors, as a result of which the successors to the directors whose terms 

have expired will be elected to serve from the time of election and qualification until the third annual meeting 

following their election; 

requiring that directors only be removed from office for cause; and 

limiting the determination of the number of directors on our board and the filling of vacancies or newly 

created seats on the board to our board of directors then in office. 

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the 

Delaware General Corporation Law, whiclh prevents some stockholders holding more than 15% of our outstanding 

common stock from engaging in certain business combinations without the prior approval of our board of directors or 

the holders of substantially all of our outstanding common stock. 

These provisions of our charter documents and Delaware law, alone or together, could delay or deter hostile 

takeovers and changes in control or changes in our management. Any provision of our amended and restated 

certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control 

could limit the opportunity for our stockholders to receive a premium for their shares of our common stock. Even in 

the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market 

price of our common stock if they are viewed as discouraging takeover attempts in the future. 

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Registration Statement on Form S-l Page 43 of211 

Table of Content. 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA 

This prospectus includes forward-looking statements. All statements other than statements of historical facts 

contained in this prospectus, including statements regarding our future results of operations and financial position, 

business strategy and plans and our objectives for future operations, are forward-looking statements. The words 

~believe," "may," "will," ~estimate." "continue," "anticipate," "intend," "expect" and similar expressions are intended to 

identify forward-looking statements. We have based these forward-looking statements largely on our current 

expectations and projections about future events and financial trends that we believe may affect our financial 

condition, results of operations, business strategy, short-term and long-term business operations and objectives, 

and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and 

assumptions, including those described in the "Risk Factors" section of this prospectus. In light of these risks, 

uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not 

occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking 

statements. 

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to 

time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our 

business or the extent to which any factor, or combination of factors, may cause actual results to differ materially 

from those contained in any forward-looking statements we may make. Before investing in our common stock, 

investors should be aware that the occurrence of the risks, uncertainties and events described in the section entitled 

"Risk Factors" and elsewhere in this prospectus could have a material adverse effect on our business, results of 

operations and financial condition. 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that 

the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future 

results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will 

be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and 

completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking 

statements for any reason after the date of this prospectus to conform these statements to actual results or to 

changes in our expectations. 

This prospectus also contains statistical data and estimates, including those relating to market size and growth 

rates of the markets in which we participate, that we obtained from industry publications and reports generated by 

the California Renewable Energy Transmission Initiative, the Database of State Incentives for Renewables & 

Efficiency, Ecofys, Euromonitor, Freedonia Group, iSuppli, the National Renewable Energy Laboratory, Navigant 

Consulting, Navigant Consulting PV Senvices, New Energy Finance, the U.S. Energy Information Administration and 

Solarbuzz. These data and estimates involve a number of assumptions and limitations, and you are cautioned not to 

give undue weight to them. These publications typically indicate that they have obtained their information from 

sources they believe to be reliable, but do not guarantee the accuracy and completeness of their information. 

Although we have assessed the information in the publications and found it to be reasonable and believe the 

publications are reliable, we have not independen~y verified their data and, accordingly, we cannot guarantee their 

accuracy or completeness. In addition, projections, assumptions and estimates of the future performance of the 

industries in which we operate and the markets we senve are necessarily subject to a high degree of uncertainty and 

risk. 

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Document 

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The slOry made it onto the WSJ, 35 well. 

htlp:I/online.wsi,coml~rt!cle/Slll00014240S2748704629fl0457S3;Ml;l3..!D1ZQ~S,html?-'nod~goo!!lenews ws! 

Great update -I hav€ no eomrnerrts.. 

Thanks. 

below are some updates on 117, from our weekly call this 

course ofthe week. don't update 

leI me know if yo\! have 

Current loans: 

its existing 

shareholders, has explained as a it is 

something 018 black eye forthe company. It do!!s howevertempornrl!y alleviate some of the cash bum 

21 
536 


76267.439

1214 

concerns we've ralsed in the past, ~~;~I~!:.~:;~I~~~;;;;~'~~:;~~~;;~:~~;;t;~~ ilLmonIt9l!!lK.!l!!lc[jolllmm£9111~Iy; if DOE does 

given the high profile 5-1, POTUS and VPOWS evenlsover t'le pa,t year. 
537 


76267.440

II 

P(()8r,w' Examioor 

Energy Sr.m,h 

Office of Management a 

Tel: 

EmilI!: 
538 


76267.441

Document 

72 
539 


76267.442

~ To: 

Sent: .. ~~------- Subject: 

Treasury staff has learned from the Office of Management and Budget that the Department of Energy is close to 

implementing a set of adjustments to the Solyndra Loan Guarantee Agreement in response to Solyndra's 

financial condition. We understand that these adjustments may include subordination ofSolyndra's $535 

mi1lion reimbursement obligation to DOE and possibly the forgiveness of interest. Unless DOE has other 

authorities, these adjustments may require approval of the Department ofJustice pursuant to 31 USC 3711 and 

31 CFR Part 902. Unless other authorities exist, this statute rests with DOJ the authority to accept the 

compromise of a claim of the U.S. Government in those instances where the principal balance of a debt exceeds 

$\00,000. Let me know if you need the name ofa contact at DOJ. 

Will you be referring the contemplated adjustment to DOJ or are there other authorities that DOE is using to 

compromise this debt? 

Please let us know if the FFB can be of any assistance as you move forward. If you need to modify any FFB 

agreements, please let me know. 

Sincerely, 

-

000005 
540 


76267.443

Document 

73 
541 


76267.444

From: 

To; 

Cc; 

Subject: 

Date, 

Attachments: 

Importance: 

-

QUI Present<lUOO 

Monday. December 15, 2008 11:19:46 AM 

Three Highest l'rIorJtjes 12 16 08 doc 

High 

Attached is the draft presentation for the CRB tomorrow that provides an update on Solyndra, Front-End 

and Nuclear. Let me know if you have addi~onal information that should be Included - or changes. 

Thanks! 

-

76267.445

TITLE XVII LOAN GUARANTEE PROGRAM 

THREE ffiGHEST PRIORITIES THROUGH JANUARY 15, 2008 

I. PRESENTATION OF THE SOL YNDRA PROJECT TO THE eRn FOR APPROVAL BY JAN

15TH. 

Due Diligence: Proceeding on schedule. LGPO and GC will meerwith Solyndra and its associated advis

December 17-18 to discuss and negotiate terms and conditions. 

Independent Engineer: On December 22nd, the independent engineer will provide the LGPO with an ou

their engineering report and will also identify issues. A draft engineering report is expected the week of J

5th. 

Marketing Consultant: will not be available through "sources sought" by January but the LGPO has ob

two "off the shelf' studies which will be sufficient for the CRB including an European study and a domes

We will make the independent marketing consultant study a condition precedent (CP) to ultimate closing. 

same will be the case for the NEP A FONS! report, a CP to closing. 

Outside Counsel: Outside counsel is on-board as of December 11 tl>. 

Term Sheet Template: has not been agreed with GC which is an integral part of the approval documenta

forms the basis of the final negotiations with the,client. 

12115/08 

76267.446

IT. FRONT END NUCLEAR RECOMMENDATION TO THE CRB BY JANUARY 15TH. 

Independent Engineer: LGPO staff travelled to OakRidge December 9-12 to launch the independent e

study for both USEC and AREV A. 

NEPA: A DOE NEPA regulation (10 CFRPart 1021, Section 216) report is required for the Front End 

Solicitation due to the oversubscription of a limited allocation available among the applicants. The LGP

staff assures that this report can be completed by January 15th without the necessity for any outside assis

Programmatic Counsel: GC support is required to assist in the due diligence process. Specifically, ass

required to review the completed Part II submissions as well as structuring issues. LGPO will'provide G

December 5, 2008 with a reco=ended list for programmatic counsel as well as a proposed scope of wo

effort must be handled on a programmatic basis, there is insufficient time to handle this through the "sou

sought" process. Programmatic counsel must be identified and on board within the week of December 1

latest to meet the January 15th schedule and can be funded by the LGPO or the GC office. 

12/15/08 2 

76267.447

ill. NUCLEAR POWER FACILITIES RECOMMENDATION TO THE CRB BY JANUARY 15T

PROCEED ON DUE DILIGENCE FOR A SELECTED NUMBER OF THE APPLICANTS. 

Status of Applications: Part II applications are due on Friday December 19th• To date, the LGPO has rece

Part II application. LGPO will commence work on the Part IIs on a rolling basis as they are received. 

Programmatic Consultants: Since approval is being sought to proceed with due..diligence only, there is n

need for programmatic consultants with the exception of the need for GC involvement and support. 

Programmatic Counsel: GC support is required to assist in the evaluation of the Part II applications. Part

nuclear experience is desired and therefore, this requirement must be serviced by some form of programma

counsel funded either by the LGPO or the GC office. This issue must be resolved within the week of DeC

15,2008 liltest to meet the January 15th schedule. 

12/15108 
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Document 

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------------- From: 

Sent: 

To: 

Cc: 

Subject: 

_ -- I think that you have overlooked the major factor in the response regarding the 

model artifact that might point to a potential liquidity issue in September 21311. That is, 

for this period of time the Project has not yet reached Project Completion, as defined in the 

agreements. Liquidity at the Project level is simply not relevant during this period, as the 

duty for the parent to deliver a completed Project still applies, and the parent guarantee is 

to meet all cost overruns until Project Completion has been achieved. This would include any 

operational shortfalls during that period. By the time Project Completion will be declared, 

the project will have accumulated some $123 million in cash ($613 million of which will be in 

a debt 5ervice reserve account). 

Project costs as defined in the Rules explicitly include "costs of design) engineering" 

startup, commissioning and shakedown." Until the declaration of Project Completion~ the 

project remains in the startup I commissioning and shakedown phase, and therefore under the 

parent guarantee. You will recall that the documents also require a prefunding of a facility 

in support of that guarantee of $30 million over and above the budgeted project cost (which 

itself includes overrun contingencies of over $65 million). There is no need for 

establishing some separate temporary "liquidity facility" between the parent and project to 

meet an imagined need during the pre-completion phase that would not otherwise covered by the 

negotiated deal. 

After investing over $1 billion in cash equity at the parent and project. levels" the equity 

investors will simply not permit any potential projected short term liquidity shortfall to 

prevent reaching Project Completion. 

Note also that there are essentially no working capital requirements at the project level. 

Production materials are funneled through the parent, and not held at the project company. 

Finished inventory is immediately forwarded to and inventoried at the parent. The project 

company does have responsibility for direct purchase of some minor amounts of material and 

for payment of utilities. These are all budgeted for and accounted for in the model as 

operational costs. 

-----Original Message-----

From: • 

Sent: Thursday, August 28, 2889 3:28 PM 

To: • 

Subject: FW: Solyndra; Responses to Credit Analysis Questions 

• 294 
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Thanks for requesting the additional information. I would like your analysis of the 

materials presented. 

In order to move this forward, I think we have the following next steps: 

1. I will look at the property tax information against the issue raised by RW Beck in 

January. 

2. We can adjust the income tax assumption to 30%. The result should be de rninimus-, 

but we should use that assumption from PWC. 

3. The issue of Working Capital remains unresolved. First} it seems clear that the 

cost overrun equity commitment would support cost overruns and ineligible project costs. 

However -' the issue is cash balances ... not cost. John seems to agree that the model runs 

out of cash in Sept. 2011 even in the base case without any stress. This is a liquidity 

issue. Secondly ... given the implications above .. it is difficult to assume in a default 

scenario that any other entity would be able to assume management of the project company 

without any working capital. As a practical matter I this is not feasible and leads to 

questions of ability to run the project company as a stand alone entity. Finally) how can 

we advance a project that hasn't funded working capital requirements nor seems to have any 

provision for funding working capital requirements and that generates a working capital 

shortfall of $50M when working capital assumptions are entered into the model? This is a 

serious issue we need to resolve as a credit matter. It also simply won't stand up to 

review by oversight bodies. Are there provision in the agreements that provide access to 

working capital provided by the parent (e. g., a liquidity facility)? I don' t think the cost 

overrun commitment ac'Complishes this, but perhaps an inter-company line of credit 

would. 

4. We still do not have a lender case. In order to move forward, I have gone ahe~d and 

built one. I will send it under separate cover. I need you to confirm it and to include 

it in the due diligence update. Moving forward, the deal team needs to provide this case. 

Notwithstanding the working" captal issue above, the lender case supports the conclusions 

you Ive made and addresses the LGPO policy requirement of ht3ving a lender case. 

Thanks. 

Subject: Solyndra: Responses to Credit Analysts Questions 

-In response to questions related to the credit analysis of the Solyndra Fab Z project, we 

have prepared the responses below. 

The current Solimdra Fab Z Base Case Projections have changed since the original model was 

presented, and the DOE Loan Origination team, Fitch Rating'5 and RW Beck have reviewed the 

updated model. The terms of the Project Sales Agreement require that Solyndra) Inc. purchase 

108% of the output of the Project as it comes off the manufacturing line; hence .. "Inventory" 

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is now assumed to be zero. Consequently .. working capital requirements for the project are 

modest". and for modeling purposes the Accounts Receivable and Accounts pay.able are set at a 

net zero. 

Solyndra is informed that testing the Base Case under stress conditions results in 

essentially nil cash at Fab 2 in September 2Bl1". and any assumption of a delay in collecting 

Accounts Receivable from Solyndra would be an unbudgeted cash drain on the Solyndra Fab 2 

Project, potentially resulting in a cost overrun. This analysis is correct assuming that the 

Project has not otherwise come in under budget elsewhere and that none of the Project' 5 

budgeted contingency was available to pay for this cost overrun. However .. it should be noted 

that September 2811 falls well before Fab 2 has achieved "Project Completion," which is 

forecast to occur in April 2012. Project Completion as defined by the Common Agreement 

includes factors related to Physical Completion" Operational Completion and Financial 

Completion. 

DOE bargained for a 1813% Solyndra, Inc. guarantee to pay for any cost overruns beyond the 

$733 million Project Cost prior to Project Completion, and further requires Solyndra .. Inc. to 

pre-fund a restricted cash account of $30 million to cover any potential cost overruns. The 

8ase Case Projections show that Fab 2 will have accumulated approximately $123 million of 

cash at the time of Project Completion when Solyndra) Inc's guarantee would be released. Of 

the $123 million of cash at Fab 2, approximately $68 million funds the full Debt Service 

Reserve Account. No cash dividends can be made until certain milestones are achieved after 

Project Completion, which assures the liquidity of the Project. Solyndra believes that it 

has included all of the Project Costs that it reasonably anticipates in the $733 million 

budget. 

Additionally, considering the magnitude of the import of Fab 2 to Solyndra, Inc.' s business 

and the substantial equity commitment made by Solyndra, Inc. to the Project, there exist 

tremendous incentives for Solyn'dra .. Inc. to ensure a successful Project. 

Solyndra has modeled a 25% income tax rate for Solyndra Fab 2 so that the Project can pay for 

the income tax that its activities engender. 

Solyndra believes that it will pay a 25% effective income tax rate on a consolidated basis 

for its worldwide operations .. and Solyndra assumes this rate in all of its forecasts. At the 

request of DOE) Solyndra' 5 auditors .. PricewaterhouseCoopers provided an opinion dated August 

6, 

2889 that states that a range of 24%-38% was appropriate for Solyndra, Inc., which Solyndra 

believes substantiates its estimate of 25%. Due to the operating losses forecast for 

Solyndra Fab 2 during its initial ramp of commercial production} the Base Case Projections 

indicate that Fab 2 will not have a tax liability until its NOL' 5 have been exhausted in June 

2812. The Base Case Projections as submitted to DOE are fully-functional) and changing the 

income tax rate from Solyndra' s estimate of 2S% to the high-end of the reasonable range (38%) 

a5 indicated by pwc reveals only a modest impact to the Project. Cash balances at Fab 2 in 

June 2Bll are forecast to be approximately $136 million, including an approximately $68 

million debt service reserve account. Any change to the income tax rate has no material 

impact on 

the Proj ect' s liquidity. The impact of a 30% income tax rate 

assumption is only seen in a minor red\,Jction of 8.1 to the Debt Service Coverage Ratios, as 

noted below 

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76267.452

At the lowest Debt Service Coverage Ratios period calculated for the year 2615) the Base Case 

Projections show that only $81 million OT the FFB loans remain outstanding and "Fab 2 will 

have generated in excess of $500 million of cash. A liquidation of Fab 2 at the end of 2e15 

would generate substantially more than $81 million (according to the analysis performed by 

Fi Hh Rating). At this low point, Fab 2 is forecast to generate 16e% of the required cash to 

make debt payments. Hence) Solyndra concludes that OOE enjoys a very secure position at this 

point in time even with a 3e% income tax rate. While Solyndra believes that a 25% income tax 

rate is appropriate, a summary analysis of the effects of a 30% income tax rate is attached 

for DOE' s consideration. 

The Base Case PrOjections include all property taxes. The property tax is combined with a 

number of Facilities-related expenses in the worksheet named "Model Assumptions" in the Base 

Case Projections. A scan of Row 146 reveals episodic spikes in Facilities costs> which 

correlate to the underlying property tax assumptions. A copy OT the detailed line item 

assumptions that comprise the Facilities budget is attached for OOE's consideration. 

Specific line items related to property tax are highlighted in green color (please see Rows 

102) laS) . 

106 and 134 in the "Facilities Budget" file). A summary review of this Facilities Budget 

worksheet will review that property tax is modeled in significant. detail. 

Please contact me to discuss any questions you may have related to the foregoing, Thank you. 

Regards) 

• 

** * ** '" *** ***,. * * *'*"' .... ** ** .. '" ....... '" '" * 

SOL YNDRA, INC. 

4770() Kato Road 

Fremont, CA 94538 

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!I-----

~~~t: 

..... weum Frb1i2Z 23. 2011 3:33 PM ___ -- Subject: RE: Treatment of Solyndra restructuring 

Thank you •••• 

Thank you for work.ing with us to better understand the details of the Solyndra restructuring. Based on the information 

you have provided to support DOE's stated position that Solyndra !s In lIimminent default" and DOE's analysis that the 

restructuring would leave DOE in a better position if the borrower does ultimatelv default, OMB has determined that the 

restrucfturing constitutes a work~OUArf' than ar~OdTfficaftio~n'r"nder OMB Cirficular A.l1, Sectio~J18S. . d 

In the ulure, to the extent that, u<jh t~:~ 'is ftu I I If or other DOE Inancings, DOE WI be reqUire to 

demonstrate that the borrower~ S It '''f' ! 'fF it dl r~Vlde reasonable analysis that any actions taken will 

produce a better return to the ~~v r , ~~I ih,Or~ a tOPla,:"SS4!)1ed in the baseline cashflows in order for the action 

to qualify os a workout, rather I,\V ~ U' A, C \lory'1 ,J ' 

Thanks agaln, 

Regards, 

-

Assistant Director for Budget 

Office of Management and Budget 

229 
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y DOE assessed the value of its recovery under the following 

three situations: 

-Forccd liquidation in December collateral securing 

existing loan. Such li~gp wo sed on a sale of assets . 

• Forced liquidation aft~etion~t:~roject (the proceeds from 

the restructured loan V:t~:~ffici~ehieve projcct complction). 

Such liquidation woul~he ~ 

Solyndra entities as a going concern. 

II Performance of the project under the Consolidation Plan (which 

includes the restructured loans). 

DEPII.RTl'<1ENT Of ENER.GY CD 

76267.458

DEPART ENT Of EN RG
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76267.459

obtained 

201 

tbe recovery 

than its 
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Document 

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November 10,2011 

The HonorablG Henry A Waxman 

Ranking Member 

Committee on Energy and Commerce 

U,S, House of Representatives 

Washington, D,C. 20515 

Hogan love Us US LLP 

Columbia Square 

555 Thirte6T1th Street, NVV 

Washington, DC 20004 

T +1 2026375600 

F +1202637 59tO 

WW'thf,hogan!ovells,com 

Re; Energy Policy Act of 2005 Sectioll 1702 Illterpretation 

Dear Congressman Waxman: 

The k,ttcr responds to the request made by your staff to provide you with 

interpretation of Section 1702 of the Energy Policy Act of 2005, focusing J~"~""V''''J 

whether Section 1702 of the Act gives the Department of Energy ("DOE") 

guaranteed loan to other debt incurred by a project in a p()st-default, In particular, 

! was asked to comment on whether the February 15, 201 opinion of Susan Chief Counsel 

of the Loan Programs Office, entitled Solyndra Restructuring (hereafter refe·rred to as the "Opinion") is 

supported by the statute. 

As ! explained to staff in connection with responding to this request, I have no confidential 

information about facts of the Solyndra loan guarantee, and I have not had access to the Solyndraloan 

guarantee documents, My knowledge of the matter comes from what has been publicly reported. In 

addition, while I have represented several clients in DOE loan and loan guarantee malters, I have not had 

occasion previously to consider the question of DOE's authority to subordinate a guaranteed loan in a 

restructuring, Finally, as I also explained to your staff, Susan Richardson is someone whom I know, I 

have not, however, discussed the Committee's request for my views or the substance of what follows with 

Ms. Richardson or anyone else at DOE. 

have concluded that the is supported both by the statute and DOE's interpretation of Section 

1702 as reflected in 10 Part 609, the regulations governing the guarantee program, and the 

associated rulemaking proceedings. (It is noteworthy that the initial rulemaking was concluded during the 

Administration, and I believe that the amendments were also concluded before the 

loan restructuring issues arose,) Tbe is also supported by commercial practice with 

the restructuring of loans that are in 

Starting with the statute itself, Section states: "The obligation shall be subject to the conditioll 

that the obligation is not subordinate to other " Had Congress sought to prohibit subordination 

\\DC - 7Q.::.l13O/'CXlO6:)O· 33245CJ!lvZ 

at any time, under any circumstances, one might expect the provision to be 

tenns, such as: "The obligation shall not be subordinated to other financing," 

1702(d)(3) suggest that Congress had a more limited intent First, Section 
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76267.463

The Honorable Henry A. Waxman - 2 - November 10,2011 

1703(d)(3) is presented as one of three conditions that must be met prior to the issuance of a loan 

guarantee. The three conditions are presented as detenninations the Secretary must make before issuing 

the loan guarantee. This is reinforced by the phrasing "the obligation is not subordinate to other 

financing." The use of the present tense "is" suggests a requirement at a particular point in time, i.e., the 

point at which the guarantee is issued. Finally, J agree with the Opinion that the use of the tenn 

"condition" as it appears in the context of Section 1702(d)(3) is reasonably understood to refer to a 

"condition precedent," that is a condition that must be met prior to issuance of the guarantee. 

I find it significant that DOE plainly understood Section 1702(d)(3) in this light when it undertook the 

rulemaking to implement the loan guarantee program in 2007. In 10 CFR 609.10(d), DOE set out a long 

list of requirements that DOE must ensure are satisfied "[p]rior to the execution of a Loan Guarantee 

Agreement," that is, conditions precedent. Included in that list were the statutory requirements set out 

Section 1703(d)(I), (d)(2) and - of interest here - (d)(3). Following the structure of the statute, the rule 

used the present tense "is," describing the required condition as: "Any Guaranteed Obligation is not 

subordinate to any loan or other debt obligation .... " 10 CFR 609.10(d)(13).1 A requirement that must be 

satisfied as a condition precedent to the issuance of a loan guarantee is not necessarily a requirement that 

must prevail regardless of what occurs thereafter, and neither the statute nor the regulations elsewhere 

state that the non-subordination requirement must be met at all times. 

DOE repeated this understanding of the statute as distinguishing between what is required before a loan 

guarantee is issued and what requirements apply in the event of default in a 2009 rulemaking amending 

10 CFR Part 609: "section 1702(d) addresses certain threshold requirements that must be met before the 

guaranty is malle; and section 1702(g) addresses the Secretary's rights in the event of default of the loan." 

74 Fed. Reg. 63544, 63545 (2009). DOE went on to note that the structure of the statute "key[ed] its 

particular provisions to the sequence of stages that are foreseeable in the loan guarantee relationship." Id. 

It is noteworthy that Section I702(g), which deals with default, does not contain language prohibiting 

subordination. 

Two other aspects of DOE's loan guarantee rulemaking provide indirect support for the conclusion that 

the non-subordination requirement, which clearly must be met before a loan guarantee is issued, does not 

prohibit DOE from agreeing to subordination if the borrower defaults and a loan must be restructured. 

The regulations provide that, where the loan guarantee agreement or any applicable intercreditor 

agreement so provides, in the event of default, a lender and the Secretary may agree to a workout strategy 

andlor a plan of liquidation. 10 CFR 609.15(h). There are no limitations in that provision on what a 

workout strategy might include. In particular, the rule does not preclude subordination of the guaranteed 

debt as a component of a workout strategy. 

Finally, it is significant in my analysis that, in amending the loan guarantee rules in 2009, DOE 

eliminated a restriction that would have required it to hold a first lien position on all assets of a project 

receiving a loan guarantee. In making that change, DOE explained that its "original reading of the statue 

was in tension with the financing structure of many commercial transactions in the energy sector," 

involving for example ownership by tenancy-in-common or co-lenders or co-guarantors - commercial 

structures that some who had planned to apply for loan guarantees needed to employ if their projects were 

to go forward. DOE concluded that the statute did not strictly require the first lien requirement and that 

imposing a restriction that was not consistent with commercial practices would have had the effect of 

As originally adopted in 2007, 10 CFR 609.1 O(d)(13) also required that DOE have a fIrst lien on all project 

assets. That requirement was removed in 2009, as discussed below. 

\\DC • 70313Bf()():)6lO -~32"SOB II':! 
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The Honorable Henry A. Waxman - 3- November 10,2011 

limiting the ability of the loan guarantee program to serve its intended purposes. 74 Fed. Reg. at 63545-

46. 

Likewise here, interpreting the statute to prohibit subordination of the guaranteed debt, even where 

additional new money is necessary as part of an effort to reduce the losses associated with a default, 

would not be consistent with commercial practice. A lender providing additional funding to a transaction 

already in default routinely insists that its debt be superior to earlier incurred debt because such later debt 

is being incurred at a point at which it has become apparent that the risk associated with a project is 

higher than anticipated at the time of the original financing and neither the existing lenders nor the equity 

has elected to provide the additional funds. Given this commercial expectation that, in a default situation, 

earlier incurred debt would expect to be subordinate to later incurred debt, had DOE reached any other 

conclusion about its authority under Section 1702, it would have sharply constrained DOE's ability to 

undertake any meaningful restructuring of guaranteed loans, a result that would likely increase taxpayer 

risk from projects that run into unexpected financial difficulties. While in the case of Solyndra, even the 

additional money injected into the project as a result of the restructuring proved to be insufficient to save 

the project, one would expect that in other cases, an infusion of additional debt could help to rescue a 

project and thereby protect taxpayer interests. 

In short, I conclude from the statute, the loan guarantee regulations, and DOE's prior interpretations of 

Section 1702 that, had it expressly considered the question of its authority to subordinate its guaranteed 

debt in a post-default restructuring before the Solyndra default situation arose, DOE likely would have 

reached the same conclusion reflected in the Opinion, and that its conclusion is legally supported. 

I hope the foregoing analysis is helpful to you in your deliberations. 

Very truly yours, 

~~ M~nne Sullivan 

Partner 

maryanne.sullivan@hoganlovells.com 

02021637-3695 

\\DC ·703138/!XX)530·3324508v2 
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564 

Mr. STEARNS. Mr. Secretary, also, I would echo the ranking 

member’s comments. But I would say, in conclusion, that after listening to you for almost 3 1⁄2, almost 4 hours, you seemed to fail 

to monitor the loan guarantee program; failed to heed the warning 

sign of the Treasury Department, OMB, and even your own legal 

counsel; you ignored subsequent Solyndra bankruptcy predictions 2 

years by your staff; you disregarded the ongoing possibility that 

you should have got Department of Justice’s opinion. The legal 

opinion you got in an email is really not credible. 

And I think even most Members on both of sides agree, Mr. 

Green pointed out, from Texas, that illegal subordination of taxpayers to two hedge funds I think shows a high degree of mismanagement and ineptitude. And I would think, under the circumstances, that it could have been done a lot better. 

Don’t you feel, in retrospect, that this was poorly managed? 

Mr. CHU. I think, as I look back at the events and at the time 

and what did we know and when we knew it, decisions were 

made—competent decisions were made by the people in the loan 

program. 

And, again, going back, this is very important, that the United 

States be supporting these innovative technologies. The wisdom of 

Congress in that bill supported that. And, again, they acknowledged that there were risks in supporting innovative companies 

and innovative projects, and that is why there was this large loan 

loss reserve that was set aside and appropriated. That money could 

have been appropriated for other things. 

Mr. STEARNS. Well, I will conclude by saying, I don’t know how 

many loan risks of a half a billion dollars we can afford to lose as 

taxpayers. 

And, with that, the subcommittee is adjourned. 

[Whereupon, at 3:35 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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76267.467

Energy & Commerce Committee 

Subcommittee on Oversight and Investigations 

Hearing: The Solyndra Failure: Views from DOE Secretary Chu 

November 17, 2011 

The Honorable Michael C. Burgess Opening Statement 

This hearing is one in a long line of hearings this year which started out as a simple and 

straightforward inquiry by this committee to the Department of Energy into how a brand new 

program which we authorized was being run. It was bread and butter congressional oversight 

and no one at the time could have imagined that a simple request to find out how DOE 

determined who received funds from the loan guarantee program could turn into an inquiry into 

how DOE mismanaged and ultimate lost over half a billion dollars in taxpayer funds. 

And that's what this all comes down to. Under Secretary Chu's leadership, the 

Department of Energy was run like a private venture capital firm, and the taxpayers were left 

holding the bag. Except that a government agency has no business acting like a venture capital 

firm. Venturc capitalists know what they arc doing, and know what's at stake. What's at stake 

is their own monev. If a venture capitalist makes a bad bet, he loses income, he loses his 

investment. If the bureaucrats at the Department of Encrgy make a bad bet, they retain their 

salary, they go home like any other day, and they come to work thc next day having incurred 110 

real consequences. 

The government is not a venture capital firm, and the people who work in DC have no 

business acting like it is. But that's not even the worst part of this whole story. As we all know 

at this point, Solyndra was the White House's poster child for the "grecn" revolution it intcnded 

to push with its failed stimulus packagc. At every turn, Secretary Chu, his peoplc at DOE, and 

the leadership at the White House, expcdited decisions that career staff at DOE and OMS 

repeatedly said they were uncomfortable rushing. 
566 


76267.468

They rushed the decision to grant the loan so that the Vice President and the Secretary 

could make their appearance in September 2009. They rushed their decisions in the Spring of 

20 I 0 so that the President could visit Solyndra's facility. And when they saw that all of their 

mismanagement had caught up to them, and that Solyndra was going to fail and layoff its 

employees, they rushed to keep the story under wraps, imploring the company to hold off any 

announcements on the layoffs until after the 20 I 0 midterm elections. 

But Secretary Chu didn't become a pseudo-Venture Capitalist on his own. Clearly the 

White House had its hand in directing this Department to make these decisions. and to make 

them fast. Who was ultimately making these calls? We have seen over and over again that 

Valerie Jarrett, Carl Browner. Ron Klain, and Rahm Emmanuel had keen interests in pushing the 

Solyndra loan guarantee forward. Who was the real puppet master calling the shots on this 

program? Whose door should the taxpayers be beating down asking where their money is? With 

the white House releasing only a handful of documents, despite a congressional subpoena 

requiring them to produce all documents. one wonders what it will take to get these answers. 

hope this committee pursues these questions with earnest until the White House tinally 

cooperates. 

Secretary Chu's Department of Energy has been an utter failure at protecting taxpayer 

money. The American people gave control of the Iiouse of Representatives to the Republican 

Party exactly because they knew the kind of oversight that we are pursuing today was never done 

under Nancy Pelosi's watch. 

It's time this Administration was held accountable for its failures. Today I hope we get 

some answers. 

2 
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76267.469

QUESTIONS FROM CHAIRMAN CLIFF STEARNS 

Q I. You stated in your prepared remarks. "Congress established Section 1703 and 1705 loan 

guarantee programs as well as the [ATYM] program, all of which provide support to 

cutting edge clean energy industries that involvc tcchnology and market risks. In so 

doing, Congress appropriated nearly $10 billion to covcr potential losses in our total loan 

portfolio." Chairman Emeritus Barton and Rep. Pompeo noted that this $10 billion was 

not in fact designed to cover loan losscs. 

Ala-d. 

a. Were the twelve solar generation projccts with long term power purchase agreements 

included in the portfolio to offset the risk of the manufacturing start-ups like 

Solyndra? Is it your position that these projects could not have sccured adequate 

private capital without the loan guarantees0 

b. Do the utilities that have contracted for the power generated by these projects pay for 

the transmission costs or are they covered by the terms of the loan guarantee? How 

does this affect the utilities' ratemaking? 

c. Please further elaborate on your claim that the $10 billion in total credit subsidy 

appropriations was a loan loss reserve fund. How were credit subsidy costs explained 

to you? Please provide any related briefing materials. How did this understanding 

factor into DOE's decision making? 

d. Please explain the current status of the $10 billion in funding, and how it has been 

allocated or appropriated. 

The Department of Encrgy's (DOE) solar generation projects were not included in 

the portfolio to offset the risk ofthc solar manufacturing companies. While DOE was 

conscious of the benefits-both credit and non-credit-of a diversified portfolio, our 

effort was designed to fulfill Congress's legislative intent as stated in the American 

Recovery and Reinvestment Act CARRA). When adding Section 1705 to the Energy 

Policy Act of 2005 (EPAct) through ARRA, Congress directed agencies to invest 

appropriated funds "as quickly as possible consistent with prudent management" and 

set an outside date of September 30. 20 I I for the issuance of loan guarantces and 

commencement of construction by the projects (ARRA, Section 3). Accordingly, we 

were required to prioritize projects by their ability to reach financial closing and 

commence construction within the timeframe set by Congress. 
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76267.470

DOE does not believe that these projects would have moved forward as quickly, and 

many would not have moved forward at all, without loan guarantees. Several fa2tors, 

including the long term nature of the financing required. the size of projects, the 

limited capacity of the credit markets, and the economic terms on which commercial 

financing, if available at all, would have been provided limited these projects' ability 

to secure private capital. That result would have been inconsistent with the 

Congressional intent of ARRA. 

Transmission costs are determined individually for each project. Generally, however, 

the project is responsible for construction of interconnection facilities, and, if 

required, transmission facilities to the point of interconnection with the grid. The cost, 

of such construction would be eligible project costs, borne pro rata by project equity 

and proceeds of the guaranteed loan. The cost oftransmissic1I1 from the 

interconnection point including construction cos:s of transmission facilities, would 

generally be borne by the utility. As such. state Public Utility Commissions and the 

Federal Energy Regulatory Commission (FERC) are responsible for rate-making and 

determining exactly how SllC1 costs are taken into account. 

Congress explicitly outlined the intended purpose of credit subsidy costs in the 

Federal Credit Reform Act of 1990 (FCRAl. FCRA requires DOE to compute the 

estimated long term "cost" of each loan or loan guarantee-lhat is, lhe discounted net 

present value of payments to and frol11 the Government under the loan or loan 

guarantee, excluding administrative costs. Such payments would include: 

disbursements, payments of principal and interest net of defaults, recoveries, claim 

payments on guaranteed and direct loans to cover defaults, and any recoveries from 

2 
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76267.471

default. In other words, this computation estimates the potential cost to the 

government of the direct or guaranteed loan, and in that way can be thought of as 

similar to a loan loss reserve for each loan. 

Although commercial financial institutions loan loss reserves are not the same as a 

credit subsidy cost under FCRA, the purpose of the credit subsidy is analogous to a 

loan loss reserve for a given loan in that it accounts for, and is intended to ensure that 

resources are available to cover projected losses associated with the loan. A key 

difference between the private sector concept ofa loan loss reserve and that of the 

credit subsidy cost under the Section 1705 program is that loan loss reserves are 

usually pooled to support a portfolio consistent with various requirements, whereas 

the credit subsidy is the estimated cost of each specitic loan, based on that loan's 

specific characteristics. The projected credit subsidy cost of a loan guarantee was not 

expressly taken into account in our decision-making under Section 1705, except to 

ensure that we had adequate appropriated funds avai lable to pay such costs. The 

factors taken into account in computing the credit subsidy cost, however, are directly 

related to the creditworthiness and level of risk of the project. Those factors were, of 

course, taken into account in ollr decision-making. We have already provided the 

Secretary's briefing materials in connection vvith Solyndra for review by the 

Committee and we have not identified to date any additional briefing materials on this 

specitic subject. 

Finally, regarding the cu rrent status of the $10 bill ion in funding, as of March 7, 2012, 

$5,142,100,000 has been obligated to pay the credit subsidy costs of ATYM loans and 

secticn 1705 loan guarantees. 

3 
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76267.472

Q2. In discussing the model referenced in one email from a DOE staffer that stated, "The 

issue of working capital remains unresolved ... the model runs out of cash in September 

2011, even in the base case without any stress," you noted, ''It wasn't predicting 

bankruptcy of the company. It was predicting a cash-flow issue that, upon further 

analysis, did not appear and, in fact, did not appear in reality." Several other emails show 

that there were concerns that DOE was only looking at the project and not evaluating the 

health of the parent company. 

A2a-c. 

a. Now that it is clear that the health of the parent companies, not the projects, is what 

caused Solyndra and Beacon to declare bankruptcy, arc there concerns about the type 

and scope of due diligence conducted prior to the loans being approved? 

b. Please indicate which of the loan guarantee projects project finance arrangements arc. 

c. In addition to Solyndra, please list any loan guarantee that has been restructured, 

modified, or amended in any way after closing, and explain how these loan 

guarantees were amended and why. 

DOE is satisfied with the type and scope of diligence performed prior to approval 

of loan guarantees. Our due diligence encompassed cach entity that would have 

material obligations to DOE or to the project. including, where applicable, project 

sponsors and parent companies. We note also that our diligence does not stop at 

approval-it continues through the issuance of the loan guarantee and the 

disbursement of loan proceeds. In addition, DOE monitors the companies and their 

markets during the term of the loan, in an effort to spot trouble early, when more 

options exist for both the company and the lenders. 

It is important to reiterate that Icading financial institutions who share credit 

exposure with the Loan Programs Office (LPO) in the Financial Institution 

Partnership Program (FIPP) program and cxperienced the LPO's underwriting and 

due diligence processes have concluded that these processes are on par with, ifnot 

more rigorous than their own. In addition, an independent review recently conducted 

by former Assistant Secretary ofthe Treasury for Financial Stability, Hcrbert 

4 
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Allison, to assess the current overall health of the LPO portfolio concluded on 

January 31, 2012, estimates that the long-term cost of the outstanding portfolio, 

including both Title 17 and ATVM loans, is $2.7 billion, roughly $200 million lower 

than Department's most recent estimate. 

Below is a list of Title XVI! projects that have project finance arrangements. The 

projects marked with an asterisk have some characteristics of project financing and 

some characteristics of corporate financing: 

Abengoa Biomass* 

Abengoa Mojave 

Abengoa Solana 

Abound* 

Agua Caliente 

Antelope Valley 

Brightsource 

Cogcntrix Alamosa 

California Valley Solar Ranch 

Kahuku 

Poet* 

Record Hill 

Sempra Mesquite 

SWIP/Great Basin 

Solar Reserve Tonopah 

U.S. Geothermal 

Amp 

Blue \1ountain 

Desert Sun 

Genesis 

Granite 

Onnat 

Shepherd's Flat 

To ensure that we have a common understanding of the term "project financing 

arrangements", DOE notes that project finance generally refers to the long-term, 

I imited recourse, debt financing of infrastructure projects. The borrower is usually a 

special purpose entity (SPE) that can only engage in the business of the relevant 

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project. Principal and interest payments on the loan are made solely from cash flows 

generated by the SPE. The loans are usually structured with recourse to the SPE's 

asscts and limited or no recourse to the sponsor/parent. Project finance transactions 

often (but not always) have an agreement in place in which a credit:worthy third 

party agrees to purchase all of the output of the project for a specified price for at 

least the term of the loan. 

In the course of monitoring our loan guarantees, DOE has agreed to minor 

amcndments to the loan guarantee documentation for several projects. These 

amendments include items such as clarifications, typographical corrections, changes 

of equity holders that have no impact on the credit quality of the equity holders, 

extensions of first advance deadlines, and adjustments to procedural details. 

Besides Solyndra, the only project for which DOE has agreed to substantive 

amendments is Beacon's Stephentown project. Those amendmentsstrcngthened 

DOE's protections through increased requirements for funding of the debt service 

reserve and guarantee of the reserve by the sponsor. 

As a result of the recent auction of the assets of Beacon, including the Stephentown 

project, DOE has entered into modified debt arrangements with the Stephentown 

project company. As of closing of the auction sale, the project company is owned by 

an affiliate of Rockland Capital. Under the modified arrangements, the project 

company issued a $25 million promissory note to DOE, which will be paid on terms 

reasonably similar to the terms of the prior agreements with Beacon. 

Q3. While responding to comments made about former DOE CFO, Steve Isakowitz, telling 

6 
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Committee staff that he did not remember DOE validating any assumptions about the 

Chinese market before approving the Solyndra loan, you stated, "I personally did not do 

it, but I am sure my loan people have done many market surveys." 

a. Plcase provide any market surveys conducted by DOE staff prior to issuing the 

Solyndra loan. Please also provide any documents or analyscs validating assumptions 

about the Chinese market. 

A3a. DOE has previously produced to the committee copies of all market studies and 

reports prepared in conncction with the Solyndra transaction. Those reports and 

studies are: Independent Market Consultant's Report Solyndra Fab 2 Manufacturing 

Facility, by R.W.Beck, dated April 4, 2009 and Independent Market Advisory 

Services, DOE Loan Program, Solyndra. Inc., by Navigant, dated February 22. 20 10. 

Irthe Committee requires re-production of these reports, DOE can provide copies of 

each under separate cover. 

Q4. In responding to Chairman Stearns' question about whethcr you were aware of other 

situations where taxpayers have been subordinated to outside commercial loans, you 

stated that "OPIC and Ex-1M have, in some cases, subordinated loans." 

a. At the time DOE was restructuring the Solyndra loan guarantee in late 20 I 0 and early 

20 II, did you ask whether the government had ever subordinated its interest in a loan 

guarantee agreement? If so, please include any examples you were shown-OPIC.Ex1M, or otherwise-of taxpayers being subordinated to private entities. 

A4a. DOE's primary focus, when considering the potential restructuring of the loan 

guarantee to Solyndra, was on our authority under Title XVII of EPAct to agree to 

subordination in the context of the Solyndra restructuring. We were generally aware 

of other government agencies taking actions in connection with troubled or defaulted 

loans that subordinated government interests. However. we considered the paramount 

question to be DOE's own legal authority, and our analysis of the best interests of the 

governmcnt and taxpayers in the case of Solyndra, not the authorities or actions of 

other government agencies. 

Q5. In response to Ranking Member DeGetle 's question about whether you were "aware of 

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76267.476

any contact by someone from the White House to anybody in the DOE ... asking them to 

take an unusual action relating to the loan guarantee or to the restructuring?" you stated, 

"No, I am aware of no communication from White House to Department of Energy 

saying to make the loan or to restructure." 

Later in the hearing, whcn asked by Rep. Blackburn whether there was "any 

communication between DOE and the White I-louse about the restructuring and the 

subordination of that loan?" you stated, "Certainly at the time that we were discussing 

this, I was aware of no communication whatsoever with the White House." Rep. 

Blackburn followed up by asking, "Are you are of any communication now?" to which 

you answered, "1 was made aware of it yesterday." You then agreed to provide us with 

the information relating to that communication. Please provide the Committee with the 

names of individuals from DOE and the White House who were involved in such 

communications as well as the actual communications. 

Further, Rep. Blackburn asked, "Did the White I-louse approve or sign off on in any 

way ... the restructuring and the subordination of this 10anT' After some apparent 

confusion about the question, you eventually responded, "Well, as I said before, the 

OMB looked, knew what we were doing, and they went ahead and said,Jhey said they 

did not say, no. you cannot do this," When asked, "Anybody in the White House other 

than OMB?" you responded, "There may have been other opinions, and we can get that 

information back to you." Please provide the other opinions provided by individuals in 

the White llouse other than OMB. Please also provide all such communications between 

DOE and OMB. 

One email exchange in particular, as well as your testimony, indicates that the White 

House was more involved in these decisions than they have publicly professed. On 

August 12, 20 I I, around the time a second restructuring was being considered, Heather 

Zichal sent an email to Nancy Ann De Parle and Melody Barnes, which states, "[Black in 

the fall of 20 lOwe had to restructure the deal. At that time, WH (our shop, OMB, NEC) 

reluctantly went with DOE's course of action to embrace restructuring." Ziehal goes on 

to assert, "1 have a commitment on the process from doe that no final decisions about 

next steps can be made without first getting signoff from the WH." 

a. Do you maintain that you had no communications with anyone from the White 

House? These are high-level officials in the White House. Who at DOE was 

communicating with them and why were you not aware of it? Please provide all 

related documents and communications. Please also explain to us why you believe 

you were not informed of such conversations. 

ASa. Secretary Chu did not receive any instructions from the White House to take or not to 

take any action related to Solyndra. More specifically, at no time did the White 

House direct the Secretary or the Department to restructure or not to restructure 

Solyndra's loan guarantee obligation, or to amend any term of the restructuring. As 

Secretary Chu stated in his testimony, and as the 192,000 pages of documents 

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produced to the Committee reflect, the decision to restructure Solyndra's loan 

guarantee obligation was "the responsibility of the Department of Energy" and was 

not driven by any White House involvement. Again, at no time did White Housc 

officials direct the Department to take or not to take any action relating to thc 

proposed restructuring. On the contrary, the decision to restructure Solyndra's loan 

guarantee in February 2011 like the decision to issue a conditional commitment in 

March 2009 and to finalize the loan guarantee in September 2009 was made by the 

Secretary on the merits to advance the goals of ARRA and Title XVII of EPAct 2005 

and to secure the maximum possible bene1lt to the American people. 

Q6. Throughout the hearing, you repeatedly asserted that you just recently learned that 

someone at DOE told Solyndra to dclay the announcement of layoffs until aftcr the 

midterm elections in November 20 I O. 

A6a-b. 

a. Who from DOE told Solyndra employees to delay the announcement? Did anyone 

from DOE discuss this issue with anyone from the Executive Office of the 

President? Did anyone from the Executive Oflice of the President discuss this 

issue with anyone ti'om Solyndra? 

b. Please provide all documents and communications relating in any way to this 

request. Please make arrangements to have any individuals at DOE interviewed 

by Committee staff as soon as possible. 

DOE has referred this matter to the Department's Inspector General, and has not 

learned the outcome of any resulting inquiry. DOE would be willing to brief the 

Committee on the results of any such inquiry when it has been completed. 

Q.7 In response to Chairman Emeritus Barton's question about when DOE General Counsel. 

Scott Harris, told you that subordinating taxpayer interests did not violate the Energy 

Policy Act of 2005, you stated, "This was in a discussion as we were discussing whether 

we should subordinate or not. and it had to do with restructuring, and so before we could 

even think of subordinating in a restructuring, we had to make sure that it was legaL" 

When told that the decision to subordinate had been made prior to the legal memorandum 

accepting subordination being dratied, you stated, "I would not know that, but it certainly 

would not be the way we do things in business, the way we do things in the Department 

of Energy. One has to tlrst decide whether what are the legal bounds." Knowing now 

that Susan Richardson tlrst communicated with Scott Harris after the agreement to 

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subordinate was made with Solyndra's investors and prior to analyzing the subordination 

provision in the Energy Policy Act of 2005, what steps are you taking to ensure that this 

process is not followed for future decisions of this magnitude? 

A 7. Any assertion that DOE decided to restructure Solyndra's obligation "he fore 

determining the legal hounds" applicable to that action is false. There were, of 

necessity, substantial discussions of the potential terms of a restructuring in advance of 

the final determination by the Secretary to authorize the restructuring. Absent such 

discussion, and a non-binding agreement reached among the parties on the proposed 

terms of a restructuring, it would have been difficult-and potentially fl'uitless-to 

engage in the detailed analysis undertaken by DOE of both the merits, and legality, of 

the proposed restructuring. 

DOE did not. howcver. enter into any binding agreement to restructure the loan until after 

the Secretary approved the restructuring on February 22. 20 II. This agreemcnt also came 

only after the Department engaged in a thorough analysis of whether doing so would be 

in the taxpayers' best interests and whether DOE had authority to do so under applicable 

law. Specifically, as the documents produced to the Committee make clear, career 

ot1icials in LPO, including the ot1ice's chief counsel, as well as attorneys in DOE's 

Ofllcc of General Counsel, reviewed the matter and concluded that the restructuring was 

permitted under Title XVII of EPAct, as amended, 42 U.S.C. §§ 16511-16514. Only 

after this review was complete did the Secretary authorize the proposed Solyndra 

restructuring. 

Q8. Rep, Griffith highlighted section 1702(g)(4)(A) of the Energy Policy Actof2005, which 

states, "If the borrower defaults on an obligation, the Secretary shall notify the 

Attorney General of that default." He pointed to several documents noting that on 

December 1,20 10, Solyndra defaulted on a financial requirement in the agreement and 

that $95 million of the guaranteed loan commitment had yet be advanced. In response 

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to Rep. Griffith's question about whether you notified the Attorney general in 

accordance with the law, you stated, "1 will get back to you on that." Did DOE notify 

the Attorney General when Solyndra defaulted on December 1,20] O? 

AS. In December 20]0, Solyndra breached a covenant; it did not fail to make a required 

payment of principal or interest on the guaranteed loan. Neither Title XVII nor the Final 

Rule requires notice to the Attorney General in such circumstances. As such, the 

Attorney General was not notified. 

Section 1702 (g)(4)(A) of Title XVII requires that the Attorney General be notified if the 

borrower defaults on an obligation. In context, it is clear that the "default" 

contemplated by Section 1702(g) (captioned DEFAULTS) is a default in payment on the 

guaranteed obligation. Sections 1702(g) (1 )-(2) relate to payment on the guarantee 

(which can only be due if there has been a default in payment on the loan) and its 

consequences. Section 1702(g)(4), captioned "ACTIONS BY THE ATTORNEY 

GEN ERAL," has two parts: subsection (A) requires notice to the Attorney General of a 

default and subsection (B), captioned "RECOVERY," provides that on "notification, the 

Attorney General shall take such action as is appropriate to reeover the unpaid principal 

and interest due" on the obligation. (Emphasis added.) If there has been no default in 

payment, as was the case in Solyndra, there is no basis for taking sueh action, and no 

requirement to provide notice. 

This practice is also consistent with DOE's regulations. On October 23, 2007, after 

notice and eomment, DOE issued a Final Rule that codifies the interpretation of Section 

1702(g) explaincd here. The Final Rule requires notification to the Attorney General if 

the "Borrower has defaulted in the making of required payments of principal or interest 

on any portion of a Guaranteed Obligation" and has not cured the default within any 

applicable grace period. 10 CFR Parts 609.15(a) and (c). The Final Rule distinguishes a 

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Borrower default that results from "a breach of one or more of the terms and conditions 

of the Loan Guarantee Agreement" or other loan documents (10 CFR. part 609.15(b», 

and its potential consequences. The Final Rule does not require notification to the 

Attorney General in the case of such a breach. 

Q9. Rep. Murphy asked you about one email from an OMB staffer in June 2010---after 

Solyndra cancelled its IPO-that suggested DOE had yet to ramp up its monitoring 

function immediately. You responded. "I was told that by that time, we were 

monitoring the loans, but we had - I'm not really sure of the exact timing, but we had 

one - Solyndra was our first loan, and we then established a loan monitoring program, 

which has consistently been made more robust as time progressed." You mentioned 

several of these changes throughout the hearing, including the establishment of an 

independent monitoring office. Ranking Member DeGette asked you to supplement 

your testimony within 30 days and provide the Committee with a summary of the 

changes that you have made internally to improve your oversight and administration. 

You replied, "I would be delighted:' Plcase provide us with that summary and specify 

which changes have been made based on DOE's experiences with Solyndra and Beacon 

Power. 

A9. LPO has expanded its Portfolio Management Division (PMD) to ensure its ability to 

actively monitor loan and loan guarantee transactions. restructure transactions as 

necessary, and maximize recoveries to the U.S. taxpayer. PMD has three functional 

groups-Asset Monitoring and Supervision, Credit Review & Compliance, and Special 

Assets & Loan Administratioll- that are accountable for the various risks involved in 

loan and loan guarantee transactions. 

Processes and systems to support proactive monitoring, loan administration, 

compliance, repOiting, and resolution include, among other things: 

Monitoring Policies and Procedures 

QuickSilver custom portfolio management software systcm 

Davis-Bacon Act compliance mechanism 

Mechanisms for managing troubled assets 

Mechanisms for responding to external inquiries and oversight 

Credit Review and Compliance framework 

Periodic reports to provide timely warning of significant events 

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Early warning system (for transactions that require heightened attention) 

Default list 

Impaired assets list 

PMD is held accountable through rigorous internal and external reviews, which include: 

Internal Credit Review as well as Compliance Quarterly Evaluations 

Analysis of periodic PMD reports by DOE, the Risk Committee, LPO and PMD senior 

management 

OIG Examinations and GAO Audits 

Annual DOE audit by KPMG 

In addition, fonner Assistant Secretary of the Treasury for Financial Stability Hcrbert 

Allison has reviewed DOE's Loan Guarantee Program and provided a report (enclosed 

here), dated January 31,2012, on the current status, credit characteristics, and risk of 

loss of DOE's portfolio of loans. While the report confirms that DOE's overall pOlifolio 

of loans is expected to perform well, it also includes a number ofrecommendations on 

how to improve the management of the loan program and ongoing monitoring of the 

loan portfolio. DOE is reviewing those recommendations to determine the best way to 

use them to further strengthen the program. 

Q10. Based on numerous emailsreviewedbytheCommittee.itis apparent that one of 

Solyndra's strategies to obtain additional capital was to have government buildings 

purchase their panels. Rep. Burgess discussed the fact that Jonathan Silver connected 

former Solyndra CEO, Chris Gronet, with Bob Peck, Commissioner of Public Buildings 

at GSA, asking him to meet with Solyndra and that he would "personally appreciate it." 

You responded that "this is the first time I've been made aware of this. 

a. Do you think that it is appropriate tor the head of the Loan Programs Office (LPO) to 

contact potential purchasers-either inside or outside of the federal government-on 

behalf of one particular struggling loan guarantee recipient? Has Silver or anyone else 

from the LPO contacted DOD or GSA on behalf of other loan guaranteereeipients? If so, 

please provide the Committee with these communications. 

A lOa. DOE regularly provides businesses, industries, universities and other stakeholders with 

information on the programmatic and financial resources of the Department as well as 

our local, state, and federal partners. DOE furthers its mission by facilitating these 

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stakeholders' efforts to address the economic, energy, and environmental challenges 

confronting the United States. DOE has no control over the General Service 

Administmtion's purchasing decisions. In addition, any entity seeking to obtain a GSA 

contract to supply goods or services must follow all applicable rules, policy and 

procedures set out in the Federal Acquisition Regulation (FAR), the principal set of rules 

in the Federal Acquisition Regulation System and the Defense Federal Acquisition 

Regulation Supplement, issued pursuant to Office of Federal Procurement Policy Act of 

1974. As the FAR's Statement of Guiding Principles for the Federal Acquisition System 

lays out, its purpose is to promoting competition, minimize administrative operating 

costs, and conduct business with integrity, fairness, and openness while fulfilling the 

public policy objectives of the United States (48 CFR 1.102). At this time, DOE is 

unaware of any additional contact between any LPO official and DOD or GSA on behalf 

of a loan guarantee recipient. LPO officials did have contact with DOD officials in the 

course of the LPO's evaluation of an application for a loan guarantee for a project that 

involved the installation of solar rooftop panels on privatized housing tl)l'military 

personnel. No loan guarantee was issued for that project, and, to the best of DOE's 

knowledge, the contact was made solely for purposes of completing the LPO's 

underwriting analysis. If the Department identities additional examples, we will work to 

provide that information to the Committee. 

QII. Rep. Blackburn discussed DOE's observer on Solyndra's board, who was appointed as 

a condition of the restructuring agreement. After stating that you did not approve the 

choice of the board observer, you agreed to provide information about who actually 

made the decision and to whom at DOE the board observer reported. Please provide 

that information. 

A II. DOE's right to have a Board observer was set forth in Solyndra's restructuring agreement. 

It was therefore part of the overall transaction approved by the Loan Programs Office 

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management and, ultimately, the Secretary, No specific individual was formally 

designated for the role, As the restructuring agreement was managed by the Portfolio 

Management Division, the role was filled by Portfolio Management Division staff, under 

the direction of the Director of Portfolio Management. 

Q 12. In discussing several members' requests to provide information relating to other loans 

that are in trouble, you stated, "We believe that most of the loans are in good shape" 

and that you "believe the majority of the portfolio seems to be in good shape ... a large 

majority." Please provide documentation regarding the financial position of the 

companies in the loan guarantee program to support your claims. 

A 12. Former Assistant Secretary of the Treasury for Financial Stability Herbert Allison 

reviewed DOE's Loan Guarantee Programs and provided a report on the current status, 

credit characteristics, and risk of loss of DOE's portfolio of loans. 

When funding the programs, Congress appropriated nearly $10 billion to cover estimated 

subsidy costs in our total loan portfolio, thereby acknowledging the inherent risks of 

funding new and innovative technologies and also ensuring that those risks are properly 

accounted for in the budget. While the portfolio includes loans to a range of projects 

from the world's largest solar and wind installations to geothermal power plants with 

different levels of risk, the Allison report found that DOE has been judicious in balancing 

these risks. Using the methodology required by FCRA. the report re-estimated the level 

of credit subsidy necessary for the portfolio and calculated a credit subsidy cost of $2.7 

billion on the outstanding portfolio, $200 million less than DOE's most recent estimate. 

While this estimate unavoidably depend on many assumptions and will fluctuate over 

time, the vast majority of loan guarantee recipients are expected to pay the loans back in 

full, on time, and with interest. 

The report also noted that DOE is not a "passive bystander;" that is, DOE has the ability 

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to reduce or mitigate risk in the portfolio over time and has "robust tools" for protecting 

itselffrom elective risk. These tools include strong covenants in all loan commitments 

issued after mid-20 10 that allow DOE to control the amount of additional risk it assumes. 

DOE agrees that it must be an active manager continllollsly monitoring projects. their 

market environments. and other identified risks to seize all opportunities to minimize 

exposure to loss. 

Finally, the report also includes a number of recommendations on how to improve the 

management of the Department's loan program and ongoing monitoring of the loan 

portfolio. DOE is reviewing the recommendations to determine the best way to use them 

to further strengthen the program. A copy of the report is submitted for the record. 

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Report of the Independent Consultant's Review 

with Respect to the Department of Energy Loan 

and Loan Guarantee Portfolio 

January 31, 2012 
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76267.486

T ABLE OF CONTENTS 

1. INTRODUCTION .............................................................................................................. 5 

A. The White House Mandate ...................................................................................... 5 

B. The Portfolio ............................................................................................................ 5 

C. Evaluation of the Portfolio ....................................................................................... 6 

D. Current Management and Governance .................................................................... 8 

E. Early Warning System ........................................................................................... 10 

II. APPOINTMENT OF THE INDEPENDENT CONSULTANT AND 

TEAM; ASSIGNED TASKS: METHODOLOGY ....................................................... 12 

A. Assigned Tasks and Deadlines ............................................................................... 12 

B. Qualifications of the Independent Consultant... ..................................................... 12 

C. The Independent Consultant's Methodology and Guiding 

Principles ................................................................................................................ 13 

III. ANAL YSIS OF THE CURRENT STATE OF THE PORTFOLIO: 

LOAN EVALUATION AND STRATIFICATION BY RISK OF 

DEFAULT AND LOSS .................................................................................................... 16 

A. Legal and Regulatory Factors That Shaped the Portfolio ...................................... 16 

I. Statutory basis and implementing regulations ........................................... 16 

ii. Factors shaping the development of the Portfolio ..................................... 17 

IV. SUMMARY OF THE INDEPENDENT CONSULTANT'S 

EVALUATION OF TIlE PORTFOLIO -- DESCRIPTION OF THE 

EVALUATED LOANS .................................................................................................... 20 

A. Characteristics of the Utility-Linked Loans ........................................................... 21 

B. Characteristics of the Non-Utility-Linked Loans .................................................. 22 

C. Characteristics of the Ford and Nissall Loans ........................................................ 23 

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V. SUMMARY OF THE INDEPENDENT CONSULTANT'S 

EVALUATION OF THE PORTFOLIO -- RANKING OF THE 

EVALUATED LOANS .................................................................................................... 24 

A. Introduction ............................................................................................................ 24 

B. Assessing the Credit Risk of Utility-Linked and Non-UtilityLinked Loans ......................................................................................................... 24 

C. Ranking the Evaluated Loans According to Credit Risk ....................................... 26 

VI. THE INDEPENDENT CONSULT ANT'S EVALUATION OF THE 

PORTFOLIO .................................................................................................................... 28 

A. Overview oflhe Independent Consultant's Evaluation 

Methodologies ....................................................................................................... .28 

B. Description of the FCRA Methodology ................................................................. 29 

C. Valuation Using the FCRA Methodology .................................... , ........................ 30 

D. Results of Valuation Using the FCRA Methodology ............................................ 30 

E. Characteristics of the FCRA Methodology ............................................................ 32 

F. Valuation Using the FMV Methodology ............................................................... 33 

G. Valuation Results Using the FMV Methodology ................................................. .35 

H. Characteristics of the FMV Methodology ............................................................. 36 

l. Portfolio Concentration Risk ................................................................................. 37 

VII. MONITORING AND GOVERNANCE OF THE PROGRAMS ................................ 38 

A. Statutes and rcgulations ......................................................................................... 38 

B. LPO monitoring and governance infrastructure as of October 20 II ..................... 38 

i. LPO structure ............................................................................................ .38 

ii. Internal DOE oversight orthe Programs and the LPO ............................. .40 

Ill. Recent changes (0 the Programs' managemcnt, monitoring, 

and governance .......................................................................................... 4I 

VIII. I{ECOMMENDATIONS FOR STRENGTHENING THE 

PROGRAMS' MANAGEMENT AND OVERSIGHT ................................................ .43 
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76267.488

A. Provide Long-Term Funding for the Programs ................................................... ..43 

B. Fill Key Positions in Management with Experienced Profcssionals .................... .43 

C. Clarify Authorities and Accountabilities of Managers ......................................... .44 

D. Establish and EtTectivcly Communicate Clear Goals for 

Management ........................................................................................................... 44 

E. Proactively Protect the Taxpayers' Interest .......................................................... .45 

F. Engage in Long-Range Strategic Planning for the Programs ............................... .45 

G. Improve Reporting to the Puhlic ........................................................................... .46 

H. Strengthen and Restructure Internal Oversight of the Programs .......................... .46 

I. Establish External Oversight. ................................................................................. 50 

IX. THE ESTABLISHMENT OF A COMPREHENSIVE EARLY 

WARNING SySTEM ...................................................................................................... 51 

A. Create a Comprehensive Management Information Reporting 

System .................................................................................................................... 51 

B. Establish a Protocol for Timely Reporting of Critical Information ....................... 52 

C. Incorporate Lessons Learned Into Policies, Procedures, Reporting, 

and Decision-Making ............................................................................................. 53 

X. LIMIT ATIONS OF THE REPORT .............................................................................. 54 

XL ACKNOWLEDGEMENTS ............................................................................................ 56 

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I. INTRODUCTION 

A. The White House Mandate 

The Chicf of Staffofthe White House requested that Herbert Allison review the 

Department of Energy"s (,'DOE") loan and loan guarantee programs for alternative energy 

projects and provide: 

(I) A report on the current status. credit characteristics. and risk of 

loss of DOE's portfolio of loans and loan guarantees provided to 

suppol1 alternative energy projects (hereinafter, "the Portfolio"); 

(2) Recommendations for enhancing the monitoring, management, 

and oversight of DOE's loan and loan guarantee programs, and 

(3) Recommendations pertaining to early warning systems to 

identify and mitigate potential problems with individual loans or 

loan guarantees. 

Mr. Allison was asked to complete the White House's mandate (the "Review") in 60 days 

once a team of independent advisers was assembled to assist in performing the work. Mr. 

Allison and the advisers collectively are referred to throughout this report as "the Independent 

Consultant," 

B. The Portfolio 

DOE operates two programs that provide loans or loan guarantees to support clean 

energy projects. The Title XVII program, established under the authority of Title XVII of the 

Energy Policy Act of2005 (,TPAce) and the American Recovery and Reinvestment Act of 

2009 CARRA"). provides loan guarantees for loans made to support certain types of clean 

energy projects. The Advanced Technology Vehicle Manufacturing program C'ATVM") was 

established by the Energy Independence and Security Act of 2007 ("EISA") to make direct loans 

to manufacturers of advanced technology vehicles. (Hereinafter. the Title XVII and ATVM 

programs are collectively referred to as "the Programs.") 

The Independent Consultant conducted an evaluation of the Portfolio as of November 28, 

20 II. In total, 30 loans were evaluated. of which 25 were closed under the Title XVII Program 

and tivc were closed under ATVM (collectively, the "Evaluated Loans"). In general. the 

Evaluated Loans were structured as funding commitments, with limited or, in many cases, no 

funds drawn under the loans at closing, Borrowers have the ability to draw under the loans from 

time to time to fund specific project costs ("Eligible Costs") provided that they meet certain 

conditions precedent that vary among the individual loans. 

To facilitate evaluation, the Independent Consultant grouped the POl1folio into three 

broad categories. each consisting of a distinctive project type and loan structure. 

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76267.490

"'-'=~""-'="'-'"-":£""i" The lirst category includes loan guarantees supporting utilit)-

generation or transmission of alternative sources of energy (the "Utilit)-

The Portf(llio includes 20 Utility-Linked Loans. 

The second category includes cellulosic ethanol projects, 

solar and small. stal1-Up automotive manufacturing companies that 

comprise the projects (the "Non-Utility-Linked Loans"). These loans on 

average nrc smaller than the Utility-Linked Loans and bear greater risk. The Programs include 

eight Non-Utility-Linked Loal15, excluding loans made to Solyndra Inc. CSolyndra") and 

Ikawn l'll\\er Corporation ("Beacon"), which arc both in bankruptcy. 

I.\ml and Nissan Loans. The third category comprises the loans madc to Ford Motor 

Company rTurd") and Nissan North America, Inc. ("Nissan") (the "Ford and Nissan Loans"). 

The Fnrel and Nissan Loans arc made to established ccorporate credits with structures typical of 

traditional securcd corporate loans_ 

Table 1: SUIJi/l1ar)' olthe fm/II(/fed Loans as ojXol'cmher 28. 2011 

C. Evaluation of til(' Portfolio 

The Independent Consultant \\as din.:cted the White f louse Chief of Starfto report on 

the currcnt slalus of DOL's pm\l()lio. The Consultant reviewed detailed 

inllmnation about each project and formed its 0\\11 view of the project's current status, 

To evaluate the Portl()lio, the Independent Consultant used two methodologies, detailed 

in the Report. that hmc distinctly di ffcrcnt purposes. 

The tlrst is the "FeRA rYkthodology:' whieh the DOE must usc for budgeting purposes 

w comply with the Federal Credit Reform Act of 1990 C'FCRA"). it calculates the "Credit 

Subsidy Cosf- that is budgeted to cover the risk of estimated shortfalls in payments Ii'om each 

loan. The Credit Subsid) C(lSt estimated by the DOE jllr each loan rcllcets DOE's assessment of 

each loan's credit quality, 

The FCR/I Methodology focuses un default risk and associated rates of recovery. These 

dcl~llllt and recovery rates arc based on broad industry data provided by the rating agencies and 

6 
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therefore arc not representative ora pOlifolio of loans like those held by the DOE. For budgeting 

purposes, the FCRA Methodology estimates only the present value of the expected credit loss 

from the loan. This present value is a central estimatc that assumes that the credit loss is 

accurate. It does not account for the possibility that the actual loss may be higher or lower than 

the estimate. If the eventual actual loss exceeds the Credit Subsidy Cost, that incremental loss is 

absorbed by the taxpayers pursuant to the permanent, indefinite budget authority under FCRA. 

This budgeting approach is applied to the federal government's broad and diverse 

portfolio of loans and guarantees established through many programs that were created for a 

variety of purposes. In view of this diversity, variations over time in the individual estimates for 

each program tend to offset each other, thereby making FCRNs use of a central estimate for 

each program an appropriate mechanism for budgeting purposes. 

The second methodology for evaluating the Portfolio, the "FMV Methodology," is used 

in the capital markets to estimate the reduction from the loan's face value that would result in a 

"fair market value" for the loan, that is, the price at which investors would receive what they 

believe to be an acceptable rate of return. The FMV Methodology is based on market data for 

the most comparable bonds and loans that exist in the market. It takes into consideration ccrtain 

variables, such as liquidity, concentration, reinvestment. and other market risks, for which an 

investor would expect to be compensated through a discount in price. However, those risks do 

not apply to the government as long as it intends to hold the loans and guarantees for the long 

term. 

Notwithstanding the differences in purpose of these two methods, the Independent 

Consultant believes it is beneficial to use the FMV Methodology in addition to the FCRA 

Methodology in assessing and evaluating the Portfolio and in developing recommendations 

regarding management, governance, and reporting described in the Report. The FMV 

Methodology provides additional insight into the future marketability of these loans and 

guarantees, into the financial incentives that sponsors and other parties have to invest in these 

projects, and into ways that DOE should manage the Programs to protect and enhance value to 

taxpayers over time. 

Neither the FCRA Methodology nor the FMV Methodology can predict the eventual 

realized loss associated with any loan or with the Portfolio as a whole. The eventual loss will be 

the product of many factors, some unique to a particular loan, which the [,CRA Methodology 

and the FMV Methodology can neither capture nor forecast today. 

Furthermore, the present value estimates of cost under either the FCRA Methodology or 

the FMV Methodology fluctuate materially with changes in assumed long-term interest rates, 

For instance, if long-term interest rates on U.S, Treasuries were to rise significantly from today's 

historic lows, the Credit Subsidy Cost estimate as calculated under the FCRA Methodology, all 

other factors unchanged, would decline substantially. 

Additionally, these methodologies assume that DOE is a passive bystander unable to act 

to reduce or mitigate risk in the Portfolio over time. To the contrary, DOE has robust tools for 

protecting itself against taking on elective risk. Since the middle of 20 1 0, all new commitments 

for loans and guarantees contain strong covenants that give DOE powerful tools to control the 

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amount of additional risk it assumes. For instance, if projects do not meet covenants, DOE can 

elect to withhold funds or to require more protections and/or equity participation to compensate 

in part for additional risk. If it elected not to fund projects that are failing to meet covenants, it 

would potentially rcduce the projected loss in the Portfolio. 

In fact, there will be many such funding thresholds ahead. and DOE will therefore have 

many opportunities to protect itself against taking on elective risk. Currently, actual loan and 

guarantee amounts are only about one-third of total commitments, and almost half of the 

currently drawn amounts of Portfolio commitments are to Ford. rated by the Independent 

Consultant as investment grade. 

As stated on page 31, DOE's latest re-estimate of credit subsidy for thc Portfolio totals 

$2.9 billion. The Independent Consultant's comparable valuation applying the FCRA 

Methodology is $2.7 billion. 

As described in greater detail on pages 33-35, the FMV Methodology, which calculatcs a 

different form of risk as described in the Report. estimates that investors would currently price 

the Portfolio at a discoulH to aggregate par value ranging from $5.0 billion to $6.8 billion. 

The FCRA and FMV estimates are calculated for the full $23.4 billion of loan 

commitments. As noted above, only a third of the commitments are funded and some may never 

be funded, in full or in part, if some projects fail to meet requirements of their loan agreements. 

in which cases the estimates of credit subsidy would decline. 

The rCRA and rMV projections of potential losses in the Portfolio unavoidably depend 

on many assumptions and will fluctuate over time. More important to the ultimate performance 

of the Portfolio will be DOE's management of it going forward. DOE must be an active 

manager continuously monitoring the projects, their market environments, and other identified 

risks to the Portfolio and seizing opportunities to contain taxpayers' exposure to loss. 

D. Current Management and Governance 

The White House Chief of Staff asked the Independent Consultant to provide 

recoillmendations for enhancing the Jllonitoring, managell1cnt and oversight of DOE's loan and 

loan guarantee programs. 

The DOE's Loan Programs Office ("LPO") that directly manages the Programs combines 

several operational divisions (including Title XVII origination, portfolio management, credit, 

technology, and A TVM origination) with control divisions (credit and compliance). Some key 

positions in LPO are either vacant or staffed by acting heads and rely heavily on consultants and 

contractors. 

Three committees oversee the Programs. Two consist of LPO staff members as well as 

managers from other departments within DOE. 

The Independent Consultant identified several opportunities to strengthen thc 

managemcnt of the program and enhance both the independence and the expertise of oversight 

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functions. The main recommendations related to management and oversight are summarized 

below: 

Strengthen management 

DOE should assure long-te1ll1 funding for its management and oversight of the 

Portfolio. Fees from borrowers will not be sufficient to cover these expenses once 

origination ceases. Compared to thc potcntial for greater losses if the Portfolio is 

not managed closely and competently, the cost of adequate management and 

oversight will be small. 

DOE should fill key positions in management as soon as practicable. 

DOE should clarify authorities and accountabilities of managers. Lines of 

authority are not sufficiently clear. Delegation of authority should be more 

specific regarding the actions each organization may take and the limits ofthat 

authority. 

Give more definition to key Program goals 

DOE should develop explicit objectives and standards of performance for 

managing the Portfolio during the construction phase of the projects and beyond. 

The Title XVII program's statutory standard of "reasonable prospect of 

rcpayment" is vague. DOE should provide clear guidance regarding the meaning 

of "reasonable prospect of repaymcnt" so that the financial goal for managers is 

unambiguous. 

DOC should better define the desired balance between policy goals and financial 

goals. 

Create independent risk management 

DOE should create a position of Chief Risk Otlicer ("CRO") to lead a Risk 

Management unit housing all DOE functions dedicated to monitoring the 

Programs, including the current Credit and Compliance functions. Significant 

risk decisions by LPO should be subject to prior concurrence of the CRO. 

The Risk Management unit should be separate from and independent of LPO. 

These two units should have different reporting lines to senior DOE management. 

Once the independent Risk Management department is established, DOE should 

abolish the Credit and Risk Committees. 

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76267.494

Refine DOE ovcrsight boards 

The role of the Credit Review Board ("CRB") should be broadened to include 

overseeing "enterprise" risks including credit, compliance, accounting, 

operational integrity, reporting, and protection of DOE's intcrests in defaults and 

bankruptcies. 

DOE should establish an interagency oversight hoard to review the Programs' 

governance and to advise the Secretary about broad policy, control and 

performance issues. This board could be modeled on similar boards overseeing 

other U.S. government loan programs. 

Proactively protect the taxpayers' intcrest 

DOE should aggressively strengthen its position as lender or guarantor in cases 

where borrowers seck relief from requirements in the loan agreements. Given the 

novelty. complexity and scale of the projects and the exacting covenants in their 

loan structures, the Independent Consultant believes that many projects are likely 

to seek such relief at some point during the term of the DOE loan or loan 

guarantee. 

• To strengthen its ability to protect the taxpayers' interest. DOE should define the 

tools it will use (e.g., seeking equity interests and stronger loan covenants) as well 

as the financial and policy goals it will pursue in negotiating with borrowers. 

Reporting to the public 

DOE should implement a comprehensive communications plan, Including a more 

robust website, to providc timely information to the public on the performance of 

the Program. 

E. Early Warning System 

The White I-Iousc Chief of Staff rcqucsted that the Independent Consultant develop 

recommendations pertaining to carly warning systcms to identify and mitigate potential problems 

with individual loans or guarantees. 

DOE should implement a comprehensive and consolidated Management Information 

Reporting System ("MlRS") that includes three categories of information: 

Trends affecting the markets and the regulatory environments in which the 

borrowers operate; 

The Status of every loan, borrower. contractor and offtake party that can affect 

each project; and 

The internal performance of the LPO and the Programs. 

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Senior managers, LPO, and Risk Management should jointly design the MIRS to be a 

shared resource for decision-making and performance measurement. The MfRS, if well 

designed and actively utilized, will prompt early action to manage emerging risks. 

11 
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n. APPOINTMENT OF THE INDEPENDENT CONSULTANT AND TEAM; 

ASSIGNED TASKS; METHODOLOGY 

A. Assigned Tasks and Deadlines 

The Chief of Staff of the White House requested that Mr. Allison conduct a review of the 

current state of the Portfolio to be completed on or before January 28. 2012. Solely to provide 

funding for the Review, the Independent Consultant"s work was conducted pursuant to written 

contracts with DOE. These contracts provided DOE with absolutely no rights to control, direct, 

or influence the Review, nor has DOE done so. Moreover, other than directing the tasks to be 

performed, the White House Chief of StafT did not control, direct. or influence the Review. nor 

did any other member of the executive branch. 

As the White House Chief of Staff requested. the Review addresses three areas: 

(I) Analysis of the current state of the closed loan and guarantee 

portfolio under the Section 1703, Section 1705 and ATYM 

programs as of November 28. 20 II; 

(2) Recommendations for enhancement to the Programs, if 

warranted and practical, to ensure effective monitoring and 

management ofthe current loan and guarantee portfolio; and 

(3) Recommendations, if needed. pertaining to early-warning 

systems to identify and mitigate potential concerns on a timely 

basis. 

As part of the first task, the White House ChiefofStatTrequested that the Independent 

Consultant review and evaluate each Portfolio loan and loan guarantee to determine its current 

status, credit characteristics, and risk of loss. The Independent Consultant was requested to 

develop a risk rating and evaluation system for the Portfolio that is consistent with private sector 

best practices and to use that system to stratify the Portfolio by risk of default and loss. 

The White House ChiefofStufrrequcsted as part of the second task that the Independent 

Consultant review the current Portfolio management practices, including governance and 

monitoring stondards. with a particular focus on identifying opp011unities to enhance the ongoing 

DOE monitoring activities. 

As part of the third task. the White House Chief of StafT asked the Independent 

Consultant to develop and recommend an early warning system for identifying loans andlor 

guarantees to place on a watch list and to provide appropriate reporting mechanisms. 

B. Qualifications of the Independent Consultant 

Mr. Allison has served in a number of senior positions in the public and private sectors. 

Most recently, he was the Assistant Secretary of the Treasury ror Financial Stability. He was 

named as President and Chief Executive Officer of Fannie Mac after Fannie Mae was placed into 

12 
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conservatorship. Mr. Allison formerly was the Chairman, President and Chief Executive Ofticer 

ofTIAA-CREF from 2002 until his retirement in 2008. 

Mr. Allison conducted a comprehensive search for a financial finn and for a law finn to 

assist him in the Review and exercised his sole and independent judgment in choosing the 

advisers. Mr. Allison identified fifteen law firms and approximately half a dozen financial 

advisory firms. The principal selection criteria were institutional capacity, knowledge and 

experience in project finance and corporate finance, experience \.vith U.S. govcrnment programs 

and procedures, and the absence of conflicts of interest. 

After careful review, Mr. Allison selected and engagcd Greenhill & Co., LLC, an 

investment bank. and Arnold & Porter LLP, a law firm. Mr. Allison also selected David 

Johnson. an experienced corporatc finance executive, who previously served as Chief Financial 

Officer of Fannie Mae (aner that company was placed into conservatorship by the U.S. 

government) and also served in the same capacity at Hartford Financial Services Group, 

and Ccndant Corporation. to advise him. Each adviser was required to meet requirements for 

expeltise and to comply with applicable standards, policies. and regulations prohibiting contlicts 

of interest. 

Mr. Allison coordinated, supervised. and approved the work of the retained professional 

advisers and is solely responsible for the contents of the Report. The Report was specifically 

prepared at the request ofthc White House ChiefofStaffand should not be relied upon by any 

other person. 

C. The Independent Consultant's Methodology and Guiding Principles 

The Independent Consultant exercised complete and absolute discretion in planning and 

carrying out the Review and in defining the information requested from DOE and other parties, 

subject to the limitations set forth in Section X of the Report. 

In order to perform the assigned tasks within the sixty-day review period. the 

Indepcndent Consultant developed and executcd a work plan, including an analysis of 

voluminous documentation, and a targeted set of interviews of DOE and other U.S. Government 

personnel. 

Documentation reviewed included. but was not limited to, the underlying legal and 

financial documentation of the loans and loan guarantees in the Portfolio, current and fonner 

DOE procedures and policies relating to the Programs. reports from the independent consultants 

to DOE. intcl'agency presentations, rating agency reports, and information regarding the current 

status of each credit in the Portfolio. With respect to each credit. a standardized list of 

documents was requested and obtained. 

DOE personnel were cooperative and responsive to the requests of the Independent 

Consultant. The Indepcndent Consultant did not request documcnts from othcr agencies, given 

the time constraints. 
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Thc Independent Consultant developed loan valuation mcthodologies described more 

fully below and. relying on the documentation provided by DOE. conducted an cxtensive and 

iterative review of every credit in the Portfolio. including updated information about thc 

operational and financial performance of the projects or manufacturing facilities underlying cach 

credit. 

The Independent Consultant also met on several occasions with DOE officials and with 

employees of a DOE contractor involved in the Programs to discuss policies. procedures, 

assessment of risk in the Portfolio. and views of spccific credits and technologies. The 

Independent Consu Itant met with the Secretary of Energy ("the Secretary"). Deputy Secretary of 

Energy ("the Deputy Secrctary"). DOE Inspector General. the Senior Advisor to the Secretary. 

the former head of LPO, the former Senior Advisor to the LPO Executive Director, and more 

than fifty DOE employees. contractors, and consultants. In addition, the Independcnt Consultant 

spoke with officials ofthc Department ofthc Treasury ("Treasury") and the Office of 

Management and Budget (HOMB") to develop an understanding of those agencies' respective 

roles in the Programs. A full list of the governmcnt officials and other individuals with whom 

the Indcpendent Consultant met during the Revicw and a descriptive overview of materials 

received Ii'om DOE are set forth in Appendices Band C. 

The Indcpcndent Consultant considered the relevant statutory and regulatory framework 

of the Programs. The Independent Consultant also reviewed DOE's management, governance, 

and information-reporting systcms relating to the Portfolio. including recent changes directcd by 

the Secretary. 

The Independent Consultant adopted several guiding principles in conducting the 

Review. First, in keeping with the scope of the assignment. the Independent Consultant neither 

assessed nor formed any conclusions regarding national cncrgy policy or other policy 

considerations. In addition, in order to cncourage open discussion. the Independent Consultant 

interviewed current and former U.S. government officials with thc understanding that while the 

Independent Consultant would consider and incorporate into the Report as deemed appropriate 

the views they expressed. the Rcport would not attributc these views to any particular individual. 

The Independent Consultant made clear that it would not in any way become involved in, or 

attempt to inlluencc, DOE decision-making relating to the Portt(llio. and the Indcpendent 

Consultant did not do so. Finally, the Independent Consultant shared a draft of the Report with 

DOE and the White Housc shortly before its issuance to assure factual accuracy. To the extcnt 

DOE or the White House providcd factual clarifications, that information is included in thc 

Report. 

In vicw of the strict deadline for completing the Report. the Independent Consultant 

evaluated only those loans and loan guarantecs in the Portfolio that had closed as of November 

28. 2011, although the Report incorporates information provided through the date of the Report. 

The Independent Consultant did not evaluate the loans to Solyndra and Beacon, which tiled for 

Chapter II bankruptcy protection in October 20 II and November 20 II. respectivcly. 

While DOE continues to modify its loan monitoring and governance procedures, the 

Independent Consultant's description of DOE monitoring and governance procedures, and the 

recommendations for improvement, are based on the review of the documents. interviews. and 

14 
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other information made available as of the date of the issuance of the Report. The Independent 

Consultant. in the time allowed to prepare this Report, was unable to assess the effectiveness of 

DOE's recent changes in its loan monitoring and govemance procedures. 

In reviewing the Portfolio, the Independent Consultant did not consult subject matter and 

market forecast experts for thc various projects and technologies because it would have taken 

several weeks to identi fy experts in each of these areas, to screen them for conflicts of interest, 

and to move them through the U.S. governmcnt approval process necessary to engage them as 

subcontractors to the Independent Consultant. The Independent Consultant concluded that 

given the limitation of the Review to a sixty-day period. these practical constraints would have 

prevented these subject matter experts from contributing substantially and in a timely manner to 

the Review. However. the Independent Consultant did have access to information prepared by 

eXpe!lS that DOE provided in response to the Independent Consultant's requests. 

The Independent Consultant was provided access to confidential or proprietary business, 

technical. and financial information belonging to the U.S. government or other entities. subject to 

confidentiality agreements including but not limited to DOE plans, policies, rcpolls, studies. 

lInancial plans, internal data protected by the Privacy Act of 1974 (5 U.S.C. § 552a), data which 

have not been released or otherwise made available to the public, information relating to the Title 

XVII or ATVM programs, applications submitted to DOE. and other information submitted in 

response to solicitations made under the Title XVII or ATVM programs. The Independent 

Consultant has not disclosed any such conlldential or proprietary information in the Report. In 

addition. the Independent Consultant has not disclosed information on individual credits in the 

Portfolio because of contractual conlldentiality agreements binding the Independent Consultant 

and DOE. 

15 
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III. ANALYSIS OF THE CURRENT STATE OF THE PORTFOLIO: LOAN 

EVALCATION AND STRATIFICATION BY RISK OF DEFAULT AND LOSS 

To analyze the Portfolio's current status. the Independent Consultant reviewed the legal 

and regulatory framework of the Programs to understand how the Portfolio took shape. The 

Independent Consultant also reviewed the financial structures of the projects the Programs 

supported. With that background. the Independent Consultant performed the Review requested 

by the White House Chief of Staff. 

A. Legal and Regulaton' Factors That Shaped the Portfolio 

i. Statutory basis and implementing regulations 

DOE operates two programs that provide loans. loan guarantees, or grants to support 

clean energy projects. The Title XVll program, established under the authority of Title XVII of 

the EPAct. which was enacted in August 2005. provides loan guarantees for loans made to 

support certain types of clean energy projects under Section 1703 of the EPAct. The Title XVII 

program was modified in 2009 by ARRA. enacted in February 2009, which added Section 1705 

of the EPAct. The addition of the Section 1705 progral11 included an appropriation offunds that 

allowed DOE to pay the Credit Subsidy Cost of certain loan guarantees. Prior to ARRA. under 

the Section 1703 program, the recipients of Title XVII loan guarantees were required to pay the 

Credit Subsidy Cost, unless Congress appropriated funds for such costs, which it did not do until 

2009. 1 DOE issued a first set of regulations governing the Title XVII program in October 2007 

(10 C.F.R. Part 6(9). and released modifications to these regulations in 2009. 2 

The second DOE loan program, the A TVM program, was established by Section 136 of 

EISA, enacted in January 2008. Section 136 authorized DOE to create the ATVM program and 

to make a total of up to $25 billion in direct loans to manufacturers of advanced technology 

vehicles ("A TVs'·). which are vehicles meeting certain specified fuel economy standards. or their 

associated components, that have their manufacturing facilities in the U.S. DOE released the 

regulations governing the ATVM program in November 2008.) 

A separate but related program supporting clean energy projects was the cash grant 

pmgram established by Treasury under Section 1603 of the ARRA (as amended by Section 707 

orthe Tax Relief, Unemployment Insurance Reauthorization. and Job Creation Act 01'2010). 

Under this program. Treasury could provide grants to persons and entities that either (I) placed 

certain types of alternative energy properties into service during 2009. 20 I O. and 20 II or (2) 

began construction of a specified energy property in 2009.20 I O. or 20 II.~ Eligible alternative 

energy properties included wind facilities, closed-loop or open-loop biomass facilities, 

geothermal facilities. and equipment to produce, distribute, or use energy derived from 

alternative sources sueh as solar, geothermal. wind, fuel cells, or microturbines. Treasury was 

authorized to make grants in an amount up to 30 percent of the basis of the funded property as a 

substitute for the equivalent tax credits the projects' owners would have eventually received for 

making these investments.' Several of the projects receiving loans or loan guarantees under the 

Programs have applied for or received grants from Treasury under Section 1603. certain of the 

proceeds of which must be used to pay down a portion of the DOE-guaranteed loan. thereby 

reducing the DOE's overall exposure. 

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ii. Factors shaping the development of thc Portfolio 

The requirements and limitations that the statutes and regulations impose on the 

Programs shaped the development of the Portfolio in several ways. As summarized below. the 

legal constraints caused DOE to create a portfolio that consisted of: 

Innovative alternative energy projects employing technologies that had not 

reached commercial maturity and involved more risk lhan is typical for project 

and corporate debt financing; 

Loans and loan guarantees but, except in one case, no form of equity investment: 

Credits that DOE determined to meet statutory criteria of "reasonable prospect of 

repayment" and "financial viability"; 

Credits of long tenor, approaching thirty years in some cases; and 

In the case of the Section 1705 credits, loans and loan guarantees that were 

required to close by the statutory deadline of September 30,2011. 

In addition: 

The fces that could be charged under the Programs were below market; and 

• The solicitation process limited the pipeline of projects because it depended upon 

project sponsors proactively submitting proposals to DOE. 

The effect of each of these factors on DOE's development of the Portfolio was as 

follows: 

The statutes and regulations require the Programs to SUppOlt innovative projects 

employing technologies that have not yet rcached commercial maturity. 

DOE implemented the Programs to fulfill a perceived need for public programs to 

provide financing to alternative energy projects that had achieved deployment of a pilot facility 

but had not yet diffused, commercialized, and scaled-up the new technology. Both DOE and 

private observers of the alternative energy industry helieved that many projects at this stage of 

development stalled or ended for lack offunding that would have been available for technologies 

[hat had proven their viability in one or more commercial-scale installations. Because both the 

Title XVII and the A TVM programs focus on providing support to projects involving innovative 

technologies that needed support to become commercialized and diffused through the 

marketplace, the supported projects inherently involve higher degrees of risk and uncertainty 

than projects that are typically financed in the banking and securities markets. 

The EPAct focuses DOE's support on innovative, not-yct-commercial technologies. The 

EPAct rcquires that the loan guarantees made under the Title XVII program bc awarded to 

projects that "employ new or significantly illlProved technologies as compared to commercial 

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technologies in service in the United States at the time the guarantce is issued."" The EPAct 

specifies that the types of projccts eligible for loan guarantees included renewable energy 

systems; advanced fossil energy technology; advanced nuclear energy facilities; efficient 

electrical generation, transmission, and distribution technologies; efficient end-use energy 

technologies; and production j~lcilities for fuel emcient vehicles, including hybrid and advanced 

diesel vehicles7 

Like the Title XVII program, ATVM is intendcd to support innovative technologies, 

specifically, those that improve automobile fuel efficiency. In the case of A TVM, DOE is 

authorized to make direct loans to automobile manufacturers and component suppliers to 

establish, reequip, or expand a facility located in the U.S. to manufacture "qualifying" ATVs and 

"qualifying" components for ATVs, or to perfi:mn engineering integration in the U.S. of 

qualifying A TVs and qualifying components. 8 A TVM was expanded in 2009 to include 

~:~n~:~~:~~ers of "ultra ettlcient vehicles" -- vehicles with a fuel efficiency of at least 75 miles 

The statutes and regulations specify the form of the support DOE could provide 

under the Programs, but are silent as to whether that support can include taking an 

equity stake in a project as consideration for the loans or loan guarantees. 

The EPAct limits DOE to making loan guarantees under the Title XVII program with 

appropriated funds, and does not authorize DOE to use appropriated funds to purchase equity in 

a company. The EPAct and implementing regulations are silent as to whether DOE could take 

equity in consideration for its loan guarantees, for waiving covenants or as part of a loan 

workout. 

A TVM differs from the Title XVII program in that the A TVM program provides direct 

grants and loans of federal funds, rather than loan guarantees, to the borrowers. Like the Title 

XVII implementing regulations, the A TVM implementing regulations are silent regarding the 

ability of DOE to take equity positions in borrowers or underlying projects. 

The statutes and regulations require the Programs to support projects that, in 

DOE'sjudgment. promise "a reasonable prospect of repayment" in the case of the 

Title XVII program and involve a "linancially viable" borrower in the case of 

ATVM. 

Under the Title XVII program. DOE is authorized to grant loan guarantees only in cases 

in which the Secretary determines there is a "reasonable prospect of repayment" of the 

guaranteed loan. lo Neither the [PAct nor the Title XVII program's implementing regulations 

define the term "reasonable prospect of repayment." 

An applicant for an A TVM loan is required to show, among other factors, that it would 

be "tlnancially viable" in the absence of any additional federal funding for the proposed 

project. I I Under the regulations, DOE determines whether a manufacturer is "financially viable" 

based on a review of financial mctrics enumerated in the A TVM implementing regulations, such 

as the applicant's debt-to-equity ratio as of the date of the loan application, the applicant's 

earnings before interest, taxes. depreciation. and amortization CEBITDA") for the applicant's 

JR 
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I~ostrecent ~iscal year prior to the date ofth~ lo~n ap,plication. and the applicant's debt-toEBIl DA ratio as of the date of the loan application .• 

The statutes provide for long-duration loans and loan guarantees. 

The EPAct contemplates guarantees for long-term obligations in the Title XVII program; 

the term of the underlying loan guaranteed by DOE eould be up to the lesser of30 years or 90 

percent of the projeeted useful lifetime of the physical asset finaneed by the loan. 13 DOE ean 

make loans under ATVM with a term equal to the lesser ofthc projected life (in years) of the 

eligible project or 25 years. 14 

The fact that Title XVII guaranteed loans can have terms of up to 30 years and ATVM 

loans can have terms of up to 25 years means that many of DOE's commitments are oflong 

duration. DOE will be responsible for managing the Portfolio for many years into the future. and 

this fact influences the Report's later recommendations with respect to management and 

governance. 

The statutes imposed certain deadlines on DOE's ability to make loans and loan 

guarantees, 

Under the Title XVII program, projects receiving loan guarantees under Section 1705 

wcre required to commence construction no later than September 30, 2011. 15 In addition, 

Section 1705 also included a sunset provision, under which DOE's authority to make loan 

guarantces under the Scction 1705 authority expired on September 30,2011. 1

" Because ARRA 

was enacted in February 2009, DOE had less than thrce years to identify eligible projects, 

negotiate loan guarantee documentation, and close the transactions under its Section 1705 

authority. Given the long lead times typical for innovative energy projects, this provision 

effectively limited the pool of potential projects to those that had progressed in conceptualization 

and development to the point where sponsors could complete the lengthy DOE application and 

negotiation process by September 30, 2011. 

The fees that could be charged under thc Programs were below market. 

The govcrning statutes set the fees that DOE could charge loan and loan guarantee 

recipients under the Programs. The [PAct provides that DOE can charge fees no higher than 

"sufficient to cover applicable administrative cxpenses" under the Title XVII program. 17 Under 

the A TVM wagram. DOE can charge for administrative costs up to $100.000 or 10 basis points 

of the loan. ~ These fees are higher for origination -- for which thcre arc a number of 

administrative expenses -- than for the monitoring process. These provisions constrain the 

funding for monitoring and oversight. 

The solicitation process limited the pipeline of projects because it depended upon 

project sponsors proactively submitting proposals to DOE. 

After the passage of the EPAct in 2005, DOE made an early decision to sourcc loans for 

the Title XVII program through a formal solicitation process. DOE thereby limited itself to 

considering only projects submitted in response to the solicitation. 

19 
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IV. SUMMARY OF THE INDEPENDENT CONSULTANT'S EVALUATION OF THE 

PORTFOLIO -- DESCRIPTION OF THE EVALUATED LOANS 

The Independent Consultant conducted an cvaluation of the closed loan and loan 

guarantee P0I1folio under the Programs as ofNovembcr 28, 2011. In total. there were 30 

Evaluated Loans. of which 25 were closed under the Section 1705 portion of the Title XVII 

Program and five were closed under the A TYM program. As noted above. the Independent 

Consultant did not evaluate the loans to Solyndra and Beacon. Total exposure to Solyndra and 

Beacon as of November 28,2011, was $567 million. 

In general, the Evaluated Loans under the Programs were structured as funding 

commitments with limited, or in many cases, no funds drawn under the loan at closing. 

Borrowers have the ability to draw under the loans from time to time to fund the Eligible Costs 

provided that they meet certain conditions precedent that vary among the individual loans. 

The 30 Evaluated Loans total $23.77 billion. As of November 28, 2011. $8.30 billion of 

proceeds or 35 percent of total funds committed had been drawn undcr the Evaluated Loans. Of 

the $23.77 billion in Evaluated Loans. $22.66 billion represents DOE's aggregate commitment. 

reflecting the fact that loans made under the rinancial Institution Partnership Program ("FIPP") 19 

are only up to 80 percent guaranteed. 

The Independent Consultant grouped the Programs into three broad categories with each 

category representing a different project type and loan structure. The first category. the UtilityLinkcd Loans, all have a project finance structure. which is a common mcthod of financing the 

construction of a long-lived asset, typically a discrete infrastructure asset such as a power plant. 

A morc detailed deseription of projcct finance funding structures follows. The Utility-Linked 

Loans represent the greatest number of loans and loan guarantees under the Programs and the 

greatest aggregate commitment. 

The second category comprises the Non-Utility-Linked Loans and includes cellulosic 

ethanol projects. solar manufacturing companies. and small. start-up automotive manufacturing 

companies. The Non-Utility-Linked Loan structures combine some elements of project finance 

loan structures and some elements of traditional corporate loan structures. 

The third category comprises the rord and ~issan Loans. The rord and Nissan Loans 

were made to established corporate credits with loan structures typical of traditional secured 

corporate debt. 

Utility-Linked Loans. The Portfolio includes 20 Utility-Linked Loans totaling $14.40 

billion, of which $13.30 billion represents the DOE's aggregate commitment, taking into account 

the fact that the I'IPP loans are only partially guaranteed. As of November 28.20 II, $3.15 

billion of proceeds. or 22 percent oftolal Utility-Linked Loans funds committed. had been 

drawn. The Utility-Linked Loans category includes solar, wind, and geothermal generation. and 

electrical transmission projects. 

Non-Utility-Linked Loans. The Portfolio includes eight Non-Utility-Linked Loans, 

excluding loans made to Solyndra and Beacon. The Non-Utility-Linked Loans represent 

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aggrcgatc DOE commitments of$2.01 billion. As ofNovembcr 28.20 II. $556 million of 

proceeds, or 28 percent of total Non-Utility-Linked funds committed, had been drawn. 

Ford and Nissan Loans. The Ford and Nissan Loans represent aggregate DOE 

commitments of$7.36 billion. As ofNovcmber 28, 2011. $4.60 billion of proceeds, or 63 

percent. of total Ford and Nissan funds committed. had been drawn. 

A. Characteristics of the Utility-Linked Loans 

The Utility-Linked Loans are all structured as project financings. In addition, certain of 

the Non-Utility-Linked Loans incorporate many project-financing clements. 

Unlike corporate financings, which typically support the consolidatcd assets of a 

corporation. a project financing supp0l1s the development and operation of a specific asset and 

relics on the cash generated by that asset alone for its repayment. 

The borrower in a project tinancing is typically a special purpose project company whose 

only asset is the project itself. The projcct company is in turn owned by one or more project 

sponsors. which fund equity contributions that, along with thc debt raised in the project 

financing. pay tllr the construction of the project. The project financing is structurcd such that 

the project loan is non-recourse to thc project sponsors, meaning the lenders must look only to 

the project company and its assets for repayment. Howevcr. as described below, the various 

parties to and documentation supporting a project financing often provide certain forms of credit 

support to help ensure repayment in the event that the construction or operation of the project 

does not go as planned. The key parties and contracts in a project financing are listcd below. 

Projcct Company. The project company acts as the borrower in the project financing and 

owns the assets of the project. 

Projcct Sponsor. The project sponsor owns the project company and funds equity 

contributions. which along with the debt raised in the project financing are anticipated to pay for 

the construction of the project. If the project sponsor is not rated investment gradc, it typically 

provides a letter of credit to the project company to guarantee the funding of its equity 

commitment. The project sponsor often commits to fund a certain level or cost overruns in 

addition to the amount or its base equity commitment. 

Engineering. Procurement. and Construction Contractor. The enginecring, procurement 

and construction CEPC") contractor agrees to dcsign the project. procure necessary components 

and materials, and construct the project. Under a "full-wrap" EPC contract, the EPC contractor 

is Icgally and financially bound to deliver the jinished projcct by a certain date and at a certain 

cost. Alternatively. some projects do not enter into a full-wrap EPC contract, but rather into 

separate agreements for engineering services. procurement of components andior construction. 

Operations and Maintenance Service Provider. The operations and maintenance 

("O&M") service provider is responsible for the day-to-day operations or the project following 

the completion of construction. The O&M scrvicc provider often guarantees it will meet certain 

performance levels or face financial penalties. 

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Project Offtaker. The project offtaker agrees to purchase the output of the project for an 

extended period of time. The offtake agreement is intended to provide stable and predictable 

cash flow to repay the project loan. [n the specific context of the Utility-Linked Loans, the 

output is typically electric power sold to an investmcnt grade utility under a power purchase 

agreement ('"PPA") for an extended period of time (20-30 years). 

Credit Agreement. The credit agreement between the project company and the project 

lenders governs the extension and repayment of the project loan. The key terms and provisions 

in the credit agreement that provide protection to the lender and guarantor include: 

Provisions granting a security interest in all project assets and contracts: 

Conditions precedent to initial funding and each subsequent draw request (for 

example, a certification by the borrower that it has sufficient funds availahle to 

complete the project); 

Interest, costs, and fees paid to the lender; 

Representations and warranties (for example. stating that the borrower has 

complied with relevant laws, has the right to pledge its assets as collateral. etc.); 

Covenants (for example, agreements not to incur additional indebtedness except 

under cel1ain circumstances, not to make expenditures in excess of budgets except 

under certain circumstances. etc.); 

Provisions for mandatory prepayments under certain circumstances (using. for 

example, proceeds from a Section 1603 cash grant, proceeds from performance 

liquidated damages received [t'om the EPC contractor. etc.); and 

Provisions requiring the funding of debt service and maintenance reserve 

accounts. 

Appendix E provides a more comprehensive and detailed list of the key documents 

typically included in a project financing. 

B. Characteristics orthe Non-Utility-Linked Loans 

The Non-Utility-Linked Loans fall into three sub-eatcgories. based on the type of project 

or company to which the loan has been committed. 

Cellulosic Ethanol Project Loans. The loans to the cellulosic ethanol projects arc 

structured effectively as projcct financings. with a special purpose project company. an EPC 

contract. a parent completion and performance guarantee. and ofTtake agreements for the 

cellulosic ethanol production. As such, lenders benefit from structural protections in the 

construction phase that are largely similar to those that support the Utility-Linked Loans. 

I-!owever. unlike the Utility-Linked Loans. these projects have offtake agrcements with affiliates 

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of the project company and project sponsors rather than fixed-price agreements with a utility as 

is typical of Utility-Linked Loans. 

Automotive Manufacturing Companv Loans. These loans are provided to small start-up 

automotive manufacturing companies. Unlike the project financings. the loans have not been 

made to special purpose entities but rather are supported by the general corporate credit of the 

borrower. In all cases, the loans are secured by substantially all of the assets of the borrower and 

benefit from financial covenants. The borrowers can draw on the loans periodically provided 

certain milestones are met. Repayment of the loans is contingcnt on the borrower successfully 

executing its business plan. 

Solar Manufacturing Company Loans. The solar manufacturing loans are to early-stage 

companies engaged in the business of manufacturing components filr solar energy generation. 

The loans are supported by the general corporate crcdit of the borrower. In all cases, the loans 

are secured. Many of the loans have not yet funded or have only funded partially. In most of the 

solar manufacturing loans, the equity investor assumes the initial start-up risk before any portion 

oCthe DOE guaranteed loan is funded. The loan documents provide additional protection to the 

DOE in the form of conditions precedent that must be met at various stages prior to advances 

under the loans. These conditions precedent include: 

A celtain amount of incremental equity contributions have been f'unded; 

Certain contract milestones (e.g.. for sale of the product) have been met; 

The latest milestone for gross profit margin milestone has been reached; 

The most recent required report from an independent engineer and/or market 

consultant has been provided and is acceptable; 

Permits to construct the current stage of the project have been received; and 

The borrower can demonstrate that sutlicient funds are available to continue and 

complete construction. 

Iftbe companies do not meet the prescribed conditions precedent, the DOE is not 

obligated to advance additional funds to the borrower. 

C. Characteristics of the Ford and Nissan Loans 

The Ford and Nissan Loans resemble traditional corporate loans made to mature 

companies. The loans are supported by the general corporate credit of the borrower and the loan 

documentation contains customary loan covenants. In the case of Ford. the DOt guaranteed 

loan is split into two tranches: one secured by a junior liell 011 all the collateral pledged under 

Ford's senior secured credit agreement and the other secured by a first lien on the assets 

purchased using the proceeds of both tranches. The Nissan loan is also required by statute to be 

secured by assets purchased with loan proceeds. 

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V. SUMMARY OF THE INDEPENDENT CONSULTANT'S EVALUATION OF THE 

PORTFOLIO -- RANKING OF THE EVALUATED LOANS 

A. Introduction 

The lirst step taken by the Independent Consultant to evaluate the Portfolio was to assess 

the risk of each loan. The second step was to rank the loans relative to each other according to 

their assessed risk. The third step was to translate those rankings into numerical scores that in 

turn were translated into credit ratings such as "8B8," "BB," and "CCC+:' which are meant to 

be fair approximations of the debt ratings independent rating agencies would assign to the 

transactions as of the date of the Report. Each transaction's specific letter rating was used by the 

Independent Consultant as an input to its own evaluation of the Portfolio. 

The Ford and Nissan Loans were not included in the ranking exercise becausc they are 

established corporate credits with current external credit ratings. As such, the Independent 

Consultant relied upon independent ratings from credit rating agencies. The Ford loans were 

rated in accordance with Ford's senior secured credit ratings. The Nissan loan was rated in 

accordance with its corporate credit rating. 

DOE docs not require borrowers to provide updated credit ratings on completed 

transactions. Therefore, the Independent Consultant performcd a credit ranking and rating 

cxercise with respect to the guaranteed loan transactions that closed before November 28, 20 II 

as a first step to conducting the evaluation of the Portfolio. The Independent Consultant did not 

rank loans made to Beacon and Solyndra. 

B. Assessing the Credit Risk of Utility-Linked and Non-Utility-Linked Loans 

In assessing the credit risk of each Utility-Linked and Non-Uti lity-Linked Loan, the 

Independent Consultant used nine fundamental categories of credit quality (the ;'Nine Criteria") 

listed below. Details regarding each of these criteria are provided in Appendix D. 

Project Sponsor; 

Technology; 

Capital Structure; 

Market and Oft~take; 

Project Completion; 

Operation Cost and Performance; 

• Infrastructure; 

Legal; and 

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Legislative and Regulatory. 

The Independent Consultant assigned each credit a Ilumerical value ranging !i'OI11 0 to 5 

for celch orthe Nine Criteria. with 5 being the strongest, and then applied criteria wcightings 

("the Criteria Wcightings") to the Nine Criteria in order to gcnerale un oycrallnumericul SCOre 

f()l' each twnsaction. 

DOE used a similar approach to risk assessment using the Nine Criteria und a weighting 

method()log~ in its underwriting process for Utility-Linked Loam and most Dfthe NOll-UtilityLinked Loans. The Independent Consultant used the same Nine Criteria as did DOE beclluse, in 

the opinion of the Independent ComuItant, they comprise the salient factors for evaluating the 

credits and are substantially similm' to the criteria that would he cmployed by private sector 

credit analysts for these types of loans. Areas where the Independent Consultant departed from 

the nocs methodology arc detaikd below. 

The Criteria Weightings applied to each category arc summarized belo\\'. Bold ligures 

indicate the departurcs fro111 DOE's weightings oCthe criteria. Where weightings in one 

category are im;reasco. the weightings of the other categories are decreased pro rata. 

Tabk 2: ("rilaia Weighlings Al'piied to Fach oFthe ,vine Criteria 

The Independent Consultant considered currently 3nilablc information in determining 

the strengths and risks of each credit and attempted to evalLWte the loans in a consistent manner. 

All transactions \Vere evaluated as of the same point in time. in line with the Independent 

Consultant', intention to apply a consistent approach to evaluation across the P0I1folio. 

Utilitv-Linkctll.Q;lIlS, The Independent Consultant relied upon the Nine Criteria for each 

orthe Utility-Linked Loans, consistent with DOE's methodology. Criteria Weightings (across 

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the Nine Criteria) were not altered from the weightings used by DOE. In three cases, DOE 

tilc[ored in specific incremental criteria. In these cases, the Independent Consultant concluded 

that these factors "'ere already captured in the Nine Criteria. As a result, it did not amend the 

Criteria Weightings. 

Non-Utilitv-Linked Loans. The Independent Consultant relied upon the Nine Criteria to 

assess each of the solar manufacturing and cellulosic ethanol loans. consistent with DOE's 

methodology. The Independent Consultant also used the Nine Criteria in assessing each of the 

automotive manufacturing loans (excluding ford and Nissan). a departure from DOE's approach 

to evaluating those loans. In these cases, DOL: relicd on projected financial ratios as a measure 

of credit quality. The Independent Consultant believes that the Nine Criteria better measure the 

credit quality of the early-stage auto manufacturing companies than do projected financials that 

rely on IllUllY assulllptions. 

In ranking the solar manuf~lcturing loans. the Independent Consultant assumed that the 

borrower had met all conditions precedent and that DOE had made its first advance under each 

loan. The Independent Consultant believes that these are reasonable assumptions in evaluating 

the risk of the loans given that, if a solar manuiilcturing company does not meet certain 

conditions precedent. no funding of the loan will occur and DOE will have no exposure under 

the loan guarantee. 

With respect to the Criteria Weightings used to assess the credit of the Non-UtilityLinked Loans. the Independent Consultant departed from DOE's approach. for the solar 

ll1anufilcturing loans. the Independent Consultant increased the Criteria Weightings related to 

market exposure. The Independent Consultant believes that market-related risk is especially 

signifIcant for the solar manufacturing companies and that this risk had increased since the loans 

were originated. Criteria Weightings related to legislative and regulatory risk were increased for 

the cellulosic ethanol loans. The Independent Consultant determined that the legislative- and 

regulatory-related risk is especially significant fiJI' these loans. given the projects' reliance on the 

Renewable Fuel Standards ("RFS") mandate. 

DOE did not have Criteria Weightings fiJI' the small. start-up automotive manufacturing 

loans, as DOE did not use the Nine Criteria to evaluate those loans. The Independent Consultant 

believes that the same Criteria Wcightings applied to the solar manufacturing companies wcre 

appropriate for the small automotive manufacturing companies. with market-related risk being 

the most significant. 

c. nanking the Evaluated Loans According to Credit nisk 

Once the Independent Consultant had assigned numerical scores based on the assessment 

methodology above. the Independent Consultant ranked the loans in order of their numerical 

ratings !i'0I11 high to low. Based on the Independent Consultant's experience with project 

tinancings. it considered the I110st credit-wo!1hy transactions (those with the highest nUI11erieal 

scores) to be of low investment-grade credit quality (BBB) and the least creditworthy to be 

sufficiently risky to have equity-like investment characteristics. For the purposes of the 

evaluation. the Independent Consultant assumed that the weakest credit in the Portfolio would 

have a CC rating. 

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I'he evaluation prneess used a standard, cOllsistent credit evaluation methodology to 

evaluatc each transaction in the Utility-Linked and Non-Utility-Linked Loan p0!1folios 11'0111 a 

credit perspective and then compared the transactions with one another. The objective was to 

establish a list that mnked the relative credit quality of the loans li'om highest to Ic\\\ est. 

The Independent Consultant translated each numerical score into a letter rating, with the 

top credits rated at the BBB level, down (0 the weakest credits, which \Vere rated at the CC level. 

The table belovv was developed by thL' Independent Consultant and shows how numerical scores 

Ivere translated to letter ratings at each discrete rating kl'el. The DOE llsed a similar translation 

! !owelcr, DOL's translation of numerical scores inw letter ralings was based on 11 

scale, 

This risk rating and credit rating assignment ewrcise rc:;ultcd in 17 of the credits 

receiving ratings that IV ere either higher or lower than lho:;e assigned by DOE. 

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VI. THE INDEPENDENT CONSUL TANT'S EVALUATION OF THE PORTFOLIO 

A. Overview of the Independent Consnltant's Evalnation Methodologies 

Once the Independent Consultant had assessed the credit risk of each project and 

assigned a letter rating to each, the Independent Consultant used two distinct and noncomparable methodologies to quantify risk associated with the Portfolio: the FCRA 

Methodology and the FMV Methodology. The methods differ substantially from each other and 

are used for different purposes, as discussed below. 

Notwithstanding their differences in method and purpose, the Independent Consultant 

believes it is beneficial to use both the FMV Methodology and the FCRA Methodology for 

assessing and evaluating the Portfolio and for developing recommendations regarding 

management. governance, and reporting. The FMV Methodology provides additional insight 

into the future marketability of these loans and guarantees, the financial incentives that sponsors 

and other parties have to invest in these projects, and the ways that DOE should manage the 

Programs to protect and enhance value to taxpayers over time. 

The FCRA Methodology. The first methodology involved the calculation of credit 

subsidy costs for each loan in the Portfolio in accordance with FCRA. For credit programs that 

administer full or partial loan guarantees (such as the Programs). FCRA defines the cost of these 

programs as the estimated long-term cost to the government on a net present value basis, 

excluding administrative costs. An amount equal to this long-term cost is budgeted to cover the 

risk of estimated shortfalls in loan repayments and. as described previously, is referred to as the 

Credit Subsidy Cost. Prior to entering into a Loan Guarantee. the DOE is required to receive 

either an appropriation for the Credit Subsidy Cost or a cash payment of such cost directly from 

the applicant. DOE is also required each year to re-estimate the Credit Subsidy Cost for each 

loan that has had a disbursement. The Credit Subsidy Cost estimated by the DOE for each loan 

reflects DOE's assessment of each loan's credit quality. The Independent Consultant relied upon 

its own assessment of credit quality. using the ratings that were applied to each loan in the 

Portfolio. to develop its estimate of Credit Subsidy Cost. A summary of FCRA and how the 

Independent Consultant used this approach is detailed in the f()lIowing section. < 

The FMY Methodology. The sccond methodology involved the calculation of an 

estimated "fair market" value ("FMY") for each loan in the Portfolio in a manner that the 

Independent Consultant believes would be used by parties buying similar loans in the market. 

Because the interest rates on the Evaluated Loans are set at or very ncar the Treasury's 

concurrent borrowing rates. the interest rates are significantly below market rates for comparable 

commercial loans. Thc FMY Methodology estimates the amount of discount to face value that 

investors would require in order to receive an acceptable total return. The Independent 

Consultant relied upon its assessment of credit quality, using the ratings that it applied to each 

loan in the Portfolio, to develop its own estimate of a fair market value discount for each loan. A 

summary of the FMY Methodology and how the Independent Consultant used this approach is 

detailed below. 

Neither the [,CRA Methodology nor the FMV Methodologv can be used to predict the 

eventual realized loss associated with any loan or loan guarantee or the Portfolio as a whole. The 

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eventual loss will depend upon the outcomes of many factors, some unique to certain loans, that 

the FCRA Methodology and the FMV Methodology arc not designed to capture and that cannot 

be predicted with confidence today. Furthermore, the present value estimates under either the 

FCRA Methodology or the FMV Methodology fluctuate substantially with changes in discount 

rates that are functions of assumed long-term interest rates. For instance, if long-term interest 

rates on U.S. Treasuries were to rise significantly fl'om today's historic lows, the Credit Subsidy 

Cost estimate as calculated under the FCRA Methodology, all other factors unchanged, would 

decline substantially. 

B. Description of the FCRA Methodology 

Prior to entering into a loan guarantee, DOE is required to receive either an appropriation 

for the Credit Subsidy Cost or a cash payment of such cost directly from the applicant. In 

consultation with OMB and a third-party consultant contracted by DOE, LPO has developed a 

Credit Subsidy Cost estimation methodology that emulates the method used by OMB. 

This Credit Subsidy Cost relies on a methodology developed in conjunction with OMS to 

determine the net present value of cash flows to and from the government resulting from either a 

direct loan from the government, or a government guarantee of a third-party loan. The model 

requires lhree inputs: 

Project credit rating 

Expected recovery rale in the event of a default 

Project principal and interest payment schedule 

For direct government loans, the model applies a cumulative default rate to each 

scheduled principal and interest payment to produce a forecasted default amount. The default 

payments for a guaranteed loan are calculated by applying the historical default data for loans of 

that age and raling to the appropriate remaining principal balances. The detault rates lIsed are 

based on default data provided by Moody's and Standard & Poor's CS&P"). The default curves 

applied to a particular project correspond to the project's credit rating. which is a letter credit 

rating determined by DOE, with input from OMB, bascd on a comprchcnsive risk rating 

methodology which takes into account all of the due diligence and analysis performed by DOE 

through the underwriting process. The lettcr credit rating is an approximation of the rating that 

would be assigned by a third-party credit rating agency. 

The model then applies an expected recovery rate to the estimated delaulted cash nows. 

The expected recovery rate is the percentage of principal estimated to be recovered in the event 

of a default. That rccovery rate is adjusted up or down by LPO, with input from OMB, taking 

account of project-specific risk factors. 

The application of the default rates and expected recovery rates to the appropriate loan 

balance yields a forecast of cash nows to and from the government over the life of the loan. 

Those expected cash flows are then discounted using OMB's Credit Subsidy Calculator (CSC2). 

The CSC2 discounts the cash flows at relevant Treasury rates. The sum of the discounted cash 

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flows, net of disbursements for direct loans, is the Credit Subsidy Cost, which is expressed as a 

dollar amount. That dollar amount is then divided by the obligation amount, equal to the sum of 

all disbursemcnts, to arrive at the Credit Subsidy Rate, which is expressed as a percentage. 

C. Valuation Using the FCRA Methodology 

The Independent Consultant considered the results of the FCRA analysis under two 

cases, one based on DOE's credit ratings for each loan as of early December 20 II, and one 

based on the Independent Consultant's credit ratings for each loan. 

DOE Annual Re-Estimate. The credit subsidies for eaeh loan drawn as of September 30, 

20 II were re-estimated by DOE as part of its normal annual budgeting process. Each loan 

subject to a re-estimate received a new letter rating from DOE that in turn was used as an input 

in the FCRA methodology to re-estimate its credit subsidy in early December 2011. If a reestimate was not required for a loan because no funds had been drawn as of September 30, 2011, 

its credit subsidy at obligation was used. 

Independent Consultant's Modified Credit Subsidy Calculation. The Independent 

Consultant asked DOE's third-party consultant (with DOE's acknowledgement) to recalculate 

the Credit Subsidy Cost for each of the 17 loans for which the Independent Consultant's credit 

rating differed from DOE's credit rating. All other inputs to the FCRA Methodology remained 

unchanged. 

In its re-estimate of the Credit Subsidy Cost using the FCRA Methodology, (he 

Independent Consultant did not make any changes to the recovery rate assumptions used by 

DOE. The Independent Consultant understands that the determination of a recovery rate for each 

loan resulted from subjective analysis and discussion between DOE and OMB on a loan-by-Ioan 

basis. The assumed recovery rate has a substantial effect on the Credit Subsidy Cost calculation. 

The Independent Consultant ran sensitivities on a small sample of the 103ns, rc-estimating the 

Credit Subsidy Cost for recovery rates both above and below those chosen by DOE. The results 

of the sensitivity analysis using the small sample confirmed that changes to the recovery rate 

could have a meaningful impact on the credit subsidy caleulation. 

In order for the Independent Consultant to determine a recovery rate for each loan, the 

Independent Consultant would need to commission an appraisal of each of the underlying assets 

securing the loan. For the purposes of this report, the Independent Consultant did not have the 

time or budget to commission appraisals for each asset securing each loan in the Portfolio. 

D. Results of Valuation Using the FCRA Methodology 

Utility-Linked Loans. The Utility-Linked Loans portfolio comprises 20 loan guarantees 

with an aggregate principal value of $14.4 billion. 

The initial Credit Subsidy Cost DOE calculated under the FCRA Methodology of each 

particular loan closed (otaled $1.491 billion at the time of closure. 

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The Independent Consultant's re-evaluation of each Utility-Linked Loan's credit rating 

resulted in ten loans receiving ratings different from those assigned by DOE, some of which 

were lower and some of which were higher by one to two credit rating categories. 

The factors that resulted in changed ratings varied among the loans, but in general 

included the Independent Consultant's independent views on the following factors: 

Financial strength and creditworthiness of project parties; 

Legal and regulatory changes since the loans closed; 

Technological and operational risks (based upon the projects' independent 

engineer reports); and 

Project progress to date. 

In certain cases, the Independent Consultant's views on these t:1ctors were more positive 

and in other cases (hey were more negative than DOE's views. Overall, the Independent 

Consultant's reevaluation of the Utility-Linked Loan portfolio's creditworthiness resulted in a 

modestly lower average rating than had been assigned by DOE. Updated Credit Subsidy Costs 

for Utility-Linked Loans calculated using the FCRA methodology with DOE's credit ratings as 

of December II. 2011 totaled $1.551 billion. Updated Credit Subsidy Costs calculated using the 

FCRA methodology with the Independent Consultant's credit ratings totaled $1.696 billion, a 

nine percent increase (0 DOE's ITRA re-estimate. 

Non-Utility-Linked Loans. The Non-Utility-Linked Loans pOl1folio comprises eight loan 

guarantees with an aggrcgate principal value of $2 billion. 

The initial Credit Subsidy Cost DOE calculated under the FCRA Methodology totaled 

$479 million at the time each particular loan closed. 

The Indepcndent Consultant's reevaluation of each loan's credit rating resulted in six 

loans receiving ratings different from (hose assigned by DOE, all of which were lower by one to 

three credit rating categories. 

The factors that resulted in changed ratings varied among the loans, but in general 

included (he Independent Consultant's independent views (which in certain cases were more 

positive and in certain cases more negative than DOE's views) on the following factors: 

Changes to market related risks; and 

Project progress to date. 

Overall, the Independent Consultant's reevaluation of the Non-Utility-Linked Loans 

portfolio's creditworthiness resulted in a lower average rating than had been assigned by DOE. 

Updated Credit Subsidy Costs calculated using the FCRA methodology with DOE's credit 

ratings as of December 11,20 II totaled $640 million. Updated Credit Subsidy Costs calculated 

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using the FeR,\ methodology with the Independent Consultant's credit ratings totaled $820 

million. a 28 percent increase to DOE's FCRA re-cstimate. 

Ford and NissQD Loans. The Ford and Nissan loans hm'c an aggregate principal value of 

$7.4 billion. 

The initial Credit Subsidy Cost DOE calculated under the FCRA Methodology totaled 

$3.0 billion at the lime the DOE made its 103n commitments in 2()09. 

The Independent Consultant evaluat"d the existing credit ratings ofFord and Nissan. as 

well as inli:lrlnation regarding the security package and ranking of the loans in each company's 

capital structure. The independent Consultant raised the raling on the Ford loans by illUr 

categories ii'om DOE's ruting at rc-estimation, The Nissan 10311 was let! unchanged from DOE's 

rating at re-cstimation, 

Overall. the Imlepcndent Consultant's reL'valuation l1fthe Ford and Nissan portfolio's 

credil\\ orthincss resulted in a higher average credit rating than had been assigned by DOE. 

Credit Subsidy Costs calculated lIsing the FCRA methodology with DOE's credit 

as of December II. 2011 totaled S75J million. Updated Credit Subsidy Costs calculated 

using the FCRA mcthodology with the Independent Consultant's credit ratings totaled $166 

million, a 78 perccnt decrease to DOE's FCRA re-cstimate of credit loss. 

Table 4: Results o(the FeRA :vtetho!i%gy Calculatiol1s 

E. Characteristics of the FCRA Methodologv 

While the valuation of any long-tcrm loan is necessarily an estimate, the Independent 

Consultant notes that the Portfolio has several characteristics that make it particularly 

challenging to value: 

Many of the projects employ novel technology and/or imolve significant scale-up 

risk; 

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The loans have tenors that are longer than those typically found in the 

marketplace, and therefore a small change in discount rates results in a relatively 

large change ill valuation; and 

Many of the loans are to projects still in a construction phase. during which they 

have not yet demonstrated their capability to perform. 

The "CRA Methodology requires an assessment of credit quality that is determined in 

part through an analysis of the financial forecasts associated with each loan. These forecasts are 

subject to numerous assumptions and actual results may differ materially from the forecasts. 

Furthcrmore. the projects arc complex and fundamentally difficult to forecast. inherent in the 

nature of the Programs is the financing of innovative projects at an earlier stage than that at 

which they would have been able to attract financing in the privatc market. 

The FCRA Methodology focuses only on default risk and associated rates of recovery. It 

relics upon an assumed default rate for each loan that varies by credit rating (with lower rated 

loans having a higher risk of default) and time horizon (with payments further into the future 

having a higher risk of defaulting) and an assumed recovery rate in the event of such a default. 

Thus. the FCRA \1ethodology estimates only the present value oflhe expected credit loss from 

the loan. It assuilles that that forecast is correct and docs not account fiJr the possibility that the 

aetualloss may be higher or lower than the estimate. If the eventual actual loss excecds the 

Credit Suhsidy Cost, that incrcmental loss is ahsorbed hy the taxpayer pursuant to the permanent. 

indefinite budget authority under FCRA. 

The resulting estimate of defaulted cash !lows. offset by associated recoveries. is 

discounted at the government's cost of funds (i.e .• a risk-free rate) to arrive at the Credit Subsidy 

Cost. It is important to note that the default rates are based on historical data compiled by the 

rating agencies over several decades. and theref(lre arc not reflective of the specific nature of the 

loan guarantees in the POltfolio (e.g, the particular industries involved. the unique degree of 

technology and scale-up risk. the illiquid nature of the loans from a trading perspective. and thc 

longer than typical tenor for credits of these ratings). 

As a result of these characteristics. the results frolll the legally required FCRA 

Methodolog) do not reflect the discounts from the loans' face values that investors would 

deilland to hear the full set of risks involved in this particular Portfolio. 

To be clear. while the results of the FCRA Methodology reprcsent reasonable estimates 

ofthe expected credit cost of the loan guarantee at the eurrent time. this valuation Illethodology. 

like the FMY Methodology discussed below. cannot be relied upon as a predictor of the eventual 

performance of thc Portfolio. 

F. Valuation Using the FMV Methodologv 

The Independent Consultant also conducted a fair market valuation of the Portfolio. To 

do so. the Independent Consultant assigned a range of discount rates to the estimated cash flolVs 

of each loan based on: 

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Yields on the bonds of similarly rated issuers. adjusted for the particular 

characteristics and lack of liquidity of each loan; 

The Independent Consultant's independent credit rating for eaeh loan (described 

above); and 

The anticipated weighted average life of each loan. 

Each loan's DOE-estimated principal and interest payment schedule (provided to the 

Independent Consultant in early December 2011) was discounted using the assigned yield range 

that was developed based on yields for similarly-rated utility and industrial bonds as of January 

2012. adjusted to reflect the Indepcndent Consultant's experience with the market Illr projeet 

finance credit. In general, approximately 100 additional basis points were added to the marketobserved yields to reflect differences between the loans in the Portfolio and the loans and bonds 

illr which publicly a\ailable yield data could be obtaincd. Those ditTcrcnces include: 

Complexity of the projects and their loan documentation: 

Reduced trading liquidity; and 

The repayment pattern of the loan (i.e .. some major investors. such as insurance 

companies. prefer loans with a single maturity date rather than loans that 

gradually repay). 

To reflect the speculative nature of the projects in the lower ratings categories. the 

Independent Consultant widened the range of yields applied as (he loans' ratings declined, 

starting at a one percent range for the highest ratings category and expanding (0 a five percent 

range for the lowest ratings category. 

The resulting range of present values of each loan was deducted from the loan's principal 

amount to arrive at an estimate of the range of economic values of the loan guarantee. Because 

the interest rates on the Evaluated Loans are set at or vcry ncar the Treasury's borrowing ratc. 

those interest rates are significantly below market rates Itl!' comparable commercial loans. For 

an investor to earn a market rate of return lI'om these loans. the investor would have to purchase 

them at a significant discount to their facc value. 

The yields for Ford were based on a combination of yield data on Ford's publicly traded 

debt as of January 1012. The yields for Nissan were based on similarly rated industrial bond 

indices. 

The table below sUlllmarizes the range of yields applied to credits at each rating level. 

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Table 5: Rllnge 0/ rields Applied 10 Credils ([I Each Raling L",'c! 

G, Valuation Rcsults Using the FMV Mcthodology 

"'_,"-'~'-'-====="'. The Independent Consultant's fair market value analysis resulted 

billion to $5,() billion to the total principal amount ofthl' loans. 

Non-Utilitv-Linked Loans, The Independent ConsultanCs fair market value analysis 

resulted in an aggregate discount of$707 million to $858 million to the total principal amount of 

the loans, 

Ford and Nissan Loans, The Independent Consultant's fair market value analysis resulted 

in an aggregate discount of$716 million to $1,021 billion to the total principal amount of the 

loans, 

The results of the Independent Consultant's fair markel valuation methodology afC 

summarized below, 

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Table 6: Nc'suits ,,/the [<'}tv ,Helhodology ('a/elilolion 

H. Characteristics of the FlVIV Methodology 

The Independent Consultant notes that the purposc and calculation ofthc FIVIV 

i'iletllOdology differ from those of the FCR/\ The Independent Consultant 

allribuks this ditTerence to the fact that the lTRA and the FMV Methodology 

mcasure different sets of risks, 

The F~lV iVlcthodology is hased on (he returns that investors are observed to demand in 

the market at a specific point in timc for hearing risks similar (0 those present in the Portt()lio, 

/\s such. it reflects the full range of risks j()r Ivhich investors \\ould demand to be compensated 

in a private market transaction at the time the analysis was conducted, Tbat range of risks 

includes not only the risks described previously in the se<:tion on Characteristics of the FCRA 

Valuation Methodology (Section VI(E)). but additional risks. among "hich are: 

The risk that the estimate of credit loss may prove to be incorrect; 

The concentration risk in the Portfolio (see Section L below); 

The reinvestment risk (the risk either that an illl'('slment may terillinate earlier 

than its stated knor and the rate of return (,)[ available alternative investments 

may be less than the rate of return urthe original investment. or the risk that 

income li'om an investment can only be im'ested at a rate of return less thun tbat 

offered by the original investmcnt); 

The liquidity risk pertaining to the unusual nature of the loans in the Programs: 

and 

Other market risks for which un investor would expect to be compensated with 

additional price discount but which the government. uniquely. dnes not conll'on!. 

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In addition, the FMV Methodology is based on market data for the most comparable 

bonds and loans that exist in the market. However, the distinctive characteristics of the loans in 

the Portfolio limit the comparability of the available market data to thesc loans. Furthermore, the 

market data fluctuate on a daily basis, making any valuation representative of only a single point 

in time. 

The aggregate results of the FCRA Methodology represent reasonable estimates of the 

discount to face valuc that investors would require to purchase the Portfolio in thc open market. 

However, as with the FCRA Methodology, the FMV Methodology cannot be relied upon to 

predict the eventual perf()rmance orthe Portfi)lio. 

l. Portfolio Concentration Risk 

In evaluating the Portfolio, the Independent Consultant noted several risk exposures that 

span several loans. These includc: 

Exposure to the price of photovoltaic ("PV") panels. The seven PV generation 

projects will benefit if their cost to acquire panels decreases but the three PV 

manufacturing projects will not bcnefit if competitors' prices decrease. 

State renewablc power standards. Almost all the Utility-Linked Loans are 

supported by power purchase agreements from utilities seeking to satisfy state 

mandates to source large portions of their power from renewable sources. These 

loans are exposed to the credit of these utilities and to the continuation of their 

regulatory requirements to source this type of power even if its price is higher 

than power from alternatives. 

First Solar and Abengoa. At least threc projects rely on First Solar, Inc. to 

produce their solar panels and three projects rely on the Spanish company 

Abengoa as their sponsor. 

RFS. Two projects rely on the Environmental Protection Agency's RFS2 

cellulosic ethanol mandates to establish a market for their product. 

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VII. MONITORING AND GOVERNANCE OF THE PROGRAMS 

The second task that the Chief of Staff assigned to the Independent Consultant was to 

make: 

Recommendations for enhancement to the Programs. if warranted and practical. to ensure 

effective monitoring and management of the eurrent loan and guarantee portfolio. 

A. Statutes and regulations 

The EPAct contains few requirements for monitoring and supervision of loan guarantees 

DOE granted under the Title XVll program. The monitoring and oversight language of the 

EPAct and implementing regulations is limited to clauses requiring recipients of guarantees to 

keep records and to provide access by the Secretary to the records to facilitate audit and 

governing actions for DOE to take in the event a borrower defaults on the underlying loan.2o 

The EISA docs not provide any requirements regarding governance and monitoring of 

loans aner closing. The ATVM program regulations require parties to an ATVM transaction to 

maintain records of the transaction and allow DOE access to any relevant records for the purpose 

of audit or examination?1 

Neither the statutes nor the regulations governing the Programs specify internal or 

external oversight or reporting requirements. The statutes and regulations do not specify the 

types or frequency of audits or examinations DOE must perform, the specific events that should 

trigger an audit or examination, or other guidance rclated to oversight and monitoring of DOE 

loans or loan guarantees. 

B. LPO monitoring and governance infrastructure as of October 20ll 

i. LPO structure 

LPO, which manages the Programs, most recently codified the structure and management 

of the Title XVII program as it operated in October 20 II and the structure and management of 

the ATVM program in November 2009. LPO is headed by a single Executive Director who 

reports directly to the SecretaryY The LPO Executive Director "serves under the broad 

guidance of the Secretary of Energy:·2J 

LPO analyzes and assembles the documentation that the Secretary uses to determine 

which projects receive loan guarantees under the Title XVII program and loans or grants undcr 

the ATVM program. LPO is also responsible (subject to the oversight described below) for the 

management of the Portfolio after these transactions havc closed. 

LPO is divided into several divisions responsible for specific aspects of the origination 

and monitoring/oversight processes: 

The Loan Guarantee Origination Division ("LGPO-OD") is responsible for the 

origination and underwriting of guaranteed obligations under the Title XVII program. The 

LGPO-OD is responsible for moving projects through the application reviews, and for 

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processing and overseeing detailed due diligence. It is also responsible for developing and 

negotiating terms and conditions associated with the guaranteed obligation, developing and 

negotiating closing documentation, recommending approvals and rejections of loans and 

ultimately closing the loan guarantee.24 

The 1\ TVM Division is responsible for the origination of loans under the ATVM 

program, performing the due diligence, negotiation, and closings associated with 1\ TVM loans. 

and making recommendations on loan decisions. 

The Technical and Project Management Division (''TPMD'') is responsible for providing 

technical analysis and input to the Title XVII and A TVM origination divisions. It supervises the 

work of independent engineers and technical experts retained to assist in the origination 

process. 25 

The Credit Division is responsible for performing the Credit Subsidy Cost estimation 

during the origination process for both the Title XVII and the 1\TVM programs, It generally 

implements. administers, and updates the credit policies and risk evaluation methodologies that 

LPO uses during origination and management oftransactions 26 The Credit Division also 

performs credit risk assessments and maintains the credit subsidy cash flow model that thc 

Programs use to estimate the Credit Subsidy Cost of a loan or loan guarantee.27 The Credit 

Division submits the Credit Subsidy Costs it calculates to OMB for approval. 28 

The Portfolio Management Division C'PMD") is responsible for managing Title XVII 

and A TVM transactions once they have received their first disbursement (i.e., once the 

origination process is complete). This includes monitoring projects through the construction 

period, checking adherence to repayment schedules and loan covenants, and monitoring legal 

and regulatory activities. Some of the more important responsibilities described in the Programs' 

policies and procedures include: 

Managing the large number of post-closing decisions required over the life of a 

loan or guarantee. These include whether to authorize disbursements, modify or 

amend the terms of the transaction, waive the transaction terms, and in some 

instances, pursue workout or foreclosure. Even a transaction requiring no 

modifications or amendments can require monthly evaluations over time to 

determine whether conditions precedent had been mel before the next tranche of 

loan proceeds was released to the borrower. 

• Reviewing and re-rating projects periodically, in conjunction with the Credit 

Division, to update the risks associated with a project and enable LPO to update 

the valuation of the Portfolio on an ongoing basis for FCRA compliance. 

Administering the periodic reporting system for all projects, producing weekly. 

quarterly, semi-annual and annual reports on the status of Portfolio projects, both 

individually and as a group. The frequency, detail and distribution of the reports 

vary based on project status. 

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In carrying out its responsibilities, LPO's policies and procedures call for PMD to make a 

determination of whether a credit action or a development pertaining to a borrower is "material." 

LPO policies do not dcfine what constitutes a "material" amendment or waivcr. PMD personnel 

stated that thc standard they use to determine whether an amcndment or a waiver is material is 

whether the change involves DOE taking on additional risk. Other examples of material changes 

or credit actions include restructuring, pursuing foreclosure in the event of a default, and the 

disposition of assets 29 This determination dictates whether a particular borrower or crcdit action 

will be scrutinized by the Risk Committee, the CRB, or the Secretary. 

Another significant responsibility ofPMD is managing a Watch List of projects that it 

has identified as higher risk (for reasons such as a breach of a covenant, falling behind schedule, 

or presence in an industry or market sector experiencing challenging market conditions). 

Projects on the Watch List are subject to heightened scrutiny. Among other responsibilities, 

LPO's policies and procedures call for PMD to review and reevaluate Watch List project risk 

ratings monthly and to hold weekly calls with Watch List borrowers. 

LPO is currently staffed by 92 full-time equivalent employees. who are spread among the 

various divisions within LPO. In addition, LPO uses over 60 full-time contractors as consultants 

on dilTerent aspects of the program. The current LPO Exccutive Director holds that position in 

an acting capacity. 

ii. Internal DOE oversight of the Programs and the 

LPO 

There arc several committees involved in overseeing credit transactions and the LPO. 

The Credit Committee is responsible for independently reviewing proposed loans and loan 

guarantees based on the information provided to it by the Title XVII and A TVM origination 

divisions, and making recommendations to the LPO Executive Director about whether the 

Executive Director should recommend to the CRB approval of the loans or loan guarantees to thc 

borrower30 

The Credit Committee is chaired by DOE's Acting Chief Financial Ofticer. The other 

members of the Credit Committee are thc PMD Director, LPO's ChiefCollnsel (non-voting), and 

three senior officials selcctcd by the committee's chairperson. 

The CRB is responsible for making the final recommendation to the Secretary about 

whether to provide a loan or loan guarantee to the borrower. 31 According to the DOE Title XVII 

Policics and Procedures. the CRB "serves a management and oversight function that is similar to 

that of a transaction approval group within an investment bank or commercial bank.',32 The CRB 

reports to the Secretary, who makes the final decision about whether to proceed with a 

transaction. The CRB fulfills this role for both the Title XVII and ATVM programs; the 

Programs do not have their own, separate CRBs.31 The CRB is governed by the CRB Charter, 

most recently revised in December 20 II. 

The CRB consists of eight members and includes both political appointees and seniorlevel staff. Several of the CRB membcrs have backgrounds in business, finance, and technology. 

The Deputy Secretary chairs the CRB.)·! The CRB's other members include the Undcr Secretary 

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of Energy. the Under Secrctary of Energy for Science, the DOE's Chief Financial Officer 

("CFO"), the Chief of Staff to the Secretary. the Senior Advisor to the Secretary of Energy (for 

Financial Matters). the DOE General Counsel. and other DOE employees appointed by the 

Secrctary35 ' 

iii. Recent changes to the Programs' management, 

monitoring, and governance 

The Secretary directed a number of changes in management. monitoring, and governance 

of the Programs and the Portfolio during the Review. These changes are described below. 

Structural Changcs. The Secretary recently expanded the role ofthc CRB to include 

participating in monitoring transactions that have closed, and directed the creation of a new 

committee to oversee management of the Portfolio. 

The CRR is now responsible for rcviewing and making recommendations to the Secretary 

concerning decisions to be taken throughout the life of a loan. such as material modifications to 

transaction agreements. initial disbursements. and any disbursements to companies on the Watch 

List 

At the Secretary's direction, the DOE has also recently added a Risk Committee to the 

oversight and monitoring process, The Risk Committee is "intended to playa broad role in 

oversight of portfolio management" and to ensure that "the CRB and Secretary are appropriately 

informed respecting the portfolio as a whole. including signiticant or material actions or cvents 

affecting individual portfolio assets,'·36 The Secretary has also charged the Risk Committee to 

work with LPO staff' and company managcmcnt "to understand the credit conditions in each 

loan" and to "review often rapidly changing external market conditions that bear on portfolio 

eompanies,,,}7 The Risk Committee's roles and responsibilities are specified in a Risk 

Committee Charter dated December 20.20 II, 

The Risk Committee consists of at least seven members and is led by the chair of the 

Credit Committee. The other members of the Risk Committee include the PMD Director. the 

LPO Chief Counsel, the LPO Director of Credit. the Director orthe LPO TPMD, the Director of 

the LPO Management Operations Division, and two members of the eRn, appointed by the 

Secretary to serve on the Risk Committee. 38 Therefore, each member of the Risk Committee is 

either a member of LPO or of the CRE. DOE also plans to include industry program experts as 

ex officio non-voting I11cmbersJ9 

Both the Risk Committee and the CRB seek to make decisions by consensus. However. 

these bodies are permitted to make decisions by majority vote.~o 

Strengthening of the Disbursement Process. Approval of disbursement requests for DOE 

loans or loan guarantees requires multiple reviews, For a first disbLlrscment or a disbursement to 

a project on the Watch List. these reviews can include PMD, the Risk Committee, the CRB. and 

the Secretary. bctclre DOE approves the disbursement. 

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The Secretary has rccently required DOE to take additional steps in determining whether 

to authorize a disbursement These new processes include (I) increasing the use of internal DOE 

resources whcre the Department has technical and market expertise (such as in solar, biofuels 

and electric vehicles), (2) using consultants during the post-tinancial-close monitoring that are 

different from those used during the origination phase, and (3) cngaging informal networks of 

industry participants and investors to gain additional market intelligence,'1 

Stricter Oversight of Watch List Projects and Material Changes to Projects. As part of 

the Secretary's enhancements to transaction monitoring. senior DOE leadership receives weekly 

briefings on Watch List transactions. 42 The Risk Committee also reviews projects on the Watch 

List weekly.'] Finally, thc CRB gives additional scrutiny to transactions on the Watch List in its 

regular monthly reviews of the Portfoli044 The Secretary has directed that he be informed of all 

major transactions involving Watch List companies that can alTcct company performance, 

including changing market conditions or changes in the competitive marketplace, and will 

review all material loan amendments. modifications and disbursements for companies on the 

Watch List, as well as initial disbursements. 

Additional Review of Credit Subsidy Model Calculations. The Risk Committee and the 

CRB will review the inputs to the periodic recalculation of a loan or loan guarantee's Credit 

Subsidy Cost (as required by FCRA) and will include input t1'om outside consultants in making 

these reviews. 

LPO personnel informed the Independent Consultant that implementation of these 

revisions to the Programs and development of additional processes is ongoing. 

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VIII. RECOMMENDATIONS FOR STRENGTHENING THE PROGRAMS' 

MANAGEMENT AND OVERSIGHT 

The White House Chief of Staff requested that the Independent Consultant review the 

current Portfolio management practices, including governance and monitoring standards, with a 

particular focus on identifying oppoliunities to enhance ongoing DOE monitoring activities. 

A. Provide Long-Term Funding for the Programs 

Becausc the Programs will extend up to thirty years, DOE must assure adequate 

funding to manage and oversee the Programs on a long-term basis. 

Now that the September 30, 20 I I deadline for new Section 1705 lending has passed. the 

fOCllS of LPO appropriately has shifted from originating loans and guarantees toward managing 

the Portfolio. 

This crucial activity will require staffing LPO for a long period because the Portfolio's 

loans and guarantees have maturity dates extending up to 30 years. Throughout the life of the 

Programs. issues affecting the Portfolio's value will continually arise and important decisions 

affecting the interests of taxpayers will have to be made. The pioneering nature of the projects' 

technologies heightens the importance of expertise and continuity among the managers and 

professionals in LPO and other supporting areas. Furthermore. successfully managing this 

Portfolio will take the commitment of experts with long-term perspectives. That will be best 

accomplished if employees are confident that LPO will be adequately funded. Therefore, taking 

steps in the near future to assure continued. adequate funding for managing. staffing and 

overseeing the Programs is critical to recruiting and retaining the talented personnel needed to 

administer the Programs. 

Fees payable by borrowers in connection with origination and monitoring loans and loan 

guarantees are used to cover administrative expenses. DOE cannot unilaterally increase the fees 

on loans already in place. It is possible that. in the near term. additional fees will be received 

from the closing of pending applications. However. over the next several years. the total amount 

of fee income to DOE will decline when originations cease. Therefore, adequately funding the 

management and administration of the Programs will depend on obtaining atlditional budgeted 

and appropriated funds in the future. 

The funds for operating the Programs are small relative both to the size of the Portfolio 

and to the potential reduction in loan repayments if the Portfolio is not actively and effectively 

managed over time. 

B. Fill Key Positions in Management with Experienced Professionals 

DOE should create a balanced mix of managers in LPO, including some who have 

experience in managing government programs and others with substantial private sector 

experience and skill in project management and finance. 

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Today, some key positions in LPO are occupied by acting directors relying on outside 

contractors to augment their expertise. At least one manager is acting head of several 

departments. The Acting Executive Director of LPO is an interim appointment and the position 

of Director of Credit is vacant. 

The DOE has tried to till those positions with permanent employees without success to 

date. The Independent Consultant believes that, by adopting the recommendations in this section 

of the Report, the DOE should he better able to fill the vacant positions with permanent, highly 

qualified individuals. 

C. Clarify Authorities and Accountabilities of Managers 

DOE should assign authorities for decision-making only to individual managers and 

never to committees where collective responsibility can obscure individual accountahility. 

The Secretary has ultimate authority over the Programs and accountability for their 

results. Delegated authorities for taking day-to-day actions and approving recommendations are 

distributed formally and informally among various executives and committees. For example, the 

CRB, rather than an individual onicer, currently is authorized to approve recommendations to 

the Secretary. Althoughjob descriptions and committee charters describc the authorities of each, 

managers and employees have indicated that, in practice, lines of authority have been less clear 

and the framework of management and governance is still evolving. 

Delegation of authority should be more specific regarding the kinds of permitted actions 

each manager in the chain of command may take and any limitations on that authority. For 

example. the LPO Executive Director can bypass the CRB and take a matter directly to the 

Secretary for approval if, in the LPO Executive Director's judgment, the matter is urgent. The 

definition of "urgent" is left to the discrction of the LPO Executive Director. Another example is 

the authorization of the LPO Executive Director to handle "routine" waivers of covenants (for 

instance, whenll1eeting a covenant will be delayed by a few days); all other waivers must have 

approval of the Secretary. That authorization seems imprecise and too restrictive; allowing the 

LPO Executive Director to approve some kinds of non-routine waivers up to a certain dollar 

limit could enhance timely decision-making and relieve the Secretary from having to decide 

matters that will not materially affect the Ponfolio's value. Delegating such authority, however, 

requires clear policies to guide decisions by those assigned responsibility. 

D. Establish and Effectively Communicate Clear Goals for Management 

DOE should develop explicit objectives and standards of performance for managing 

the Portfolio during the construction phase of the projects and beyond. 

Many challenging decisions will have to be made throughout construction and operation 

of the projects. such as whether to waive covenants of loan agreements for projects that are 

lagging their benchmarks. timetables or operating standards. The Title XVII program's statutory 

goal of "reasonable prospect of repayment" is vague and must be clarified so that managers can 

make decisions and recommendations within their authorities quickly and with confidence. DOE 

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should provide clear guidance regarding the dcsired balance between meeting policy objectives 

and managing recoveries. 

E. Proactivelv Protect the Taxpayers' Interest 

DOE should continually look for ways to strengthen its position as lender or 

guarantor without compromising the success of a project and the incentives of sponsors 

and counterparties to support that project. 

In a positive development for taxpayers, LPO increased the number and rigor of the 

covenants and conditions precedent to funding construction in many of the projects it closed after 

mid-20 I O. These actions underscore both the impol1ance and the feasibility of utilizing available 

protections in contracts at all project stages to mitigate risks to taxpayers. 

The novelty, complexity and scale of the projects. coupled with the exacting covenants in 

their loan structures. likely will cause many projects to seek relief from some requirements in the 

loan agreements. In such cases, to strengthen its position as lender or guarantor, DOE might 

insist that sponsors issue warrants to DOE to purchase shares in return for waivers or extensions 

of covenants. 

So that it can act both in a timely and consistent manner, DOE should establish written. 

clearly articulated policies governing the means it can use (for instance, are warrants to purchase 

shares an acceptable form of compensation?) and the fInancial and programmatic policy goals it 

will purslle in negotiations with borrowers. 

DOE should assure that in addition to professional staff. LPO continues to retain 

independent outside experts in engineering, project tlnance. and other relevant disciplines to 

advise it on an ongoing basis. 

F. Engage in Long-Range Strategic Planning for the Programs 

DOE faces strategic choices as it determines how to manage the Portfolio over the 

life of the Programs. 

Once projects have completed construction and begun commercial operation in the next 

several years, management of the Portfolio will require fewer resources but will still need 

continuolls. expert oversight This oversight is critical because future changes in projects and 

markets will precipitate adjustments to terms of loans and create new opportunities to sustain or 

enhance protections for taxpayers. 

As it determines how to manage the P0I1folio over the life of the loans, DOE can choose 

among several possible strategies. They include: < 

Continuing to manage the Portfolio through a streamlined LPO, staffed with 

highly-qualified permanent employees; 

Outsourcing part or all of the day-to-day management of the Portfolio while 

maintaining robust monitoring and oversight Financial institutions that currently 

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handle servicing andlor trustee work for commercial lenders (particularly in 

securitizations) could be retaincd to handlc a substantial portion of current LPO 

activities once projects achieve operating maturity; and 

Selling or otherwise disposing part or all of the Portfolio over time. Once the 

projects supporting thc borrowings arc operating successfully. they should he 

more attractivc to commercial investors than they are in the development phase. 

One or more of these strategies might require enabling legislation. 

G. Improve Reporting to the Public 

DOE should provide clearer, broader information to the public on the progress and 

performance of the Programs and the Portfolio. 

DOE should provide robust. regular reporting in accordance with a comprehensive 

communications plan including but not limited to a more informative, dedicated website. Of 

course, these disclosures must not violate the confidentiality of loan agreements and of 

proprietary information. 

DOE already provides considerable iniormation about the Programs, projects, guarantees 

committed and currently extended, and recent developments, but that information is dispersed 

across several Internet platforms and embedded alongside information from other programs. It 

should be consolidated and presented more clearly and comprehensibly to the public. 

The information currently reported to the public should be supplemented by updates, at 

least quarterly. on amounts (and changes in amounts) of estimated credit subsidy to the aggregate 

Portfolio and its major components. using the FCRA Methodology as well as a "fair market 

valuc" method. 

H. Strengthen and Restructure Internal Oversight of the Programs 

DOE shonld create a new Risk ,'Vlanagement department encompassing all DOE 

functions that monitor LPO and should appoint a highly experienced Chief Risk Officer 

("CRO") to head it. DOE shonld also reorganize oversight of the Program. 

From the inception of the Programs, successive Secretarics have recognizcd the 

importance of establishing chccks and balances to the activities of LPO so that the Programs 

benefit from independent perspectives, broader expeliise and separation of control functions 

from the operations they mon itor. 

The Credit Division, largely reliant on contractors and consultants. evaluates exposures to 

loan losses and advises on credit decisions and loan structures. The Credit Review, Compliance. 

and Reporting subdivision of PMD focuses on adherence to laws. regulations and DOE policies 

in dccision-making and operation of LPO. The Credit Division and PMD's Credit Review. 

Compliance. and Reporting subdivision now reside within LPO. 

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To enhance the independence of the oversight function, DOE should create a new Risk 

:v1anagement department, headed by an experienced CRO, to house all DOE functions dedicated 

to monitoring LPO, and including those of the Credit Division and the Credit Review, 

Compliance, and Reporting subdivision. 

The functions of the Risk Management department should include: assigning and 

regularly updating LPO's risk ratings and related evaluations of all loans and guaranties; 

representing DOl' in developing credit subsidy calculations under the supervision ofOMB; 

regularly reviewing and verifying reporting and record-keeping throughout LPG; supporting 

LPO and the CRB with independent analysis and advice; assessing operating systems and 

processes of LPO; and monitoring developments in energy markets as well as federal and state 

initiatives that could impact the Portfolio. 

The charters of the Risk Management and LPO departments should require that 

significant decisions by LPO have prior concurrence of the CRO. Conversely, the CRO must be 

accountable for keeping LPO informed of Risk Management's findings in a timely manner. In 

cases where the CRO and the Executive Director of LPO differ on an issue within Risk 

Management's purview, they should jointly consult with the Secretary, who has the ultimate 

decision-making responsibility. 

Risk Management's main role should be informing and advising LPO concerning actual 

and potential risks to the Portfolio. That role should not impinge on the authority and 

accountability of LPO for the performance of the Portfolio, but instead should add value by 

contributing independent expertise in evaluating risk. This "check and balance" should help 

produce broad, objective analyses of the Programs' goals. methods, risks and performance. 

Senior managers within Risk Management should attend the regular meetings of LPO 

managers to assure continual communication and Illutual understanding. 

To bolster the independence of Risk Management from LPO, the two dc<parlmcnts should 

have separate reporting lines to senior management. For example, the CRO could report to the 

CFO or to the Deputy Secretary, whereas the Executive Director of LPO repol1s directly to the 

Secretary. 

DOE has crcated several committees to advise on credit decisions. The Credit 

Committee has focused mainly on credit risks in loans as they are originated and initially funded. 

Its role going forward, now that originations have ceased in the 1705 program. is unclear. 

The recently formed Risk Committee is intended to playa role in general oversight of 

ongoing Portfolio management. The Credit Committee and the Risk Committee are both 

advisory and are charged to make recommendations to the LPO Executive Dircctor, the CRB, 

and the Secretary for action. 

The CRB, as noted earlier in the Repol1, has a function "similar to that of a board of 

directors of a banking organization."' Its tasks include reviewing and approving policies, 

establishing standards for risk assumption, and recommending approval of transactions to the 

Secretary. It is chaired by the Deputy Secretary and is composed of senior DOE officials. 

47 
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Although in the last six months DOE has significantly enhanced oversight of its credit 

exposures, the new structure involves multiple committees with overlapping memberships and, 

in some instances, without full independence from LPO. For instance, the mcmbership of the 

Risk Committee overlaps those of the Credit Committee, the CRB, and LPO. Several managers 

in DOE believe that the existence orthese multiple committees has slowed decision-making and 

caused uncertainty about how to navigate proposals toward decisions. 

To clarify responsibilities. assure timely decision-making and reduce burdens on 

committee members. the Credit Committee and the Risk Committees should be abolished. 

Checks and balances will be more robust and applied more continuously by an independent Risk 

Management department that continually engages with the LPO and has authority to contest 

decisions and recommendations by LPO before they are implemented. 

The CRE should continue to provide senior, independent oversight. Its role should be 

broadened to include overseeing "enterprise" risks including credit. compliance, accounting, 

operational integrity, reporting. and protecting DOE's interests in def~1Ults and bankruptcies. 

DOE should include in the CRB's membership some career-level experts from other 

government agencies with considerable expetiise in matters pertaining to LPO's activities. 

including project finance and governance. 

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Figure 1: Proposed Structure of Program Management & Oversight 

Credit Review 

Board 

Secretary of 

Energy 

Chief Risk Officer 

Credit 

Project Risk 

r:::::",,, 

E~eratll1g Fxternal 

Regulatory 

Compliance 

Legal 

Regulatory 

Policy 

Risk Reporting 

Inter-Agency 

Oversight Board 

Fxecutiye Director 

Loan Program Office 

Technical and 

Product 

Management 

Program 

Reporting/M 1 RS 

ATVM 

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T. Establish External Oversight 

Overall governance of the Programs would benefit from access to senior 

government officials of other departments and agencies who have knowledge of proven 

"best practices" across credit programs government-wide. 

Laws enabling some major lending or capital programs in other areas of government 

include a requirement for interagency. advisory oversight of their governance. The ExportImport Bank's board includes the Secretary of Commerce and the U.S. Trade Representative, ex 

officio. The Overseas Private Investment Corporation ("OPIC") board includes representatives 

from six other federal agencies, including the Office of the U.S. Trade Representative, the 

Agency for International Development, and the Department of Labor. The statute establishing 

the Troubled Assets Relief Program (,'TARP") mandated independent, monthly oversight by a 

Financial Stability Oversight Board chaired by the Chairman of the Board of Governors of the 

Federal Reserve System and including the Secretary of the Treasury. the Secretary of the 

Department of Housing and Urban Development. the Chairman of the Securities and Exchange 

Commission. and the Director of the Federal Housing Finance Agency. Those boards advise on 

broad policy. control and performance issues. 

The Secretary could emulatc that legally mandated "best practice" of oti)er loan programs 

by creating a similarly constituted board to advise him on policy matters. Membership could 

include. at the under secretary or equivalent level. representatives from Treasury. OMB and at 

least two other federal dep3liments or independent agencies that extend complex crcdit (for 

example, the Export-Impoli Bank. the Department of Agriculture, thc Department of 

Transportation, or OPIC). The charter of the proposed interagency committee should clearly 

articulate the roles of the members and the overall role of the committee. 

The multi-agency advisory board would benefit from additional members with private 

sector expertise in industries relevant to thc Programs, such as electrical utilities, banking and 

venture capital. Thcre are precedents for including private-sector representatives on advisory 

boards of federal agcncies. For example. eight of the IS members of the OPIC board come from 

the private sector. 

Independent of the establishment of a multi-agency advisory board, the roles of the 

Treasury and OMB, which now interact with DOE on the Programs, should be clarified. 

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IX. THE ESTABLISHMENT OF A COMPREHENSIVE EARLY WARNING 

SYSTEM 

The third task that the Chief of Staff assigned to the Independent Consultant was to 

make: 

Recommendations, if needed, peltaining to early-warning systems to identify and 

mitigate potential concerns on a timely basis. 

The Title XVII and ATVM statutes and implcmenting regulations do not specifically 

require DOE to maintain an "early warning system" to identify potentially troubled loans or loan 

guarantees and take mitigating actions. 

The principal "early warning system" currently in place is DOE's process for identifying 

projects to be placed on the Watch List and subsequently monitoring their condition. 

The Independent Consultant recommends that DOE: (i) develop a comprehensive 

management information system to provide key decision makers with information needed to 

make timely and informed decisions on an ongoing basis; (ii) establish a protocol for timely 

reporting of critical information; and (iii) incorporate lessons learned into policies, procedures, 

reporting. and dccision-making. 

A. Create a Comprehensive Managcmcnt Information Reporting Svstem 

The early warning system should provide key decision makers with information needed 

to make timely and informed decisions. It should be built upon a Management Information 

Reporting System that highlights trends potentially affecting the creditwOIthiness of loans and 

guarantees, and that tracks progress toward addressing those trends. 

The system and the reports it generates should: provide early notice of potential issues 

and problems bearing on the value orthe Portfolio; focus management's attention and priorities 

on the most important factors determining performance; and furnish a basis for management 

decision-making and for communicating thc Programs' status to senior oftlcers of DOE and 

oversight bodies. 

The reports should include a section covering external conditions affecting the Programs, 

such as trends in markets where the borrowers operate. Those trends should include changes in 

prevailing pricing, market shares of borrowers and key competitors, and products and 

technologies. This overview should also identify any prospective federal or state legislation that 

could afTect subsidies and regulations influencing supply and demand for clean energy. 

Another section of the repOlts should contain updates on every loan and borrower and on 

the overall condition of the P0I1folio, highlighting: 

Variations from the project's expected performance that, if continued, could result 

in breaching loan covenants; 

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Management's plans and timetables for correcting those variations, and progress 

to date; 

Changes in the management of projects; 

Changes in the performance and financial condition of EPC contractors, O&M 

providers; and suppliers that are responsible for completing the project, fulfilling 

performance guarantees or making paymcnts required by off-take agreements; 

Trends in the Credit Subsidy Cost oflhe loan and in any other accepted measures 

of exposure to loss; and 

• The overall condition of the Portfolio, including trends in Credit Subsidy Cost and 

in the incidcnce of significant waivers or modifications of loan covenants. 

A third section of the reports should address the internal performance of LPO and the 

Programs. including: 

Compliance with DOE policies; 

• Efficiency of LPO's operations; 

Trends in filling vacant positions; 

Turnover of managers and professionals; 

Progress against overall milestones and goals of the Programs; 

• Progress of plans to reduce or mitigate risk in the Portfolio; and' 

• Performance in responding to findings of the Inspector General of DOE and the 

Government Accountability Office. to Congressional letters. and to inquiries from 

the public. 

B. Establisb a Protocol for Timely Reporting of Cdtical Information 

LPO should have policies and accountabilities for timely reporting of significant events 

to senior management of DOE, to oversight bodies and to departments or officials outside DOE 

with a need to know. 

LPO management should be evaluated in part on whether the focus and content of its 

reporting are informative and have proven effective in anticipating, preventing, or correcting 

identified deficiencies. 

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C. Incorporate Lessons Learned Into Policies, PI'ocedures, Reporting, and 

Decision-Making 

LPO should use the information it collects as pal1 of the early warning system to inform 

future decisions regarding the Porttolio. including those related to disbursements, waivers, and 

amendments, 

The policies, procedures, and intormation reported by the early warning system should 

appropriately be modified to incorporate these lessons learned. 

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X. LIMITATIONS OF THE REPORT 

As part of this assessment and review. the Independent Consultant's work was affected 

by the limitations arising out of the Independent Consultant's unique status and the 

circumstances under which the Report was prepared. 

Compressed Time Period/or Review. The Report was prepared over a sixty-day 

period beginning on November 28. 201 I. Because of this abbreviated time 

period. the Independent Consultant's work plan necessarily omitted activities that 

might have provided further insights. such as a more detailed examination of each 

loan's performance and of the financial, operational. regulatory. and market 

demand risks facing eaeh loan applicant; screening, retaining and consulting with 

subject matter experts regarding the promise and limitations of some of the 

cutting-edge technologies involved in utility-linked and in l11anufacturing 

projects: and more extensive examination of the loan origination and monitoring 

processes and practices that DOE followed for each of the loans.' The 

Independent Consultant designed and executed a work plan and methodologies 

calculated to produce comprehensive. inciep<;mdent conclusions based on available 

facts. 

Scope oj'Review. Due to the limitations inherent in the scope of and time period 

allotted for the Independent Consultant's review of the Portfolio requested by the 

White House as noted above. the Independent Consultant was unable to fully 

obtain. and the Report does not contain, all of the inforl11ation that may be 

required to evaluate any of the borrowers. other project pal1icipants, loans, assets. 

projects or other persons referenced in the Report. The Independent Consultant 

did not conduet any appraisals of any assets or liabilities of any of the borrowers 

or other project participants referred to in the Report. The Independent 

Consultant has assumed and relied upon the accuracy and cOl11pleteness of 

information publicly available, supplied or otherwise made available regarding 

the Port/olio and the borrowers and other project participants for the purposes of 

the Report. 

Current Status of the Projects lind Portj'o/io. The Report is necessarily based on 

financial, economic. market and other conditions as in effect on, and the 

information made available to the Independent Consultant as oLJhe date of the 

Report. It should be understood that subsequent developments will atTect the 

analysis contained in the Report. Actual outcomes may difTer materially from the 

evaluations provided in the Report. 

Inherent Subjectivity o(Judgments. Thc Independent Consultant applied widely 

recognized financial models, financial analysis methods, principles of legal 

analysis. and available knowledge of the energy industry and of thc financial 

markets to value and assess the risk profile of each loan in the Portfolio. The 

Independent Consultant also constructed customized methods of evaluation of the 

Portfolio to take account of the many distinctive contingencies embedded in the 

54 
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76267.539

contracts, construction and ofllake phases, technologies and markcts of the 

individual projects in thc Portfolio. The Indepcndent Consultant also drew upon 

knowledge of bcst commercial practices in making recommendations for 

improvemcnts in management, governance. an early warning system, and 

reporting. Throughout the Report. the Independent Consultant has stated the 

methodologies, assumptions, and, whcre appropriatc. uncertainties underlying the 

analysis. Reaching the conclusions set forth in the Report nevertheless and 

necessarily involved exercising a significant degree of subjective judgment. 

• Limits olFinancial Models. The Independent Consultant idcntified several 

Portfolio characteristics that make it particularly challenging to value, including 

the fact that many of the projects employ novel technology and/or involve 

significant scale-up risk, the loans have longer terms than those typically found in 

the marketplace, and therefore a small change in discount rates results in a 

relatively large change in valuation, and many of the loans are to projects still in 

the construction phase, which is riskier and harder to evaluate than is the 

operations phase. 

• Lack of Investigative Authority. The Independent Consultant did not have 

subpoena authority or any other legal means to compel the production of 

documcnts and information from government agencies or from third parties. The 

Independent Consultant made requests for documents, intcrviews with relevant 

officials, and demonstrations of information technology tools used by DOE in 

connection with its monitoring of the Portfolio. While DOE provided substantial 

information and tcchnical assistance in response to these requests. the 

Independent Consultant was not able to assess the extent of, or to requirc 

certification of, DOE's compliance with these requests, and did not have access to 

any form of legal compulsion to require additional assistance. Similarly, the 

Independent Consultant did not have legal authority to obtain access to 

contidential information of any of tbe participants in the various loan transactions. 

including the applicants, project sponsors, EPC contractors, O&M contractors, 

and offtaking utilities. 

• E,istence olConcurrent Investigations. Various other investigations and reviews 

were proceeding at the same time as the Review. 

• Review Based on a Single ['oint in Time. Tbe Independent Consultant performed 

the Review based on a snapshot of the Programs' operations at the time of the 

Review. At the same time as the Independent Consultant was undertaking the 

Review, the Secretary was implementing important changes to t~e Programs. 

Due to their nascency, the Independent Consultant has not seen the rcsults of 

those changes or assessed their effectiveness. In fulfilling the mandate from the 

White I-louse Chief of Staff, the Independent Consultant regarded the Review as 

an opportunity to recommend lasting changcs in the Programs' structure and 

operation. 

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76267.540

XI. ACKNOWLEDGEMENTS 

The Independent Consultant wishes to acknowledge and thank the officials of DOE and 

other government departments for their openness, cooperation, and assistance during the Review. 

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APPENDICES 

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Appendices--Table of Contents 

Appendix A: Glossary of Terms 

Appendix B: Types of Documents Provided to the Independent Consultant by DOE 

Appendix C: Index of Meetings of the Independent Consultant 

Appendix D: Details of the Nine Credit-Ranking Criteria (the "Nine Criteria") < 

Appendix E: Key Documents in a Project Financing 

Appendix F: Statement ofContlicts 

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Appendix A 

Glossary of Terms 

ARRA American Recovery and Reinvestment Act of2009 

A TV Advanced Technology Vehicle 

A TVM Advanced Technology Vehicle Manufacturing 

Beacon Beacon Power Corporation 

cro Chief Financial Officer 

CRB Credit Review Board 

CRO Chief Risk Officer 

Credit Subsidy Cost Estimated long-term cost to the government on a net present value basis of 

a loan or loan guarantee 

Criteria Weightings Weightings given by the Independent Consultant to the Nine Criteria 

CSC2 Credit subsidy calculator developed by OMB 

Deputy Secretary Deputy Secretary of Energy 

DOE Department of Energy 

DSCR Debt Service Coverage Ratio 

EBITDA Earnings Before Interest, Taxes, Depreciation. and Amortization 

EISA Energy Independence and Security Act of 2007 

Eligible Costs Project costs that borrowers may fund with loan proceeds under the 

Programs 

EPAct Energy Policy Act of2005 

EPC Engineering. Procurement. and Construction 

Evaluated Loans The 30 loans and loan guarantees that the Independent Consultant 

evaluated in the Report 

FCRA rederal Credit Reform Act of 1990 

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76267.544

FCRA Methodology Models used by DOE and OMI3 to establish credit subsidies as part of the 

government budget 

FIPP Financial Institution Partnership Program 

FMV Fair market value 

FMV Methodology A methodology the lndependcnt Consultant used to evaluate the Portfolio 

Ford Ford Motor Company 

Ford and Nissan Loans made to Ford Motor Company and Nissan North America, Inc. 

Loans 

LOs Liquidated Damages 

LGPO-OD Loan Guarantee Origination Division (for Title XVII program loan 

guarantees) 

LPO Loan Programs Office 

MIRS Managcmcnt Information Reporting System 

Nine Criteria Criteria the Independent Consultant used to evaluate the credit risk of each 

loan 

Nissan Nissan North America. Inc. 

Non-Utility-Linked Loans and loan guarantees to projects not linked to a utility, 

Loans including cellulosic ethanol projects, solar manufacturing companies, and 

small, start-up automotive manufacturing companies 

O&M Operations and Maintenance 

OMf) Office of Management and Budget 

OPIC Overseas Private Investment Corporation 

PMD Portfolio Management Division 

Portfolio The portfolio of loans and loan guarantees issued by DOE under the 

Programs 

PPA Power Purchase Agreement 

Programs The Title XVII loan guarantee program and the ATVM loan and grant 

program 

PV Photovoltaic 

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76267.545

Review 

RFS 

S&P 

Secretary 

Solyndra 

TARP 

TPMD 

Treasury 

The review the Department of Energy's ("DOE") loan and loan guarantee 

programs for alternative energy projects undertaken by Herbert Allison at 

the request of the Chief of Staff of the White House 

Renewable Fuel Standard 

Standard & Poor's 

Secretary of Energy 

Solyndra Inc. 

Troubled Asset Relief Program 

Technical and Project Management Division 

U.S. Department of the Treasury 

Utility-Linked Loans Loans and loan guarantees to utility-linked projects for the generation or 

transmission of alternative sources of energy 

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Appendix B 

Types of Documents Provided to the Independent 

Consultant by DOE 

1. Policies and Procedures for the Title XVII and A TVM Programs 

2. Loan Programs Office Governance Narrative 

3. Loan Application, Closing and Post-Closing Monitoring Materials 

4. Loan Documentation. including Credit Ratings and Credit Subsidy Calculations 

5. Consultant Reports, Project Plan Timetables and Financial Projections 

6. Loan Agreement Amendments, Waivers, and Modifications 

7. Interagency Correspondence. Memoranda and Reports 

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Appendix C 

Index of Meetings of the Independent Consultant 

The Independent Consultant met with the individuals listed below, individually or in 

groups, on the stated dates. 

U.S. Department of Energy 

November 28. 2011 

Steven Chu, Secretmy, Deparlment of Energy 

Daniel B. Poneman, Deputy Secretmy and Chief Operating Officer, Office oj'lhe Deputy 

Secretary, Department oj' Energy 

Richard Kauffman. Senior Advisor fO the Secretary oj'Energy, Department o/Energy 

Brandon Hurlbut. Chiej'l!lStaft: Office olthe S'ccretary. Department oj' Energy 

December 1. 20 II 

Richard Kauftlnan 

Sean A. Lev. Acting General Counsel and Deputy General Counselji)r Environment and 

Nuclear Counsel, Office olthe General Counsel, Departmenf oj'Ener!,'y 

David G. Franz. Loan Guarantee Program Director, LPO, and Acting Program Director, A TVM, 

Department of Energy 

Susan S. Richardson, Chie/Counsel. LPO, Department ()j'Enerb"Y 

Frances I. Nwachuku, Director, Proiecrs and PortjiJlio l'v/anagement, LPQ, Department Ilj' 

Energy 

Dong Kwun Kim. Chhf Engineer, Technical and Project Management Division, LPO, 

Department olEnergv 

Kimberly J. Heimerl. Attorney Advisor, LPO, Depew/ment olEncrgy 

Douglas Schultz, Program Manager, Fin(lnciailnstitutiol7 Partnership Progrm!1 and Senior 

Investment Officer, LPO, Department oj' Enel)!Y 

.Jonathan Levy, DepUly Assistanl Secrelary/i)r the House, Congressional & Inlergovernmcntal 

Afj(tirs, Office o/the Deputy Secretm)', Department 0/ Energy 

Jim 'vIcCrea. Financial Consultant, LPO, Deparrml'nt oj' Energy 

December 13.2011 

Kichard Kaufth1an 

David G. Franz 

Susan S. Richardson 

Frances I. Nwachuku 

Dong Kwun Kim 

Robelt Marcum. Depury Director, Portfillio Management Divl:~ion, L1'o. Department olEnergy 

Kimberly J. Heimert 

Jim McCrea 

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December 14, ;0 II 

Jonathan Silver, Former Executive DireClOl', LPO, Depal'tmen/ o(J~nel'KY 

David A. Wilson. Partner, Thompson fline LLP 

John D. Adams. Partner, McGuireWooc/s LLI' 

December 14. 20 II 

Richard Kauffman 

Dong KWlin Kim 

Todd A. Shrader, Director, Fossil Enerf!Ji, Technical and Project Management Division, LP(), 

Department of Energy 

Kimberly J. Heimer! 

Scott Stephens, S%r ManufacturinK Project Manager, LP(), Departmen/ of EnerKY 

Robin Sampson. Physical Scientisi, LPO, Department (!fEnerf!J' 

Dr. Ramamoorthy Ramesh, Sunshoi Director, Office (!fSolar Energy Teci1noloKies Program, 

Department of Energy 

Minh Sy, Le. Deputy Solar Enerf!J' Technologies Program Manager, Office qlSolar Energy 

TechnoloKies Program. Department olEnerf!J' 

Dr, Ranga Pitchumani, Concentrating Solar Power Program Lead. Office of Solar Energy 

TechnoloKies Program, Department of EnerKY 

Joseph W. Stckli. E'ngineer, Concentrating Solar Power Program, Office orSolaI' Energy 

Technologies Program, Deparllllent ofEnerKY 

December 16. 20 II 

Kimberly J. Heimert 

Anthony Curcio. Chief Operating Officer, Summit ConsultinK, LIC 

Brian Oakley. Director, Scul1y Capital Services, Inc, 

December 20. 2011 

Gregory H. Friedman, [nspector General, Office olthe Inspector General, Department o/Tnergy 

John R, Hartman. Office oj'the Inspector General. Department of Energy 

Deal teams on all transactions and senior LPO management 

December 78.2011 (Teleconference) 

Susan S. Richardson 

Frances I. Nwachuku 

Rober! Marcum 

Kimberly J. lieimert 

January 9-10.2012 

Richard Kauffman 

Nick Whitcomb, Acting Director, A7TAI, Department olEner?JI 

Susan S, Richardson 

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76267.549

Frances I. Nwaehuku 

Dong K wun Kim 

Robert Marcum 

Douglas Schultz 

Todd A. Shrader 

Kimberley Heimert 

Jason Gerbsman, SupervisOl~v Program & Afanagement Ana(vst. A TVM. Department of Energy 

Jim McCrea 

Morgan Wright 

Brian Oakley 

Januarv 20, 2012 

Richard Kauffman 

Brandon Hurlbut 

Morgan Wright 

U.S. Office of Management and Budget 

Decem bel' 2. 20 I I 

Jeffrey D. Zients, Deputy Directorfor Management and F'ederal Chiej'Performance Officer, 

Qflice oj'the DireclOr, Office oflvlanagement and Budget 

Boris Bershteyn, General Counsel, Office oj'Management and Budget 

Courtney Timberlake, Assistant Director, Budget Review, Office oj'llIanagement and Budget 

U,S. Department of the Treasury 

December 15,2011 

George Wheeler Madison, General Counsel, Department of the Treasury 

Christian A, Wiedeman, Deput)J Gl!neral Counsel, Department o/the 7i'easury 

Mary John Miller, Assistant Secrf!tary, Assis/ant Secretary jar Financial Markets and Under 

Secretaryfor Domestic Finance-Designate, Ofliee o/Domestic Finance, Department oj'the 

Treasury 

Gary Grippo, Deputy Assistant Secretarv, Deputy Assistant Secretary.fin· Govcr/1lnel1f Financing 

Policy, Office o/Fin{fnciallv/arkets. Department o/the Treasw}' 

Judson Jaffe. Environment and Energy. Olfice oj' International Affairs, Department of the 

7i'caslII:v 

Summit Consulting, LLC 

December 19,2011 

Anthony Curcio 

Brian Oakley 

Scott Burroughs. Senior Consultant, Summit Consulting, LLC 

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Appendix D 

Details of the Nine Credit-Ranking Criteria 

(the "Nine Criteria") 

• Project Sponsor 

o Financial strength 

o Experience and track record in developing similar projects 

o Commitment to project (e.g, as evidenced by parent guarantecs of obligations, 

overrun commitments, completion guarantees, etc.) 

o Strategic value of project to sponsor 

o Quality / experience of management team 

Technology 

o Technology track record (i.e., is the project based on an established technology, 

an emerging technology, or is it the first of its kind?) 

o Engineering and design (e.g., modularity, flexibility) 

o Scale-up risk 

o Technology guarantees from sponsor or suppliers 

o Issues raised in independent engineer reports, and project's response 

o Special provisions in project documents (e,g" provision of an equipment 

performance reserve or similar arrangement) 

o Financial strength and experience of those providing the technol0gy 

Capital Structure 

o Ratio of debt and equity to total project costs 

o Forecast debt service coverage ratio ("DSCR") (including sensitivity to adverse 

changes in the financial model) 

o Tenor ofloan(s) 

o Interest rate exposure 

o Funding profile of debt versus equity 

o Restricted payments provisions (i.e., Limitations on equity distributions) 

o Debt service and operating reserves 

o Strength of conditions precedent to funding (including due diligence provisions) 

Market and Off-take 

o Cettainty of sale of output (i.e" is a buyer committed to buy the project's output 

for an extended time period corresponding to the tenor of the loan?) 

o Counterpatty financial strength 

o Termination provisions 

o Competitiveness (i.e" is the cost of the power delivered by the project higher than 

prevailing market rates, and how likely would the offtakeI' be to terminate the 

contract if given the oppottunity?) 

o Ability to replace ofTtaker on similar or superior terms 

o Statutory support for otT-take agreement (such as state Renewable Portfolio 

Standards) and degree of public support 

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• Project Completion 

o Experience and track record of contractor and other vendors 

o Financial strength of contractor and other vendors 

o Project timeline, including relative to milestones in project documents 

o Availability of equipment and labor 

o Protection from cost overruns (e.g., contactor guarantees, fixed-price terms, 

overrun commitments from sponsor) 

o Status of permitting and regulatory approvals (necessary for completion of the 

project) 

o EPC contract terms (force majeure, acceptance testing, consequences of 

performance that is short of specifications) 

o Site condition 

o For projects under construction, any issues reported and the proposed response 

o Amount of contingency for cost ovcrruns and change orders included in the 

project budget 

o Strength of sponsor completion guarantee 

• Operation Cost and Performance 

o Predictability of operating costs (often a function of the maturity / experience with 

the technology) 

o Expccted reliability of project equipment 

o O&M contract terms (e.g., fee arrangements, availability guarantees, etc) 

o Financial strength and experience (particularly with project technology) of O&M 

contractor 

o Provisions in project documcnts (e.g., O&M and/or maintenance reserves and 

their position in the cash flow waterlftll) 

Infrastructure 

o General accessibility of site for construction and operations 

o Access to market (e.g, transmission interconnection plans, need Tor transmission 

upgrades, schedule to complete, progress to date) 

o Availability of required resources (e.g., process water, geothermal resource) 

• Legal 

o Contractual framework (security interest, structure of cash flow waterfall, etc) 

o Intellectual property factors (particularly with respect to novel technology) 

o Site control 

o Organization (e.g., Limitations on activities of the project entity, independent 

directors, etc.) 

• Legislative and Regulatory 

o State and local political suppoli 

o Risk of regulatory changes and protections for lenders 

o International trade law considerations 

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Appendix E 

Key Documents in a Project Financing 

Credit Agreement. The credit agreement between the project company and the project 

lenders governs the extension and repayment ofthc project loan. Project loans typically provide 

for a construction period, during which the loan may be drawn in installments to fund 

construction, and an amortization period. in which the project makes repayments of principal and 

interest. Payments are usually made quarterly. The payment schedule is often customized to the 

specific project's projections; for example. it may call for larger payments during seasonally 

stronger qual1ers and lower repayments in seasonally weaker quarters. 

The repayment schedule (and indirectly, therefore, the size oCthe loan) is typically 

designed to meet a targeted DSCR. The DSCR is the ratio of available cash flow to required 

debt payments (principal and interest) over a given period of time. A higher DSCR represents a 

greater "cushion" against adversc changes in the project's financial performance. In addition, 

the final repayment is typically scheduled to occur prior to the end of the offtake agreement. 

providing a ··tail" or cushion in the event that the loan beeomes delinquent and requires more 

time than expected for repayment. 

Other key terms in the credit agrecment include: 

Conditions precedent to initial funding; 

Conditions precedent to each subsequent draw of funds from the loan facility (for 

example, a certilication by the borrower that it has sufficient funds available to 

complete the project); 

Interest, costs, and fees; 

Representations and warranties (for example, stating that the borrower has 

complied with relevant laws, has the right to pledge its assets as collateral, etc.); 

Covenants (for example. agreements not to incur additional indebtedness except 

under cel1ain circllmstances, not to make expenditures in excess of budgets except 

under certain circumstances, etc.); and 

Provisions for mandatory prepayments under certain circumstances (for example, 

lIsing proceeds from a Section 1603 cash grant, proceeds from performance 

liquidated damages received from the EPC contractor as described below. etc.). 

These terms generally provide protection to the lender and guarantor (the government). 

The credit agreement also requires the borrower to pay for an independent engineer 

selected by the lender to review and comment on the design of the project, the project's 

projections and technical aspects of the project documents. The independent engineer also 

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monitors progress during the construction period for the benefit of the project lenders, and 

provides input regarding the satisfaction of technical conditions precedent to requests for 

advances under the loan agreement. 

Collateral Agencv and Accounts Agreement and the Security Agreements. The collateral 

agency and accounts agreement and the security agreements together provide for the pledge of 

the assets constituting the project (generally, real property, equity interests in the project owned 

by the project sponsor and personal property, including contract rights and deposit accounts) and 

for the priority of entitlements to such assets in the event of a default. 

The collateral agency and accounts agreement also contains provisions directing the flow 

of funds (the "cash flow waterfall") from revenues derived from the project to specified accounts 

and interest holders, and provides security to the lenders that the funds will be applied to protect 

the lender's priority and the continued operation of the project through the term of tile loan. 

Such provisions include establishment and operation of reserve accounts for debt service. 

operations and maintenance andlor major maintenance, restricted payments proyisions (i.e., 

under what conditions the project can distribute cash to its owners), and events of default and 

consequences of such events of default. 

The cash flow waterl:11l varies depending on the nature of the project. but may include the 

following accounts (in an order of seniority usually similar to the following); 

Operating account, providing for the payment of expenses associated with 

operations of the project; 

Debt service payment account, providing for the payment of project loan principal 

and interest; 

Operating reserve account, providing a cLishion to pay for day-to-day operating 

expenses in the event of an adverse change in the project's financial performance 

or a business interruption; 

Major maintenance reserve account, providing for cash to pre-fund infrequent, 

periodic, substantial cash needs for scheduled maintenance activities such as 

major overhauls; 

Debt service reserve accoLlnt, analogous to the operating reserve.account but for 

the protection of the project's ability to meet its principal and interest payments 

on the project loan in the event that an operating problem (or other event) either 

reduces the cash flow of the asset or prevents the operation of the project for a 

period of time; and 

Restricted payments account, from which distributions to the project's sponsor 

may be paid provided certain conditions are met. 

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Cash tlow proceeds through the waterfall in order of the accounts; for example, if the 

debt service reserve account is not fully funded, no cash flows to the restricted payments account 

until the funding is fully restored. 

EPC Contract. The EPC contract in a project financing is often a "full wrap" contract in 

which the contractor agrees to deliver to the project company a finished asset with certain 

guaranteed performance characteristics by a certain date at a fixed price. The consequence of a 

failure to do so on the part of the contractor is usually the payment of liquidated damages 

("LOs") to the project. 

The EPC may provide for LDs in a number of circumstances. These may include: 

Delay LDs, typically on a daily basis, for failure to complete construction by the 

guaranteed date; 

Capacity LDs, in the event that the finished project is not capable of the 

production capacity for which it was designed; and 

Performance LDs, in the event that thc project fails to producc at least a ccrtain 

level of output over a specified time period. 

LDs may be subject to a cap, both in total and for specific causes. Capacity LD 

provisions are generally designed to "buy down" the project loan to restore the DSCR to its 

intended level. Delay and perfonnance LD provisions are generally designed to at least cover 

l.Os that the borrower itself may owe to the PPA counterparty (as described below) and to cover 

the cost of interest on the loan for the pcriod of the delay. 

The EPC contractor also provides warranties with respect to project hardware and its 

design and installation services. There may also be scparate (and typically longer) warranties 

with respect to specific components of the project, either tl'OI11 the EPC contractor or directly 

from the original equipment manufacturer. 

The obligations of the EPC contractor are typically guaranteed by the contractor's parent 

company. 

As an alternative to the "full wrap" contract described above, some projects elect to 

effectively act as their own gcneral contractor and to contract separately with multiple pmties for 

the various materials and services requircd to construct the project. These agreements often have 

terms similar to a full wrap contract (e.g., fixed prices, performance guarantees) but extend only 

to the scope of the individual agreement, not to the project as a whole. 

O&M Services Agreement. The O&M services agreement provides for a service 

provider to operate the asset on bchalf of the project company in return for a fee. The service 

provider is often an affiliate ofthc project sponsor or, in some cases, of the EPC contractor. The 

O&M services agreement typically providcs for the service provider to provide staffing, 

operation, preventive and scheduled maintenance, spare parts management. and other support 

services to the project. 

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The terms of the O&M services agreement may include performance guarantees (e.g., 

that the asset will be available for production for a guaranteed minimum percentage of possible 

production hours). There are typically bonus and penalty provisions associated with such 

guarantees (often effectivcly placing the service provider's fee at risk). 

The O&M services contractor's parent otten guarantees its obligations undcr the 

agreetnent. 

Offtake Agreement. The ofthke agreement provides for the sale of the project's output, 

typically for a pcriod of time that extends beyond the expected tinal maturity of the project loan. 

In the context of the DOE Loan Guarantee Program. the most common type of offtake 

agreement is a PPA under which the output of a generating facility is sold to a utility. 

In general. terms of a PPA include: 

Amount of power to bc sold, including: 

o A base contract quantity; 

o A guaranteed minimum to be delivered; and 

o The amount the utility is required to purchase; 

Price, which may be fixed, cscalate, or adjust based on the time of day the power 

is delivered; 

Curtailment provisions (under which the utility is temporarily relieved of its 

obligation to purchase the power); 

A schedule for project development, including a guaranteed datc by which the 

project will be commercially operational; 

Penalties. usually in the form of LDs, for failure to mcet schedule milestones or 

output targets; and 

Events of default under which the PPA may he terminated. 

The creditworthiness of the PPA counterparty is considered key in evaluating credit risk 

of the project in light of the importance of its ability to meet its purchase obligation over an 

extcnded period oftimc to support repayment of the project loan. 

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Appendix F 

Statement of Conflicts 

Herbert All ison 

Mr, Allison made all required disclosures to the Contracting Officer of DOE, It was 

determined that Mr. Allison had no conflicts that would constrain his full participation in the 

Review, 

David Johnson 

In engaging Mr. Johnson. Mr. Allison required that Mr. Johnson have no conflicts of 

interest that would impair his independence or limit. in any way. his ability to render objective 

and impartial advice to Mr. Allison. In addition, DOE's contracting rules and regulations 

contain specific requirements governing organizational conflicts. To this end. Mr. Johnson has 

advised that he made all required disclosures, made all necessary representations, and has taken 

all necessary steps, as required by Mr. Allison and the Contracting Officer of DOE. 

Grcenhill & Co,. LLC 

In engaging Greenhill & Co" LLC ("Greenhill"), Mr. Allison required that Greenhill 

have no institutional conflicts of interest that would impair its independence or limit. in any way. 

its ability to render objective and impartial advice to Mr. Allison, In addition, DOE's contracting 

rules and regulations contain specific requirements governing organizational conflicts. To this 

end, Greenhill has advised that it made all required disclosures, made all necessary 

representations, and has taken all necessary steps. as required by Mr. Allison an'd the Contracting 

Officer of DOE, 

Arnold & Porter LLP 

In engaging Arnold & Porter LLP C'Arnold & Porter"), Mr. Allison required that Arnold 

& Porter have no institutional conflicts of interest that would impair its independence or limit. in 

any way, its ability to render objective and impartial advice to Mr. Allison. In addition. DOE's 

contracting rules and regulations contain specific requirements governing organizational 

conflicts, To this end. Arnold & Porter has advised that it made all required disclosures, made 

all necessary representations, and has tuken all necessary steps, as required by Mr. Allison and 

the Contracting Officer of DOE, 

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76267.557

ENDNOTES 

, See Energy Policy Act of 2005 (",EPAct"), Pub. L. No. I 09-58, ~ 1702(b), 119 Stat. 594, 1117-

18 (2005). 

2 See Loan Guarantees for Projects That Employ Innovative Technologies. 72 Fed. Reg. 60,116 

(Oct. 23, 2007) (to be codified at 10 C.F.R. pt. 609); Loan Guarantees for Projects That Employ 

Innovative Technologies. 74 Fed. Reg. 63.544, 63,545 (Dec. 4. 2009) (to be codified at 10 C.F.R. 

pt. 609). 

3 See Advanced Technology Vehicles Manufacturing Incentive Program, 73 Feci. Reg. 66,721 

(Nov. 12.2008) (to be codified at 10 C.F.R. pt. 611). 

4 See American Recovery and Reinvestment Act 01'2009 ("ARRA") Pub. L. 111-5, § 1603(a). 

123 Stat. 115, 364 (2009). 

5 Jd. § 1603(b)( I), (2). 

6 See EPAct § 1703(a)(2). 

7 Jd. § 1703(b). 

8 See Energy Independence and Security Act of2007 ("EISA"). Pub. L. No. 110-140, § 136 (b). 

(d), 121 Stat. 1492. 1515-16 (2007). 

9 See Energy and Water Development and Related Agencies Appropriations Act 01'2010, Pub. L. 

No. 111-85, 9 312, 123 Stat. 2845, 2874-75 (2009). 

Iii See EPAct § 1702(d)(I). 

II See EISA § 136(d)(3). 

12 See 10 C.F.R. § 611.100(c) (2008). 

13 See EPAct § 1701(1). 

14 See EISA § 136(d)(4)(8). 

15 See ARRA § 406. 

II> Jd. 

17 See EPAct § 1702(h). 

IS See EISA § 136(1). 

,.) DOE established the FIPP as part of its implementation of the section 1705 loan guarantee 

program. Under the FIPP, a financial institution or a group of financial institutions serving as 

lenders to alternative energy projects (the "Lender" or, in the case of a group of financial 

institutions, the "Lead Lender") applied to DOE for loan guarantees under the section 1705 

program. See LOAN GUARANTEE PROGRAMS OFFICE, DEP'T OF ENERGY, LOAN GUARANTEE 

SOLICITATION ANNOUNCEME''iT, FEDERAL LOAN G! IARANTEES FOR COMMERCIAL TECHNOLOGY 

RENEWAIlLE ENERGY GENERATION PROJECTS UNDER THE FINANCIAL INSTITUTION PARTNERSHIP 

PROGRAM 6 (October 7, 2009). The Lender or Lead Lender was responsible for developing the 

financial structure of the project and for applying for the loan guarantee on behal I' of the project 

73 
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76267.558

sponsors or developers. ld. at 7. The FIPP program further required Lenders to share a 

"significant amount," at least 20 percent. of the risk of the guaranteed loan on a pari passu basis 

(i.e .. having equal treatment or equal rights of repayment). See id. at 7; EPAct § l702(c). 

20 See EPAct § 1702(g); 10 C.F.R. §§ 609.17(a)(I), (2); 609.IO(d)(I8). 

21 See 10 C.F.R. § 611.109 (2008). 

n See LOAN PROGRAMS OFFICE, DFP'T OF ENERGY, TITLE XVII POLICIES AND PROCEDURES 3 

(October 20 II). 

23 DOE POSITION DESCRIPTION OF EXECUTIVE DIRECTOR, LOAN PROGRAMS OFFICE, ES-30 1-00. 

24 See LOAN PROGRNvlS OrnCE. DEp'T or ENERGY, TITl.E XVII POLICIES AND PROCEDURES 3 

(October 20 II). 

25 ld. at 3-4. 

26 lei. at 4; ADVANCED TECHNOLOGY VEHICLE MANUFACTURING LOAN PROGRAM OfFICE, DEl"!' 

OF ENERGY. A TVM POLICIES AND PROCEDURES. SEC. V.3.3 AT 42-44 (2010). 

27 See LOAN PROGRAMS OFFICE, DEp'T OF ENERGY, TITLE XVI I POLICIES AND PROCEDURES 4 

(October 20 II). 

28 ld. at 162. 

29 See LOAN PROGRAMS OFFICE, DEp'T OF ENERGY, RISK COMMITTEE CHARTER 3 (20 II). 

10 See LOAN PROGRNvlS OFFICE. DEP'T OF ENERGY, TITLE XVII POl.lCILS AND PROCEDURES 5 

(October 20 II). 

11 See LOAN PROGRAMS OFFICE. DEp'T OF ENERGY, TITLE XVII POl.lCIES AND PROCEDURES 5 

(October 20 II). 

32 1d. 

13 See DEP'T OF ENERGY, CRF.DIT REVIEW BOARD CIIARTER ~ I (December 20 II). 

34 !d. ~ 2. 

35 ld. ~~12-3. 

36 Sec LOAN PROGRAMS OFrICE, DEP'T OF ENERGY. LPO RISK COMMITTEE CHARTER I (2011). 

37 See Memorandum from Secretary of Energy Steven Chu to White House Chief of Staff 

William M. Daley (Dec. 13,20 II) ("'Secretary Chu Memo"). . 

3B See UlAN i'ROGRA\1S OFFICE. DEP'T OF ENERGY. RISK COMivllTTEE CHARTER I (2011). 

19 See Secretary Chu Memo. 

4() See UlAN PRO(iRAMS OFFICE. DEP'T OF ENF-:RCiY. RISK COMMITTEE CHARTER 2 (2011); Dep't 

of Energy. Credit Review Board Charter ~ 4 (20 II). 

41 See Secretary Chu Memo. 

"' ld. 

43 1d. 

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76267.559

75 
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76267.560

Department of Energy 

Washington, DC 20585 

February 18, 2011 

EXEC· 2011·001822 

MEMORANDUM FOR THE SECRETARY 

FROM: 

SUBJECT: 

EXECUTIVE DIRECTOR !lJtTHE LO~AN ~?~WfFICE 

FRANCES NWACHUK 

DIRECTOR OF POR~ NAGE ENT, LOAN PROGRAMS 

OFFICE 

ACTION: Concurrence for the U.S. Department of Energy ("DOE") 

to mod Ify that Common Agreement dated September 2, 2009 (the 

"Original Common Agreement") by and among Solyndra Fab 2 LLC 

(the "Borrower"), DOE and U.S. Bank National Association (the 

"Collateral Agent") 

ISSUE: Whether to (a) restructure Borrower's reimbursement obligations to DOE 

pursuant to the Original Common Agreement, and (b) as part of the restructuring, 

subordinate certain of Borrower's reimbursement obligations to DOE to the 'providers of 

distressed debt funding. 

BACKGROUND: Borrower is developing a thin·film solar photovoltaic manufacturing 

facility in Fremont, California (the "Prolect"). Borrower obtained a $535,000,000 loan 

(the "FFB Loan") from the Federal Financing Bank (the "FFB") to provide construction 

financIng for the Project and DOE guaranteed repayment of the FFB Loan pursuant to a 

guarantee issued September 2, 2009 (the "Guarantee"). The terms and conditions upon 

which DOE issued the Guarantee are set forth in the Original Common Agreement and 

include, among other things, (a) the Borrower's contractual obligatIon to reimburse DOE 

for guarantee payments made by DOE, and (b) remedies if Borrower defaults on such 

reimbursement obligations. 

Several events of default relating to financial requirements have occurred under the 

Original Common Agreement. The Borrower has provided to DOE a restructured 

business plan and model, including restructured terms of payment of the Borrower's 

reimbursement obligations to DOE and new cash infusions from third party investors. 

The loan Programs Office has reviewed and analyzed the Borrower's restructured 

business plan and model and has determined that there is a reasonable prospect that 

the Borrower will be able to make the restructured payments, as and when such 

payments become due under the restructured business plan and model. The Loan 

@ Pllnt!::!d with soy ink on recyclod pi;lper 
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76267.561

Programs Office has carefully considered the circumstances leading to the Borrower's 

default and all reasonable responses to such default, including foreclosure on the 

collateral securing the Borrower's reimbursement obligations under the Original 

Common Agreement. Based on the Loan Programs Office's review of the Borrower's 

restructured business plan and model and DOE's responses to the Borrower's default, 

the Loan Programs Office has determined that restructuring the Borrower's . 

reimbursement obligations to DOE as described below will yield the highest probable 

net benefit to the DOE by minimizing the DOE's loss on the Guaranteed Loan. 

The Borrower's restructured business plan and model (the "Restructuring") contains the 

following elements: 

The Restructuring contains the following elements: 

(a) DOE's collateral package will be enhanced, as all assets of the Borrower's 

parent and its affiliates will be transferred to the Borrower and thereafter secure the 

Borrower's obligations to DOE and Third Party Lenders (defined below); 

(b) The Borrower will obtain additional funding under a $75 million note 

("Tranche A") issued to third party lenders, and will issue a $175 million note ("l!:.ill:l.£.b.g 

f') to certain third-party lenders that previously funded that amount to the Borrower's 

parent (collectively with the holders of Tranche A, the "Third-Party Lenders"); 

(cl The Borrower's existing $535 million reimbursement obligation to DOE 

will be amended to comprise a $150 million reimbursement obligation ("Tranche B") 

and a $385 million reimbursement obligation ("Tranche 0"); 

(d) The Borrower will have the right to borrow an additional $75 million 

("Tranche C") from the Third-Party Lenders on specified terms and conditions; 

(e) Tranches A, Band C (the "Senior Facilities"), will constitute senior secured 

facilities on a pari passu basis in lien and payment priority, except that, for the first 2 

years after closing of the restructuring, Tranche A (a new $75 million loan) will have 

payment priority from the proceeds of a foreclosure (if any) on the collateral securing 

the Borrower's payment obligations; 

(f) Tranches 0 and E (the "Subordinate Facilities") will constitute 

subordinate secured facilities, secured on a pari passu basis, but with DOE's Tranche 0 

having payment priority; 

(g) The Senior Facilities will have certain lien and payment priority over the 

Subordinate Facilities; and 
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(h) Interest on each of the Senior and Subordinate Facilities will be 

capitalized for limited periods. 

In order to effectuate the Restructuring DOE, the Borrower, the Collateral Agent and 

certain other parties would enter into an Amended and Restated Common Agreement 

(the "Restructured Common Agreement") and the documents and instruments specified 

therein (the "Restructuring Documents"). 

The Chief Counsel of the loan Programs Office has reviewed the terms of the. proposed 

restructuring, including the proposed subordination of certain of the Borrower's 

reimbursement obligations to DOE, and in consultation with the Office of the General 

Counsel has determined that the subordination is permissible under Title XVII of the 

Energy Policy Act of 2005. 

Accordingly, the loan Programs Office requests that you make the following approvals, 

ratifications, and authorizations: 

1) Authorize the Executive Director of the Loan Programs Office, the Chief 

Operating Officer of the loan Programs Office, and the Director of the loan 

Guarantee Origination Division, Loan Programs Office, and the Director, 

Portfolio Management Division, loan Programs Office (including any person 

acting as such Executive Director or Chief Operating Officer or Director), acting 

together or individually, (the "Delegates") to enter in the Restructuring 

Documents; 

2) Authorize the Delegates to execute and deliver all of the Restructuring 

Documents to which DOE is a party and all other agreements, certificates, and 

instruments as are necessary or appropriate in connection with the issuance and 

administration of the Guarantee, all in form and substance satisfactory to such 

Delegate; 

3) Authorize the Delegates to administer (including by executing and delivering 

other agreements, certificates and instruments) the Guarantee, the 

Restructuring Documents, and all other agreements, certificates, and 

instruments as are necessary or appropriate in connection with the Guarantee. 

URGENCY: Authority to execute loan documents is needed for the closing of the 

transaction which is scheduled to occur on or about February 18,2011. 
661 

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76267.563

RECOMMENDATION: That the Secretary approve each of the determinations, 

ratifications nd authorizations set forth above. 

APPROVE : a/blsAppROVED: ___ _ 

CONCURRENCE: 

---s;:6-Jm;,-SScott Blake Harris 

General Counsel 

DATE: FEB 22 2011