

Controversial U.S. energy loan program has wiped out losses - danso
http://www.reuters.com/article/2014/11/13/us-doe-loans-idUSKCN0IX0A120141113

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anigbrowl
People who want the accounting nitty-gritty should consult the most recent GAO
report ont he program:
[http://www.gao.gov/assets/670/662944.pdf](http://www.gao.gov/assets/670/662944.pdf)

It's worth remembering a few things in relation to this. One, while this
profit is only nominal, interest income will continue and will thus generate a
real net profit soon enough, like sometime next year. Total net income to the
treasury is anticipated to be about $5bn, assuming no more defaults. Two,
Congress originally expected to write off as much as $10 billion at the time
it set up the program. The actual default rate has been only about 2.25%,
which is very good. Three, the program is often mischaracterized as a giveaway
to wind and solar manufacturers, it's also the backstop for a $6.5 bn
investment in two new nuclear plants in Georgia that are currently under
construction, the first additions to the US nuclear fleet in 30 years.

Bloomberg had a good analysis of the program's history last year, with many
interesting facts (eg the administrative costs of the Loan Program Office are
covered up front by applicant fees):
[http://www.bloomberg.com/news/2013-10-10/one-of-world-s-
bigg...](http://www.bloomberg.com/news/2013-10-10/one-of-world-s-biggest-
clean-energy-finance-shops-is-back-in-business.html)

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saosebastiao
This is good, I hope. Unfortunately, I fear that these loans are earning
interest from companies whose revenues are also subsidized by other government
programs, which wouldn't be much different from the status quo, where they
inflate away their debt.

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briandh
Interestingly, one plant (partially owned by Google) recently applied for a
Treasury grant to pay off its DoE loan [1]. As far as I know it has not been
approved, but I'd be interested to know whether any companies have
successfully done this.

[1] [http://online.wsj.com/articles/ivanpah-solar-project-
owners-...](http://online.wsj.com/articles/ivanpah-solar-project-owners-delay-
repaying-loans-documents-say-1411488730)

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refurb
_According to a report by the Department of Energy, interest payments to the
government from projects funded by the Loan Programs Office were $810 million
as of September - higher than the $780 million in losses from loans it
sustained from startups including Fisker Automotive, Abound Solar and
Solyndra...._

Not sure I agree with that. Sure it has more money than when it started, but
you need to take into account what that money would be worth if it had been
invested at a risk-free rate during that time period.

If I lose $10 then get $10 back 5 years later, I'm still down $1.59 if you
assume that $10 could have gotten a 3% return for each of those 5 years.

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Someone1234
But the difference between $810 and $780 is greater than 3%. So even using
your 3% example they have still broken even.

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adventured
Sticking with the hypothetical, you forgot to calculate 3% per year. That's
$23.4 million per year ($70.2 million up to this point +/-).

~~~
Someone1234
Maybe but that also assumes they had all of the losses at the start of the
10th year and made all of the profits at the end of the 10th year.

Also what returns 3%/year? I could imagine 3%/10 years (or even 15 years).

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pessimizer
This is a meaningless number, like the ones that say that the bailout was
profitable. At least the article realizes this instead of just copying the
press release: "The report's findings are more of a political victory than a
financial one. It took the program three years to break even after Solyndra's
failure, while during that same time the Standard & Poor's 500 index increased
67 percent."

1) Is this 810M nominal, or inflation adjusted?

2) What was the market rate for loans at the time, and what rate did the
creditors get from the Treasury? The difference is a loss.

3) How much would insurance have cost for these loans in lieu of the
government guarantees they were given? This was also a cost, and a subsidy to
the private lenders involved with the program.

I want the government to be spending on research into renewables, and spending
generously, but these bullshit press releases are what make Jonathan Gruber's
remarks about voter stupidity (which largely boils down to innumeracy) and the
need to fool them in order to get policies enacted seem like an overt,
conscious policy regarding all of the financial services interventions
(including ACA) that have happened during this administration.

You may not agree with Walter Lippmann, but he wasn't proposing a way to
structure governance, he was describing how we're already being governed and
the inherent hard problems in coming up with any alternative that doesn't
either converge to the current form or destroy itself over time.

