"Today, the White House released Allison’s review. It includes an analysis of every loan guarantee issued from DOE, as well as recommendations for managing this portfolio of guarantees going forward. This independent review was requested by the White House in late 2011, to make sure that the DOE loan guarantee portfolio was cost-effective for taxpayers.
The Allison review confirms what we already know, thanks to the Congressional Research Service and Bloomberg Government. Instead of looking at individual investments, CRS examined the entire DOE portfolio, and concluded that the overwhelming majority of the portfolio was in electrical generation projects, which DOE structured to have very low risk. Bloomberg Government took that a step forward, and concluded that the media’s incessant focus on Solyndra was “not proportional to its impact.”
There are multiple reasons why the risks to taxpayers from this program are so low. First, most of the guarantees went to support projects that have very secure contracts to sell their power to investment-grade rated utilities. Allison and his team of independent auditors endorsed the methodology that DOE initially used to evaluate these types of projects, writing, “The Independent Consultant used the same Nine Criteria as did DOE because, in the opinion of the Independent Consultant, they comprise the salient factors for evaluating the credits and are substantially similar to the criteria that would be employed by private sector credit analysts for these types of loans.”
Second, even in the event that something does go wrong with an investment, there is almost always someone willing to buy the project at a discount. For example, Beacon Power declared bankruptcy after getting a loan guarantee for $43 million. But, this wasn’t a $43 million loss for taxpayers, because Rockland Capital agreed to buy the project for $30.5 million. Obviously, this is not the perfect outcome, but it helps to understand why Beacon’s bankruptcy won’t cost taxpayers the full amount of the guarantee."
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