Skip to comments.First Solar's Crony Socialism is a Big Failure
Posted on 06/07/2012 1:18:44 PM PDT by jazusamo
Renewable-loving Los Angeles is showing that even the power of billions of dollars in taxpayerstimulus cannot overcome the dominant hand of government regulation, and ironically its costing President Obama more green jobs.
One of the darlings of the Department of Energys Loan Guarantee Program,First Solar, has seen itsstock price take a drubbing, laid off thousands of workers, and left its leadership with significant influence from WalmartsWalton family scrambling to save the company. The latest stumble has led to another setback of worker inactivity at First Solars Antelope Valley Solar Ranch One project in California, approximately 75 miles north of downtown Los Angeles, despite$646 million in taxpayer-guaranteed loans. At issue is a disagreement with Los Angeles County safety inspector over electrical installations and whether they meet standards.
According to one Green tech Web site, approximately half of the workers 120 or so at AVSR1 have been furloughed. But a local newspaper, The Mountain Express, reports the actual figure may be twice that. The dispute over the standards has extended several weeks with both sides firmly entrenched.
First Solar denied the electrical inspector access to these [equipment] shelters that need to be inspected, said one anonymous electrician who worked the project. That is what brought all of these furloughs for us and the layoffs for First Solar May 25. The electrical inspector shut down all deliveries of electrical and mechanical [supplies].
The conflict may not come at a worse time for First Solar. A sale of AVSR1 to Exelon Corporation (with First Solar to remain as manager and operator) was just completed in the fall, and the release of the first funds from its loan began in April. But AVSR1 has been the subject of controversy in the local community over the effects it will have on land use, wildlife, and water usage, which led to a previous round of layoffs at the end of 2011. Overall First Solar had cut 100 jobs earlier in December, and then slashed global payroll by 2,000 workers in April.
As the green jobs hemorrhaged, executive pay rose. Former CEO Rob Gillette received $32 million over a two-year period before he was dismissed in October. The Arizona Republic reported in April that First Solar also paid its eight top executives nearly $16 million last year.
Besides AVSR1, taxpayer money backs two other major First Solar projects:Desert Sunlight (Calif.) and Agua Caliente (Ariz.). All three solar farms combined have more than $3 billion in loan guarantees at stake. The Department of Energy pegged job creation for AVSR1 at 350 construction jobs and 20 permanent jobs. That works out to $1.75 million per job just from the loan guarantee, not taking into account the renewable energy tax credits and state incentives the project would receive.
Until its recent announcement to close operations in Germany and Malaysia, First Solar was one of the worlds largest if not the largest solar companies. It may still be, with billions of dollars in private investment including that of the aforementioned Walton family, reportedly the largest stakeholder. With the enormity of resources at its disposal, management should be able to deliver and operate its projects, right?
The Waltons appear to think so, too (although they likely welcome the government help). With ownership of 112 million shares, according to The Street Web site, the family (and especially heiress Kristy Walton) cant be happy with the massive devaluation of First Solars stock. Under Gillettes leadership price-per-share dropped from $143 to below $100 (after peaking at just above $175 in February 2011), leading its board to bring back founding CEO Michael Ahearn on an interim basis. The bleeding hasnt stopped, as the price stood at about $33 at the beginning of this year. Yesterday it closed at $12.65, below the $20 price at which it went public five years ago.
The Street reported in April that the Waltons sought an expansion (which was successful) of First Solars board, adding Walton Enterprises CFO Richard Chapman, who is also director of the Walton family office. Ahearn remains as chairman of the board, and James A. Hughes a former Enron executive was installed as CEO. The discount empires influence has been met with skepticism, according to The Street, which said Ahearns return could only be considered a success if a sale of the company could be engineered at some premium that big shareholders can stomach.
That might be a challenge as First Solar also faces a shareholder class action lawsuit, which alleges the company failed to disclose the massive costs it was incurring due to defects in its solar panels. The company reported it replaced $125.8 million-worth of panels in the 4th quarter last year, and set aside $37.5 million to cover future claims. The Securities and Exchange Commission is also investigating First Solar for violations of Regulation Fair Disclosure.
Perhaps if First Solar overseers were focused on product quality and running a viable business, without dependence on taxpayers, they might not find themselves in such fixes with intense public scrutiny. But instead they played the crony socialism game in pursuit of government favors and cash, as federal candidates reaped benefits of First Solar employees generosity, according to the Center for Responsive Politics. Michael Ahearn donated $40,400 to the Democratic Senatorial Campaign Committee since 2008, and company executives and staffers also gave $37,158 to President Obama and various other Democrat candidates for Congress during that time. Recently departed First Solar board member Jose Villarreal, who is also a board member of the extreme left-wing Center for American Progress, has given more than $42,000 to Democratic congressional candidates and campaign committees since the 2008 election cycle.
And according to the Washington Free Beacon, Kathleen Weiss, the head lobbyist and (former) vice president of First Solar, has visited the White House at least 16 times to meet with Obama confidante Valerie Jarrett and other senior administration officials.
All that and First Solar cant overcome shareholder anger, managerial shortcomings, and a little safety inspector in Los Angeles. When will cronyism-inclined business people figure out that ingratiation with government doesnt work nearly as well as hard work, good service and product value?
Paul Chesser is an associate fellow for the National Legal and Policy Center.
Congrats for calling it “Crony Socialism”. Crony Capitalism is a misnomer.. Even Sarah Palin says it, argh!
I think I'll call that Green Irony!
Isn’t the term “Crony Socialism” redundant?