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Sessions: SolarCity Might be the Next Solyndra

Posted: November 19, 2013 at 4:45 pm   /   by

Sen. Jeff Sessions, R-Alabama

WASHINGTON – On Monday, Sen. Jeff Sessions, R-Mobile, sent a letter to Treasury Secretary Jack Lew regarding tax credits to SolarCity, a solar energy company that has lost over $300 million since 2008.

The inquiry was sparked by an August 31 story in the financial publication Barron’s about SolarCity, a company that is the U.S. leader in leasing solar panels to consumers.

“Like other renewable- energy companies, SolarCity is dependent on government subsidies to make a profit,” Barron’s noted. “The higher the reported value of a panel, the larger the taxpayer subsidy. In part because of uncertainty over those subsidies, Barron’s urged investors to be wary of SolarCity’s high-flying shares.”

Barron’s also said that the Treasury Department’s inspector general is investigating whether SolarCity “misrepresented the fair market value of the solar systems it installed.”

In Sessions’ letter to Lew on Monday, Alabama’s junior senator questioned whether SolarCity could survive on its own without being propped up by U.S. taxpayers.

“Over-inflating the cost of solar products is not only detrimental to the government, but to investors as well. Barron’s questioned whether SolarCity’s economic outlook or market value was adequately reflected through its stock prices, raising the question of whether its survival is reliant on political support, rather than investors’ belief in the company’s prospects,” Sessions wrote in his letter to Lew.

“In simple terms, there is concern that SolarCity might become the next Solyndra—a company propped on the back of the taxpayers, not the product produced,” he continued. “Barron’s summarized the company’s financial state in this way: ‘[SolarCity] has lost $322 million since 2008, including $91.6 million last year, on $128.7 million in revenue. Analysts expect SolarCity to lose $1.84 a share this year on $146.1 million in revenue.’ The article notes that although there is a divide on SolarCity’s net worth, ‘what analysts can agree on is that SolarCity will need more financing, particularly as federal tax credits fall to 10% in 2017.’”

Solyndra was a solar panel maker that received over half a billion dollars in U.S. Energy Department loan guarantees before it went bankrupt. It was the very first company to garner a government loan guarantee during President Barack Obama’s stimulus program.

Sessions, the ranking member of the Senate Budget Committee, has asked Treasury Secretary Lew for a response to his SolarCity letter no later than December 18.  The entire text of the letter can be found here.