Julian Castro’s Team Ridicules CNN Report on OCI Solar Deal as “Hit Job”, But Major Questions Remain

October 24, 2012

Local Politics, State Politics

CPS Energy, OCI Solar Power and Nexolon North America formed a consortium that will invest $1 billion to develop and operate the largest municipal utility solar project in the country, headquartered in San Antonio, Texas. The venture plans to bring several manufacturing facilities together to produce solar panel components and create 800 professional and technical jobs. - AreaDevelopmentOnline

Is Castro using CPS Energy to bail out South Korea’s Nexolon Ltd?

The San Antonio Express News may want to protect its favored son (the editorial board leans left, and endorsed Barack Obama), but it looks like the solar deal that Julian Castro is promoting as good for San Antonio could actually be just another bailout for a failing green energy firm.  And an overseas one at that.

Castro cronies are calling the recent CNN piece about the Mayor’s deal with South Korea a “hit job”,  with the Express News labeling it “disparaging” and defending Castro, refusing to look past the talking points put out by Castro’s office.  For all of its research abilities and contacts, interesting that the local newspaper still has been “unable to compile a complete list of bidders” that competed for the project.

CNN reported in its story that OCI Solar had never put out one single MW of solar power prior to the contract being signed, and that it was offering a price per MW at a rate more expensive than other bidders.  Those are facts.  OCI Solar was formed this year and its new President & CEO was named the same month (July, 2012) as the contract formalization with CPS Energy.  Experience?  Maybe its parent company, but not OCI Solar, the American company contracted to do business with CPS.

It would appear that OCI was formed solely to meet requirements that bidders be a US based company, and is nothing more than a tool of its South Korean parent company Nexolon Co. Ltd.

Mayor Castro continues to laud the deal, painting himself the victim of irresponsible reporting by CNN, telling local news outlets this week that any questions about the deal are politically motivated by those who fear his rise in the Democrat Party:

“The firm that got this, OCI Solar, is moving it’s corporate headquarters to San Antonio,” Castro said. “It does have a Korean parent company, but the company that we’re actually dealing with is American OCI Solar.”

Castro said the decision was made based on price, experience and how many jobs would be created in San Antonio.

Castro supporter Lanny Sinkin,  executive director of Solar San Antonio, who has said “Solar power is like a gold mine,”  told the Express News that OCI’s package made it the best choice.

OCI’s financial stability, manufacturing expertise and ability to follow through on the contract played a role in why it was chosen, as well as technical expertise.

Is that so?  Accountants and intelligent investors might disagree.

Source:  Businessweek

Year over year, Nexolon Co., Ltd. has seen their bottom line shrink from a gain of 35.5B to a loss of 24.1B despite an increase in revenues from 451.3B to 588.2B.An increase in the percentage of sales devoted to cost of goods sold from 87.30%to 101.25% was a key component in the falling bottom line in the face of rising revenues.

Nexolon Co., Ltd. may have more financial risk than other companies in the Semiconductors and Semiconductor Equipment industry as it is one of the most highly leveraged with a Debt to Total Capital ratio of 75.58%. This ratio actually increased over the last year. Additionally, an examination of near-term assets and liabilities shows that there are not enough liquid assets to satisfy current obligations. Accounts Receivable are among the industry’s worst with 37.92 days worth of sales outstanding. This implies that revenues are not being collected in an efficient manner. Last, Nexolon Co., Ltd. is among the least efficient in its industry at managing inventories, with 49.80 days of its Cost of Goods Sold tied up in Inventories. [emphasis mine]

Is it smart business to give a 25 year billion dollar contract to a company with such a negative bottom line and no experience producing solar power in America? 

As much as Castro’s team at CPS Energy wants to make it seem that it is doing business with an American firm that is in the process of “relocating” to San Antonio, here are the facts.  The shell company may have been “based”somewhere in America by its paperwork only,  but the parent company is totally South Korean, through and through.  Don’t take my word for it, listen to Nexolon’s CEO talk about what the project means to the foreign firm.  SolarPVInvestor:  Nexolon Aspires to Global Leadership in the Aftermath of Industry Shakeup:

We had a chance to conduct a conversation with Mr. Je-Hyun Yoon, Nexolon’s CEO, and Mr. Tae-Jin Chung, Head of IR, on the company’s technological advances and recent developments in the US.

In recent news Nexolon combined efforts with OCI Solar, an EPC and Development company and the subsidiary of OCI Chem, to build solar plants in the US.  As part of this agreement Nexolon made a commitment to erect a 200MW module assembly plant in Texas, US.

SPVI: Can you tell us why, at this time, Nexolon is expanding into module manufacturing, particularly with the overcapacity and global glut of inventory?

Nexolon: As we all know the solar PV industry as a whole is going through a tough time. Nexolon has been making efforts to find new growth potentials, and the US market was one of them. As a result, the CPS project is the consensus of all three players involved: CPS, OCI Solar Power and Nexolon. CPS was looking to develop a project that entailed job creation, OCI SP was interested in EPC project and Nexolon was finding a profitable new business model. Nexolon guaranteed to create over 400 jobs in the San Antonio area by building a cell and module plant. This facility not only aims to supply to CPS project but also to satisfy the growing US market with our advanced solar products. For this project Nexolon Korea will be supplying solely n-type mono wafers to Nexolon America to maximize efficiency and power productivity. We are very excited and thankful to capture this opportunity. We firmly believe the CPS project to be the stepping stone to take full advantage of both the rising US market and the next industry upturn.

We believe N-type mono market is not suffering from an oversupply problem because there are few players who can provide N-type mono wafers on the supply side due to technological entry barrier at the moment.

SPVI: With continuously dropping ASP, there is more risk of bankruptcies and shutdowns in the industry. In your opinion, what impact will this have on the growth of solar energy, and mainly solar as an investment for individual investors?

Nexolon: Every solar player is bleeding right now due to dropping ASP, but it has two positive impacts on the solar industry.

Firstly, continuously falling ASP will eventually lead to grid parity to make solar PV industry economically independent without government subsidy on the demand side. Secondly, a global glut of production capacity will be wiped away due to consolidation on the supply side. As supply and demand mismatch improves, the market will be expected to be normalized. Survivors will expand their market presence when the market turns around. We have no doubt Nexolon is one of the beneficiaries. That is one of the reasons we are going to raise around KRW 68B in follow-on offerings to secure cash and make our balance sheet strong enough to survive.

From this back and forth we learn that Nexolon, through OCI,  is hoping to cash in on its contract with CPS Energy to become the major player in the industry, pushing out other American companies in the process. Nexolon effectively plans to capitalize on the lucrative San Antonio deal when the market turns around.  Market turn around, as described by  Mr. Je-Hyun Yoon, CEO,  will happen when solar energy production becomes as cheap as other energy.  When will that happen?  Who knows.  San Antonio is an experimental proving ground.

If a billion dollars of taxpayer money isn’t enough to help Nexolon recover its losses,   OCI will also be getting federal tax credits to sweeten the pot.

The way this deal is structured, like most solar energy projects, is through a 25-year “power purchase agreement.” OCI will own the facility outright, allowing it to take advantage of federal tax benefits, but will sell the power exclusively to San Antonio at an agreed-upon rate. So, in a technical sense, you could say the profits from producing solar power are going to a South Korean parent company via its U.S. subsidiary. But, the deal has been praised precisely for its emphasis on local green jobs.

Castro’s defenders are doing Gumby impressions to make it seem like it’s a win-win – oh and yeah, so what if profits are going overseas?  It only matters when Republicans do it.

Before we write off CNN’s report as a “hit job” because Castro and Co. want us to look the other way, maybe someone should ask why we’re bailing out a failing South Korean company that can’t manage its inventories or expenses. Why are taxpayers being asked to invest in an industry that even its own industry experts say has a “volatile future, at best.” Is San Antonio – home to several large military bases – the new sanctuary city for illegal immigrants looking for make work jobs in a fantasy economy, and overextended foreign companies looking for a bailout?  Is Castro using taxpayer funds to help recoup losses of Democratic investors who lost their shirts in Obama’s Solyndra scandal?   If so, the taxpayers are going to need some very deep pockets.

Update: The list of failed solar energy projects grows. Tales of fraud from the Obama admin’s green-energy crypt.


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11 Comments on “Julian Castro’s Team Ridicules CNN Report on OCI Solar Deal as “Hit Job”, But Major Questions Remain”

  1. RICK Says:

    SARA This is a Before and After Election issue. I’m sending this out.

    Reply

  2. chilejackson Says:

    Wish I had the time a resources to check this closer. Looks like the entire deal may be tied back to Obama. I was trying to find something to link the Chicago based Cornerstone Resources company back to Obama since the company was started in 2009 after Obama was elected and sold a year or so later to the OCI Korean company in 2011. How would a Korean company even know a startup energy company was for sale in Chicago? What ties did the Cornerstone employees have to the Democratic party? Did they or OCI contribute to the Obama election funding?

    Not sure but heard their were 2 RFP’s and the original CPS RFP was for a 50 KW facility but after the bidding for that RFP was closed it was canceled and expanded to a 400 KW facility. I would bet the dates would correspond to the Castor visit to Korea and the state dinner that was reported by CNN.

    Reply

    • Sara Says:

      This info is very intriguing….

      Reply

      • Hal Jackson Says:

        We need to keep this alive. Seems the CNN reporter has vanished for now.

        I understand the manufacturing process for the Solar Cells use Highly Caustic Chemicals and also uses millions of gallons of water and the Mayor is all for building the plant over the drought prone San Antonio Aquifer.

        Strange Castro is trying to protect the South Texas water supply on one side and then trying to poison it on the other!!

        Reply

  3. Richard Says:

    So, is the new preferred way to hide funny money behind the Sun. Wasn’t Solyndra the Bell Weather “BULL” carrying a bundle of money into the Sun, which did shortly thereafter set. Are we supposed to swallow this malarkey because it’s Politically Correct or should we perhaps realize that a Korean Solar Company, Pre K and light rail are all part of the same train steering us down the wrong track to socialist hell.

    Reply

    • Sara Says:

      I just think the deal warrants more scrutiny, considering how much taxpayer money has been lost on solar to date. This is the biggest public utility deal in the country, with a major Obama crony behind it. That in itself should warrant further investigation. Where is the type of microscope media put on Bain Cap or Haliburton? At the very least it wouldn’t be surprising to find money going into the pockets of the usual suspects.

      Reply

  4. John Foddrill Sr Says:

    Mayor Julian Castro, the City Council , City Attorney Michael Bernard ( brother of White House Social Secretary Jeremy Bernard ) City Manager Sculley and others have violated the Texas Open Meeting Act, the US Constitution and other laws by casting illegal votes during illegal meetings.

    The ordinance supporting this boondoggle is voidable via the courts.

    http://tpr.org/post/source-banned-city-hall

    Reply

Trackbacks/Pingbacks

  1. This Nexolon OCI CPS Energy Solar Power Deal Sure Seems Shady | Sara for America - January 16, 2013

    [...] I’ve written previously about the City of San Antonio’s deal to bring a South Korean solar panel manufacturer to the city’s south side, see: Julian Castro Ridicules CNN Report But Major Questions Remain. [...]

  2. Still No Sunshine on San Antonio’s Solar Project with South Korean OCI Nexolon | Sara for America - February 17, 2013

    [...] Julian Castro Ridicules CNN Report as Hit Job but Major Questions Remain [...]

  3. Say What? Another Solar Energy Firm Backed by Taxpayer Money Is in its Death Throes! Are You Listening, San Antonio? | Sara for America - March 1, 2013

    [...] more about it here, and here and here.   Let’s just say that this whole solar deal seems a bit on the shady [...]

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