The Obama administration has been notable for doing one thing exceptionally well – propping up failing energy companies with taxpayer money, until they eventually fail.
Never mind, has been the media’s response to date. And so, as expected, the Brooks Development Authority in San Antonio approved the land portion of CPS Energy’s deal with Nexolon on Monday. The land contract is decidedly favorable to Nexolon, the newly formed US subsidiary of OCI Solar, a South Korean conglomerate with plans to build a solar panel manufacturing plant at the site, and a goal of becoming a major worldwide player in solar power.
It can’t be said that Brooks’ board members disregarded concerns about the deal as much as it could be said that they just didn’t have the wherewithal to even ascertain what those concerns might be. Even though the San Antonio City Council recommended that Brooks conduct an audit of the planned project — one wasn’t done. Why bother? Taxpayer money is always obtainable if problems arise, just ask Solyndra’s chief financial backer, Barack Obama.
“We’re going into this as a big winner,” Brooks Development Authority board member Ramiro Cavazos reportedly told the San Antonio Express News. “There is no deal anywhere that is without any potential risk, but this deal is strong.”
That’s what he says. According to published reports:
Under the terms of the deal, Nexolon America LLC will pay $5 million for a 10-year lease on 86 acres valued at $17 million. Nexolon can take possession of the land at any time during the lease for no additional cost. But the company then would have to pay property taxes on the land.
Those are very favorable terms for a project that hopes to bring 400 jobs in an industry barely keeping its head above water. As I’ve blogged previously, financial problems at Nexolon America’s parent company, South Korea-based Nexolon Co. Ltd., are widely known in the industry, and have raised concerns about Nexolon America’s ability to complete the project. The company lost $60 million during the first six months of 2012, carries a heavy debt load, and had less than $20 million in cash and equivalents on hand. No big deal though, supposedly.
But Nexolon officials, speaking at a San Antonio Express-News Editorial Board meeting this month, rejected notions that the company doesn’t have the financial wherewithal to build the plant.
“We have been performing (in) this harsh industry situation better than others — not the best — but better than most others,” said Woo Jeong Lee, chairman of Nexolon Co. Ltd. He also serves as the president of Nexolon America.
Questions persisting, the project has progressed through its required paces, and at this point, appears to be a done deal. The Brooks land purchase ultimately became the most controversial part of the project, due to the incentive package provided by City Hall, but it wasn’t the land purchase that should have drawn the most attention, in my opinion. The focus should have been on the bidding process that landed Nexolon the deal in the first place.
CPS Energy has yet to release the bids that it rejected in favor of Nexolon’s proposal. According to a staffer for City Councilman Carlton Soules, whom I spoke with briefly yesterday, two bid requests went out. The first bids came back lower than anticipated, so CPS added an economic component and asked for new bids. It’s unclear to me how many companies resubmitted their bids a second time with the new component. CPS Energy rebuffed previous requests for that information last summer, and the local paper didn’t press the issue. However, it was reported at the time that Nexolon’s bid came in priced higher, and without a history of viable solar energy production in the US. For some reason CPS Energy liked its bid the best anyway, and that is where questions linger.
It seems likely, given the following indisputable facts, that the deal may have been rigged from the beginning, through a series of events showing potential collusion with a White House predisposed to pushing solar energy on American taxpayers – regardless of cost or profitability.
The following timeline seems to indicate a very collaborative relationship between Obama’s White House and Mayor Julian Castro, during a process which ultimately led to the selection of a South Korean firm for one of the largest solar projects in the United States:
1. The Beginning: Julian Castro meets with President Obama 2009:
2. February 2011: CPS Energy (Mayor Castro is on the CPS Board) issues Request for Proposal for 50MW Solar Project to be built in San Antonio.
3. July 2011: CPS Energy increases the Request for Proposal from 50MW to 400MW making it one of the largest solar projects in the United States.
4. October 2011: Mayor Castro and a group of Texas businessmen travel to Korea. Mayor Castro cuts his trip early to fly to the White House for a State dinner with Korean President Lee.
5. October 2011: Mayor Castro sits at the same table with President Obama and President Lee at the State Dinner at the White House. (see seating chart reported in Washington Post)
6. November 2011: CPS Energy cancels the previous RFP and re-issues new RFP making changes that include new economic development portions and specifically make some very unique requirements including the following minimum requirement:
“an “anchor” facility for the manufacture of the solar energy related products (for example, crystal pulling, ingot, and thin film module manufacturing) and related assets”
Anyone who is involved in RFPs and contracting knows that making specific requests that only a particular entity can fulfill can rig a process to favor certain bidders over others. This seems awfully close to what happened here. CPS Energy gave very specific minimum requirements for the modified RFP. I addition, and notably. they gave a very accelerated schedule for response to the RFP that was not reasonable for the project’s size –— unless certain bidders already knew in advance what was going to be requested.
7. January 2012: CPS Energy surprises everyone by selecting and announcing the winning bidder – a Korean firm that has not built a single solar project.
At the press announcement announcing the OCI selection with CEO Doyle Beneby and Mayor Castro in attendance, an Executive from OCI describes interaction they had with CPS Energy — “lots of long hours” — during the RFP process that was supposed to be a fair and closed process. This admission was caught on tape, below.
The (4:16) mark shows CPS Energy Chairman Derrick Howard (seated next to Mayor Castro) in the background get very uncomfortable as the OCI Executive starts to describe how they were in contact and working with CPS Energy directly during the RFP process.
These points should raise questions regarding a potentially corrupted process where American solar firms never even had a chance to win the bid. The truth is important no matter how far along the players are in the project timeline currently. The largest municipal owned utility in the United States is entering into a long term power purchase agreement in which all profits will flow to Korea, not remain in the United States. And “high paying” jobs for San Antonians? We shall see who ends up siting in the ivory corporate towers, and whose pockets are lined with taxpayer money.