Could Mississippi’s Twin Creeks go the way of Solyndra?

November 13, 2011

Economic Development, Energy

Obama visiting the now-defunct Solyndra plant in California.

Obama and Barbour have bet on green energy winners and losers

Since its declaration of bankruptcy and subsequent FBI raid in early September, solar manufacturing company Solyndra has stayed in the national news, and President Obama has come under fire from Republicans with allegations of crony capitalism.

This month the White House refused to provide documents regarding communications with Solyndra investors subpoenaed by the House Energy and Commerce Committee. Obama favored Solyndra, which received a federal loan guarantee of more than $500 million, touting it as a green jobs provider.

Rep. Darrell Issa (R-Calif.), chairman of the Oversight and Government Reform Committee, told The Hill: “I want to see when the president and his cronies are picking winners and losers.”

Issa’s committee has looked at whether it is improper for members of Congress or White House staff to select companies eligible for subsidized government loans when those companies could give campaign donations.

Issa uttered rhetoric used by Gov. Haley Barbour in March when he criticized Obama’s green energy funding in The Wall Street Journal, saying: “The federal government too often is picking winners and losers. I don’t think we should be saying we are willing to fund this kind of energy but not that kind of energy.”

Despite that rhetoric, during the past year and a half, Barbour has recruited six green energy manufacturers – three of which are in the solar industry – to Mississippi with taxpayer-backed loans totaling $400 million.

Barbour has placed his own bets on monocrystalline and thin-film solar panels, renewable crude, energy-efficient glass, solar silicon, and bio-fuels and bio-products through companies Twin Creeks Technologies, Soladigm, Stion, KiOR, Calisolar, and HCL Cleantech. State legislators, thinking of the 4,550 green jobs these companies collectively promise, have supported him. All six are venture capital-backed, and most have no commercial-scale manufacturing experience.

Twin Creeks Technologies plant in Senatobia, Miss.

Solar panel manufacturer Twin Creeks Technologies was the first green energy company to receive Mississippi stimulus. In April 2010, the California-based company announced its intent to set up its first commercial-scale plant in the state and received a $50 million loan award. Twin Creeks held its grand opening in May of this year, but it still isn’t manufacturing a commercial product. The company has promised to create 500 jobs over the next five years, and 180 by the end of 2011, but in June it reported having 15 employees. At press time its website listed two job openings.

Twin Creeks’ new 88,000-square-foot factory, funded with $22 million in state dollars, sits in Senatobia. No sign or logo identifies the plant. Twin Creeks spokesperson Tarpan Dixit says the plant is not in commercial production but in “validation mode” and waiting for certification — but that’s not the message conveyed by state officials. At Twin Creeks’ grand opening in May, Barbour said he was “delighted to celebrate the start of production” at the factory. In September Kathy Gelston, chief financial officer of the Mississippi Development Authority — the state’s economic development agency — said the factory was producing “sellable panels.”

Tate County Economic Development Foundation director J.E. Mortimer recently toured the factory and saw the equipment: “We are still looking for really good things from this company. … Solyndra is nothing at all like Twin Creeks.”

Gelston has said the green energy companies can only use the loans for building and equipment, so taxpayers have collateral if any of the companies collapse. But she admits that the Authority hasn’t assessed the forced liquidation value of the assets, should a fire sale become necessary.

Barbour spokeswoman Laura Hipp said that Mississippi’s alternative energy companies must “meet benchmarks before receiving state funds” and must return the money if they violate their contracts. She said Twin Creeks now employs only 16 people but stated the company is only contractually “committed to employ 500 employees within five years.”

Some stakeholders in the Twin Creeks deal have political connections. W.G. Yates & Sons Construction of Philadelphia built part of the Twin Creeks plant. Executives and family members from W.G. Yates’ parent, The Yates Companies, gave $25,000 to Barbour’s federal PAC in August 2010. The Yates Companies also donated this year $10,000 of in-kind air travel to Haley’s PAC, a Barbour fundraising arm in Georgia.

Yates spokesman Kenny Smith said, “The Yates family did give money to the governor’s Georgia PAC because they were optimistic that he was going to run for president and they were supporting him in that effort. It had absolutely nothing to do with the work at Twin Creeks.”

Several partners at one Twin Creeks backer, DAG Ventures, are Republican donors. Firm co-founder John Duff Jr. gave more than $100,000 to the Republican National Committee, which Barbour has chaired, but then started giving to the Democratic National Committee.

It’s hard to know about funding of the five other companies: Secretive hedge funds back some of them, hampering transparency. One venture capital firm, Khosla Ventures, funds four of the six green companies that received state loans. Artis Capital Management, a hedge fund with ties to Khosla, backs two of the companies. Artis (also a backer of Solyndra) is an intensely secretive $1 billion hedge fund. Its website is password-protected, and its investors are unlisted. Public filings with the SEC only reveal the company’s president and counsel, and neither appears to have ties to the Barbour administration. Last year Artis partner David Lamond gave a paltry $500 to Haley’s PAC in Georgia.

Barbour, a powerful Washington lobbyist with BGR Group before becoming governor, has joined super PAC American Crossroads and will fundraise for Republicans for the 2012 elections upon leaving office next month.

Only time will tell if Barbour’s venture capital instincts are as good as his political abilities.

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