Another US-Backed Energy Company Goes Bankrupt

By: EW News Desk Team   Date: 31 October 2011

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31 October 2011

A second alternative energy company, which received a loan guarantee similar to the one acquired by Solyndra from the same US Department of Energy (DOE) program, has gone bankrupt – barely a year after receiving US government financing to provide green energy jobs and resources for the country.

Beacon Power Corp., a Massachusetts based energy storage company, filed for Chapter 11 proceeding late on Sunday, becoming the second green tech company that had been backed by the US government to become bankrupt in the space of two months.

The first of the companies had of course been Solyndra, which had filed for bankruptcy after receiving a $535 million loan guarantee from the US government. Beacon’s loan guarantee though was significantly lower, though still costly at $43 million.

"This latest failure is a sharp reminder that DOE has fallen well short of delivering the stimulus jobs that were promised, and now taxpayers find themselves millions of more dollars in the hole," said Cliff Stearns, a Florida Republican who is leading the House Energy and Commerce Committee's probe into the bankruptcy of Solyndra, as quoted by Reuters.

DOE and Beacon spokesmen though were keen to avoid any comparisons with Solyndra, claiming that both cases had several key differences to each other and were therefore unique.

OE spokesman Damien LaVere noted that Beacon, unlike Solyndra, still ran an operational facility in Stephentown, New York, which have long term contracts it could use to generate money.

Furthermore, the company also had maintained a substantial portion of cash reserves, with the government the first in line to get paid back.

"Protecting taxpayer dollars remains the top priority for Secretary Chu and the Department, which is why we were careful to include many protections for the taxpayer in the loan guarantee for the Stephentown project," said LaVere in a statement as quoted by CNN.

Beacon representatives added that the company wasn’t about to shut down in the face of bankruptcy, but rather restructure its operations in order to regain its losses.

The current economic and political climate, the financing terms mandated by DOE, and Beacon’s recent delisting notice from Nasdaq have together severely restricted Beacon’s access to additional investments through the equity markets,” said Beacon’s Chief Executive Officer F. William Capp in papers filed in the US Bankruptcy Court.

According to LaVere, Beacon is currently looking to reorganise its business and continue operations at its Stephentown plant.

That doesn't mean there won't be layoffs, but it is important to note that the plant we funded is going to continue providing a valuable service,' DOE spokesman Damien LaVera noted in an email.

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