by InvestorPlace Staff | March 19, 2012 6:13 pm
At first, the story sounds too absurd to be true. How can a company receive millions of dollars of government subsidies, then get a loan guarantee to sell its product to itself?
Yet somehow, First Solar (NASDAQ:FSLR) managed to do just that.
How did the company pull off this feat? It started in 2010, when the Obama administration gave a $16.3 million grant to First Solar to expand a factory in Ohio. That same year, then-Gov. Ted Strickland announced $1 million in job training grants to First Solar. In addition, the Ohio Department of Development lent $5 million and the state’s Air Quality Development Authority lent $10 million to the company.
After receiving these loans and grants, First Solar then proceeded in September 2011 to sell solar panels to two wind farms in Canada. To facilitate this sale, the Export-Import Bank, a government organization designed to encourage U.S. manufacturers to export more goods to foreign markets, guaranteed the sale, to the tune of $455.7 million.
What this meant was that if the wind farm defaulted on the money it borrowed to purchase the panels, the Export-Import Bank would cover the cost of the sale for First Solar. However, up until this week, the company that owned these wind farms was a wholly owned subsidiary of First Solar (the farms were recently sold to another company).
If the Export-Import Bank isn’t going to be used to promote exports to foreign markets, and is only going to be used to help companies hedge their bets — and even subsidize sales to themselves — then its existence needs to be seriously examined.
— Benjamin Nanamaker, InvestorPlace Money & Politics Editor
The opinions contained in this column are solely those of the writer.
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