The proposal by Solargen Energy, Inc. to build a 420-megawatt,
$1 billion-plus solar energy farm in the county’s Panoche Valley
must clear two significant hurdles to become a reality. The first
is environmental. The second is financial.
The proposal by Solargen Energy, Inc. to build a 420-megawatt, $1 billion-plus solar energy farm in the county’s Panoche Valley must clear two significant hurdles to become a reality. The first is environmental. The second is financial.
The California Environmental Quality Act (CEQA) details the environmental evaluation process. What are the standards for determining financial viability? A key element of that has to be the financial condition, experience and history of the developer – Solargen Energy, Inc. – and its principal investors. That area needs a comprehensive independent evaluation.
There is more at stake than promises of jobs or payoffs to the county coffers. A successful project will depend on many millions of dollars in taxpayer cash subsidies and credits and the county has an obligation to protect that investment. We, the residents, would be paying much of the bill directly and indirectly.Â
The solar industry has had its share of hype. In the summer of 2008, OptiSolar announced that it would build a 550-megawatt solar power plant in San Luis Obispo County and that PG&E had agreed to buy the electricity. By March 2009, OptiSolar essentially was out of business. The company was criticized for having ambitions “over the top” compared with its size. One of Solargen’s early presentations identifies its Panoche Valley project as being “comparable” to the OptiSolar project. A company with significant experience and 2009 revenues of $2.1 billion eventually picked up the proposal. Even still, that project has been delayed.
One can start an analysis with Solargen’s business documents. Solargen is listed as “SLGE” on the over the counter (OTC) market called the Pink Sheets. Many of these companies do not file annual reports or audited financial statements with the SEC, making it very difficult for investors to find reliable, unbiased information. Solargen’s December 2009 Annual Report was not filed with the SEC.
Even in the risky OTC environment, Solargen carries a “Limited Information” flag that can apply to companies with financial reporting problems, in economic distress or that may not be troubled, but are unwilling to meet Pink Sheets’ “Guidelines for Providing Adequate Current Information.” Solargen’s Annual Report states that their Common Stock may be considered a “penny stock” thus subject to SEC notification rules detailing special risks.
According to the SEC Release No. 34-29093 as quoted in Solargen’s report, the market for penny stocks has suffered in recent years from patterns of fraud and abuse, including (among others):
n Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
n Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
n The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
Liquidity, the ability to trade on a market, may also be nonexistent in some circumstance.
These are not meaningless warnings. They are there for a reason.
Every company report contains risk factors and disclaimers; the Solargen Report is full of them. Several are worrisome, but one stands out (capitalization in the original) – “THE COMPANY HAS NO EXPERIENCE IN THE SOLAR PROJECTS WE PLAN TO DEVELOP IN THE FUTURE.”
The obvious risk is that after receiving generous taxpayer funding, the project might default or go through a series of owners, the last of which concludes it’s not feasible.
Much more information is required. The board of supervisors needs to get moving on a comprehensive financial analysis to determine if this is a viable proposal.
Marty Richman is a Hollister resident.
