Siemens exported three dozen wind turbines to two Peruvian wind farms in 2014, and the U.S. Export-Import Bank provided $65 million in taxpayer financing, because all of the blades and some of the nacelles (the gear mechanisms inside the towers) were manufactured in the U.S. This subsidy won Ex-Im’s “Deal of the Year” presented this week at Ex-Im’s annual conference.
But the timing of this deal was odd, and it highlights a hole in the arguments made by the agency and its defenders. Here’s the thing: Siemens had already completed the sale to both wind farms, months before Ex-Im approved the loan.
In fact, one of the two wind farms was completed and generating electricity before Ex-Im’s August 2014 approval of the loan. The other wind farm was under construction, and the contract on that Siemens sale had been signed months earlier.
Here’s the timeline:
Siemens announced on Sept. 20, 2014 that it had “received an order from Spanish wind developer Cobra Energia for the supply, delivery and commissioning of a total of 11 wind turbines with a total capacity of 32.1 megawatts.” This was for the Marcona wind farm, in southern Peru.
The Marcona wind farm began operating in April 2014, according to Natixis, the French firm that helped line up all the financing for the two wind farms.
Three months later, on May 2, 2014, Siemens announced the second sale, for the adjacent Tres Hermanas wind farm, adding 25 wind turbines. Construction on that wind farm began in July, according to Energy Monitor Worldwide, a trade publication.
A month later, Ex-Im approved the taxpayer cash to the Spanish developer. At the Aug. 7, 2014, meeting of Ex-Im’s board of directors, the board approved two direct loans — one for each wind farm — worth a combined $65 million, Ex-Im would report in a subsequent press release.
“This financing helps ensure that the turbines helping to power Peru are made here in the U.S. by American workers, rather than in a competing country,” Ex-Im Chairman Fred Hochberg said in the statement.
But the loan came more than a year after Siemens had booked the first sale, four months after Siemens had booked the second sale, after one wind farm was up and spinning, and after the second wind farm had begun construction. How did a loan made after Siemens won the sale ensure that Siemens would win the sale?
Ex-Im spokesman Lawton King sent me the following explanation: “It is not uncommon for project-finance transactions to take up to two or more years after receipt of the application. The Siemens’ deal was in the works for some time.”
Busy with the annual conference, Ex-Im staff was unable to provide me with the timeline of when and who applied for the financing along the way. Siemens has not yet responded to my queries, originally made on Wednesday.
It makes sense that a company might begin a project using bridge financing while project financing is not finalized, or still in the pipeline. It makes sense that a bank might want to finance a project already underway. But Ex-Im isn’t an ordinary bank that goes around looking for profitable deals. It’s supposed to finance deals when that financing makes the difference between a U.S. manufacturer getting or not getting a sale. If the sale is already made without Ex-Im financing, it’s hard to see how this is appropriate use of taxpayer-funded loans.
