|
Mail
Magazine 24...
After
Massive Losses, Stimulus-Backed Company Asks for More Taxpayer Cash
by Lachlan
Markay
April 29, 2012
A
financially troubled green energy company has seen its stock prices
plummet to
below a dollar per share (UPDATE: see below) since receiving a nearly
$250
million federal grant in 2009. The company lost $257.7 million last
year. Two
of its clients make up half of its business, and one is also struggling
financially.
But none of
that has stopped A123 Systems, which manufactures batteries for
electric
vehicles, from applying for another $233 million in federal backing
through the
Energy Department’s Advanced Technology Vehicle Manufacturing program,
according to its latest filing with the Securities and Exchange
Commission.
“We have
made a loan application under the Advanced Technology Vehicles
Manufacturing
Loan Program, or the ATVM Program, to support our continued
manufacturing
expansion,” A123 said in the SEC filing. “Based on the amount of our
grant
award under the DOE Battery Initiative and the guidelines associated
with the
ATVM Program, we believe we will be permitted to borrow up to $233
million under
the ATVM Program.”
It is not
clear that the Energy Department will approve the request. The rule
establishing the ATVM program dictates that loan recipients must be
“financially viable without the receipt of additional Federal funding
associated with the proposed project.”
Whether
A123 meets that qualification is questionable. “Much of our planned
domestic
manufacturing capacity expansion depends on receipt of these funds
[from the
ATVM program] and other incentives,” the company stated in its SEC
filing, “and
the failure to obtain these funds or other incentives could materially
and
adversely affect our ability to expand our manufacturing capacity and
meet
planned production levels.”
The Energy
Department did not return multiple requests for comment on A123’s loan
application. [UPDATE: In an email Friday afternoon, DOE spokesman Bill
Gibbons
said that the Department could not comment on pending loan
applications.]
Even if the
company is eligible for the loan, however, it is in dire financial
straits, and
may be a shaky bet for an administration already plagued by a series of
Solyndra-esque green energy flops.
According
to its SEC filing, A123 is relying not only on further federal funding,
but on
its two largest clients, which together account for half of its
business. One
of those companies, Fisker Automotive, is also financially troubled.
“For the
year ended December 31, 2011,” its filing states, “revenue from our two
largest
customers, Fisker and AES Energy Storage, LLC and its affiliates, or
AES,
represented 26% and 24% of our revenue, respectively.”
Fisker,
which received a $529 million loan through the ATVM program despite
conducting
significant portions of its operations in Finland, delayed production
of one of
its models, and was forced to lay off 65 employees. A pair of U.S.
senators is
investigating DOE’s decision to award its Fisker loan.
The 26
percent of A123’s revenue coming from its relationship with Fisker
increased by
1,300% percent since 2010. “If Fisker is unable to fulfill its
commitment under
the supply agreement,” A123 states, “our revenues could be materially
lower
than our forecasts and we may have under-utilized manufacturing
capacity.”
A123 even
cites a shortfall in orders from Fisker as a cause of its declining
financial
health in 2011. “In November 2011 and again in January 2012, we
announced
revised annual revenue guidance for 2011 due to an unanticipated
reduction in
orders from Fisker for the fourth quarter,” the SEC filing states.
Ali Meyer
contributed to this report.
(UPDATE:
A123 shares rose above a dollar on the news that the company would be
awarded a
sizable Army contract. Developing…)
Source:
blog.heritage.org
Read this
and other articles at Mail Magazine 24
|
