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The U.S. Department of Energy (DOE) has suspended stimulus payments to a major green energy company after the company said it is having trouble finding financing and may have to declare bankruptcy.
ECOtality admitted that possibility in a filing with the Securities and Exchange Commission (SEC) last week. Lackluster sales caused revenues to fall significantly short of its expenses, the company said.
“Although the company is currently exploring options for a restructuring or sale of the entire business and/or assets of the company, the company may need to file a petition commencing a case under the United States Bankruptcy Code as part of any such process or otherwise in the very near future,” ECOtality said in its SEC filing.
ECOtality has received more than $100 million in federal funds, the bulk of which came in a $99.8 million stimulus award for the construction of its electric vehicle charging stations.
The company continued receiving federal funds even as it came under federal investigation for insider trading. Last week’s SEC filing revealed that it has also been under investigation by the Department of Labor for alleged violations of the Fair Labor Standards Act and the Davis-Bacon Act.
“The company has agreed to pay certain employees and contractors identified by the company and the DOL back wages and liquidated damages in an aggregate total amount of approximately $855,000,” the filing revealed.
Those payments contributed to its financial shortfall during the first half of the year, the filing said.
Observers say the company’s business model is explicitly geared towards currying political favor in an effort to obtain taxpayer funds. It recently elected former Energy Secretary Steven Chu’s chief of staff to its board.
DOE’s inspector general recently faulted poor demand for its products for numerous problems with its federal award under DOE’s EV Project.
Its SEC filing attributes revenue shortfalls to “the company’s failure to attain sales volumes of its commercial Electric Vehicle Service Equipment (‘EVSE’) sufficient to support the company’s operations in the second half of 2013.”
Other SEC filings have made clear that the company remains highly dependent on continued federal funding. Recognizing that fact, it unsuccessfully attempted to make its charging stations independently viable.
“As cash flows from the EV Project declined, it was essential that the company transition from subsidized installations of EVSEs under the EV Project to regular commercial sales and installations,” the SEC filing explains.
“At this time, neither the company’s direct sales force nor the independent dealers have generated sales volumes of its commercial EVSE products sufficient, in combination with other sources of revenue, to support the company’s operations in the second half of 2013,” the filing concluded.
As a result, and due to the company’s apparent inability to find additional private financing, it is now considering filing for bankruptcy protection.
ECOtality said it has hired restructuring adviser FTI Consulting to help find financing for the company, “execute profitability improvement alternatives,” and potentially manage the sale of the company or its assets.
DOE announced last week in response to ECOtality’s inability to secure financing that it will suspend EV Project payments to the company “while it investigates the situation and determines whether the award should continue.”
ECOtality did not respond to a request for comment.