Ecotality Warns of Financial Troubles, Hires Restructuring Advisor
Ecotality, the company that received $115 million in U.S. Department of Energy funds in 2009 to build electric car charging infrastructure, is facing dire financial challenges. The company today filed a Form 8-K disclosure that warned of recent developments that could “significantly impact its ability to meet its ongoing obligations and to fund anticipated operating losses.”
The company's Board of Directors retained FTI Consulting, as a restructuring advisor. The Wall Street Journal reported that the company is considering restructuring or a sale to address its problems. PluginCars.com this morning asked Joshua Katz, Ecotality’s chief marketing officer, what the best scenario for a company turnaround might be. “That’s a tough one,” he said. “Honestly, I can’t answer that at this time.”
Katz sought to reassure current users of the Blink Network. “At this point, we continue to operate the Blink Network and chargers,” he said. “Until further notice, we will continue to meet the needs of EV drivers during this challenging time.”
The company indicated that it was not able to make a transition from being supported by the DOE's EV Project, to a profitable independent company. “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,” states the Form 8-K, a document used to notify investors of any material event that is important to shareholders or the United States Securities and Exchange Commission. Ecotality is traded on the NASDAQ under the symbol ECTY.
The Form 8-K states: “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.”
With the support of the Department Energy, Ecotality has to date installed more than 13,000 Level 2 residential and commercial charging stations, and approximately 100 DC Quick Chargers.
Katz declined to clarify the level of threat to the company—and the likelihood of bankruptcy. Instead, he said that observers should “draw their own conclusion.” He said, “It’s in the 8k. That’s where we’re at.”
The Form-8k listed these problems:
- The company has been unable to obtain additional financing.
- In an August 8 letter, the DOE said it was suspending all payments under the EV Project to Ecotality, and told the company that is not authorized to incur any additional costs under the DOE award.
- The company has agreed to pay certain employees and contractors approximately $855,000—in consideration for a release by such employees and contractors of any and all liability with respect to any wage related matters.
- The company's will not introduce its planned new product offering, its Minit Charger industrial line, and therefore there will be no revenues from the product in 2013.
In the 8-K, the company also acknowledged technical problems with its equipment, including overheating when used with some cars. From the earliest period of Ecotality’s participation in the EV Project, its effort has been plagued by delays, miscommunication, technical glitches, and customer dissatisfaction. As indicated in the PluginCars.com's guide to buying a home EV charger, the Blink charger uses a fancy design, but is considered more expensive and less reliable than competing models.
Blink officials have previously placed blame on lackluster electric car sales for its difficulties.
Yet, Ecotality has been able to deploy one of the largest networks of public and residential electric car charging equipment. Tens of thousands of electric car drivers rely on those chargers to fuel their cars. It's too early to know the potential adverse impact on those drivers, and the EV market, if the Blink chargers were to cease operation, even if temporarily.
“The needs of electric car drivers are paramount to us,” said Katz. “I urge drivers to visit a Blink charger today, to show your support for the growth of EV infrastructure.”
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