MacIver News Service | October 31, 2012
[Madison, Wisc...] With President Obama set to return to the Badger State for campaign stops in Green Bay and Milwaukee during the next three days, it is worth examining how one of his favorite Wisconsin companies has fared since his visit there in 2010.
It is no secret that Obama Administration policies over the past four years have favored green energy projects that have experienced massive failures. Earlier this month, A123--an electric car battery manufacturer--joined a long list of the president's favored companies that have filed for bankruptcy.
Meanwhile, a Wisconsin company that has seen its share of the spotlight continues to experience ups and downs.
When President Obama visited ZBB Energy in Menomonee Falls on August 16, 2010, the plant had already received $16 million in tax credits and loans.
"Now I'll be honest with you, there's going to be a big debate about where we go. There are folks in Washington right now who think we should abandon our efforts to support clean energy. They've made the political calculation that it's better to stand on the sidelines than work as a team to help American businesses and American workers," the president said at the plant.
But, after pouring billions of taxpayer dollars into the green energy industry, government support has proven to be no substitute for the free market. According to the Heritage Foundation, 19 green energy companies that have received a total of $1.6 billion in taxpayer funded federal support have filed for bankruptcy. Another 15 companies are listed as faltering.
ZBB Energy is not on the Heritage list, but the company has gone through some struggles even though it seemingly holds a lucrative niche in the green energy industry.
Once electricity is generated, it has to go somewhere. Currently, the two options are consumers or nowhere at all. According to company documents and filings, ZBB Energy is attempting to introduce a third option by developing batteries that can store electricity on an industrial scale. Additionally, ZBB has created a control system that can coordinate the batteries with power sources and consumer needs. The Menomonee Falls company is the only manufacturer certified to implement this system.
The new technology is especially important for renewable energy since it is impossible to control when the sun or wind will facilitate energy production. With wind farms spread across the country producing a power generation capacity of 50,000 megawatts, ZBB's business should be booming--but it isn't.
In its September 19, 2012 Securities and Exchange Commission (SEC) Form 10-K filing that's required for all publicly traded companies, ZBB was frank.
"We cannot predict when we will operate profitably, if ever," the report reads. "Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future."
The last time MNS examined ZBB Energy was nine months ago on January 16, 2012. Its stock then was selling for 81 cents per share. On October 15, 2012, ZBB's stock closed at 28 cents per share. When the company's stock was first offered publicly, the price was $5.80 per share.
This year, the company had revenues of $4.8 million and net losses of $13.7 million. Its accumulated deficit now sits at $69 million.
"We may need additional financing to maintain and expand our business, and such financing may not be available on favorable terms, if at all. In the event that we issue any additional equity securities, investors' interests in the Company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold," according to the SEC report.
Despite the fact that ZBB Energy is, to its knowledge, the only company certified to implement battery storage into the grid, the report goes on to state that they are still being outperformed by their competitors.
"Even with these advantages, the market for renewable energy products and services is intensely competitive and continually impacted by evolving industry standards, rapid price changes and product obsolescence," the report reads. "Our competitors include many domestic and foreign companies, most of which have substantially greater financial, marketing, personnel and other resources than we do."
Following the president's visit to ZBB in 2010, the Milwaukee Journal Sentinel reported:
"These are important investments. The fact that they've been championed by the administration and the government is an intelligent investment on behalf of the country," said Richard Soultanian, co-president of NUS Consulting Group. "These are investments that we as energy consultants see being made all over the world."
Ashe Schow, of the Heritage Foundation, disagrees.
"When the government plays venture capitalist, it tends to reward companies that are connected to the policymakers themselves or because it sounds nice to 'invest' in green energy," he wrote. "Venture capitalist firms exist for this very reason, and they choose what to invest in by looking at companies' business models and deciding if they are worthy."
The MacIver News Service spoke with a representative of ZBB Energy earlier this month in an attempt to reach a company spokesperson. No one from the company who is authorized to speak on the record has responded to MNS's inquiries.