Energy Conversion Devices (Nasdaq:ENER) filed for bankruptcy this morning in the U.S. Bankruptcy Court for the Eastern District of Michigan. ECD says it wants sell through separate transactions its wholly owned operating subsidiary United Solar Ovonic, which had been making and steadily improving the output of solar panels until the business fell apart last fall, as well as other assets, including its minority stake in Ovonyx, a licensor of phase change memory technology used in computers. Even with the sales, ECD’s obligations cannot be met and more than 53,000,000 million shares of its common stock are now effectively worthless, and will be dissolved upon acceptance of the bankruptcy plan, the company said.
ECD said it has received support for its operating and divestiture plan with holders of approximately 70% of the Company’s $263.2 million in outstanding 3% Convertible Senior Notes due 2013. It remains to be seen what the other creditors will do, and if the court accepts the plan.
Yesterday, Energy Conversion Devices sold its majority owned subsidiary Ovonic Battery Company to German BASF Corporation for a gross purchase price of $58 million in cash before transaction fees, minority holdings, working capital and other unspecified adjustments. Ovonic had been for sale since last summer.
Ovonic was the inventor and licensor of nickel-metal hydride (NiMH) rechargeable battery technology, but the cancellation of GM’s EV1, which used the batteries, and the building of a NiMH battery factory in Ohio, which was never reached production, severely hurt the company, which had a record of obtaining research grants and licensing patents, but was ultimately never able to profitably commercialize its advanced technologies. Toyota, the largest global automaker using NiMH batteries in its Prius and other hybrid vehicles had its batteries produced in Japan.
While Ovonic battery was said to be pursuing cathode materials for lithium-ion chemistry batteries, which are the current favored technology for EVs and hybrids, OBC was never able to convert widespread interest in this area to profits, as controversial government grants and subsidies went to other companies.
General Motors received $105 million from the government to produce the Volt, which grew out of the aborted EV1. GM’s battery supplier LG Chem received $151.4 million in stimulus funds to make lithium-ion polymer battery cells for the Volt. Such subsidies will likely be hotly debated for all industries during the election.
United Solar Ovonic is covered under a separate bankruptcy filing During the last year three other U.S. solar panel makers filed for bankruptcy. Evergreen Solar, Spectrawatt Inc., and Solyndra all couldn’t make business plans work in the face of weak demand, declining prices and the uncertain future of government subsidies. Solyndra, of course, became a political nightmare for the Obama Administration since it received a half-billion-dollar loan from the government under failed promises to create ‘green jobs’ and boost exports.
“Our current capital structure and legacy costs are preventing USO from making the investments necessary for the future of the business without restructuring through the bankruptcy process,” said Julian Hawkins, ECD’s President and Chief Executive Officer.
Energy Conversion Devices last posted results of its first quarter of fiscal year 2012, ended September 30, 2011. Total consolidated revenue from continuing operations for the quarter was $22 million compared to $65.3 million in the first quarter of fiscal year 2011, and $70.5 million in the fourth quarter of fiscal year 2011. The company sold 11.4 megawatts of its unique UNI-SOLAR brand solar products in the face of sluggish global demand for solar products and sharp price decreases triggered by government subsidies in Europe and Asia. For the quarter, ECD generated a net loss from continuing operations of $57.5 million, which includes a non-cash impairment charge of $34.3 million. This result compares to a net loss of $15.4 million in the year ago period and $42.8 million in the prior quarter.