Pennsylvania vows to recover money from bankrupt Pittsburgh battery maker
The Pennsylvania Department of Community and Economic Development intends to try to recover money Aquion Energy Inc. owes it.
Aquion, a once-promising Pittsburgh battery company with a manufacturing facility in Westmoreland County, filed for bankruptcy this week and lists the state as its top creditor.
“DCED is prepared to take whatever steps are necessary and legal under the bankruptcy code to recover our loans,” spokeswoman Heidi Havens wrote in a statement to the Tribune-Review. “Upon notification that the bankruptcy petition was filed, DCED commenced a comprehensive review of the project to include an evaluation of collateral.”
The loans were secured by collateral, but Havens would not say what that collateral was. Aquion was current on all of its loan payments and made payments as recently as last week. Havens would not say how much was still owed.
Aquion announced March 8 it had filed for Chapter 11 bankruptcy after it failed to raise enough money to keep it running. About 80 percent of its employees were let go. The company shuttered its 335,000-square-foot factory inside the former Sony plant in East Huntingdon. Aquion, headquartered in Lawrenceville, hopes to find a buyer for its assets.
State incentives helped keep Aquion in Western Pennsylvania in 2012 when the company was looking for a place to expand and build a factory. The company received $8.6 million in grants and another $8 million in loans from the state, according to DCED's investment tracker tool. Aquion's bankruptcy filing listed the $8.6 million in grants.
Aquion promised the state it would create 341 jobs on top of the 70 people it already employed and invest at least $64.4 million in private money in the factory. In February 2016, the company reported to the state it had created 50 jobs and secured $108.4 million in private investment. It asked for a two-year extension on its job promise and was granted a one-year extension, DCED reported.
The company's extension expires at the end of the month, when the state will reassess its progress, Havens wrote.
J.J. Abbott, spokesman for Gov. Tom Wolf, said Aquion's bankruptcy is unfortunate but a reminder of why the governor wants tighter accountability on businesses that receive state funding.
“It is critical that they are monitored scrupulously to ensure that every taxpayer dollar is being spent wisely to provide maximum return on investment. Businesses that receive state funding to expand economic opportunity must be held accountable for the use of those dollars,” Abbott wrote to the Tribune-Review.
In his 2017-18 budget proposal, Wolf, who wasn't in office when Aquion received state funding, recommended tighter controls on state funding for economic development projects. Wolf proposed forcing companies that receive state grants to maintain newly created jobs for five years and stay in the state for at least eight years. If a company fails to create the jobs it promised, it will have to repay the grant. If the company moves out of state, it must repay the grant plus a 10 percent penalty.
The Regional Industrial Development Corp. of Southwestern Pennsylvania, Aquion's landlord in East Huntingdon, loaned the company about $1.5 million when it moved in. The company still owes a substantial portion of the loan, said Don Smith, RIDC president. He hopes to recover as much of the outstanding loan as possible through the bankruptcy.
“I still think this was a good bet. It was the right thing for us to do with our mission to create jobs in the region,” Smith said, adding that Aquion employed more than 100 people at the factory.
Smith hopes whoever buys Aquion will choose to restart the battery factory. If not, he suspects the newly rehabbed facility will be in demand in the region.
Smith and several others said they were surprised by Aquion's announcement. The company appeared to be among Pittsburgh's hottest. It raked in awards, high-profile deals, and big name investors, including Bill Gates. The company reported $33 million in investments in April 2016 and last month was named the top funded startup in Pennsylvania by CB Insights, a firm that tracks investments. It raised more than $190 million from investors since its founding in 2009.
Aquion produced a saltwater battery that could be used to store energy from solar panels and other renewable sources. In 2015, Aquion installed then the world's largest battery for a private home at the Hawaiian residence and farm of Earl Bakken, the founder of the medical device giant Medtronic. The company installed large battery banks at Alpha Omega Winery in Napa Valley, Calif., and Stone Edge Farm, a winery in Sonoma, Calif., in 2016.
But the battery business is a battle between Davids and Goliaths where the giants — behemoth firms like Samsung, LG, Panasonic and Tesla — often win, said Ravi Manghani, an energy analyst and consultant at GTM Research.
“It seems like everything is rosy but it's a market that is ultra competitive when it comes to cost,” Manghani said.
Other battery and energy storage companies — A123, Beacon Power, Xtreme Power Inc. and Ener1 — all declared bankruptcy in the last decade but emerged, usually after their assets were acquired by another company.
The giants are producing lithium ion batteries. Smaller startups like Aquion are producing competing batteries with different chemistries at a lower cost. Aquion might have been a low-cost alternative to lithium ion batteries when it was founded in 2009, but in the years since, lithium ion has caught up.
“The prime time has arrived for the battery market but the price point is probably going to be below what Aquion expected it to be at,” said Brad Meikle, an analyst and investor in energy storage for the Minneapolis-based Craig-Hallum Capital Group. “It's unfortunate to see a company die just when their market is really taking off.”
Aaron Aupperlee is a Tribune-Review staff writer. Reach Aupperlee at firstname.lastname@example.org or 412-336-8448.