President Obama kicked off a five-state campaign swing yesterday with a stop at a "clean energy" plant in Menomonee Falls, Wisconsin. As it happens, Mr. Obama couldn't have chosen a better company to demonstrate the risks that taxpayers are taking with their billions in green stimulus investment.
The White House press corps has been dragged to so many of these energy events that it has lost interest in looking at the companies it visits. But the case of ZBB Energy is worth a closer look. Mr. Obama praised it for "pointing the country toward a brighter economic future," but we'll let readers decide if they'd write the same checks if they were investing their own money.
ZBB has been around for more than a decade, developing batteries and equipment to store energy from wind turbines and solar cells. More efficient and long-lasting storage devices have long been the Holy Grail of renewable energy, since they would allow operators to store intermittent wind and solar energy for later use. A technological breakthrough would be a great achievement, but the problem is that the effort has proven to be both difficult and costly.
That hasn't stopped the Obama Administration, which has been investing willy-nilly in the commercial battery industry. And so last January, when the Department of Energy announced $2.3 billion in "clean energy manufacturing tax credits," ZBB was one of 183 recipients—collecting $14 million.
We wonder who in government looked at ZBB's filings with the Securities and Exchange Commission. Since going public in June of 2007, ZBB has been hemorrhaging money. The firm lost $4.9 million in fiscal 2008 and $5.5 million in fiscal 2009. In its most recent filing, in May, it said it had lost $6.9 million for the first nine months of its current fiscal year. It explained it had a "cumulative deficit" of $44.1 million and informed shareholders that it "anticipates incurring continuing losses." It acknowledged that its ability to continue as a "going concern" was predicated on its ability to drum up additional funds.
In March the company engaged in various stock transactions—including a private placement to the company's directors—to raise some $1.9 million. It obtained a $1.3 million loan from the federal stimulus program and borrowed $1.5 million more from Investors Bank. In June it announced a debt agreement, which would allow it to tap a further $10 million.
Meanwhile, a review by the company's audit committee last fall discovered that ZBB's former CEO had been wrongly compensated as both an employee and an independent contractor, and that the company had failed to withhold his proper taxes. He stepped down, and the management team was reshuffled. ZBB was also forced to restate its financial results after a separate audit committee review found the company had recognized revenue from a contract in the wrong quarter. (Continues here)