NuScale laying off majority of workers
By Erik Siemers, Business Journal staff writer
Business Journal staff writer
NuScale Power Inc. on Friday expects to lay off a majority of its remaining 70 workers after its hopes for a critical piece of funding fell through.
The Corvallis-based startup, which is developing scalable nuclear reactor technology, is on the hunt for new financial backing after its primary investor’s assets were frozen as part of a federal U.S. Securities & Exchange Commission probe.
A federal judge last month gave a receiver in the case the authority to issue loans to companies, including NuScale, that were expecting payments from the Stamford, Conn.-based Michael Kenwood Group.
But NuScale Chief Financial Officer Bruce Landrey said the receiver on Monday decided not to approve the loans to the company.
NuScale had been hoping to receive $5 million, which Landrey said would have been enough to keep the company going for four to five months, long enough to put together long-term funding and keep its work force employed.
Now that the funding fell through, NuScale — which had already furloughed 30 other workers — will scale down to between 15 and 25 workers, though the exact number hasn’t been determined.
“We will continue with a core group of employees working toward securing both interim financing, long-term financing and continuing progress on our commercialization and licening efforts,” Landrey said.
The SEC claims that Francisco Illarramendi, the Kenwood Group’s majority owner, misappropriated some $53 million from a pair of hedge funds controlled by the Kenwood Group into bank accounts he personally controlled and then made unauthorized investments in long-term private equity deals.
It said Illarramendi invested $23 million in an unnamed West Coast based nuclear energy company that was due a $5 million cash infusion this month to cover operational expenses.
NuScale — which has not been accused of any wrongdoing — has raised $37 million from investors since its founding in 2007 and said the majority has come from the Michael Kenwood Group, which began investing in the company last year.
That left the company hunting for new capital, an effort that thus far has been unsuccessful.
Despite widespread uncertainty in the nuclear industry, Landrey said NuScale’s search for new backers has been unaffected by the recent concerns about nuclear energy resulting from fears in Japan that earthquake-damaged nuclear reactors could face a meltdown.
“We’re getting continued expressions of support from the U.S. governemnt, both Democrats and Republicans in Congress, and the domestic and international marketplace,” Landrey said.
That’s largely, he said, due to NuScale’s technology.
Not only would the NuScale reactors be smaller and scalable, but they would use what Landrey called a “passive safety system.” The technology is designed to cool the reactor using water, but without using mechanical pumps and systems that could break down or prone to failure during a power outage.
“It’s an extremely simple system,” Landrey said.
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