How well did Oregon vet its $5 million in loans to now-bankrupt ReVolt?
By Matthew Kish
ReVolt Technology CEO James McDougall predicted swift growth for his company's battery technology.
How well did Oregon government agencies vet the now-bankrupt company ReVolt Technology before giving it more than $5 million in taxpayer-backed loans?
That's a tough question to answer.
The Business Journal filed public records requests for all ReVolt loan application materials submitted to the state of Oregon, Oregon Department of Energy and Portland Development Commission after the company announced last month it would file bankruptcy and liquidate.
The company received loans from each entity, including $3.4 million from Oregon's Department of Energy, $1.15 million from the Portland Development Commission and $500,000 from the governor's Strategic Reserve Fund. (It also received a $5 million federal grant and Business Energy Tax Credits.)
Each government agency responded with records this week or last.
Under public records law, state agencies can protect trade secrets and other confidential financial information submitted to the state.
Due to worries about its intellectual property leaking, ReVolt also asked officials to sign a non-disclosure agreement that put additional limitations on what information could be disclosed to the public.
Not surprisingly, the information received by the Business Journal is heavily redacted. Since detailed descriptions of the company's technology and most of its financial information – including its balance sheet — are redacted, it's difficult to determine whether the company presented a good case for more than $5 million in taxpayer subsidies.
A confidential August 2010 memo between ReVolt and the Oregon Department of Energy contains the only sales forecast.
In the document, signed by ReVolt CEO James McDougall, the company predicted it would sell 5,000 batteries per year by 2013. At $5,000 each, the company predicted 2013 revenue of $25 million.
Without more detail about ReVolt's product or business plan, it's tough to judge whether that sales projection was realistic.
Dave Hurst, a senior analyst with Pike Research, previously told Sustainable Business Oregon that the zinc-air battery technology being developed by ReVolt wouldn't be viable "in the first part of this decade."
The Portland Development Commission's Loan Review Committee characterized its investment in ReVolt as "high risk" after reviewing the company's loan application.
"That's why you have a diverse portfolio," said agency spokesman Shawn Uhlman. "You've got some that are much more conservative, and again, this one we identified as high risk."
Knowing that the investment entailed risk, the state and the Portland Development Commission built safeguards into the loans in order to limit losses.
The Department of Energy and the Portland Development Commission reimbursed ReVolt after it spent its own money and submitted qualifying receipts.
That avoided the misuse of taxpayer funds and limited the state's exposure if the company failed.
ReVolt qualified for a $3.4 million loan from the Department of Energy, but only $2 million went out the door before the company abruptly closed.
Similarly, ReVolt only drew down $1 million of the $1.15 million loan it was given by the Portland Development Commission.
That means of the more than $5 million in taxpayer-backed loans promised to ReVolt, only $3.5 million ended up in the company's bank account.
While it's impossible to predict what creditors will recover at such an early stage of a bankruptcy, the various government agencies required $4.5 million in collateral, mostly equipment at ReVolt's headquarters and manufacturing plant near Portland International Airport.
"We are collateralized pretty good in this loan," said Anthony Buckley, the Oregon Department of Energy's Energy Development Services Division administrator. "A lot of the equipment was used as collateral."
Buckley said the state thoroughly underwrote the loan in order to identify risks.
"At the time of underwriting, both parties showed evidence of being able to pay back the loan," he said.
He also said the loan came from a program - the Small Scale Energy Loan Program — that's paid dividends over its 30-year history.
"Over 30 years it's brought a tremendous amount of value to the state and to the citizens of Oregon," he said. "Over 30 years it's made close to $880 million in loans. Only recently have we experienced a few defaults and a lot of that is rooted in the current economy."
Uhlman said support for companies like ReVolt is critical to state and local plans for becoming a hub for green business.
"While (ReVolt's) technology is still pretty new and still pretty visionary, when we look at what we're trying to achieve with the clean-tech sector, you need that balance."
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