February 3, 2012
By: Brenna Working
Evergreen Energy Inc., a developer of alternative fuel sources, has filed for Chapter 7 bankruptcy protection in U.S. District Court in Delaware, according to Bloomberg News. The company’s Chapter 7 petition marks the third prominent bankruptcy of a green energy firm in recent months.
Sources note that Evergreen’s bankruptcy decision came after the company was unable to raise sufficient money to fund its ongoing research and development projects. The Securities and Exchange Commission (SEC) reports that the inability to get sufficient funding became apparent after a partner of Evergreen’s in China signed an agreement in December 2011 indicating that both it and Evergreen had to raise between $40 and $50 million dollars.
The money was to go toward the construction of what sources are calling a “K-fuel facility” in China, per an agreement with a coalmining operative signed by the Chinese partner.
At the time of its Chapter 7 filing, Evergreen Energy reported $25 million in debts and $240 million in assets.
While the disparity between Evergreen’s reported debts and assets may seem surprising at first, its decision to choose Chapter 7 bankruptcy points to company leaders’ foresight regarding its future prospects.
Because Evergreen was unable to find $40 to $50 million in financing for its immediate needs, leaders likely recognized that its business model was not investor-friendly and thus unlikely to attract future cash injections. The decision to file for bankruptcy shows prudence on the company’s part: if liquidation sales go well, it should be able to repay its creditors in full and wind down the company gracefully.
Other alternative energy companies have not been so lucky: Fremont, California-based solar panel maker Solyndra filed for bankruptcy after receiving a $535 million loan guaranteed by the U.S. government. It listed $867.1 million in debts to only $854.1 million in assets when it filed.
Beacon, located in Tyngsboro, Massachusetts, filed for Chapter 11 bankruptcy in October with $72 million in debt and only $47 million in assets. These three bankruptcy filings raise serious questions about the viability of the green and alternative fuel industries in the United States.
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