Finding the Silver Lining in AstroPower’s Bankruptcy

We’ve all watched the trials and tribulations of AstroPower over the past year. While I’ve been worried that an American solar electric company might fold – truly a national tragedy – there remains a chance that GE’s purchase of AstroPower’s assets can be the best thing that has ever happened to the U.S. solar electric industry and U.S. solar electric consumers. It’s odd how things work in bankruptcy, but in this case, you can see the advantages of our capitalistic and legal systems.

RE Insider, February 16, 2004 – AstroPower is reporting US$205 million in assets versus $143.5 million in liabilities to the bankruptcy court. Why did they file when they have such a seemingly positive position? They were probably operating unprofitably for a long time. After they were delisted from the NASDAQ in July 2003 their access to capital was cut off and they had to live on their internal resources and lines of credit. These conditions probably provided insufficient cash to continue to operate. Eventually the secured and trade creditors would have said “no more.” Their reduction of people from about 550 to about 350 helped a lot, but it was too little too late. Filing for bankruptcy now provided a way for GE to rescue the company while its core business was still intact. AstroPower has about 14 to 15 million shares outstanding and last traded at about $0.09 per share. Hypothetically, you might be able to buy the company lock stock and barrel for about $1.2 to $1.4 million, although the Board of Directors are not likely to recommend it to the stock holders and the purchase would be fraught with financial danger. GE’s offer of $15 million to buy “certain assets” translates to about $1.05 per share, not bad relative to $0.09. However, for business and legal reasons, GE is not buying stock and the shareholders probably won’t get anything. AstroPower stockholders are in the soup. While it may be of little solace to the investors, we should all thank them. Their seed capital got AstroPower going and gave the company enough time to commercialize a future energy technology. AstroPower’s unsecured creditors will be lucky to get $0.10 to $0.25 on the dollar. Sorry you guys, but look at it this way. You’ve earned substantial gross margin dollars from AstroPower over the past. This loss may be a hardship for some suppliers and create some collateral damage. It’s tough, but you can take a tax write-off, and if you play your cards right, you’ll have a new customer called GE. That should sound pretty good. Here’s where the silver lining starts to show… AstroPower’s core team is still together and the plant is up and running. Without knowing too many details, AstroPower’s emergency team has done a fantastic job. I’m sure they have been in tough negotiations. They have trimmed a lot of the unneeded overhead, gotten rid of non-performing assets, and unfortunately a lot of people, but in the process made the company look a lot better from the operations side. This is to say they are closer to operating at breakeven. This helped get GE interested and the company should be commended. If the bankruptcy court approves the sale of assets, GE will probably get an almost “turnkey” solar electric operation with some intellectual property and a team with a ton of experience. This platform, when combined with GE’s fantastic brand, excellent management style, financial strength and commitment to renewables, will result in an even better solar electric company, one that can be a major supplier to U.S. and world consumers. I’ll bet the former AstroPower employees that make the new team will enjoy getting a GE paycheck and having GE benefits while they continue their important work on solar electricity. I hope that GE will reverse the trends, grow the business and hire more people. Over the past decades we seem to be getting behind on taking care of ourselves in the U.S. Our energy future needs to be in our control. While the jury is still out, I think GE’s purchase of AstroPower’s assets, if approved, will signal that our capitalistic and legal systems can work, and in this case, put our country in a stronger position. As Bob Maynard says around the office “to the pioneers go the arrows and to the settlers go the land.” My colleagues at Energy Outfitters and myself honor the work that AstroPower accomplished as pioneers. They sweated long and hard to get where they are. We are thankful GE is around to be a settler. Let’s circle the wagons and help GE and AstroPower in every way we can. About the author… Glenn Harris is General Manager, Energy Outfitters.
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