ZBB Energy Shareholders Approve Ownership Deal With Chinese Solar Firm
Shareholders of ZBB Energy, a small Milwaukee-area manufacturer of renewable energy storage and power control products, voted to approve a deal with China-based Solar Power Inc. that brings an injection of up to $70 million in capital, new orders for up to $120 million worth of ZBB products, and potential new ownership.
ZBB (NYSE: ZBB) shareholders also voted to change the company’s name to EnSync, which board members believe is “more reflective of our current business, which is no longer singularly focused on zinc bromide battery development and production, but rather the development of solutions for our customers that synchronize energy storage equipment with microgrids and electric utility providers,” board chair Paul Koeppe wrote in a letter to shareholders in May.
ZBB announced Thursday that both measures were approved by 96 percent of the shareholder votes cast. The company had postponed the vote, originally scheduled for June 29, because it failed to achieve a quorum.
As part of the deal with Solar Power Inc. (SPI) announced in April, the Shanghai-based company will purchase $80 to $120 million worth of ZBB products over the next four years. SPI develops, installs, and operates residential and utility solar power projects in China, Japan, Europe, and North America. ZBB plans to supply 40 megawatts-worth of electronics and battery equipment with a minimum of two hours of energy storage capacity, Koeppe wrote in the shareholder letter.
“This first commitment represents only 1.5 percent of the 2.6 [gigawatts] currently in SPI’s announced pipeline,” Koeppe wrote. “As SPI grows, we expect this purchase commitment to grow as well.”
ZBB’s deal with SPI isn’t exclusive, so the company will continue selling to other customers, he added. To that end, the company this week announced a $3 million order from a Hawaiian university.
SPI agreed to purchase 8 million shares of ZBB common stock for $5.3 million and 28,048 preferred shares for $28 million. In addition, it has a warrant to purchase 50 million common shares for $36.7 million in the future.
Those stock purchases are dependent on SPI following through with the purchase of ZBB products. But if all goes according to plan, SPI would end up owning 70 percent of ZBB, according to an SEC filing.
The company’s board and shareholders decided that giving SPI control of the company would be worth it.
ZBB has struggled financially. It posted an $11.9 million net loss in 2013 and an $8.8 million loss last year. In October 2013, the New York Stock Exchange warned ZBB that it could be delisted if it didn’t improve its financial position. A year later, the company said it had regained compliance with listing standards, in part through raising $13.5 million in a public stock offering in August.
ZBB’s stock has traded between 41 cents per share and $1.85 per share over the past year, and the company’s market cap is around $30 million. ZBB’s stock was trading at 77 cents per share on Thursday, the same as Wednesday’s closing price.
The SPI deal could give ZBB the jolt it needs. The company only generates about $8 million in revenue annually, so the four-year, $80 million-plus supply agreement is huge. It also gives ZBB increased access to the Chinese market, where the government is investing heavily in solar energy over the next decade and where much of SPI’s business is concentrated, ZBB said. (ZBB also has a joint venture in China called Meineng Energy.)
ZBB’s board saw the deal as an opportunity to help it make the leap “from development stage to a high-growth manufacturing company,” the SEC filing said. Now, it will be up to ZBB, with the help of its new partner and potential owner, to make good on those plans.