A Delaware bankruptcy judge on Tuesday approved a private equity firm's $30 million offer for an alternative energy company that failed despite a $39 million government loan.
Rockland Capital was the winning bidder at an auction last week for assets of Beacon Power Corp., which makes flywheel energy storage systems that keep power frequency steady on electrical grids.
Rockland's offer for Beacon's assets, including a 20-megawatt flywheel energy storage plant in New York, combined $5.5 million in cash with a promissory note of $25 million payable to the Department of Energy.
The Energy Department also is slated to receive about $1 million in cash from the sale, along with about $2 million in unused cash collateral that will revert from Beacon to DOE, Beacon attorney William Baldiga said after Tuesday's court hearing.
DOE spokesman Damien LaVera said the total recovery for federal taxpayers will amount to about 70 percent of their investment.
"The department is pleased that this agreement improves the prospect of recovering taxpayer funds," he said.
Baldiga told Judge Kevin Carey that it's still unclear whether Beacon's general unsecured creditors, including trade creditors owed about $3 million, will recover any money. He also noted that the deal cannot close without approval from the Federal Energy Regulatory Commission, which Baldiga said should not be an issue.
"We've already had very positive initial discussions with FERC and we have every reason to expect that we will have that approval within 30 days or so," he told Carey.
Pending final FERC approval, Rockland will be involved in Beacon's day-to-day operations and assume operating costs going forward at its own risk, Baldiga said.
Robert Burns, an attorney for Rockland, noted that the firm specializes in energy-related investments and is committed to Beacon, which he described as "a strategic asset."
"They do this for a living, so this is not a purely financial investment for a fund that has 30 different types of businesses," Burns said.
Beacon, based in Tyngsboro, Mass., blamed its bankruptcy filing on the political fallout involving Solyndra Inc., a California solar energy company that sought bankruptcy protection after receiving a loan of more than $500 million from the Obama administration.
"In that political environment, the loan officers found it very difficult to make decisions," said Beacon CEO F. William Capp, who plans to stay with the reorganized company.
Beacon drew down $39.1 million from a $43 million DOE loan offer to a Beacon subsidiary for construction of the 200-flywheel facility in Stephentown, N.Y., outside Albany.
The company also was awarded a $24 million Smart Grid stimulus grant in 2009 to build a similar facility in Hazle Township, Pa., with Pennsylvania kicking in an additional grant of $5 million. Capp said plans for Pennsylvania facility are still on track.
Beacon also received a $4.6 million loan from Massachusetts in 2008 for expansion of its Tyngsboro facility. As part of the purchase by Rockland Capital, the Massachusetts Development Finance Agency, which has a secured claim of about $3.3 million on the balance of its loan, agreed to settle its claim for $750,000.
"They wanted to do what they could to keep those jobs in the state, and we're very appreciative of that," said Capp, noting that Rockland plans to keep most of the current Beacon workforce of about 40 employees, almost all of them based in Tyngsboro.