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Smith Electric Vehicles secures new strategic investor and battery supplier; production to resume in Kansas City in mid-2014

13 May 2014

Smith Electric Vehicles (SEV) has secured a $42-million commitment from Li-ion battery developer and manufacturer Sinopoly Battery Limited for a conditional subscription of Series AA convertible promissory notes, Series E preferred stock and common stock of post-listing of SEV in the amounts of US$2 million, US$10 million and US$30 million, respectively.

The $42-million investment will position Sinopoly as a strategic shareholder in Smith Electric. Under the agreement, Sinopoly will become Smith Electric’s exclusive supplier for batteries in vehicle applications that are compatible with Smith Electric’s platforms and customer requirements. Sinopoly will also become a preferred supplier for certain electric vehicle components that can be manufactured in its Hangzhou facility. The first $2 million in funding closed Monday, and the remainder will be invested in two tranches pending milestones to be achieved by both companies in the coming months.

Upon the completion of the funding, Sinopoly is estimated to be the single largest shareholder of SEV, holding no less than 19% equity interest. Sinopoly is entitled to appoint one director in SEV after the completion of the listing.

Smith Electric will resume production in its Kansas City, Missouri, facility in mid-summer 2014. The company said that the suspension of production in the fourth quarter of 2013 was in order to transition its supply chain to Tier 1 suppliers, enabling Smith Electric to produce its vehicles at a lower cost.

Sinopoly has Li-ion battery production bases in Jilin and Tianjin. The total designed annual battery production capacity of the Jilin production base is 120 million Ah. The current designed annual battery production capacity of the Tianjin production base is 130 million Ah. A maximum of 1.5 billion to 2.0 billion Ah annual battery production capacity facilities can be built at the Tianjin production site, which will be one of the group’s core production bases in the future.

Sinopoly’s investment in Smith represents an important and strategic advance step in establishing Sinopoly as a significant integrated player in the EV industry. The combined expertise of Smith and Sinopoly, which will adopt the name of FDG Electric Vehicles Limited shortly, along with the macro-subsidy policy for alternative energy vehicles, uniquely positions us to capitalize on the rapidly growing commercial EV market in China and the US.

—Cao Zhong, the chairman and executive director of Sinopoly Battery

Sinopoly’s investment in Smith Electric Vehicles marks an important milestone in recapitalizing and restructuring the company in preparation for the public market. This agreement underscores Sinopoly's institutional understanding of the global electric vehicle industry and the company's commitment to working with Smith Electric to create a major player in the market."

—Charles Gassenheimer, chairman of the board of Smith Electric Vehicles

Gassenheimer, the former CEO of Li-ion battery company Ener 1, was appointed chairman of Smith Electric Vehicles in April 2014.

May 13, 2014 in Batteries, Electric (Battery) | Permalink | Comments (14) | TrackBack (0)

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This is all very good - Smith makes urban delivery vehicles which, as many people have pointed out, is a perfect application for electrification.

The faster we electrify urban delivery and waste removal, the better, especially in highly polluted cities.

Once the EV fleet is big enough to do some significant overnight load-levelling (trough-filling), the case for more nuclear energy will be plain.  Nuclear is not only free of criteria emissions, but essentially all GHGs as well.

NPPs are OK except for:

1) the very high total cost currently reaching between $0.16 and $0.20/kWh, i.e = close to 2X wind or solar with storage. CPPs and NGPPs are cheaper yet but pollute more.

2) poor public acceptance and perceived lack of safety and security.

3) the very long approval, construction and commissioning time (10+ years). i.e. = close to 5X wind or solar and up to 10X CPPs and NGPPs.

4) Very high ongoing maintenance cost with highly specialised personnel and very expensive replacement parts.

5. Very high overhaul cost.

6. Extremely long, difficult and high shut down cost.

NB: Even China had to scale down its NPPs program due to above causes and look at Solar and Wind as possible alternatives.

Harvey:
China briefly reduced its schedule to reassess after Fukushima, and is now back on track, with 88GWe planned by 2020.
The rest of your stuff is about as well informed.

Production volumes in amp hours is meaningless. How about kWh please? Or perhaps giga-joules, since no one can keep kW and kWh straight?

Does the name "Sinopoly" imply they produce lithium polymer batteries?

DM. Seems to be much less than the 120+ large NPPs (for a total of over 160 GWe) originially planned by China?

Worldwide, it seems that as many NPPs are getting shut down (temporarily or permanently) as new ones are being built.

As the existing NPPs are getting older and require more and more maintenance, average production may drop from about 93% to about 83% in another 15 years or so.

Sorry, but the world has not known the expected NPP boom. Will China rectify the down slide in the next 6 years and build 88 new facilities by 2020. One can doubt it?

I thought Smith Electric died a quiet death a year ago.

Smith received around $30M in “Stimulus” money in 2010, and announced orders for something like 500 trucks. They filed an S-1 back in Nov of 2011 looking for $76M. Despite the better part of a year trying to drum up interest, not enough serious money showed up and they withdrew the IPO following Sept. Then last month they said meh, never mind we’re halting production.

It’s a really crummy business and at least in the last 7 years or so has never made money. You can still access the S-1 on sec.gov and see how feeble it was. Sinopoly (yet ANOTHER Chinese LiFePO manufacturer) apparently has the cash to bail out Smiths (though I can’t understand why they didn’t wait for a BK --- $42M is too much).

Commercial truck customers are not discretionary spenders like me or other EV nerds. They are also not like municipal transport authorities funded primarily by operating subsidies. A BE Truck has to make financial sense to be purchased in anything beyond symbolic ("look how Green we are at Joe's trucking") quantities. And for the foreseeable future they don’t.

Nobody is making money building and selling E-trucks. Even Smith’s prospectus forecast only a 3% CAGR in the near term. Their latest buyer will regret this.

Davemart - your statement may or may not be accurate, but it is meaningless. China may put up it's money to build power plants, but they also have built cities that stand empty. The only way the US will build NPPs is the same -- if the Government guarantees 100% of the loans, thus taking 100% of the risk so investors don't have to. If investors take on the risk, solar and wind will win along with CPP and NGPP.

If you can show me an NPPs being built with private capital, I may listen to your arguments. Otherwise, they are meaningless.

Little large hydro power has been built by private capital in the US or elsewhere. If the subsidies and government regulations requiring wind power went away there would be no more wind farms built. The cost of storing wind energy till it is needed or providing backup with fossil fuels is very costly and windturbines produce only about 25 percent of their rated electricity over the years. The only way ethanol production from maize stays around is subsidies. Most people have no idea that they are already naturally radioactive so the anti nuclear folks including the oil producers are able to scare most of the people into believing that any and all radioactivity is to much, but forget to tell people that all the best foods are radioactive naturally as is every cell in every living thing including plants and people. If the people stayed put in the area near Fukishima not one person would have died from radioactive exposure during the last years since but several have died in automobile accidents. TEPCO had their big expensive battery installation at a wind power plant instead of at the reactors where it well might have saved them. They also ignored changes that their engineers had invented which would have cooled the reactors without large amounts of electricity. Regulations forced upon the nuclear power plants just out of fear have raised the costs. CANDU reactors are very reliable and can be built in a short time and can use as fuel all used fuel rods from US, UK, France, Japan, Russia, and China and others. The US produces a lot of used fuel rods but no actual fuel rod waste, but the government will not allow their use in CANDU or other heavy water reactors. Any Plutonium can be totally destroyed by using it in thorium based CANDU reactors. The present large reactors proposed for construction are a waste of money compared to the CANDU reactors but every country must have its own brand. China built two CANDU reactors on schedule and under budget but Russia underbid future ones just to get the business which is of course more expensive now and much delayed. The US government required that Japan evacuate large areas of its own population based on false fears and beliefs. Yes Chernobyl exposed people to radiation but not one person of the general population died within months of radiation and only about 50 people who were ordered to secure the reactor died. Many coal mines have had more deaths. Simply turning off diesel generators during the Tsunami may have worked to save them, but multiple sets of diesel generators can make all reactors in Japan safe from the failure of Fukushima; better yet use many Capstone turbines always running in an enclosed building. People will vote and demonstrate against nuclear power and text or talk on cell phones whilst driving. If the reactor had been built below sea level the ocean could have cooled it and radio active water would not have likely flowed back into the ocean. It is clear that Korea should build many more reactors and build undersea cables to japan for great income. All people against or for Nuclear power plants should read the book "Power to Save the World" All energy is nuclear energy and the big reactor in the sky, SOL, kills more people every year than even automobiles. ..HG..

Herman
'It’s a really crummy business and at least in the last 7 years or so has never made money.'
Well to have survived the previous 73 years of their history I suppose them must have made money before then.

Investment in U.S. business does not happen unless it is more profitable than investments in other parts of the world. China decided to go big in solar, now dominates the market. If we wait for the private sector only, other countries will pass us by.

Money has no border nor allegiance.

Yes, people with $$$$$ to invest will look for places with the best profit margin potential. Since the world economy has been moving to Asia for the last 20+ years, many $$$$B from EU and USA have moved with it.

By 2030 or so, two of the world largest economies (with 3+B people) may be located in Asia and their local market may be larger than EU's and USA's combined, as it was 2000+ years ago.

Thomas, I am aware of their storied history and have seen their trucks running in the Mother Country. But their prospectus reveals a no-growth, debt-laden non-profit looking for investors in recent years. Since Tanfield has owned Smiths for quite some time, we can't know from here if in fact SEV has been a weak sister for many years, carried by the Parent company as an affectation of management.

In any case Tanfield still owns a significant portion of SEV, and is not yet bought into the Sinopoly proposal:

"The board of Tanfield believes there is still a very high level of risk that the planned listing process outlined by the Smith management will not be successful. Part of the process requires the restructuring of the capital structure of Smith and the approval of a number of significant investors. These approvals may not be granted.

“As indicated in Tanfield’s investment update of 14 March 2014 there will be a marked dilution to the ultimate holding by Tanfield in its Smith investment and therefore in the ultimate value to Tanfield shareholders.”

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