A Global Battery Firm Is Going Out of Business, Citing Covid-19

Source: By David R Baker, Bloomberg • Posted: Monday, June 15, 2020

The Massachusetts-based company, which has long struggled to turn a profit, told customers it would begin an “orderly wind down,” according to a letter Thursday seen by Bloomberg. It will finish projects under development but not seek new business.

NEC’s parent, the Japanese conglomerate NEC Corp., had been trying to sell the business. But the pandemic and its economic upheaval made finding a buyer difficult, said Steve Fludder, who has resigned as chief executive officer.

“That process was indeed impacted by the events that have impacted everything in the world,” Fludder said in an interview.

NEC was among a relatively small clutch of companies in the large-scale battery industry with a global reach. But many of the businesses that need big batteries, such as developers of solar plants and wind farms, have been building up their own capacity to install them. Integrators such as NEC have been forced to find buyers or partners to survive, said Logan Goldie-Scot, head of clean-power research at BloombergNEF.

“The abrupt demise of NEC Energy Solutions is tied to the growing importance and consolidation of energy storage as a technology,” he wrote in a research note Friday. “It is no longer a niche, standalone product.”

NEC’s contracts for battery maintenance expire in 2030, at which point it will formally close, a spokesman for the parent corporation in Tokyo said.

Plunging prices

Plunging prices for the batteries have put pressure on profit margins, even as bigger energy companies such as Engie SA and Wartsila Oyj jump into the business.

“Other large energy players are really getting into this space and putting a lot of money into it, seeing the long term potential,” said Julian Jansen, who leads research on stationary energy storage for IHS Markit. “The storage industry is really in the starting blocks to ramp up.”

NEC Energy Solutions has been unprofitable since it was established in 2014, the spokesman in Tokyo said. Despite the growing market for batteries, the intense price competition isn’t expected to change, he added.

Fludder, who was replaced as chief executive officer by Mark Lymbery, said NEC Energy Solutions was close to break-even and growing quickly, with more than 1 gigawatts of projects installed.

But its parent company no longer makes batteries, Fludder said. The firm’s team and intellectual property remain strong, he said, adding that it’s possible new investors or owners could still emerge.

A majority of employees will stay with the company long enough to complete its existing projects. Fludder said he’ll remain with the company in a transition role at least through the end of the month.

— With assistance by Mark Chediak, and Aya Takada