It was with the greatest fanfare last month that Pennsylvania Gov. Josh Shapiro announced a nearly $353 million “investment” by EOS Energy Enterprises to not only relocate the headquarters of its zinc bromine-based battery storage systems to Pittsburgh from New Jersey but to create 735 new jobs locally while retaining 265 others.
Of that “investment,” $22 million is coming from Keystone State taxpayers in the form of grants and capital funding.
The canned accolades were quick to follow.
It’s “a move that cements Pennsylvania’s status as a national hub for clean energy manufacturing and innovation,” Shapiro said.
EOS CEO Joe Mastrangelo praised the “strong public-private partnership,” calling it as important to the project as are “natural resources and technology innovations.”
Rick Siger, secretary of the state Department of Community and Economic Development, said “bold investments like this one” will expand “opportunity for people across Western Pennsylvania.”
Allegheny County Executive Sara Innamorato called Eos Energy’s expansion in Allegheny County (which is chipping in $2 million) “a testament to our region’s collaborative spirit and commitment to shared prosperity.”
Stefani Pashman, CEO of the Allegheny Conference on Community Development, said “Eos’ move will not only strengthen our region’s position as a hub for advanced energy storage, but it will also attract new suppliers, partners and innovators to the Pittsburgh region.”
And, of course, organized labor loves the deal because EOS workers last year voted to join the United Steelworkers Union (which you can bet will raise the cost to EOS and taxpayers to do business).
All accolades aside, we are forced to ask a number of questions:
If EOS Energy’s zinc bromine-based battery storage systems are the coming be-all and end-all to power-storing systems, why is there a need for taxpayers to have skin in the game?
If the product is so good, shouldn’t it be a slam-dunk for EOS to make a tidy profit off it as a reward for risking its capital and its capital alone?
And what kind due diligence did our government almsgivers perform to affirm EOS’ claims?
We are forced to ask those questions, especially the third, in light of a Post-Gazette story last week that raises doubts about EOS as a company and the very zinc bromide battery technology on which it is hanging its, and taxapayers’, fortunes.
From the P-G article:
“EOS sees a large market developing for longer-duration batteries and says that potential data center projects now account for 22 percent of the company’s [orders] pipeline, which EOS estimates is an opportunity universe of $22.6 billion. The company said it had $644.4 million [worth] of orders in its backlog as of Sept. 30.
“How the company calculates these numbers — and what it considers possible, probable and contracted — has been the subject of skepticism from short sellers.
“A report published by Fuzzy Panda Research [the week of Oct. 26] charged that much of that backlog is ‘fictitious,’ with potential projects entered but never culled from the list when they don’t materialize.”
To its credit, and as a matter of fairness, the P-G notes that “short sellers are investors who make financial bets that a company’s stock price will drop and sometimes publicize what they see as the company’s failings to hasten that drop.”
And EOS CEO Mastrangelo told the P-G “We are certain that the allegations … are without any merit.”
But there are other concerns.
As reported by Investing.com, the same Fuzzy Panda Research report claims “EOS has hidden multiple instances of thermal events resulting in leaks of hydrogen bromide gas, which Fuzzy Panda describes as ‘deadly.’”
And, “According to the short-seller, former executives revealed the company maintains three different sets of financial projections that vary significantly depending on the audience.”
“Most damaging to EOS’ prospects,” Investing.com says, is that “Fuzzy Panda alleges the company provided ‘false and misleading’ financial projections to the [U.S. Department of Energy) to secure [a prior and separate] loan approval.
“The report suggests this could constitute a default on loan covenants, potentially forcing immediate repayment of approximately $90.9 million in debt, representing about half of the company’s cash reserves,” Investing.com says.
Additionally, questions have been raised about EOS battery customers reporting “significant performance issues” and the very economic efficacy of EOS batteries.
So, and again, were government officials — federal, state and county — aware of these concerns before they awarded millions of taxpayer dollars to EOS?
It’s not as if there were no concerns in other quarters prior to the Fuzzy Panda report.
If government officials were not aware, what was the due diligence process?
And can they categorically refute the Fuzzy Panda contentions?
The fact of the matter is that a simple Google search produces myriad financial and other outlets raising what appear to be credible question about EOS – and not just a short-seller that some might allege is only serving itself.
Sound public policy now demands that county, state and federal officials take another look at EOS. If a thorough, and independent, review finds nothing amiss, fine.
Although we will continue to question why taxpayers yet again are being turned into the venture capitalists they never should be.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
