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Published: Sunday, 6/30/2013 - Updated: 1 year ago

Solar-panel company on verge of end

Willard & Kelsey in Perrysburg contends big order could wipe out troubled times

BY KRIS TURNER
BLADE BUSINESS WRITER
Jim Appold, an original and main investor in the Willard & Kelsey Solar Group, has kept the business afloat using his personal funds.  Jim Appold, an original and main investor in the Willard & Kelsey Solar Group, has kept the business afloat using his personal funds.
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Jim Appold talks about Willard & Kelsey Solar Group as if the company is bustling with activity.

The phrase “we are” consistently rolls off the 74-year-old company president’s tongue. When it was formed in 2007, Willard & Kelsey’s founders wanted to revolutionize the solar-panel industry. They projected profits of almost $70 million for the first year of production.

Last week, that vision seemed like a far-fetched dream: No one tended to the machinery that hissed, beeped, and hummed from all corners of the company’s more than 200,000 square-foot building in Perrysburg. Pallets of clear glass sheets sat undisturbed and boxes of ready-to-sell solar panels collected dust in the back of the facility. Besides the firm’s five owners, the company has about five employees.

The troubled solar-panel manufacturer, which idled most operations in 2011, plans to close its doors today, but a company lawyer said Friday that the firm could reopen if it receives an order from India. Willard & Kelsey has been trying to negotiate the deal since 2012.

WILLARD & KELSEY AT A GLANCE

What is it?
The Perrysburg-based solar-panel manufacturer formed in 2007. The company aimed to produce cadmium telluride thin-film solar panels. It only filled one order and received about $10.6 million from the state of Ohio. The company is closing today but could reopen if it receives an order from India.

What now?
The company has agreed it owes the state $12 million plus interest, but it's unclear if the state will be able to recoup the public funds it lent this private firm. Although the state has collateral at Willard & Kelsey, the company doesn't own its building and leases half its equipment. The state lent Willard & Kelsey $5.1 million after it was aware the firm was financially troubled.

“They’ve been talking about it for months now and said they intend to proceed,” said Richard Kerger, a Toledo-based attorney who represents Mr. Appold and spoke on behalf of the company. “If you take a snapshot today it looks the same, but if you look ahead, the circumstances have the potential to be very different.”

The price and scope of the potential deal were not disclosed by Mr. Kerger.

Willard & Kelsey is on the hook to repay more than $12 million in state loans, which it defaulted on last fall, and owes millions more to suppliers. It also faces a slew of lawsuits.

Whether the state can recoup the public money it spent funding this private venture is unclear. Willard & Kelsey doesn’t own its $6.4 million building and has leased half its equipment.

Soon after the company’s founding, issues began to emerge. In its second year of operation, executives began paying themselves millions. They also freely used funds for things such as sporting events, a birthday party, and ATMs in casinos.

Documents obtained by The Blade reveal the state had many indications of instability at Willard & Kelsey; some are dated as early as 2009, just two years after the firm was established. Even so, officials under Gov. John Kasich were surprised to learn in January, 2012, that the company laid off most of its work force.

Willard & Kelsey has been kept afloat in recent months by Mr. Appold, who planned to stop funding the operation as of today. He said last week that the power bill alone cost him $17,000 a month, and that’s without any production occurring at the facility. Mr. Kerger said on Friday that no new funding had been injected into the firm.

The Perrysburg company, formed in 2007, is to close its doors today. The Perrysburg company, formed in 2007, is to close its doors today.
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Missing the mark

The only work Willard & Kelsey has completed was a $1 million order in 2009. The production line never has been capable of spitting out the 120 solar panels an hour that would have made the company a commercial success. The line tops out at about 60 panels an hour.

Mr. Appold said Willard & Kelsey’s cadmium telluride thin-film technology works; it just never worked well enough. He still believes in the idea, and it’s why the former owner of Consolidated Biscuit Co. sunk an undisclosed amount of his personal fortune in the company.

“It was one production line, and we didn’t get the amount or the numbers we needed [to become profitable],” said Mr. Appold, who spoke on behalf of Willard & Kelsey.

Mr. Kerger said the company’s executives feel confident they can fill the Indian order if it comes to fruition. 

Firm’s origins

Faux street signs that read Willard and Kelsey jut from a support beam near the entrance of the company’s production area. They are a nod to the East Toledo intersection of Willard Street and Kelsey Avenue, which is near where Chief Executive Officer Mike Cicak and Chief Technical Officer Jim Heider were raised.

The company was born from the minds of innovative Toledoans who wanted to bring jobs and economic prosperity to northwest Ohio, Mr. Appold said. Their vision of a solar future for the area was bold, but Willard & Kelsey’s executives had the business and solar-science experience to back up their dream.

Mr. Cicak is a former director of Glasstech Inc. and helped found Solar Cells Inc., which eventually became First Solar Inc., one of the largest solar-panel manufacturers in the world. Mr. Heider held technical and management positions at Glasstech and First Solar. Chief Operating Officer Gary Faykosh spent more than 35 years at Glasstech and First Solar and has a background in material sciences.

Mr. Appold, the company’s main financial backer, is an engineer turned businessman. He began his career at General Motors and built an empire. He owns the Oliver House in downtown Toledo, has had his hand in more than 10 business ventures, and sold Consolidated Biscuit Co. — with operations in five states — in 2010 for an undisclosed amount.

Mossie Murphy, who worked in alternative energy financing, was brought on to help the company acquire more funding.

“Keep in mind Cicak, Heider, and Faykosh all were involved with mastering the design of the original panels right from the beginning of it,” Mr. Appold said. “There wasn’t much doubt in my mind these three guys would be able to put together what was needed because they were instrumental in what was eventually sold to First Solar.” 

The Willard & Kelsey Solar Group has found that its solar- panel line doesn't produce at a fast-enough rate to be profitable. The Willard & Kelsey Solar Group has found that its solar- panel line doesn't produce at a fast-enough rate to be profitable.
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High hopes

The company had clout and great expectations when it first formed, but it needed more than experience and ideas. Acquiring capital was paramount.

The executives, including former president and CEO Bill Mitchell, invested $26.5 million. A supplier that Mr. Appold declined to name lent the company $8.25 million and leased it $22 million in equipment. An Italian investor loaned Willard & Kelsey $5 million and an added $3.5 million was lent through Huntington Bank.

That $65.25 million, plus about $10.6 million from the state of Ohio, funded the solar-panel line that snakes through the building, payroll, and corporate operations of Willard & Kelsey. The money was raised over several years.

In late 2008, everything was falling into place. The executives thought they were on track to make gross profits of $326.1 million in the first five years of production, which is one of the more conservative figures included in Willard & Kelsey’s initial projections.

Their ambitious endeavor, however, failed.

The solar-panel line isn’t capable of mass production. After the company filled a $1 million order from Thailand in 2009, executives realized they couldn’t manufacture solar panels at a rate that would be profitable.

“What they find is they can produce glass that is functioning as represented but not in commercial quantities,” Mr. Kerger said.

The company spent years trying to perfect its manufacturing process and never got it quite right, Mr. Appold said. Even if it could mass-produce solar panels, it couldn’t sell them for $3 a watt as Willard & Kelsey’s founders once anticipated. The Chinese aggressively entered the solar-panel market a few years ago and sell their products at a highly competitive rate.

Solar panels such as Willard & Kelsey’s now go for about 70 cents a watt. At that price, Mr. Appold said the company probably would break even or lose money on each panel produced.

If the Indian order doesn’t come in, the company will begin to mothball its solar-panel line this week, Mr. Appold said. 

Money matters

Before Willard & Kelsey ever sold a solar panel, its executives began receiving frequent $30,000 to $40,000 payments from the firm, beginning in August, 2008. In all, the executives received about $3 million. And, from May through August, 2009, executives expensed more than $20,000 for spending that included tickets to the Detroit Tigers and Pittsburgh Steelers and airline tickets for family members.

That’s all on top of executive salaries that totaled about $2.2 million during the last five years.

Mr. Mitchell, who was fired from Willard & Kelsey in October, 2009, and died in July, 2011, claimed executives were compensated with some of the $5 million loaned by the Ohio Department of Development.

Mr. Appold denies any wrongdoing by Willard & Kelsey with regard to its state funding and said it was Mr. Mitchell who approved the payouts and expenses. The payouts were later converted to loans at the behest of the firm’s accountant.

With revenue projections nearing the $70 million mark for the first year of operation, Mr. Appold said the $30,000 to $40,000 payouts seemed reasonable.

“It was a number that was arrived at with the partners. It was a number, it was a fair number,” he said. “They were managing it, and they thought that is what the salary would be at that amount.”

Mr. Appold has repaid his loans from Willard & Kelsey, but he says the other executives have not. They have an outstanding balance of $2.15 million, which is due by the end of 2017. A spokesman for Willard & Kelsey from the Toledo public relations firm Hart Inc. would not disclose how much the executives owe individually.

Those loans were part of a lawsuit brought against the company by Brenlux sarl, a business that bought the Italian investors’ $5 million interest in the company. The lawsuit stated Willard & Kelsey created “corporate waste through sham loans and ‘guaranteed payments’ ” to company executives.

The case, filed in U.S. District Court in Toledo, was settled in December, 2011. A settlement was not included in the court documents, and Mr. Kerger declined to disclose the specifics of it because of a confidentiality clause.

The Blade was able to determine that Willard & Kelsey also has been sued for about $700,000 since 2012 by 10 companies. As a result of one of those suits, Willard & Kelsey has a lien for $273,947 plus interest filed against it.

As of May 31, the firm owed 125 companies a total of $2.4 million. Those companies probably won’t see a penny from Willard & Kelsey if no new revenue comes in, said Mr. Kerger, who added that Willard & Kelsey does not plan to file for bankruptcy.

“What moral judgment do we make? You start favoring one or the other”? he asked. “There is nothing we can do. We didn’t want to be here.” 

Finished solar panels are stacked on carts at the plant in Perrysburg. Executives say the firm could handle a hoped-for order from India. Finished solar panels are stacked on carts at the plant in Perrysburg. Executives say the firm could handle a hoped-for order from India.
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‘Red flags’

The state of Ohio had ample warning Willard & Kelsey was in trouble.

The Ohio Tax Credit Authority never recorded more than 51 jobs at Willard & Kelsey, a far cry from the 400 the company was contractually obligated to generate under its state funding agreements. From July, 2009, to November, 2011, the Ohio Department of Development received at least eight requests from Willard & Kelsey executives to alter the terms of the firm’s $5 million state loan. All were granted.

After the state had been made aware of financial issues at Willard & Kelsey, the Ohio Air Quality Development Authority granted the firm a $10 million loan in 2010, of which it received $5.1 million. By this time, the company had stopped producing a product.

“I found this entire program very troubling, and Willard & Kelsey was a perfect example. It’s almost as if we had so much money we had to give it to people, ready or not,” Jeff Jacobson, vice chairman of the air authority’s board, told The Blade. “I got involved with these loans when they all started going bad, and we all started digging backward. It was shocking to me there were all these red flags that no one heeded.”

Last fall, the state declared that Willard & Kelsey had defaulted on its state loans because it missed several payments. The loans were sent to the Ohio Attorney General’s Office for collection. Willard & Kelsey has reached an agreement with the state acknowledging that it owes $12 million plus interest, according to Hart Inc. Whether the firm is able to pay that amount is uncertain. 

Collection efforts

The attorney general’s office is working to determine the value of the company’s assets. It hired Joseph Shea of the Cincinnati law firm Shea, Coffey & Hartmann to spearhead the process. Bringing in outside counsel is common for high-dollar collections, said Dan Tierney, a spokesman for the attorney general’s office. It is the state’s third-largest account in collection at this time.

Mr. Tierney wouldn’t comment on whether the state can collect the $2.15 million that was loaned to Willard & Kelsey executives from company funds.

The state has collateral rights to some of the firm’s machinery and holdings, but Willard & Kelsey leases half its equipment and doesn’t own its building. The manufacturer’s property and building are owned by Mr. Appold and Mr. Cicak under a limited liability corporation.

It’s unclear whether state officials knew the company didn’t own its building or all of its equipment. Katie Sabatino, a spokesman for the Ohio Development Services Agency [formerly the Ohio Department of Development], wouldn’t comment on the matter, citing pending legal action.

The Blade repeatedly requested an interview with the agency to discuss how and if loan collateral is assessed, but Ms. Sabatino denied those requests.

She did issue a statement about the collateral backing state loans: “We manage a wide range of programs that each have different guidelines and processes associated with them. The program guidelines, including collateral requirements, for available economic development incentives can be found on the JobsOhio Web site.”

In the past, state development officials have been willing to discuss the Kasich administration’s job-creation track record, but recently they’ve been unwilling to talk about Willard & Kelsey in detail.

The state also has the option to recall a $500,000 grant it awarded the company in 2009 because the firm failed to create the 400 jobs executives touted in its infancy. Those potential jobs helped attract high-profile visits from Democrats such as Vice President Joe Biden, Labor Secretary Hilda Solis, and former Democratic Gov. Ted Strickland. Ms. Sabatino declined to comment on whether the state will ask for its grant money back and again cited pending legal action.

Willard & Kelsey appraised its depreciated equipment at $18.5 million in June, but that value is subject to discretion.

Selling Willard & Kelsey’s equipment would be tough because so few companies are in the market to purchase it, said Brian Lee, executive vice president of Hilco Industrial, which handled the sale of equipment from failed solar companies such as Uni-Solar and Solyndra. Even if a buyer is found, the equipment often is stripped down sold as parts, he said.

Mr. Lee couldn’t estimate the value of Willard & Kelsey’s equipment without inspecting it.

“This is not an easy deal. It’s not like selling a stamping press, a foundry, a tool room, or an automotive facility,” Mr. Lee said. “It’s more special, and it’s a challenging environment. We have not seen the environment turn for the better.”

Contact Kris Turner at: kturner@theblade.com or 419-724-6103.



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