Eco Investor February 2019

Pre-Revenue Securities

Greatcell Solar in Administration

Greatcell Solar, which may be better known to many under its previous name of Dyesol, called in the administrators in December after failing to raise enough capital to further the commercialization of its built-in photovoltaic technology.

While it remains to be seen what the administrators may save, the move is a major disappointment for a company that has been developing and trying to commercialize its world leading solar technology for 14 years.

The initial dye solar cell technology was invented in 1988 by Professor Michael Graetzel of Switzerland. Dyesol was formed in 2004 to acquire the technology from Sustainable Technologies International Pty Ltd and Greatcell Solar S.A., and the new company listed in 2005.

The dye solar cell (DSC) technology used dyes, pastes and electrolytes instead of silicon to produce electricity. In recent years the company moved to exploit solid-state DSC technology known as Perovskite Solar Cells. Also known as artificial photosynthesis, the technology does not need direct sunlight, can reduce costs, and can be incorporated into buildings as part of glass windows and steel roofing.

Commercialization has been a long and expensive road. At 31 December 2017, Greatcell Solar had contributed equity of $110 million and accumulated losses of $118 million. There has also been considerable grant funding. Its intangible assets including intellectual property were valued at only $572,308, and the balance sheet had total assets of $5.5 million and net assets of only $140,043.

Among the total liabilities of $5.4 million, there were trade and other payables of $3.1 million; and borrowings of $0.8 million from the Commonwealth Bank, which has security over Greatcell Solar Ltd, Greatcell Solar Australia Pty Ltd and Greatcell Solar Industries Pty Ltd. The finance facility allowed advances based on the R&D tax offset, but there appears to have been no update on the situation, apart from a June 2018 quarterly update that says that $2.25 million of the $4 million facility had been drawn along with another $0.4 million from an overdraft facility. Cash at hand was then only $487,000.

Greatcell Solar's shares have been suspended since February 2018 as the company sought to raise enough capital for a Major Area Demonstration (MAD) prototype project seen as a critical step towards commercialization.

The company was initially upbeat about raising the capital and was able to secure a $0.6 million convertible note and $425,000 in grants. But it was unable to secure substantial, long-term funding for the $25 million MAD project and in December Greatcell Solar Ltd, Greatcell Solar Industries Pty Ltd and Greatcell Solar Australia Pty Ltd were placed in voluntary administration.

Directors said the decision follows some unfortunate developments including the untimely death of chief scientist, Dr Hans Desilvestro, in a mountaineering accident on 10 November last year. The company said it had undertaken a global search and chased down every potential funding opportunity, but was not able to attract sufficient long-term equity investment. The situation was exacerbated by Tasnee, its strategic shareholder, which advised that it is not in a financial position to contribute.

Directors said the administration "is an extremely disappointing outcome for Greatcell Solar, its directors, employees and shareholders given the considerable investment already undertaken over many years to achieve an advanced, pre-commercialisation status for its 3rd generation photovoltaic technology. The company is widely considered amongst its international peers to be pre-eminent in the field of Perovskite Solar Cell PV technology.

"More recently the Company's funding model has been adversely affected due to highly conditional access to available government assistance because of increasing amounts of ‘red-tape' and changes to ATO R&D rebate entitlement that disregard previously accepted methodologies. Unsurprisingly, banks are becoming increasingly cautious about lending in such an uncertain regulatory environment. Greatcell Solar has also been adversely affected in its refinancing efforts by the Federal Government energy policy settings that are unsupportive of renewable energy investment. This predicament has made access to the Australian equity capital markets for renewable energy technology companies very challenging.

"With the appointment of Administrators, BRI Ferrier, the outlook for shareholders is uncertain at best.

"The directors apologise unreservedly to all stakeholders for failing to have the technology sufficiently developed to make it a compelling investment case at this time. We consider all known options for the survival of Greatcell Solar as it is currently structured have been exhausted. However, we do not believe that the operations of our 50 per cent subsidiary, Greatcell Solar Materials, a manufacturer of specialty chemicals, will be affected by these developments." (ASX: GSL)