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Silent power goes dark

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BAXTER — Silent Power quietly closed its doors last week.

The high-tech Baxter-based company is now in the process of selling its physical and intellectual assets. It was an unexpected end to what has been a standout business in the lakes area in the technology and renewable energy fields.

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Silent Power manufactured and marketed energy storage systems for renewable energy and backup power markets for residential and commercial customers. The company employed about 19, letting half go last week and the rest Monday.

John Frederick, former CEO at Silent Power, was still at his desk Tuesday afternoon, working for an orderly end to a company that seemed on the cusp of bigger things.

The Baxter company described itself as offering instant, clean and quiet power when people needed it for energy storage and backup power. Silent Power’s OnDemand Energy Appliance, about the size of small refrigerator, provides a backup energy option in the case of an outage or serves as a way to save money by storing off-peak energy for use during higher cost peak demand times. The company’s systems supply energy directly to customers or utilities. It acts as a complement to renewable energy.

Silent Power’s end came quickly and unexpectedly.

In 2012, a strategic partnership with a South Korean company Hanwha SolarOne Co. brought in an $8 million investment to help fuel Silent Power’s expansion and bring high-end engineering jobs to Baxter. Combining solar power with the ability to store energy was expected to fuel job creation in the lakes area. Silent Power was already working with more than a dozen utilities across the U.S. on energy storage projects.

At the time, Hanwha SolarOne Co. described its investment as an aggressive push into the energy storage market. Frederick said Hanwha is the third largest solar panel maker in the world.

“Toward the end of 2013 we knew we would have additional cash need and we felt Hanwha would be able to provide that,” Frederick said.

Going into January, Frederick said Silent Power officials continued to believe Hanwha was going to provide funding. Finally, on Jan. 26, Frederick said Hanwha stated it wasn’t going to do anything.

“It put us in a real bind,” Frederick said, noting there was little cash left for Silent Power’s secured lender the Initiative Foundation and unsecured lenders doing business with the Baxter business.

“As we took a closer look at things we just felt we had to basically just stop operations of the company,” Frederick said. “It put us in a very poor position. Had we had answers earlier I think we could have done things differently. It would have given us more time to prepare other options. Since (Hanwha) seemed positive about doing that right up until the end, it was really tough to react.”

Frederick said now the focus is to work with the Initiative Foundation to sell the company’s assets — including software and engineering designs.

“We were about 75 to 80 percent complete on our next generation energy storage solution so we think that could potentially be of interest to others,” Frederick said.

There is always the possibility someone could buy the intellectual property and hire back employees and start over, Frederick said.

Until Hanwha invested in the company, Silent Power was backed by local investors. “I think that’s the real story here, a number of people in the community supported Silent Power,” Frederick said, noting local investors provided $6 million to $7 million to the company. The first really outside investor was Hanwha. Through it all, Frederick said Silent Power provided about 20 good jobs during the Great Recession. “I think it’s just really unfortunate we ended up picking the wrong investment partner outside of Minnesota,” Frederick said.

If the board had known the funding wouldn’t be forthcoming earlier, Frederick said the board could have explored other options. “It happened very quickly,” he said.

He said the energy storage market continues to look very bright. Silent Power had a global focus shipping as much product out of Minnesota as within, Frederick reported. Now with demand expected from California with its legislative directives and rebates, Frederick said doing volume was on the near horizon — as close as the end of 2014. California established an energy storage mandate to complement renewable energy efforts.

“I think we may have been a little ahead of our time and I don’t think it would have been much longer before volume occurred in the industry,” Frederick said. “I think the volume is going to occur both in the United States and globally. We were optimistic, but sometimes it just doesn’t work out.”

Frederick said Silent Power is making efforts to support customers who have purchased the product. A number of prominent business names previously served on the Silent Power board and have been shareholders, including Arnie Johnson, Jim Anderson, Brian Thuringer and Tom Anderson.

“We really appreciate all their support,” Frederick said.

Silent Power was founded in 2002. The company’s first focus was on “innovative and reliable power conversion and energy storage equipment” for home and businesses using solar, wind and hydro power as an alterative to fossil fuel generators or as backups in the case of a utility grid failure. Silent Power’s major focus came to be matching renewable energy production, which on a national average with wind is at night or prime sunlight hours between 9 a.m. and 3 p.m., with peak electrical grid demand, typically between 4-7 p.m.

“It would be great if we found a way to continue on but that remains to be seen,” Frederick said. “At this point we are trying to pay back our secured creditors and other unsecured creditors.”

Framed newspaper articles line the Silent Power’s interior walls — along with plaques noting U.S. patents — in its offices in the Baxter Industrial Park. In 2009, then Minnesota Gov. Tim Pawlenty toured Silent Power telling its officials they were on the leading edge of change. Pawlenty said smart grid capabilities were critically important. His administration signed legislation requiring 25 percent of Minnesota’s electricity to come from renewable energy by 2025.

The Minnesota Department of Commerce just completed an energy storage study and has it on its website. “I think that is still the correct path for Minnesota whether Silent Power exists or not and hopefully there will be others,” Frederick said. “We were very optimistic about the future and wanted to be part of it.”

RENEE RICHARDSON, senior reporter, may be reached at 855-5852 or renee.richardson@brainerddispatch.com. Follow on Twitter at www.twitter.com/Dispatchbizbuzz.

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Renee Richardson
Richardson is a Pacelli High School graduate from Austin, Minn., who earned an applied science degree from the University of Minnesota, Waseca, with an emphasis in horse management. She worked extensively in the resort industry. She received an associate’s degree from Central Lakes College, where she was editor of the Westbank Journal student newspaper, as well as a summer intern at the Dispatch. She graduated from St. Cloud State University summa cum laude with a bachelor’s degree in mass communications and interned at the St. Cloud Times covering business while attending SCSU. She's been with the Brainerd Dispatch since 1996.
(218) 855-5852
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