Electric vehicle maker faces "difficult funding position"

COVENTRY based electric vehicle manufacturer Modec is facing a radical financial restructuring as it looks to overcome a “difficult funding position”.

In its latest set of accounts, the pioneering company said it was in advanced talks with a third party to establish the company as a viable entity.

The accounts, for the year ended December 2009, show the company, which makes electric trucks and vans, made a loss of almost £6m and had net liabilities of almost £29m.

To stem losses, the company entered into a joint venture with US firm Navistar in December 2009. The deal saw Modec sell the intellectual property rights to the vehicle in return for £3m. This allowed the JV to manufacture and sell the vehicle in the US.

Navistar also provided a £1.5m loan to Modec and acquired a 25% interest in parent company, Borwick Group, for £3.9m.

However, Modec, which employs 70 people, said further funding was needed if the business was to evolve to the next level and spent much of 2010 securing funding from a suitable partner.

The efforts resulted in working capital funding from a third party being injected into the business in the form of a secured loan. Last year also saw the firm raise £1.1m from a sale and leaseback agreement of certain fixed assets.

However, this was still not sufficient to sustain the business.

In their report to the company’s annual accounts, directors state: “At the date these financial statements have been signed (January 20, 2011), the company continues to face a difficult funding position to enable it to realise the growth potential of the vehicle.

“As a result it (the company) is in advanced discussions with (a) third party to dispose of the trade, assets and certain liabilities of Modec Ltd.

“This new company would be unencumbered by the secured debt obligations within Modec Ltd and is therefore a more suitable trading entity for attracting investment moving forwards.”

The directors said that while they were confident of the future viability of the vehicle under the ownership and control of a third party, the ability of the company to continue as a going concern would depend on the level of financial support from the parent company, named as Federated Investments LLP.

The document states that Federated Investments was owed £32.2m by the company as of the end of December 2009.

However, the directors said they had received confirmation from Federated Investments that support would be forthcoming “for at least 12 months from when the financial statements have been signed”.

Consequently, they said it had remained appropriate to prepare the financial statements on a “going concern basis”.

Modec has spearheaded electric vehicle technology in the UK and has been continually praised by Government for its work. Former Labour Business Minister Pat McFadden said it was a key example of a company realising the vision for low carbon manufacturing while helping the UK automotive industry manage the transition from conventional to electric drive technologies. Its factory was opened by David Cameron in 2007 when he was Leader of the Opposition.

No one from Modec was available for comment.