Pentadyne Out of Business

Call it the Mystery of Lassen Street. Pentadyne Energy Corp. was an up and comer in alternative energy storage, attracting notice for its green products, receiving contracts from defense contractors, interest from big city transit agencies, and funding from major investors. In early July the company’s headquarters and manufacturing facility in Chatsworth was closed up. The employees from the chief executive on down were let go and all its assets put up for sale. In business since 1998, Pentadyne had been making its flywheel technology commercially available since 2004. Within five years the Chatsworth-based company had shipped 700 of its energy storage units that provide an uninterrupted power supply to electric trains and to keep things like servers, communications equipment and medical devices running in the event of an outage. In late February, then-CEO Mark McGough appeared at the Cleantech Forum XXVI in San Francisco where he told an audience the company had $11.3 million in revenues in 2009 and forecast $16 million in revenue for 2010. Something changed between McGough’s comments and July when a letter was sent out to creditors giving a hint of why Pentadyne closed shop. The company suffered substantial operating losses, piling up nearly $9 million in debt to two private investment firms in both direct and indirect loans. There was an additional $2.5 million in unsecured debt on Pentadyne’s books, the letter stated. Attempts to reach McGough and other executives were not successful. Rather than file for Chapter 7 bankruptcy, the company went the route of a general assignment given to a Beverly Hills firm, Insolvency Services Group. A general assignment is quicker than a bankruptcy and does not involve going to court but obtains the same result: selling off assets to pay creditors. The Uninterrupted Power Supply division, the larger of the two making up Pentadyne, was the first to sell off. The Rail division was expected to be sold by the end of August, according to Steven Spector, the attorney handling the liquidation of assets. “(Pentadyne) management was aware of interest by a company in the UPS division and directed us to this buyer,” Spector said. Confidentiality agreements prohibited Spector from naming the buyers or what assets each purchased. It was a quiet and perhaps unexpected exit for a company that was billing itself at its website as a leader in manufacturing of flywheel electrical energy storage and recycling technology. Large backers Backing for the company came from some heavy hitters in the energy industry, including DTE Energy, whose subsidiary is Detroit Edison; Sempra Energy; and Electricité de France. Pentadyne also received funding from private equity firms specializing in alternative energy companies, such as Rustic Canyon Partners in Santa Monica, and Nth Power. In the letter to creditors, Rustic Partners was identified as one of the firms owed part of the $9 million in debt. Attempts to reach a representative of Rustic Canyon were not successful. A fifth round of financing in September 2008 brought in $22 million and bumping up the total funding of Pentadyne to $68 million. An alternative to batteries as a backup power source, Pentadyne flywheels have been used at NASA’s Glenn Research Center, and purchased by Beaver Aerospace and Defense, and the Long Island Railroad. The flywheel technology earned Pentadyne awards from media conference producer AlwaysOn, the World Economic Forum, EC&M magazine, and Buildings magazine. In 2008, Pentadyne landed on fastest growing private companies lists compiled by Inc. magazine, the San Fernando Valley Business Journal, and the Los Angeles Business Journal. In 2009, then-CFO Mark Campion was nominated for a Top CFO Award given by the San Fernando Valley Business Journal.