Better Place receives "going concern" warning

Despite $812 million losses, Israel Corp. is "positively considering" further investment in the electric vehicle venture.

Better Place lost $454 million in 2012 and received a "going concern" warning, the financial report of Israel Corporation (TASE: ILCO), the controlling shareholder in the electric car venture reveals. Better Place's losses last year were double those of 2011 and the company's accumulative losses now stand at $812 million.

The worst damage was wrought in the fourth quarter of 2012 when Better Place lost $251 million following which Israel Corp. marked down the company's value by $179 million for its Israel activities and the structural change implemented. Better Place has undergone dramatic upheavals in recent months that began with the ousting of its founder and CEO Shai Agassi due to disappointment in the electric car venture's slow progress and dissatisfaction at the pace at which electric cars were entering the market.

Agassi's successor Evan Thornley quit Better Place after less than three months and a long list of other senior executives have left the company. Better Place has cut back one third of its work force and today has 600 employees worldwide of whom 10% are set to leave.

In attempts to save the company, Better Place decided to focus on just the Israeli and Danish markets. In both markets the company has managed to sell several hundred Renault Fluence electric vehicles using Better's Place's batteries and recharging and battery exchange infrastructure.

Despite the dire situation, Israel Corp's annual report said, "Better Place is working to continue applying the measures it began several months ago to streamline the company and reduce expenses and return to the path of profitability.

Better Place revenue is insignificant amounting to just $7 million in 2012, while the operating loss jumped to $386 million. The rapid rate at which Better Place is burning up money has resulted in the swift depletion of 90% of the company's cash reserves, which totaled $34 million at the end of 2012 from $293 million at the end of 2011. The electric vehicle company's equity deficit climbed to $765 million at the end of 2012.

Israel Corp's share of the accumulated loss amounts to $293 million and most of this sum has been set aside. The value of the investment in Israel Corp's books is just $16 million compared with $101 million at the end of 2011. These huge losses are not deterring the company, controlled by Idan Ofer, from continuing to inject capital into Better Place, which needs more liquidity.

After injecting another $66 million into Better Place (out of $100 million raised), Israel Corp. notes in its annual report, "As the lead investor in Better Place, the company is satisfied with the progress in the past few months and is positively examining a further investment in light of the fact that Better Place is dependent on continuing financing through capital or debt until it can produce positive cash flow from its ongoing operations."

Israel Corp. adds, "Better Place has changed its structure of operations and management thinks that this step will significantly reduce the amount of additional financing required in 2013 and the coming years."

Published by Globes [online], Israel business news - - on March 21, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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