CarCharging Group's Recent Capital Raise Boosts Balance Sheet, Operational Efficiencies

Dec.11.13 | About: Car Charging (CCGI)

There is no better way to assess the success of electric vehicle charging companies, than by first determining the outlook of the industry. If the industry outlook is good, then companies like CarCharging Group Inc. (OTCQB:OTCPK:CCGI), the world's largest electric vehicle charging services provider, can concentrate on growing their businesses.

The company recently raised $10M from institutional investors, as it seeks to boost its financial position and operational efficiencies. Having acquired assets of the Bankrupt ECOtality, CarCharging Group is now the world's largest provider of electric vehicle charging services. The $10M will play a huge role in strengthening the company's balance sheet, while at the same time helping ease the tension on operations, as it continues to grow its business.

Overview

CarCharging Group is a nationwide provider of electric vehicle charging services. It provides electric automobile charging services to residential, commercial and municipal property owners in North America. The company now has more than 13,950 charging points in 35 states, following the purchase of ECOtality's Blink Assets and the Blink Network.

For the nine months ended September 30, CarCharging Group generated $182,480 worth of revenues, compared to last year's $246,330, while operating expenses grew from $3.6M to $14.6M. Now, with total current liabilities standing at nearly $10m against current assets of just over 3.3M, CarCharging needed additional cash in order to service operational obligations, as well as improve its financial position.

On December 6, the company announced that it received $10M from institutional investors. The company said that the money would be used to strengthen its balance sheet as well as add operational capital for its expansion.

What the $10M Raise Means for CarCharging Group

The $10M added to CarCharging Group's financials comes at an opportune time, when the company needed it and, consequently positions itself well for the anticipated industry growth. As highlighted regarding the company's liabilities, the $10M will be pivotal in making the picture look a little rosy for the critical investor.

CarCharging Group has not been generating enough revenues to support its operations. Since inception, the company has only generated sub-$600,000 worth of revenues against more than $33M in operating expenses. The good news though is the fact a majority of these operating expenses are in the form of stock compensations, which means the company need not worry of unstable long-term debt position. Nonetheless, there is nearly $10M in current liabilities, and the company will use some of the $10M received from institutional investors to improve its current ratio.

Additionally, following CarCharging Group's $3.335M acquisition of ECOtality's Blink Assets and the Blink Network business, this made the company the world's leading electric vehicle charging services provider. The company is positioning itself for sustainable growth, as more automobile manufacturers continue to produce electric vehicles. The $10M raise is going to help CarCharging in its expansion campaign without having to rely heavily on debt financing.

The Industry Looks Rosier

The market seems to be growing faster than the electric vehicle charging companies are. Right now, all the major automobile manufacturers have committed to produce hybrid vehicles that require electric charging services by 2015. Additionally, the government has expressed its backing for the industry by introducing tax incentives for electric vehicle buyers as well as grants for manufacturers.

For instance, in 2009, the Ford Motor Company (NYSE:F) was awarded $5.9B in government grants, as the U.S government seeks to foster electric vehicles industry. Tesla Motors (NASDAQ:TSLA) on the other hand, received $465M worth of loans.

The electric vehicles industry is attracting nearly all the top automobile manufacturers, including Nissan, Toyota, Mercedes, and BMW among others. Now, when you have the top brands in the industry committing to produce vehicles that will require the services of CarCharging Group, then you have to say that the industry looks astonishingly admirable.

Several other factors are driving automobile companies to produce hybrid vehicles. Therefore, it is not just about class, or shifting trend, although I have to admit that gasoline vehicles are here to stay. However, whether or not they will dominate the future is a debatable question. The reason being, we have environmentalists pushing for reduction of gaseous emissions in the air, as global warming and climate change continue to threaten humanity.

The effect of the calls by environmentalists is beginning to be felt, with governments now joining the campaigns. Clean energy, seems to be the starting point, and then after that it will be minimal-to-zero pollution, if we are to save our planet. There are several avenues to achieving this and one of them is the manufacture of electric vehicles, in which case, car-charging companies will be waiting to capitalize. But again, why wait when you can start positioning to pounce right now? CarCharging Group is doing exactly that, especially with its recent acquisition, and capital raise.

Furthermore, while the cost of gasoline is becoming more expensive by the day; the cost of electricity is becoming cheaper. For instance, in the 20th Century, electricity cost between $0.20 to $0.40 per kilowatt-hour, while gasoline could be purchased for about $0.05 per gallon. Right now, the average retail price for gasoline is about $3.60 per gallon, while the average cost of electricity per kilowatt-hour is about $0.11.

This makes purchasing electric vehicles more attractive to customers than gasoline vehicles, of course barring the purchase cost. But even the purchase prices are expected to decline with time as more manufacturers engage in the business. Just to note, Nissan dropped the price of its 2013 LEAF model by more than $6000, while the U.S government has approved a $7,500 tax credit to purchasers of electric vehicles.

CarCharging is more or less, a lone ranger in this industry, with a majority of its competitors being minor players or subsidiaries of energy companies. Some of the rivals include EV Connect, primarily based in Los Angeles, California and EV Charge America, based in Las Vegas. School Charging based in New York, and BlueMobility Systems, as well as Greenlots. All these are minor companies, not capable of challenging CarCharging Group in the business of providing charging services for electric vehicles.

Perhaps, the electric vehicle manufacturers themselves may fancy extending their businesses to provide charging services to customers, in which case it would pose a potential threat. But as it stands, CarCharging Group stays well above the competition having achieved this through one of the best methods.

There is no better way to eliminate competition, than buying your key rivals. CarCharging Group has been busy in the market, but not just by providing car charging services, but also acquiring its rivals. The company has acquired four rivals, to become the world's largest electric vehicle charging.

The acquisition of ECOtality was the highlight of them all, as it transformed CarCharging Group from a 1,100-charge points company, to a 13,950-charge points owner. This is a key advantage over its competitors, as it seeks to position itself for the inevitable growth of the industry.

Conclusion

CarCharging Group has had financial difficulties over the past, and this won't go away instantaneously. However, the $10M received from institutional investors is certainly going to ease the situation, giving the company the opportunity to increase its service provision to customers thereby boosting revenue growth.

As the industry continues to grow, the company would have set enough outlets across the world to position itself as the company of choice for residential, commercial and municipal customers. But most importantly, it needed to boost its financial position, which I believe will not only improve the picture of its balance sheet, but also provide operational efficiency for the immediate future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.