Business Context and Reporting Period
This Form 8-K, dated October 23, 2021, reports a strategic partnership and capital investment by Bloom Energy Corporation (Bloom Energy) with SK ecoplant Co., Ltd. (SK ecoplant). The filing details the entry into a Securities Purchase Agreement and amendments to existing joint venture and distribution agreements to expand operations in the South Korean market and the hydrogen economy.
Key Financial Metrics and Transaction Terms
- Initial Investment: SK ecoplant agreed to purchase 10,000,000 shares of zero coupon, non-voting redeemable convertible Series A preferred stock (RCPS) at $25.50 per share, totaling approximately $255 million.
- Second Investment Option: SK ecoplant holds an option to purchase a minimum of 11 million shares of Class A Common Stock on or before November 30, 2023. The price will be the higher of $23 or 115% of the 20-day volume-weighted average closing price preceding the purchase notice.
- Ownership Cap: SK ecoplant and its subsidiaries are capped at holding 15% of Bloom Energy's issued and outstanding capital stock.
- Financial Performance: This filing does not provide revenue, profit, cash flow, margin, debt, or liquidity metrics for the company.
Material Changes and Agreements
The filing outlines several material changes to the relationship between Bloom Energy and SK ecoplant:
- Securities Purchase Agreement: Establishes the $255 million initial investment in RCPS, which automatically converts to Class A Common Stock one year after the closing of the initial investment.
- Preferred Distribution Agreement (PDA) Restatement: Updates the 2018 agreement to include three-year purchase commitments (take or pay) for Bloom Energy Servers in South Korea, rollover procedures, premium pricing, and termination clauses.
- Joint Venture Agreement (JVA) Amendment: Expands the scope of assembly work at the South Korean joint venture facility for Bloom Energy Servers.
- Commercial Cooperation: A new agreement regarding initiatives in the hydrogen market and general market expansion for Bloom Energy Servers and Electrolyzers.
Guidance, Outlook, and Governance
Management Commentary and Governance:
- Board Representation: Upon the closing of the Second Investment, SK ecoplant will be entitled to designate one director to Bloom Energy's Board, provided they maintain at least 5% beneficial ownership.
- Standstill Provision: SK ecoplant is subject to a standstill provision preventing them from exceeding 15% ownership until the later of the second anniversary of the Second Closing, the loss of board designation rights, or ownership dropping below 5%.
- Voting Obligations: SK ecoplant agrees to vote its securities in accordance with the majority recommendation of the Board and has agreed to execute an irrevocable proxy.
- Preemptive Rights: SK ecoplant has the right to purchase new securities to maintain its fully-diluted ownership percentage after the Second Closing.
Risks and Contingencies:
- Closing Conditions: The Initial Investment is subject to customary conditions, including antitrust approvals. The agreement may be terminated if the First Closing does not occur by December 31, 2021, unless extended to March 31, 2022.
- Forward-Looking Risks: Risks include the success of the partnership, market adoption of hydrogen, continued incentives in South Korea, and general market uncertainties including the impact of the COVID-19 pandemic.
Investor Verification Checklist
- Verify the closing date of the Initial Investment and whether the December 31, 2021 deadline was met or extended.
- Confirm the status of antitrust approvals required for the transaction.
- Monitor the exercise of the Second Investment option by SK ecoplant prior to November 30, 2023.
- Review the specific terms of the PDA Restatement and JVA Amendment once filed as exhibits to the Form 10-Q for the quarter ended September 30, 2021.
- Track SK ecoplant's ownership percentage to ensure compliance with the 15% cap and 5% threshold for board representation.