Exergy partners mull legal action, but energy firm expects new funding soon

Exergy Development Group, the alternative energy consortium that has come into U.S. cycling as a major sponsor over the last two years, has informed a number of partners that a funding delay means it is unable to pay its contracts at this time. A number of the impacted parties are considering legal action, but at least two major partners have spoken out in support of the Boise, Idaho, company, which says it is doing all it can to rectify the situation after a funding shortfall.

Exergy CEO James Carkulis last Friday sent an email to a number of impacted parties, including event promoters and technical services vendors, informing them that the company could not honor its financial commitments, leaving a multi-million-dollar hole in its wake. Unpaid invoices range from the tens of thousands to hundreds of thousands of dollars.

VeloNews has spoken with a number of sources, but many of them would not speak on the record out of fear that they wouldn’t be paid by Exergy. VeloNews understands that a number of parties have filed or plan to file suit against Exergy over the funding shortfall. Multiple vendors claim to have contacted Exergy on numerous occasions regarding late payments. Those vendors have told VeloNews that Carkulis and vice president Elizabeth Woolstenhulme have responded with a variety of answers, with Carkulis saying last week that he would attend the Tour of Utah and hand deliver outstanding checks. He did not appear at the race.

“There are some personalities that you have to work with. We’re talking with everybody as much as possible. We really want to get the money paid out, but we can’t be on the phone at all times,” Woolstenhulme told VeloNews. “If an individual contacts us everyday, or contacts multiple people in our office… some people ask the same question to different people wanting a different answer.

“They don’t like the answer, but unfortunately it is what it is… There is nothing I can do to make them happy right now, short of paying them and I want to pay them.”

One source told VeloNews that he had never encountered an issue of this nature in more than five years of working with Medalist Sports, which organizes the Amgen Tour of California, Exergy Tour, Larry H. Miller Tour of Utah, USA Pro Challenge and Lance Armstrong Foundation rides. The source is awaiting payment for services rendered at the Exergy Tour in May.

“It’s not that we haven’t gotten paid; it’s the run-around that we’re getting,” said the source, who asked not to be named. “We at some point are almost ready to say ‘hey, give us X number of dollars and let us cover our costs and get out of it without turning it over to legal.’ We even asked for half of it initially, but we never heard anything.”

Since entering the sport with the Exergy men’s team in 2010, the company has signed on to sponsor USA Cycling, a stage of the USA Pro Challenge, the most aggressive rider jerseys at the Pro Challenge, Amgen Tour of California, Larry H. Miller Tour of Utah and Nature Valley Grand Prix, the women’s Exergy Tour, and the Exergy Twenty12 women’s team. Exergy also signed on to back the 2012 and 2013 U.S. Gran Prix of Cyclocross and the 2013 world cyclocross championships in Louisville, Kentucky. According to Woolstenhulme, Exergy has paid out $2 million into the cycling industry via sponsorships in 2012. UnitedHealthcare is the only other sponsor to be so intricately woven into the fabric of American cycling today.

When VeloNews spoke with Team Exergy manager Tad Hamilton on Tuesday, he wouldn’t say whether the team had been paid, but did say that he expected “to have a team next year, and we expect to be good. And we expect to do big races again. That’s what we expect.”

Exergy Twenty12 manager Nicola Cranmer said that the company had lived up to its contract for 2012 and pledged to continue into the future.

“They’ve fulfilled their financial obligation to us. This is news to us,” Cranmer told VeloNews. “We’re all good and moving forward for next year with a bigger program.

“James Carkulis and Exergy Development Group have singlehandedly raised the profile of women’s racing here in the U.S. There are plenty of other places that Exergy could spend their money, but they have chosen cycling. The cycling industry is vulnerable and sponsors like James Carkulis should be valued; perhaps this requires more patience, particularly in this political energy climate.”

Vendors for the inaugural Exergy Tour aren’t as optimistic. According to multiple sources, the race’s service providers, including the power supplier, stage crew and local police department have yet to be paid.

USA Cycling chief operating officer Sean Petty told VeloNews that he hoped the situation would be resolved soon.

“Exergy has committed to support USA Cycling and based on their previous history of meeting financial obligations to cycling teams and events, we trust they will honor any outstanding commitments as soon as possible,” he said.

Carkulis was not available to comment on Wednesday, but did tell Cyclingnews.com’s Pat Malach that he was “very embarrassed about this situation.”

“This year has been a bit of a strange year for us when it’s come to our normal business practices,” said Carkulis. “We have tens of millions of dollars that are invested into our [energy] projects and we’ve had a number of delays in our financial closings.”

Woolstenhulme said that recent changes in the Idaho legislature and the expiration of key renewable energy credits had surprised her and resulted in the budget shortfall. In its 12 years of operation, Woolstenhulme said that the company has gone through rough patches in the past and has emerged, as she expects it to this time.

“We have a negative political climate in Idaho for renewable energy with local utilities. It impacts renewable energy in the sense of investors wanting to come in and invest in projects in the state,” she said. “When lenders start to see projects curtailed it makes them nervous and they pull out.”

The shortfalls are not limited to Exergy’s cycling partners, Woolstenhulme said, claiming that a number of energy industry vendors have yet to be paid and that while Exergy has not seen layoffs, company staff members have worked “outside the box to find solutions.”

“I am going to say that yes, we’ve all sacrificed,” she said. “We’re doing the best we can, we’re being as honest as we can… We’ve been there when the cycling world has needed us. We’ll continue to fulfill our obligations. There’s just a hiccup and that’s all it is, but you have a group that’s really trying to make something bigger of it.”

Woolstenhulme said that Exergy had a contingency plan in place and expects to be able to pay outstanding invoices soon. Two sources said that they expected Exergy to begin paying outstanding invoices later this week.

“The company will get some additional funding from a different source shortly and once that happens and funds start generating, things will get back up to speed,” she said. We’ve had a major setback… Our commitment to cycling… it’s a passion for our CEO and it’s a passion for our company. We believe in the ethics of these athletes and that’s not going to change. We will continue to support it.

“We will meet our commitments.”

Matthew Beaudin contributed to this report.