Battery maker’s bankruptcy is ill-timed for White House

Source: John McArdle • E&E • Posted: Monday, January 30, 2012

Just days before a White House-appointed auditor is set to deliver a report on the Department of Energy’s troubled loan guarantee program, another of the department’s stimulus-funded endeavors made headlines this week at a particularly bad time for the Obama administration

Ener1 Inc. — which received more than $118 million in the form of a DOE grant to make electric-car batteries — filed for bankruptcy yesterday. The announcement threatened to undermine the administration’s offensive on its investments in renewable energy.

In recent weeks, Obama has fought back hard — in both his first television ad of the 2012 election and his State of the Union address — against attacks over the Solyndra solar company that went bankrupt last August after receiving more than half a billion dollars through a DOE loan guarantee initiative that also received hefty stimulus funding (Greenwire, Jan. 19).

“Some technologies don’t pan out; some companies fail,” Obama told Congress on Tuesday night. “But I will not walk away from the promise of clean energy.”

Late last year, in an effort to take control of the expanding criticism over DOE’s loan program in the wake of Solyndra, the White House appointed former Treasury official Herb Allison to conduct an evaluation of the performance of DOE’s loan portfolio. Allison was tasked with drawing up recommendations for enhanced monitoring of the loan program and a plan for establishing a system to identify troubled loans before they go the way of Solyndra.

Allison’s two-month review effort ends tomorrow.

A White House official said the report is expected to be received Monday, but it won’t be released to the public until after the administration has reviewed and assessed its findings.

Ener1, whose subsidiary EnerDel makes advanced lithium+ion batteries for electric vehicles in Indiana, did not receive its funding through the loan program and won’t be included in Allison’s review.

But Ener1’s bankruptcy announcement is nonetheless casting a shadow over the upcoming report.

“For those of you keeping score at home, we now have three DOE-backed companies that have declared bankruptcy,” Rep. Jim Sensenbrenner (R-Wis.) said today, referring to Ener1, Solyndra and the Massachusetts-based Beacon Power Corp., which filed for bankruptcy in October after receiving a $43 million loan guarantee. “The news further reinforces the need for congressional action.”

Sensenbrenner has dismissed the Allison audit as a political smokescreen and in November introduced his own bill that would require independent audits of all renewable energy loan guarantees as well as independent reviews for all future loans (E&ENews PM, Nov. 3, 2011).

“My bill would require an honest audit of DOE loans,” Sensenbrenner said today. “The administration is only interested in the appearance of independence. … I don’t anticipate that the White House-sponsored audit will do much to shed light on how three-quarters of a billion dollars of U.S. taxpayer dollars have funded failing companies.

GOP support for battery make

But as Capitol Hill Republicans try to turn the announcement into a political cudgel, they are running up against the problem of having a few of their own on the record as supporting the stimulus-funded project.

Democratic operatives have been quick to point out that Indiana Gov. Mitch Daniels — who gave the Republican response to Obama’s State of the Union speech this week — has visited EnerDel and promoted the company

In 2008, according to an EnerDel release, Daniels joined the CEO and other company officials to announce a major expansion of the company’s Indianapolis manufacturing facilities.

“Eight hundred fifty jobs of any kind is great news. When those jobs are in a technology of tomorrow, like electric cars, it offers the prospect of even bigger news to follow,” Daniels said then, according to the company’s release. “Indiana has what it takes to lead this automotive revolution and today is step one.”

In 2009, Sen. Richard Lugar (R), joined fellow Indiana Sen. Evan Bayh (D) in sending a letter to Energy Secretary Steven Chu expressing support for the company’s application for stimulus dollars.

“Indiana supports this [loan] application, as well as the company’s more recent grant application under stimulus funding, and we add our individual voices to urge its favorable consideration,” the senators wrote. “EnerDel is shovel-ready — in terms of both product and personnel. Their applications offer a significant opportunity to lend valuable taxpayer dollars in this important economic and security objective.

Unlike Solyndra, Ener1 does not plan to shut down. In a press release yesterday, Ener1 announced a restructuring plan that it said would reduce its debt and provide up to $81 million to “recapitalize the company to support its long-term business objectives and strategic plan.” The company says the plan will allow for normal operations and employment levels.

In an interview today, Mary Anne Sullivan, a former DOE general counsel who now serves as head of the law firm Hogan Lovells’ energy regulatory practice in Washington, D.C., said Ener1’s bankruptcy announcement does not mean the company failed to advance the development of lithium-ion batteries.

“The mere fact that they haven’t been able to make their business case so far doesn’t take away from the fact that they may have made a valuable contribution to the development of advanced batteries that will have a bright future,” Sullivan said.