Government funded battery maker A123 denied of remaining grant

Bankrupt government funded battery maker A123 Systems Inc will not receive the remaining balance of a supposed $249 million grant, the United States Energy Department announced on Monday, a day following sale of the company to a Chinese company.

A source of Reuters who asked not to be named because proceedings are on going said that the U.S. government made it clear to all parties involved last week that the rest of the grant will no longer be given.

Wanxiang Group, a Chinese company, won in a bidding against the Milwaukee-based Johnson Controls Inc. the Chinese firm is awaiting the finalization of the deal due to pending court and regulatory approval.

Johnson Controls Power Solutions president Alex Molinari said that he expected the sale to push through and approved by the Delaware Bankruptcy Court next Tuesday.

Meanwhile, Republicans representatives hit the program of White House for clean energy grant saying that the government wasted taxpayer money by funding A123 previously.

A123 received almost $133 million out of the promised $249 million grant during its filing of bankruptcy in October this year.

A123 did not issue any comment on the matter.

The Chinese firm Wanxiang, which bid $256.6 million for the bankrupt A123, reportedly did not ask to get the remaining grant balance, nor expect to receive it, a source familiar with the bidding said.

The department official  said that recipient company of the grant is required to establish facilities and tax-payer funded equipment to be located in the United States.

The Energy department also said it has a right to demand compensation if it does not approve of the buyer of the bankrupt firm.

Wanxiang America president Pin Ni said that his company would respect whatever decision the DOE will make.

A source familiar with the bidding said that Wanxiang did not anticipate a demand from Energy Department because the taxpayer-funded equipment will remain in the United States, as originally intended by A123.

Many lawmakers expressed their concern regarding the acquisition of A123 by Wanxiang, which still needs final approval from the powerful Committee on Foreign Investment in the United States (CFIUS).

Treasury Secretary Timothy Geithner heads the committee, an inter-agency group that scrutinizes foreign deals for security concerns.

Critics argue that the technology of A123 should not be allowed to be given to Chinese hands after the firm received government funding.

The review process at the Treasury Department is the last hope for ensuring some regard for U.S. interests,” said Republican Senator Chuck Grassley of Iowa in a statement last Monday.

Grassley and Senator John Thune of South Dakota are some of the strongest critics of the deal, and has repeatedly raised some concerns about the pursuit of the Chinese firm.

If the United States government will not approve the acquisition, A123 will be back on the auction block.

Molinari said his company is very interested to bid again. He also added that a runner-up bid made jointly by NEC Corp of Japan is worth $251 million.

Wanxiang did not buy A123’s business that works together with the United States Defense Department, which many lawmakers believe would pose a national security threat. The said business was sold separately to Navitas Systems for $2.25 million.

The Obama administration once boasted of A123 as a success story. The company struggled this year after some serious technical missteps and weak demand for electric cars.

The grant given to A123 was part of the $2 billion stimulus package of the Obama administration to enliven domestic battery production. The Energy Department Secretary Steven Chu once visited one of the company’s plants in 2010.

source: reuters

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