Ownership Questions Dog ENER1 (HEV) As It Competes For Loans And Grants

Ener1 seems like it would be one of the companies most likely to benefit from the stimulus plan. After all, the company makes batteries for electric cars and it has a manufacturing plant in Indiana, so it benefits American workers. Plus, the market for these batteries should take off as America tries to reduce the amount of fossil fuels used to power our vehicles. Here’s how Barron’s describes Ener1’s growth potential:

If Ener1 were to win 5% to 12% of a million-vehicle battery market, the company estimates, it could pull in $2.1 billion in annual revenue with 15% margins (based on earnings before interest, taxes, depreciation and amortization). "If you want to apply a 15 times multiple to that cash flow, which in any normal market is a reasonable growth market, you’re talking about a $4.5 billion equity-market cap," says CEO Charles Gassenheimer.

To help expand its facilities here, Ener1 has applied for a $480 million loan from the US Department of Energy and plans to apply for some of a $2 billion dollar grant that is part of the Advanced Battery Manufacturing Initiative in the stimulus plan.

However, questions about the company’s ownership are complicating the application process. Here’s how the Barron’s article I linked to above explains the problem:

As of late February, some 62% of Ener1’s outstanding shares were owned by privately held Ener1 Group. In turn, 66% of Ener1 Group — a recent participant in a $5.7 million loan to Think Global, which is trying to emerge from bankruptcy — is held by Bzinfin, a British Virgin Islands company whose "indirect beneficial owner" is Boris Zingarevich, a Russian businessman. Zingarevich has close ties to Russian President Dmitry Medvedev and Prime Minister Vladimir Putin.

This is a concern for the Department of Energy. There are fears that if Ener1 develops a successful battery, all of the research and development funded with DOE loans and grants could be transferred back to Russia, especially since there are also military applications for the technology.

Speaking to Barron’s, Ener1 CEO responded to these concerns by denying that the Russian investors have any influence on the decisions the company makes. Here’s how he explains the situation:

Gassenheimer says that Zingarevich joined the company "when the two founders ran into financial difficulties… If it were not for Boris, this company would not be alive today. He’s been a tremendous partner, a patient investor. It’s nice to have someone with this level of patience that is fully committed to the story." He adds that Zingarevich "as a matter of SEC rules…is deemed to ‘beneficially own’ a majority of our shares" but has no day-to-day role in the company. And Gassenheimer says that, like many U.S. companies, its investors include Americans and foreigners.

2 thoughts on “Ownership Questions Dog ENER1 (HEV) As It Competes For Loans And Grants”

  1. Write your congressman! The Detroit Big 3 (Who are fronts for the oil companies), the banks (Who conduit the oil company money) and AIG (who keeps the oil companies protected) were handed money in a sack within a few days with no questions asked, no application and no review process but the alternative energy people, ie: wind, solar and electric cars must pay massive fees, file thousands of pages of paper and wait years to see if they MIGHT get some money. It seems as if there is an intentional program going on to delay alternative energy. Already, multiple solar companies that were waiting for that money have been forced to go out of business by the delay and most of the electric car companies are going to die soon too.

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