Ener1 Files For Bankruptcy Protection

On Thursday, lithium-battery developer Ener1, Inc. (NASDAQ: HEV) filed a voluntary petition in the U.S. Bankruptcy Court in the Southern District of New York for Chapter 11 bankruptcy protection.

The writing may have been on the wall -- share prices for the Indiana-based company were miserable in 2011.  The horrible showing was capped by the company being ousted by the NASDAQ on December 12th.

In May 2011, Energyboom's Terry McDonald reported that shares were down 53% during 2011 and down 46% over the previous year.  This was due, in part, to the company suffering major net losses, which it largely attributed to the write-down of its 48% investment in Think Holdings, AS, a Norwegian electric vehicle manufacturer.

Think Holdings, stopped production of its Think City electric vehicle in March 2011, filed bankruptcy in June (the fourth time in the company's 20-year history), and was bought in July by Russian Investor Boris Zingarevich.

The turmoil surrounding Think Holdings, in particular, the halt of production, is a major factor in the reason why Ener1 has had to file for bankruptcy. According to interim CEO Alex Sorkin, who took command of the company in November 2011, this is due to an exclusive contract between the companies for Ener1 to provide batteries for Think EVs.  Sorkin also cited a slower than expected adoption of electric vehicles as impacting the company's business plan.

Ener1 estimates it will re-emerge from the restructuring process in 45 days with books balanced and a clear plan to move ahead. As Sorkin says, "We believe that the restructuring plan will enable us to address our business and financial challenges comprehensively, quickly and efficiently, and position us to compete much more effectively in the energy storage market."

Considering it was an investor, the U.S. government may be counting on the company surviving its current situation. In 2009, the Department of Energy granted Ener1 subsidiary, Ener1 Del, $118.5 million as part of the Obama Administration's stimulus package. Ener1 Del has recieved 55 million (which the company has had to match with its own funds) from the grant so far.

Ener1 is the third energy company backed by the U.S. government to file for bankruptcy in the last four and a half months. In September 2011, solar developer Solyndra, who was backed by a $535 million DOE loan guarantee, claimed bankruptcy; this was followed in October by the failing of Beacon Power Corp., which had been awarded $43 million.

These failed investments have become a political firestorm for the Obama Administration. Republicans claim there has not been enough discernment from the government when its "dolling out" the public's money.  Republicans claim this represents serious negligence given the state of the economy.

The Ener1 bankruptcy comes just days after President Obama re-pledged his commitment to developing new, clean energy in his State of the Union address. After conceding that "some technologies don’t pan out; some companies fail," the President went on to say:

"But I will not walk away from the promise of clean energy.  I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here. We’ve subsidized oil companies for a century.  That’s long enough. It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable, and double-down on a clean energy industry that never has been more promising.  Pass clean energy tax credits.  Create these jobs."

Now, just four days later, Ener1's bankruptcy has his opposition raising more questions and concern about federal funds supporting private clean energy companies.

Commenting on Ener1's bankruptcy filing, Congressman Cliff Sterns (R) of Florida said:

"We have a national debt exceeding $15 trillion, and the Administration is borrowing money from China to waste on subsidies for companies that are not viable.  It is interesting that Ener1 made the filing after the President touted subsidies for batteries given that the Administration asked Solyndra to hold off the announcement of job losses until after the 2010 elections.”

Image Credit: kwrintl.com