A123Systems Wins $249M Piece of DOE Grants

8/5/09

A123Systems, the Watertown, MA-based developer of advanced lithium-ion battery systems, appears to be figuring hugely into President Obama’s plans to nurture U.S. development and manufacturing of electric-powered vehicles and cutting edge batteries. The company announced today that it has won a $249 million grant from the U.S. Department of Energy and plans to use the federal dollars to fund construction of manufacturing operations on U.S. soil.

The company’s manufacturing plan, which begins with construction at a site in Livonia, MI, was one of 48 projects that garnered a total of $2.4 billion from the DOE’s initiative to fund development of next-generation electric vehicles and batteries, according to a press release from the White House. A123 said it will have to match the DOE grant funding with its own money over an unspecified period. The firm received the second-largest grant among the 48 recipients, second only to a $299.2 million grant awarded to Milwaukee, WI-based automotive and industrial products firm Johnson Controls (NYSE:JCI), according to this list of grant winners. A123 said it is also applying for grants under the DOE’s advanced technology vehicles manufacturing program.

A123, a spinout from the lab of engineering professor Yet-Ming Chiang at MIT, said it plans to build U.S. plants to produce its patented nanophosphate cathode power and to assemble various components and the actual battery packs that can be integrated into automobiles. The company declined to be interviewed for this story because of its ongoing registration to complete an initial public offering. The firm has already raised more than $350 million in private equity from a bevy of investors including General Electric (NYSE:GE), its largest shareholder, and North Bridge Venture Partners of Waltham, MA.

“This grant is another exciting step towards creating an American battery infrastructure, which may reduce our dependence on foreign oil and increase our nation’s energy security,” said David Vieau, A123′s president and CEO, in a statement. “The capital provided by the DOE’s investment will help us speed our growth and better compete in global markets.”

The firm, founded in 2001, revealed in April that it had raised $69 million in private equity dollars from various investors to fund its manufacturing projects. At the time, the firm had signed deals to provide batteries for 19 different vehicle models, including electric-powered cars in development at Auburn Hills, MI-based Chrysler. The firm’s batteries are designed to provide higher voltage and last longer than traditional systems.

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