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Stimulus-Backed ‘Green’ Bankruptcy of the Week: Ener1

By Doug Powers  •  January 26, 2012 03:06 PM

**Written by Doug Powers


When the story of the Department of Energy’s green loan program is written someday, the entire book will be contained in chapter 11:

After months of financial turmoil, an Energy Department-backed lithium ion battery company has filed for Chapter 11 bankruptcy protection.

The company, Ener1, received a $118 million grant from DOE in 2010 as part of the president’s stimulus package. The money, which went to Ener1 subsidiary EnerDel, aimed to promote renewable energy storage battery technology for electrical grid use.

But despite generous federal support for the company, Ener1 was racked by problems last year. In October, NASDAQ delisted the company due to non-compliance with Securities and Exchange Commission filing requirements. A month later, the company’s president, chief executive, and top financial officer were fired.

On Thursday, Ener1 announced it will initiate a pre-packaged Chapter 11 bankruptcy plan as part of an agreement to restructure the company’s debt obligations.

The problem? Something the government often fails to take into account when spending tons of other people’s money because they think it can be artificially created later on: Product demand:

In a statement announcing the company’s bankruptcy, CEO Alex Sorokin said that the company’s business plan was crippled by insufficient consumer demand.

“We moved aggressively to reduce costs and shift focus when the marketplace did not evolve as quickly as anticipated. Our business plan was impacted when demand for lithium-ion batteries slowed due to lower-than-expected adoption for electric passenger vehicles,” Sorokin wrote.

Translation: You’re not buying Volts fast enough, America!

Not long ago, Ener1 was the proud recipient of a big sloppy Recovery Summer kiss of death from our very own Sheriff Joe Biden:

There will be others.

**Written by Doug Powers

Twitter @ThePowersThatBe

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