A123 received a $249 million dollar grant as a part of a $2 billion stimulus initiative to promote domestic battery manufacturing.  Under terms of the grant, A123 received a dollar from the DoE for every dollar it spend on building battery facilities in the US.

A123 Family Of Battery Products

A123 Family Of Battery Products

Before declaring bankruptcy in October, A123 had drawn down about $133 million, leaving $116 million still on the table.

At the time of the company's sale to Chinese auto parts giant Wanxiang this weekend, it was unclear whether the grant balance would still be available for further expansion.

It won't.

An unidentified official, who did not wish to be named as the bankruptcy proceedings are still being wrapped up, said that the grant agreement died with A123, and all parties were made aware of this before the Chapter 11 auction began last Thursday.

Wanxiang bid $256.6 million for the A123.  During the proceedings, Wanxiang intentionally left out the more sensitive military aspects of A123's business, and also did not request the grant money, nor did it anticipate doing so,  according to a person familiar with the deal.

The US Department of Defense contracts were sold to Navitas Systems for $2.25 million.

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The DoE does still have the ability to uphold the conditions of the grant, which require taxpayer-funded equipment and facilities to stay in the United States.  Additionally, if the US department does not approve of A123 being sold to Wanxiang it can ask to be compensated for its investment, although to what degree (and how much) is unknown.

Pin Ni, president of Wanxiang America, said he would "respect" any decision on the matter by the DoE.  It is not anticipated that any such request for compensation will be forthcoming however, as Wanxiang has said it plans to re-start and use the US facilities paid for by the grant.

Several politicians and lawmakers have expressed concern over the buyout of A123 by a Chinese company, and the deal still has yet to be ratified by CFIUS (Committee on Foreign Investment in the United States (CFIUS).

Although the deal is expected to proceed without issue (with approval by the Delaware Bankruptcy Court coming as early as today), if for some reason Wanxiang was disqualified by CFIUS, Johnson Controls has said it would still be interested in bidding again.  Johnson Controls and NEC (of Japan) teamed together during the auction and placed a bid if $251 million.

Reuters