Applicants must show their products are technically feasible

The Zingareviches have vast interests in timber. In the early 1990s, they and Zakhar Smushkin began building what is now Ilim Holdings, based in St. Petersburg, Russia. In 2004, Forbes listed the brothers among the richest Russians. In the '90s, Ilim's legal director was Dmitry Medvedev. In 1999, Medvedev joined Putin's cabinet; last year, he become president. Ilim has prospered.
In 2007, it sold a 50% stake to International Paper (IP) for $620 million. Boris, Mikhail and Smushkin are on Ilim's board.
Attempts to reach Zingarevich through Ilim Group and through Bzinfin's attorney in Geneva were unsuccessful. However, in a statement, Ener1 blames the emergence of this issue on the efforts of a short seller to drive down its share price. It also notes that Boris Zingarevich has "indirect ownership of less than 40%" of its shares.
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.
Today, he adds, Ener1 has more than 90 customers (although he won't name them) and 15 programs for automotive or defense applications. Among potential customers: a large European auto maker now testing a laptopbattery pack for a hybrid; another big customer testing an electric-vehicle pack; and a national postal service considering converting vehicles to electric power.
"Dispositive and voting power" over the Ener1 shares held by Ener1 Group is exercised by a board that includes CEO Gassenheimer, Boris Zingarevich, Mikhail Zingarevich (Boris' brother) and Alexei Paramonov.
In any case, Ener1 has survived the first round of the DoE's loan process, which whittled the number of applicants to 25 from 75, and now must pass the DoE's due-diligence vetting.
Applicants must show that their products are technically feasible and their businesses are financially viable. The DOE requires that applicants have manufacturing facilities in the U.S., that engineering integration be done here, and that related costs be paid to American suppliers. The $480 million loan, it's hoped, will come through this year.
In theory, foreign control shouldn't matter to the Department of Energy. However, it wants to foster an American advanced-Toshiba PA3241U PA3241U-1ACA AC Adapter battery industry. The U.S. players now include A123 Systems, founded at the Massachusetts Institute of Technology, and Johnson Controls (JCI), which has a joint venture with France's Saft Groupe (SAFT.France). Says Frank Gaffney, president of the Washington-based Center for Security Policy: "We desperately need to be establishing an industrial base in this country for a Toshiba PA3241U-1ACA AC Adapter battery technology... . [But] it's insanity to be building a national Toshiba PA3241U-2ACA AC Adapter battery infrastructure in the pockets of the oligarchs of the past and future Soviet Union." Kevin Kearns, president of the Washington-based U.S. Business & Industry Council, worries that Ener1's DOE-funded expertise could "be sucked out of the company and sent back to Russia." One factor behind such concerns: Advanced Toshiba PA3260E batteries are likely to have military, as well as civilian, uses.
The Ener1 CEO is clearly upset about the low stock price; he blames hedge funds having to sell HEV shares to meet redemptions. Ener1's prospects have never been brighter, he contends, and it has financing alternatives if the loan is denied. For example, it could seek a strategic partnership, like that of Toyota with Panasonic or Johnson Controls with Saft. Gassenheimer says he's been in talks about such deals since Ener1 bought out Delphi.