Posted on Mon, Nov. 19, 2007 [/align] Fort Lauderdale's Ener1 powers up BY PATRICK DANNER[/align] Hybrid electric vehicles may be what's hip in today's automotive world, but the battery that provides power already is passé.Automotive and alternative-energy companies, including Fort Lauderdale's Ener1, see lithium-ion batteries replacing nickel-metal hydride batteries in the next generation of hybrid vehicles.Ener1's EnerDel subsidiary aims to be the first large-scale lithium-ion battery manufacturer for hybrid electric vehicles produced by Detroit's three major automakers. The venture, a partnership with automotive supplier Delphi known as EnerDel, initially expects to produce 300,000 lithium-ion batteries a year at a plant in Indianapolis.While lithium-ion battery technology is still in development, Ener1 is counting on EnerDel to become a major player in the field and reverse the publicly traded company's fortunes. Ener1 has very little in the way of revenue and has lost more than $200 million in its short history.Leading the hoped-for turnaround is Ener1 Chairman Charles Gassenheimer, 34, a former money manager who worked at hedge fund Satellite Asset Management, an Ener1 investor. He joined Ener1 in January 2006 and is based in New York office of Ener1 Group, a private equity firm that is Ener1's largest shareholder. The Ransom Everglades graduate is the son of Linda Gassenheimer, who authors a food column for The Miami Herald.'I used to joke that this is a company that had very few mistakes untouched,' Gassenheimer says. But, he adds, ``Without question, the company has always had extremely good technology.'HybridCars.com Editor Bradley Berman calls lithium-ion batteries the 'holy grail of automotive batteries.' They are more powerful, last longer, and perhaps most importantly, cost significantly less than nickel-metal hydride batteries.While hybrid electric vehicles can deliver better gas mileage than comparable vehicles with a gas engine and lead-acid battery, they carry a $3,000 to $5,000 premium. As a result, it can take as long as seven years or more for a driver to recoup the added cost.Lithium-ion batteries, says Charles Gassenheimer, can ``deliver a break even for the consumer in under a year-and-a-half.'Thus far, though, none of the big three U.S. car makers has revealed any plans to introduce a lithium battery to their fledgling lineup of hybrids. (Toyota is out front, with plans to add a lithium battery to the Prius hybrid for 2010. General Motors aims to introduce a plug-in hybrid with a lithium battery -- the Chevy Volt -- possibly within a few years.)'Battery technology is a hot topic,' says Nick Cappa, a Chrysler spokesman. ``It is the most significant hurdle for hybrid technology.'Safety, in particular, is a big concern for car makers. Last year, lithium batteries in laptops short-circuited, causing some computers to overheat and even catch fire, the Associated Press reported at the time. Sony spent $429 million recalling 9.6 million batteries.EnerDel 'has cracked the code of being able to deliver a safe and cost-effective solution,' Gassenheimer says, predicting EnerDel's lithium battery will be featured in as many as three U.S. hybrid electric vehicles by 2010.Berman of HybridCars.com, a consumer-information website, is optimistic but skeptical it will happen that soon.'It's very difficult to determine if the claims of battery companies, which seem very promising, will pan out,' Berman says. A more realistic time frame may be closer to 2015, he says.EnerDel in September was awarded a $6.5 million contract from the United States Advanced Battery Consortium, an organization formed by Chrysler, Ford Motor and General Motors to produce a cost-competitive lithium battery. It's the second leg of a three-phase program.Meanwhile, EnerDel last month announced what it calls the largest lithium battery contract ever with Think Global of Oslo, Norway. The car maker plans to use EnerDel's lithium battery in its Th!nk City vehicle, an electric vehicle that looks like a cross between a Volkswagen Beetle and a Mini Cooper.EnerDel hopes to have its lithium battery in 2009 model-year vehicles of the Th!nk City. It has to deliver by March production prototypes that will enable vehicles to drive up to 100 miles without recharging. A price on the vehicle hasn't been set.EnerDel projects the contract could produce $70 million in battery sales in the first two years, though Think says it could top $200 million.The contract would be a much-needed financial boost for Ener1, which as a development-stage company has burned through cash with not much in the way of sales. The company employs about 85, including five at its Fort Lauderdale headquarters.The firm's combined losses since inception top more than $217 million. And it's been musical chairs in the management ranks in recent years.Ener1 was created in the late 1990s and went public in 2002 when it merged into a publicly traded shell company. Ener1 Group, the New York private equity group, holds an 85 percent stake in Ener1.Ener1 Group is comprised of CEO Gassenheimer, Chief Technology Officer Peter Novak, President Mike Zoi, and Russian timber magnates Boris and Mikhail Zingarevich.Ener1 never benefited from raising any funds through an initial public offering and has been 'miscapitalized,' Gassenheimer says.'It did a lot of its dirty laundry in public,' he says, referring to efforts to clean up its balance sheet by reducing debt.Gassenheimer has focused on cutting Ener1's debt to position the company to take advantage of its technology. The company had negative shareholders' equity of $75 million when he arrived. Today it's at about negative $30 million, and he has told shareholders positive shareholders' equity is near.Though the firm has raised doubts about its ability to remain in business, Gassenheimer says he hopes to remove the 'going-concern opinion' by the end of the year.'I have completely changed the dynamic,' he says. As proof of the turnaround, he says, heavyweight financial firms Credit Suisse and Fidelity Investments took positions in Ener1 this year.Ener1's market capitalization is at about $338 million. The stock closed at 61 cents Friday. With the business EnerDel expects to do in the next couple of years, Gassenheimer says it will make a good takeover target.'There are a lot of really, really big players that want to get into automotive batteries,' he says. ``I wouldn't be surprised if we're able to sell [EnerDel] at a very, very nice profit.'[/align] [/align]