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BEHIND THE NEWS: Cash infusion propels pioneering battery firm into future

December 10, 2007

EnerDel, an Indianapolis company pioneering a new kind of battery for hybrid vehicles, has just received a badly needed jolt of juice.

EnerDel's parent, Florida-based alternative-energy firm Ener1 Inc., late last month wrapped up $32 million in equity financing from a group of investment heavyweights, including JPMorgan Chase and Credit Suisse.

The investors received warrants giving them the right to invest another $43 million within 180 days, boosting the total capital commitment to $75 million.

"The investors we have gotten aboard are blue-chip investors," said Ulrik Grape, CEO of EnerDel, which employs 55 at its north-side headquarters and another six in Japan. "It certainly solidifies the financial condition of the company. Potential customers can see we have good financial backing."

Analysts have long said Ener1 has promise, but it's also awash in red ink. Since the start of 2005, it has posted more than $70 million in operating losses.

Ener1 owns 80 percent of EnerDel, with the remainder held by Michiganbased Delphi Corp. Another Ener1 subsidiary is developing fuel cells, which produce electricity through a chemical reaction between hydrogen gas and oxygen. A third develops nanotechnology-based materials and manufacturing processes for battery applications.

It's risky stuff, to be sure, which helps explain why the company's stock trades for just 64 cents a share, and that's after appreciating 178 percent so far this year.

The runup stems largely from the substantial progress EnerDel has racked up in 2007 preparing to roll out a lithiumion battery for hybrid vehicles. EnerDel and a handful of rivals in Japan and the United States are racing to bring lithium-ion car batteries to market. The batteries hold great promise because they are lighter, smaller and higher-powered than the nickel metal hydride batteries currently used in hybrid vehicles.

EnerDel said it is the first firm to successfully integrate a lithium-ion battery into an operating hybrid vehicle. It rolled out the modified Toyota Prius at an industry conference in California this month.

It was the latest in a string of successes for EnerDel. This fall, the company announced it had received $2.5 million from the U.S. Department of Energy and $6.5 million from the U.S. Advanced Battery Consortium, whose members include Chrysler LLC, Ford Motor Co. and General Motors Corp.

In addition, EnerDel struck a $70 million contract to supply Think Global of Oslo, Norway, with batteries for its electric Th!nk City vehicle.

The millions of dollars investors have poured into Ener1 should help EnerDel keep up the momentum.

"It is a strong indication they are going to be around," said William Keegan, a spokesman for Ener1. "One of the problems with early-stage companies is they run out of juice and never get to the point of manufacturing. That's not going to happen here."

If all goes well, EnerDel could swell in size, giving Indianapolis a major economic boost. Laura Engel, an analyst at Stonegate Securities in Dallas, notes that the world's hybrid-vehicle market, now about 500,000 vehicles, is expected to increase to 2 million vehicles by 2010 and 4.8 million by 2017.

The auto research firm J.D. Power & Associates said the number of hybrid models on the market is expected to increase from 11 to 52 by 2012.

Sun gets burned on Finish Line

Sun Capital Partners, which bought Marsh Supermarkets Inc. for $325 million in cash and assumed debt last year, must be regretting it ever took a shine to Finish Line Inc., another locally based retailer.

The Florida-based private equity firm disclosed in a March regulatory filing that it had amassed 2.4 million Finish Line shares, purchasing the bulk early this year for more than $12 apiece.

Turns out, the firm bought high, and now is selling low. A recent Securities and Exchange Commission filing shows Sun recently unloaded nearly 450,000 shares-all for less than $4 a share.

Sun officials did not return telephone calls. As of the Nov. 29 SEC filing, Sun still owned 4.8 percent of Finish Line.

Shoe Carnival shares slide

Shares of Evansville-based Shoe Carnival Inc. hit a five-year low Dec. 4 and now are down 69 percent since February.

The primary culprit: Shoe Carnival's lower-to-middle-income customers are feeling squeezed by housing woes and rising gas prices. The company announced last month that tepid fiscal third-quarter sales had caused profit to fall 50 percent.

NextGeneration Equity Research said in a report last month that macroeconomic issues, not management missteps, were to blame for the company's declining fortunes. At the same time, it offered little optimism that the company would rebound anytime soon.
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