Barron's Thinks Ener1 (HEV) Could Excel With Its Electric Battery

This weekend's Barron's had a bullish piece on Ener1 (Nasdaq: HEV), a manufacturer of electric-car batteries. It said Ener1 could benefit from Barack Obama's vision of having a million electric vehicles on U.S. roads by 2015.

The Democratic Obama administration is pushing hard for green transportation. Barron's said if Ener1 were to win 5% to 12% of a million-vehicle battery market, it estimates, it could bring in $2.1 billion in annual revenue with 15% margins. "If you want to apply a 15 times multiple to that cash flow, which in any normal market is a reasonable growth market, you're talking about a $4.5 billion equity-market cap," says CEO Charles Gassenheimer. Currently, Ener1 has a market cap of $481 million.

A $2.1 billion revenue stream looks a lot nicer than the $7 million in revenue Ener1 had last year, along with a loss of $43 million.

Barron's says the key to Ener1's ambitions is a $480 million Department of Energy loan, which it's seeking to expand its Indiana facilities under the Advanced Technology Vehicle Manufacturing Incentive Program. And soon, HEV hopes to apply for part of a $2 billion DOE grant from the Advanced Battery Manufacturing Initiative, part of the Obama stimulus package.

But, there are questions that could be problematic for Ener1. An indirect beneficial owner of shares is Boris Zingarevich, a Russian businessman. Zingarevich has close ties to Russian President Dmitry Medvedev and Prime Minister Vladimir Putin. Barron's says in theory, foreign control shouldn't matter to the Department of Energy. However, the DOE wants to build an American advanced-battery industry.

Although, there are concerns over Ener1's foreign ownership, is still has survived the first round of the DoE's loan process, which reduced the number of applicants from 75 to 25. Ener1 hopes the $480 million loan will come this year.

Ener1's CEO says his company prospects have never been brighter and it has financing alternatives if the loan is denied. For example, it could seek a strategic partnership with a larger company.

Ener1 says it has more than 90 customers and 15 programs for automotive or defense applications.

The uncertainty over Ener1's future has cut the value of its shares 50% from its high. If Ener1 succeeds and gets a federal loan, it could be a viable and thriving business, but if not, then be careful buying shares of Ener1.

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