Ener1 Strengthened its Advantage in the Lithium-Ion Battery Race

Ener1, Inc., maker of advanced battery technology designed to power the next generation of hybrid and electric vehicles, strengthened its advantage in the lithium-ion battery race, by acquiring exclusive ownership of EnerDel, including essential manufacturing and intellectual property assets from former joint venture partner Delphi Automotive Systems LLC. The agreement was approved by the Honorable Judge Drain, who is overseeing Delphi's efforts to emerge from bankruptcy.

"The agreement gives Ener1 sole ownership of crucial assets at an important time in this rapidly growing industry," said Ener1 Chairman, Charles Gassenheimer. "It gives us more freedom and greater opportunity to bring innovations to market faster and at lower cost. The transition also paves the way for new strategic partnerships, something we have long said is a key competitive objective."

In addition to the state-of-the art manufacturing facility near Indianapolis, Indiana, Ener1 emerges from the Delphi arrangement with a wealth of human capital and industry know-how, specifically a world class battery management systems team that makes it an industry leading end-to-end solutions provider. Ener1 also received contributions to its already extensive patent portfolio. Delphi will have no operating control of the EnerDel subsidiary and will no longer maintain a seat on the company's Board of Directors.

Ener1 has a number of key advantages in the intensely competitive lithium-ion market. In addition to having the only U.S. manufacturing facility, the company has close ties to the prestigious Argonne National Laboratory and ITOCHU Corporation -- a major shareholder and key distributor of the high-precision equipment needed for lithium-ion battery production.

The company recently received the prestigious R&D 100 award for excellence in its technology and uniquely innovative design. The award is shared by EnerDel and its partners at Argonne. EnerDel is an active member of the United States Advanced Battery Consortium, which works closely with automakers, component companies and others to accelerate the commercial development of new battery technology.

EnerDel has an agreement to provide up to $70 million worth of batteries for the Think contract over the next two years. The company recently delivered a confirmation prototype to Oslo, Norway, for Think's installation into a Th!nk City vehicle. The next production milestone is the delivery of 20 pre-production units to Think from the end of August.

"The market demands new technology from suppliers, particularly now when the need to transition away from fossil fuels is great. This is an opportunity for us to unlock important resources and bring them into play quickly and competitively," Gassenheimer said. "It means greater value for Ener1 as a company."

In effecting the transaction, Delphi transferred to Ener1 the entirety of its 19.5% equity interest in EnerDel, including its EnerDel Series A Preferred Stock. In exchange, Ener1 transferred to Delphi 2,857,143 million shares of Ener1 Restricted Common Stock and $8 million in cash, and will revise the exercise price for certain outstanding warrants to $5.25. The warrants are exercisable into 750,000 shares of Ener1 Common Stock and were originally issued to Delphi in October 2004, as part of the original JV formation.

Under the original formation agreement, Ener1 had the right to first refusal with respect to any offers to buy out Delphi's interest in EnerDel. Ener1 exits the agreement maintaining its debt-free status. At current burn rate, the company is fully funded at present levels of activity through the end of 2009.

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