September 20, 2023

Kentucky suspends stimulus for battery maker whose federal loan was cut after claims of ties to China

NASHVILLE, Tenn. (AP) — Kentucky officials say they won’t begin disbursing $21 million in economic incentives for a proposed electric vehicle battery facility until the company further explains why the U.S. Department of Energy abruptly canceled a $200 million loan for the project after some congressional Republicans claimed the company has inappropriate ties to China.

Texas-based Microvast was one of 20 companies to win preliminary grants totaling $2.8 billion to boost domestic production of electric vehicle batteries. The company is building battery plants in Kentucky and Tennessee and was in talks with the Energy Department for a $200 million grant funded through the infrastructure bill of 2021.

Yang Wu, Microvast’s founder and CEO, said the company was surprised by the energy department’s decision not to grant the loan, which cut back on plans for a plant in Kentucky focused on a new battery technology, the polyaramid called separator, would feed. The department gave no reason to break off talks.

It’s unclear if the company will still try to build out the Kentucky project. A spokesperson for the company did not respond to emails asking if plans for a facility there were still under development. An investor presentation slideshow days after news of the federal denial broke late last month did not mention Kentucky or the loan. The company has also tried to fight back against claims of undue Chinese influence.

In March, the administration of Democratic Governor of Kentucky Andy Beshear announced the project, which was expected to involve a $504 million investment from the company and create 562 full-time jobs in a new plant in Hopkinsville, expected to open in would be completed in March 2025. would be about 30 miles (48 kilometers) across the state line from the Microvast facility being built in Clarksville, Tennessee. The company has additional locations in Florida and Colorado, and internationally in China, England and Germany.

Now Kentucky officials say they need more information from the company about the federal decision before moving forward with the incentives deal they tentatively approved. When first considering the company’s plans for Hopkinsville, officials weighed “the presence of Microvast’s current U.S. operations, the presence of leadership in the U.S. and the presence of federal funding” and other factors, Brandon Mattingly said. , spokesman for the Kentucky Cabinet for Economic Development.

Officials are continuing an “open communication” with Microvast, Mattingly added.

“Because these agreements are performance-based in nature, no government funding has been provided in connection with this project to date,” said Mattingly. “In addition, no further action will be taken with respect to tax benefits until the company provides more information regarding the DOE’s decision to withdraw funding to the satisfaction of our Cabinet.”

Wu, Microvast’s CEO, said “there will be some timing impact” in bringing the polyaramid separator technology to market as a result of the federal loan decision, which he says does not change the company’s plans for the technology. “.

Following the decision, Microvast issued a rebuttal to the claims of ties to China, including a comment that Wu “is a US citizen”.

“Microvast is headquartered in Texas, its shares are traded on Nasdaq, and operations for our global business are centralized in the US,” Wu said in a written statement following the loan decision. “Neither the Chinese government nor the Chinese Communist Party have any ownership in the company, nor do they control or influence the company’s activities in any way.”

During a February hearing of the U.S. Senate Energy Committee, Senator John Barrasso, a Republican from Wyoming, questioned whether the planned grant to Microvast would benefit China. Barrasso cited a company that filed with the Securities and Exchange Commission in which Microvast said it may not be able to protect its intellectual property rights in China.

In a May 1 letter to US Secretary of Energy Jennifer Granholm, Barrasso said that Microvast’s CEO had “bragged to Chinese media about Microvast’s strong ties to the People’s Republic of China”.

In its March annual filing, Microvast said it has “become the subject of recent research, criticism and adverse publicity regarding US-listed companies with substantial operations in China” and that investigating and defending itself if there is allegations come forward, “will be costly and time consuming”. and distract our management from growing our business.”

Microvast said its focus is on completing the Tennessee facility, saying the company is about halfway through its more than $300 million investment in the plant.

Tennessee economic development officials awarded Microvast a $3 million grant for its Clarksville project, which was announced in 2021. The company has withdrawn all of the grant money, which requires it to create at least 90% of the 287 jobs it promised, according to the state Department of Economic and Community Development.

The Ministry of Foreign Affairs has rejected any further possibility of providing incentives for Microvast.

“To protect Tennessee’s strong economy and security, our administration is focused on recruiting trusted global partners who want to invest in our state and create good jobs for Tennesseans, while remaining vigilant regarding companies associated with a designated foreign opponent,” said Jade Byers, the spokesman for Tennessee Republican governor Bill Lee.

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