The Biden administration is reviewing $200 million in funds it originally earmarked for lithium-ion battery maker Microvast Holdings Inc. amid criticism about the company’s ties to China and as part of a broader evaluation of similar awards made in the sector.
(Bloomberg) — The Biden administration is reviewing $200 million in funds it originally earmarked for lithium-ion battery maker Microvast Holdings Inc. amid criticism about the company’s ties to China and as part of a broader evaluation of similar awards made in the sector.
The Energy Department, in letters to concerned lawmakers that were seen by Bloomberg News, said the funding is undergoing “a thorough post-selection risk-based, due-diligence review.” That’s happening in consultation with the Department’s Office of Intelligence and Counterintelligence among other agencies. The grants were first announced in October.
Microvast shares fell as much as 13% in New York trading on the news.
The funding, part of a broader $2.8 billion award designated to 20 companies from the bipartisan infrastructure legislation signed into law in 2021, came under scrutiny from both Democrats and Republicans who pointed to Microvast’s links to China. The company had previously disclosed in a filing with the Securities and Exchange Commission that a “substantial portion” of its operations are located in the Asian country and that it receives subsidies from the government. Its operations are also “subject to extensive” regulation by the Chinese government, the filing added.
Kathleen Hogan, the Energy Department’s principal deputy under secretary for infrastructure, wrote in the letters dated Feb. 1 that the agency is reviewing all projects and companies selected for the battery funding. “The Department reserves the right to cancel the award negotiations and rescind the selection upon a determination of any failure to satisfy applicable legal, policy, or other” requirements, she wrote.
Shares of the Stafford, Texas-based company soared 40% on Oct. 19 after the Energy Department announced the funding award for the construction of Microvast’s electric vehicle battery manufacturing plant in Tennessee.
China “exerts substantial influence over the manner in which we must conduct our business activities and may intervene at any time and with no notice,” the company wrote in the filing dated April 29 of last year. “We may not be able to protect our intellectual property rights in” China, Microvast added.
In an emailed statement, Shane Smith, Microvast’s chief operating officer, said the company is a publicly traded American company with no ownership by the Chinese government.
“All decisions and control, and all senior management, are centralized in the US,” Smith said, pointing out that all the companies selected for the awards are undergoing the same process.
Microvast’s links to China have drawn the ire of the Republicans on the House Science Committee as well as from Wyoming Senator John Barrasso, who serves as the top Republican on the Senate Energy and Natural Resources Committee.
The DOE has an “apparent lack of sufficient guardrails in place to prevent federal funds from ultimately benefiting” China, Representative Frank Lucas, the chair of the House Committee on Science, Space and Technology, wrote in a letter to Energy Secretary Jennifer Granholm last month. That “raises serious concerns about the Department’s ability to protect US taxpayer dollars from exploitation,” he said.
In a response to a request for comment from Bloomberg News, an Energy Department representative referred to remarks made earlier this month by Deputy Energy Secretary David Turk, who was asked about the award during a Senate energy committee hearing. Turk noted the funding had yet to be finalized and was still undergoing due diligence.
“Unfortunately, most of, in fact, the vast majority of battery manufacturing is in China right now,” Turk said at the hearing. “We have to have an eyes-wide-open strategy, spending taxpayer funding in the way that we all would want taxpayer funding to be spent, re-asserting our leadership, and trying to bring as much of that as quickly as we can” to the US, he added.
(Updates with shares in third paragraph.)
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