A123Systems Expanding Battery Tech Production and R&D with Fresh $69M Financing

A123Systems says it has reeled in $69 million from GE and other investors to ramp up production of its advanced lithium-ion batteries and enhance development of its smart grid energy storage technology.

The $15 million that GE (NYSE:GE) contributed to the round—via its GE Energy Financial Services and GE Capital units—ups the company’s stake in Watertown, MA-based A123 to $70 million and makes GE the largest investor in the privately owned firm. As part of the investment, Mark Little, senior vice president and director of GE global research, has joined the board of directors at A123. Other investors in the round of include Conoco Phillips, Detroit Edison, Espirito Santo Ventures, North Bridge Venture Partners, CMEA, Alliance Bernstein, Qualcomm, Sequoia, Novus, and MIT.

The infusion of cash will enable A123 to create an unspecified number of new jobs at its facilities in Hopkinton, MA, and Novi, MI, as well as at other plants it aims to open in Michigan. The planned production facilities are expected to churn enough battery cells for 5 million hybrid-electric cars or 500,000 plug-in electric vehicles, according to A123. The company, which now has deals to provide battery systems for 19 vehicle models, said last week that it struck a deal to supply its nanophosphate lithium-ion batteries to Auburn Hills, MI-based Chrysler for electric-powered vehicles, with the first model due out in 2010. A123’s battery cells are designed to provide higher voltage and longer battery life than traditional systems.

“We do not believe our country can afford to wait to develop advanced batteries,” said David Vieau, president and CEO of A123, in a statement. “With this financing, we will begin an expansion that we expect to accelerate upon receipt of government funds. This expansion would create jobs and enable innovation.”

The plan to ratchet up the firm’s manufacturing will also boost R&D of its energy storage technology for supplementing and stabilizing power supplies for the electricity grid.

A123, formed in 2001 with technology licensed from MIT, has now raised more than $300 million, according to a company spokesman.

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