A123 plans $175 million IPO in 3-6 months

TRAVERSE CITY, Michigan Fri Aug 15, 2008 1:58pm EDT

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TRAVERSE CITY, Michigan (Reuters) - Battery maker A123 Systems expects to go public in the next three to six months through a planned $175 million initial public offering, its chief executive said on Friday.

A123, which is competing to supply next-generation lithium-ion batteries for General Motors Corp's (GM.N) all-electric Chevy Volt, is "strongly considering" building a U.S. battery manufacturing facility, Chief Executive David Vieau told Reuters on the sidelines of an industry forum.

Watertown, Massachusetts-based A123 filed for an initial public offering last week to raise as much as $175 million. It had not detailed the expected timing of its market debut.

"That has to assume everything happens according to the schedule but certainly in three to six months," Vieau said when asked about the timing.

A123 plans to use the proceeds from the IPO to expand manufacturing facilities and pay off debt.

A123 is paired with Germany's Continental AG (CONG.DE) in a joint bid to provide lithium-ion battery packs for GM's heavily touted plug-in hybrid.

Under the deal, A123 would supply battery cells while Conti would build them into the 400-pound, T-shaped battery packs that the Volt will require.

The two companies are in competition with South Korea's LG Chem (051910.KS) for the closely watched Volt contract.

GM has said it will name a battery supplier this year to meet the 2010 launch target for the Volt.

"It's a very close and competitive situation," Vieau said, referring to the Volt battery contract. "Nothing has been determined yet."

A123 currently has manufacturing facilities in South Korea and China, but is looking at building U.S. manufacturing facilities to supply GM and other U.S.-based manufacturers.

"There is a strong consideration given to that," Vieau said.

A123's long-term plan is to have manufacturing capacity in Europe as well to supply European automakers, Vieau said, citing analyst projections that the lithium-ion battery market will grow to $20 billion by 2020.

In a market reeling from high fuel prices, GM has a lot riding on the Volt, which it is racing to bring to market before rivals have an all-electric equivalent on the road.

Skeptics have raised questions about the electric cruising range for the Volt, as well as the cost of the battery pack, which is estimated to add about $10,000 to the price of a vehicle.

But Vieau said it was possible to bring down the initial cost for Volt buyers by leasing the expensive battery to consumers. LG Chem's battery unit Compact Power has said it is also looking at that kind of a financial arrangement to lower the cost.

Leasing could be a viable alternative because the batteries are expected to retain much of their capacity and be ready for a secondary use even after their projected end of life in the car, Vieau said.

He was speaking on the sidelines of the Management Briefing Seminar organized by the Ann Arbor, Michigan-based Center for Automotive Research.

(Editing by Gerald E. McCormick, Phil Berlowitz)

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