PLUG OK license plate Should Investors Believe the Hybrid Hype?
Oct 21, 2005 (From the CalCars-News archive)
This posting originally appeared at CalCars-News, our newsletter of breaking CalCars and plug-in hybrid news. View the original posting here.
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An amateur's comments on trading in EEEI today (while not making a big deal about what happens on any one day with one stock -- and while acknowledging that anything could happen tomorrow): EEEI announced its partnership with CalCars at 9:10 AM EST. The stock then rose rapidly from its previous close of $2.98 to $4.60 at 12:10. Then the company made its second announcement of the day -- an investment by In-Q-Tel,and its (welcome) plans to use its bi-polar technology in Li-Ion batteries as well as Ni-Mh. After rising as high as $5.23, it closed at $4.45 (below its mid-day price), up almost 50% on 40x normal daily volume. Despite the dual announcements, it looks like most of the "pop" came from the Calcars announcement. We interpret this as a validation point -- from at least some investors -- for the company's recognition of the potential market for plug-in hybrids.­onedaywonder/­index.cfm?story=20051020 (One-Day Wonder is the name of the column, about rapidly rising stocks)

Rocky Mountain Hybrid By Lawrence Carrel Published: October 20, 2005


Shares of Electro Energy (EEEI) surged 49% to $4.45 Thursday after the battery maker agreed to design a prototype battery pack that could be used to power a Toyota Prius. The agreement, which involves no payment to the company, was inked with the California Cars Initiative, or CalCars, a nonprofit group that's trying to create a market for plug-in hybrid cars. Toyota Motor (TM), the manufacturer of the Prius, has no connection to the deal.

"We have no dealings with Electro Energy," says Nancy Hubbell, a spokeswoman for Toyota. "And the chances of that happening are minimal. When it comes to the development of our cars, that is done in-house. We have engineers in Japan developing our hybrid systems. And our batteries come from Panasonic. It is one of our business partners, and that is a long-standing relationship."

Though Electro Energy didn't claim any relationship with Toyota in its press release, it's not surprising that it wants to connect its name to the wildly popular Prius. With gasoline prices so high, the Prius, introduced in 1997, is the best-selling hybrid in the world. Toyota expects this year to sell more than double the 50,000 vehicles that it sold in 2004. The Japanese auto maker projects its hybrid sales will hit a million vehicles by 2010.

Electro Energy, based in Danbury, Conn., said it plans to develop a battery that can be retrofitted into a Prius. The goal is for the retrofitted battery to provide enough power during short trips so that the Prius engine doesn't need to tap its gas reserves. Hybrids have engines that use both gas and electricity. As a result the vehicles are more fuel-efficient and less harmful to the environment than traditional internal combustion engines. CalCars, the nonprofit partner, sees this as a way to promote the commercial use and mass production of plug-in hybrid electric vehicles.

"The long-term objective would be to commercialize our product and sell it to auto makers as a component of their cars," says Audra Mace, Electro Energy's chief financial officer. "We don't currently have manufacturing capabilities, but we have announced intent to acquire manufacturing capabilities."

Added Felix Kramer, who founded CalCars in 2002: "We're not paying Electro Energy anything. It's a joint development project. We don't have a timeline for when it will be ready. When we have a vehicle, we will make it available."

That's not welcome news for Electro Energy. With a major customer filing for Chapter 11 bankruptcy protection, Electro Energy's revenues plunged 48% to $1.8 million for the six months ended June 30. This resulted in a net loss of $1.9 million, compared with the net loss of $420,004 for the first half of 2004.

Founded in 1992, Electro Energy develops high-powered, rechargeable bipolar nickel-metal hydride batteries for a wide range of applications. It supplies nickel cadmium batteries and components for satellites, aircraft and other specialty applications. The Pentagon and the Department of Energy have purchased its research-and-development services.

Adding a wrinkle to the frenetic trading in Electro Energy's shares on Thursday was the midday announcement that In-Q-Tel, a private nonprofit venture group established by the Central Intelligence Agency, had boosted its stake in Electro Energy. On Monday, In-Q-Tel agreed to purchase 241,692 common shares of Electro Energy, plus warrants to buy an additional 75,829 shares at an exercise price of $3.11 per share, for $800,000. The money will be paid out over 14 months as the company achieves certain development milestones. Electro Energy's public float is just 8.4 million shares, with about 50% of the stock held by insiders.

"As a Securities and Exchange Commission registrant, we have an obligation to report a material event within four business days," says CFO Mace. "And we have complied with that."

In-Q-Tel was formed by the CIA to invest in technologies that could potentially benefit national security. In yet a third press release, Electro Energy said it reached an agreement with In-Q-Tel to develop advanced rechargeable bipolar lithium ion batteries. The company didn't specify what the batteries would be used for, and no payments will be made under the development pact. Work will be done at Electro Energy's battery manufacturing facility in Colorado Springs, Colo.

Quote: "There are a lot of groups developing plug-in hybrids," says Toyota spokeswoman Hubbell. "It's like hot-roders from the 1950s. And the current generation are technology hot-roders who want to supe up cars like the Prius - not with tail fins, but technology and hardware like advanced battery packs. That is separate from our company, but we realize there is a lot of passion for that."

Electro Energy Inc. (EEEI) Share price as of Wednesday's close: $2.98 Share price now: $4.45 Change: 49.3% Volume: 4.0 million shares, daily average 96,700 shares Last time this high: Sept. 6, 2005 52-week high: $14.50 52-week low: $2.75 Forward P/E before announcement: n/a Forward P/E after announcement: n/a

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