By Timothy Gardner
WASHINGTON (Reuters) -The U.S. Energy Department on Monday canceled a $200 million grant for lithium battery company Microvast Holdings, a source familiar with the matter said, after lawmakers cited concerns over its alleged links to China's government.
The department had been in talks with Microvast over the grant to help build a plant in Tennessee. The grant stemmed from the $1 trillion 2021 bipartisan infrastructure law.
Two Republican lawmakers criticized the decision to grant the funding in a letter last December to Energy Secretary Jennifer Granholm, saying Microvast had ties to the Chinese Communist Party (CCP) that raised "serious concerns about the department’s ability to protect U.S. taxpayer dollars."
Representative Frank Lucas, a Republican, said the grant's cancellation was "a win for taxpayers and American businesses."
"These funds are intended to strengthen America’s battery production and supply chain, not to tighten China’s stranglehold on these supplies," he said in a statement.
The lawmakers have not provided details about the company's alleged ties to the Chinese government.
Texas-based Microvast did not immediately respond to a request for comment. The company has manufacturing plants in Tennessee, Germany and China.
The source declined to say whether the decision to cancel the negotiations had anything to do with concerns about China ties. Contract decisions are made on factors including a company's past performance, financial management and accounting systems, the source said.
The Energy Department has "a rigorous review process prior to the release of any awarded funds, and it is not uncommon for entities selected to participate in award negotiations ... to not ultimately receive an award," a spokesperson said.
The grant had been set to support work by General Motors and Microvast on developing specialized EV battery separator technology and building a new separator plant. The projects had been expected to create hundreds of jobs.
GM did not immediately respond to a request for comment.
Senator John Barrasso, the top Republican on the Senate energy committee, had previously written to Granholm saying that the award was antithetical to the intent of the infrastructure law.
On Monday Barrasso said the administration of President Joe Biden, a Democrat, should "overhaul its grant making process and conduct due diligence before issuing press releases" on grants.
(Reporting by Timothy Gardner; additional reporting by David Shepardson and Costas Pitas; Editing by Bill Berkrot and Stephen Coates)