A company has agreed to sell a New York flywheel energy storage plant to repay a $43 million federal loan guarantee it received last year.

Massachusetts-based Beacon Power Corp. reached an agreement with the Department of Energy on Saturday as part of its Chapter 11 bankruptcy proceeding in the U.S. Bankruptcy Court for the District of Delaware. The agreement requires Beacon to sell the Stephentown, N.Y., plant by Jan. 30.

The company filed for bankruptcy on Oct. 30, 14 months after receiving a $43 million loan guarantee from DOE to help produce technology that prevents grid power surges. Beacon previously requested a $23 million DOE grant (Greenwire, Oct. 31).

DOE officials insisted on quickly recovering as much of the remaining loan balance of $39.1 million as possible, which led to the decision to sell the plant, Beacon said. The company is now beginning the process of auctioning off the plant to the highest bidder, company spokesman Gene Hunt said.

Beacon declared bankruptcy after running into uncertainty in the clean-tech market and the lack of federal regulation addressing how much the company could earn at the plant. DOE also changed the restrictions it applied to the federal loan guarantee, which made it more difficult for the company to raise capital, Hunt said.

Congressional focus on the now-bankrupt solar firm Solyndra Inc., which received a $535 million federal loan guarantee, has heightened scrutiny of Beacon's situation (E&ENews PM, Nov. 17).

The Stephentown facility is expected to continue running at full power throughout the auction and sale, Hunt said. Grid operator New York Independent System Operator monitors the status of the plant and can see whether the facility needs to inject or absorb power from the grid to balance supply and demand, Hunt added.

Beacon CEO Bill Capp said in a statement that the company is in preliminary discussions with several strategic investors and private equity firms interested in investing in the restructured company.

"Our goal was to reach a settlement agreement with the DOE Loan Programs Office and we have done that," he said. "We will now focus on attracting new capital to reorganize our company."

The court is giving Beacon full access to $3 million in cash collateral the company provided to secure the loan, including $600,000 in revenue from the plant. The court is also allowing Beacon to sell off other assets such as intellectual property and a patent portfolio, but the company said it hopes to raise enough capital by the end of January to avoid that.

The Federal Energy Regulatory Commission issued a new rule last month that will increase the value of the plant when the regulation takes effect next year, Beacon said. FERC issued an order to boost compensation for technologies like batteries, and flywheels will make the plant more valuable when it goes into effect next year.

"Someone else is going to own the plant, and they're going to benefit from the FERC ruling," Hunt said. "[The rule] was issued 10 days before we filed for bankruptcy."