Valence Applies for Federal Grant to Construct Advanced Battery Production Facility

Proposed Central Texas Plant Potentially Online in 2012 with Expected Full Operational Capacity by 2016 Providing up to 4,000 Jobs

AUSTIN, Texas May 27, 2009; Valence Technology, Inc., a leading U.S.-based manufacturer and supplier of lithium iron magnesium phosphate energy storage solutions, today announced it has submitted a grant application to the U.S. Department of Energy under the Electric Drive Vehicle Battery and Component Manufacturing Initiative. This initiative supports the construction of facilities to manufacture advanced battery technology components for electric vehicles. The company’s proposed facility would manufacture lithium phosphate cathode material, high-capacity advanced cells and battery packs for electric drive vehicles and other applications.

Valence submitted its application requesting $225 million in federal grant funds over a three-year period and plans to fund the remaining $359.4 million (61.5% of the total project costs) through state and local tax and other incentives. The annual production capacity of the proposed facility is estimated to be 660,000 battery packs or more than one million kilowatt hours (kWh) of equivalent available energy and can be online as early as August 2012. This grant application is a separate request from the Company’s March loan application under the Advanced Technology Vehicles Manufacturing Incentive Program (ATVMIP). Funds under both programs are available to qualified companies.

“Our recent grant proposal includes an aggressive construction plan for manufacturing capacity that exceeds the Department of Energy specifications,” said Ross Goolsby, Valence Chief Financial Officer. “We can put this manufacturing plant online in the U.S. and begin production quickly because after 20 years in business we already possess the manufacturing know-how, comprehensive intellectual property portfolio, next-generation technology and experience needed to deliver results and generate new jobs.”

Funds totalling $2 billion for grants under this initiative have been appropriated under the American Recovery and Reinvestment Act of 2009, which aims to stimulate the economy and create new American jobs by specifically utilizing renewable energy technologies that will shift the nation to a low-carbon economy.

“Texas knows energy and as a United States public corporation we appreciate Texas’ determination to become the leader of the next energy evolution. Valence Technology wants to put that expertise to work with this grant. We’ve already demonstrated our manufacturing capability overseas and know we can bring our technology and manufacturing expertise to Texas, putting more Americans to work sooner rather than later with safe lithium phosphate technology,” said Robert L. Kanode, Valence President & CEO.

“We’re pulling together infrastructure and suppliers to rally around our high quality, proven battery systems. The multiplier from our success will mean success for the region, attracting industries with next generation technologies. Valence Technology already has the capabilities to produce and deliver large-format energy solutions for electric drive vehicles, hybrids and other applications. Funds from this grant are important to ensure advanced battery jobs and advanced technologies grow and thrive on U.S. soil,” continued Kanode.

“With significant incentives projected from the state, county and city governments, Leander, Texas, was chosen as the primary site for our advanced battery manufacturing plant,” added Goolsby. “Both State and City officials have demonstrated incredible support for the plan to provide up to 2,700 new, high-tech jobs in the Central Texas region by 2012 and up to 4,000 jobs by 2016. The State of Texas, Williamson County and the City of Leander are projecting and seeking approval of more than $150 million in incentives over a ten-year period.”

This past March, Valence Technology submitted an application to the Department of Energy’s Advanced Technology Vehicles Manufacturing Incentive Program for low interest loans to help finance the construction of this new world-class lithium iron magnesium phosphate battery manufacturing facility.

About Valence Technology, Inc.

Valence Technology is an international leader in the development of lithium phosphate energy storage solutions. The company has redefined lithium battery technology and performance by marketing the industry’s first safe, reliable and rechargeable lithium iron magnesium phosphate battery. Celebrating 20 years in business, Valence today offers a proven technology and manufacturing infrastructure that delivers ISO-certified products and processes that are protected by an extensive global patent portfolio. Headquartered in Austin, Texas, Valence has facilities in Nevada, China and Northern Ireland. Valence is traded on the NASDAQ Capital Market under the ticker symbol VLNC. For more information, visit http://www.valence.com.