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Analysis: Shareholder consolidation issues add to developer woes

GERMANY: At a time when wind developers in Germany are navigating a new period of regulatory upheaval and facing competitive auctions to set onshore wind support levels, it is not ideal to also have to channel corporate energy into resolving shareholder disputes.

The 22.4MW Kisselbach wind farm near Mainz, developed by Juwi
The 22.4MW Kisselbach wind farm near Mainz, developed by Juwi

But issues with recent wind-developer acquisitions may prove a bigger headache for the companies concerned than preparing for regulatory change.

In both MVV Energie's rescue of wind and solar developer Juwi and PNE Wind's acquisition of another German wind developer, WKN, lack of adequate due diligence appears to be at the root of the problems.

MVV Energie, a stock-exchange-listed energy supplier, hit the headlines in August, when it unexpectedly announced a further capital injection of €70 million, raising its stake in Juwi to 63.1%.

This came less than a year after the initial €99.4 million capital injection to acquire 50.1% of Juwi at the end of 2014.

On 30 July 2015, shortly before the second capital increase, MVV Energie had already been confronted by a non-profit consumer advisory service for investors.

The Verbraucherzentrale für Kapitalanleger (VzfK), an association representing shareholder interests, appealed to MVV Energie shareholders to call for a general meeting to demand MVV's main stakeholder — the city of Mannheim — and MVV's company management pay for damages resulting from the Juwi takeover.

Juwi's net loss of €52.7million for 2013 — after a net profit of €4.86 million in 2012 —revealed its dire straits.

The company was no longer able to meet credit commitments and its lending banks could have cancelled its credit lines at any time. In December 2014, a debt restructuring with banks and creditors was agreed and MVV Energie rescued Juwi with €99.4 million, according to a Juwi financial report dated 26 May 2015.

VzfK accused MVV of injecting nearly €100 million in capital for its 50.1% stake in Juwi without first performing sufficient due-diligence investigations.


"A good example of the doubtful quality for the project pipeline is the Neu-Anspach wind farm, which MVV's board of directors said at the company annual general meeting on 13 March comprised 15MW, when a superficial check would have shown the permitting process covered only 12MW and was unlikely to be granted a permit", claimed VzfK.

"The only logical reason why the project has not yet been abandoned — and why more MVV shareholders money is being wasted — appears to be the attempt to cover up inadequacies in the acquisition," VzfK continued in its July complaint.

The association also complained of Juwi Wind's (now known as Juwi Energieprojekte) links to a corruption affair in the southern state of Thuringen, involving a local politician who also had a consultancy contract with Juwi.

Under suspicion of gaining undue advantage in the affair, Juwi co-founder Matthias Willenbacher stepped down as board member at the end of March, but the risk of damage to MVV's reputation remains, VzfK claimed.

MVV reacted in August, recommending that its stakeholders do not respond to the VzfK initiative, saying that the charges "are to a large extent linked to a broad rejection of MVV Energie's policy orientation towards renewable energies".

It stressed that the acquisition and capital increase was carried out on the basis of sufficient information and in line with all obligations. Thanks to its stake in Juwi, MVV Energie "can participate more strongly in renewable-energy growth than previously", the company added.


Developer PNE Wind's troubles erupted following its acquisition of another wind developer, WKN, in 2013. Again due diligence seemed to have been neglected, but PNE Wind's generous management remunerations have also triggered shareholder acrimony.

The purchase price paid by PNE Wind for acquisition of WKN "may prove to have been too high", said rating agency Creditreform in its April 2015 rating report for PNE Wind, granting it BB-status.

PNE Wind is seeking damages of up to €6.2 million from Volker Friedrichsen, the former main owner of WKN and a current stakeholder in PNE Wind, the rating agency said. In July, Martin Billhardt, CEO of PNE Wind, added that the company was looking at further legal claims of €17 million.

In its 2014 annual report, PNE Wind conceded that assumptions regarding the facts and the business development of WKN "may prove to have been too optimistic and/or PNE Wind could have estimated risks in connection with the business activity of the WKN Group wrongly or too optimistically". (Volker Friedrichsen founded WKN in 1991.)

Meanwhile, following PNE Wind's failed annual general meeting on 16 June — when debate on the hot issues of WKN and level of remuneration of the supervisory and management board remained unresolved before the midnight deadline — PNE Wind announced on 14 August that the complete supervisory board would step down, along with Billhardt, as of 30 September.

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