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More questions than answers available -- Another profit warning from NEG Micon

Following its third profit warning in a year, NEG Micon says it will be requesting the stock market for an extra EUR 135 million in the spring, a sum it expects existing shareholders to cough up. It is the fourth capital increase in four years. The big unanswered question is what NEG Micon wants the money for.

If, as the company's directors indicate, the sum is to be used to strengthen NEG Micon's financial basis, how will the company go about it? Or is the money to be used to reduce its bank debt of EUR 242 million, in reaction to pressure from nervous bankers? What security is there that the directors of the company now have the problems under control?

Questions have been many following NEG Micon's warning last month that it now expects to make a loss this year of EUR 40-67 million, down from the plus EUR 0-13.45 million it most recently confirmed in August. Earlier in the year the company reduced its expectations from a EUR 33.6 million profit for 2003.

NEG Micon blames its latest reduction of expectations on delayed projects and reduced turnover in Germany -- a problem area the company claimed to have tightened control of two profit warnings ago. Share prices immediately dropped by 20%, despite news of a 90.75 MW order for New Zealand and a conditional order for 82.5 MW for South Australia, both placed by New Zealand's Meridian Energy and together worth around EUR 150 million. The company's share value was brought down to EUR 242 million, compared with Vestas' EUR 1.7 billion.

A new question was raised by the behaviour of NEG Micon's main shareholder, Schouw & Co, which followed its immediate pledge to provide EUR 33.6 million to the capital increase with an explanation that it would neither say yes or no to the increase before it knew the prospects. What prospects did Schouw & Co's boss Jens Bjerg Sørensen have in mind? A strengthened NEG Micon or prospects for a sale? If a sale was on the cards, Schouw & Co, which shares its board chairman, Jørn Ankær Thomsen, with NEG Micon, would be the first to know.

Analysts, meantime, pointed out that NEG Micon shares were now so cheap that it would be strange if they were not of interest to an existing wind turbine manufacturer, or one of the big name companies looking to get into the wind business. NEG Micon's broader product base made it a more interesting purchase proposition than a company like German Nordex, they said.

The questions remain unanswered. NEG Micon director Torben Bjerre-Madsen again declares himself painfully embarrassed over yet another profit warning. He says he can well understand people who want to see evidence that the company can keep its promises. He now promises that there will be no profit warnings in 2004. The opinion of analysts is that if that promise is also broken, a sale of the company is the only remaining option.

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