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Netherlands

Wind Business: Credit pinch foils Econcern - Buyers emerge on heels of bankruptcy

Bankrupt Dutch holding company Econcern, until recently a rising star in the renewables sector with a worldwide portfolio of wind projects exceeding 1 GW, has managed to quickly find buyers for much of the remains of its business.

Econcern toppled when a EUR150 million credit facility expired on April 1 and it failed to secure new investment for an array of ambitious clean energy projects. With critical cash flow jeopardised, the company went into receivership in late May.

Energy company Eneco, based in Rotterdam, Netherlands, is buying "the core parts" of Econcern subsidiaries Ecofys, a clean energy consultancy, and Evelop, a renewables project developer, according to Econcern's Kate Adlington. Both are involved in wind power. Econcern's biggest wind investment to date is co-ownership with Eneco of the 120 MW Princess Amalia offshore wind farm, the largest in the Netherlands, formerly known as Q7. It came online in June last year.

Econcern had high hopes for its offshore wind business and hoped to score in Britain's 25 GW third round of offshore wind power site leases. The company was intending to invest EUR10-12 billion in wind, solar and other renewable energy on the way to achieving profits over EUR1 billion, on revenue of EUR8 billion, by 2012.

Econcern's demise leaves a trail of wind projects in the lurch. Of Econcern's total wind portfolio, 215 MW is in operation, but at least 896 MW had either only secured financing or reached advanced stages in the permitting process. Econcern was also negotiating an agreement to build a combined 720 MW of wind projects in China (Windpower Monthly, January 2009).

Some 400 employees across Econcern and the two daughter companies will retain their jobs under the Eneco plan. Eneco and Econcern are also close to agreeing a sale of solar photovoltaic subsidiary Ecostream. In addition, much of Econcern subsidiary Betronic, a renewable energy service firm, has been bought by Dutch engineering company Protechnum. Econcern officials would not divulge the value of assets sold.

A series of setbacks exacerbated by the global financial crisis lay behind the failure to secure extended loans past April 1, says Econcern's Elroy Bos. "Continuation of the financing was conditional on certain results for 2008 and because of the delay in projects we experienced in 2008 we didn't meet those objectives," he says. Econcern's wind division, comprising about a third of its business, suffered a loss during the period.

The consortium of lenders behind the expired credit facility were Rabobank, ING, HSBC, Santander, Commerzbank and BNP Paribas, says Bos. The first two have extended a short-term loan to hold Econcern over as it goes through receivership.

Aftershocks

Econcern's performance had been strong, with net profit rising 96% to EUR85 million in 2007, the last year for which the company has released earnings figures. But there were signs of distress in April, when the company announced it would shed some 200 employees. After the credit facility ran out, the company finally buckled under. It was "A business strategy that was trying to do too much at the same time," concedes Bos.

Econcern's meltdown has had a knock-on effect on German wind developer Plambeck Neue Energien, its partner in the 400 MW Gode Wind 1 offshore wind farm under development in the North Sea. Owned 90% by Econcern and 10% by Plambeck, it was to become one of Germany's first truly offshore wind farms.

Plambeck was set to receive payments totalling EUR22.5 million after transferring rights for the 80 turbine project to Evelop in 2007. At that time, it expected financing for construction of the plant to close in the fourth quarter of 2009. Econcern has said it may not fulfil its payment commitments. If so, Plambeck says its forecast 2009 earnings before interest and taxes of EUR29-33 million will drop to EUR5-7 million.

Plambeck is seeking other partners to share the costs of construction. Given the scarcity of offshore wind projects of Gode Wind 1's calibre, independent consultant company 7c Consult says cash-rich energy companies such as Denmark's Dong, Norway's Statkraft and Germany's EnBW, RWE and E.ON are likely to show interest in taking a stake. Gode Wind 1 is already permitted and its electricity will receive fixed payments of EUR150/MWh.

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