Vestas faces shareholder rebellion at AGM

DENMARK: A company specialising in the recovery of investors' money wants shareholders to vote on the appointment of a scrutiniser to look at Vestas' recent business decisions.

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Deminor, which has acquired one share in Vestas, wants the vote to be held at the company's upcoming annual general meeting on 21 March. Vestas' board of directors are recommending the shareholders vote against the motion.

According to its website, Deminor has achieved successful settlements in 2012 from investors in Lehman Brothers and healthcare company Sonova. In its letter to Vestas, Deminor said it wanted the scrutiniser to investigate issues such as accountancy practice and board-level departures.

Under Danish law any shareholder is allowed to submit a scrutiny proposal at a company's AGM. It has to be accepted by a majority.

Deminor manager Edouard Fremault claimed the company represented around "100 institutional investors from around the world". He said the company aimed to "get full transparency of some of the issues shareholders have been facing for the last three years".

"The stock price has been a major problem but it's not just about that. It's about corporate governance. There's a lack of confidence in the board," Fremault added.

A number of areas for investigation are related to the implementation of the IFRIC 15 accounting policy that was introduced by Vestas in 2010. Under this policy, revenue from contracts is not recognised until the projects have been handed to the customer.

Previously revenue was recognised on completion of the wind farm. At the time, Vestas said it was adopting the practice in accordance with international financial reporting standards.

Concerns related to IFRIC 15 include:

  • Whether profit warnings issued by the company since 1 January 2010 are related to the implementation of IFRIC 15 and why the reference of it was withdrawn from a company announcement later that year. Deminor also questioned the reasons behind the cancelation of KPMG's auditing contract that year.
  • Deminor also questioned whether Vestas had correctly disclosed revenue and EBIT downgrades from "low deliveries" in 2012, and had correctly calculated EBIT from its servicing division from 2010 to the first half of 2012.

The departure of former CFO Henrik Norremark is also addressed. Norremark left at the beginning of last year but was in the news towards the end of 2012 when Vestas revealed it was suing him over a number of deals made in India. Deminor wants an investigation into the delayed disclosure of this on 3 October  when the announcement showed Vestas "was aware of the illegal nature of the transactions on 6 September".

In a statement, Vestas said: "In the opinion of the board, additional investigations will be unnecessary and only obstruct the work of the board and impose needless costs on the company."

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