EarthFirst says it sought CCAA protection because its cash on hand "would not allow it to meet its obligations" with respect to construction of the 144 MW Dokie 1 wind project in north-eastern British Columbia. By mid-November, construction was on schedule, with four Vestas 3 MW turbines fully erected and another four partially up. The remainder are scheduled to be installed next year.
The project ran into trouble earlier this year when a C$35 million cost overrun and a consultant's report downgrading Dokie's production estimates by 2.3% forced the company to seek an additional C$50 million in debt and equity financing (Windpower Monthly, October 2008). According to court documents, EarthFirst was not able to raise the additional funds in time to meet the conditions of its agreement with WestLB AG, the lead lender, and the senior secured credit facility it had negotiated with the German bank expired. At the same time, court documents say, conditions in the world credit markets meant WestLB was having difficulties syndicating the C$212 million debt facility for the full amount.
Construction at Dokie has continued out of the firm's available cash without the benefit of any project financing, apart from a turbine supply loan from WestLB on which EarthFirst owes about C$130.9 million. WestLB served notice on November 3 that it intends to enforce its security on the Dokie 1 assets. The two parties have agreed, however, that WestLB will not enforce its claim until January 4.
EarthFirst called in consultants in August to examine "strategic alternatives" to allow it to restructure its affairs and complete the project, which is the first in British Columbia. Those efforts have been "severely hindered by the unprecedented crisis in the global financial markets which has impacted on EarthFirst's ability to raise financing or to complete a sale of the company," says EarthFirst. The creditor protection will allow the company to continue to find a solution. "EarthFirst further expects CCAA protection will allow corporations currently engaged in the sale process additional time for due diligence," it says.