In search of funds for survival -- Theolia final results

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French renewable energy producer Theolia is still in a "precarious" position, the company acknowledges in its financial results for 2008. Theolia confirms a net loss of EUR 244.1 million, up from a loss of EUR 48.6 million a year ago. "The aggressive growth ambitions in the past, based on external growth and multiplication of subsidiaries, collided with the current global financial crisis," the company says.

It ascribes EUR 201.9 million of its loss to non-recurrent items, including impairments and depreciated asset values of EUR 105.6 million. Net debt rose sharply from EUR 215 million at the end of 2007 to EUR 498.1 million a year later. It has now returned to its original strategy of developing projects for sale to raise capital for new projects instead of retaining them.

To add to Theolia's woes, the sale of a 12 MW plant in Germany, agreed in 2007 for EUR 17 million, has been cancelled as the buyer is unable to secure funding and the sale of a further 55.5 MW in Germany to Meinhold International Power for EUR 81 million looks increasingly unlikely, given the June deadline.

On the positive side, the company reports strong growth in electricity sales. Income from its wholly-owned generation rose 106% to EUR 55.5 million, while that at wind plant managed for third parties was up 61% to EUR 43.4 million. This reflects the full-year benefit of output from its 50.4 MW wind plant in Morocco and the 165 MW of German operating capacity acquired from GE in 2007.

At the end of 2008, Theolia owned 360 MW of operating capacity on its own account, 27 MW more than a year earlier, and managed 293 MW for third parties in Germany and 18 MW in France (table). Its other main value component, says CEO Marc van't Noordende, is its "solid" pipeline of projects in development, a total of 2580 MW, of which 246 MW is under construction and 492 MW fully permitted. Over 70% of its pipeline is in France, Italy and Germany, with more than half -- 1264 MW -- in France alone.

To build projects, it first needs funds. The company says it realised savings of EUR 10 million in 2008, including halving its headquarters' workforce and closing operations in its non-core markets of Spain, Greece, Czech Republic, Croatia and Poland. It believes more savings are possible. Theolia is also selling over 200 MW of projects and assets in France, Germany and Spain, though Van't Noordende notes it is not a seller's market.

Nevertheless, he reports significant interest from utilities, institutional investors, and infrastructure funds looking for stable and guaranteed long-term cash flows. The level of interest varies from wanting to take a minority position in individual projects to outright purchase of a portfolio. Given the amount of uncertainty surrounding the sales and planned investment, however, Theolia says it is unable to give operational or financial guidance for 2009.

That said, 2009 started reasonably well for the company. Consolidated revenues doubled in the first quarter to EUR 78.2 million, largely thanks to the sale of 35.5 MW in Germany to an undisclosed buyer for EUR 51.9 million. This helped compensate for the fall in revenues from sales of electricity and operation for third parties during the quarter because of poor winds in both Germany and France. Theolia also took receipt of EUR 15 million in early May, originally due mid-January, with respect to the sale of its 24.02% stake in Thenergo, a non-wind asset.

In total this increased the amount of cash for investment from just EUR 9 million at the end of last year to EUR 22 million in mid-May. The news also gave the share price a boost. Following the publication of the 2008 financial results, Theolia shares fell 11.7% to EUR 2.88, while overall the company had lost nearly 90% of its value during the previous 12 months. Shares have now rallied somewhat to trade at around €3.50.

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