Buyout of developing arm

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The slowdown in the German wind energy market is the primary factor behind Repower Systems' decision to divest its wind development subsidiary, Denker & Wulf, the turbine manufacturer says. The company was offloaded late last year through a management buyout after an unnamed "large German bank" agreed to provide finance. Repower will now concentrate on its core activity of turbine manufacturing and expansion of foreign business, it says.

News of the sale comes just three months after Repower issued a statement denying recent newspaper claims that the company was suffering liquidity constraints and thus planning to sell Denker & Wulf. Then it stressed "the board of management wishes to point out there are no plans and no intention to sell Denker & Wulf." Repower's Thomas Schnorrenberg still stands by that statement, saying "liquidity is and was sufficient. A sale to a third party was not planned." The management buyout, on the other hand, he suggests, has been on the cards for some time but bank financing was not readily available. "This came quite suddenly at the end of the year," he says.

Repower sold its 84.15% stake in Denker & Wulf to its managers, Torsten Levsen and Rainer Newe, for a mandatory minimum price -- to be confirmed following a full financial appraisal. The two men now hold just over 99% in the developing company, with the remaining stake held by REDKW Holding company. REDWK, which is owned by the two founders and namesake of Denker & Wulf, also owns 28.99% of Repower Systems. With 30 staff on its payroll, up to 70 MW of wind capacity operating and another 30 MW under construction, Denker & Wulf plans to continue its focus on the German market for now.

While Repower says it will work with Denker & Wulf in the future under a preferred supplier agreement, Schnorrenberg says another reason for the sale is that project development is capital intensive. Repower needs its resources "to move into new markets and for new technology." The company's foreign business is expected to account for more than 50% of its sales in 2005, it says, forecasting a two-figure rise in sales this year. Sales in 2004 have remained around the same as 2003's EUR 299.3 million, but a drop in earnings before interest and taxes to EUR 5-10 million is expected compared with EUR 12.9 million in 2003.

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