Wind Business: Skypower seeks court protection

Another credit crunch victim puts assets up for sale.

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SkyPower Corporation has obtained court protection from creditors following the financial collapse of its principal shareholder.The Ontario Superior Court of Justice granted SkyPower a reprieve under the Companies' Creditors Arrangement Act on August 12.

The renewable energy developer, based in Toronto, says it made the application to ensure the "short-term stability" of the company while it conducts a "quick and efficient" competitive sale of its assets.

"There are several potential bidders who have expressed interest in purchasing SkyPower's assets," says CEO Kerry Adler. "We expect a vibrant process to maximise value for our stakeholders and preserve the business as a going concern for the employees, customers and suppliers."

The firm's troubles stem from the bankruptcy of Lehman Brothers, the US investment bank that bought a 50.1% equity stake in SkyPower in June 2007 through its private equity arm, and increased that to 82.2% with additional equity infusions of US$300 million. Lehman Brothers, a casualty of the subprime mortgage crisis, filed for bankruptcy in September 2008.

Since then, said Adler in an affidavit, the company has been "struggling to meet" its debt obligations.

SkyPower, founded in 2003, has accumulated more than C$250 million in debt and "does not have the funds to meet its liabilities as they come due and is insolvent," says Adler's affidavit.

The bulk of that debt is C$213.9 million remaining on a turbine supply loan from a syndicate led by HSH Nordbank AG of Germany. The company borrowed the money in December 2007 to buy 134 GE Energy 1.5 MW turbines from a third party. The loan matured in March and HSH, after granting several extensions, drew the line at the end of July.

The wind turbines are currently in storage in the Canadian provinces of Quebec and Ontario and the US state of Minnesota. Their purchase was the second major deal SkyPower made for turbines in 2007. In July of that year, it bought 200 GE Energy 1.5 MW turbines from the manufacturer for delivery this year.

In an effort to reduce its debt, SkyPower sold the contractual right to buy 180 of the turbines to EDF Energies Nouvelles this past March. It retained the rights to 20 turbines, to be delivered in May 2010, for use in its Digby wind project in Nova Scotia.

The company will continue its day-to-day operations with its existing management team, and has obtained a US$15 million debtor-in-possession loan from CIM Group to help manage its short-term obligations.

SkyPower brought its first wind farm - the 27 MW Fermeuse project in Newfoundland - online this summer. It won a power purchase contract with the Ontario Power Authority in January for its 64.5 MW Byran Wind Project and, along with joint venture partner Scotian WindFields, also has a contract with Nova Scotia Power for the 30 MW Digby Wind Park. Neither project has started construction. The company also holds interests in wind and solar projects at various stages of construction and development across Canada and the United States.

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