German solar developer S.A.G. Solarstrom today filed for insolvency citing unresolved refinancing negotiations that have failed to bridge the company's 20 million liquidity shortfall.
Having held talks with banks and other creditors since late November, the company has concluded bridging current cash shortfalls is not possible, and that it will be unable to meet the interest payment on a corporate bond due on December 16.
While the company is not over-indebted in accounting terms, it has decided that the implementation of self-administered insolvency proceedings is the best course of action. The group will appoint a provisional trustee to oversee a restructuring over the next three months, working closely with creditors in an attempt to salvage the group.
"Within less than four weeks, we were confronted with a situation that was completely unforeseeable for us," said Solarstrom CEO Karl Kuhlmann. "We had firmly scheduled cash inflows from the closing of the sale of German photovoltaic projects, from the closing of an Italian project with seven photovoltaic systems and from a loan that we had granted to an Italian project company, for November and December.
"They were delayed for completely different reasons. Altogether, a sum of over 20 million is lacking. It has not been possible for us to cover this significant liquidity shortfall, depite all our efforts."
Damaging cycle of insolvency
As a solar supplier, Solarstrom has been sorely exposed to the recent inequities that have bedeviled Europe's PV industry in 2013. Following delays in receiving funds from the enforced sale of many of its German projects, the company was already playing cash flow catch-up and has been further injured by the insolvencies of a key module supplier and several service providers over the course of the year.
As a result, bank financing for many of its planned projects was withdrawn or refused; a situation exacerbated by delays in million-euro-range cash inflows.
Last week, the company warned pv magazine that it may have to quit the industry as a result of its escalating project costs and widening cash gap, hinting at further problems caused by the collapse of a major contract deal with an international energy company.
Solarstrom last week announced the unnamed client's demands of the developer caused the project, believed to amount to 117 MW, to fall through. After having its BB+ credit rating suspended earlier this week, it would appear that the writing has been on the wall for the company ever since.
Future cash flow and restructuring
A press statement issued today confirmed that funds due from Italy in November are now unlikely to be received until 2014 due to a delay in the sale of an Italian system portfolio that caused a legal dispute with a local network operator. Additionally, there has also been a delay in the payment of a loan granted to an Italian project company that had earmarked Solarstrom's services.
"The fact that we will not implement our project pipeline has only affected the insolvency to the extent that the negative operating result now expected has made the refinancing talks more difficult," explained Kuhlmann. "I am convinced that S.A.G. Solarstrom has a very realistic chance of continuing the company through restructuring, due to its profitable units and enormous expertise."
Over the next three months, Solarstrom will work with a provisional creditors' committee and provisional trustee to self-administer its insolvency proceedings in the hope of identifying a sustainable path towards survival.
During a conference call chaired by Mr. Kuhlmann on Friday afternoon, the CEO revealed that there were no immediate job cuts planned for the 191 employees and that he was confident a restructuring plan could be successfully concluded within the next three months.
Currently, confirmed Mr. Kuhlmann, Solarstrom has no plans to exit the project business, although he did share his concerns that the future of the industry in Europe is likely to be "very difficult".
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