Photo Credit: Senvion
Shares in Senvion were in free fall Wednesday after the embattled German wind turbine maker announced it was entering a process called self-administration in a last-ditch turnaround attempt.
The Hamburg-based manufacturer said the move was to safeguard an ongoing transformation program “after refinancing discussions with lenders have so far not come to a positive conclusion.”
According to financial sources cited by Reuters, Senvion needs at least 100 million euros ($112 million) to remain afloat in the short term.
Germany’s self-administration law encourages financially stricken companies to declare insolvency early on, and thus increase the chances of a recovery, by allowing leadership teams to retain control of the business with oversight from a supervisor acting on behalf of creditors.
Senvion said it is initiating self-administration proceedings at both its main business and its German trading arm.
In a press statement, CEO Yves Rannou said: "We aim to use the self-administration proceedings to focus on restoring a profitable and sustainable business for our group [more rapidly]. We are in the process of discussing financing options."
Investors flee
Shares tanked on the news, dropping 49 percent in 24 hours to less than €0.50 a share ($0.56). Senvion’s share price has fallen more than 95 percent in the last 12 months.
Senvion began a restructuring program in January, and Rannou said this week that the company still has “a fundamentally sound and strong business model.”
The company said it had appointed two insolvency administration advisers with “significant experience in successfully delivering self-administered restructuring programs" to work alongside the management team.
Senvion also said management has the support of creditors including major shareholder Centerbridge, the U.S.-based private-equity firm, which has pumped €82 million ($92 million) into the turbine business over the last nine months.
The company said it would continue with production, services, maintenance and customer support while refocusing operations and initiatives on particular markets, streamlining its product portfolio and looking for efficiency gains.
"Industry tension"
Aris Karcanias, co-lead of FTI Consulting's Global Clean Energy Practice, said that while some of the issues facing the turbine maker were company-specific, it was also having to adapt to a “new normal” for wind’s original equipment manufacturers.
Industry competition has intensified over the past five years through the introduction of auctions, the consolidation of large manufacturers, the expansion of Chinese players internationally and challenges from solar and other generation technologies, he said.
“There is a genuine industry tension,” Karcanias commented. “Market access, really knowing your customers, and being able to continuously reinvent your technological portfolio whilst driving new service revenues [have] become critical to survival.”
Dominant players such as Vestas and Siemens Gamesa Renewable Energy could afford to play in dozens of markets and sell from large-scale portfolios because they had the revenues to invest in innovation and research and development, he noted.
But “without scale, one must know where they have a [chance] to win and a laser-sharp focus on market niches others cannot compete with,” he said.