THEOLIA : Reignited development and reasonable investment policy
Aix en Provence, April 18, 2011
Reignited development and reasonable investment policy
Reduction of net financial debt by 158.5 million euros
Cash position of 110.5 million euros ensures implementation of backlog
Establishment of an investment vehicle to accelerate development will reinforce future growth
|(in million euros)||12/31/2010||12/31/2009 restated (3)||12/31/2009 reported|
|Current operating income||(19.7)||23.4||27.8|
(1) Following the application of the IAS 8 standard, restatement of revenue generated from the sale of electricity from wind farms owned by third parties who have contracts offering no guaranteed margins (see Note 1 of this press release).
(2) EBITDA = current operating income + amortization + non operational risk provisions.
(3) Following the application of the IAS 8 standard, restatement following the correction of an error (see Note 1 of this press release).
Fady Khallouf, CEO of THEOLIA, stated: "The past difficulties continue to impact our financial statements. In 2010, the Company successfully completed a significant financial restructuring including the renegotiation of its convertible bond that led to an exceptional net financial income of 75 million euros, and a capital increase. Since then, the Company has been committed to reinvigorating its development and to continuing its clean up. At the same time, the implementation of a co-investment strategy, based on the long term, is moving forward. The goal is to attain the scale necessary to ensure the Group's profitability and to benefit from our position and the expertise of our teams in a growth sector."
Financial restructuring of the Company
During the year THEOLIA completed a significant financial restructuring including the renegotiation of its convertible bond and a capital increase of 60.5 million euros.
This transaction has enabled THEOLIA:
to reduce its financial debt by 142.4 million euros between December 31, 2009 and December 31, 2010, and
to increase its cash position by 16.1 million euros between December 31, 2009 and December 31, 2010.
The bondholders' ability to request an early redemption of their bonds has been extended from January 1, 2012 to January 1, 2015.
The bonds that have been converted since the adoption of the new terms of the convertible bond (1,381,945 OCEANEs to date) have enabled a reduction by 21.1 million euros of the maximum amount to be reimbursed in case of redemption requests from all the bondholders on January 1, 2015. To date, the maximum amount to be reimbursed would be 155.3 million euros.
The Group's overall financial position has improved significantly and the financial debt will continue to decrease in line with future bond conversions.
Reinvigoration of operational activity
Through the financial restructuring, completed in July 2010, the Group has regained the flexibility necessary to reignite its development.
The significant plan of disposals carried out in 2009 and the first half of 2010, in order to reestablish the Group's cash position, had reduced the Group's operational capacity by 204 MW and its pipeline of projects by 90 MW.
In addition, the financial difficulties encountered by the Group between mid 2008 and mid 2010 did not allow for the development of the pipeline and reduced the access to project financing of the backlog projects.
The Group's new financial position has allowed for a reduction in the pace of disposals during the second half. As of December 31, 2010, the total installed capacity operated by the Group is 869 MW, of which 283 MW for own account and 586 MW for third parties.
At the same time, the Group has pursued its investments at a sustained pace, but with a prudent and rigorous approach. In 2010, 41.8 million euros have thus been invested in wind projects under development, notably in Italy, Germany and France.
An active management of the pipeline of projects has been reinitiated and a number of operational achievements were recorded during the second half, notably:
the commissioning of the Giunchetto wind farm in Italy, with a net capacity of 15 MW for the Group,
the entry into the construction phase of the Gargouilles wind farm in France, with a capacity of 18.4 MW for own account,
the receipt of a construction permit free of third party claims for a 12 MW wind farm in France, and
the confirmation of the validity of the construction permit for the Giuggianello wind farm in Italy, with a capacity of 24 MW, which was previously subject to a third party claim.
Since 2011, the Group has also:
secured project financing for the Gargouilles wind farm in France,
continued the construction works on this same project with the staggered arrival of the wind turbines on the site in April, and
initiated the wind turbine selection process for the Magremont wind farm in France, with a capacity of 15 MW.
The Group is focused on the completion of the projects that have secured construction permits and display profitability rates that correspond to the investment criteria that the Group has set. The goal is twofold:
to accelerate future commissionings in order to reinforce its operational positions in the Group's four main countries: France, Germany, Italy and Morocco, and
to optimize the allocation of its equity.
At the same time, the Group is committed to improving its performance, notably by:
cleaning up its remaining non-wind stakes to later close or sell them,
the intended exit from the partnership in India that is unfavorable to the Group in its current form,
the continuation of the drastic policy to reduce costs applied to all of the subsidiaries,
an optimized cash management, and
the development of industrial synergies among its different locations.
Lastly, the Group continues to focus on the implementation of its co-investment strategy through the establishment of an investment vehicle. The goal is to bring additional financial means to the Group to enable an even faster future growth. The work so far accomplished has enabled the Group to further discussions with top tier investors in view of a long lasting partnership.
Past difficulties' main impacts on the 2010 results
Despite all the efforts undertaken for the turnaround of the Company since the second half of 2010, the consolidated financial statements were still impacted by certain difficulties related to the Group's past.
The reduction in the installed capacity following the disposals carried out in 2009 and the beginning of 2010 reduced the operational performance of the activity Sale of electricity for own account.
The main disposal of the year, having occurred prior to the financial restructuring, was not completed under favorable conditions for the Group and recorded only a very weak margin.
A significant analysis has been carried out on the main subsidiary of the Group, THEOLIA Naturenergien, in Germany. The conclusions mainly relate to the activity of operating wind farms for third parties and the appraisal of the subsidiary's value.
In particular, the Group has identified a significant risk of non collection on certain old debts related to the Operation activity. As of June 30, 2010, a provision for 3.6 million euros had been recorded for these debts. A more detailed analysis has led to an additional provision of 5.4 million euros as of December 31, 2010, for an overall provision of 9 million euros over the period.
The Group has taken a provision for future losses related to older contracts for the management of wind farms for third parties, in the amount of 4.7 million euros. The analysis led by the Group illustrated that the production level of the wind farms in question will very likely not be in line with the revenues guaranteed by these contracts.
In addition, the Group has accounted for a depreciation of 11 million euros on the goodwill in the activity Development, construction, sale in Germany. In fact, the Group has downgraded the wind farm sales targets in Germany in the "trading" activity, historical activity of THEOLIA Naturenergien, to levels that better correspond to market conditions. The valuation using discounted future cash flows illustrated an impairment on the goodwill initially recorded.
Finally, the recording of an expense related to the transactional agreement executed with two members of the former management for an amount of 1.4 million euros in the context of their lawsuit against the Company also impacted the 2010 results.
These negative impacts having been compensated by an exceptional income of 75 million euros (net of expenses) related to the derecognition of the convertible bond following the revision of the terms of the issuing contract, the consolidated net income yields a profit of 5 million euros.
Please note that the revenue figures published for 2009 and 2010 have been restated for the revenue coming from the sale of electricity from wind farms owned by third parties who have contracts offering no margin guarantees. In 2010, the reported revenue from the Operation activity has been reduced by 33.3 million euros and the published revenue from the Operation activity in 2009 has been reduced by 34.2 million euros (see Note 1 of this pres release).
In addition, the reported 2009 financial statements have been restated in line with the IAS 8 standard following the derecognition of the assets sold over 2009 and before, having an impact on the balance sheet and income statement reported as of December 31, 2009 (see Note 1 of this press release).
The Board of Directors, having met on April 18, 2011, approved the 2010 consolidated financial statements, prepared in accordance with the internationally accepted IFRS standards, after having received confirmation from its statutory auditors that the audit procedures had been carried out and that the approval certificate was in the process of being issued.
CONSOLIDATED INCOME STATEMENT
The consolidated revenue amounts to 154.5 million euros for 2010, representing a decrease of 48%. This decrease reflects the change in the Group's situation. The significant plan of disposals of 234 MW of wind farms and projects, carried out in 2009 to reestablish the Group's cash position, had contributed greatly to the revenue of the Development, construction, sale activity. In 2010, the Group sold only 72 MW.
The breakdown of revenue by activity is as follows:
|WIND ACTIVITIES||Non-wind activity||Consolidated total(1)|
|(in million euros)||Sale of electricity for own account||Development, construction, sale||Operation|
|Change||- 28%||- 53%||+ 16%||- 18%||- 48%|
(1) The Corporate sector does not generate revenue and is thus not illustrated in this table.
The Group's consolidated EBITDA amounts to 3.4 million euros in 2010, versus 45.5 million euros in 2009. The breakdown by activity is listed below:
|wind activities||Non-wind activities (1)||Corporate||Consolidated total|
|(in millions euros)||Sale of electricity for own account||Development, construction, sale||Operation|
|Change||- 30 %||+ 13 %||- 1 190 %||+ 88 %||- 124 %||- 93 %|
As a reminder, the consolidated EBITDA recorded in 2009 benefitted from the positive effect of the reversal of two significant provisions in the Corporate activity for a cumulative amount of 25 million euros.
The Group's EBITDA in 2010 was led by the Sale of electricity for own account activity, that registered a margin of 66% of revenue.
This indicator was nonetheless impacted by four negative factors:
the drop in EBITDA from the Sale of electricity for own account activity, mainly due to the disposals of wind farms carried out in 2009 and the beginning of 2010 that reduced the Group's installed capacity for own account;
the absence of sufficient margins in the Development, construction, sale activity to absorb the structure costs;
the provision for old debts related to the Operation activity for an amount of 9 million euros, the Group taking into consideration a risk of non collection; and
the negative impact from the sale of a 39% stake of the Italian wind farm Giunchetto for an amount of 3.1 million euros, notably due to the partial derecognition of the goodwill related to this wind farm.
The Group's operational income establishes a loss of 34.5 million euros in 2010, versus a positive income of 26 million euros in 2009.
The depreciations recorded by geographic zone in 2010 break down as follows (in millions of euros):
rest of the world (3.4)
The Group also provisioned the future losses related to the older contracts for the management of wind farms for third parties, offering revenue guarantees, for an amount of 4.7 million euros and recorded in "Other income and non-current expenses" an expense related to the transactional agreement executed with the former management for an amount of 1.4 million euros.
Lastly, the Group accounted for the following provisions for a cumulative amount of 13 million euros (in million euros):
goodwill impairment in Germany (11.0)
goodwill impairment in Italy (0.6)
impairment on projects included in the pipeline in France (1.8)
asset impairments in Germany (0.7)
various reversals 1.1
The Group's financial income is 45.6 million euros in 2010, made up essentially of (in million euros):
a profit from the derecognition of the convertible bond 80.7
fees related to the restructuring of the convertible bond (5.7)
the annual interest expense of the convertible bond (13.9)
an interest expense related to operating wind farm loans (8.2)
the change in the fair value of the SWAPs (2.5)
In all, the net income of the consolidated entity for the full year 2010 is a profit of 5 million euros, versus a loss of 25.2 million euros in 2009.
DEBT AND CASH POSITION
The net debt, declining by 158.5 million euros, went from 396.1 million euros as of December 31, 2009 to 237.6 million euros as of December 31, 2010, mainly due to the financial restructuring completed in July 2010.
|(in million euros)||12/31/2010||12/31/2009|
|Of which project financing||(210.5)||(238.7)|
|Convertible bond (1)||(117.5)||(218.7)|
|Other financial liabilities||(8.4)||(4.5)|
|Of which financial instruments or SWAPs||(6.0)||(4.5)|
|Current financial assets||0.1||0.2|
|Cash and cash equivalents||110.4||9.2|
|Net financial debt||(237.5)||(396.1)|
(1) The stated amounts correspond to the debt component of the convertible bond.
The Group's net cash position increased by 16.1 million euros over the year, notably following the capital increase completed in July 2010.
The cash position breaks down as follows:
|(in million euros)||12/31/2010||12/31/2009|
|Reserved cash for SPV (1)||17.7||16.5|
|Total net cash and cash equivalents||110.4||94.2|
(1) SPV: special purpose vehicle.
FOR MORE INFORMATION
|Edward F. McDonnell
Tel: +33 (0)4 42 906 594
Public relations and Communications
Tel: +33 (0)4 42 906 596
French Société anonyme (public limited company with Board of Directors) with share capital of €112,710,902
Registered office: 75 rue Denis Papin - 13100 Aix-en-Provence - France
Tel: +33 (0)4 42 904 904 - Fax: +33 (0)4 42 904 905 - www.theolia.com
THEOLIA is listed on the compartment C of Euronext Paris, code: TEO
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