DFN: Reduced feed-in tariff and today’s announcement by Creditreform of the suspension of SolarHybrid credit rating puts increased pressure on SolarHybrid’s efforts to consummate it’s acquisition of Solar Trust of America (formally Solar Millennium LLC) primarily for STA’s Blythe development properties.
Impact of proposed amendments to German Feed-In-Tariff Legislation on solarhybrid AG
The Management Board of solarhybrid AG announces: On 22 February 2012, Federal Minister of Economics and Technology Dr. Philip Roessler and Federal Minister for the Environment, Nature Conservation and Nuclear Safety Norbert Röttgen published a proposal for a Cabinet bill for formulation assistance for the legal amendment to the Renewable Energy Act (EEG).
In that document, the two federal ministers proposed the following changes in the EEG:
Reduction of the feed-in tariff for electricity that is generated at photovoltaic ground mounted facilities by more than 30%.
Elimination of all feed-in tariffs for photovoltaic ground mounted plants with a capacity of more than 10 MWp.
Effectiveness of the above changes as of 9 March 2012.
Introduction of the possibility of any future changes in the feed-in tariff by way of ministerial decree without participation of parliament or Federal Council.
Immediately after the announcement of these proposals, all industry bodies announced total rejection of the intended EEG amendment. In quick succession well-known politicians of all parties, especially the government coalition, representatives of German business associations and trade unions and representatives of the management of solar companies joined in this rejection. The main points for criticism were:
Drastic reduction in feed-in tariffs for solar power and thus loss of market potential in Germany.
Associated loss of jobs.
Short-term implementation of the measures and future elimination of the legislative process – thus no implementation of the protection of confidence in public law with significant repercussions for the reputation of the Federal Republic as an investment location, particularly in renewable energies.
In the meantime, there is another draft for formulation assistance that deviates only slightly from the first draft and that will be debated on 9 March in the Bundestag in a first reading. With regard to the transitional regulations to ensure the protection of confidence, it was established that ground monuted facilities with a capacity of more than 10 MWp would be assigned the original EEG tariff if the decision on the binding site plan had been finalized before 1 March and the plant is fully completed before 1 July 2012.
From the perspective of the Management Board, the proposed legislative changes would have the following significant repercussions on the profitability of solarhybrid AG:
No possibility of realizing the major project Neuhardenberg with a planned output of 150 MWp, because that performance is over 10 MWp. While indeed the decision on the binding site plan is dated 16 December 2011, nonetheless the duration of a binding site plan and authorisation procedure must be set at a minimum of 7 months, so that the commencement of construction was planned for mid-2012 and completion for the end of 2012. Thus, the EEG refunding capacity would cease. This would mean a loss of investments made thus far in this project in the amount of approximately € 7.5 million. Allstedt II with a capacity of less than 10 MWp.Allstedt III and Fürstenwalde II, loss of investments made in these projects of approximately € 4
million.solarhybrid in Germany is called into question, because solarhybrid is currently without exception focused on the project development and realization of photovoltaic power plants with a capacity of at least 10 MWp.
The previously mentioned repercussions have further repercussions on the financial position of solarhybrid AG, such as for example the loss of the possibility of financing through capital market measures (share capital increases and the issue of bonds) or the possibility of financing through bank loans, reduction or loss of credit ratings, etc.
Because of the completely unpredictable drastic proposals of the two ministers to be implemented in the short term, before the final conclusion of the legislative process on the EEG amendment these repercussions have already materialised today for solarhybrid AG.
In particular, in the opinion of the Management Board, the
implementation of financing measures significant for the company that were in quite an advanced stage when the Ministerial draft was announced to now be under threat. Until yesterday, solarhybrid AG had planned the issue by way of private placement with institutional investors of a abond for the financing of the acquisition, agreed in February 2012, of the US activities of Solar Millennium AG and of the the Italian Vega project. The Management Board is currently reviewing alternative financing for these projects and is involved in tangible negotiations in this regard.
In addition, the Management Board expects continuous debates on the implementation of the EEG amendment, and due to the Federal Cabinet’s adoption of formulation assistance, further uncertainty in terms of investments in renewable energies.
The Management Board will now await the final enactment of the EEG amendment and examine the repercussions on the corporate strategy and financial and profitability position of solarhybrid AG.
Based on the current developments, the publication of the audited consolidated annual report 2011 in March 2012 no longer appears possible.