EuroBusinessMedia (EBM): Theolia, a European producer of electricity from wind energy, reports earnings for 2008. Marc van't Noordende welcome. You are the newly appointed CEO of Theolia. What are your comments on your full-year results and, given the significant size of the net loss for the full year 2008, minus €244 million, how do today’s results impact the company’s ability to recover in 2009?
Marc van't Noordende (MN): 2008 was a very bad year for the company. Some of the reasons and causes were already prevalent in 2007. We started 2008 pretty much in the same way we ended 2007, with a very ambitious, acquisitive growth strategy, fueled by the proceeds of the convertible that was so successfully raised in 2007. In the middle of the year there was a lot of confusion about the announcement of a change in strategy for our German affiliate; the market didn’t take that very well, particularly because it wasn’t backed up by an adequate financing plan for that new strategy. Later there was a management change, which again added to the turmoil and all of this happened in the middle of the worst financial crisis for the last 50 or 60 years. Now, with hindsight, it’s very easy to say that we pay too much for acquisitions. With hindsight, it’s very easy to observe that we shouldn’t only acquire companies but we should also manage and integrate them. But we are where we are. The 2008 figures reflect indeed a number of write-offs of goodwill and write-downs of asset value in line with IFRS rules. Having said that, of the €244 million net loss, a large, very significant portion is made up from one-off and incidental items. So that combined with the actions that we have taken in the last quarter of 2008 and in the first quarter of this year make me confident that we will be able indeed to do dramatically better in 2009.
EBM: What is your situation update today on your cash position and any progress you are making on your planned asset sales?
MN: The cash situation today remains very tight. I first announced that to the market in my update in November, repeated that in my update to the market in January, and today the situation hasn’t substantially changed. Why? Because the vast majority of the proceeds from those divestments still have to hit our bank account. We have started a number of sales processes for over 200 MW of installed capacity and projects. These are very well defined processes, managed by experienced professionals - financial advisers - and they are in various phases of execution. In today’s market, though, these processes are different than two or three years ago. Investors have a lot of opportunities in front of them, they take time to evaluate, they take time to compare and they take time for decision. So that’s where we are today, still with a very tight cash situation that should improve, though, significantly in the remainder of this year.
EBM: You have said before that you were exploring some other options aside from straight asset sales to raise cash, such as the sale of minority stakes in individual projects, for example. Are any of your alternative solutions to raise cash meeting with interest in the current market environment?
MN: The short answer is yes. There is a lot of interest for our business and for our assets. Why? Well, despite the financial crisis, the cash flow pattern, the cash flow profile, or the risk profile, of our projects hasn’t changed. There is a significant interest from the side of utility companies that look forward to expanding their base of renewable energy production, but also from institutional investors, infrastructure funds, pension funds and the likes that are looking forward to stable and guaranteed long-term cash flow. So there is a lot of interest. We have had outsiders express interest indeed in taking a minority position in individual projects, but we have also had expressed interest in taking a position in our entire installed base, be it a minority position or even an outright sale from us to them. So we are currently evaluating which one of the alternatives in front of us fits our needs best and we hope to be able to take a decision in the coming months.
EBM: What can you tell us today about the outlook for your project pipeline, in particular, what are we looking at this year in terms of new installed capacity and the geographical mix?
MN: We have a very solid pipeline – more than 2500 MW spread over a large number of countries. However, more than 70% of that pipeline finds itself in European countries – European countries with a very stable and recognised regulatory framework. With respect to what to expect from Theolia in the coming year or two years, that’s a more difficult question. Why? We have to find ourselves a budget that is internally financed, financed by the divestments and the sale of projects and assets that we just talked about. The timing of the incoming of the proceeds is the most difficult part. We’ve been rather conservative in terms of the prices, but it is very difficult to forecast when such a sale will be closed. So for that purpose we have a flexible budget. We’ll do more if we have the means; we’ll do less if we don’t have the means. And for these reasons I find it difficult today to give any operational or financial guidance to the market.
EBM: What is your cash flow generation target for 2009?
MN: Well, the answer is quite similar to the answer on the previous question. We don’t really have a cash flow target. Well, you can say it differently – we have a budget that is self-financed. So I guess that’s what the ultimate cash flow target is.
EBM: You have a sizeable convertible bond which you mentioned earlier and which comes to maturity in 2014. Given the company’s delicate financial situation today, have you already started to look into various options to refinance your convertible bond?
MN: It’s a very good question and it’s an important subject. The markets have started to recover, but by no means it’s business as usual. So we feel it’s a little bit too early to talk with banks about the refinancing of our convertible bond. But, we are looking at the subject and we’ll take action whenever we feel that the market is ready for it.
EBM: The company’s share prices rebounded significantly in the past few months. Is this simply short-term trading activity on the stock or are new investors building up long-term positions, and, if so, do you know these investors?
MN: Possibly short-term trading. But if you look at Theolia, we have a significant installed base, with stable cash flows, underleveraged, partly, one the one hand. On the other hand, we have a solid pipeline. Two value components that probably have not been adequately reflected in the past couple of months into our share price. Why? Also simple: if we don’t have the financial means to invest in our pipeline, it’s very difficult to ascribe any value to it. So the short-term liquidity problems that we are facing probably depress our share price. So once we are able to demonstrate that we have those issues behind us, I would expect that we will find some recognition of that in our share price development.
EBM: And finally, what is your vision for Theolia today? How confident are you that you’ll indeed be able to turn the company around, and how soon do you see that happening?
MN: We are in the middle of developing and modelling a number of strategic scenarios. On the one extreme, you have the utility play - you build your assets and you keep them for electricity production. On the other extreme, you have the development play - you develop and build your assets, maybe operate them for a few years to demonstrate their viability, and then you sell them, all of them. Now, between those two extremes, there are a number of hybrid models that also each have their own logic. We haven’t made a choice yet, but we are hoping to do so in the coming two or three months. And after having done that, obviously we will design our company in line with that chosen scenario and we will present ourselves to the market, and we’ll see what type of investor fits best with the scenario that we will be choosing.
EBM: Marc van't Noordende, newly appointed CEO of Theolia, thank you very much indeed.
MN: It was a great pleasure to be here.
