CBD Energy sails close to the wind on asset sales, debt

The board of diversified renewable energy group CBD Energy has admitted there are doubts about the ability of the company to continue as a going concern, even though it remains confident the company’s troubles can be overcome and it can return to a profit in the current financial year.

CBD Energy’s future appears to be at least partially tied to its ability to conclude the sale of a 5MW solar PV plant in Italy, and for the support of an un-named financier that has provided a $6.5 million loan.

The revelations came in the delayed release of its annual report, where it was also revealed that its bottom line result had blown out to a loss of $40.4 million -compared to a previously announced $21.7 million – due to a series of write-downs of investments and the discovery of “errors” in its accounting. Its previous year’s results were shaved from a profit of $5 million to a net profit of $1.15 million.

CBD Energy is currently in the midst of a merger with US-based Westinghouse Solar, and says it expects this to proceed and the listing on Nasdaq will boost its share price and its ability to raise capital.

CEO Gerry McGowan will become executive chairman of the company, following the retirement of former trade minister Mark Vaile, while Robert F. Kennedy Jr will join the board.  Kennedy is a son of the former Senator, a radio host, lawyer and environmental activist, as well as a partner in energy efficiency investor specialist VantagePoint Capital Partners.

McGowan will also take control of CBD Energy’s Australian solar business, which he said had reacted poorly to the dramatic changes in Australian market conditions.

McGowan said in a statement issued on Friday that CBD Energy is in the “final stages” of a €12.5 million sale of a solar plant in Italy with a UK-based financial institution. It says the party has also agreed to finance a further 25MW of projects worth €50 million.

“The past year has been a difficult one for CBD,” the company said, pointing to changing policy environment in Australia and a shortage of capital. This shortage of capital is believed to have contributed to its withdrawal from the AusChina wind consortium, although it said it expects to pocket a $15 million development fee from the 107MW Taralga wind project in NSW, which may be sold to AusChina, and expects to be involved in similar deals in the future.

The inability to raise capital was also blamed for its failure to establish an energy retailing business through Neighbourhood Energy. It said the listing on Nasdaq and the merger with a world-wide brand should improve its access to capital.

CBD Energy said it wanted to diversify away from Australia because there was no clear vision or policies from state and federal governments, and constant and dramatic changes to tariffs had led to a boom-bust solar PV industry. In this regard, CBD Solar is no different to other companies such as Ceramic Fuel Cells, which announced last week it was packing its bags, and Pacific Hydro, which swung much of its focus on recent years to offshore markets.

However, its problems appear to be at least partly self-inflicted. McGowan said the Australian solar division should have performed “much better than it has” and he would now take over the management of this business, and recent restructuring had achieved annualized cost savings of around $3.5 million. The division in 2011/12 lost $13.5 million, as revenue slumped to $29 million, less than a quarter of its sales in the previous year.

McGowan said the international solar markets held more promise. Apart from the Italian projects, the company had commenced construction of its first US project, had won a $7.6 million extension to its Thai solar project, and in all had a pipeline of 400MW.

The international business is being led by Edwin Cywinski, the founder of eco-Kinetics – the company’s main Australian solar business – who earned another $1.3 million in the last year as part of an earn-out clause, adding to a $1.9 million earned from this agreement a year earlier.

The additional writedowns from CBD Energy included a writeoff of the value of patents from its Larkden solar thermal graphite storage technology, the Emerald and Bowen joint ventures with a Nathan Tinkler company Buildev (nearly $4 million), and “errors” in capitalizing expenditure on projects . It says it has appointed new auditors.

It says it has a $6.5 million loan with an un-named external party which can become due and payable when the lender decides. “Management expects to be able to defer repayment of the loan until it has sufficient resources to do so and is in continuing discussions with the lender on this matter,” it writes in the annual report.

“As a result of these matters there is a material uncertainty whether the group will continue as a going concern and whether it will realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report.”

However, it said the directors have reasonable grounds to expect its position will improve, given the anticipated sale of the Italian solar plant, the expected development fee for the Taralga project, the one-off nature of its recent losses, and its pipeline of future projects.

 

Get up to 3 quotes from pre-vetted solar (and battery) installers.