Solarstrom project deal collapses

Shares in SAG Solarstrom have plummeted by more than 30% over the past two days, after the German PV group admitted that negotiations regarding its near-term project pipeline have fallen through.

Last week Solarstrom issued a profit warning for 2013, stating that “advanced stage” negotiations regarding its pursuit of a “three-digit MW range” project pipeline had been delayed – meaning it would be unable to complete any of the projects this year as hoped.

But Solarstrom has followed up by saying that the negotiations have collapsed altogether.

The reason, the company acknowledges, is its own failure to stump up the “disproportionately high” down payments and performance bonds demanded by its negotiating partner in advance of the projects entering construction.

“The guarantees and warranties which are increasingly required on the market can amount to payments up to 20% of the project volume before the start of the project, and up to 10% after completion of the project,” Solarstrom says.

“In many projects, the capital commitment is no longer proportionate to the achievable margin, taking into account the risks of large-scale projects.”

The collapse of the negotiations – and the changing market winds – means that the future of Solarstrom’s Plant Construction business have been called into question, the company says.

In its most recent earnings report, published in early November, Solarstrom stuck to its ambitious installation targets for 2013, despite having fallen severely behind schedule – a situation it blamed partly on the uncertainty caused by the now-resolved EU-China solar spat.

Shares in Solarstrom fell sharply on the news, and are down nearly 60% since the beginning of November, leaving the company with a market valuation of less than €20m.