Press releases

Commenting on the half year results, Fady Khallouf, Chief Executive Officer of THEOLIA, said:

“THEOLIA's agenda since the beginning of 2013 has been particularly busy.

End of January, the Group took control of Breeze Two Energy, a wind energy player operating an installed capacity of 337 MW. Consolidating this entity for the first time modifies significantly the main financial indicators of the Group. The operational integration process started already, but we have not beneficiated yet from its effects. Our target is to generate significant operational synergies in order to maximize the performance of this new entity.

Excluding Breeze Two Energy, THEOLIA's 2013 half year results are in line with those of the first half of 2012.

The other major event for the Group is, naturally, the ongoing takeover offer initiated by MEIF 4 AX Holdings SAS, part of the Macquarie group. The tender period will end on September 6. It will only succeed if the threshold of 2/3 of the voting rights is met. If the offer is successful, THEOLIA will have a long-term majority shareholder willing to provide the financial means needed to meet its short and long term commitments.”
 

1. Key highlights of the first half of 2013
 

THEOLIA takes control of Breeze Two Energy
End of January 2013, THEOLIA took control of Breeze Two Energy GmbH and Co. KG (“Breeze Two Energy”), a German company which holds and operates wind farms for its own account for a total of 337 MW, of which 311 MW are located in Germany and 26 MW in France. Almost all of those farms were commissioned between 2006 and 2008. They all benefit from long-term electricity purchase agreements (20-year contracts in Germany and 15-year contracts in France). Taking control of new wind farms in operation in Germany and France enables THEOLIA to significantly enhance its operational position in its two historical countries.

In 2012, Breeze Two Energy registered a revenue of €46 million, entirely generated through sales of electricity, and an EBITDA of €31.6 million.

Breeze Two Energy is a limited partnership controlled by its General Partner, Breeze Two GmbH. Breeze Two Energy's wind farms were financed through a bond issue, performed in 2006 and divided in three categories: A, B and C, the Class A bond debt being the senior debt.

BGE Investment S.à.r.l. (“BGEI”), a subsidiary wholly owned by THEOLIA, purchased 70% of the Class C bonds, as well as various rights including the right to indirectly appoint Breeze Two GmbH's Managing Director. Fady Khallouf, THEOLIA's CEO, was also appointed Managing Director of Breeze Two GmbH. These new functions grant him the power to manage Breeze Two Energy. Breeze Two Energy has been therefore fully consolidated in THEOLIA's financial statements as from January 31, 2013.

This transaction amounts to €35.5 million, mostly financed by a vendor loan amounting to €34 million, due in 2026, and by cash for €1.5 million. This loan was taken out by BGEI and is without recourse towards the parent-company, THEOLIA. A part of that debt could nevertheless be guaranteed by THEOLIA in the future, according to the levels of cash-flows generated by Breeze Two Energy which will be available to THEOLIA.

THEOLIA intends to create significant operational synergies with Breeze Two Energy, in particular by performing the future management of Breeze Two Energy's wind farms, which is today subcontracted to third parties. This new organization is currently being implemented, which requires mastering specific constraints for Breeze Two Energy.

New building permit obtained in France
Having obtained a building permit without recourse since November 2012, the Chemin Perré project was still on hold pending the creation of a wind power development zone (“Zone de développement éolien”, ZDE) in order to benefit from the regulatory feed-in tariff.

Adopted in April 2013, the Brottes Act cancelled the ZDE procedure and therefore removed the last administrative obstacle to the implementation of this project.

The Chemin Perré project is located on the Nogentais community of communes, on the territory of the towns of Montpothier and Villenauxe-la-Grande, in the Aube French department.

It will include 9 wind turbines, for a total estimated capacity of 23 MW.

Beginning of the construction of a project in France
In late 2011, THEOLIA obtained a building permit without recourse to install the Hautes Bornes wind farm on the territory of the towns of Languevoisin-Quiquery, Breuil and Billancourt, in the Somme French department. The building permit provides for the installation of 7 wind turbines.

During the first half of 2013, THEOLIA selected and ordered 3 MW wind turbines to perform this project, therefore bringing the total installed capacity of the future wind farm to 21 MW.

Escrow of the Giunchetto wind farm in Italy
In the context of investigations led by the Nicosia public prosecutor against former executives of the Aerochetto S.r.l company, a 51% subsidiary of THEOLIA, for infringements related to the acoustic impact of the Giunchetto wind farm and to alleged defects in the farm's construction, the wind farm was preventively put in escrow by the judge of the preliminary investigation on April 24, 2013.

By a decision dated June 13, 2013, this measure was confirmed by the Court of Enna, which based its decision on the acoustic issue.

The prosecutor authorized the Aerochetto company to perform remedial works on the wind farm related to issues which were partially the grounds for the initial escrow request, and asked an expert to perform new sound measurements on July 5 and 15, 2013.

On August 8, 2013, the Aerochetto company obtained the release of escrow of 25 wind turbines (over 35 wind turbines composing the wind farm), enabling starting again their operation as soon as August 9, 2013.

The Aerochetto company is pursuing its best efforts to obtain the release of escrow of the remaining 10 wind turbines as soon as possible.

2. The Group's business activity over the first half of 2013
 

THEOLIA's consolidated financial statements for the first half of 2013 were approved by THEOLIA's Board of Directors during its meeting on August 28, 2013, in the presence of the Statutory Auditors. They include Breeze Two Energy, fully consolidated as from January 31, 2013.

CONSOLIDATED INCOME STATEMENT

1. EBITDA = current operating income + allocations to amortization and to non-operational risk provisions.

• Consolidated revenue

The Group's consolidated revenue amounted to €46.5 million for the first half of 2013, including Breeze Two Energy as from January 31, 2013, up by +30% compared to the first half of 2012. Its breakdown by activity for the two half-year periods is as follows:

1. Excluding Environment activities.

The revenue from the Sales of electricity for own account activity reached €40.4 million for the first half of 2013, an increase of +53% compared to the first half of 2012. This achievement is related to the consolidation of Breeze Two Energy as from January 31, 2013, which contributed to the activity's revenue in the amount of €16.7 million. Excluding Breeze Two Energy, the revenue from this activity amounted to €23.7 million, a 10% decrease compared to the first half of 2012. The activity for this half year is still penalized by less favorable wind conditions during the first quarter of 2013 than during the first quarter of 2012, and from negative scope effects in Germany and France, related to disposals performed in 2012.

As at June 30, 2013, installed and controlled capacities for own account reached 644 MW, including Breeze Two Energy, compared to 304 MW as at June 30, 2012.

The Sales of electricity for own account activity, which relies on 15- to 20-year electricity buy-back contracts, benefits from a recurring revenue and significant margins over the long term. This secure activity accounts for 87% of the consolidated revenue for the first half of 2013.

The revenue from the Operation activity amounted to €3.3 million for the first half of 2013, a 4% decrease compared to the first half of 2012. The Operation activity was also penalized by less favorable wind conditions during the first quarter of 2013 than during the first quarter of 2012 in Germany.

As at June 30, 2013, capacities managed for third parties reached 625 MW, compared to 599 MW as at June 30, 2012.

The revenue from the Development, construction, sale activity includes the revenue from the sale of projects or operating wind farms, as well as the invoicing of development and construction services performed for third parties. The revenue from this activity decreased, in line with the Group's strategy to reduce the pace of wind farm and project disposals. For the first half of 2013, the revenue from this activity came to €2.3 million.

The Non-wind activity registered a revenue of €549 thousand for the first half of 2013, produced by the solar park in Germany.

• EBITDA

THEOLIA's consolidated EBITDA strongly increased during the period. It reached €24.3 million for the first half of 2013, including Breeze Two Energy as from January 31, 2013, compared to €15.9 million for the first half of 2012. The consolidated EBITDA margin on the consolidated revenue also increased from 44% for the first half of 2012 to 52% for the first half of 2013. Its breakdown by activity during the two half-year periods is as follows:

EBITDA for the Sales of electricity for own account activity reached €27.7 million for the first half of 2013, up by +43% compared to the first half of 2012. This achievement is related to the consolidation of Breeze Two Energy as from January 31, 2013, which contributed to the EBITDA of the activity in the amount of €11.4 million.

For the first half of 2013, EBITDA for the Operation activity totaled €1 million, in line with the first half of 2012.

EBITDA for the Development, construction, sale activity improved during the first half of the year. Margins on the disposals of projects and construction services partially offset development costs. Moreover, EBITDA for this activity benefited from the positive net effect of provision reversals in the amount of €0.3 million, due to former issues being solved.

EBITDA for the Non-wind activity showed a loss of €0.3 million for the first half of 2013. This activity was notably penalized by a €0.8 million risk provision.

EBITDA for the Corporate activity registered a loss of €1 million for the first half of 2013, compared to a loss of €0.3 million for the first half of 2012.

• Operating income

The following table shows the bridge between EBITDA and operating income for the two half-year periods:

The strong increase in amortization is mainly due to the consolidation of Breeze Two Energy, the amortization of which, after restatement, is recorded according to a linear method, over 20 years in Germany and 15 years in France. From January 31, 2013 to June 30, 2013, Breeze Two Energy's wind farm amortization reached €9.7 million.

• Financial income

The Group's financial income represented a net cost of €21.1 million for the first half of 2013, compared to a net cost of €14.2 million for the first half of 2012.

The net interest cost related to the convertible bond amounted to €6.9 million, in line with the first half of 2012. It includes, for the first half of 2013, interest accrued over the period, totaling €2.1 million, as well as an additional non-cash interest cost of €4.8 million, due to the convertible nature of the bond.

The net interest cost related to operating wind farm financing strongly increased during the first half of 2013, as it includes, in addition to the net bank interests on project financing bank loans, the net interests on Breeze Two Energy's bonds as from January 31, 2013. This additional cost amounted to €7.6 million and included interests on Class A bonds, interests on Class B bonds and 30% of interests on Class C bonds.

Moreover, during the first half of 2013, the Group depreciated some financial assets for a cumulated amount of €2.5 million. During the first half of 2012, the restructuring of the main operating wind farms' debt in France had resulted in a non-recurring financial cost of €2 million.

• Net income of the consolidated Group

In total, the net income of the consolidated Group for the first half of 2013 was a loss of €17.6 million, compared to a loss of €10.3 million for the first half of 2012.

Consolidating Breeze Two Energy over 5 months negatively impacted the net income of the consolidated Group in the amount of €5.9 million.

DEBT AND CASH POSITION
Net financial debt reached €470.5 million as at June 30, 2013 and broke down as follows:

Project financing fell by €8.5 million during the half-year period, as part of its normal amortization. It is reminded that project financing is non-recourse or with limited recourse against the parent company. Each special purpose vehicle holding a wind farm directly takes out financing with the bank and ensures reimbursement through the cash flows generated by the operation of the wind farm.

As at June 30, 2013, Breeze Two Energy's debt, as consolidated in THEOLIA's financial statements, amounted to €269.5 million, corresponding to the temporary fair value of the Class A, B and C bonds of Breeze Two Energy, the Class C bonds being only integrated up to 30%. In compliance with the IFRS 3R standard, the Group has twelve months as from the date of the transaction to finalize the allocation of the purchase price to Breeze Two Energy's assets, liabilities and contingent liabilities. Given the size and complexity of the transaction, the allocations recognized as at June 30, 2013 were determined provisionary and may be reviewed based on the final valuation of fair values.

The €34 million vendor loan, entered into by BGEI to take control of Breeze Two Energy, is due in 2026 and is without recourse against the parent company, THEOLIA. It was registered in “Other non-current liabilities” in the balance sheet.

The convertible bond increased by €2.6 million, specifically following the recording of additional non-cash interests of €4.8 million, due to the convertible nature of the bond.

As at June 30, 2013, the cash assigned to a swap contract relating to the OCEANEs and recorded, according to IFRS, in “Current financial assets” amounted to €4.6 million.

The cash position breaks down as follows:

3. Significant events after the date of closing of the half year financial statements
 

Takeover offer on THEOLIA initiated by Macquarie
On July 8, 2013, MEIF 4 AX HOLDINGS SAS (the “Offeror”), which is controlled by Macquarie European Infrastructure Fund 4 (“MEIF 4”), an investment fund dedicated to long-term infrastructure investment with extensive experience in the renewable energy sector in Europe, filed a friendly takeover offer for THEOLIA.

This offer was approved on July 23, 2013 by the French Stock Exchange Authority (“AMF”).

The offer is open from July 26, 2013 to September 6, 2013 inclusive.

The offer aims to give THEOLIA a long-term majority shareholder that will provide stability in a difficult economic and regulatory environment. If the offer is successful, THEOLIA will thus be able to plan for repayment of its convertible bonds ahead of the early redemption date of January 1, 2015, and to pursue its development plans.

The offer includes all existing shares of THEOLIA (consolidated and non-consolidated shares) and all outstanding OCEANEs and stock warrants.

The prices offered for all the securities targeted by the offer are as follows:

• 1.70 euro per share, offering a 51.8% premium over the last share price prior to the announcement and a 40.8% premium over the volume-weighted average price over the month prior to the announcement (i.e. on July 5, 2013);
• 0.85 euro per non-consolidated share;
• 15.29 euros per OCEANE, plus the accrued coupon, offering a 51.6% premium over the last trading price prior to the announcement and a 49.0% premium over the volume-weighted average price over the month prior to the announcement (i.e. on July 5, 2013); and
• 0.002 euro per stock warrant.

The offer has been considered as fair from a financial standpoint by the Board-appointed independent expert. THEOLIA's Board of Directors considers the offer to be in the interest of the THEOLIA Group, its shareholders, the holders of OCEANEs and stock warrants, and its employees.

The offer is dependent on receiving, at the end of the offer, at least 2/3 of the Company's voting rights, both on a diluted and non-diluted basis. If this condition is not met, the offer will lapse.
The Offeror reserves the right to implement a squeeze-out following the offer if the relevant thresholds are met.

Details on the offer are provided in the offer document and the offer document in response having received respectively the visas No. 13-405 and No. 13-406 of the AMF on July 23, 2013, which are available on the AMF's website (www.amf-france.org).

On August 29, 2013, THEOLIA filed with the AMF its 2013 half year financial report. It is available on the Group's website www.theolia.com, section “Finance – Results”. A presentation on the 2013 half year results will also be available on this website as from August 29, 2013 at 2 p.m.

About THEOLIA
THEOLIA is an independent producer of wind energy, active over the entire wind value chain. The Group develops, builds and operates wind farms in four countries: Germany, France, Morocco and Italy. In total, the Group operates 1,269 MW for its own account and for third parties.

CONTACT

THEOLIA
French Société anonyme (public limited company with Board of Directors) with a share capital of €90,852,262.20
Registered office: 75 rue Denis Papin – BP 80199 - 13795 Aix-en-Provence Cedex 3 - 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 NYSE Euronext Paris, code: TEO