David Iles, a United States shareholder of Windflow Technology who bankrolled its UK activities, will take control of the unprofitable turbine maker and forgive about $21 million of loans in exchange for the company’s UK subsidiaries.
The announcement was made with Windflow’s annual results, which showed a wider loss of $4.3 million in the year ended June 30 and an acknowledgment that its seven-year investment in the UK market ‘‘has not paid off’’.
The eight turbines in operation were far below expectations and sales had not generated enough to cover the company’s overheads as a turbine manufacturer.
Annual sales were $606,000, excluding revenue from discontinued operations of about $1.1 million from the UK, up from $363,00 a year earlier.
Faced with negative equity of $7.3 million (up from $2.8 million a year ago) as a result of its accumulating loan liabilities, which has hindered Windflow’s ability to enter new long-term business relationships, the company has entered a conditional agreement with Mr Iles that will allow it to repay the debts by transferring the UK-based assets to him and converting all its outstanding convertible preference shares.
His holding would rise to 73% from 42% if the deal, which needs shareholder approval and is subject to due diligence, proceeds.
However, repaying the debt would not be enough to maintain Windflow as a going concern, it said yesterday.
As a result, the company will shut its Christchurch factory and shrink its headcount to ‘‘the minimum staff numbers’’ needed to support the operation and maintenance of the UK turbines and chase other potential sources of revenue. It has not been able to conclude licence deals for its technology.
Windflow also gave a gloomy account of the New Zealand market, which it said ‘‘continues to stagnate because of an oversupply of power and weak prices for carbon in the global emissions trading markets.’’
The company had intended to raise more capital in 2016-17 but that had depended on being able to increase licensing, engineering services, turbine sales, turbine project developments and electricity sales.
‘‘During the year ended 30 June progress with licensing, turbine sales and turbine project developments have fallen short of expectations,’’ it said.
Iles agreed to provide the shareholder loan facility in July 2012, giving the company the funds to undertake its UK wind turbine projects.
As at June 30, the aggregate liability under the loans was $20.7 million with a security over the ‘‘wind turbine’’ fixed assets $10.2 million and work in progress and inventories of $2.7 million, notes to its accounts say.
It is recorded as a current liability ‘‘as the negative equity as at 30 June 2017 places the company in breach of the loan covenants and enables the lender to call the loans,’’ although Mr Iles has told the company he will not call any of the loans before October 31 this year .
Shareholders will be asked to vote on the restructuring and the conversion of 17.8 million preference shares to 53.5 million ordinary shares at a meeting, it said.
