Prokon, a German renewables firm that raised more than a billion euros by issuing so-called “Genussrechte,” or non-voting shares that promise high yields, has issued a desperate plea to its investors to stop redeeming those shares so that it can remain solvent.
The plea, prompted by mass redemptions following losses at the firm, was made by Prokon founder and chief executive Carsten Rodbertus on the firm’s website. “Much to our dismay, the current media campaign against us has scared many investors into redeeming their Genussrechte,” said Rodbertus. “If we cannot hold on to at least 95% of the Genussrechte capital, we will be forced to declare insolvency at the end of January.”
Peculiar to Germany, Genussrechte are a share-bond hybrid. While they pay interest that, currently, is well above that of corporate bonds, the investor assumes considerable risk in that the issuer can use the capital from Genussrechte to cover losses. In the case of insolvency, the claims of Genussrechte holders are subordinated to those of banks and bondholders.
Through the issuance of Genussrechte that promised an interest rate of at least 6% annually, Prokon collected €1.4bn from around 75,000 private investors. The company was known for its marketing via TV, direct mailings and roadshows to drum up finance for the country’s transition from nuclear power to renewables.
The Genussrechte capital enabled Prokon to build a considerable renewables business during its 19 years ofexistence, including the development of 50 onshore wind parks with a combined capacity of 526MW and ownership of a biodiesel plant and a sawmill in eastern Germany. The company, based in the northern German town of Itzehoe, employs around 1,300 people.
But some financial experts and consumer protection advocates have long doubted Prokon’s ability to meet its interest payments from its cash flow. Last August, Michael Olbrich, an accounting professor at the University of Saarland, told public television that Prokon’s accounts showed that “the firm has never made enough money to meet those payments.”
Since late November, when Prokon disclosed €210m in cumulative losses, the company has been hit by a wave of Genussrechte cancellations. Prokon insists, however, that the losses were the result of €330.4m in interest payments to Genussrecht holders. “Had we not guaranteed 8% in interest to these investors but just 2.9%, the amount paid out would have been €120.5m, and we would haven’t had a loss,” the company said. Prokon’s cumulative sales were put at €3.4bn.
Since Rodbertus’ plea appeared last week, German shareholder association DSW says that around 2,000 Prokon investors have contacted it seeking help. DSW managing director Marc Tüngler said: “Instead of threatening his investors, Mr Rodbertus should be more concerned with making Prokon’s accounts and business model transparent.”