German project developer SAG Solarstrom has cancelled a triple-digit megawatt pipeline citing onerous financial commitments required to start projects.
The company warned last week that protracted negotiations with an “international energy company” had delayed a number of projects, forcing it to revise its earnings forecast for 2013.
On Thursday afternoon Solarstrom said it now considered these talks “failed” and that the project pipeline would not be implemented.
“This was due to the financial deposits required for these projects from S.A.G. Solarstrom AG in the form of down payment and performance bonds before the start of the projects as well as warranty guarantees after completion of the projects,” the company said in a statement.
“The guarantees and warranties which are increasingly required on the market can amount to payments of up to 20% of the project volume before the start of the project and up to 10% after completion of the project, representing a disproportionately high capital commitment for the company. In many projects, this capital commitment is no longer proportionate to the achievable margin, taking into account the risks of large-scale projects,” it continued.
A Solarstrom spokeswomen told PV Tech the problem with cash deposits was not constrained to the UK market.
“This is not a problem we have had just with these negotiations but something we have increasingly seen during the course of the year. It’s a market requirement but it is really difficult when you have such a long capital binding period combined with a low margin, that’s why we have that business segment under review,” she added.
“In the last few years a lot of companies couldn’t cope very well with the market changes and couldn’t continue business. That has driven the requirement for higher guarantees. It was possible to get insurance for these warranties but this is no longer possible. Normally now you need a cash deposit.
“It’s a competitive market and a difficult environment out there,” she said.