Proven Energy, the Scottish wind turbine manufacturer which went into receivership after discovering a potentially dangerous fault in one of its products, owed more than £4.5 million to unsecured creditors.
It is unlikely the creditors – including many suppliers – will receive any of the money back, with Clydesdale bank also left out of pocket and the main shareholder writing off £11.5m, according to a report into the company’s affairs by receivers KPMG.
The report highlighted the dramatic events leading up to the collapse of the company, which had manufactured small wind turbines sold across the world since 1993.
In September the company’s directors issued a statement after identifying a serious manufacturing defect with the company’s flagship P35-2 turbine.
The fault meant the company was unable to manufacture or sell the problem model which accounted for 75 per cent of turnover. Significant media coverage of the issue centred on a risk of blades “flying off” turbines.
“This had a significant and immediate adverse impact on the company’s cash flow as invoices were unable to be presented to the bank for payment under its invoice discounting facility,” said the report.
The position was worsened when the company’s main investor and shareholder Low Carbon Accelerator (LCA), an investment fund which specialises in the sector, publicly withdrew its support for the company in an announcement to the stock market, although the receivers’ report stressed that was in line with LCA’s obligations as a quoted company. LCA also said it was writing off its £11.5m investment in the company.
With no further funding forthcoming from any source, the directors decided that insolvency was inevitable. The receivers began marketing the company shortly after being appointed, with five final bids received.
The one from eventual buyer Kingspan Renewables, part of the Irish construction products group Kingspan, was described as a “clear front runner” which provided the “most favourable and certain outcome for creditors”. The deal saw the company’s 18 remaining employees out of its 75-strong workforce transfer to Kingspan which said at the time it intended launching new turbines based around Proven’s other models which would be made at its Stewarton base.
Although no figure has been quoted for what it paid for the business, the report said the company’s patents, trademarks and goodwill realised £1.3m with land and buildings sold for £160,000. The report noted that, during the sales process, no party had come forward with a “detailed or tested fix” to resolve the issues with the problem turbine.
The company’s bankers were owed £1.43m when receivers were appointed and have been paid a total of £950,000 of money owed under secured and floating charges.
The report said the receivers estimate that, although the bank will receive a significant recovery, there will be a shortfall and given that, they do “not anticipate any recovery for unsecured creditors”.
In its most recent full year accounts to 31 May, the company saw turnover of £9.4m with net losses of £874,000.