Huge wind farm in limbo as Chinese power group, Nordic metals giant and tax officials clash in court

The financial future of a big part of Europe’s largest onshore wind complex is mired in legal limbo amid claims and counterclaims by its main owner, the Chinese state-run power group CGN, the industrial giant buying its green electricity and Sweden's tax authorities.

Markbygden Ett reportedly wants to terminate its contract with Hydro and sell electricity from the wind farm in the open market.

Technical problems

“It has become clear that the wind farm has technical problems that lead to noticeable loss of production. This affects the company's value and the possibilities of achieving a viable business in the future in a decisive way,” Hydro's submissions to the court stated.

“The problems have not been taken into account to a sufficient degree when the liquidity budget for the company has been drawn up,” the court document quoted Hydro as stating.

The wind farm was built in 2018-19 with 3.6-137 turbines from GE, but the US company declined to comment on the stated technical problems. CGN didn’t reply to repeated requests for comment.

Under the terms of that PPA, Markbygden Ett, commissioned in 2019, committed to supply a fixed amount of electricity to the power unit of the Norwegian metals group for 19 years.

Three-quarters of the equity in Markbygden Ett was sold to CGN in 2018, but the project company ran into financial difficulties after the wind farm was unable to produce all the electricity needed for the PPA with Hydro.

Sweden’s tax agency argued that the losses resulting from these circumstances “can be described as an outcome of a financial investment abroad that did not turn out to be as successful as it was intended,” the court documents related.

“The ultimate owners of Markbygden Ett AB are government Chinese interests,” the document states.

“Taking this into account, the company's financial difficulties should not be resolved through a restructuring which could mean that the company's creditors become the ones who have to bear the financial consequences of the failed investment,” it says, still referring to the tax agency’s view.

“Instead, it should be up to the owners to contribute additional funds if they want to avoid the company being declared bankrupt.”

The court document also cites GE as arguing that “an arbitration procedure has been initiated in another country between Markbygden Ett AB and the company in the GE group that supplied components to the wind farm.”

The identity of the GE unit that supplied the components in question was not made clear, but the court document continued: “The GE company has been forced into that arbitration. This too can be expected to take time and as long as the procedure is ongoing, it means uncertainty regarding the outcome and financial consequences.

“That uncertainty is of decisive importance for the possibilities of achieving a successful restructuring,” the document states.

District court rejects arguments

The Swedish district court ultimately rejected the arguments against CGN’s planned restructuring.

It said the objections that Hydro and GE Energy have raised “aim at conditions about which it is difficult to draw any definite conclusions at this time".

The court document stated: "Taking into account the uncertainty that prevails, the district court judges that those conditions do not apply as such prove that they can be the basis for a finding that the purpose of the reconstruction could not be assumed to be achieved.”

The court also rejected the tax agency’s point of view, arguing Markbygden Ett had presented several scenarios for a settlement, some of which mean that the non-priority creditors would be redeemed and fully paid before a settlement is reached between the remaining parties.

“In summary, it is the district court's assessment that none of the objections raised against continued restructuring mean that there are reasons to decide that the restructuring should cease. It must therefore be allowed to continue according to the original decision,” the court said.

Hydro appeals

The court granted Hydro the right to appeal the restructuring as well as the later decision to continue that restructuring, but declined to make reasoning public.

No verdict on the appeal has been made public yet. Hydro had no comment on the appeal.