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Daldrup & Söhne AG to focus on drilling after sale of geothermal business

Drilling rig on site in the Netherlands (source: Daldrup & Söhne AG)
Alexander Richter 19 Jan 2020

With the sale of its geothermal power business, Daldrup & Söhne AG is reorganising its business and is to focus on its drilling activities, with geothermal projects ongoing in the Netherlands and Germany.

Following the sale of the Geysir Group with the geothermal power plants in Landau and Taufkirchen to IKAV Group, Daldrup & Söhne AG is realigning its business with a focus on its drilling business.

As we reported earlier this week, Daldrup & Söhne AG has agreed with the IKAV Group, represented by the Luxembourg fund IKAV Invest S.à r.l., to sell the remaining 48.944% of Geysir Europe GmbH. In July 2019, IKAV Invest S.à r.l. had already acquired 48.944% of the shares in Geysir Europe GmbH in a first step. Thus, the Daldrup Group has sold all its shares in Geysir Europe GmbH. The agreement includes the company shares in the geothermal power plants Taufkirchen and Landau.

Daldrup received funds of EUR 5.2 million under the first agreement from June 2019. With the conclusion of the second agreement Daldrup will initially receive a further purchase price payment of EUR 1.0 million.

Daldrup & Söhne AG has capitalised services rendered and receivables from the sold Geysir companies in the amount of approximately EUR 32.5 million. Within the scope of the sale, some of these items will probably have to be subject to extraordinary value adjustments in the financial year 2019. From today’s point of view, these will amount to approximately EUR 15 million, subject to the audit by the appointed auditors, which will begin shortly. They are of a historical nature and have no negative impact on the liquidity situation or the operative business of Daldrup & Söhne AG. The repayment of the remaining claims of Daldrup & Söhne AG by the Geysir companies in the amount of approx. 18 million Euros is to be effected within the next seven years and is linked to the achievement of realistic performance values of the two power plants.
In the course of the deconsolidation of the Geysir Europe Group, the Geysir shares will probably be valued at-equity for the last time in the financial statements of the 2019 financial year.

Debt from power plant activities to be completely eliminated

With the sale of Geysir Europe GmbH, the debt from power plant activities will be reduced by EUR 42 million and thus completely eliminated. Furthermore, the economic transition as of 31 December 2019 will eliminate further investment requirements in the power plant companies. The net loss of the Geysir Group in the period 2010 to 2018 amounted to a total of EUR 28.6 million. With the sale, the sustainable loss situation of the Geysir companies will no longer have a negative impact on the Daldrup Group from the financial year 2020 onwards. There will be no further cash flow transfers from Daldrup & Söhne AG to the Geysir Companies.

All in all, the sale is another important milestone in the reorientation towards a profitable drilling company in the future. Daldrup & Söhne AG thus regains operational freedom of action, in particular to profitably advance the business with geothermal energy for heating purposes in the context of the heat turnaround.

Operating result for 2019 expected to be in line with forecast

The operating development and the expected operating result of Daldrup & Söhne AG must be distinguished from this. From today’s point of view and subject to the audit by the auditors, the Management Board expects the individual financial statements of the AG to show a total output of about EUR 38 million and an EBIT result of about EUR 1 million in 2019. The operating business of the AG would thus be in line with the forecast made at the end of May 2019, which was to achieve a total operating performance of EUR 40 million with an EBIT margin of 2 % to 5 % if major orders were invoiced as planned. The forecast for consolidated earnings for 2019 published at the end of May 2019 will no longer be matched by a comparable group of consolidated companies in the future.

Geothermal energy for the heat system transformation

With the sale of Geysir Europe GmbH, a further key element of the change in strategy announced in 2019 was completed. The majority shareholdings in geothermal power plants have been replaced. The group of companies is concentrating on its profitable drilling services business in the four business units. It is planned to focus the geothermal energy business area in particular on the development and utilisation of geothermal heat. In this context, minority participations in geothermal power plants are also planned for the future. In terms of risk/return profile, however, these projects should correspond to the medium-sized character of Daldrup & Söhne AG. Reference projects of this kind include, for example, the Nature’s Heat plant for greenhouse operators in the Netherlands and geothermal district heating for Stadtwerke Schwerin, which will be completed in 2019, as well as the project of Aardwarmte Combinatié Luttelgeest BV, the Netherlands, the implementation of which commenced in the 1st quarter of 2020. The project company Geothermie Neuried GmbH & Co. KG remains within the Daldrup Group with the aim of further development. Here, the IKAV Group has the option of developing the project together with Daldrup as shareholder.

The order book remains very good at around EUR 42 million. In addition, further talks are currently underway with European project developers for the commissioning of deep geothermal drilling.

Source: Company release