German Pellets files for insolvency

By Erin Voegele | February 11, 2016

On Feb. 11, German Pellets GmbH announced a German court has appointed a provisional insolvency administrator with regard to insolvency proceedings that have been initiated against the assets of the company.

A statement issued by German Pellets indicates the insolvency court in Schwerin, Germany, has appointed Bettina Schmudde, a lawyer with the firm Kanzlei White & Case, as the provisional solvency administrator. The notice also states that in its Feb. 10 resolution, the court instructed the provisional solvency administrator to safeguard the company’s assets. The administrator also has the task of ascertaining whether there are sufficient grounds to commence proceedings and assessing the prospects for the company’s continued existence.

The wages and salaries of the company’s approximately 650 employees are guaranteed for three months during the provisional insolvency proceedings by means of insolvency substitute benefits. The notice goes on to state that the declaration of claims shall not be possible until the insolvency proceedings have commenced, which is likely to be in early May. Creditors are directed to refrain from declaring any claims before that date.

On day prior, on Feb. 10, German Pellets issued a statement noting had petitioned the court to restructure through bankruptcy proceedings under its own administration. The company also said it intends to continue its business operations in full during the preliminary insolvency proceedings.

According to German Pellets, economic difficulties were the result of three primary factors, including the dramatic decline in oil prices, lower pellet revenues resulting from two warm winters, and a bad investment the company made in 2010 in KAGO, a furnace manufacturer.

On Jan. 27, German Pellets issued a press release stating despite the current drop in oil prices, the market opportunities for the pellet sector are assessed to be positive. The release cites London-based consultancy company Hawkins Wright as forecasting an increase in global demand for pellets, up to nearly 49 million metric tons per year in 2019, up from 29 million metric tons in 2015.

“The power-station business remains a growth driver,” said German Pellets in the Jan. 27 statement. “Countries such as the United Kingdom, Denmark and Belgium are replacing use of fossil-fuels in electricity generation, by use of biomass; this is also driven by the resolutions taken at the United Nations Climate Change Conference, at which agreement was reached on the goal of limiting global warming to below two degrees Celsius. Alongside the power-station market, the pellet-fuelled heating market is also attaining continuous and dynamic growth. The burning of wood pellets in pellet-fired heating systems and stoves has established itself in countries such as Italy, Denmark, Germany, Austria and France, diminishing the market share of fossil-fuels such as oil and gas.”

A statement issued by the German Energy wood and Pellet Association (DEPV) on Feb. 11 notes that the organization does not expect the insolvency proceedings against German Pellets to result in a domestic pellet shortage. In late January, DEPV published a statement providing an overview of the 2015 pellet industry in Germany, along with a forecast for the current year. That statement notes that the massive drop in oil prices meant only about 16,000 pellet boilers and furnaces were put into service in Germany last year. Approximately 40,000 were originally expected to be installed during the year. The organization has called for additional government support to increase the use of biomass heating.

German Pellets current owns two U.S. pellets plants along with a port operation in Port Arthur, Texas. In mid-2015, the company announced the second phase of construction had begun on its pellet plant in Urania, Louisiana. Annual capacity at the facility is being increased from 578,000 metric tons per year to 1.156 million metric tons per year.  The company’s 500,000 ton per year pellet plant in Woodville, Texas, reached full capacity in 2014.