Photon Energy comments on the Senate's decision on the Amendment of the Renewable Energy Act
09-12-2010
In its session on 8 December 2010 the Senate of the Czech Republic passed the Amendment of the Renewable Energy Act No. 180/2005 previously approved by the Lower House of Parliament on 9 November 2010 by not passing a resolution. In a letter to the Lower House of Parliament the Czech President Vaclav Klaus expressed his disagreement with the legislation and announced that he would leave the Amendment without his signature so that it would automatically become law after a 15-day period. Hence, the Amendment is certain to become law.
The most material impact of the Amendment is the introduction of a 26% tax on the revenues generated by photovoltaic power plants connected to the grid in 2009 and 2010 in the financial years 2011-13. This measure comes on top of the scrapping of a 6-year income tax holiday on profits generated by photovoltaic plants and an extension of the depreciation period for the plants to 20 years.
As a consequence of this Amendment the debt financing of photovoltaic projects is under material stress as due to the 26% revenue tax the Debt-Service-Coverage-Ratios (DSCR) measuring the relationship between the Free After-Tax Project Cash and the Loan Annuities will be materially below typical values of 1.2 or 1.3. In many situations the value may be below 1.0, which means that the equity investors will have to inject money to cover part of the instalments. As a direct result of this Amendment the banks providing project financing for photovoltaic power plants in the Czech Republic have in many cases materially changed the terms, mainly by asking for a higher equity contribution by the investors. This has also been the case for Photon Energy's project financing after the draft legislation was proposed by the Czech government.
The management of Photon Energy will evaluate the impact on the value of its assets and its operations and will undertake all necessary steps to minimize the negative impact of this Amendment. Management will evaluate all available options to protect the value for all of the company's shareholders.
The management board of Photon Energy will continue informing investors about further developments regarding the Amendment and the impact on its business.
§ 3 section 1 of Exhibit 3 of the Alternative Trading System Rules, as adopted by Resolution Nr. 147/2007, dated 1 March 2007, and amended by Resolution Nr. 733/2009, dated 18 December 2009, of the Warsaw Stock Exchange Management Board.
The most material impact of the Amendment is the introduction of a 26% tax on the revenues generated by photovoltaic power plants connected to the grid in 2009 and 2010 in the financial years 2011-13. This measure comes on top of the scrapping of a 6-year income tax holiday on profits generated by photovoltaic plants and an extension of the depreciation period for the plants to 20 years.
As a consequence of this Amendment the debt financing of photovoltaic projects is under material stress as due to the 26% revenue tax the Debt-Service-Coverage-Ratios (DSCR) measuring the relationship between the Free After-Tax Project Cash and the Loan Annuities will be materially below typical values of 1.2 or 1.3. In many situations the value may be below 1.0, which means that the equity investors will have to inject money to cover part of the instalments. As a direct result of this Amendment the banks providing project financing for photovoltaic power plants in the Czech Republic have in many cases materially changed the terms, mainly by asking for a higher equity contribution by the investors. This has also been the case for Photon Energy's project financing after the draft legislation was proposed by the Czech government.
The management of Photon Energy will evaluate the impact on the value of its assets and its operations and will undertake all necessary steps to minimize the negative impact of this Amendment. Management will evaluate all available options to protect the value for all of the company's shareholders.
The management board of Photon Energy will continue informing investors about further developments regarding the Amendment and the impact on its business.
§ 3 section 1 of Exhibit 3 of the Alternative Trading System Rules, as adopted by Resolution Nr. 147/2007, dated 1 March 2007, and amended by Resolution Nr. 733/2009, dated 18 December 2009, of the Warsaw Stock Exchange Management Board.
