Creditors of closed offshore wind manufacturer TAG Energy Solutions face a shortfall of more than £61m, a report from the firm’s administrators shows.
TAG Energy Solutions Ltd (TAGES) and its trading vehicle, Tees Alliance Group Corporate (TAGC) Ltd, were placed into administration in October following a lack of available work. The Billingham-based firm had closed its doors in September, sparking 68 redundancies.
Workers were paid redundancy out of an escrow fund established by E.ON, which the firm had been supplying as part of a “landmark” deal to produce foundations for the Humber Gateway wind project.
In a deal which is expected to complete in January, TAGC’s administrators Duff and Phelps are now selling the firm’s freehold property and plant and machinery to a joint venture of Denmark’s Bladt Industries and Germany’s EEW SPC. The deal is anticipated to raise £2.9m for TAGC’s “preferential” creditors.
However there remains a deficit of more than £61m, comprising £55m of intercompany loans and a £1.3m grant supplied by former regional development agency One NorthEast in 2010.
The sum also includes £170,000 owed to the firm’s investors Platina Partners, which, along with Environmental Technologies Fund, backed the management buyout of TAGES in 2010.
At the time the firm also received £3m of grants – including money from the Department for Energy and Climate Change and the One NorthEast grant.
TAG was set up to plug a gap in the UK market for offshore wind fabrication work, but struggled to win large enough contracts to sustain itself.
A report to creditors from Duff and Phelps said the offshore wind market in the UK had developed at a much slower pace than TAGC directors had anticipated.
As a consequence shareholders instructed EY to market the business for sale in 2012/13 – a process which was halted when TAGC won a substantial contract with E.ON to supply foundations for the Humber Gateway wind project.
Costs escalated on the “landmark” contract and TAGC needed further funding to complete the work. Suppliers of the firm declined, and the directors turned to E.ON which provided the additional capital needed.
With no work on the horizon following the E.ON contract, TAGC closed its Haverton Hill operations on September 26 and laid off 68 staff.
EY were instructed to resume its marketing of the business and several interested parties had entered a due diligence process. By the end of September it was decided a share sale was not possible and the firm’s assets should be sold through the insolvency process.
The Bladt Industries and EEW SPC joint venture had been in talks with the firm throughout this period and the administrators continued negotiations before securing a deal in November – including a £100,000 deposit.
On announcing the deal, the two firms said they expected to invest between £25m to £35m in the Haverton Hill facilities.
The 2012 accounts for TAGC show the firm was operating at a £9.2m loss.