FRANKFURT Jan 23 Germany's justice minister has
promised tougher regulation of niche investment products after
the insolvency of Prokon, a wind park group that lured investors
with aggressive ad campaigns on prime-time television, in buses
and commuter trains.
The company of 1,300, which operates 50 wind parks in
Germany and Poland, had raised 1.4 billion euros ($1.9 billion)
by touting profit-participation rights and promises of returns
of at least 6 percent a year.
Consumer groups had long warned that the company, founded in
1995, was not spelling out the risks to investors.
After German media reports questioned whether Prokon's
generous pay-outs were backed by actual profits, investors began
asking for their money back, and the company ran out of funds.
"The Prokon case shows once again that we must regulate the
grey capital market," said Justice Minister Heiko Maas. "We have
to create transparency where consumers are struggling to protect
The insolvency deals a blow to thousands of retail investors
who had hoped to profit from Germany's shift from nuclear to
renewable power, such as wind and solar.
To encourage investment in renewable energy projects, the
German government introduced incentives that guarantee producers
fixed prices over a 20-year period. But the sector has grown
faster than intended, prompting the government to scale back
so-called feed-in tariffs.
In recent years, Germany has seen a wave of insolvencies of
solar power companies which went from boom to bust, including
Q-Cells, Conergy and Solon. Renewable energy accounted for more
than 23 percent of Germany's power generation last year, with
wind power as the top contributor at nearly 8 percent.
Prokon founder Carsten Rodbertus, speaking at the company's
headquarters in Itzehoe near Hamburg on Thursday, admitted to
making mistakes but vowed to stick to his business model and
continue operations. He said he had already begun talks on the
sale of individual wind parks.
Marc Tuengler of DSW, a lobby group for private
shareholders, and Michael Kemmer, head of the German banking
association, both called for changes in the way niche investment
products like those sold by Prokon are regulated.
The banking association is calling for Bafin, the financial
regulator responsible for supervision of German banks, to be
given responsibility for such products as well.
But Michael Meister, a senior official in the German finance
ministry, cast doubt on whether new rules were the answer.
"Retail investors ultimately carry the responsibility for
their decisions," he said.
The profit-participation certificates that Prokon sold offer
high interest payments but investors face a hit if the company
makes losses. Unlike shares, the securities do not give holders
any say in the company.
Prokon investors are in the dark about whether they may get
some of their money back. As the company has not published
detailed financial results since 2011, it may take time for
insolvency administrator Dietmar Penzlin to sort through its
"Only then can it be determined what value Prokon's assets
have and whether the holders of the profit-participation rights
can hope to recover something," said experts at investor rights
(Writing by Noah Barkin; Additional reporting by Jan Schwartz,
Anneli Palmen, Ludwig Burger, Christoph Steitz)