bmp greengas insolvency to cause “at least” €150 million in losses

Insolvency proceedings for biogas trader bmp greengas were initiated on 1 August, with a restructuring plan to occur "due to the dramatic change in the procurement situation" - as a result of market shifts and the fall-out from Russia's invasion of Ukraine. This meant that the firm was unable to meet its obligations to its customers.
The Association of Municipal Companies (VKU), which represents the interests of the local public utility sector in Germany, has estimated the potential damage to impacted municipal utilities as being at least €150 million.
This figure was the result of an ad hoc survey VKU conducted with its member companies that are bmp greengas companies: "the overall higher sum of the total damage will certainly become apparent in the insolvency proceedings," according to the association.
Survey results
The VKU survey found that 81% of municipal utilities responded that the current uncertainty regarding deliveries from bmp greengas would jeopardise their transition to a climate-neutral heat supply. Due to supply issues, bmp greengas had offered many new customers contracts with volume reductions at often significantly higher prices.
The same applies to around 87% of bmp's customers in  the municipal utilities sector. The survey reported that these companies receive 40% less than the originally contractually agreed delivery quantity, whilst experiencing prices of around 35% more.
Three-quarters of the affected municipal utilities will be unable to obtain the lost quantities from other suppliers at short notice.
If they do, they will only be in part, and at significantly higher costs.
Half of bmp greengas' customers from the municipal utilities association have so far rejected the new contracts, with 25% still negotiating with the biogas trader, and 25% agreeing to them.
The affected companies will incur additional costs. Among other things, this is due to procurement from other suppliers (68%), higher prices for bmp greengas (61%) or the elimination of EEG subsidies (54%).
For many municipal utilities, damage in the single-digit million range is already forecast for the current calendar year, according to VKU.
Since most of the supply contracts were concluded over several years, the expected total loss is cumulative.
For example, individual municipal utilities are already reporting expected total losses of €20 million to €60 million euros each. The long-term commitment was an expression of the trust many municipal utilities had placed in bmp greengas because of its affiliation with the EnBW Group, added VKU.
"The bmp greengas insolvency has the potential to slow down the heat transition. Affected municipal utilities now have to pay for a disaster for which they are not responsible, and this presumably at the expense of necessary investments to achieve the climate targets," said Ingbert Liebing, VKU managing director.
"Customers of bmp greengas are understandably very upset. Trusting in the creditworthiness of the indirect EnBW subsidiary, they concluded the original supply contracts," added Liebing.
He called on the state government of Baden-Württemberg to intervene in the case of bmp greengas, an indirect subsidiary of the state-owned EnBW.
"The pioneers of the heat transition, who relied on biomethane at an early stage, are now being punished. This generates more than just [a] shaking [of] the head," observed Liebing.
At the beginning of last week, the Karlsruhe District Court opened insolvency proceedings in self-administration. As a result, bmp greengas has been given the opportunity to restructure itself as part of the insolvency proceedings. From VKU's point of view, this is at the expense of many municipal utilities.