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Friday, 8 February 2013

Royal Imtech N.V. gets lost in Polish morass: Dutch technical service provider forced to write off €100 mln on work-in-progress bill for Warsaw amusement park

Like I wrote earlier this week, this has not been the best of weeks for investing in Dutch stock. Apart from the nosedive that Dutch telecom company KPN took after the presentation of its annual rates and the announcement of a follow-on stock offering of €4 bln, there was one other tech fund in distress: Royal Imtech N.V (IM) aka Imtech.

On Monday, 4 February 2012, Imtech’s  CEO René van der Bruggen made a statement that a €100 mln bill on work-in-progress for an amusement park in Poland should be written off. The company had received a bill of exchange from its Polish customers as a payment for already carried out activities. Unfortunately, this bill bounced at the banks, due to the fact that the Polish customers allegedly didn´t have their financing in order.

According to Van der Bruggen, Imtech could even be forced to make larger write-offs on this Polish project, as the total damage for the project was yet under investigation.

A consequence of this huge write-off was that Imtech couldn’t meet its banking covenants anymore, with the possible result that credit lines from the banks would be suspended. This was the reason that dividend payments for the shareholders of Imtech had been cancelled and the presentation of the annual data had been postponed until further notice.

Het Financieele Dagblad wrote on this developing story:

Technical service provider Imtech should write off €100 mln on projects in Poland. The company, with a quotation on the Amsterdam stock exchange NYSE Euronext, announced that it couldn´t meet its banking covenants anymore. The publication of the annual data, originally planned for Tuesday, 5 February, would be postponed until further notice.

Imtech stated on Monday that it is hit hard by the lacking funding of its largest principal in Poland, as well as through other irregularities on its projects in the Eastern European country. Imtech stated that it is going to perform a forensic investigation into the events in Poland and the situation that emerged from this. During this investigation, the local Polish management has been suspended, according to the company in a press release.

The Executive Board of Imtech expects a depreciation of at least €100 mln for expenses already made. As the exact size of this depreciation cannot be set at this moment, Imtech is not able to aggregate the data for the annual report 2012. Therefore the presentation of the annual data is postponed until further notice, as well as the annual shareholder meeting, originally planned for April 3.

The depreciation of at least €100 mln concerns three projects for Adventure World Warsawa (the building of a newly planned amusement park in Warsaw) and a project concerning energy-generating biomass plants, also in Warsaw, with an aggregated value of €757 mln.

Imtech found that the advanced payments coming from these four Polish projects were not at Imtech’s disposal, as was originally agreed with the principal. This is allegedly caused by the fact that the principal doesn’t have its funding in order.

The news on this financial setback hit the shareholders like a hammer, especially as it was not clear yet how much damage the project in Poland would really deliver eventually. The fund has been slaughtered at the Dutch stock exchange and lost 45% of its rating in the Midkap index (an index for medium-sized funds) in one day. The statement of the executive board, that there had possibly been other irregularities within Imtech´s Polish projects was even more troublesome for investors and shareholders.

Adventure World, the Polish amusement park and main protagonist in this drama, was somewhat puzzled by Imtech´s statement on Monday, as can be written in these snips from a BNR news-radio article.

According to the Dutch director of Adventure World, Peter Mulder, Imtech had exaggerated the value of the activities it had carried out for the park. It was unclear to him why Imtech had set the amount of damage this high, as the expenses that Imtech had made would have been significantly lower. ”This amount of €100 mln is not correct. I´m certain about that”, Mulder stated.

He further stated that he had not yet received an invoice from Imtech for the preparing activities in the park, that should be opened in 2015. His company would have made a €200 mln advanced payment on a blocked account.

After reading this opaque story, I can imagine that the shareholders and investors were not exactly happy about the ´adventures´ of Imtech in Poland.

Especially the story concerning the bounced bill of exchange and the blocked accounts with €200 mln in advanced payments by Adventure World that do or do not exist, leave ample room for speculation. As a consequence, there had been the designated write-off of €100 mln on work-in-progress, that had been disputed by Adventure World director Peter Mulder as being exaggerated.

On top of that, there has been the message from CEO Van der Bruggen that Imtech´s Polish projects could have been subject to´irregularities´ during the execution. The expression ´irregularities´ could point at a wide array of disturbing causes.

In my humble opinion (warning: this is pure speculation on my behalf!), even bribery of Polish officials could be among these causes. The situation at Philips Poland of 1.5 years ago showed that these things can never be ruled out.

There is one other disturbing fact: when I look at a photo-series of World Adventure amusement park, connected to this article in the FD, I wonder where the €100 mln in activities, carried out by Imtech, did go? I don't see this park being finished (no way!) within two years and I don't see how millions of Euro's could be spent on this park, unless in drawings, computer-designs and blueprints.

The fact that – apart from the Polish officials – also the German management of Imtech have resigned, gives much food for thought. I suspect that these Polish adventures of Imtech could have an unpleasant follow-up in the very near future.

To be continued…


  1. Of course! It must be some bribery! It is a "wild-east" after all! ..Right?!?
    Ineterstingly enough, nowhere in this posting there is any, even the most minute squeek(sic!) about the fact, that the "Principal" who owes all this money is actually a Dutch citizen!
    LasPalms is not a Polish company!
    But why bother blaming our own brethren.. It must be the Poles! ...after all, they started the war.. troublemakers??

  2. I am sorry if I gave you the impression that this is an anti-Polish article and I insulted you and your country-men. And you are right about the owner and director of Adventure World Warsaw being Dutch citizens.

    The main theme of this article is how €100 (actually €150) million of Imtech's got lost, seemingly without a trace, leaving only a muddy field and one arch standing on it. With my speculation that it might be spent on bribery of officials or other fraudulent activities, I was only looking for clues into this very opaque case.

    I was NOT trying to insult Polish people. You must know that I have an East-European wife, so I know a thing or two about prejudice.

    Further, you are free to think about me and my opinions what you want.