Prokon (PROjekte und KONzepte), which has been rumored for the past weeks to be teetering on the brink of default, finally filed for insolvency on Wednesday. The company, which runs over 50 wind parks with hundreds of windmills in Germany and Poland, and employs 1,300 workers, is Germany’s biggest, with a capital of 1.4 billion euros, collected from over 75,000 private investors. These, however, are not shareholders in the normal sense; the “shares” they own at Prokon are certificates only, which do not give holders any say in the running of the company, nor any sound legal base for requesting detailed information from the management on the company’s doings. All they learn comes from media reports on Prokon. Certificates operate in a legal gray zone in Germany, and the Prokon default has prompted new calls for legislation to impose strict controls or better, a total ban on these “financial products.”
There have been voluminous withdrawals of capital, altogether 280 million euros in the past weeks, after critical reports appeared in the German media that questioned whether Prokon’s profits matched its interest payments: indeed, accounts published on Prokon’s own website show, that in the first nine months last year, it paid out interest of [Euro]67.2 million, double its earnings before interest, tax, depreciation, and amortisation of [Euro]33.5 million for the same period. With a yield of 6-8 percent promised to certificates owners, Prokon has particularly attracted people whose normal savings accounts did not offer any revenue near that. The company apparently ran a classic Ponzi scheme, paying old investors from the money new investors brought in. Prokon last week denied running a Ponzi scheme, claiming: “Our projects are merely unconventionally financed.” The end of Prokon is, however, a rather conventional one, appropriate for a Ponzi scheme. The state prosecutor’s office in Luebeck, northern Germany, is investigating Prokon.