A consortium of institutional investors acquired six woodchip-fired district heating plants in Sweden. The holding company and the underlying SPC’s were leveraged with significant amounts of debt. Following the acquisition, the actual performance of the business was significantly below expectations due to numerous factors, including:

  • Mechanical failures caused outages and resulted in poor availabilities.
  • Operations could not be automatized to the degree thought. As a result, operating costs were higher than expected.
  • Cost of the woodchip fuel increased by more than 40% after the acquisition. Due to partially poor quality, some of the woodchip had to be substituted with expensive oil.
  • The acquired businesses had long-term contracts with customers not willing to pay price increases to cover rising fuel costs.

Disputes with the equipment supplier and one of the lending banks resulted in additional challenges.

EIC’s Initiative

As a result, it became increasingly more evident that the acquired district heating business would most likely fail to service its debt unless several immediate measures were taken. EIC conducted a rapid, in-depth root-cause analysis and managed to move the business ahead in three parallel steps. In the first step, technically qualified and experienced management was mobilized to run the business. With this measure, availability figures rapidly improved.

In the second step, EIC opened the discussion with the lenders about the deteriorating financial situation and drafted a plan to improve the situation. It was proposed to transfer the district heating assets into “NewCos”, allowing the renegotiation of the off-take agreements on an arms-length’s basis. Institutional investors were persuaded to re-capitalize the business with additional equity and subordinated loans. In return, lenders consented to a revised debt service schedule.

EIC then supported the owners and lenders in taking a firm position against the unreasonable claims by the equipment supplier of the district heating plants. Finally, those supplier claims were successfully repelled by the Supreme Court of Sweden.


As a consequence of the implementation of the above measures, the district heating business regained sustainable prospects. The institutional investors were able to successfully exit the business when their holdings were acquired by a large pan-European utility.

Key Success Factors

  • Multidisciplinary, analytical skills
  • Ability to manage different stakeholders in parallel
  • In-depth understanding of regulatory trends and contractual concepts
  • Network to mobilize relevant technical, legal and commercial resources