November 17, 2008

Project Financing

EarthFirst Canada obtains creditor protection related to Dokie wind energy project

RICHARD GILBERT

staff writer

The global financial crisis has forced the Dokie wind energy project in northeast B.C. to seek court protection, in order to hold off creditors who are looking to recover $131 million in debt.

EarthFirst Canada Inc. announced recently that it obtained creditor protection.

A press release stated that the crisis in global financial markets hindered the company’s ability to develop alternatives for financing or completing the sale of the company.

“EarthFirst has sought protection under the CCAA (Companies’ Creditors Arrangement Act) as its current cash in hand would not allow it to meet its current obligations and its obligations with respect to the ongoing construction of its 144 MW Dokie 1 wind energy project in British Columbia,” stated the release.

“While under CCAA protection, EarthFirst will continue with its day-to-day operations and will continue with its efforts to pursue strategic alternatives.”

The Court of Queen’s Bench of Alberta in Calgary granted CCAA protection for an initial period of 30 days expiring Dec. 4, to be extended as the court sees fit.

“EarthFirst further expects CCAA protection will allow corporations currently engaged in the sale process additional time for due diligence,” said the release.

While under CCAA protection, EarthFirst is under the supervision of Ernst & Young Inc., which is the court-appointed monitor.

The firm is responsible for reviewing ongoing operations, assisting with the development and filing of a new plan, liaising with creditors and reporting to the court.

The plan must be approved by affected creditors, as required by law, as well as by the court.

At the end of the restructuring process, the value of what is left for shareholders will depend upon the terms of the plan approved by the affected stakeholders.

If by Dec. 4, EarthFirst has not filed a plan or obtained an extension of the CCAA protection, creditors and others will no longer be stayed from enforcing their rights.

If the plan is not approved, it is possible that EarthFirst would be placed into receivership or bankruptcy.

The company installed B.C.’s first commercial wind turbine on the Dokie wind project on Oct. 6 on a site about 50 kilometres northwest of Chetwynd, in the Peace River region.

Construction on the 144 MW Dokie wind project began in May 2008 with on site activities such as clearing the land, roadbuilding and foundation work.

Site preparation also included geo-technical work, detailed design, the tendering of various balance of plant contracts and ordering of long lead-time equipment.

EarthFirst announced in July that the total capital cost estimate of the project had increased to $360 million from $325 million.

About $22 million of the increase was due to higher than anticipated tendered pricing, as a result of increased labor and commodity costs.

The remainder of the increase came from an increase in the contingency allocation, which jumped to $36 million from $23 million.

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