Power problems

In Hot Water

Is FG Gruppe spouting hot air?
  • Why it matters

    Why it matters

    Several geothermal sites in southern Germany are ideal for capturing energy. But despite raising millions in funds, FC Gruppe has failed to exploit its sites, worrying investors and casting doubt over the future of geothermal power in Germany.

  • Facts


    • FC Gruppe is using a geothermal plant to heat vegetable greenhouses.
    • The company aims to build power stations capable of generating electricity for thousands of homes.
    • It has raised €28 million ($35 million) from private investors, and €38 million from a partner, well short of targets.
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Saint Vitus must certainly have been pleased by the tomatoes. At the harvest festival in the Bavarian village of Kirchweidach, a large basket of them was placed beneath his image at an altar, along with pumpkins, ears of corn and red cabbages.

But the 3rd-century saint would have been surprised by their origin: The tomatoes came from the largest greenhouse in Germany to be heated by geothermal energy.

FG Gruppe, a green energy company based in Regensburg, southern Germany, was behind the ripe and juicy gift. It also sent tomatoes grown in the village to investors in its geothermal subsidiary, Geokraftwerke.de. It was a friendly gesture after collecting €28 million ($35 million) from them to finance construction of its geothermal power plants.

So far, however, tomatoes are the only payoff for the investors, other than interest payments. According to one, who didn’t want to be named: “I can’t get very enthused about the vegetables.”

The investor told Handelsblatt that he paid several thousand euros to buy registered bonds that promised earnings of 7.25 percent interest for at least seven years. According to the sales brochure, the goal of the investment is “construction of geothermal power plants in southern Germany with an effective output of 10 megawatts.” That’s enough to power a few thousand homes.

It would be a bountiful source of money if only the electricity were flowing.

Geothermal plants use hot water tapped from deep below the surface as either a direct source of heat, or to create steam, which is then used to drive a turbine and generate electricity. Germany, with its push towards renewable energy, is a good place to exploit such a power source: A purchase price of 25 cents per kilowatt hour is guaranteed, well above the 13 cents per kilowatt hour average cost paid by industry in 2013.

It would be a bountiful source of money if only the electricity were flowing. But up to now, only the vegetable greenhouse heated with geothermal energy is standing. No power plants have been built, four years after FG Gruppe started collecting money.

So far, investors have been getting their interest payments. But the investor Handelsblatt spoke with worried that he  won’t get his original stake back. “Where is the money supposed to come from?” he asked.

The investor trusts neither FG Gruppe nor its manager and shareholder, Wolfgang Hageleit. Mr. Hageleit, whose hobby is racing cars, is known for posing on the Internet as “Turboprinz 911,” in front of Ferraris and Learjets. He explains that geothermal energy is not his only business and that he doesn’t owe his commercial success to it. Mr. Hageleit also rents racing cars.

He is keen to reassure investors. “We are right on schedule,” he said.


Wolfgang Hageleit is yet to build a power plant. Source: FG


Such a statement is cast in to doubt by the situation at another FC Gruppe project in southern Germany.

In a banquet room in the town of Seebruck am Chiemsee, beside a large lake, FG Gruppe treated locals to a free feed while inviting them to a town-hall meeting. The investment group wanted to sell the idea of building a geothermal power plant not far from their scenic lake. “We need all of you,” said FG manager Johannes Falk. “We are optimizing our project so everyone can live with it.”

The investor trusts neither FG Gruppe nor its manager and shareholder, Wolfgang Hageleit.

Guests later learned that the company had acquired drilling rights long ago, and ultimately it would be the district administrator who decides on the project. Mayor Bernd Ruth was especially unhappy with the fait accompli.  “FG already had the rights for two to three years, and at the beginning we didn’t even have a clue,” he grumbled.

A citizen’s action committee in the neighboring village of Schnaitsee successfully blocked building on the site originally planned for the power plant. Shifting the drilling site one kilometer cost FG Gruppe €2 million.

Others costs have spiraled out of control. The technology is relatively new and difficult to calculate. But geologists say a layer of marine limestone four kilometers (2.5 miles) beneath Seebruck is ideal for capturing energy. The porous rock contains thermal water with a temperature of about 130 degrees Celsius (266 Fahrenheit).

The FG Gruppe brochure gives the impression that geothermal projects are commonplace. It predicts the power-plant subsidiaries will quickly achieve interest of more than 12 percent.

The current reality, however, is quite different. The showcase project at Kirchweidach brought up so little water that another drill hole had to be sunk. What is more, an expensive drilling head fell into the hole and couldn’t be recovered.

Instead of the projected 200 liters per second, the pump brings up a maximum of 130 liters.

At the showcase project in Kirchweidach, FG Geothermie, the subsidiary company overseeing the tomato and Seebruck projects, has an investment partner, Geoenergie Bayern. The partner invested €38 million ($48.1 million) before hot water was finally flowing. That’s more than twice the amount that FG Geothermie calculated in its brochures, which floated a price of €18 million in drilling costs per power plant.

The showcase project at Kirchweidach brought up so little water that another drill hole had to be sunk.

The Kirchweidach project has so far only managed to provide heat for the tomato greenhouse. There are also plans for a long-distance heating network to nearby villages, but these currently amount to just a few sticking out of the ground. Originally, there were plans for a capacity of five to six megawatts. Now the talk is of construction in stages, with a start of 500 kilowatts – or one-tenth of what was projected.

“Geothermal energy requires stamina,” said Bernhard Gubo, director of Geoenergie Bayern. He also said his company has the support of a large British investor for the long term.

On the other hand, FG Gruppe depends mostly on the money of small investors. The intention in 2010 was to collect €50 million within 18 months. Today, four years later, the sum is €28 million.

In the meantime, the firm found a large investor. SAM AG, based in Switzerland, collected investors’ money and wanted to participate with up to €100 million as a shareholder in the projects. But the Swiss investment firm went bankrupt in 2013. Insiders say that up until then, only €27 million had been put up. Mr. Hageleit bought the shares of SAM AG for €350,000 and agreed to make no further demands. Since then, Mr. Hageleit is the sole shareholder of FG Gruppe.

So where’s the money? “I would like more transparency,” said the investor who spoke to Handelsblatt. “If the concept isn’t going to work, I would like to get my money back.” He asks: How are investors being paid their interest? How long will the money last?

“Geothermal energy requires stamina.”

Bernhard Gubo, Director, Geoenergie Bayern

FG Gruppe counters that it issues “information regularly about the current situation.”

Mr. Hageliet calls the tomato greenhouse and heating network “a success that we are very proud of.” But revenues from heat sold over the network will certainly not be enough to pay investors both interest and principal. For that, power plants would have to be built.

“The business model anticipates that the interest will be generated after partial sale or completion of the geothermal project,” writes FG Gruppe.

The clock is ticking. By the end of 2017, the first investors can opt out and demand their money back. If the plan doesn’t work, they are liable for the entire risk. Their money is considered to be proprietary capital. In the case of loss, they are subject to the entire default risk.

Mr. Hageleit said it won’t come to that: “I have invested myself and have a vital interest in seeing that the project is carried through to completion.” He said auditing firms assume the undertaking will be achieved. Moreover, he said, the financing is “supported by further large investors.” He declined to provide any names.

Investors have another reason to be nervous. If the money does run out, the local mining authority requires companies to maintain reserves to cover the cost of closing up uncompleted drilling sites. If this happens, FC Gruppe’s investors would have sunk their money into a 3,800-meter-deep hole.

And local communities would be left sitting on plans for their power plants.


Gertrud Hussla is an editor at Handelsblatt covering financial issues, Anna Steiner is a freelance journalist specializing in green energy. To contact the authors: Hussla@handelsblatt.com

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