Irish property company Treasury Holdings could face a multimillion euro compensation demand from German local authorities affected by the insolvency of its waste subsidiary Herhof.
The German company, bought by Treasury for €20 million in 2003, has contracts to thermally treat waste in specially-built plants before it enters landfills, a legal requirement here from June.
With five waste-treatment plants in construction simultaneously, Herhof ran into liquidity problems last year.
Treasury promised but failed to put together a group of investors to continue operations and insolvency proceedings have begun. Now one local authority says it expects Treasury to pay €8.5 million required to complete construction of its waste plant.
The court-appointed administrator said that other local authorities expect Treasury to cover the additional running costs of processing their waste with rival companies.
"The new owners committed themselves, regardless of the economic situation of the subsidiary, to make available their own means if necessary to get the Osnabrück plant ready for operation," said Karl-Josef Leyendecker, senior counsel for the western city of Osnabrück.
"It's difficult for me to assess [ the situation] because bankruptcies do happen, but naturally there is the possibility to let a bankruptcy happen."
A spokesman for Treasury Holdings said: "If there are contractual obligations they would have a consequence."
Bernd Ache, the court-appointed administrator, criticised the Irish company yesterday saying: "Treasury was prepared to do everything [ to save Herhof] except invest money." He said the company was not prepared to deposit €1 million with a German court to postpone the insolvency proceedings.
The current insolvency was "predictable", he said, ever since Treasury said a year ago it would get new investors on board.
"There are easier ways of throwing money out the window," said Mr Ache.
He is now trying to find a buyer for the company as a whole before breaking it up. He says he has several potential buyers, none of which are Irish.
Treasury has not ruled out buying back the company, but only if local authorities retained their contracts with the Herhof plants and didn't put their waste contracts out to tender again.
Herhof won so many waste contracts because its tender of €73 per tonne of waste was lower than the standard price of up to €200. The group's bid was so low because of its patented method of treating waste to produce a high-energy "dry stabilitate" which can be sold as fuel at a profit.
