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Solar Company On Verge Of Spain’s Largest Bankruptcy

November 27, 2015
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By Paul Homewood  

 

image

http://elpais.com/elpais/2015/11/26/inenglish/1448550150_453924.html 

 

Stranded assets, Mr Carney?

 

El Pais report:

 

Spanish renewable energy company Abengoa on Thursday applied for preliminary protection from creditors and called in lenders to start negotiating the terms of an agreement that would prevent a definitive suspension of payments.

In accordance with Spanish insolvency laws, the company has four months to reach an out-of-court agreement with its creditors.

Abengoa is on its way to becoming the biggest bankruptcy case in Spanish business history – even bigger than the fall of real estate giant Martinsa-Fadesa.

 

 

While the Seville-based firm desperately seeks a new deal with its creditors or a new investor to shoulder part of its €8.9 billion of gross financial debt, it is also asking bondholders to group together into a committee to renegotiate the debt.

“The committee is necessary in order to manage our commitments in an efficient manner,” said a company spokesperson.

Meanwhile, shares in the renewable energy and engineering giant continued to plunge, registering losses of up to 25 percent on Thursday – its last day of trading after the Ibex 35’s technical committee decided to take Abengoa out of the blue-chip index.

“Many bondholders are now selling,” confirmed Stuart Stanley, of Invesco Asset Management. “If nobody is willing to intensify their positions, then who’s going to help Abengoa? Right now, the company needs a white knight.”

On Wednesday, the company informed the United States stockmarket watchdog, the Securities and Exchange Commission (SEC), that Javier Garoz, head of the US unit, was leaving the group.

Abengoa, which is made up of around 650 businesses, did not explain the reasons for Garoz’s departure.

 

Meanwhile, Spanish Industry Minister José Manuel Soria said on Thursday that he hoped Abengoa would be able to save itself, but noted that it is a private company.

“The government is closely following all steps being taken, but the case affects a company from the private sector, since the government is not in the position of the National Industry Institute, in which the state could inject capital into this and that company,” said Soria in an interview with state broadcaster TVE.

Soria called Abengoa “a business of reference in Spain” in the field of renewable energy. The company has a workforce of 27,000 employees and three quarters of its business is conducted outside Spain.

Employment Minister Fátima Báñez on Thursday guaranteed that the government would help seek a solution “with a future” for Abengoa and called on all parties involved to “negotiate and dialogue to the point of exhaustion.”

Báñez said that the government “wants to help with that dialogue” and called Abengoa a “very important company, not just because of the number of workers but also because it is one of the most innovative businesses in our territory.”

 

The Washington Times also picks up the story:

 

If you were wondering what the Spanish word for “Solyndra” is, this week provided the answer: “Abengoa.”

Abengoa is a Spanish company that was another of President Obama’s personally picked green energy projects, and it’s now on the verge of bankruptcy too, potentially saddling taxpayers with a multibillion-dollar tab and fueling the notion that the administration repeatedly gambles on losers in the energy sector.

The renewable energy firm, which is constructing several large-scale solar power projects in the U.S. and has received at least $2.7 billion in federal loan guarantees since 2010, said Wednesday it will begin insolvency proceedings, a technical first step toward a possible bankruptcy.

The news comes at an especially awkward time for Mr. Obama. On Sunday he’ll travel to Paris for a historic climate change summit and is expected to call on world leaders to reject fossil fuels and spend heavily on renewable energy, including solar power.

Abengoa’s looming demise is eerily reminiscent of the fall of solar power firm Solyndra in 2011, a colossal failure of government investment that left taxpayers on the hook for more than $530 million.

A potential Abengoa bankruptcy could be much worse for taxpayers, although it’s unclear how much of the guaranteed loans the company has paid back. Neither the White House nor the Energy Department responded to requests for comment Wednesday seeking information on how much the company still owes on the loans, for which the federal government might be left on the hook.

Critics say Abengoa is yet another reminder that the administration’s meddling in the energy sector — and its insistence that, with enough government financial backing, ambitious renewable projects can compete in the free market — leads to disaster for taxpayers.

“When you have a company that is based on subsidies, it is no surprise they run into financial trouble because their business model isn’t based on economics; it’s based on politics,” said Daniel Simmons, vice president for policy at the conservative Institute for Energy Research, a leading critic of the administration’s spending on renewable fuels and of the president’s energy policy more broadly.

“The government money fueled Abengoa’s growth. They fueled their desire to take on more debt. It’s now obvious they have a very serious debt problem,” Mr. Simmons added. “What is troubling is that if there are large projects that private-sector people think they’ll be able to make money on, there’s no need to take those projects to a government. That’s where these projects go wrong: thinking governments will necessarily make good investment decisions.”

Wednesday’s news sent Abengoa’s stock price falling by about 60 percent. International banks’ total exposure to a full Abengoa bankruptcy stands at about $21.4 billion, according to Reuters news agency, meaning the company’s downfall would end up being the largest bankruptcy in Spanish history.

The announcement came after private Spanish backers said they were bailing on plans to pour hundreds of millions of dollars into the company.

Company officials say they’re continuing to work with creditors in the hopes of staving off a full-on bankruptcy filing.

“The company will begin the negotiating process with its creditors with the aim to reach an accord to guarantee the financial viability under Article 5 of the Bankruptcy Act, which the company intends to request as soon as possible,” Abengoa said in a statement.

The company has received loans from governments around the world. In the U.S. the administration awarded the company about $2.7 billion for two majors projects — the Solana Generating Station in Arizona and the Mojave Solar Project in California.

Mr. Obama personally touted the company in 2010 in an attempt to justify to taxpayers why he was committing nearly $1.5 billion to the Solana project.

“In the short-term, construction will create approximately 1,600 jobs in Arizona. What’s more, over 70 percent of the components and products used in construction will be manufactured in the USA, boosting jobs and communities in states up and down the supply chain,” the president said on July 3, 2010. “Once completed, this plant will be the first large-scale solar plant in the U.S. to actually store the energy it generates for later use — even at night. And it will generate enough clean, renewable energy to power 70,000 homes.”

But the Solana project has run into a multitude of hurdles. The Arizona Republic reported earlier this year that the plant has fallen far short of its targets, generating about 603,567 megawatt hours of electricity in 2014 as opposed to the projected 900,000 megawatt hours. The project came online in 2013.

Throughout the construction process, subcontractors also alleged that Abengoa routinely changed plans on the fly and sometimes failed to make payments, creating a frustrating and confusing situation on the ground in Arizona. More than a half-dozen subcontractors have been involved in payment disputes with the company, according to the Arizona Republic.

Abengoa and its public relations representatives have maintained that, with a project the size of Solana, such disputes are inevitable, and the company has worked hard to resolve them as soon as possible.

Moving forward, critics such as Mr. Simmons believe the administration may, for public relations purposes, back away from further renewable energy investment in the short-term.

Eventually, however, he argues Mr. Obama and his deputies will continue to put taxpayer money on the line in the name of fighting climate change.

“There might be a pause, but the administration believes it is smarter than private investors,” Mr. Simmons said. “They will continue to make these sorts of investments, subsidies, because they think they know best.”

 

 

 

Remember those words – When you have a company that is based on subsidies, it is no surprise they run into financial trouble because their business model isn’t based on economics; it’s based on politics.

 

We keep being assured that solar technology can compete against fossil fuels. But if it could, Abengoa would not be on the verge of bankruptcy.

24 Comments leave one →
  1. Retired Dave permalink
    November 27, 2015 5:06 pm

    The last two paragraphs say it all Paul. Well that was your point of course – wasn’t it??

  2. Joe Public permalink
    November 27, 2015 5:14 pm

    Maybe those enthusiastic advocates of solar such as Greenpeace & FoE will put their money where their mouth is.

  3. November 27, 2015 5:14 pm

    This will be the first of many in Europe. There’s a couple in Denmark that are sailing close to the wind. The appetite has gone from governments and the whole lot will fall like a house of cards…

  4. November 27, 2015 5:38 pm

    Bankers have got nothing on renewable energy shysters

  5. November 27, 2015 5:44 pm

    Reblogged this on Petrossa's Blog and commented:
    They’ve spent too much on running diesel-generators i gues. Didn’t they show power output at night?

  6. manicbeancounter permalink
    November 27, 2015 6:09 pm

    Why does nobody ever learn? Decades ago there was the argument that infant industries would only develop with Government backing. It used to be under the umbrella of “Industrial Policy”. Rarely did it work. Industrial Policy never worked where there were no incentives to innovate and to cut costs. It will not work where the assessment of success is left to those who back the businesses, and who have no experience of real world business management.

  7. November 27, 2015 6:35 pm

    Thanks for the news, Paul.
    “their business model isn’t based on economics; it’s based on politics.”
    Abengoa bites the dust, and brings investors down with them.
    The green scammers, and their governmental enablers, they got their salaries paid on time, they should give those funds back to the people they robbed.

  8. November 27, 2015 8:03 pm

    Solar power in Spain has a chequered history of mad subsidies, with many fraudulent claims being made to get them.

    http://wattsupwiththat.com/2014/08/17/nobody-expects-the-spanish-solar-inquisition/

    And Obama’s attempts to ‘buy a climate’ are an expensive joke.

  9. Don Keiller permalink
    November 27, 2015 8:06 pm

    Music to my ears🙂

  10. Graeme No.3 permalink
    November 27, 2015 8:06 pm

    The trite obvious comment: The sun is setting on the solar power industry.

    The whole thing is based on wishful thinking, sunshine is free so solar power will be cheap. No thought to clouds, seasons, latitude on earth or most importantly the energy density. The last alone would have rung warning bells for any engineer, but they weren’t allowed to make the decisions.
    In the australian phrase – politicians couldn’t run a piss up in a brewery.

  11. November 27, 2015 9:12 pm

    Could be a harbinger of a crash to come. Billions have been plowed into green scams by institutional houses lead by Goldman Sachs. I’m also seeing money flow that is hedging that bet thru investment in coal.

    Crashes occur in markets where the few see it as obvious while the rest are surprised.

  12. nzrobin permalink
    November 27, 2015 11:26 pm

    Re the quote:
    “Remember those words – When you have a company that is based on subsidies, it is no surprise they run into financial trouble because their business model isn’t based on economics; it’s based on politics.”
    Could I suggest that ‘politics’ should be replaced with ‘an ideology and wishful thinking’.

    • November 27, 2015 11:49 pm

      “Could I suggest that ‘politics’ should be replaced with ‘an ideology and wishful thinking’.”

      Maurice Strong plays a pivotal role in the emergence of CAGW as an ideology. He was smart enough to realize that he could promote his cause by seducing a disenfranchised scientist (Hansen) or two and it would snowball.

      It’s not a new tactic, but a brilliant one. Hoffer in True Believers even lays out how once loved professionals are vulnerable prey to the mass movement.

      Hansen is now hard at work with his granddaughter
      http://www.slate.com/articles/news_and_politics/jurisprudence/2015/11/children_sue_the_obama_administration_over_climate_change.html

      They are an example of a larger movement in the states to sue for the children
      http://ourchildrenstrust.org/

      The unseen damage of CAGW is that it is teaching an entire generation the value of deception. Many will mimic the lessons learned whether it succeeds or fails.

  13. DennisA permalink
    November 28, 2015 12:09 am

    Lord Stern is currently still shown as a member of the international advisory board of Abengoa, http://www.abengoa.com/web/en/accionistas_y_gobierno_corporativo/estructura_organos_gobierno/estructura_organos_gobierno/

    Also a Board member is Professor Mario Molina, IPCC author who shared the Nobel Prize for Chemistry in 1995 for his work in the 70’s on CFCs and the (alleged) depletion of the ozone layer. He is a member of WWF-México’s Senior Advisory Council and as Professor of Chemistry and Biochemistry at the University of California at San Diego, he was a member of President Obama’s transition team.

    Professor Molina also happens to be a member of the Earth League, http://www.the-earth-league.org/members-bios.html, with Lord Stern of the Grantham Institute, John Schellnhuber, Potsdam Director and climate advisor to the Pope, Jennifer Morgan of World Resources Institute, former head of WWF political campaigns on climate, a member of Schellnhuber’s Potsdam Scientific Advisory Board, as was again Lord Stern until last year.

    Other IPCC authors in the Earth League are Schellnhuber’s deputy at Potsdam, Ottmar Edenhofer, Nebosja Nakicenovic, Sir Brian Hoskins, Director of Imperial College Grantham Institute, Professor Ramanathan of the Scripps Institute and Pamela Matson at Stanford, WWF board member and board member at John Podesta’s ClimateWorks Foundation.

    Back to Abengoa’s advisory board, we have Kemal Dervis of the Brookings Institute, formerly the head of the United Nations Development Programme, the UN’s global development network, from August 2005 to 28 February 2009. He was also the Chair of the United Nations Development Group, a committee consisting of the heads of all UN funds, programmes and departments working on development issues at the country level. Another member Bill Richardson, was Energy Secretary to Bill Clinton.

  14. John F. Hultquist permalink
    November 28, 2015 2:18 am

    From the text:
    “Many bondholders are now selling,” confirmed Stuart Stanley, of Invesco Asset Management. “If nobody is willing to intensify their positions, then who’s going to help Abengoa? Right now, the company needs a white knight.”

    Sorry, for cases such as this “white knights” are as scarce as Unicorns.
    What happens is that the withered company will be sold for whatever the scavenger investors are willing to pay. There is a newsletter called [ scavengerreport dot com ].

    Often the scavengers are the folks that promoted the company, or formed it, and conned the governments for the subsidies. Those parts of the business that have value in another context, such as land and buildings, will be acquired for a fraction of the true market value, and re-purposed. A new company may be formed with the intent of finding another government program and harvesting the subsidies therefrom. It appears only those with the green patina do not understand this process.

  15. roger permalink
    November 28, 2015 9:31 am

    On this occasion it would appear that the green patina was not indicative of a copper bottomed investment.
    When the scavengers are done, will only the patina grin through, reminiscent of the Cheshire cat?

  16. November 28, 2015 10:16 am

    Private industry picks winning technologies. All that is left for Governments to pick are losing technologies.

    • November 30, 2015 9:19 pm

      The French government’s Electricite de France was a choice so successful that Europe’s power company polluters complained that it wasn’t fair competition. It is now EDF Inc, and is going after wind power subsidies as greedily as anybody else.
      But of course the worst ever losing technology is the USA’s “health industry” – at least if you are a patient or buying insurance.

  17. johnmarshall permalink
    November 28, 2015 11:36 am

    Looks like Stern might loose a packet as well. Best news I have heard for months.

  18. Paul2 permalink
    November 28, 2015 2:56 pm

    Skynews have long been on the battle bus for climate hysteria and here’s a wizard idea they had earlier today. They pitted a hydrogen car against an electric car so see who would reach Paris first. To save you having to look at the video at the top of the page I’ll draw your attention to the end when the reporter says

    “Our journey finished here. If electric cars are going to be a viable, long distance option the recharging network needs to improve. We pressed on to the conference centre. A normal car would have produced enough carbon dioxide to fill a large van but we’ve emitted just water vapour. A victory for team hydrogen and the climate”.

    Water vapour hmmmmnn?

    http://news.sky.com/story/1595908/eco-rally-hydro-and-electric-cars-do-battle

  19. November 28, 2015 5:45 pm

    Finnish media has been touting a study that suggests solar power costs will halve by 2030s or so. Turns out it comes from an “independent and objective” initiative called EU PV Platform (eupvplatform org). Not mentioned was the fact that the authors have strong links with solar industry, some are directly on payroll.

    It further turns out that EU PV Platform is an energy lobby front ran by EPIA (DuPont and friends). EPIA has worked for years with e.g. Greenpeace to push solar feed-in tariffs and fighting against electric waste regulation (so much for the environment). They recently rebranded as SolarPower Europe.

    Google and Wayback Machine can find many documents, meeting minutes etc. on their webs. Try googling “site:eupvplatform.org epia messages”. These may shed some light on the inner workings of the lobby. Also features Abengoa.

    The supposed independence of the platform is referred to as a “brand” that should be strengthened. The idea is to feed messages to policymakers and media from a seemingly neutral source. In one meeting, EUPV’s steering committee is getting reminded that they will have to align their messages with the ones of EPIA.

    Well, they’ve had great success in Finland at least. The national news agency totally bought the message about halving prices and keeps repeating it as the official view of scientific community.

  20. November 30, 2015 9:14 pm

    It is time to recognise that coal burning ships put the most successful, centuries-long wind technology out of business, until they themselves were mostly superseded by oil.
    As for solar, surely Europeans know why Africans have darker skins? Europe gets less sunlight.
    There is a technology, as reliable and responsive to demand as fossil carbon. It is the far more ancient, non-fossil source oif the heat of the Earth’s mantle. Massive atomic nuclei assembled by supernovae as gravity crashed the atoms together.

    One bomber each carried more destructive energy to Hiroshima and Nagasaki than great fleets of them did to Hamburg, and inexcusably, to Dresden.

    There are designs for totally sustainable nuclear power, meltdown immune, at http://transatomicpower.com, http://terrestrialenergy.com, and http://arcnuclear.com
    The stuff we call “nuclear waste” or even “spent” nuclear fuel, still has 24 times as much energy as has already been taken out of it, and TransAtomic Power’s first design can actually use that stuff.
    Observe now, the USA has had no breakdowns since Three Mile Island, and THAT one was exaggerated. It has consistently been getting just about 20% of its electric demand from nukes. Multiply 20% by 24.

  21. November 30, 2015 9:25 pm

    The worst effect of the supposedly “renewable energy” from solar sources is not so much that it isn’t sustainable, as that the association with the disease it is supposed to cure discredits those who assert the reality of the global warming problem.
    If you attempt to cure rabies, or TB, or measles, with prayer, acupuncture, and homeopathy, the fact that these cures do not work does not prove the non-existence of the diseases.

  22. November 30, 2015 9:30 pm

    The fact that grass is green is evidence that it isn’t using the energy of that part of the spectrum. In fact, despite the huge benefits that a plant would receive from more highly efficient conversion of sunlight to carbohydrate energy, this is the best that evolution could bring them in this immensely difficult photochemical energy problem.

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