Bankruptcy Looms For Spain's Green Energy Giant
Talk about awkward timing.
At the Paris climate summit earlier this week, Spanish Prime Minister Mariano Rajoy pledged to "de-carbonize" his economy. But back home, Spain's biggest renewable energy company is on the verge of becoming the country's biggest-ever bankruptcy.
Abengoa S.A. was founded more than 70 years ago in the sunny southern Spanish city of Seville. Back then, it was a traditional electric company.
Nowadays it runs solar, biofuel and desalination plants, plus power lines and telecom equipment, all over Spain and abroad — from Brazil, to India, to the United States. It employs nearly 29,000 people worldwide.
One of the company's flagship projects is the Solana parabolic trough solar plant near Gila Bend, 70 miles west of Phoenix, Ariz. — the world's biggest solar plant of its kind. Abengoa also runs several big desert solar plants in California, and half a dozen ethanol and biofuel plants in places like Kansas and Missouri. The company's U.S. headquarters are near St. Louis.
Subsidies Scrapped
With more than 300 sunny days a year, Spain had been emerging as a leader in renewable energy in Europe, and exporting its technology abroad.
But two years ago, Rajoy's government cut its subsidies for solar and wind power in Spain. It was early 2013, at the height of Spain's economic crisis. Unemployment was near 27 percent, and the Spanish government was struggling to pay interest on its debts.
The cutbacks devastated Spain's renewables sector. Some smaller firms went out of business. Big survivors like Abengoa were left living off loans. The U.S. government has guaranteed some $2 billion of Abengoa's loans, because of the estimated $3 billion Abengoa has invested in job-creating projects in Arizona and other U.S. states.
Last week, the Basque steel company Gonvarri pulled out of a deal to invest some $370 million in Abengoa — money the renewables giant needed to stay afloat.
Spain's former king, Juan Carlos (fourth from left), walks with Abengoa Chairman Felipe Benjumea (to the right of the king), in front of a new solar tower in southern Spain in 2009. Abengoa, a large international company focused on renewable energy, now faces potential bankruptcy.
Since then, Abengoa's CEO has resigned. Its stock has plunged more than 50 percent. And the company is applying for creditor protection — the first step toward bankruptcy.
Another Solyndra?
Abengoa has four months to salvage its finances before bankruptcy kicks in. The company's lawyers reportedly spent two consecutive nights at the Madrid offices of KPMG, the auditor, trying to sort out Abengoa's finances and debts — which are in the billions of dollars, and perhaps even the tens of billions.
Spain's economy minister, Luis de Guindos, has said he's closely monitoring Abengoa's woes but suggested it's not likely that the Spanish government would rescue the company. He was quoted as saying he thinks the company can remain in business.
Meanwhile, Abengoa's plight is drawing comparisons to Solyndra, the green technology company from California that President Obama's administration backed with government funds before it went bankrupt in 2011. Solyndra had received $536 million in loan guarantees from the U.S. Energy Department, plus tax breaks. Most of that money was never recovered.
Abengoa got up to $2 billion in U.S. government loan guarantees, but it has not yet defaulted on any debts.
It's still too early to tell what will happen to employees of Abengoa's U.S. subsidiaries, most of which remain profitable, according to the firms. If the parent company goes bankrupt, they could be spun off or sold.
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Transcript
STEVE INSKEEP, HOST:
Spain's prime minister was among those dignitaries who attended the opening of the climate summit in Paris this week. Back home, his country's biggest renewable energy company is in trouble. It could soon become Spain's biggest ever bankruptcy, affecting a company that operates in the United States and received U.S. taxpayer help. Reporter Lauren Frayer is covering this story. Hi, Lauren.
LAUREN FRAYER, BYLINE: Hi, Steve.
INSKEEP: What went wrong?
FRAYER: Well, the company is called Abengoa. It's a 70-year-old Spanish electric company that now runs solar plants, power lines, water desalination plants all over Spain and all over the world. And one of the landmark projects that it runs is the massive Solana project in Arizona. It's the biggest solar plant of its kind, a parabolic trough plant. It's also a huge player in California's solar industry. The company runs half a dozen ethanol biofuel plants in places like Kansas, Missouri. And overall, it's got some $3 billion invested in the U.S. alone, employing 29,000 people worldwide.
INSKEEP: Well, that all sounds pretty impressive, so why bankruptcy?
FRAYER: Well, Spain was a leader in renewable energy, until two years ago. The Spanish government, strapped for cash at the height of the economic crisis here, decided to cut virtually all the subsidies it was offering for solar and wind power. That put the renewables industry here in Spain in shambles. Some firms went out of business. The survivors, big companies like Abengoa, were left living on loans. And in fact, even the U.S. government has given it some $2 billion in loan guarantees. But last week, Abengoa saw a deal with a new investor worth a third of a billion dollars fall through. And the company really needed that money to stay afloat. Since then, the CEO has resigned. The stock price has fallen by 50 percent, and the company is applying for creditor protections. It's the first step toward bankruptcy.
INSKEEP: Well, Lauren, many people here in the United States will remember the company Solyndra. It was much publicized that the company went under, taking many millions of dollars of U.S. subsidies with it. Are you saying that U.S. government money, taxpayer money, could disappear in this bankruptcy?
FRAYER: Well, President Obama did personally pledge federal money to Abengoa's Arizona plant five years ago. That plant did create lots of jobs there. It's too soon to tell what'll happen to the company's U.S. subsidiaries and employees. They could be spun off, sold off. Abengoa has four month to salvage its finances before bankruptcy kicks in. The company's debt, though, is likely in the billions, maybe even tens of billions. Just down the road from me here in Madrid, Abengoa's lawyers were up all night at the offices of KPMG, the auditor going through their books to figure this out. The biggest losses would likely be for Spanish banks. Already, Spanish banking stocks are down. Spain's banking sector, as you recall, got a bailout from Europe three years ago. This could destabilize Spanish banks just at the moment they're getting on firm footing again.
INSKEEP: Lauren Frayer is in Madrid. Lauren, thanks.
FRAYER: You're welcome. Transcript provided by NPR, Copyright NPR.
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