An­other green en­ergy project goes in the red

Aben­goa a Span­ish se­quel to Solyn­dra

The Washington Times Weekly - - Politics - BY BEN WOLF­GANG

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 multi­bil­lion­dol­lar 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 will 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 half­dozen 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.

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