Obama green energy project Abengoa on verge of bankruptcy; demise recalls Solyndra
Photo by: Miguel Angel Morenatti Spain's King Juan Carlos (fourth from left) walks with Abengoa Chairman Felipe Benjumea in front of solar panels during the inauguration of a solar tower in southern Spain. The firm, which is also constructing 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. (Associated Press)
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.
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