On the clean energy front, team Obama keeps plugging away with failure after failure. This go around involves a clean energy company in Spain that increasingly appears as if it will become the largest bankruptcy in Spanish history.
Please consider Abengoa: Another Story Of Sudden Insolvency.
Throughout this current year, 99 companies across the world have defaulted, the second highest figure in the decade after the 2009 crisis, according to S&P.; Spanish firm Abengoa could be added to the list.
Besides being involved in renewable electricity generation and converting biomass into biofuel, it is also one of the world’s leading power lines builders and a top engineering and construction firm. It employs 24,000 people worldwide.
The Andalucian company has amassed dozens of very important infrastructure projects in the past few years all over the world, from the U.S. to China and Latam. The problem is that with a gross debt pile of some €8.9 billion, and exposure to Spanish and international banks of around €20.2bn, Abengoa has found, and continues to find it difficult to get them off the ground.
Abengoa had no problem in getting Citi to lead a €100 million (£70million) share sale in July to raise funds for the group at a price of €2.80 a share (now they are worth €0.44). A particularly embarrassing situation for the US bank.
Furthermore, days after the Citi-led share sale, Abengoa revealed it was seeking to raise €650 million of capital and dispose of €500 million of assets. It also alerted the market that its free cash flow for the year would be as much as €800 million lower than previously forecast. But its executives didn’t dare tell the truth. While investors began to worry, they had no problem in saying the company didn’t need more capital.
Another person who didn’t expect such a terrible outcome is Obama. His 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. Republicans and other critics of renewables were short of time to remind Obama of his previous failure with Solyndra in 2011. This left taxpayers responsible for more than $530 million. These people reminded the President that the administration’s meddling in the energy sector leads to disaster for taxpayers.capital.
Appeal of Clean Energy
I am all in favor of clean energy. I just have one mandatory requirement: no government involvement or subsidies.
Governments have a tendency to back losers as team Obama has shown. Worse yet, backing losers takes money away directly or indirectly from other companies, possibly with better technologies.
If a project requires subsidies to be viable, then it’s not viable, period. If venture capitalists want to pour money into such projects, I am all in favor of that too. But none of these projects should be at taxpayer expense.
Finally, without governments sloshing money around, the free market on its own accord will sort out the winners and losers. Government waste and backing of loser companies and loser technologies just adds to the delays.
Mike “Mish” Shedlock