Abengoa, a renewable energy multinational company headquartered in Spain, has been a favorite of the Obama administration in getting federal tax money for clean energy projects.
Since 2009, Abengoa and its subsidiaries, according to estimates, have received $2.9 billion in grants and loan guarantees through the Department of Energy to undertake solar projects in California and Arizona — as well as the construction of a cellulosic ethanol plant in Kansas.
But in the space of less than a year, Abengoa’s financial health has become critical, leading investors to worry whether the company can survive.
The company’s stock price on NASDAQ has swooned — from $29.32 on Sept. 2, 2014 to $5.62 on Tuesday:
On Aug. 3, the brokerage firm BNP Paribas downgraded Abengoa’s rating from neutral to “Underperform” after the company’s shares dropped 31.76 percent in three months.
At last week’s close, Abengoa’s high-yield bondholders were scrambling amid concerns over company covenants. This came after news of Abengoa’s plans to increase capital. BloombergBusiness described Abengoa SA as “distressed,” and the company’s troubles are fueling speculation bankruptcy may be in the offing.
The bad news has led to critics of the administration’s green energy policies to pounce.
“Nudging companies to do what you want them to do is one thing,” said William Yeatman, senior fellow specializing in environmental policy and energy markets at the Competitive Enterprise Institute, a policy group that advocates for limited government. “But you won’t achieve that by having government pick winners and losers.”
Watchdog.org sent an email to Abengoa’s media relations office in Spain asking about the company’s woes, but we failed to get a response.
But Chris Standlee, executive Vice President of Global Affairs for Abengoa Bioenenergy, told Watchdog.org a $134.2 million loan guarantee the Department of Energy awarded to the company in 2011 for the ethanol plant in Hugoton, Kansas was repaid.
“The facility is constructed and up and running,” Standlee said in a phone call. “We’re pleased with where we are and we’ve paid back the government and we don’t owe them any money, so that’s a good thing for everybody.”
The Abengoa biofuel plant, which converts plant waste to ethanol, got a $97 million grant from DOE. Standlee said the grant came in 2007 during the administration of George W. Bush.
“We considered that a validation of our technology,” Standlee said.
“That would be a loss (to U.S. taxpayers) if the company goes broke,” Yeatman said. “Ninety-seven million dollars is not chump change. It’s a grant, so it can’t be recouped.”
In a statement emailed to Watchdog.org, a DOE spokesperson confirmed the $134.2 million loan guarantee at the Abengoa ethanol plant was repaid and said the $97 million grant “is still open.”
Abengoa received some good news Monday, announcing it won a $13 million sanitation works contract in Uruguay. That came five days after three banks agreed to underwrite the company’s capital increase, which led to a one-day spike in its NASDAQ price.
Headquartered in Seville, Abengoa has interests in more than 80 countries and employs more than 20,000 employees worldwide.
The company boasts it “applies innovative technology solutions for sustainability in the energy and environment sectors, generating electricity from renewable resources, converting biomass into biofuels and producing drinking water from sea water.”
But the large amounts of money from the U.S. government is accompanied by criticism and controversy.
Bloggers at the financial website zerohedge.com called Abengoa’s troubles as evidence of a potential “Solyndra 2.0.”
Abengoa received $1.2 billion in loan guarantees to build a solar plant in California’s Mojave Desert during President Obama’s first term.
But the Arizona project has led to two federal investigations — from the Department of Labor and Immigration and Customs Enforcement.
The Arizona Republic reported in January 2014 on complaints of $40 million in payment disputes with subcontractors, and the Washington Free Beacon quoted a former employee who said Abengoa “started bringing people from Uruguay and Spain who didn’t have a visa in the U.S.”
The DOE spokesperson said the Arizona and California projects “are performing and in good standing.”
Abengoa’s financial problems come on the heels of a final report by the Inspector General of the Department of Energy detailing the loss of more than $500 million in taxpayer dollars by the solar company Solyndra, which went belly up in 2011.
In its email to Watchdog.org, DOE defended its Loan Programs Office, saying, “Thanks to our rigorous due diligence, strong underwriting, and effective loan monitoring,” the program is doing a good job for taxpayers to spur “renewable energy projects that have supported good American jobs.” DOE says it has a loan portfolio of about $30 billion covering 30 projects and that losses account for “approximately 2 percent of the overall portfolio.”
“Throwing money at companies is not the answer,” Yeatman said. “It’s inherently inefficient and you’ll get inefficient results.”