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.
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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