In the vain hope, the world’s largest green energy zombie will somehow survive the oncoming storm.
By Nick Corbishleyfor WOLF STREET:
When it comes to racking up and defaulting on insurmountable debt, then restructuring the debt to live another day, few companies can match Abengoa, the global green energy giant, headquartered is in Spain, famous for cooking its books with Enron-esque poise before collapsing in 2015. Repercussions were felt around the world, including in the United States where his unit filed for bankruptcy with $10 billion in debt. The company then rose from the ashes of its monstrous pile of debt, only to fall back into default in 2019. Once again, the debt was restructured.
Now Abengoa is warning of a third flaw, which he blames in part on Covid-19, although his latest set of problems appears to have predated the virus crisis. The company is two and a half months late in publishing its 2019 financial report, which was due in late February.
The apparent reason for the delay was that the company was carrying out a revaluation of its subsidiary Abenewco 2, which apparently uncovered 388 million euros in previously unrecognized losses, none of which could be attributed to Covid-19.
According to the financial daily El Confidential, the real reason for the delay was that Abengoa’s auditor, PwC, refused to sign its 10-year business plan. Given Abengoa’s long history of financial chicanery, this is not beyond the realm of possibility.
Even today, it’s impossible to find a copy of Abengoa’s full financial report for 2019 on its website. But he at released an updated three-page business plan that was translated into weirdly bad english. In the document, the company reports an increase in sales, but it still recorded losses of more than 500 million euros. Admittedly, this is an improvement on last year’s €1.5 billion losses, but apparently not enough to avoid a new bailout, which includes:
- A request for €250 million in new loans of its five main banks (Santander, Bankia, Caixa, BBVA and Bankinter), of which Abengoa hopes to be 70% guaranteed by the Spanish government’s Covid-19 emergency loan fund.
- A request for additional lines of credit worth 300 million euros with these same banks as well as with the Spanish Export Credit Agency CESCE. During Abengoa’s first debt restructuring, the Spanish government used this public body to still just as quiet and still just as predictable guarantee 400 million euros of Abengoa’s debt, of which 100 million euros have already been cancelled. Now the company wants more of the same.
- New discounts for service providers worth up to 700 million euros.
- Other debt-equity swaps for company creditors. Abengoa’s various share classes trade at €0.01 or less. In other words, they are not even considered a penny stock.
Abengoa’s main creditors are the Spanish state and many of Spain’s largest lenders. The biggest lender of all, Santander, had the most exposure to Abengoa’s €1.6 billion debt and was the most interested in completing the 2016 deal, thanks to which Abengoa narrowly avoided becoming the largest corporate bankruptcy ever recorded in Spain, with more than 25 billion euros in Liabilities. Despite selling part of its stake in 2017 and 2018, Santander remains the largest shareholder.
Many other creditors must be wondering why they agreed to restructure Abengoa’s gargantuan debt in the first place. Perhaps at the time, it seemed more logical to agree to even a major haircut than to try to salvage whatever they could in a liquidation.
Despite two debt restructurings, Abengoa still has 6 billion euros of debt on its books – more than two-thirds of which is short-term – which it says it can no longer pay under the conditions established in its last refinancing agreement, concluded there a little over a year ago. .
Abengoa has already warned investors that it expects sales and Ebitda to fall 21% and 8% respectively in the coming years. He also admits, in his english full of errorsthat many of its largest operations are in regions likely to be hardest hit by the coronavirus crisis:
“Unfortunately, many regions (sic) that are expected to be most affected by economic (sic) contractions, such as Latin America, the Middle East and Sub-Saharan Africa, are Abengoa’s main markets.”
The company is already in big trouble in one of its biggest markets, Mexico, where the government last week accelerated new rules that will place tougher restrictions on new clean energy projects and give the National Center energy control the power to reject a new study on power plants. requests. According to Mexican business lobby CCR says the new legislation puts more than 30 billion euros in investments at risk, much of which belongs to European and Canadian companies that are now consider continuing government of Mexico for violating their investor rights.
Advocates of the government bill to say its objective is to ensure that local communities are properly consulted before the granting of authorizations for large-scale wind, solar or hydroelectric projects. It also aims to reduce corruption and other excesses that Mexican President Andres Manuel Lopez Obrador (AMLO) said is rampant in Mexico’s renewable energy sector.
Considering how Abengoa treated its Mexican subsidiary and its creditors during its first debt renegotiation in 2016, efficiently transfer all of the subsidiary’s cash and the proceeds of loans to the parent company’s cash, AMLO could be forgiven for wanting to crack down on bad industry practices. But critics of the bill also accuse AMLO of seeking to shield national utility CFE and state oil company Pemex from competition in the sector as part of its mission to achieve energy sovereignty.
For Abengoa, events in Mexico have strange parallels with the energy reforms passed in Spain in 2013, which sharply reduced public subsidies to companies in the renewable energy sector. With the stroke of the pen of the Spanish Prime Minister at the time, Mariano Rajoy, the sauce was over. Two years later, the company went bankrupt. Now it faces a similar threat in another key market.
Another risk he faces is to be found guilty falsification of documents, in collaboration with its former auditor Deloitte. If found guilty, Abengoa could face damages that he will not be able to pay.
For the company’s biggest creditors, including the Spanish government, this is just one of many issues to consider when considering whether to drop the company, which will ultimately mean eating all of their losses on the investment. It will also lead to approximately 14,000 job losses worldwide. The alternative is to write off even more of Abengoa’s debt while lending it even more money, including taxpayers’ money, to burn, in the vain hope that the biggest green energy zombie in the world will somehow survive the impending storm without the need for additional help. By Nick Corbishleyfor WOLF STREET.
First the global financial crisis, then the euro debt crisis, now the big one. Read… Third mega-crisis in 12 years: Eurozone economy plunges at fastest pace on record
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