Energy

Failing Green Energy Firm Halts Operations At Federally-Funded Biofuels Plant

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Michael Bastasch Energy Editor

The Spain-based green energy firm Abengoa will be halting operations at seven U.S.-based biofuel plants, including one plant that got $230 million in federal subsidies and did not sell a single gallon of green fuels.

Spanish media reports Abengoa is closing down its biofuel plant in Hugoton, Kan. The Hugoton plant got a $132 million loan and a $97 million grant from the Department of Energy to build a cellulosic biofuels plant with a 25-million-gallon-per-year production capacity. The Hugoton plant, however, did not sell a single barrel of ethanol despite claiming significant production levels.

Abengoa Bioenergy, the subsidiary in charge of the Hugoton plant, recorded significant losses in the last few years, according to Spanish media. The subsidiary racked up $275 million in losses last year, and $190 million in losses in 2013. By the end of last year, Abengoa Bioenergy’s negative equity increased to $434 million.

Watchdog.org reports Abengoa’s Hugoton plant is already laying off workers amid huge financial problems. Citing local media, Watchdog reports 50 employees have already been laid off.

“I think we have to see how this thing plays out. In the short run, of course, it’s a devastating blow,” says Neal Gillespie, the Stevens County Economic Development director, according to Watchdog.org. “In the long run, I think there’s a lot of value in that plant out there, and I suspect that either they will get it up and going or someone else will get it up and going.”

Abengoa is a multinational corporation with over 600 subsidiaries, partnerships and other such arrangements around the world. An employee at the Hugoton plant claims “layoffs were worldwide and only about 30 people remain at the corporate office in St. Louis.”

Abengoa secured loans from the Obama administration in 2011 to build its $400 million cellulosic biofuels plant. Cellulosic biofuels are hailed by federal officials as the next generation in green fuels, but production has so far failed to take off in any meaningful way.

The Hugoton plant was supposed to be a major contributor to the U.S. advanced biofuel industry. Yet, the facility has come under scrutiny from Republicans who want to know how a potential Abengoa bankruptcy will impact taxpayer dollars.

“Recent news that Abengoa, a Spanish green energy company, is entering into bankruptcy proceedings this last week has shed light on an issue of extreme concern for the American taxpayer,” Kansas Republican Rep. [crscore]Mike Pompeo[/crscore] writes to Secretary of Energy Ernest Moniz and Secretary of the Treasury Jack Lew.

Abengoa began bankruptcy proceedings in Spain last month, and the company’s single largest creditor is the U.S. government-owned Federal Financing Bank (FFB). The FFB had $2.34 billion in holding with the failing green energy firm at the end of September.

“Even more troubling is the fact that FFB’s exposure to Abengoa’s bankruptcy is solely in the financing of projects approved in the DOE green loan program, the very same program that exposed taxpayers to $535 million in losses during the Solyndra bankruptcy,” Pompeo writes to Moniz and Lew.

In response to interest from Congress, the Energy Department tried to downplay the government’s holdings of Abengoa debt.

“The Department of Energy’s Loan Programs Office (LPO) does not have any loans to Abengoa S.A. LPO currently has two active projects in its portfolio that were developed by Abengoa: Solana and Mojave. The loans for these projects were issued to project companies.  In addition, LPO financed a cellulosic biofuels project developed by Abengoa, Abengoa Bioenergy Biomass of Kansas, which recently repaid its loan in full.  Both Solana and Mojave are currently operating and repaying their loans with principal and interest.”

“The Department’s overall loan portfolio is performing very well, thanks to LPO’s rigorous due diligence, strong underwriting, and effective loan monitoring. Losses to date represent approximately 2 percent of the overall loan portfolio, while the successes of the program have supported a host of new jobs and more than $50 billion in total investment. Further, project companies supported by LPO have already repaid more than $6 billion, including more than $1.2 billion in interest payments, to the U.S. Treasury, which issued the loans guaranteed by the Department through the Federal Financing Bank.  These amounts will continue to increase as the loans are repaid over the coming years.”

While DOE loans went to “project companies,” these were created by Abengoa S.A. to manage projects financed by government-backed loans. This type of arrangement is commonplace for Abengoa, according to Bloomberg News. The company has “607 subsidiaries in 2014, as well as 17 associates, 28 joint businesses and 244 temporary joint ventures spread out over more than 50 countries,” according to Bloomberg.

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