As Spanish renewables giant Abengoa tries to renegotiate its debt with creditors, sources in the market warn that a bankruptcy could lead to a change of approach for banks financing renewables.
Abengoa filed for administration last week after plans for a €350mn (US$374mn) capital injection being negotiated with Spanish investor Gonvarri fell through. Under Spanish law, the company has four months to renegotiate with creditors before potentially going into bankruptcy.
Spanish and international banks have large exposures with the company: according to a Bloomberg article based on a document compiled by one of the creditors, Abengoa’s total debt is estimated around €20bn (US$21.2bn), including working capital and project finance.
Santander is reported to have the largest exposure at €1.5bn, followed by CaixaBank and Banco de Sabadell, each with more than €300mn. International banks involved with the company include Citi, HSBC, Bank of America Merrill Lynch and Barclays, among others.
In the past year alone Abengoa raised financing for three projects in South Africa, Uruguay and Israel, and won a number of contracts across Egypt, Mexico and the US.
The company’s need for capital surprised creditors a few days after it raised €100mn through a share sale led by Citi in July 2015. At the time shares were priced at €2.80, but their value went down to €0.33 on November 25, when the administration was announced.
Contacted by GTR, both Santander and Citi declined to comment, while a spokesperson for Rand Merchant Bank (RMB), which is involved in the financing of the Xina solar project in South Africa, says: “Any project finance facilities and projects are appropriately mitigated.”
It’s a young industry with a lot of companies still positioning themselves, and we see here that even more experienced companies can make the wrong decisions. Josefin Berg, IHS
According to Josefin Berg, senior solar power analyst at IHS, the company’s difficulties are due to corporate governance issues and bad decisions regarding the accumulation of debt to finance growth – therefore the situation is unlikely to deter banks from renewables financing completely.
“It won’t have a direct impact on the renewable sector per se, but banks might be more cautious about which companies they finance and what stage they finance them in. There is a difference between financing companies’ general growth plans and providing finance for specific projects. Banks could concentrate more on concrete projects,” she explains.
She believes that after benefiting from the exponential growth of the solar industry in Spain, spurred by government incentives, the company hoped to export its expertise, but may have been surprised by the slow growth of the sector on a global scale.
“This growth never happened in other countries; even in Spain they realised that this was an expensive programme and it was cut, and Abengoa was involved in about a third of those projects. Abengoa is involved in scattered projects in various geographies, but nothing of the same extent and of the same perceived stability after the Spanish programme. There was nowhere to go to expand based on the expertise they had in this particular sector,” she tells GTR.
As a result, banks are likely to look more closely at renewable companies’ growth plans and how they connect to real market opportunities before funding them.
“It’s a young industry with a lot of companies still positioning themselves, and we see here that even more experienced companies can make the wrong decisions,” Berg adds.