As President Barack Obama departed for the climate summit in Paris, he faces a new “Solyndra” scandal as Spain’s Abengoa SA, which received $3 billion in administration sustainable energy loans and Export-Import Bank guarantees, announced that it has started bankruptcy proceeding and may soon default on its debt.
The Obama administration tucked $90 billion of stimulus money for energy projects into a huge corner of the $800 billion American Recovery and Reinvestment Act, passed with no Republican votes barely a month into Obama’s presidency.
The money was supposedly allocated to fund “strategic clean energy investments intended to promote job creation and promote deployment of low-carbon technologies,” but much of it was squandered.
The General Accounting Office in April warned that of the 38 sustainable loans and guarantees, “the total expected net cost over the life of the loans” was “to be $2.21 billion, including $807 million for loans that have defaulted.”
But with $2.7 billion in Department of Energy loan guarantees and $225 million since 2010, Abengoa SA just began insolvency proceedings in a Spanish court on November 25 as a technical first step toward a possible bankruptcy, according to the Washington Times.
The biggest of those federal loan guarantees is $1.45 billion to build 4 solar plants in California and Arizona, which was issued to Abengoa Yield to build and operate four solar plants that were supposed to produce 1.13 gigawatts of energy, more than a nuclear power plant.
The last plant was completed and went online in December 2014. But the Wall Street Journal reported this summer that although the solar panels were supposedly designed to deliver a million megawatt hours of power annually, the “plant is putting out roughly half that, federal data show.”
Spain-based Abengoa reported that it has 607 independent subsidiaries, 17 associates, 28 joint businesses and 244 temporary joint ventures spread out over more than 50 countries, according to its annual 20-F filing with the U.S. Securities and Exchange Commission.
The complicated legal structure of Abengoa SA means that if Abengoa Yield defaults, the Obama Administration cannot look to any of the other Abengoa SA subsidiaries to collect on the $3 billion of loans and guarantees.
Under Spanish law, the preliminary creditor protection request announced on Thursday granted Abengoa SA a four-month leeway to suspend debt payments while it negotiates with its creditors.
Ryan Alexander, president of the non-partisan ‘Taxpayers for Common Sense’’ told the Washington Post that with the Obama Administration facing another cycle of taxpayer-funded renewable energy companies beginning to implode: “What’s so troubling is that politics seems to be the dominant factor.”
He added, “They’re not talking about what the taxpayers are losing; they’re not talking about the failure of the technology, whether we bet on the wrong horse. What they are talking about is ‘How are we going to manage this politically?’”
As President Obama and his entourage, including California Governor Jerry Brown, jet off to Paris on Air Force One to attend the United Nations Paris Climate Change Conference that begins on November 30, they will face a new sustainable energy scandal when they arrive.