Insolvency chills hit indebted Abengoa

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Richard Heap
December 4, 2015
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This content is from our archive. Some formatting or links may be broken.
Insolvency chills hit indebted Abengoa

There is something particularly depressing about finding out you are at risk of losing your job in the run-up to Christmas. It turns a time of celebration into a prolonged job hunt.

And yet that is the situation for the estimated 29,000 employees of Spanish renewables group Abengoa, which could yet become the biggest bankruptcy in Spain’s history.

This week, the company’s creditors started talks with KPMG about restructuring debts at the troubled group. Abengoa revealed last week that it has started insolvency proceedings after Gestamp subsidiary Gonvarri ditched a plan to inject €350m into the firm, which has been struggling with large debts. If these creditors cannot find a solution then Abengoa would go bust in the first quarter, with all the havoc that would wreak on employees’ lives.

The good news for those workers is there is a way to go before their worst fears become reality. The bad news is there does not appear to be well-thought-out survival plan, and those looking at Abengoa say it will take a lot of work to untangle its complex web.

Over the last year, Abengoa has been trying to address problems with huge debts, which were €9.8bn in summer. It announced a €1.6bn programme of disposals in September that it wanted to happen during 2016; and made a series of management changes.

However, the disposals have been piecemeal, and we have little confidence that it now has the management in place that it wants. Chief executive Santiago Seage quit on Friday, with all operational powers handed over to chairman Jose Dominguez Abascal.

Interested parties in Spain are also split on what is the best for the future of the company, which has some interests in wind.

Workers’ unions Confederación Sindical de Comisiones Obreras and Unión General de Trabajadores have urged the Spanish government to protect the firm, with nationalisation one possible option. The Spanish government has rejected calls to nationalise the firm, with economy minister Luis de Guindos saying that Abengoa is still a viable company.

Many investors will disagree with his assessment. Gonvarri refused to invest €350m in the firm, and its decision followed on from banks refusing to put in €1.5bn. Auditors have been expressing their worries about Abengoa, which has struggled to start work on its projects due to its capital-intensive business model of building projects and then operating them.

The Spanish government’s preferred option is for Abengoa to find an industrial partner, but it looks unlikely to us that one company would want to take on Abengoa’s diverse income streams. We cannot see a pure renewables player attempting it.

Because here’s the thing. Abengoa is known as a renewables group, and has operations in the solar, wind and hydro sectors among others. It has also taken on a series of large infrastructure projects across the world, including in Europe, Asia and the Americas; and it is one of the world’s leading buildings of power lines. It would make most sense to find multiple partners with specialist expertise than one general player who tries to do it all.

And what about the future of its wind operations? Well, wind is a comparatively small part of the firm’s development plans, with a handful of schemes under way in Latin America. There is plenty of consolidation in the wind sector, and we are sure there would be companies keen to buy these wind assets despite the wider malaise in the economies of Latin America.

Such a deal would not save the company, but offloading its wind assets would help it to re-focus on its core operations. And, in the long run, that could save a lot of its employees a lot of heartache.

There is something particularly depressing about finding out you are at risk of losing your job in the run-up to Christmas. It turns a time of celebration into a prolonged job hunt.

And yet that is the situation for the estimated 29,000 employees of Spanish renewables group Abengoa, which could yet become the biggest bankruptcy in Spain’s history.

This week, the company’s creditors started talks with KPMG about restructuring debts at the troubled group. Abengoa revealed last week that it has started insolvency proceedings after Gestamp subsidiary Gonvarri ditched a plan to inject €350m into the firm, which has been struggling with large debts. If these creditors cannot find a solution then Abengoa would go bust in the first quarter, with all the havoc that would wreak on employees’ lives.

The good news for those workers is there is a way to go before their worst fears become reality. The bad news is there does not appear to be well-thought-out survival plan, and those looking at Abengoa say it will take a lot of work to untangle its complex web.

Over the last year, Abengoa has been trying to address problems with huge debts, which were €9.8bn in summer. It announced a €1.6bn programme of disposals in September that it wanted to happen during 2016; and made a series of management changes.

However, the disposals have been piecemeal, and we have little confidence that it now has the management in place that it wants. Chief executive Santiago Seage quit on Friday, with all operational powers handed over to chairman Jose Dominguez Abascal.

Interested parties in Spain are also split on what is the best for the future of the company, which has some interests in wind.

Workers’ unions Confederación Sindical de Comisiones Obreras and Unión General de Trabajadores have urged the Spanish government to protect the firm, with nationalisation one possible option. The Spanish government has rejected calls to nationalise the firm, with economy minister Luis de Guindos saying that Abengoa is still a viable company.

Many investors will disagree with his assessment. Gonvarri refused to invest €350m in the firm, and its decision followed on from banks refusing to put in €1.5bn. Auditors have been expressing their worries about Abengoa, which has struggled to start work on its projects due to its capital-intensive business model of building projects and then operating them.

The Spanish government’s preferred option is for Abengoa to find an industrial partner, but it looks unlikely to us that one company would want to take on Abengoa’s diverse income streams. We cannot see a pure renewables player attempting it.

Because here’s the thing. Abengoa is known as a renewables group, and has operations in the solar, wind and hydro sectors among others. It has also taken on a series of large infrastructure projects across the world, including in Europe, Asia and the Americas; and it is one of the world’s leading buildings of power lines. It would make most sense to find multiple partners with specialist expertise than one general player who tries to do it all.

And what about the future of its wind operations? Well, wind is a comparatively small part of the firm’s development plans, with a handful of schemes under way in Latin America. There is plenty of consolidation in the wind sector, and we are sure there would be companies keen to buy these wind assets despite the wider malaise in the economies of Latin America.

Such a deal would not save the company, but offloading its wind assets would help it to re-focus on its core operations. And, in the long run, that could save a lot of its employees a lot of heartache.

There is something particularly depressing about finding out you are at risk of losing your job in the run-up to Christmas. It turns a time of celebration into a prolonged job hunt.

And yet that is the situation for the estimated 29,000 employees of Spanish renewables group Abengoa, which could yet become the biggest bankruptcy in Spain’s history.

This week, the company’s creditors started talks with KPMG about restructuring debts at the troubled group. Abengoa revealed last week that it has started insolvency proceedings after Gestamp subsidiary Gonvarri ditched a plan to inject €350m into the firm, which has been struggling with large debts. If these creditors cannot find a solution then Abengoa would go bust in the first quarter, with all the havoc that would wreak on employees’ lives.

The good news for those workers is there is a way to go before their worst fears become reality. The bad news is there does not appear to be well-thought-out survival plan, and those looking at Abengoa say it will take a lot of work to untangle its complex web.

Over the last year, Abengoa has been trying to address problems with huge debts, which were €9.8bn in summer. It announced a €1.6bn programme of disposals in September that it wanted to happen during 2016; and made a series of management changes.

However, the disposals have been piecemeal, and we have little confidence that it now has the management in place that it wants. Chief executive Santiago Seage quit on Friday, with all operational powers handed over to chairman Jose Dominguez Abascal.

Interested parties in Spain are also split on what is the best for the future of the company, which has some interests in wind.

Workers’ unions Confederación Sindical de Comisiones Obreras and Unión General de Trabajadores have urged the Spanish government to protect the firm, with nationalisation one possible option. The Spanish government has rejected calls to nationalise the firm, with economy minister Luis de Guindos saying that Abengoa is still a viable company.

Many investors will disagree with his assessment. Gonvarri refused to invest €350m in the firm, and its decision followed on from banks refusing to put in €1.5bn. Auditors have been expressing their worries about Abengoa, which has struggled to start work on its projects due to its capital-intensive business model of building projects and then operating them.

The Spanish government’s preferred option is for Abengoa to find an industrial partner, but it looks unlikely to us that one company would want to take on Abengoa’s diverse income streams. We cannot see a pure renewables player attempting it.

Because here’s the thing. Abengoa is known as a renewables group, and has operations in the solar, wind and hydro sectors among others. It has also taken on a series of large infrastructure projects across the world, including in Europe, Asia and the Americas; and it is one of the world’s leading buildings of power lines. It would make most sense to find multiple partners with specialist expertise than one general player who tries to do it all.

And what about the future of its wind operations? Well, wind is a comparatively small part of the firm’s development plans, with a handful of schemes under way in Latin America. There is plenty of consolidation in the wind sector, and we are sure there would be companies keen to buy these wind assets despite the wider malaise in the economies of Latin America.

Such a deal would not save the company, but offloading its wind assets would help it to re-focus on its core operations. And, in the long run, that could save a lot of its employees a lot of heartache.

There is something particularly depressing about finding out you are at risk of losing your job in the run-up to Christmas. It turns a time of celebration into a prolonged job hunt.

And yet that is the situation for the estimated 29,000 employees of Spanish renewables group Abengoa, which could yet become the biggest bankruptcy in Spain’s history.

This week, the company’s creditors started talks with KPMG about restructuring debts at the troubled group. Abengoa revealed last week that it has started insolvency proceedings after Gestamp subsidiary Gonvarri ditched a plan to inject €350m into the firm, which has been struggling with large debts. If these creditors cannot find a solution then Abengoa would go bust in the first quarter, with all the havoc that would wreak on employees’ lives.

The good news for those workers is there is a way to go before their worst fears become reality. The bad news is there does not appear to be well-thought-out survival plan, and those looking at Abengoa say it will take a lot of work to untangle its complex web.

Over the last year, Abengoa has been trying to address problems with huge debts, which were €9.8bn in summer. It announced a €1.6bn programme of disposals in September that it wanted to happen during 2016; and made a series of management changes.

However, the disposals have been piecemeal, and we have little confidence that it now has the management in place that it wants. Chief executive Santiago Seage quit on Friday, with all operational powers handed over to chairman Jose Dominguez Abascal.

Interested parties in Spain are also split on what is the best for the future of the company, which has some interests in wind.

Workers’ unions Confederación Sindical de Comisiones Obreras and Unión General de Trabajadores have urged the Spanish government to protect the firm, with nationalisation one possible option. The Spanish government has rejected calls to nationalise the firm, with economy minister Luis de Guindos saying that Abengoa is still a viable company.

Many investors will disagree with his assessment. Gonvarri refused to invest €350m in the firm, and its decision followed on from banks refusing to put in €1.5bn. Auditors have been expressing their worries about Abengoa, which has struggled to start work on its projects due to its capital-intensive business model of building projects and then operating them.

The Spanish government’s preferred option is for Abengoa to find an industrial partner, but it looks unlikely to us that one company would want to take on Abengoa’s diverse income streams. We cannot see a pure renewables player attempting it.

Because here’s the thing. Abengoa is known as a renewables group, and has operations in the solar, wind and hydro sectors among others. It has also taken on a series of large infrastructure projects across the world, including in Europe, Asia and the Americas; and it is one of the world’s leading buildings of power lines. It would make most sense to find multiple partners with specialist expertise than one general player who tries to do it all.

And what about the future of its wind operations? Well, wind is a comparatively small part of the firm’s development plans, with a handful of schemes under way in Latin America. There is plenty of consolidation in the wind sector, and we are sure there would be companies keen to buy these wind assets despite the wider malaise in the economies of Latin America.

Such a deal would not save the company, but offloading its wind assets would help it to re-focus on its core operations. And, in the long run, that could save a lot of its employees a lot of heartache.

There is something particularly depressing about finding out you are at risk of losing your job in the run-up to Christmas. It turns a time of celebration into a prolonged job hunt.

And yet that is the situation for the estimated 29,000 employees of Spanish renewables group Abengoa, which could yet become the biggest bankruptcy in Spain’s history.

This week, the company’s creditors started talks with KPMG about restructuring debts at the troubled group. Abengoa revealed last week that it has started insolvency proceedings after Gestamp subsidiary Gonvarri ditched a plan to inject €350m into the firm, which has been struggling with large debts. If these creditors cannot find a solution then Abengoa would go bust in the first quarter, with all the havoc that would wreak on employees’ lives.

The good news for those workers is there is a way to go before their worst fears become reality. The bad news is there does not appear to be well-thought-out survival plan, and those looking at Abengoa say it will take a lot of work to untangle its complex web.

Over the last year, Abengoa has been trying to address problems with huge debts, which were €9.8bn in summer. It announced a €1.6bn programme of disposals in September that it wanted to happen during 2016; and made a series of management changes.

However, the disposals have been piecemeal, and we have little confidence that it now has the management in place that it wants. Chief executive Santiago Seage quit on Friday, with all operational powers handed over to chairman Jose Dominguez Abascal.

Interested parties in Spain are also split on what is the best for the future of the company, which has some interests in wind.

Workers’ unions Confederación Sindical de Comisiones Obreras and Unión General de Trabajadores have urged the Spanish government to protect the firm, with nationalisation one possible option. The Spanish government has rejected calls to nationalise the firm, with economy minister Luis de Guindos saying that Abengoa is still a viable company.

Many investors will disagree with his assessment. Gonvarri refused to invest €350m in the firm, and its decision followed on from banks refusing to put in €1.5bn. Auditors have been expressing their worries about Abengoa, which has struggled to start work on its projects due to its capital-intensive business model of building projects and then operating them.

The Spanish government’s preferred option is for Abengoa to find an industrial partner, but it looks unlikely to us that one company would want to take on Abengoa’s diverse income streams. We cannot see a pure renewables player attempting it.

Because here’s the thing. Abengoa is known as a renewables group, and has operations in the solar, wind and hydro sectors among others. It has also taken on a series of large infrastructure projects across the world, including in Europe, Asia and the Americas; and it is one of the world’s leading buildings of power lines. It would make most sense to find multiple partners with specialist expertise than one general player who tries to do it all.

And what about the future of its wind operations? Well, wind is a comparatively small part of the firm’s development plans, with a handful of schemes under way in Latin America. There is plenty of consolidation in the wind sector, and we are sure there would be companies keen to buy these wind assets despite the wider malaise in the economies of Latin America.

Such a deal would not save the company, but offloading its wind assets would help it to re-focus on its core operations. And, in the long run, that could save a lot of its employees a lot of heartache.

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