Colwich ethanol plant owner Abengoa pursuing bankruptcy protection

Source: By Eagle staff and wire services, Wichita Eagle • Posted: Monday, November 30, 2015

Spanish renewable energy and engineering giant Abengoa, which operates plants in Kansas, says it has begun bankruptcy protection proceedings in a bid to avoid what could be one of Spain’s largest insolvencies.

Abengoa told Spain’s market regulator in a statement Wednesday that it will be seeking preliminary protection from creditors with the aim of reaching a deal on its debt within four months.

The statement came after a Spanish technology firm announced it was pulling out of an agreement to help invest in the Seville-based firm.

Abengoa, which has some 24,000 employees worldwide, has debt of $9.5 billion.

The company operates an ethanol plant at 523 E. Union in Colwich as well as one in Hugoton.

Officials at the Colwich plant on Wednesday deferred comment to Abengoa’s U.S. headquarters in the St. Louis area. A spokeswoman there was not available for comment.

Abengoa has been seeking to reassure investors that it can generate enough cash to service its debt. The company said earlier this month that Gonvarri Corporacion Financiera, a unit of industrial group Corporacion Gestamp, would become its biggest shareholder after agreeing to acquire a 28 percent stake by injecting new funds.

Gonvarri ended the accord because Abengoa failed to meet the conditions set, Abengoa said in a regulatory filing Wednesday.

“The future of the company seems very black,” said Carlos Ortega, a trader at Beka Finance Sociedad de Valores SA. “It has a tremendous amount of debt which no bank wants to refinance and now even its partners are backing out.”

Auditing firm Deloitte said Abengoa’s losses, slumping shares and difficulty accessing financing could generate “significant doubts” over its ability to keep operating.

“The reaction in the market is huge,” said Felix Fischer, a credit analyst at independent research provider Lucror Analytics in Singapore. “A financial restructuring would be a very messy and lengthy process. There are so many different layers of different liabilities.”

Moody’s Investors Service downgraded the company last week to B3, six levels below investment grade. The ratings company said the amount of immediately available cash at Abengoa is “insufficient” and the plan to raise capital via a rights issue and asset sales may not be enough to boost liquidity.

Abengoa entered Kansas through its 2002 acquisition of the Colwich plant from High Plains Energy. In 2011, Abengoa shut down the plant after 25 years of operation, but reopened it in September 2014. Officials at the plant said Wednesday that it had been producing ethanol through the summer but was currently shut down for maintenance.

Abengoa opened its Hugoton plant in 2014. The southwest Kansas plant was built to produce 25 million gallons of ethanol from nearly 350,000 tons of biomass annually.

Most ethanol operations – including Abengoa’s Colwich plant – use corn or other grain kernels, rather than the cheaper and much more abundant plant cellulose, such as contained in corncobs, wheat straw or switchgrass.

Contributing: Jerry Siebenmark of The Eagle