Creditors and partners working alongside Abengoa, among them various Latin American state-held entities, are feeling the pressure following news that the Spanish renewables developer filed for insolvency protection last week.
Abengoa filed for bankruptcy under article 5 of Ley Concursal on 25 November 2015 after Gonvarri, a subsidiary of Gestamp, withdrew its offer to invest €250 million (around $260 million) of fresh capital into the firm and become a majority shareholder.
The firm has built up a strong presence in Latin America and presented many competitive bids in recent auctions. Latin America accounts for the largest portion of Abengoa's revenues (36% as at June 2015), followed by North America (28%) and Spain (14%). Local banks and international lenders present in the region have provided debt to a number of projects in the region in which Abengoa has equity exposure.
Abengoa Mexico's issuer rating was downgraded by Moody's to Caa2 from B3 mirroring that of its parent company after Abengoa Mexico missed interest payments to noteholders worth Ps2.2 billion ($133 million) on 26 November. On 3 December, Abengoa Mexico is due to pay interest on two short-term bonds issuances worth around Ps260 million, according to local press.
LatAm project portfolio
According to the IJGlobal database, Mexican projects recently awarded to Abengoa include the $700 million Norte III combined cycle project in to be built in Ciudad Juárez, a $600 million cogeneration facility in Salina Cruz being developed in partnership with Italy's Enel which will supply state-owned oil and gas company Pemex and the $566 million El Zapotillo aqueduct.
Abengoa bid aggressively against Spanish rival Iberdrola for the Norte III IPP in January 2015, when it was retendered by Mexico's national power agency CFE. The state-held company had initially awarded the project to Iberdrola in January 2014, but Abengoa found grounds for a retender.
Prior to the insolvency filing and in light of Gonvarri's announcement, sources familiar with the Norte deal told IJGlobal that documentation for a $540 million mini-perm facility was “very well advanced" and could have closed by the end of 2015. The banks lined up to participate included international lenders Société Générale, Crédit Agricole and SMBC, among others. The facility is due to repay a 12-month, $200 million bridge loan provided by a similar lender group, which closed in March 2014.
Last December Abengoa closed a $487 million project financing for the construction, operation and maintenance of El Zapotillo in the state of Guanajuato. Local infrastructure fund Fonadin and state development bank Banobras provided the debt. Under the terms of both agreements, Abengoa is due to provide sizeable equity contributions.
"Of course there is great concern here," a Mexico City-based energy lawyer told IJGlobal yesterday (1 December). "We have had calls from people wanting to understand the implications of the declaration of the parent company, over its Latin American operations."
The lawyer added, "Each project needs to be reviewed specifically because the effects may be very different if there is an SPV, which has created security interests over assets in favour of lenders, isolating them from Abengoa, than if it is participating directly".
Abengoa also holds a number of engineering, procurement and construction contracts with key Mexican projects, they include the 148.5MW Tres Mesas wind farm owned by Goldman Sachs Infrastructure Partners and local fund GBM Infraestructura, as well as a CFE-led hybrid solar and gas-fired project, known as Agua Prieta II.
Meanwhile in Chile, Abengoa made big gains in a power auction held in October 2015. The Chilean government awarded 20-year power supply contracts with local distributors beginning in 2017. The Spanish firm won a quarter of the total 1,200GWh contracted.
The firm is constructing the Cerro Dominador concentrated solar project in Maria Elena in Chile’s Antofagasta region. Abengoa closed a $205 million bridge loan with indebted Brazilian bank BTG Pactual for the project in August 2014. The overall project cost could reach around $1 billion.
Abengoa is also a prominent player in the Uruguayan power sector, through subsidiary Teyma, having secured two power purchase agreements with state utility UTE for the Peralta and Talas del Maciel II wind farms. The firm established special purpose company, Nicefield, to develop the 70MW Campo Palomas project under an operating lease agreement with UTE. The Inter-American Development Bank (IDB) has been hired to structure the financing of the project.
Abengoa has penetrated Uruguay's nascent PPP sector. In July 2015 an Abengoa-led consortium closed a $90 million equivalent project bond issuance in the local capital markets to fund the Punta de Rieles prison PPP in Uruguay. The project is Uruguay's first PPP to be awarded and reach financial close.
The Uruguayan and Chilean governments have said that they are "closely monitoring" Abengoa's situation.
Assets could be sold as a consequence of the Abengoa fallout according to the industry, but the firm would have to seek permission from its relevant partners in order to do so. While it is likely there would be a market for some of the sort-after projects that Abengoa has won in recent tenders, but it will also depend on the prices that contracts have been bid for and won.