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JPS Stands To Lose $400m Yearly From Prepaid Meters

December 7, 2015 Webmaster

Jamaica Public Service Company (JPS) claims that switching all its low-consuming users to prepaid meters would increase the risk profile of the utility provider, and secondly, cost it hundreds of millions in lost non-fuel revenue annually – an ironic twist given that the meters are meant to curtail losses.

JPS currently offers prepaid meters in select inner-city areas under a pilot programme, but its admission of the cost puts the timeline for its larger role in question.

“If all customers consuming less than 100 kilowatt hours switched to the prepaid service, JPS stands to lose J$399 million in non-fuel revenues per annum,” the power utility said in its annual tariff application documentation published late last month by its regulator, the Office of Utilities Regulation (OUR).

“By any measure, this exposure is significant and further increases the risk profile of the company, especially given the challenges in meeting certain financial covenants.”

JPS holds US$324 million in long-term loans, and its financial covenants require a minimum undisclosed debt to earnings before interest tax depreciation and amortisation. The company was fully compliant with all its loan obligations as at September 2015.

Customers that consume less than 100 kWh are classified as Rate 10 users. These users usually are low-income households but account for some 222,000 of the 594,000 JPS customers, according to OUR documentation.

Regular customers – Rate 20 – who consume less than 75,000 kWh per month would remain revenue neutral for the switch to prepaid meters.

JPS added that this level of loss is “unsustainable” and is only acceptable for the remainder of the prepaid pilot which offers prepaid meters to a relatively small number of customers. The power utility wants the OUR to increase the prepaid rates to Rate 10 customers in order to remove a large part of that shortfall.

“We would, however, like to state that the rate structure should aim for revenue neutrality as the prepaid programme evolves,” said JPS.

The company proposed an adjustment to non-fuel tariff rates for Rate 10 prepaid customers to $14.4311/kWh for the first 119kWh in a 30-day cycle; and $20.5719/kWh for every kWh above 119kWh in a 30-day cycle.

The OUR rejected that specific JPS proposal. It approved instead a Rate 10 prepaid rate of $13.19/kWh for the first 100kWh in a 30-day cycle and $20.85/kWh for every kWh thereafter for a 30-day cycle.

JPS made US$23.7 million net profit over nine-months ending September 2015 on revenues of US$583 million which nearly doubled the US$12.5 million in profit earned a year earlier.

There was no response to mailed queries and calls to JPS for comment on this story up to press time.

The Gleaner

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Bill Gates joins with Mark Zuckerberg and other top investors for urgent global action on climate change

December 4, 2015 Webmaster

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Bill Gates, co-founder of Microsoft [Image source: On Innovation.com, via Flickr]

On the opening day of the COP21 global climate change meeting in Paris, Bill Gates and Mark Zuckerberg have announced they have joined together with other private investors to help fight climate change by investing in renewable energy. The Breakthrough Energy Coalition will provide financial support to companies that take clean energy innovations out of the laboratory and commercialize them, the main idea being to accelerate progress on clean energy development.

“The world is going to be using 50 percent more energy by mid-century than it does today” said Mr Gates on his gatesnotes blog. “That should be good news, especially for the world’s poorest, because right now more than 1 billion people live without access to basic energy services. Affordable and reliable energy makes it easier for them to grow more food, run schools and hospitals and businesses, have refrigerators at home, and take advantage of all the things that make up modern life. Low- and middle-income countries need energy to develop their economies and help more people escape poverty. But the world’s growing demand for energy is also a big problem, because most of that energy comes from hydrocarbons, which emit greenhouse gases and drive climate change. So we need to move to sources of energy that are affordable and reliable, and don’t produce any carbon.”

Mr Gates added that although current renewable energy technologies, like wind and solar, have made a lot of progress and could be one path to a zero-carbon energy future, given the scale of the challenge, the world needs to be exploring many different paths, and that means it also needs to invent new approaches. These energy breakthroughs will be made by private companies, but their work will rely on the kind of basic research that only governments can fund.

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Mark Zuckerberg, co-founder of Facebook [Image source: Jason McELweenie, Flickr]

Ways in which to promote clean energy innovation

Earlier in the year, Mr Gates set out on his blog three important ways in which to promote clean energy innovation – incentives, markets and treating poorer countries fairly.

The first of these involves governments drastically increasing their funding for research on clean energy solutions. At present, only a few billion dollars are spent per year on researching early-stage ideas for zero-carbon energy, when really, the world should be spending two to three times as much. Gates said that governments should be doing this for the public good and that the benefits of doing so are “far greater than the amount that the inventor can capture.” Expanded government support for energy research will also lead to more private investment. Gates has invested in companies developing new batteries and other energy storage solutions and also companies developing advances in solar power technology. However, governments need to act quickly on this because these energy transitions are time-intensive.

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Windmill Sunset [Image source: Max and Dee Bernt, Flickr]

The second important step is to ensure that energy prices reflect the full impact of emitting carbon. At present, the market does not factor in ‘negative externalities’ – the costs to health and the damage to the environment caused by greenhouse gas emissions. If these costs are reflected in the price, renewable energy will become more competitive with fossil fuels and that in turn will attract more investors to the market. Governments should support this process by creating incentives to develop new solutions while also ensuring certainty in the market so that energy companies can plan ahead and enact the transition to zero-carbon energy.

The third step is to recognize that, at this late stage when climate change is already starting to have disastrous effects on the world, it will continue to hit the poorest people in the world hardest. This means that those countries that have done most to create this problem should spend the most to invest in mitigation and help poorer countries to adapt. The Gates Foundation is now doing this by helping small farmers in poorer countries to adjust to hotter and more unpredictable weather by increasing productivity.

The Breakthrough Coalition

The Breakthrough Coalition consists of some of the world’s top investors who have joined together in the understanding that technology will help to solve the world’s current energy issues, particularly the urgent issue of climate change. This requires an aggressive and urgent global program of zero-emission energy innovation based on a model of public-private partnership between governments, research institutions, and investors. It will involve large funding commitments with a key role being played by governments, with aggressive increases in funding for basic and applied energy research. Current levels of government funding are insufficient.

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[Image source: CheapFullCoverageAutoInsurance.com]

The coalition is focused on the creation of a network of private capital intended to drive forward the transition to an advanced energy future. It is doing this by concentrating on providing investment for early stage companies, involving early investment through seed, angel and Series A investments, with commercial capital expected to take over in the later stages once the investments are de-risked. It will invest in a number of sectors, including electricity generation and storage, transportation, industry, agriculture and energy efficiency. The aim is to boost the development of novel technologies and innovations that make existing technologies more efficient, scalable or help to reduce costs. Given that most of these innovations will come through government research pipelines, the coalition has decided to focus its investments on countries participating in the Mission Innovation international initiative.

Mission Innovation

Mission Innovation was also launched on the opening day of COP21. It consists of a commitment by20 countries to invest in clean energy research and its aim is to “reinvigorate and accelerate global clean energy innovation with the objective to make clean energy widely affordable.” The initiative will seek to double government funding for clean energy innovation in each of its member states

The Breakthrough Coalition consists of:

Bill Gates, co-founder of Microsoft; Mark Zuckerberg, co-founder of Facebook, and Dr Priscilla Chan; Mukesh Ambani, Chairman and Managing Director of Reliance Industries (India); John Arnold, co-chair of the Laura and John Arnold Foundation; Marc Benioff, Founder, Chairman and CEO of Salesforce.com; Jeff Bezos, Founder and CEO, Amazon; HRH Prince Alwaleed bin Talal, Chairman of the Board of Trustees, Alwaleed Philanthropies, Saudi Arabia; Richard Branson, Founder of the Virgin Group; Ray Dalio, Founder, Bridgewater Associates; Aliko Dangote, Founder and Chief Executive, Dangote Group, Nigeria; John Doerr, General Partner, Kleiner Perkins Caufield & Byers, United States; Reid Hoffman, Founder, LinkedIn and Partner, Greylock, United States; Chris Hohn, Founder, The Children’s Investment Fund, UK; Vinod Khosla, Founder, Khosla Ventures, United States; Jack Ma, Executive Chairman, Alibaba Group, China; Patrice Motsepe, Founder and Executive Chairman, African Rainbow Minerals (ARM), South Africa; Xavier Niel, Founder, Iliad Group, France; Hasso Plattner, Co-founder and Chairman, SAP, Germany; Julian Robertson, Founder and Chairman, Tiger Management, United States; Neil Shen, Founding Managing Partner, Sequoia Capital China, China; Nat Simons and Laura Baxter-Simons, Co-founders, Prelude Ventures, United States; Masayoshi Son, Founder, Chairman and CEO, SoftBank Group Corp., Japan; George Soros, Chairman, Soros Fund Management LLC, United States; Tom Steyr, Businessman, Philanthropist, and President, NextGen Climate, United States, Ratan Tata, Chairman Emeritus, Tata Sons, India; Meg Whitman, CEO, Hewlett Packard Enterprise, United States; Zhang Xin and Pan Shiyi Co-founder and CEO, SOHO China, Chairman, SOHO China; and finally, the University of California (UCLA).

The Mission Innovation initiative consists of:

Australia, Brazil, Canada, Chile, China, Denmark, France, Germany, India, Indonesia, Italy, Japan, Mexico, Norway, Saudi Arabia, South Korea, Sweden, United Arab Emirates, United Kingdom and the United States.

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Abengoa Says Old Harbour Project Will Employ Hundreds

December 2, 2015 Webmaster

The oil-fired JPS power plant in Old Harbour Bay, St Catherine is to be converted to LNG.

Spanish firm Abengoa SA has revealed the value of the upgrade and employment prospects for the 190MW power plant project amid pre-bankruptcy filings in its home market.

“The contract for the plant, which will be powered by natural gas and cooled by seawater, is worth more than US$200 million,” said Abengoa in a release.

The engineering and renewable energy firm was selected as preferred bidder by Jamaica Public Service Company (JPS), and the parties are in the process of finalising the contract for the LNG-fired power plant. JPS has said the full project cost would be closer to US$300 million.

Abengoa has about four months in which to secure deals with its creditors and restructure its debts if it is to escape full bankruptcy. JPS has said it is not ready to give up on its preferred bidder just yet, but is monitoring the situation.

Abengoa said it will be responsible for the design, engineering and construction work of the plant that will replace an existing fuel-oil facility and is expected to “create between 300 and 500 jobs during the construction phase”.

JPS wants to decommission the existing fuel-oil plant and move to a natural gas facility to create a cleaner, efficient and more reliable source of power, added Abengoa.

The more than 40-year-old Old Harbour plant remains one of the least energy efficient in the island and its upgrade would form part of the Jamaican Government’s drive to increase cleaner forms of fuel. Jamaica aims to increase renewable energy reliance to 20 per cent of the energy output within the medium term.

SEAWATER COOLING SYSTEM

“The plant will use a seawater cooling system that returns the warm water without adversely impacting the environment. Abengoa’s design will use the existing infrastructure as much as possible, requiring less power and improving the overall output of the plant,” said the Spanish firm in late November, adding that the project would extend Abengoa’s experience in turnkey combined cycle projects to the Jamaican market.

The company informed that it filed for insolvency protection on November 25 before the Mercantile Courts of Seville. The company also indicated that it would continue negotiations with its creditors with the objective of reaching an agreement that ensures the company’s financial viability, “under the protection of Article 5 of the Spanish Insolvency Law”.

The company recorded a €194 million net loss attributable to its parent over nine months ending September 2015 on revenues of €4.87 billion. It holds €6.2 billion in total debt while its earnings before interest tax and amortisation totalled €1.3 billion or 4.5 times net leverage.

Abengoa’s other major combined-cycle projects include the 640MW plant in Centro Morelos, Mexico, and the 440MW combined cycle plant in Portland, Oregon, United States, currently under construction. More recently, Abengoa was awarded two combined cycle plants in Mexico – Nuevo Pemex 680MW, and Norte III, 924MW.

The Gleaner

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France and India are launching a global alliance aimed at bringing solar energy to everybody

December 1, 2015 Webmaster

Indian Prime Minister Narendra Modi (L) and French President Francois Hollande (R) shake hands during a news conference at the Elysee Palace in Paris, April 10, 2015. REUTERS/Charles Platiau

Thomson ReutersIndian Prime Minister Narendra Modi and French President Francois Hollande attend a news conference at the Elysee Palace in Paris

PARIS (Reuters) – French President Francois Hollande and India’s Prime Minister Narendra Modi will on Monday launch an international solar alliance aimed at eventually bringing clean and affordable solar energy within the reach of all.

The launch will coincide with a summit of world leaders at the start of two weeks of talks on the outskirts of Paris to seek a new global deal on curbing climate change, by shifting from fossil fuels towards renewable energy.

An Indian government statement on Sunday said there were well over 100 solar-rich countries in the tropics that could be members of the International Solar Alliance to develop clean and affordable solar energy.

“Solar energy is a practical and efficient way to reduce the greenhouse gas emissions,” it said.

Aware of the shadow cast by the failure of the 2009 Copenhagen summit, the last attempt to reach a global climate deal, the United Nations is placing as much weight on the efforts of individual governments as on an overarching U.N. agreement.

More than 180 nations have submitted national action plans, but they are not enough to achieve a goal of limiting global warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial times — the cap scientists say is essential to prevent the most devastating consequences of global warming.

India’s national plan focuses on solar, saying it is expected to grow significantly. The aim is to reach capacity of 100 gigawatts by 2022, to be scaled up further in the future.

Firms such as Tata Power have invested heavily in solar as a reliable source capable of delivering power to some of India’s poorest people.

businessinsider.com

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Jamaica set to benefit from IDB Green Bond

November 30, 2015 Webmaster

WASHINGTON, United States (CMC) — Jamaica is the only Caribbean Community (CARICOM) country that will benefit from an Inter-American Development Bank (IDB) multimillion-dollar-funded regional Energy Efficiency Green Bond Facility.

The IDB said that it has approved financing to establish the facility and that the programme was selected to receive up to US$217 million in additional funding as one of eight projects worldwide in the first round of allocations announced by the Green Climate Fund (GCF) earlier this month.

“This private sector programme stands out for its innovative financial approach, involving small and medium enterprises and the potential mobilisation through capital markets of funds from different institutional investors such as pension funds and insurance companies,” said Gema Sacristan, IDB’s Financial Markets Division Chief.

Providing an alternative financing mechanism for energy efficiency projects through the issuance of green asset-backed securities (ABS), the programme will also contribute to the development of capital markets in the region.

The programme will introduce green ABS following the Green Bond Principles standards and will foster socially and environmentally responsible investments.

“The approval of this programme furthers our commitment to supporting Latin American and Caribbean countries in the implementation of their proposed Intended Nationally Determined Contributions (INDCs),” said Amal-Lee Amin, IDB’s Climate Change and Sustainability Division Chief.

“Tapping into domestic capital markets for refinancing of energy efficiency is key for increasing the scale of investment for de-carbonisation over the medium and longer-term.”

IDB said that Mexico will be the first country to implement this programme, followed by the Dominican Republic, Jamaica, and Colombia.

The IDB’s loan of up to US$400 million will be complemented by a loan of up to US$50 million from the China Co-Financing Fund, administered by the IDB, in connection with the first utilisation of the facility in Mexico.

Jamaica Observer

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ESET, JPS Not Worried By Bankruptcy

November 29, 2015 Webmaster

LIGHT AND power providers, the Jamaica Public Service Company (JPS) said yesterday that it is getting independent advice from its lawyers on whether to proceed with a contract with Spanish firm Abengoa to construct its power plant at Old Harbour, St Catherine.

Kelly Tomblin, the chief executive officer of JPS said yesterday that its shareholders held a conference call with Abengoa to discuss the way forward.

Abengoa’s chief executive Santiago Seage resigned yesterday after it emerged the Spanish renewable energy giant was close to bankruptcy.

The JPS, with the assistance of AMEC Foster Wheeler, a consultancy firm, selected Abengoa whose package consists of general electric combined cycle frame 6B gas turbine. The light and power company was in the process of negotiating a performance contract when the matter of the bankruptcy came to light.

“We were never going to enter into a performance contract until we had some assurance about their financial abilities,” Tomblin said.

She said that December 9 was the deadline for Abengoa to satisfy JPS of its ability to undertake the project and hinted that the light and power company is getting ready to move beyond Abengoa.

“Their problem is that they have some debt coming due but they don’t have the cash to pay. They are going to try to utilise their assets and do other things but that takes too long so we won’t be able to wait out that,” Tomblin said.

The Electricity Sector Enterprise Committee, ESET, said that while it is watching the developments, it is not totally concerned at this point.

Profesor Alvin Wint, a member of the ESET, said that in addition to Abengoa, other entities had submitted detailed bids to construct the power plant and they would be in line to be considered to take on the project.

“We will be requiring that they move quickly and if they need to go to a plan B they go quickly,” Wint said.

Both major shareholders of JPS, Marubeni and Korea East West Power Company Limited have committed to each inject up to 50 per cent of the approximately US$990 million equity that is required to develop the 190 megawatt power plant by year end.

The JPS intends to raise approximately US$210 million in debt funding to help finance the project.

The Gleaner

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JPS 190MW Plant A US$300m Project – LNG Facility Won’t Harm Health Or Fish Stock, Residents Assured

November 28, 2015 Webmaster

The JPS power plant in Old Harbour Bay, St Catherine. Ian Allen

Continuous tests as well as monitoring of the construction and commercial operation of the gas-fired 190-megawatt power plant to be developed by Jamaica Public Service Company (JPS) at Old Harbour Bay, St Catherine, have been promised, amid public concerns that the facility could eventually become a health hazzard.

Those health concerns were allayed by environmental consultant Carlton Campbell, who also assured the community in a consultation session Tuesday that they would have a mechanism for complaints for matters that arise when the project gets underway.

The public is weighing in on the environmental impact assessment report, which was done by Campbell’s company, CL Environmental Limited.

Such consultations are a precursor to final consideration and approval of a major project by the central authority, National Environment and Planning Agency (NEPA).

Site preparation for the liquefied natural gas plant is scheduled to begin by the first quarter of 2016 and construction by the second quarter. Commissioning of the plant is expected 22 months later, which would be close to mid-2018 if the current timetable holds.

JPS recently settled on Spanish engineering and renewable energy firm Abengoa to develop the plant, but that selection is now complicated by bankruptcy filings by the company on Wednesday, which is seeking protection in order to restructure its debt of about €9 billion. Spanish law gives it four months to strike deals with creditors under ‘pre-insolvency’ proceedings and avoid full bankruptcy.

The size of the contract to Abengoa was not disclosed, but previous reports say the project could cost around US$200 million to US$300 million. CL’s environmental impact report indicates that capital expenditure for construction of the plant is US$219.5 million, but last night JPS clarified that this figure related to equipment only. The utility said the full project cost would end up closer to US$300 million.

Deliver power supplies

The new plant will retire old capacity at Old Harbour, and is expected to deliver power supplies to the national electricity grid at less than 13 US cents per kilowatt-hour. The current plant is oil-fired.

Old Harbour residents were told to expect intermittent traffic disruptions and longer commutes, as well as increases in the cost of travel once the 190MW project enters the construction phase.

Campbell said the expected noise levels were compliant with the night and daytime standards of NEPA and the World Bank, and that water and air quality as well as drainage and wastewater systems would be monitored continuously.

“There is a perception that there will be health implications from this new plant,” said Campbell, while ticking off a list of reported concerns that included respiratory problems, increased noise levels, pollution, vibration and soot emissions.

However, he said, a health impact study was conducted which showed that residents would not be affected.

The environmental consultant also said the natural gas emissions and effluent released from the plant were not expected to harm the fish stock on which a lot of residents of the village depend for their livelihood.

The plant is expected to employ 400-450 during construction, and 45 persons permanently at commissioning.

The project was submitted to NEPA for approval on September 2, 2014, and after initial review, the agency requested that JPS produce an environmental impact report. The report was submitted at the end of October and is under review by various agencies.

Their feedback will eventually be communicated to JPS.

“The agencies will therefore refrain from making any comments or answering any questions in relation to the development at this time, as the application is currently the subject of review,” said NEPA official Ruth-Ann Lacey-Sherrard at Tuesday night’s public consultation.

The presence of the agencies at the event, she said, was merely to observe and take note of public comments that would inform the deliberations of the Natural Resources Conservation Authority (NRCA) which is a division of NEPA.

“Please note, carefully, that the final decision on the application is the sole responsibility of the NRCA,” Lacey-Sherrard said.

“The agencies’ review of the public presentation and consultation processes is extremely important in the decision-making process. These consultation processes provide an additional opportunity for stakeholders to air their concerns, make comments, provide opinions and views on the development project, and afford the applicant the opportunity to address these,” she said.

The Gleaner

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With question mark over Abengoa…

November 27, 2015 Webmaster

JPS to open discussions with other renewable vendors

The Jamaica Public Service (JPS) yesterday announced that it will be engaging in discussions with other renewable vendors to ensure execution of the planned energy 190 MW Power Plant in Old Harbour, St. Catherine.

Chief Executive Officer, Kelly Tomblin in a press release advised the public that Spanish renewable energy and engineering firm Abengoa has filed for protection from creditors – an initial step towards filing for bankruptcy. The company was recently announced as the preferred bidder to construct the combined-cycle plant in Old Harbour.

“While JPS notes the development with regret, it is fully prepared to activate its alternative plans to ensure the execution of the project, which will replace the present Old Harbour Bay Power Station, while adding more Liquefied Natural Gas to the country’s energy mix,” Tomblin stated.

“We will be having dialogue with Abengoa — but JPS remains undaunted by the news. As a responsible corporate entity, our company has been in full preparation mode for any type of challenge regarding the completion of this project. We will not be derailed from our mission to bring real change to the energy sector and by extension, to Jamaica,” she continued.

The CEO reportedly stated that JPS has been eyeing other vendors since the announcement of the Abengoa’s financial situation.

Abengoa, which reported debt of ¤8.9-billion in its third quarter financials, began bankruptcy protection proceedings to avoid what could be one of Spain’s largest insolvencies.

The figure could be doubled when including ¤2.1 billion in funds it owed to suppliers and ¤5.9 billion of debt the company has in subsidiaries it said could potentially be sold. According to reports, the company has filed for protection from creditors with hopes of reaching a deal on its debts by March.

According to Tomblin, Abengoa was selected based on its wide ranging and impressive technical expertise. The company has been touted as one of the world’s top builders of power lines transporting energy across Latin America and a top engineering and construction business, making massive renewable-energy power plant.

The light and power company also had the understanding that Abengoa’s financiers were committed to the company for the long term.

“JPS wishes to assure its customers and all stakeholders that the 190 MW project remains on track for the plant’s commissioning in 2018.The Company will keep stakeholders informed as events unfold,” she said.

Jamaica Observer

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Pot Can’t Call The Kettle Black, JPS Says It Won’t Jump The Gun On Abengoa Bankruptcy Proceedings

November 26, 2015 Webmaster

Although Abengoa, the Spanish company selected as the preferred bidder to build a major power plant in Jamaica, has initiated steps that could lead to a bankruptcy declaration, Jamaica Public Service Company CEO Kelly Tomblin is not yet ready to call it quits on the multinational corporation.

Reacting to news of the bankruptcy proceedings initiated by Abengoa, Tomblin said she was monitoring the situation of the Spanish renewable-energy company.

It was only last week that JPS announced Abengoa as the preferred bidder to build the 190-megawatt combined-cycle plant in Old Harbour, St Catherine.

Despite fears that Abengoa may not be able to fulfil the requirements of the bid, given its precarious financial situation, Tomblin is holding out hope that the company will be able to make good on its financial obligations in relation to the bid.

“We have been monitoring the situation for some time. We have backup plans, but we have to wait and see what Abengoa shows us. But pot can’t call kettle black because JPS, as you know, has had its own financial difficulties, and we are just now emerging from those, so we know what it’s like, so we want to make sure that we don’t overreact,” Tomblin told The Gleaner last evening.

In the event that Abengoa folds completely, Kelly Tomblin pointed out that JPS has several alternatives.

“There are other vendors. We have many vendors who were poised to build the plant, so if, in fact, Abengoa can’t show, then other people can build the power plant. As you know, we have shareholders who have deep expertise, but we don’t want to jump the gun. Of course, Abengoa will have to give us financial assurance, but, again, pot can’t call the kettle black. It wasn’t very long ago that JPS, too, was facing insolvency problems,” she said.

Energy Minister Phillip Paulwell, in reacting to the news, said there was no need to panic and that JPS should be given the space to continue the procurement process.

When asked if the situation vindicates him in respect of the Energy World International (EWI) bid, Paulwell said, “There will be vindication when the gas is here because that, for me, is the most important aspect.”

Paulwell was in charge of overseeing the Government’s 391-megawatt project, which awarded a bid to EWI, a company which faced financial woes, leading to questions about its ability to deliver on the bid. This was before responsibility for the project was handed over to the Vin Lawrence-led enterprise team.

Now, with news of Abengoa’s bankruptcy filing, Jamaica’s renewable-energy plans may be delayed yet again.

Abengoa’s latest financial woes sent shockwaves through the banking sector and financial markets in Spain yesterday, fuelling concerns that the country’s lenders may be left with heavy losses.

According to international media reports, Abengoa has been having financial challenges from as far back as 2013, when Spain instituted energy reforms, which reduced subsidies to renewable-energy providers. This affected Abengoa’s capital base significantly and further exacerbated its pile-up of debt.

The Financial Times has said that a possible default by Abengoa could count as the largest bankruptcy in Spanish history, given that as of September, Abengoa carried gross debt of £8.9 billion.

The filing for preliminary creditor protection yesterday came after a potential investor cancelled plans to inject £350 million into the company.

While he could not comment on questions of whether due diligence was done on the Abengoa bid, Private Sector Organisation of Jamaica CEO Dennis Chung said news of the filing does not mean the company will go under, as bankruptcy proceedings often give a company an opportunity to rebuild.

“I couldn’t comment on due diligence. I have to believe that proper due diligence would have been done, so that question should be put to the person who actually did the due diligence,” Chung said.

The Gleaner

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UPDATE 3-Spain’s Abengoa starts insolvency proceedings, shares dive

November 25, 2015 Webmaster

* Abengoa has 4 months to reach deal with creditors

* Shares plummet 54 pct, bonds virtually worthless

* Abengoa’s bankruptcy would be Spain’s largest on record (Adds Abengoa removed from Ibex, details on company)

MADRID, Nov 25 Spain’s Abengoa started insolvency proceedings on Wednesday after a potential investor said it would not inject fresh capital into the energy firm, sending its share price tumbling by 54 percent.

Under Spanish law, companies can enter into pre-insolvency proceedings, giving them up to four months to reach an agreement with creditors to avoid a full-blown insolvency process and a potential bankruptcy.

Failure by Abengoa to reach such a deal could lead to Spain’s largest bankruptcy on record. The company employs around 24,000 people worldwide.

Spanish and international banks’ total exposure to Abengoa stands at around 20.2 billion euros ($21.4 billion), including financing for projects, a source familiar with the matter said at the end of September.

The Seville-based engineering and renewable energy firm, which has biofuel and solar-heated power plants in the United States, has been struggling for a year with high debts but the situation became unsustainable in July. It first cut its 2015 targets and stepped up an asset sales plan on July 31, only to announce a share issue days later.

Since then, the company’s market value has tumbled by around 85 percent, hit by uncertainties over whether creditor banks would agree to back the issue.

The shares plummeted by 69 percent when trading resumed following a more than three-hour suspension on Wednesday morning. They closed down 54 percent, wiping out around 470 million euros in market value on the day.

The stock market operator said Abengoa would be removed from Spain’s blue-chip index Ibex as of Nov. 27.

Bonds also lost most of their value.

Abengoa earlier confirmed that Gonvarri, a unit of privately-held industrial group Gestamp, had backed away from a plan to inject around 350 million euros into the firm.

“The company will begin the negotiating process with its creditors with the aim to reach an accord to guarantee the financial viability under the Article 5 of the Bankruptcy act, which the company intends to request as soon as possible,” Abengoa said in a statement.

Abengoa has been trying to find new investors since early August, when it announced a 650 million euro rights issue of new shares to cut gross debt of some 8.9 billion euros.

Gonvarri’s interest was conditional on banks underwriting the issue and it had asked the banks to inject 1.5 billion euros in to the company, sources told Reuters late on Tuesday.

Earlier this month, Abengoa’s auditor Deloitte said the group faced significant risks and its future depended heavily on the proposed investment deal with Gonvarri.

https://solarbuzzjamaica.com/jps-announces-preferred-bidder-for-old-harbour-plant/

Reuters.com

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