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.
