There is some good news to report on Abengoa, SA. As we noted a couple of months ago, Abengoa, SA, was in desperate need of restructuring its debt. Although this has yet to be fully completed, Abengoa, SA, was able to get 75% of its debt holders to agree to a restructuring plan (see: http://www.bloomberg.com/news/articles/2016-03-28/abengoa-wins-reprieve-in-debt-talks-to-avert-insolvency-process ). The Spanish Bankruptcy court ruled to give Abengoa, SA, more time to reach final agreements with the remaining creditors. Abengoa, SA, has until October 28, 2016, to finalize the debt restructuring (see: http://www.reuters.com/article/abengoa-court-idUSL5N17933O ). This news resulted in a strong uptick in Abengoa stock prices (see: http://www.reuters.com/article/abengoa-restructuring-idUSE8N13F015?type=companyNews ).
Abengoa is not out of the woods yet. They still must deal with the bleeding of cash that became so dramatic in 2015 (see: http://amigobulls.com/stocks/ABGB/income-statement/annual ). They are continuing to spin off various projects that are big cash drains. It is not clear how soon they can staunch all the hemorrhaging. They are not alone in this. The renewable energy sector is plagued by disappointing cash flow – especially now that energy prices are low.
A similar company, SunEdison, has suffered the same cash woes as Abengoa. SunEdison is also struggling to turn their operations cash positive as soon as practical (see: http://www.fool.com/investing/general/2016/03/04/3-reasons-sunedison-stock-could-rise.aspx ). It seems that investor and government appetite for financing cash negative renewable operations is waning. These companies will need to consolidate quickly on profitable segments and cut back on new technologies. Although these companies appear to be under considerable financial pressure, there seems to some confidence in the ability of these major players being able to find a way to become profitable. The “go-go” days may be over, but there is not yet a general panic.
Ron Stites holds a BS in Chemistry and an MBA in Finance and Accounting. Stites & Associates, LLC, is a group of technical professionals who work with clients to improve laboratory performance and evaluate and improve technology by applying good management judgment based on objective evidence and sound scientific thinking. For more information see: www.tek-dev.net.
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