When will Governments Learn?...Never??...R&D Money in the Private Sector is with the Consent of Investors, Governments Mandate the Money from their Taxpaying Citizens.

Abengoa: Another Story Of Sudden Insolvency

Although the media and many experts blame the crisis and the squeezing of the renewables industry for Abengoa’s problems, this is in fact not true. In the first place, we cannot describe Abengoa as a renewables company. Besides being involved in renewable electricity generation and converting biomass into biofuel, it is also one of the world’s leading power lines builders and a top engineering and construction firm. It employs 24,000 people worldwide. 

And, although several of its businesses lines have been suspended in Spain, we mustn’t forget the company gets 84% of its income from abroad. The Andalucian company has amassed dozens of very important infrastructure projects in the past few years all over the world, from the U.S. to China and Latam. The problem is that with a  gross debt pile of some €8.9 billion, and exposure to Spanish and international banks of around €20.2bn, Abengoa has found, and continues to find it difficult to get them off the ground. It lacked the financial resources, and the banks did not lend any more. The company has a special business model. Instead of simply building projects or running them, it does both, raising money from bond markets to finance expansion. 

Another person who didn’t expect such a terrible outcome is Obama. His administration awarded the company about $2.7 billion for two majors projects — the Solana Generating Station in Arizona and the Mojave Solar Project in California. Republicans and other critics of renewables were short of time to remind Obama of his previous failure with Solyndra in 2011. This left taxpayers responsible for more than $530 million. These people reminded the President that the administration’s meddling in the energy sector leads to disaster for taxpayers.

DYI Comments:  Governments whether on the right or the left need to get out of the business of attempting to pick winners with the newest technologies.  What the government is excellent at core research that individuals and corporate R&D departments can tap into to develop potential products. Many of course will fail just as the government has.  However, private money is obtained by consent of their investors as opposed to taxpayers that is mandated.  Core research I have no problem with and to a point encourage the government to do more.  Leave the development of products to the corporate R&D departments in risking their money and besides due to the profit motive they are far better prepared for the rigors of high risks development projects.

DYI