|
|
Analysis
Wobbles in the sustainability of renewable energy...
by Chris Yelland and Pierre Potgieter, EE Publishers
International solar power developer Abengoa (NASDAQ: ABGB), with three concentrating solar power (CSP) projects in South Africa, started insolvency proceedings on Wednesday 25 November 2015, perhaps signalling an overheating of the global renewable energy sector, and a correction in the trajectory of adoption of renewable energy in the face of reduced prices for fossil fuel-based energy from coal, oil and gas.
Click here to read the full article
As a result of the application, Abengoa's share price on the day tumbled 54%, following which trading in Abengoa was suspended. Abengoa CEO Santiago Seage subsequently resigned on Friday 27 November. On Wednesday 25 November Fitch downgraded the company by five levels to CC, and Moody's downgrade from B3 to Caa2 followed the next day, based on a perceived high likelihood of the company defaulting on its obligations to lenders and creditors.
|
| |
Abengoa's 100 MW KaXu Solar One parabolic trough-type CSP in operation in the Northern Cape
|
The energy company is a developer and major shareholder in three concentrating solar power (CSP) projects in South Africa, namely the 50 MW Khi Solar One tower-type CSP, and two 100 MW parabolic trough CSP plants, KaXu Solar One and Xina Solar One. Abengoa has partnered with the state-owned Industrial Development Corporation (IDC) to build, operate and maintain these plants. Xina Solar One and Khi Solar One are currently under construction, while KaXu Solar One is already operational.
|
| |
Abengoa's 50 MW Khi Solar One tower-type CSP under construction in the Northern Cape
|
Coming shortly after the problems in August 2015 by SunEdison, reportedly the largest renewable energy developer in world, this latest crisis by solar power company, Abengoa, highlights issues surrounding renewable energy pricing, associated risk and financial structuring and funding of renewable energy projects.
There has been a trend for renewable energy developers to set up investment entities, or Yieldco's, listed on the bourses of the major financial capitals, which purchase the developer's renewable energy assets around the world for their revenue streams, to generate long-term, low-risk cash flows for dividends to investors such as pension funds.
But Yieldco's are falling out of favour, partly because of their relatively low return on investment in high-risk destinations, such as in emerging markets like South Africa, where the weak local currency contributes to inadequate or declining hard currency revenue streams from IPPs with twenty-year power purchase agreements (PPAs) in Rands at low prices per kWh with public utilities such as Eskom.
Although the SunEdison and Abengoa crises are unlikely to affect the attractiveness of solar power in the longer term, the trajectory of adoption and pricing of renewable energy may well be affected, causing these to adjust to more stable and sustainable levels... (more)
|
