Abengoa Exit Plan Challenged

US Agencies Raise Objections to Abengoa SA's Reorganization Plan

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The Internal Revenue Service claims in court records Abengoa's subsidiary in the United States owes millions in back taxes. (DTN file photo by Nick Scalise)

OMAHA (DTN) -- Though Abengoa Bioenergy essentially has sold off its ethanol assets in North America, its parent company, Spain-based Abengoa SA, may have hit a snag in finalizing its Chapter 11 bankruptcy reorganization.

The U.S. Department of Justice, the Internal Revenue Service and the U.S. Trustee filed objections to the parent company's exit plan in the U.S. Bankruptcy Court for the District of Delaware this week.

Among a number of objections filed against Abengoa SA's main subsidiary in the United States, Abeinsa Holding Inc., is a claim the final reorganization plan unlawfully shields Abengoa SA from future lawsuits, according to an objection filed by the U.S. Trustee.

"The debtors in these cases should not be allowed the unfettered discretion to force creditors to discharge such an expansive list of people and entities, none of whom have demonstrated that they provided any contribution to the estate, let alone a substantial one, because a permanent injunction limiting the liability of non-debtor parties is a rare thing that should not be considered, if ever, absent a showing of exceptional circumstances," the U.S. Trustee said in its objection.

In another objection filed by the IRS this week, the agency argues Abeinsa Holding Inc. has failed to file a "significant number of federal tax returns."

The IRS argues it is owed about $19 million in taxes, although the agency said it is "unable to determine the amount of its claims in this case as the result of the debtors' failure to file federal tax returns."

Also this week, the U.S. Department of Energy and the Federal Communications Commission filed an objection to Abengoa's reorganization. The DOE has provided millions of dollars toward various Abengoa projects in the past decade.

The agencies argue Abengoa cannot use proceeds from the projects they funded to fund the parent company's reorganization.

The DOE provided about $15 million for the construction of a cellulosic ethanol pilot plant in York, Nebraska, that was used to develop commercial cellulosic ethanol technology at a plant in Hugoton, Kansas.

Abengoa Bioenergy provided about $17 million as its cost share, according to court documents. The company had a number of reporting and other requirements it was to meet in order for DOE to provide the funds.

"Before the petition date, Abengoa Bioenergy apparently transferred the funded property to Abengoa Bioenergy New Technologies, LLC (ABNT) without DOE's knowledge or consent," the agencies' objection said.

"DOE was not paid its cost-share of the fair market value of the funded property when it was transferred to ABNT. Following the transfer, ABNT continued to use the funded property in furtherance of the bioenergy award's objectives."

Abengoa is attempting to sell the cellulosic ethanol pilot facility in York, Nebraska, according to court documents, for nearly $1.3 million. "If the court approves the sale of the funded property, ABNT owes DOE approximately $585,937 on account of DOE's cost-share interest," the agencies said in their objection.

In January 2016, Abengoa SA announced in a letter to Spain's National Securities Market Commission the company was planning to restructure its business to focus primarily on engineering services. The company began negotiating with creditors on about $8.9 billion in debt.

On Nov. 22, 2016, Abengoa shareholders approved the restructuring agreement, according to a news release.

Abengoa did not respond to DTN's request for comment at press time.

Earlier this week, Synata Bio, Inc., outbid Shell Oil Company on the Hugoton, Kansas, 25-million-gallon cellulosic ethanol plant with a winning bid of $48.5 million.

In August, Abengoa sold three of its ethanol plants to Omaha-based Green Plains Inc. during an auction. Green Plains bid $237 million to purchase plants in Madison, Illinois; Mount Vernon, Indiana; and York, Nebraska. The plants have an annual combined production capacity of 236 million gallons.

KE Holdings LLC made a successful $115 million bid to buy the Abengoa plant in Ravenna, Nebraska, while Kansas-based ethanol plant builder ICM Inc. was the high bidder at $3.15 million for the Abengoa plant in Colwich, Kansas. ACE Ethanol, LLC, was the successful back-up bidder on the Kansas plant, with a bid of $3 million.

The Abengoa corn ethanol plant in Portales, New Mexico, was sold to Natural Chem Group LLC at auction in the U.S. Bankruptcy Court for Eastern District of Missouri. Natural Chem announced plans to convert the plant to biodiesel production.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(AG/BAS)

Todd Neeley