PHOENIX—Arizona's largest solar power plant will remain in operation despite its parent company's financial meltdown, a U.S. Department of Energy official said.

Abengoa, the Spanish company that owns Solana Generating Station near Gila Bend, is on the verge of liquidating assets in preparation for possible bankruptcy. Solana, which earns revenue by selling power to Arizona Public Service Co., was built with a $1.5 billion loan from the U.S. government.

The U.S. is protected if Abengoa goes into bankruptcy, Energy Department spokesman Bart Jackson said. According to Mr. Jackson, the loan was made to Abengoa Yield PLC and Liberty, a company separate from the parent company. Abengoa SA, however, is the largest investor in Abengoa Yield.

"Solana, which is currently online and generating clean power, is owned by a project finance company that is repaying its loan with interest," Mr. Jackson said. "As we do with every project in the Energy Department's Loan Programs Office portfolio, we will continue to closely monitor its status throughout the life of the loan guarantees to protect taxpayer interests."

The Energy Department's loan-guarantee program was created in 2005 and received billions of dollars in funding under the 2009 economic-stimulus law.

Abengoa is also the parent owner of Mohave solar plant in California. Mohave shouldn't be affected either, Mr. Jackson said.

Arizona Public Service spokeswoman Jenna Shaver said APS sends payments for Solana to a U.S. bank in the name of Arizona Solar One, a subsidiary of Abengoa Yield.

Abengoa, a renewable energy and engineering company, said two weeks ago that it was filing for preliminary creditor protection in Spain, an initial step that could lead to the largest bankruptcy case in the country's history.

Solana opened in 2013. The plant, which occupies three square miles of farmland, uses mirrors to reflect the sun's heat onto gas-filled tubes and can generate power at night. Electricity is created from the heated gas making steam and spinning turbines.

Energy Department officials have come under fire before for dealings with solar companies. In 2011, Solyndra in Fremont, Calif., filed bankruptcy after receiving a $535 million federal loan.

Copyright 2015 the Associated Press

(END) Dow Jones Newswires

December 06, 2015 19:45 ET (00:45 GMT)

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