GPRE Green Plains Inc

The U.S. government, which pumped more than $130 million into Spanish renewable-energy company Abengoa SA's U.S.-based projects, is asking a federal judge to put the brakes on the company's plan to exit bankruptcy.

Several federal agencies—including the Energy and Justice departments—are objecting to the bankruptcy-exit plan, demanding changes and at least partial repayment on the government's investments.

A spokesman for Abengoa couldn't immediately be reached for comment Thursday on the government's objections.

Judge Kevin Carey is slated to consider the bankruptcy-exit plan for Abenoga's primary U.S. subsidiary at a hearing on Tuesday at the U.S. Bankruptcy Court in Wilmington, Del.

The Energy Department had awarded $137 million to fund a total of 11 Abengoa projects over the past 13 years, according to an agency spokeswoman. The department says the funds were intended to help the it meet federal energy policies that promote the production of ethanol and other renewable energy sources.

In one objection to the plan, the Energy Department said it is owed about $611,000 from the sale of a York, Neb., ethanol plant as well as a robotic arm. Beginning in 2003, the federal agency spent $17 million to help build the plant and to purchase the robot as part of a program intended to help develop and improve ethanol-production technologies.

Abengoa is looking to sell the Nebraska plant to Green Plains Inc. for approximately $1.25 million, and the Energy Department wants its share of the proceeds. Similarly, a robotic arm the government purchased with Abengoa for $4 million was recently sold for $50,000, and the department says it is owed half of the proceeds.

The Nebraska ethanol plant currently isn't operating, court papers show. It sits on the site of a 56 million gallon ethanol-production facility, which was also sold to Green Plains for $37.4 million. According to court papers, technology and equipment developed at the pilot plant supported the startup of one of the first large-scale, second-generation cellulosic ethanol plants in the U.S.

"That project successfully demonstrated cellulosic ethanol could be produced at pilot scale and ended in 2012," a spokeswoman for the Energy Department said Thursday. "The Energy Department has not incurred a loss as a result of York pilot plant funding—DOE funds such projects without expectation or means of repayment."

U.S. Trustee Andrew Vara, who serves as a bankruptcy watchdog for the Justice Department, raised another obstacle to Abengoa's restructuring plan. In court papers filed Wednesday, he said the plan is too generous with legal protections that are intended to shield the company, its current or former management and others from lawsuits after the bankruptcy. Lawyers for the trustee said in an objection that the so-called releases are so broad that they may violate federal law.

The Internal Revenue Service has also weighed in with an objection, saying it is owed nearly $19 million. Lawyers for the IRS said in court papers filed Thursday that Abengoa has failed to file a "significant number" of federal tax returns. Until those tax returns are filed, the agency asked Judge Carey to keep Abengoa in bankruptcy.

Founded in Seville, Spain, in 1941, Abengoa is the flagship of Spain's renewable-energy industry and now develops clean-energy projects around the world. The company says cuts in clean-energy subsidies following Spain's 2013 economic crisis forced it to take on substantial debt—more than $5 billion—to survive.

After a new investment deal fell through, the company launched preliminary insolvency proceedings in Spain to restructure its mountain of debt. The move bought Abengoa time to negotiate a restructuring agreement with creditors and to avoid filing bankruptcy in Spain, though earlier this year it did launch bankruptcy proceedings in the U.S.

A Spanish judge has already approved Abengoa's master restructuring plan, which puts the company under the control of its banks and bondholders. Abengoa is now asking a U.S. court to enforce that plan here as well as to approve repayment terms for U.S. creditors.

Write to Tom Corrigan at tom.corrigan@wsj.com

(END) Dow Jones Newswires

December 01, 2016 17:45 ET (22:45 GMT)

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