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Abengoa -- nice projects, poor financials [ClearOnMoney]
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Abengoa -- nice projects, poor financials

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Commentary

Abengoa -- nice projects, poor financials

11 Jan 2013 by Jim Fickett.

Abengoa is an infrastructure company, particularly well known in solar power and desalination. I've wanted to look into them before, due to some high-profile concentrating solar power projects that looked interesting, and recently ran across them again in relation to water projects. However a first look suggests that the investor value proposition is difficult to find.

Free cash flow has been negative as long as it has been reported, for the last few years in the neighborhood of -1 billion euros/year. Since a well-run company ought to be able to take care of necessary capex and still report a positive cash flow, that negative cash flow should show up as increasing equity. However equity has been increasing at a rate of only about 200 million euros / year for the last few years.

It would be interesting to figure out where the money is really going, and to see if there is some good reason for equity not growing faster. However this is not possible. The company is extremely complex, with hundreds of subsidiaries and, even with annual reports running into the hundreds of pages, it is not possible to know what is really going on.

So I'm glad they are doing some interesting solar power projects in the Mojave desert, and I wish both the company and California well. But Abengoa is not one for the value investor.