Another Questionable Power Deal?

On February 12 Emil Hawit, the head of the National Electric Company (ENEE in Spanish), and Porfirio Lobo Sosa signed a letter of intent with the Spanish company Isofotón, to construct a 50 megawatt photovoltaic power station in Honduras.

The powerplant is supposed to be expandable to 150 megawatts.  The investment needed to make this happen is estimated at $200 million dollars.  The location of the proposed power plant was not announced, but is said by the press to be somewhere in the south of the country in Choluteca.  Hawitt told El Heraldo

 "they've been working on locating the right place and gave me the required information in meetings held at ENEE."

Juan Orlando Hernandez told Congress that an important agreement had been signed for the construction of a solar power plant in the south of the country as part of the reborn model cities initiative.

Hmm...model cities initiative in Choluteca.  That should sound familiar to our readers.  Choluteca is one of the three locations mentioned in every discussion of model cities in Honduras.

Isofotón is a privately owned company and as such releases no financial information.  The Affirma Business Group owns 80 percent, and a Korean company called TOPTEC owns the other 20 percent.  TOPTEC, a specialist in industrial automation, reportedly already has an office in Honduras.

But Isofotón is in financial hot water.  According to PV Magazine, which covers photovoltaic markets, it is contemplating bankruptcy filings.  It has told Spanish government officials that it has begun negotiations to refinance its debt.  A Madrid law firm has set up a web page soliciting Isofotón's creditors to represent their interests in insolvency proceedings against Isofotón.

In 2009, Isofotón's sales dropped 83%.  It had three different CEOs in less than a year.  Then in 2010 it was acquired by Affirma Energy Engineering and TOPTEC.  Its profits have dropped from a high of 10 million euros to less than 5 million this year.  Meanwhile in Spain Isofotón has responded to three days of protests by its employees threatened with layoffs by announcing that on March 5 it will release the terms under which it will lay off 380 of its 600 Spanish employees.

It is currently building a manufacturing plant in Toledo, Ohio, scheduled to open in July, and in February partnered with China National to acquire minority share in Tianjin Lishen Battery Co. to build solar panels in China.  At the same time as Isofotón announced the Honduras deal, it announced a new partnership to build a photovoltaic manufacturing line and polysilicon plant in Kazakhstan.

Isfotón CEO Angel Luis Serrano told Bloomberg:

We want to increase manufacturing capacity and that will happen in the United States, China and Latin America rather than in our plant in Spain.

Its Latin American presence is limited. In addition to Honduras, Isofotón signed a memorandum of understanding with the government of the state of Yucatan in Mexico for a 150 megawatt photovoltaic generation plant to be built starting in 2014.

As with other proposed investments in power generation in Honduras, this deal seems rocky from the start. Where will this $200 million investment in Honduras come from?

Reading between the lines, Isofotón is depending on the Honduran government to act as intermediary and connect it with either governmental, NGO, or private money interested in actually investing in the project.  It does not have access to the funding to build the plant on its own. We aren't quite in the position of concluding this is another questionable power deal-- but we certainly can raise the question: is this another deal doomed to fail?