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Top Solar Power Firm Cuts Work Force in Half : * Energy: Ailing Luz International says the recession and low oil prices made it impossible to get funds to complete a new plant near Barstow.

July 06, 1991|PATRICK LEE | TIMES STAFF WRITER

Blaming the recession and low oil prices, solar power company Luz International Ltd. said Friday that it laid off 350 workers--about half of its permanent work force--and postponed for a year the construction of its 10th solar plant in the Mojave Desert.

In addition to the layoffs Thursday, which affected workers in Jerusalem and California, Luz on Tuesday also let go about 300 temporary construction workers hired last month to begin building the proposed solar power plant.

Westwood-based Luz is the world's largest solar energy producer and generates about 90% of the world's solar power.

The layoffs are a sign of financial troubles at the pioneering company. Luz, a privately held firm, lost money in 1990 and so far in 1991, officials said. Earlier this year, Luz laid off about 40 workers in a cost-cutting move.

Luz finance Vice President Patrick Francois said the most recent layoffs were prompted by the company's inability to line up $280 million in loans to complete construction of a new plant at Harper Lake, a dry lake bed about 30 miles northwest of Barstow.

"We suspended construction of the project we had hoped to complete by the end of the year because we were not able to secure financing," Francois said. "We were forced . . . to reschedule that facility for 1992."

But Luz officials said the company's predicament also signaled a lack of government support for renewable energy technologies in general. Luz already operates nine solar thermal plants that provide electricity to Southern California Edison Co. by using the sun's heat to generate steam that turns electrical turbines.

"The problems we've had are a symptom of a much greater problem, which is that this country is not willing to do the kind of long-term nurturing necessary (to develop) technologies that are not even pie in the sky" and that hold great environmental and energy benefits, said Joshua Bar-Lev, a Luz vice president and general counsel.

Luz had trouble lining up financing in part because of delays in the passage of a state law extending property tax exemptions to Luz, Bar-Lev said. The law finally passed in late spring after heated debate. Federal and state income tax credits, meanwhile, expire at year-end.

"I am cautiously optimistic that this is not a terminal illness," said Charles Imbrecht, chairman of the California Energy Commission, which actively promotes renewable energy. "It's certainly something we would prefer not to see occur, but it's a function of the year-to-year nature of the federal tax credits."

Bar-Lev said lenders also balked because Luz's suppliers refused to put forward their own credit guarantees that would have secured the loan.

In addition, Francois said the recession and low oil and natural gas prices acted as disincentives to lenders. Although new technologies have made Luz's solar plants more cost-efficient, it still costs about 8 cents per kilowatt-hour for them to generate power, compared to 5 or 6 cents for fossil fuels.

"It is not as good as it should be, and the current level of oil and (natural) gas prices are at an unfortunately low level for us," Francois said.

Both said the company would continue to seek financing for the project.

The most recent layoffs affected about half of Luz's 700 total permanent workers, Francois said. About 80% of the layoffs affected Luz's operations in Jerusalem, which include manufacturing and research and development.

In addition, Bar-Lev said that all but 15 or 20 of the Westwood headquarters' 50 or 60 staff members were let go.

About 200 to 225 workers who operate the existing nine solar plants will remain on the job, and the plants will continue to operate, Bar-Lev said.

The nine plants built by Luz--basically acres of huge curved mirrors--generate about 354 megawatts of electricity, enough to power 354,000 average California homes per day.

Plans Postponed

Luz International has postponed building a solar electricity plant at Harper Lake, in the Mojave desert.

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