PDVSA Pension Ponzi: Yankee empire grabs the nukes

A few months ago, I wrote this intentionally inflammatory headline:

PDVSA pension’s $500 million bolivar bet may turn into nuke ties

The headline was about nukes to get you to read about Venezuelan state oil company PDVSA investing its pension money in a hedge fund that existed to trade bolivars for dollars, during a time when that practice was illegal in Venezuela.

There was also what I called a “Fox News-ready post-script,” which somehow never made it to Fox News. Corrupt hedge fund manager Pancho Illarramendi had bought a bunch of shares of NuScale Power, an Oregon company developing a new form of nuclear plants. Because Illarramendi spent PDVSA money on the shares, the US government had the obligation to try and get them back into PDVSA hands.

Not so quick. Rather than give Hugo Chavez a nuclear company he didn’t particularly want, the receiver moved to sell the shares to Fluor, a US engineering company. This became even weirder when Illarramendi’s father tried to block Fluor’s purchase, supposedly so he could buy the shares himself. The court sent him packing.

The Oregonian, which has followed the NuScale story for months, says today:

NuScale Power … has completed a $30 million rescue package from the big Texas energy company Fluor Corp.

The investment takes NuScale off a financial precipice and gives Fluor a 55 percent stake in its business.

NuScale will ultimately need hundreds of millions of dollars more to bring its modular nuclear reactor to market, but the company now has a degree of financial certainty and a prominent partner to carry its technology forward…

Though prosecutors did not accuse NuScale of wrongdoing, the company lost access to its investment stream when federal authorities froze [Illarramendi’s money]. NuScale laid off most of its 100 employees last winter.

Some came back at reduced or minimum wage, Lorenzini said, keeping the company afloat while it worked its way out of the financial morass…

Fluor began loaning NuScale money last summer… a federal court in Connecticut cleared the way for Fluor to convert its loans to stock and complete its $30 million investment…

Fluor had $3.04 billion in sales to the US government last year. I am guessing that aside from being a good investment, this bailout may have been a favor to US national-security types who were probably not thrilled about the idea that a promising US nuke startup would be owned by the Bolivarian Republic of Venezuela.

And so ends one bizarre part of the PDVSA Pension Ponzi.

H/T to reader DC, whose late-evening perusal of news alerts is highly appreciated.

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8 thoughts on “PDVSA Pension Ponzi: Yankee empire grabs the nukes

  1. NicaCat56

    Hmmm…this seems to become weirder and weirder…I don’t get how this transaction managed to take place. Hmmm…

  2. sapitosetty Post author

    That means I explained it poorly. Which transaction? Fluor’s purchase of NuScale? Or Illarramendi’s purchase of NuScale? Or PDVSA’s use of Illarramendi as investment advisor? Please tell me which part doesn’t make sense.

    1. virtok

      Let me interject here to ask a quick question: what happened with the money invested by Illaramendi (PDVSA pension fund) on NuScale? It seems from your explanation that Fluor bought the shares originally owned by the PDVSA pensioners, but it is not clear how that happened (you explained that “the receiver moved to sell the shares to Fluor”). I think that would clarify the situation for your readers (including me).

      1. sapitosetty Post author

        OK – I guess that since I don’t know the deal structure, I don’t know what happened to those particular shares. Honestly I haven’t read all the filings as I’ve been busy with projects. All I know is that Fluor bought a majority stake in NuScale, providing enough capital to keep the company running for a while. One of two things happened here:

        1. Either they bought the Illarramendi shares (which were rightfully property of PDVSA pensioners), and the PDVSA people are going to get some cash right away

        2. Or they just bought some newly issued shares, ensuring the (temporary) survival of NuScale, and preventing the PDVSA pension shares from becoming worthless.

        Either way, Fluor now controls the company, and the PDVSA pensioners either have sold or somewhere down the line can sell their shares.

      2. sapitosetty Post author

        OK – I guess that since I don’t know the deal structure, I don’t know what happened to those particular shares. Honestly I haven’t read all the filings as I’ve been busy with projects. All I know is that Fluor bought a majority stake in NuScale, providing enough capital to keep the company running for a while. One of two things happened here:

        1. Either they bought the Illarramendi shares (which were rightfully property of PDVSA pensioners), and the PDVSA people are going to get some cash right away

        2. Or they bought only newly issued shares, ensuring the (temporary) survival of NuScale, and preventing the PDVSA pension shares from becoming worthless.

        Either way, Fluor now controls the company, and the PDVSA pensioners either have sold or somewhere down the line can sell their shares.

    2. NicaCat56

      Hmmm, well, all of the above. Just because you’ve been busy with other projects and leave us with this, doesn’t mean that you shouldn’t give your readers more information, right? What is the situation for the PdVSA share owners? Or Fluor’s purchase of NuScale? . You said “But I know that Fluor is also providing capital for NuScale, so apparently they get the MK (PDVSA pension) shares and also provide cash to NuScale”. So, what is up with that? Where does Illarramendi come into this whole scenario? You know what else? Don’t even worry about giving me an answer for all of this; it’s so very convoluted and strange, that I’m not even sure that I could even understand an explanation of what’s happened here! “What a long, strange trip it’s been” (Truckin’, Grateful Dead)

  3. Nukinator

    Here’s how it went. PDVSA’s money was invested in the Michael Kenwood Group (MK). MK invested in NuScale and other companies. When the US government found out that Pancho was mismanaging the MK funds, the MK assets were frozen and the court appointed a receiver tasked with managing and recovering those funds.

    Fluor purchased the MK interest in NuScale power through the receiver to recover PDVSA funds. Pensioners never directly owned any shares.

    1. sapitosetty Post author

      Great, thanks for the clear explanation. But I know that Fluor is also providing capital for NuScale, so apparently they get the MK (PDVSA pension) shares and also provide cash to NuScale. Onward to the other parts of this long, strange case.

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