HMC Capital has narrowed the focus of its energy plans to wind and big battery projects as it tries again to raise $1 billion in equity for a new platform chaired by former prime minister Julia Gillard.
HMC branched into the energy market about a year ago with the appointment of Gillard, the purchase of battery project developer Stor-Energy and then the $950 million purchase of the Victorian assets of Neoen, one of Australia’s most successful renewable and storage developers.
Neoen was forced to sell its Victoria assets because of competition concerns surrounding its new owner Brookfield, and HMC says the $950 million it paid for those assets was a good deal, coming in at least 20 per cent below the replacement cost.
HMC wants to flip those assets into a new fund backed by third party investors, but its efforts so far have failed to attract sufficient interest, and it has been forced to drop plans for “peripheral” technologies such as green hydrogen.
“I think the brutal reality is that we bought Neoen (Victoria assets) incredibly well,” HMC boss David di Pilla told analysts in a Q&A presentation after the company released its annual results on Tuesday morning.
“We think we’ve probably got it 20 to 30% below market value as a result of that … what the investor base has been telling us is just let us invest in the portfolio. You’ve got to deliver the strategy against the assets, you’ve got no blue sky, and the capital will flow.
“And so that’s why we’ve decided to narrow down the strategy. We’ve got one of the best development portfolios in the country, and we’re going to execute into that, and we’ll deliver the value that we’ve got under control today.
“The thing is, when you go to market and you raise third party capital, and investors get to buy the assets off you in a sell down, and they can see the assets, and they can (do due) diligence on the assets, that’s a much easier capital raising model than going and selling a blue sky story.
“We’re confident now in the strategy we’ve got, I’m confident in the team we’ve got, and I’m confident in the outlook for that business.”
The HMC energy platform is likely to focus on two near term wind and battery storage assets, such as the up to 600 megawatt Kentbruck wind project – proposed for a pine forest in Victoria – and the up to 600 MW Moorabool battery near Geelong, next to its existing Victoria Big Battery.
Earlier, Gerard Dover, the CEO of the HMC Capital Energy Transition Platform, says HMC’s goal is to raise about $1 billion of equity and a “prudent level” of debt financing.
“This is enough to fund the seed assets in full, and progress two of the near term developments into construction and take the rest of the pipeline to financial investment decision,” he said.
“The fund will be structured as a seven year closed ended vehicle targeting returns of 15 to 20 per cent IRR (internal rate of return). We believe this strikes the right balance for institution investors, strong returns underpinned by quality assets and a clear pathway for growth to support the fundraising process.”
Dover said another 15 people will be added to the team over the next 12 months to support project delivery and operational capabilities.
“We are extremely well positioned to deliver an institutional grade platform in one of the world’s most attractive renewable markets. Our strategy is to become a national champion in the renewable energy sector, supporting Australia’s decarbonisation goals while delivering attractive risk adjusted returns for investors.”
Dover said the portfolio, which earned $64 million in EBITDA in the last financial year had already been revalued to $1.3 billion. The company has a total development portfolio of more than 5.5 GW of assets, including a 150 MW, 1450 MWh planned facility near Columboola in Queensland.
HMC, a listed company, has some $18 billion of funds under management spread across various “verticals” including real estate, digital infrastructure, private credit and private equity. It aims to grow this to $50 billion in coming years, and says the energy platform could grow from around $1 billion to between $5 billion and $10 billion.
