HMC says “fantastic” wind, solar and battery assets can rival real estate as the fund’s biggest earner

HMC Capital says it is sitting on some “fantastic assets” since branching in to the Australian renewable energy market nearly two years ago and that its future in the sector is “bright,” even if investors in the listed company are not yet sold on the strategy.

HMC, which launched its Energy Transition Fund in 2024 with former prime minister Julia Gillard as its chair, announced its 2026 half-year financial result on Tuesday morning and held a webcast to answer analyst and shareholder questions.

Since launching its energy platform, the listed company has bought up battery project developer Stor-Energy and then spent $950 million buying the Victorian assets of Neoen, one of Australia’s most successful renewable and storage developers.

HMC has been seeking to flip those assets into a new fund backed by third party investors, but struggled to attract sufficient interest, and was forced to drop plans for “peripheral” technologies such as green hydrogen.

A change in fortune arrived earlier this month, when HMC revealed that global investment giant KKR would back its energy transition platform to the tune of up to $603 million.

But HMC had been aiming to raise $1 billion, and investors have reacted poorly to the $400 million shortfall, with shares down 16 per cent since the news broke just over two weeks ago. 

As a result, HMC managing director and CEO David Di Pilla spent much of the webcast defending the value and potential of the energy assets, and the nature of returns from that part of the business.

He says investors do not yet understand the potential and importance of HMC Capital’s renewable energy portfolio, which is currently focused on developing some of its near-term assets, including the up to 600 megawatt (MW) Kentbruck wind project and the up to 600 MW Moorabool battery – both in Victoria.

“The market has been very harsh in assessing the KKR transaction,” he said during the half year results presentation. 

“The market reaction suggests to me that investors do not yet appreciate the significant value and growth we expect to generate from this business and our partnership.

“The transaction recapitalises the platform, pays down the mezzanine facility, and includes a further $250 million of committed follow-on capital. It also substantially reduces HMC’s balance sheet exposure to just $180 million. 

“We expect to generate private equity style returns on our invested capital with a target equity IRR of over 20 per cent, or a four times money multiple over the next five years.”

Di Pilla says that HMC is “deep in negotiation” with electricity off-takers for the approved Kentbruck wind farm, citing “a strong level of inbound interest from multiple and varied” parties.

“They are serious players all looking for baseload generation capacity in [Victoria], remembering there’s coal coming out of the system very soon, so that that asset is very valuable. 

“We’ve also got a battery storage project, the Moorabool project that is DA-approved, is adjacent to our Victorian Big Battery assets.

“There’s a grid connection. There is substation connection. There is already an existing contract in place with the Victorian state grid. We will probably look to expand that contract as an off-take partner there,” Di Pilla said. 

“We are basically sitting on some fantastic assets there. We’ve been patient. We’ve been working hard in the background. We’ve been operationalising that platform, and we’re really, really looking forward to the future. It’s bright. 

“Bringing KKR in on the terms that we brought them in, with the committed funding we’ve got, This is development. This is high returning private equity type stuff. So we’re very, very excited.”

The KKR deal allows HMC Capital to reach final investment decision (FID) on an $800 million battery later this year, with 90 per cent to be funded by the private equity backer, and reach FID on 2.3 gigawatt (MW) of projects in the next 12 to 18 months.

HMC Capital has an energy pipeline of 5.7 gigawatts (GW) across 19 projects, worth $1.3 billion today, which came from the purchase of Neoen Australia’s Victorian assets and from its acquisition of battery developer Stor-Energy.

Energy is the smallest but one of HMC Capital’s five asset categories.

But it says there is $10 billion worth of growth there which, if the asset manager successfully develops its pipeline, would make the energy platform the equal of the current biggest earner, real estate. 

Part of the investor concern is that compared to the same time a year ago, HMC Capital’s financial metrics have tumbled.

Total revenue is down 31 per cent, operating earnings after tax are down 79 per cent, and the earnings before interest, tax, depreciation and amortisation (EBITDA) of funds that HMC Capital is managing has plunged by 50 per cent.

Di Pilla is confident that they have shored up the books, paid down debt, and the energy portfolio to start paying its way by lower returns in other parts of the business from now on.