HMC shares plunge as market spooked by Neoen purchase delay, equity top up, turbine fire report

Shares in listed investment company HMC Capital plunged on Tuesday after the company reported a month long delay in its $950 million purchase of Neoen Australia’s Victoria renewable and storage assets, and flagged the potential of a merger of its new energy transition business.

In a detailed market update, HMC said its purchase of the Neoen assets, which include the Victoria Big Battery, the Bulgana green energy hub, and the Numurkah solar farm, along with a pipeline of development projects, would now be completed on August 1, rather than July 1 as originally planned.

It provided no explanation for the delay, although it also announced plans to merge the Neoen assets with its Stor Energy battery business, and appointed the Stor CEO Gerard Dover as head of its energy transition business, replacing Angela Karl.

HMC also flagged it was putting $50 million of equity into the Neoen portfolio, to help with the development of near term projects such as the Moorabool battery and the Kentruck wind project, and also said it was continuing discussions about further fund raising to develop its platform, albeit on a more narrow basis.

“Due to the inherent and embedded value in the Neoen Vic Portfolio assets, HMC’s future strategy and any fund raising will now be on the basis of a more focussed strategy around the Neoen VIC Portfolio and Stor Energy battery development portfolio only,” it said.

Investors did not respond well to the news. HMC Capital shares are already down heavily this year because of concerns about its investments in properties relating to the struggling Healthscope and its data centre exposures.

The shares plunged 14 per cent, or 70 cents, to $4.40. It’s ironic, because Neoen had chosen to accept an $11 billion buyout offer from Brookfield, precisely because of the difficulties in raising funds for new wind, solar and storage projects in a listed environment.

It was forced to sell its Victorian portfolio because of competition concerns relating to Brookfield’s ownership of a significant stake in network company AusNet.

On that topic, HMC said it was also evaluating options that include a “strategic partnership (or) merger with a major domestic or global financial investor that seeks to build a focussed operating, development and trading platform to optimise value over the medium term from market volatility created by the energy transition.”

Despite this, former prime minister Julia Gillard, who chairs the energy transition business, said in a statement that the company still intended to be a “national champion” of Australia’s transition to a net zero carbon economy by 2050.

“The additional financing we have secured will help accelerate the build out of the portfolio’s large scale development pipeline and generate significant value for HMC shareholders and platform investors,” Gillard said.

“Angela Karl has been critical in the development of our strategy over the past two years, and I would like to thank her for her contribution. We wish her all the very best for the future.”

HMC also made mention of the turbine fire at the Bulgana energy hub in late May, which closed down operations for at least two weeks pending investigations. It said it should be operating at near capacity by the time it takes ownership.

“On 28 May a fire incident impacted 1 of the 56 wind turbines at the Bulgana Wind Farm which has resulted in a detailed operational and safety review,” it said in a statement.

“Following the safety review, 49 of 56 wind turbines (~90%) are operating, with all apart from the fire impacted turbine expected to be operational in the coming weeks.

“With the wind farm expected to return to full operation prior to financial close, there is not expected to be any material impact on forecast cashflows or returns from the asset.”