HMC Capital struggles could see Neoen underbidder Iberdrola resurface

Outgoing head of energy transition for HMC Capital, Angela Karl, and boss David Di Pilla. Picture: Jane Dempster/The Australian

Spanish renewable energy operator Iberdrola could be dusting off its files on the Neoen Australia business, based on the latest announcement out by HMC Capital.

Investors punished HMC on Tuesday, with its share price down more than 17 per cent to $4.22, wiping about $400m off its market value as it told the market it had pushed back the settlement date of Neoen by one month.

It had also borrowed $200m of mezzanine debt for Neoen and merged it with its Stor Energy battery platform, as its gun infrastructure executive who was to run the business, Angela Karl, leaves.

She was hired from QIC last year to be HMC’s Head of Energy Transition and market sources have suggested she will be a major loss for the business, given her institutional investor relationships in the infrastructure sector.

Market observers expect that the platforms were merged to ensure Neoen had the right management and potentially more equity behind it as a backing for the debt owing, with it to be run by Stor Energy battery boss, Gerard Dover.

HMC Capital outbid rivals in the Bank of America-run contest for Neoen’s Victoria assets last year, agreeing to pay $950m through two instalment payments, including a payment of $750m at financial close and the remainder in December.

Lenders had agreed to underwrite about $550m at the time.

Comments in the statement suggesting that HMC was “currently evaluating a range of options” in relation to the Energy Transition portfolio, including “portfolio optimisation”, were taken as a sign that the group may contemplate a sale of the business.

Iberdrola was an underbidder when it was purchased by HMC, but would likely only be keen at a far lower price.

The plan for HMC Capital was to buy renewable energy assets like Neoen then raise funds from institutional investors that want exposure to the energy transition and spin the assets off into a fund.

The group said the discussions with potential investors remained ongoing.

It also flagged a “strategic partnership” or merger, which would involve a partial sale.

The situation is the latest challenge to overcome for the ambitious investment banker-turned fund manager, David Di Pilla, who founded HMC Capital with aspirations of more than doubling funds under management to $20bn from $7.5bn in 2023.

Not only does it appear evident that HMC is struggling to find equity backers for Neoen, the HMC Capital listed satellite, HealthCo Healthcare and Wellness REIT that listed in 2021 at $2 is down 30 per cent this year to 73c after the collapse of Healthscope – the anchor tenant on the majority of the properties in the fund.

Market participants are betting that Healthscope landlords could be in line for a rent reduction on their properties as high as 50 per cent, a level many believe would not be viable for HealthCo to remain profitable.

It also comes after its DigiCo REIT that listed in December at $5 a share continues to trade below the price of its initial public offering price last year, down to $3.28.

Mr Di Pilla initially won supporters through his purchase of the Woolworths Masters hardware real estate assets with backers at an opportunistic price, then listing, and was instrumental in cementing a backdoor listing of Chemist Warehouse into Sigma, creating a major windfall for investors through Sigma’s share price uplift.