Lazard on hunt for buyers for HMC Capital’s renewable energy group Neoen

Neoen Australia’s $3bn Goyder South wind and solar project. Picture: Supplied

Advisory firm Lazard is understood to be quietly courting buyers for HMC Capital’s $950m renewable energy business it bought from Neoen, say sources.

It comes just less than a year since the David Di Pilla-led business agreed to buy the Victoria assets of the renewable energy provider.

The understanding is that Lazard’s pitch is that since HMC’s purchase of the Neoen Victoria solar, battery and wind portfolio, which was generating about $60m in annual earnings before interest, tax, depreciation and amortisation and had a 2.8 gigawatt renewable energy growth pipeline, that it has rerated in terms of value.

It could be divested at a higher price.

However, the challenge for HMC Capital is that it would be footing a tax bill on the sale of the business with 558 megawatts of contracted energy.

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.

But since that time, raising the funds to own the business has been tough going.

HMC Capital announced at the start of this month that 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, departed.

Former Head of Energy Transition for HMC Capital Angela Karl and HMC Capital managing director David Di Pilla. Picture: Jane Dempster

The news sent its share price more than 17 per cent lower to $4.22, wiping about $400m from the market value and shares on Tuesday were at $3.61 before the close with its market value at $1.5bn.

Spanish renewable energy operator Iberdrola was the underbidder in the previous contest, along with IFM and CIP.

Last year, HMC Capital worked with Macquarie Capital to buy the business.

Lazard, headed in Australia by Andrew Leyden, has had a number of sell side roles for renewable energy assets, including Edify Energy, which requires billions of dollars in funding for Australian renewable energy projects.

Final bids have been received, and among those in the final mix are believed to be Canadian pension fund CDPQ and Copenhagen Infrastructure Partners, while IFM had been around the hoop.

HMC earlier said it was “currently evaluating a range of options” in relation to the Energy Transition portfolio, including “portfolio optimisation”.

The plan for HMC Capital was to buy renewable energy assets like Neoen Victoria 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.

Mr Di Pilla founded HMC Capital with aspirations of more than doubling funds under management to $20bn from $7.5bn in 2023.

HMC Capital listed satellite, HealthCo Healthcare and Wellness REIT that listed in 2021 at $2 is down 22 per cent this year to 78c after the collapse of Healthscope – the anchor tenant on the majority of the properties in the fund.

Healthscope receiver McGrathNicol is understood to have told bidders to expect a rent cut of up to 25 per cent on the operating sites.

HMC’s DigiCo REIT listed in December at $5 and was trading on Tuesday at $3.22.

Other renewable energy assets on the market are AGL Energy’s stake in Tilt Renewables through Bank of America, while groups will soon be looking for investors in the REZ Zone renewable energy developments in NSW, including Origin Energy’s $1bn-plus Yanco Delta wind development.