Update: HydrogenOne Capital Growth (HGEN) is to wind down and return what is left of shareholders’ money in the green energy fund after four difficult years.
The company, whose shares have lost three quarters of their value since 2021 and languish 70% below net asset value, has appointed Redwheel, the trading name of RWC Asset Management, to oversee the sale of assets, assisted by Global Fund Management Services (GFM) as alternative investment fund manager (AIFM). The company’s name will be changed in the near future.
The contract with fund manager HydrogenOne Capital, run by John Joseph Traynor and Richard Hulf, has been terminated with immediate effect, the board said, having recognised that the “status quo for the company could not continue”. Annual results in April recognised the uncertainty over the company’s future, requiring a secondary sale of one of its assets to boost cash levels that had shrunk to £2.3m.
Today the shares jumped 4.2%, or 1.1p, to 27.1p as investors looked forward to a narrowing in the discount, although initially that might be achieved through a reduction in the valuation of the green hydrogen portfolio, which is under review.
HGEN said the first priority of Redwheel and GFM was to find an external independent valuation agent and assess the fund’s net asset value (NAV). The 30 June NAV would normally have been published at the end of July but will now not be ready until mid-to-late September.
In a statement, the board said the appointment of Redwheel and GFM was “in the best interests of shareholders as the company navigates a challenging period ahead.”
Shareholders would benefit from a reduction in the management fee, which would also help improve cashflow, as well as having an investment adviser experienced in public and private market energy transition investments.
Although Redwheel is perhaps best known for running Temple Bar (TMPL), the value-style UK equity income investment trust, it expanded its business last year with the acquisition of sustainable fund manager Ecofin. It runs Ecofin Global Utilities and Infrastructure (EGL) and previously ran Ecofin US Renewables Infrastructure (RNEW) before stepping down after shareholders chose to wind down the fund.
Chair Simon Hogan said: “The hydrogen sector has faced a number of challenges and whilst it is recognised that there is still opportunity in the sector, the company’s circumstances, in particular its scale and inability to make follow-on investments in its portfolio companies, means that a managed realisation is the most appropriate option for it and shareholders.”
Our view
James Carthew, head of investment company research at QuotedData, said: “I was sad to see this morning’s announcement from HydrogenOne, which readers will know is a company that we have long championed. I remain convinced of the green hydrogen story, but would emphasise that this was always a long term investment. From that point of view, pulling the plug after just four years feels premature. The managers were caught out by Foresight’s unexpected decision to refuse follow-on funding for HH2E and the subsequent collapse of what was a promising company. In hindsight, they also overcommitted to investments, hence the trust’s current cashflow problems. The share price is up today on the news but I would caution that there is real danger of a big write-down of NAV to reflect the shift to selling immature investments.”
