Helius raises £1 million from director and slims down its board

Northland Capital Partners welcomed today’s announcement from Helius Energy (LON:HEGY) that the firm had raised a further £1 million and made cost-saving changes to its board of directors.

Independent broker Northland said the board changes would save around £150,000 per annum and lead to quicker decision making.

Earlier today Helius said it had raised around £1 million through a combined debt and equity deal with one of its non-executive directors, Angus MacDonald.

Helius explained that the new funds would be used to help it deliver its portfolio of biomass-powered electricity plant projects, beginning with the 100 megawatt Avonmouth plant on the Bristol Channel.

The company also announced a number of changes to its board in order to reduce its operating costs. Chairman Keith Henry has stepped down, while non-executive directors David Brocksom and Barclay Forrest have also left their positions (although Forrest had already announced his plans to retire in 2010). John Seed, former chief executive and a current non-executive director, becomes the new chairman.

MacDonald increased his holding in Helius from 19.12 percent to 24.12 percent following the issue of 4,360,674 new shares at 16 pence each, which raised £697,707 for the business. In addition, MacDonald is also providing an unsecured loan to Helius of £302,300.

Seed is to continue with the detailed review that is designed to fund ways to maximise value from the company’s portfolio of operations.

“Helius has demonstrated its capability to deliver major biomass energy projects such as CoRDe and Stallingborough, creating significant value for the Company and its investors,” Seed said. “Following the major achievement of the start of construction on the CoRDe project, Angus’s further investment, combined with the improvements in our use of funds, will allow us to continue to deliver our portfolio of projects, starting with Avonmouth.”

Corde is a 7.2MW project in Scotland with the Combination of Rothes Distillers, while Stallingborough is a 65MW net capacity biomass plant located in Lincolnshire.

Northland Capital Partners described today’s developments as “positive” for Helius. “For a small company with a lean structure it had a top heavy board structure with unnecessary costs and the announced board changes address this issue,” said the broker. “A much trimmer management structure will mean annual cost savings around £150,000 and quicker decision making.”

Northland added that the funding would help with short term operational costs and help bridge any gap until a deferred payment is received from the sale of its Stallingborough plant. (Helius sold the Stallingborough to RWE Inogy in 2008 and it is awaiting an upfront cash payment of £8.8 million from RWE).

Northland said the share deal announced today and the change in board structure “does concentrate more votes with one powerful director and shareholder”, but conceded that this was “already the de facto case”.

“The management now need to realise the value in its portfolio for its shareholders,” Northland added. “The next major event will be the announcement of financial close for Avonmouth which is now the principal focus for the remainder of [the 2011 financial year]. Our forecasts remain unchanged and our recommendation is a ‘buy’, with a price target of 54 pence.” 

Northland expects an adjusted pre-tax loss of £2.1 million from Helius for the current financial year to 30 September, increasing to £2.7 million next year.

By 10:05am today, Helius’s shares were higher by 3.5 percent at 14.1 pence each.