Helius Energy’s £6.6 million premium placing welcomed in the City

The stockmarket has welcomed yesterday afternoon’s announcement by biomass power plant builder Helius Energy (LON:HEGY) that it plans to raise £6.6 million via a share placing at 16 pence per share. The news has helped to boost interest in the shares both yesterday afternoon and this morning, while broker Northland Capital Partners said that it maintains its ‘buy’ rating for the firm’s shares with a price target of 54 pence each. House broker Ambrian also said the shares were a ‘buy’.

Yesterday, just after the announcement was made, the shares jumped more than 13 per cent to hit 15.9 pence each before falling back to 13.5 pence by the close. But after investors had a night to digest the news, the shares bounced again this morning and were up 9.3 per cent at 14.75 pence each at lunchtime.

Helius said yesterday that a fundraising at a premium to the share price demonstrated the company’s ability to attract investment from a number of high-quality new and existing institutional and other investors.

“I think it’s a cracking result in this market,” said the firm’s chief financial officer, Alan Lyons, when he spoke to Proactive Investors yesterday afternoon. “Most placings done at the moment are at a substantial discount to the share price.”

Lyons pointed out that the placing price was not only achieved at a premium to Helius’s recent share price but it represented a premium to Helius’s average price over the past couple of months.

The funds will be used to strengthen Helius’s balance sheet and provide additional working capital to allow the company to progress its immediate and longer-term pipeline of projects, including seeking to secure: project-level funding for the firm’s Avonmouth power project; and planning consent for its Southampton project.

Lyons said that a key use of the funds will be to bring Avonmouth to the point of financial close, when the firm would expect to receive a fee of around £10 million. In return Helius will be happy to be diluted down to a minority stake in the Avonmouth plant, added Lyons.

In Helius’s statement about the fundraising, Adrian Bowles, Helius’s chief executive officer, commented that the placing “clearly demonstrates that investors have confidence in Helius’s ability to develop high quality projects and the potential to realise value from its portfolio”.

Bowles said that the capital allows the firm to continue to develop a pipeline of other projects, following the financial of Helius’s CoRDe project in Scotland earlier in the year.

Northland Capital Partners commented: “This removes the overhang of an equity fundraising event, which was undoubtedly holding back the share price.”

The broker said that the financial close on Avonmouth “will be another trigger event” that will allow a reappraisal of the valuation of Helius’s portfolio.

Northland also made the point that the names of the new investors could be “just as important”, as was the fact that the placing was done at a premium to the existing market price. “These investors are well known in the business community and provide a strong endorsement of Helius’s strategy,” said the broker. 

Ambrian added that it believed the proposed equity placing gives Helius enough headroom for a further 12 to 18 months. It said this estimate assumed the company does not achieve a development fee for Avonmouth and the earn-out asset from the sales of the firm’s Stallingborough biomass pro

ject, which it sold to RWE in 2008, is not crystallised. “These factors are therefore critical in the company not having to come back to the market before its first operation plant is generating cashflow,” said the broker.

An application will be made to the London Stock Exchange for approximately 40.9 million shares to be admitted to trading on the Alternative Investment Market, and admission is expected to occur on 24 October.