Why Helius Energy has surged 171% ... again

The week has started with a bang for Helius Energy, but it was an update released after the market closed on Friday that set the fuse burning. Helius shares rocketed by as much as 171% first thing Monday after management said it had sold its stake in the CoRDe project, an operational biomass energy plant in Scotland.

Helius, which rallied as much as 196% earlier this year on news it was mulling the sale of CoRDe, has signed a conditional sale and purchase agreement for the sale of its 50% plus one share interest in the project to Leo Energy for £12.3 million. That's equivalent to over 15 times the plant's annualised profits based on first quarter performance, and quite a chunk more than Helius's initial investment of £7.85 million. CoRDe uses by-products from nearby malt whiskey distilleries to generate renewable energy and liquid animal feed.

However, planning consent for its Avonmouth project in Bristol will expire on 26 March, and management has failed to secure capex funding. It's unlikely the Southampton project will be delivered, either. Both projects had estimated 100 megawatt (MW) capacities. That's why bosses have decided to de-list the company and return cash to shareholders.

Helius shares closed at 1.625p on Friday, but traded as high as 4.4p Monday. They haven’t been this high since last September. It’s currently unclear just how much shareholders will receive, although the company did draw attention to the retention amount under the terms of the SPA of £1.23 million, professional fees relating to the disposal of £0.3 million, existing creditors and expected operational costs of £0.7 million, and contingency of £0.1 million. There are currently 195.3 million Helius shares in issue.

Chairman John Seed said: "Helius has been focused on pursuing all possible options for the Avonmouth project's funding while also working to explore the best means to deliver maximum value for shareholders should funding not be possible. While it is satisfying to have achieved a very good return on our investment in the CoRDe plant, it is a matter of great regret that Helius has been unable to secure all of the equity funding for our Avonmouth project. This is despite the project having pre-qualified for a Treasury Guarantee, all necessary consents having been obtained, support of debt funders and agreement in principle of all necessary contractual agreements.

"Having considered the trade-off between potential future returns and current value available for Shareholders we consider that the disposal of our interest in Helius CoRDe and the subsequent return of all available cash provides the best value for our shareholders as a whole. The board expects to approve a return of cash as soon as reasonably practicable after the General Meeting to approve the sale to Leo Energy Limited," he added.

Helius has fought hard to get its projects off the ground over the last year, with its chief executive and commercial director resigning last November in a bid to cut costs. In January we noted that Helius had made annualised savings of over £1 million, including surrender of the head office lease and staff cuts. That reduces operating costs to £0.84 million a year before annual income from management service agreements of £0.22 million.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.