Better Energy enters restructuring to rebuild capital base and stabilise business
The second half of 2024 ended up being a perfect storm of negative market conditions, reduced investor appetite and deferred payments from key partners, which together have meant that Better Energy has filed for restructuring for Better Energy Holding A/S and Better Energy A/S.
The Better Energy Group is looking into a 2025 with full focus on continuing to create value and ensuring sufficient working capital to restore sustainable operations as soon as possible and thus declare the restructurings successful.
The second half of 2024 ended up being a perfect storm of negative market conditions, reduced investor appetite and deferred payments from key partners, which together have meant that Better Energy has filed for restructuring for Better Energy Holding A/S and Better Energy A/S. The Better Energy Group is looking into a 2025 with full focus on continuing to create value and ensuring sufficient working capital to restore sustainable operations as soon as possible and thus declare the restructurings successful.
The green transition under great pressure
The green energy transition is in a crisis, as the shift from fossil fuels to electrification is progressing too slowly. This creates uncertainty about the pace of the transition, makes investors uncertain and thus changes investment conditions.
The main challenge is no longer the production of more renewable energy, but increasingly declining demand. To restore momentum in the green transition, it is essential to accelerate electrification and stimulate demand for green electricity.
At the same time, the market for renewable energy production is characterised by increased volatility with fluctuating energy prices, higher interest rates and yield requirements, challenges in supply chains, and increasing costs of and limitations to grid connections.
These dynamics put pressure on the energy sector's business models, as renewable energy prices are uncertain – even with more frequent occurrences of negative prices. For capital investors, the external factors create uncertainty about the valuation of renewable energy projects, which dampens the desire to invest and results in significantly higher return requirements.
Despite great political ambitions for increased electrification, flexible electricity consumption and green hydrogen production in Denmark, from the second to the third quarter of 2024 it became increasingly clear that the roll-out of green electricity production risks out-running the market. This imbalance threatens both the efficiency and speed of the green transition.
Since 2020, Better Energy has developed and constructed about half of all new renewable energy production on land in Denmark. This has been done through an industrial focus, by prioritising speed and, not least, by continuously investing in the development of new projects.
Better Energy reacts quickly to market signals and adapts the organisation in August with reductions in both cost base and staff, and at the same time postpones 3 GWp of solar power projects in development in Denmark until after 2030.
Pioneers on the front line are hit hard by the market
In the second half of 2024, the rapidly changing market conditions have very concrete and major consequences for two of Better Energy's joint venture partnerships, which represent the company's main source of earnings in the form of 50% divestments of solar parks.
Better Energy's partnership with Andel, which was established less than a year ago in December 2023, gives Andel exclusive rights to 2 GWp of solar parks spread across 15 projects in Better Energy's development portfolio. When the agreement is signed, four solar parks with a total capacity of around 750 MWp are included in the partnership, after which construction begins.
During 2024, three additional projects were planned and prepared for inclusion in the partnership, but due to market developments, Andel is forced to cancel the inclusion of these projects and postpone them indefinitely.
The cancellation – and the associated non-divestment of 50% of the projects – has a negative effect on Better Energy's revenue and earnings in 2024 and 2025. At the same time, these are projects that Better Energy has spent resources and costs on preparing for inclusion and, not least, construction start.
With these cancellations and thus clarity on a reduced activity level in 2025, Better Energy once again reduces both its cost base and staff in October 2024.
Restraint on final payments squeezes Better Energy's liquidity situation
At the same time, in Q3 and Q4 of 2024, Better Energy's second joint venture partnership with Industriens Pension is hit by restraint. This means that planned final payments on 9 projects are still outstanding.
These are 9 projects that are either fully completed or very close to completion, and where Better Energy has already covered all significant costs. Therefore, the lack of final payments creates a temporary but acute imbalance in the overall economy of Better Energy.
To adapt to this new situation and as part of the preparations for 2025, Better Energy carries out a third round of cost savings and staff reductions in November 2024, so that overall the workforce has seen reductions of around 40%.
At the same time, the reservations of Better Energy's joint venture partners are spreading to the company's other capital structures, which further complicate the company's financial room for manoeuvre.
Together, the above has a negative impact on Better Energy's ability to pay its partners on time and meet its financial obligations. Both management and the organisation have worked intensively to address the financial challenges, but as a result of the current situation, Better Energy has been forced to file a restructuring application (in Danish: rekonstruktion) in order to continue its operations and meet its financial obligations. It concerns two companies in the Better Energy Group; Better Energy Holding A/S, CVR no. 31865883 and Better Energy A/S, CVR no. 36950676.
It is a reflection of the challenges associated with a capital-intensive industry, where the timing of capital availability plays a major role. Better Energy is facing a challenging 2025, where the overriding focus will be to continue to create value, as well as to ensure sufficient working capital so that the company can quickly restore sustainable operations and thus declare the reconstructions successful.