Energy16.09.2024

Major South African solar company begins liquidation

Hohm Energy Services filed for voluntary liquidation with the Companies and Intellectual Property Commission (CIPC).

An insolvency practitioner contacted the company’s creditors on Monday, informing them that those with claims over R1,000 are entitled to nominate a liquidator for the appointment.

The solar energy company entered business rescue on 31 July 2024 and halted operations due to cash flow challenges and its inability to service existing debts.

However, legal correspondence that MyBroadband has seen shows a business rescue practitioner was never appointed.

Hohm Energy’s halt came just months after the company raised $8 million (then R152.5 million) through a record seed-funding round in February.

The company said the market had shifted from only affluent homeowners opting for solar to lower-income households being able to afford installations through financing options and other deals.

However, Hohm’s parent company, the US-based Spark Energy Services, said there was a misunderstanding about the capital raise.

“All the capital that was raised has been raised by Spark. Spark raised $8 million, but that was really over a period of two-and-a-half years,” the CEO of Spark Energy Services, Franc Gray, told MyBroadband.

“Hohm is obviously a major benefactor of that funding, but it wasn’t the only benefactor, and the money wasn’t just raised to come into a South African entity called Hohm Energy.”

He explained that the important use of the funds was to develop software to enable the solar marketplace, and a large portion of the funding went into developing it.

“That platform is owned by Spark. All the code and everything has always been in the hands of Spark,” said Gray.

“Software in isolation doesn’t really mean anything. It needs to be operationalised. So, the Hohm brand was developed to operationalise that software.”

“It had a really good start at doing that, and the one thing that’s been proven is how well the software actually worked and how well that product going to market worked,” he added.

Gray said that Spark Energy Services views the experiment around the software as a success.

He said it’s no secret that Hohm Energy ran into trouble. The company had geared up for the surge of demand for solar products resulting from intense load-shedding in recent years.

However, the reductions in load-shedding towards the end of 2023 and in 2024 caused demand to dwindle.

“It was effectively like a gold rush last year. With the complete height of load-shedding last year, a lot of capacity was built, and really what happened with Hohm is it had too many sticky costs, and when revenue dropped, it ran into trouble from a cash perspective,” said Gray.

He explained that while Hohm Energy was a major player in the space, it was still technically a start-up, having launched in 2021.

“The big challenge that start-ups always have is they don’t have any legacy revenue or profit to fall back on if the market does turn,” he added.

Following the news of Hohm’s alleged business rescue, several former employees and contractors approached MyBroadband with information that they hadn’t been paid for months.

One source told MyBroadband that the company’s business model involves few assets, with staff working from home and using their own equipment.

“The problem is that part of Hohm’s business model is that it doesn’t have a physical office. It doesn’t own assets. So everyone worked from home, had their own equipment, cellphones, and laptops,” they said.

“The business rescue is great, but when they don’t own any assets, what are they going to do?”

They added that they got attorneys involved to recover the debt on a contingency fee basis, but they dropped the case when news came that Hohm Energy was entering business rescue.

“As soon as we found out that they were going under business rescue, the attorneys pulled out because they realised Hohm has no assets.”

With Hohm Energy entering liquidation, the source’s information has been proven accurate.

“In total, I’m probably out about R120,000, but that’s just me. I know other guys where it’s R100,000 he’s owed, another guy is owed R400,000, and that’s just in my small circle,” the source said.

They said this has a ripple effect on these renewable contractors as they are out large sums of money in the face of diminished demand for solar power systems.

Gray previously told MyBroadband the claims that staff weren’t paid were inaccurate. However, he noted that he was only recently appointed to Hohm Energy.

“A lot of that happened before my time. We are looking at what has happened. From the initial view, I think most of what they’ve said is probably a little bit off,” he said.

“What I can say is, from the information that I’ve got, is that all individuals in the business have been paid up-to-date, so there’s no outstanding payments.”

Gray added that he is still investigating when and how staff and contractors got paid historically.

He confirmed that staff were allowed to sign a mutual separation agreement. However, they weren’t forced to do so.

“No one has had a gun put to their head. It was a mutual agreement. I can see just from our records that some folks signed it on the day they got it, while others took up to 10 days,” said Gray.

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