A major South African solar energy company, Hohm Energy, has gone into business rescue amid cash-flow problems.
Parent company Spark Energy confirmed to IOL that Holm Energy initiated the business rescue process due to cash flow problems associated with a downturn in the alternative energy market.
“As happened with other companies in this industry, the reduction in load shedding led to lower than expected revenues. Hohm, which had scaled up its operations to cater for higher demand, was unable to reduce its cost base quickly enough and thus experienced a cash shortfall.
“As with many start-ups, early stage businesses generally do not have sufficient cash reserves to cushion themselves against these circumstances as larger businesses do,” a Spark Energy spokesperson confirmed to IOL.
The source said the management team was currently working through the business rescue process together with their legal representatives to preserve as much stakeholder value as possible.
The company said that although new sales operations for Hohm had halted, existing customers would continue to receive service and support from a third party.
The Board also accepted the resignation of Hohm Energy CEO Tim Ohlsen, who remains a shareholder in Spark.
The spokesperson said Spark, as a whole, financially stable at present and remains committed to being a key player in the African solar energy market.
Hohm’s financial woes come in spite of the company having secured $8 million (R144 million) in seed funding in February this year, when persistent load shedding was still driving a boom in solar installations.
Hohm Energy had bargained on rapid expansion, by putting together package deals for clients that included finance options. Its website currently lists four main solar and back-up solutions, priced from R99,999, financed at R999 per month or available as a subscription from R1,350 per month.
Slowing demand for solar
Eskom has managed to keep the lid on load shedding since March 26, and this has led to lower demand for solar in South Africa.
According to a report released by solar provider GoSolr earlier in August, demand for solar installations has slowed since the unprecedented boom of 2023. Despite this, the solar market is still growing, albeit at a more modest pace, thanks to higher electricity prices and unreliable electricity supply in some areas.
“South Africans are feeling the pinch of rising electricity prices. While the growth of adoption of renewable energy was initially driven by load-shedding, we are now seeing the focus is shifting towards cost savings as a driver - as solar and other renewable energy options become cheaper,” GoSolr CEO Andrew Middleton said.
A recent study by ABSA bank confirmed that demand for alternative energy solutions had declined in the second quarter of 2024. It also showed that high electricity costs had become one of the main motivating factors for solar investment among home owners.
The cost of solar installations remains a prohibiting factor, however.
Furthermore, high interest rates continue to limit the amount of disposable household income, economists say, and this is likely putting a further damper on growth in the solar market just as it is in other sectors including the market for luxury goods and vehicles.
IOL Business