Hohm Energy, a South African solar company that made headlines earlier this year with an $8 million seed round, is currently grappling with severe financial challenges. The company has ceased operations due to cash flow problems and an inability to service its existing debts, leading it to enter a process of business rescue.
Business Rescue and Leadership Changes
Business rescue is a legal process in South Africa that allows financially distressed companies to restructure and seek ways to avoid liquidation. Under this process, a business rescue practitioner is appointed to investigate the company’s affairs, convene a meeting with creditors, and advise on the company’s prospects. By law, this process lasts for three months.
Franc Gray, the CEO of Spark Energy Services, Hohm’s parent company, confirmed the company’s current non-operational status. “We are working with legal counsel to understand a way forward, but Hohm is currently not trading,” Gray told TechCabal.
The leadership of Hohm Energy has also seen significant shifts. CEO Tim Ohlsen resigned last week, with managing director Ryan Steytler taking over the company’s leadership. Steytler made the controversial decision to place the company into business rescue, allegedly without consulting shareholders, according to Gray. Neither Steytler nor Ohlsen were available for comment.
A Promising Start Hampered by Operational Challenges
Founded in 2021, Hohm Energy gained attention with its innovative solar marketplace platform, which allowed customers to determine their solar energy requirements digitally and access loans for rooftop solar installations. The platform also provided tools for solar installers to design, manage, and finance projects.
By February 2024, Hohm claimed to have generated over 17,000 custom solar rooftop designs, valued at $190 million, with $90 million in financing applications. The company appeared to be on track for profitability by the end of 2024, according to Ohlsen’s earlier statements.
However, the company’s rapid expansion, coupled with the evolving energy landscape in South Africa, led to significant financial strain. As grid electricity improved, the demand for solar solutions waned, revealing cracks in Hohm’s business model. The company had rapidly increased its headcount in anticipation of growing solar demand, a move that proved unsustainable as revenue began to taper off.
Governance Issues and Future Plans
Hohm Energy’s operational difficulties were exacerbated by weak governance structures in its early stages. The company only formed a board in early 2024, just before its seed round, which led to inefficiencies in its operating model. An investor, speaking anonymously, suggested that more transparent reporting of the company’s health by its management could have allowed Spark to offer timely assistance.
Despite these challenges, Spark Energy Services remains committed to Hohm Energy’s future. The parent company plans to inject additional funds into Hohm post-rescue but under a new business model and with a restructured management team. The goal is to create the best possible outcome for all stakeholders involved.
Hohm Energy’s situation underscores the volatile nature of the renewable energy sector, where companies must navigate rapidly changing market conditions and operational challenges to succeed.