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Friday, Jun 14, 2024

Heliogen Battles Gross for Control

As Heliogen Inc. fights for its future in the renewable energy tech market, its leadership may also have to fight for control of company.

The Pasadena-based company last week adopted a stockholder rights plan — a poison pill —to thwart an unwanted takeover bid from its own founder, Bill Gross, whom the board ousted earlier this year. Gross, through a company he formed this year, submitted an unsolicited acquisition proposal to Heliogen the prior week, prompting the board to shore up its defenses.

The fight looms as Heliogen — hoping to rebound from a disappointing 2022 that may have contributed to Gross’ premature ouster — has refocused operations under its new CEO and aims to secure enough contracts to build a backlog that can carry it beyond 2024.

Without additional funding, the company is projected to run out of money by then.

Ousted CEO

Gross — the man behind Pasadena-based tech incubator Idealab — entered the year expecting to hand over the reins as Heliogen’s CEO.

In a resignation letter dated Feb. 5 to Heliogen’s board, Gross wrote that he’d communicated his intentions midway through last year, and in preparation for that had identified an “exceptional” outside candidate to succeed him. Gross reached this decision after “carefully” considering internal replacement options, he wrote, and initially the board went along with his plan. In Gross’ version of events, the board vetted that candidate — who has not been publicly named — and was prepared to bring him or her aboard as president, with the goal of the person assuming the CEO role within six months.

Heliogen’s Lancaster project site. The company hopes to break ground there this year.

According to Gross’ narrative, Heliogen senior management pushed back against his candidate, with some even threatening to quit. The rest of the board removed Gross as CEO in February and elevated CFO Christie Obiaya to the role. Gross, per his employment agreement, was then forced to resign from the board.

And now, he’s trying to get Heliogen back.

“He’s been interested in concentrated solar energy since his teens,” observed Gabriele Sorbara, managing director of equity research for Siebert Williams Shank & Co. in New York. “I have a feeling he just doesn’t want to let this go.”

The board quickly and sharply disagreed with Gross, disputing in a Feb. 6 filing that it had ever formally nominated his handpicked candidate and came instead to prefer a candidate that was “intimately familiar” with the company’s product and customers. It went further, explaining that it terminated Gross after concluding Heliogen “failed to achieve its potential under his stewardship as evidenced by, among other things, the company’s significant decline in market value since going public, the failure of Mr. Gross to provide unifying leadership to our executive committee and his failure to communicate a convincing path to drive improved performance in the future.”

Since his termination and resignation, Gross and energy industry veteran Paul Browning formed Continuum Renewables Inc., a company “using acquisition, licensing and in-house innovation to develop and deploy a continuum of energy transition products that provide affordable, dispatchable renewable power” according to Browning, its CEO. That company on April 13 advanced a nonbinding takeover bid, offering 40 cents per share, all cash, and stated it planned to recapitalize Heliogen as a private company.

Heliogen’s board responded early last week by enacting a stockholder rights plan that essentially allows shareholders to double their stake in the company prior to Continuum’s transaction. The board noted that Continuum is controlled by entities that directly or indirectly own around 26% of Heliogen’s outstanding shares.

Sorbara, who analyzes Heliogen, called the move a clear poison pill.

Continuum did not have a response to Heliogen’s move and declined to make Gross or Browning available for an interview. A representative for Heliogen declined to comment.

Working on contracts

Meanwhile, Heliogen has been busy shifting gears from tech development to landing the contracts to demonstrate its product viability.

Formed in 2020, the company has developed a number of renewable energy generation systems that use a web of mirrors that, through artificial intelligence, reflect sunlight to a central tower that amplifies the heat and uses it to produce steam. That steam can be used for energy generation outright or, utilizing technology from a partner company, be converted into hydrogen.

After landing the contract in November, Heliogen expects this year to break ground on its Proxima project, which will install a commercial-scale green hydrogen production facility in Lancaster. And Heliogen also has received $39 million from the U.S. Department of Energy to fund its Capella demonstration project in Mojave.

Unfortunately, a failure to land at least one additional contract in the second half of 2022 has forced Heliogen to recalibrate. The board made it clear that ousting Gross and promoting Obiaya was the first step. Since taking the helm, Obiaya has largely downsized research and development, streamlined the company’s sales process, shelved capital expenditures and laid off 15% of its workforce as part of a plan to extend its financial runway from early 2024 to late 2024.

“We know Heliogen’s innovative technology will play a substantial role in the world’s energy transition to net-zero. And the industrial customers, who are focused on this milestone, watch what we have to offer,” she said during the conference call. “However, we recognize the best way to demonstrate this to the market is by building a backlog of signed contracts and converting those to revenue.”

Obiaya was hopeful that the Lancaster project would produce data that will help sell the product. She also hailed development of next-generation heliostat mirrors that will  cost less to produce and be significantly easier to install, as well as the successful testing of an autonomous vehicle designed to clean those mirrors at night.

And in March, Heliogen landed a contract worth as much as $5 million with NantG Power LLC — a battery design and manufacturing company owned by Patrick Soon-Shiong, who collectively holds 13.1% of Heliogen’s shares — to design and engineer a calcination facility.

Still, Sorbara speculated that Heliogen would have to do more to survive and make its case to investors. And he wasn’t convinced that a change in management would solve that problem.

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Zane Hill Author