Hexicon's MunmuBaram project reaches another milestone

Hexicon has announced that its South Korean project, MunmuBaram, has entered into a Transmission Service Agreement (TSA) that will facilitate the supply of electricity to the South Korean grid once the project is ready for commissioning. In our view, this marks another important milestone for the project and supports our estimates that development will continue to progress in the right direction, with a gradual divestment anticipated before reaching the Final Investment Decision (FID). However, as this news aligns with our expectations, we are not making any changes to our estimates or valuation at this time.

Hexicon currently has 12 projects in development, totaling approximately 14,600 MW, with an additional 9,900 MW in the prospect pipeline. The MunmuBaram project stands out as one of the most significant for Hexicon in terms of net capacity (MW) and is, in our view, the closest to potential divestment, which could generate substantial cash flow. MunmuBaram is collaborating with two other developers on the grid connection facilities. These facilities will enable the efficient transfer of clean energy from each wind farm to the mainland, ensuring a stable power supply. According to the announcement, the grid connection from MunmuBaram’s offshore wind farm to KEPCO’s substation is scheduled to begin in March 2029, following the construction of the joint grid connection facility.

Progress towards FID, but regulatory approval still needed for successful divestment

The recently announced TSA with Korea Electric Power Corporation (KEPCO) is one of the most significant milestones in the development phase. While we view this as a positive step, reinforcing our expectations of successful progress and a potential gradual divestment before the FID, we are not making any changes to our estimates or valuation at this time. Our recent updated report provides a comprehensive perspective on our valuation.

We believe that Hexicon's ability to achieve cash flow neutrality depends not only on the successful development of its projects but also on its ability to divest parts of its portfolio. In order for Hexicon to divest parts of the MunmuBaram project at a reasonable price within a short time frame, the company will need to secure final regulatory approval for the change of ownership. Therefore, we remain focused on any updates regarding the ownership transfer and the establishment of the long-term ownership structure for the project.