Drax outbids Foresight to snap up Harmony Energy for £200m

Drax has outbid Foresight with a cash offer equating to 88p per share for the battery storage fund.

The board of Harmony Energy Income (HEIT ), the UK battery storage fund, has agreed to a cash offer from Drax (DRX) which values the trust at £199.9m.

The power company outbid investment manager Foresight with an offer of 88p per share, ahead of Foresight’s 84p per share bid.

Drax’s offer equates to a 35% premium to the share price prior to Foresight’s offer on 17 March. It also represents a 5% discount to the latest net asset value (NAV).

The board noted that shareholders representing 19.6% of HEIT’s share capital are supportive of the takeover.

Norman Crighton, chair of the £180m trust, explained: ‘The acquisition will provide HEIT shareholders with the opportunity to realise the value of their holdings, in cash, at an attractive value which is in excess of the reasonable medium-term prospects for HEIT on a standalone basis as a listed company.’

Drax’s planned acquisition of HEIT will enable the group to add ready-to-build battery energy storage system assets to its ‘FlexGen’ portfolio.

Will Gardiner, chief executive of Drax, said the acquisition would support UK energy security and help it to deliver a clean power system.

‘The Drax directors believe that adding battery storage to our FlexGen portfolio enables us to provide even more secure power to the country when it is needed.

‘In combination with our long duration storage, flexible generation, demand-side response capabilities and renewable generation from biomass, we will be able to supply 4.5GW of dispatchable generation to meet demand,’ he explained.

Prior to the announcement of the deal, HEIT had traded on a 14% discount to NAV. Over the past year, its shares have soared 95.6%, which is largely down to bid speculation. This compares to a 9.8% loss by the average trust in the AIC’s renewable energy infrastructure sector.

Over three years, its shares are down 16.3% which compares to a 25.6% loss by the sector average.

Deutsche Numis analyst Andrew Rees said the bid highlights the potential value on offer elsewhere in the sector. In his opinion, the share prices of the other two listed battery storage funds, Gresham House Energy Storage (GRID ) and Gore Street Energy Storage (GSF ) look cheap. They currently trade on respective discounts of 48% and 44%.