Harmony Energy delivers last-shot revenue rise before sale
Higher gas prices and tough weather conditions have delivered a revenue boost for Harmony Energy Income (HEIT ) that should help grease the wheels of its ongoing sale.
The £210m portfolio of UK battery storage assets has reported a 4.3% increase in its net asset value (NAV) in the three months to end of January to 92.4p per share as revenues grew at a quicker-than-forecast pace.
Gains were, however, ‘partially offset by debt service costs and a small decrease in the mark-to-market valuation of the company’s interest rate swap’.
Revenues were 57% higher than the previous quarter, at £9.7m, which Harmony Energy Advisor’s Paul Mason – who manages the portfolio alongside his team – said was due to ‘wholesale gas prices trending upwards, volatile temperatures and storm weather conditions’.
Battery energy storage system (BESS) revenues surged 65% in December, the largest monthly increase observed in the past four years, and Mason said the ‘positive trajectory continued into January’ as BESS revenues increased another 5%.
There were also ‘record levels’ of dispatch in the ‘balancing mechanism’, which is the National Energy System Operator (NESO) tool to balance the supply and demand of energy in Britain’s network, after issues with the system in recent years.
Difficult weather conditions also boosted BESS revenues, with low wind generation and cold weather leading to higher national demand.
‘These conditions created multiple instances of price spikes, leading to lucrative trading opportunities for storage assets. In the upcoming warmer months, we can expect periods of high wind generation coupled with low demand to create the spread opportunities,’ said Mason.
The uptick in performance over the past three months is unlikely to change the fate of the short-lived fund, which is currently in discussions with a buyer.
Despite only launching in November 2021, the fund failed to gain traction in the market as it struggled with falling valuations, failure to energise some of its projects, and the decision to scrap its dividend.
However, Shonil Chande, investment trust analyst at Panmure Liberum, said the quarterly results could help deliver a better-than-expected outcome for the trust from the sale.
‘The extent to which this helps the sales process remains to be seen but we do think that overall there is at least the potential for the overall outcome to be better than the shares currently imply,’ he said.
The NAV of the fund dropped 23% over the year to end of October due to falling revenue forecasts, which Stifel analyst Will Crighton said is more pertinent to the sale than the quarterly increase.
‘We wait for the all-important news on the sale of the portfolio,’ he said.
‘While we can understand the company would not want to disclose any sensitive information before a sale is complete, it would surely be easier to not publish this [quarterly] NAV for now – on the assumption the sale goes through in the next couple of weeks,’ he said.
Crighton noted that the exclusivity agreement with the unknown buyer has been extended to 10 March after Harmony first implied a deal by the end of February. If the deal does fall through, the company would be subject to a continuation vote at the end of April.
