Battery fund Harmony Energy Income (HEIT ) has sold one of its three ‘shovel-ready’ construction projects as it looks to contain borrowing costs and work within a tight capital budget following last October’s disappointing £15m share issue. 

The £202m investment trust said it had sold the 99-megawatt project at Rye Common in Surrey, which accounted for 5% of the portfolio, at a small premium. The move could reassure investors after the company was on Friday forced to correct its net asset value (NAV). 

The buyer is Pulse Clean Energy, a London-based energy provider led by Paul Massara, a former senior executive of RWE, the German nuclear power company which paid 1.5% over the 30 April valuation of £15.8m disclosed.

HEIT’s broker Stifel said the July NAV error, which disappointed analysts with a one-off deduction of 3p per share and saw Investec today downgrade the 7%-yielder to ‘hold’ from ‘buy’, had no material impact on the valuation of Rye Common.

Rye Common, which the company says will be one of the largest battery installations in Europe upon completion, was bought from fund manager Harmony Energy last December alongside two other construction projects: Wormald Green in Yorkshire and Hawthorn Pit in County Durham, which are due to come online in the second and third quarter of next year.

With debt levels at around 25% of NAV at its half-year results in April, the trust’s board decided to explore the sale of the asset given that, like many other trusts, it was unable to raise new money through share issues given its stock trades 23% below NAV. 

Cash from the sale could be recycled into new investments or to fund share buybacks to narrow the wide discount in the thinly-traded fund, Stifel analyst Sachin Saggar said.

Winterflood analyst Elliott Hardy said the sale should provide investors with some confidence regarding the quality of HEIT’s underlying portfolio, while Numis’ Colette Ord added that the shares would be unlikely to rerate until the 8p dividend was fully covered by operating cash.

The portfolio now comprises eight two-hour duration projects, which should all be operational by 2024, improving the cash generation of the business. Currently, three projects are operational, totalling 129MW.

The 99MW Bumpers and 49.5MW Little Raith, which are based in Buckinghamshire and Fife respectively, are due for grid connection imminently ahead of schedule.

The shares eased 0.2% to 88.6p, having fallen 26% in a sector-wide de-rating this year caused by surging interest rates and inflation.