Harmony Energy Income Trust (HEIT ) has become the second battery fund in two days to cut its dividend after reporting an alarming slump in UK revenues.

A day after rival Gresham House Energy Storage (GRID ) axed its fourth quarter dividend and said it would review the level of future payouts, Harmony said it had decided to postpone its first quarter payment of 2p per share due to be declared this month.

However, it remained committed to distributing 8p per share a year and said it would take steps to reduce its debt facilities and sell one or more assets to generate cash for future dividends, return of capital and possible share buybacks.

Having crashed over a third in the past week after GRID’s broker Jefferies flagged the danger of uncovered dividends in the sector, Harmony shares slipped 2.2% to 41p in early trading this morning. They stand on a huge discount of around 63% to net asset value (NAV). Jefferies analyst Matthew Hose downgraded the stock to ‘underperform’ yesterday.

Like GRID, Harmony said while it had anticipated a reduction in revenues from the ‘remarkable highs’ of 2022 when power prices soared after Russia’s invasion of Ukraine, ‘the scale and the speed of the reduction has exceeded market expectations’, it said.

It said an oversupply of battery energy storage systems (Bess) in the ancillary services market combined with the grid’s lack of use of them in its balancing mechanism, had driven the revenue decline. It added this was exacerbated by falls in wholesale power prices coupled with less volatile energy trading.

‘While the reasons for the recent low revenue environment are understood, and the market conditions are expected to improve, the short-term outlook remains uncertain. If these conditions do continue for an extended period, this will impact on the ability of the company to declare and make distributions. It is well understood that Bess revenues can vary across the course of a year and therefore prudent cash management is required,’ the company said.

Harmony said despite the pressure on revenues, valuations of its operational and construction assets continued to be supported by stable discount rates and transactions. In September, the company sold its Rye Common project at a 1.5% premium above carrying value.

The company plans to publish its annual results and first quarter NAV at the end of this month.