TIDMHEIT
RNS Number : 1213E
Harmony Energy Income Trust PLC
28 June 2023
28 June 2023
Harmony Energy Income Trust plc
(the "Company")
Interim Results
Harmony Energy Income Trust plc, which invests in battery energy
storage assets ("BESS") in Great Britain, is pleased to announce
its interim results for the six-month period ended 30 April 2023
(the "Reporting Period").
Highlights for the Reporting Period include:
-- NAV per Ordinary Share of 117.07 pence per Ordinary Share (as at 30 April 2023);
-- 23.1 per cent NAV total return since IPO:
- NAV per Ordinary Share growth of 7.5 per cent year-on-year
despite a reduction in NAV (-4.6 per cent) in the Reporting
Period;
- NAV growth driven by progression of the Company's portfolio
through construction and into operations;
-- 4 pence dividend per Ordinary Share declared in relation to
the Reporting Period (in line with stated distribution policy);
-- First projects energised:
- Pillswood project (98 MW / 196 MWh) commenced operations in
November 2022, the largest BESS in Europe (by MWh);
- Broadditch project (11 MW / 22 MWh) commenced operations in April 2023.
-- Farnham project (20 MW / 40 MWh) commenced operations in June
2023 (after the end of the Reporting Period) :
- Taking the total operational capacity of the portfolio to 129
MW / 258 MWh (26 per cent of total portfolio);
-- Acquisition of projects under exclusive pipeline agreement with Harmony Energy Limited:
- Three "shovel ready" projects acquired in December 2022,
taking total Company portfolio to nine BESS projects (494.4 MW /
988.8 MWh) all with 2-hour duration capability.
-- GBP60m debt facility extended to GBP110m plus a revolving credit facility of up to GBP20m;
-- 395.4 MW expected to be operational/energised by the end of H1 2024:
- Increasing proportion of operating projects within the
portfolio expected to drive revenue and project revaluations.
Norman Crighton, Chair of Harmony Energy Income Trust plc,
said:
"The Company has delivered an excellent operational performance
in the period with the successful launch of the Pillswood project -
Europe's biggest BESS (by MWh) - and of the Broadditch project.
Post period end, we've maintained the strong momentum with the
Farnham project commencing operations in June 2023.
In line with our commitment to shareholder returns we have
declared dividends of 4 pence during the Reporting Period and are
on target to pay a total of 8 pence per Ordinary Share in relation
to the Reporting Period.
Looking ahead, we continue to make strong progress across our
other projects and are on track to deliver an operational portfolio
of 395.4 MW / 790.8 MWh within the next 12 months, supporting
revenue and capital growth. As a result the Company is well-placed
to become a significant contributor to the Net Zero transition and
will continue to be a key player in the UK energy storage
sector."
Results presentation:
A results presentation for analysts will take place at 08:30
a.m. BST today by webcast. Those wishing to attend should email
harmony@camarco.co.uk . The interim results and a copy of the
presentation slides, for those unable to attend, will be available
on the Company website.
The Company's interim results for the period ending 30 April
2023 are included in this announcement and will shortly be
available to view on the Company's corporate website at:
https://www.heitp.co.uk/investors/results-reports-and-presentations/
and the National Storage Mechanism at :
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information, please contact:
Harmony Energy Advisors Limited
Paul Mason
Max Slade
Peter Kavanagh
James Ritchie
info@harmonyenergy.co.uk
Berenberg
Gillian Martin
Ben Wright +44 (0)20 3207
Dan Gee-Summons 7800
Stifel Nicolaus Europe Limited
Mark Young
Edward Gibson-Watt
Rajpal Padam +44 (0)20 7710
Madison Kominski 7600
Camarco
Eddie Livingstone-Learmonth
Georgia Edmonds +44 (0)20 3757
Lily Pettifar 4980
JTC (UK) Limited
Uloma Adighibe +44 (0)20 3832
Harmony.CoSec@jtcgroup.com 3877
The Company's LEI is 254900O3XI3CJNTKR453
Further information on the Company can be found on its website
at: https://www.heitp.co.uk/
CHAIR'S STATEMENT
I am pleased to present, on behalf of the board of directors
(the "Board") the second interim report of Harmony Energy Income
Trust plc ("HEIT" or the "Company") in relation to the period 1
November 2022 to 30 April 2023 (the "Reporting Period").
INTRODUCTION
The Board is delighted with the successful launch of the
Company's Pillswood project - Europe's biggest BESS (by MWh) - and
of the Broadditch project during the Reporting Period. After the
end of the Reporting Period, the Farnham project also commenced
operations. We would like to thank all the stakeholders who made
these projects possible.
The Board is also pleased with the progress of the other
projects that will support revenue and capital growth in the coming
months, with the aggregate energised/operational portfolio expected
to be 395.4 MW / 790.8 MWh within the next 12 months. As a result
of this progress, the Company is well-placed to become a
significant contributor to the net zero transition.
PORTFOLIO ACTIVITY / MARKET COMMENTARY
During the Reporting Period, Harmony Energy Advisors Limited
("HEAL" or the "Investment Adviser") has continued to develop the
Company's portfolio. The Company energised its first two projects,
acquired a further three projects and brought two of these projects
into construction.
As announced on 20 February 2023, the Company's debt facilities
were successfully increased to a total of GBP130 million,
comprising a GBP110 million term loan and a GBP20 million revolving
credit facility. The increased debt facilities will be used to
finance the completion of construction of the Company's existing
projects that are 'under construction'.
2022 was an exceptional year for BESS, with under-supplied
Ancillary Service markets (for much of the year) combining with
high gas prices as a result of the conflict in Ukraine to drive
record revenues for BESS in Great Britain ("GB"). Independent
third-party revenue forecasts were revised upwards in reaction to
this, with gas pricing in particular driving an increase in revenue
projections through to 2026/27 (the period assumed for Europe to
reduce reliance on Russian gas imports with a more affordable
alternative). Higher revenue projections fed through to increased
valuations for BESS projects which were corroborated by a number of
market transactions.
2023 has seen a reduction in revenues following the unusually
high prices seen in 2022. Third-party revenue forecasts now predict
a return to more normal market conditions later this year and into
2024. The latest revenue forecasts take into account the rapid fall
in gas and power prices which resulted from a mild winter and high
levels of gas storage in Europe. These revisions have in most part
reversed the revenue forecast increases published in 2022, with the
greatest reductions being in 2023/24. Medium to long-term
assumptions remain stable. It is key to note that these new medium
to long -- term forecasts remain higher than those assumed at the
time of the Company's IPO and which underpin the Company's target
project returns.
Whilst the lower revenue forecasts have led to a reduction in
the Company's NAV per share of 4.6 per cent over the Reporting
Period, NAV per share has grown by 7.5 per cent year-on-year and
NAV total return has been 23.1 per cent since IPO. This success
reflects the progression of the Company's portfolio through
construction and into operations. In particular, NAV per share has
grown as a result of the revaluation of the Pillswood and
Broadditch projects to reflect commencement of operations; the roll
forward effect as other "under construction" projects become closer
to revenue generation; and strong results in the T-1 Capacity
Market where contract pricing has exceeded modelled
assumptions.
Further revaluations continue to be expected as the balance of
the Company's projects progress from construction into operations
and the Investment Adviser continues to see strong valuations from
third parties for shovel ready BESS projects.
In terms of operating performance, the Pillswood project has
been one of GB's best performing BESS projects during 2023
(excluding Capacity Market revenue, which none of the Company's
projects will receive until October 2023), and two-hour duration
batteries continue to out-perform shorter duration BESS which are
less able to switch into Arbitrage revenue strategies as Ancillary
Service markets remain saturated. As detailed further in the
Investment Adviser's Report, HEAL is taking proactive steps to
maximise revenue potential in these market conditions and it is
expected that the continued deployment of renewable energy will
provide increased volatility allowing the Company to take advantage
of our exclusively two-hour duration portfolio, driving revenue
performance higher over the short and medium-term.
The Company declared an interim distribution of 2 pence per
Ordinary Share on 23 May 2023, in relation to the period 1 February
2023 to 30 April 2023, which was paid on 16 June 2023. This follows
the 2 pence per Ordinary Share quarterly distribution paid in March
2023. Please see further details in the Directors' Report. The
Company remains committed to delivering on its target to pay a
total of 8 pence per Ordinary Share in relation to the 2022/23
financial year.
As announced on 23 May 2023, the Company successfully bid for
both T-1 and T-4 contracts in February 2023, securing a robust
stream of revenues in the Capacity Markets starting from October
2023.
During the Reporting Period, the Company purchased three "shovel
ready" projects from Harmony Energy Limited, utilising the proceeds
of the C Share issue in October 2022 combined with the issue of a
further 7 million C Shares as part consideration to HEL. On 31
January 2023, all C Shares were converted into Ordinary Shares. The
Company's portfolio now has nine BESS projects, which have a total
capacity of 494.4 MW / 988.8 MWh, all located in GB.
The Company continues to have no direct exposure to either
Ukraine or Russia. Looking ahead, the key risks remain delays to
construction, and volatility in power pricing and revenue
generation. The Board and Investment Adviser continue to monitor
these risks closely in addition to other risks including regulatory
changes and management of third party suppliers. Whilst continued
rising interest rates are an emerging risk, given the existing
level of debt and the hedging which is in place, this is not
currently considered to be a material concern. The Investment
Adviser continues to assess appropriate hedging in relation to the
debt facility as it increases. Recent market transactions suggest
that investor demand for BESS projects remains strong and that
discount rates have remained stable despite the rise in interest
rates. The Board and the Investment Adviser continue to monitor the
impact if increased interest rates on discount rates, share price
and project valuations.
The experience of the Investment Adviser, coupled with robust
due diligence and supplier contracting, helps the Company manage
these risks.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
As an investor in BESS, the Company strives to make a meaningful
contribution to the net zero transition, while creating value for
its investors. The Board of Directors and the Investment Adviser
understand that the Company has a duty to act responsibly and
address wider environmental, social and governance ("ESG") issues
across all aspects of its business. The continued development and
successful implementation of the Company's ESG strategy will help
ensure its long-term success.
The Company made strong progress on its ESG and responsible
investment objectives during the Reporting Period. Key highlights
include:
-- The Pillswood and Broadditch projects were successfully
energised. With a total capacity of 218 MWh, equivalent to the
electricity needed to power around 333,000 UK homes for two hours,
these assets are making a real contribution to the UK's 2050 net
zero goal;
-- The Company is on track to publish disclosures relating to
United Nations Principles for Responsible Investment ("UN PRI"),
Taskforce on Climate-Related Financial Disclosures ( "TCFD") and
Taskforce on Nature-Related Financial Disclosures ("TNFD)" in the
2022/23 Annual Report;
-- The Company and Investment Adviser are expanding the data
collection and disclosure processes for KPIs that form a core part
of the ESG strategy;
-- The Company added a second community fund at the Broadditch
site to the one launched previously at Pillswood;
-- Alongside sustainability requirements embedded in the
supplier contracts, the Company rolled out its Supplier Code of
Conduct to key suppliers; and
-- The Investment Adviser appointed a Head of Sustainability
with responsibility for further strengthening and implementing the
ESG and responsible investment strategy of the Company.
OUTLOOK
Looking ahead, we have 266.4 MW / 532.8 MWh of projects
currently progressing through construction, combining to create an
expected aggregate operating/energised portfolio of 395.4 MW /
790.8 MWh within the next 12 months. As a result of this positive
trajectory, the Company expects its revenues to increase
commensurately, alongside positive project revaluations as further
projects come online.
NORMAN CRIGHTON
Chair
27 June 2023
INVESTMENT ADVISER'S REPORT
COMPANY UPDATE
HARMONY ENERGY INVESTMENT ADVISORS LIMITED IS PLEASED TO DELIVER
ITS INVESTMENT ADVISER'S REPORT IN RELATION TO THE COMPANY'S H1
2022/23 ACTIVITIES.
FINANCIAL PERFORMANCE
The unaudited NAV as at 30 April 2023 was GBP265.89 million
(117.07 pence per Ordinary Share), a reduction of 4.64 per cent
(5.70 pence per Ordinary Share) from the NAV reported as at
Financial Year end, 31 October 2022. The NAV total return over the
Reporting Period was -2.26 per cent. NAV total return since IPO is
23.11 per cent.
The recent reduction in NAV was primarily driven by lower
near-term power price and revenue assumptions based on the latest
revenue forecasts published by independent providers. The revision
to the forecasts stems from the current environment in which energy
prices have fallen significantly since the start of 2023 (having
risen significantly during 2022) with the most significant impact
being seen in revenue assumptions for 2023 and 2024. Revenue
assumptions over the medium and long-term remain broadly unchanged,
compared with 2022 forecasts, and remain higher than those assumed
at the time of the Company's IPO.
Based on market transactions, the Board's assessment (supported
by the Independent Valuer and Investment Adviser) is that discount
rates have remained stable despite the rising interest rate
environment and the Investment Adviser continues to see strong
demand for BESS projects. Further positive project revaluations are
expected as the remaining projects move through construction and
into operations. Based on current assumptions, this will trigger a
50bps reduction in discount rate. The current discount rates used
in modelling are: 10.75 per cent for shovel ready projects; 10.5
per cent for in construction projects; and 10.0 per cent for
operational projects. These discount rates are applied to all
revenues, with no differentiation for long-term contracted income
generated through Capacity Market contracts.
During the Reporting Period, the Company's share price increased
by 8.49 per cent and between IPO and 30 April 2023, the Company's
share price increased by 17.98 per share.
DIVID AND FUTURE OUTLOOK
On 23 May 2023, the Company announced the second 2 pence per
Ordinary Share quarterly distribution in respect of the 2023
financial year. This was paid on 16 June 2023. Please see further
details in the Directors' Report. The Company expects to pay two
further distributions of 2 pence per Ordinary Share each in respect
of this financial year in line with its stated dividend policy.
DEBT FINANCE SECURED
On 17 February 2023, the Company successfully completed an
amendment and restatement of its debt finance facility to increase
the amount of the term loan facility available to GBP110m; and to
add a revolving credit facility for up to GBP20m. The facility will
allow the Company, inter alia, to fund the construction of the
Bumpers, Wormald Green and Hawthorn Pit projects. The original
facility (GBP60m) is fully hedged, and appropriate hedging
instruments are being put in place to manage the interest rate risk
associated with the extended facilities.
Debt facilities are drawn into a wholly owned subsidiary of the
Company (HEIT Holdings Limited) and therefore do not appear
directly in the Company's accounts. As at the end of the Reporting
Period, total borrowing was GBP10.0m (drawn under the revolving
credit facility), representing 3.7 per cent of NAV. A further
GBP55.6m was drawn from the term loan facility after the end of the
Reporting Period, with total debt representing an aggregate 24.7
per cent of NAV as at the date of publication of this report. Once
fully drawn, the debt facilities are not expected to exceed the
Company's gearing limit, and over time, the Investment Adviser
expects that the Company's gearing will be reduced by using excess
operational cash flow once projects are operational.
INTERNAL ACTIVITY
The Investment Adviser has continued to grow the wider team with
key appointments, such as that of the Finance Director, and other
appointments in asset management, sustainability, and corporate
governance. These additions reflect the transition of the portfolio
from being largely in construction, to increasingly
operational.
The Investment Adviser's in-house asset management platform,
Harmonise, provides real-time data on the commercial and physical
performance of the Company's projects allowing accurate and timely
monitoring of performance and active management of suppliers.
There are currently 30 members of staff supporting the
Investment Adviser's management of the Company's assets in GB.
ESG
Whilst the Company strives to make a positive contribution to
the net zero transition through its investments in BESS, it also
recognises its responsibility to address wider ESG matters. The
Company and the Investment Adviser have been working hard to embed
ESG across the business. During the Reporting Period, the Company
and the Investment Adviser began expanding the data collection and
disclosure processes for KPIs that form a core part of the ESG
strategy. The Company is committed to transparent ESG reporting and
is on track to publish disclosures relating to UN PRI, TCFD and
TNFD in the 2022/23 Annual Report.
PORTFOLIO UPDATE
PORTFOLIO OVERVIEW
In the six months to 30 April 2023, two of the Company's BESS
projects became operational. The Company's Pillswood project (98 MW
/ 196 MWh) was energised in two phases with commercial operations
commencing in November and December respectively. At the date of
publication, Pillswood is Europe's largest BESS project (by MWh).
The Broadditch project (11 MW / 22 MWh) commenced operations in
early April 2023. After the Reporting Period end, the Farnham
Project (20 MW / 40 MW) was energised and commenced operations in
June 2023.
On 14 December 2022, the Company completed the acquisition of
three shovel ready projects (totalling 181.9 MW) from Harmony
Energy Limited. The Company moved quickly to execute BESS supply
and installation contracts in relation to two of these projects:
Wormald Green and Hawthorn Pit, which were categorised as under
construction in February 2023. The third acquired project (Rye
Common), remains shovel ready whilst the Investment Adviser
continues to explore options in relation to this project.
As at the date of publication of this report, the Company's
portfolio consists of 494.4 MW / 988.8 MWh, broken down as:
- 129 MW / 258 MWh (3 projects) operational;
- 266.4 MW / 532.8 MWh (5 projects) under construction; and
- 99 MW / 198 MWh (1 project) "shovel ready".
As at the date of publication, two of the five projects under
construction have batteries on-site and are progressing through
their respective grid connection and commissioning programmes.
The Little Raith (49.5 MW / 99 MWh), Bumpers (99 MW / 198 MWh)
and Rusholme (35 MW / 70 MWh) projects are due to energise in 2023.
By the end of 2023, the Company's operational portfolio is expected
to be 312.5 MW / 625 MWh.
The first six projects (312.5 MW / 625 MWh) contracted by the
Company utilise Tesla's megapack technology. In line with the
procurement strategy outlined at IPO, the Company successfully
diversified its supplier base by contracting with Envision Energy
International UK Limited ("Envision") to supply batteries to the
Hawthorn Pit and Wormald Green projects. Envision is also
contracted under long-term maintenance and services agreements in
relation to these two projects.
In relation to the Wormald Green and Hawthorn Pit projects:
-- the Investment Adviser is currently finalising contracts for
revenue optimisation services and expects to announce a new partner
in due course; and
-- contractors have mobilised and commenced early stage works on site.
Going forward, the Investment Adviser (on behalf of the Company)
will continue dialogue with existing and potential suppliers to
ensure enduring quality of service and cost competitiveness.
The Company continues to benefit from an exclusive right of
first refusal over a further 505 MW of BESS pipeline projects
developed by Harmony Energy Limited and is also continuing to
monitor for BESS project acquisition opportunities from third
parties.
CAPACITY MARKET
In early February 2023, the Company successfully bid for T-1
Capacity Market contracts in respect of the Pillswood, Broadditch,
Farnham and Rusholme projects. Service delivery under these
contracts will commence in October 2023. The T-1 Auction cleared at
GBP60 per kW/year, the second highest clearing price ever achieved
and significantly higher than the T-1 revenue assumptions in the
Investment Adviser's revenue projections at the time of the award.
Once this revenue stream commences in October 2023 it will further
enhance the revenue profiles of the relevant projects.
In addition to the Company's success in the T-1 Auction, the
Company's Bumpers, Wormald Green and Hawthorn Pit projects
successfully obtained 15 -- year duration, index linked T-4
Capacity Market contracts at the auction held on 21 February 2023.
The auction cleared at a record high of GBP63 per kW/year, more
than double the previous record high price. This revenue stream
will commence from October 2026, with these projects capable of
benefiting from T--1 contracts in the intervening years (subject to
being awarded or otherwise obtaining relevant T-1 contract(s)).
The above results mean that all projects in the Company's
portfolio (bar Rye Common) now benefit from 15-year index linked
T-4 contracts commencing from October 2024, October 2025 or October
2026 (depending on the project). The table below shows the
currently contracted income to be received from the Capacity
Market. Income in 2024 and 2025 will be increased by additional
revenue from T-1 contracts awarded to relevant projects which do
not hold T-4 contracts for these delivery years.
PORTFOLIO PERFORMANCE
The portfolio generated GBP2.7m in operating revenues in the
Reporting Period. This was predominantly driven by the Pillswood
project with the Broadditch project contributing a small amount in
April 2023. Portfolio revenue is expected to increase significantly
in the coming months as more projects become operational.
Revenues were generated from Arbitrage (buying and selling of
power in the wholesale markets and Balancing Mechanism) as well as
Ancillary Services (short-term contracts with National Grid to
provide grid stability services). A brief description of applicable
Ancillary Service revenue streams is set out in the table
below.
Note that the table below does not include National Grid ESO's
Firm Frequency Response service which is being phased out over the
coming months and replaced by increasing procured volumes across
the suite of "dynamic" services below.
Dynamic Containment Dynamic Moderation Dynamic Regulation
("DC") ("DM") ("DR")
--------------------------- ---------------------- ---------------------- ----------------------------
Frequency of Auctions/ Daily Day Ahead Auction. Bid for 4-hour blocks one
Opportunities to trade day in advance.
--------------------------- ----------------------------------------------------------------------------
Required Response Time 0.5 seconds 0.5 seconds 2 seconds
--------------------------- ---------------------- ---------------------- ----------------------------
Time that BESS must 15 minutes 30 minutes 60 minutes
be capable of sustained
delivery
--------------------------- ---------------------- ---------------------- ----------------------------
2-hour duration competitive Equally competitive Equally competitive 2-hour BESS more competitive
advantage? with shorter duration with shorter duration due to 60-minute delivery
BESS BESS requirement
--------------------------- ---------------------- ---------------------- ----------------------------
During the Reporting Period, 54 per cent of revenue was
generated from Arbitrage, predominantly in wholesale markets. The
next largest component was Dynamic Regulation ("DR") which
contributed 33 per cent. This is in line with the Investment
Adviser's assumption that Arbitrage will be the dominant source of
income as Ancillary Services are increasingly saturated. See chart
1.
2-hr duration BESS can utilise a greater proportion of capacity
in DR services than shorter-duration BESS, due to state-of-charge
management constraints. The Company's portfolio of 2-hour duration
BESS is well placed to benefit from this revenue strategy. However,
DR is a relatively small market with around 150-200 MW procured by
National Grid ESO on any given day. This has led to increased
competition between assets and the Company's projects have often
had to accept no payment for providing the "high frequency" DR
service in order to win volume in the daily auctions. Despite this,
DR "high" remains an attractive strategy because the BESS does not
pay for power imported when providing Ancillary Services and is
effectively charged up for free. This power can then be sold later
in the day via the wholesale markets, increasing the Arbitrage
spread.
In addition to lower Ancillary Services pricing, wholesale
spreads (the difference between the price paid and price received
for power) have been lower than seen throughout 2022 as natural gas
and power forward prices normalised faster than expected in
response to the mild winter and high levels of gas storage levels
across Europe. See chart 5.
Going forward and given the current market conditions in both
Ancillary Services and wholesale markets, the Investment Adviser
sees the Balancing Mechanism as a key growth opportunity for BESS
(particularly 2-hour duration BESS). The Investment Adviser is
actively working with its Revenue Optimiser to encourage National
Grid ESO to continue increasing the volume and durations of
capacity provided by BESS in the Balancing Mechanism, which
consistently sees spreads exceed those available in the wholesale
markets.
National Grid ESO has a number of planned software and process
updates due in 2023 which are designed to encourage the use of
batteries in the Balancing Mechanism. In addition, the Investment
Adviser is actively engaged in positive discussion with National
Grid ESO in relation to the use of the Company's projects in the
Balancing Mechanism prior to these updates going live.
FORWARD LOOKING REVENUE ASSUMPTIONS
Chart 2 shows the revenue and opex assumptions used for
valuation purposes up to 2035. The Investment Adviser generates
revenue assumptions based on input from three independent market
advisers and this is benchmarked by the independent valuer against
completed transactions observed in the sector.
Revenue assumptions remain above the medium to long-term average
of GBP96k/MW/Yr assumed at the Company's IPO and on which projected
returns distributions are based.
MARKET UPDATE
OVERVIEW
The UK has a legally binding target to achieve "net zero" by
2050 and has enshrined in law a target to reduce emissions by 78
per cent by 2035 compared to 1990 levels. The UK's greenhouse gas
("GHG") emissions fell by 49 per cent between 1990 and 2022, with
the shift from fossil fuel-based energy to renewables playing an
important role in delivering emissions reductions. UK renewable
generation, primarily wind and solar, has more than quadrupled over
the past 10 years, with wind farms contributing a record 26.8 per
cent of the country's electricity in 2022. This growth has been
supported by government subsidies and support schemes, such as the
Feed-In Tariff, the Contracts for Difference ("CfD") scheme and the
Renewable Obligation but has also been driven by rapid reductions
in cost that have allowed some renewable energy projects to start
competing in a subsidy-free environment. National Grid ESO predicts
that by 2050 the GB network will include a minimum of 150 GW of
renewables (Falling Short Scenario) and a possible maximum of 249
GW (Consumer Transformation Scenario).
Renewables are known as "intermittent" generation assets as
their output relies on prevailing weather conditions and can
therefore be difficult to forecast accurately ahead of delivery.
Supply and demand of electricity must be balanced and matched in
real-time in order to maintain the stability of the electricity
system. Responsibility for this balancing lies with National Grid
ESO as the system operator. This role has become more challenging
and costly as the proportion of intermittent generation on the
electricity system has increased.
In response to the growing costs and complexity of balancing the
system, National Grid ESO has developed (and is continuing to
develop) new processes, systems, and service products to encourage
new storage technologies, and in particular BESS, to develop and
participate. BESS provide important services that support the
electricity system's safety and stability, while supporting the
integration of more renewables on to the system and lowering the
carbon intensity of the grid. BESS investments do not rely on
government support and subsidies in the same manner as renewables.
National Grid ESO predicts that, in order to keep pace with the
growth of renewables, between 22 GW (Falling Short Scenario) and 50
GW+ (Leading the Way Scenario) of energy storage is required by
2050. As at the date of this report, there is currently c.5.4 GW of
storage in GB, of which c.2.6 GW (48 per cent) constitutes
utility-scale BESS.
ANCILLARY SERVICES SATURATED
As noted above, Ancillary Services pricing has reduced as
markets have become saturated. This aligns with the Investment
Adviser's expectations at IPO and reinforces the case for longer
duration batteries which are better placed to benefit from trading.
Average daily volume across all Ancillary Services (see chart 3)
ranged from 0.7 GW to 1.3 GW compared to 2.6 GW of installed
battery capacity (an increase from 1.7 GW at the start of the
Reporting Period).
Chart 4 shows the average clearing price for the services in
which the Company's projects have been most active: Dynamic
Containment and Dynamic Regulation. Bidders can decide how much
capacity to commit to high and low frequency elements of DC and DR.
If providing the high frequency service, the battery will be asked
to generate power, and if providing the low frequency service, the
battery will be asked to consume power. The Company's projects do
not pay for power imported and do not get paid for power exported
whilst providing these services. For this reason, the high
frequency DR service ("DRH" in chart 4) tends to clear at a very
low price because the BESS effectively receives free power which
can be sold via the wholesale markets. Conversely, the low
frequency DR service ("DRL" chart 4) sees the opposite effect with
higher clearing prices to compensate the BESS for power generated
whilst providing the service. This impact is less prevalent in DC
because the delivery period is much lower and therefore the volume
of imported or exported electricity is much lower than experienced
when providing DR. Whilst potential increased procurement of
Balancing Service volume from National Grid ESO over the summer
months could lead to some price increases, the Investment Adviser
generally expects Ancillary Services pricing to remain low as it
will be set by the opportunity cost of shorter duration BESS
operating in wholesale markets and the Balancing Mechanism.
ARBITRAGE SPREADS
As chart 6 shows, wholesale market spreads have reduced since
the start of 2023. This reduction largely mirrors the fall in
natural gas pricing shown in chart 5. Wholesale price spreads are
typically wider over the winter months when both gas price and
electricity demand are highest. It is therefore expected that
spreads will increase again as we enter the autumn of 2023.
Spreads in the Balancing Mechanism are consistently wider than
those seen in wholesale markets, and the Investment Adviser sees
the potential additional widening of Balancing Mechanism spreads as
renewable penetration increases over the near-term.
Balancing Mechanism actions are divided into "offers" (actions
where National Grid ESO instructs the BESS to generate electricity)
and "bids" (actions where National Grid ESO instructs the BESS to
import electricity). Since gas is usually the marginal source of
electricity supply in GB, the difference between the bid price and
offer price is often set by reference to the highest or lowest
(respectively) efficiency of participating gas power stations.
However, in periods of high renewable penetration, the bid price
can become de-coupled from gas and reduce significantly (i.e.
renewables set the price). In 2023, around 30 per cent of
electricity generation is expected to come from wind and solar.
This is expected to increase to 50 per cent by 2027 which will lead
to more periods in which the bid price is not set by reference to
gas pricing. Conversely, the offer price will remain linked to gas
even in a scenario of increased renewable penetration. Therefore,
the spread in the BM should increase as renewable penetration
increases. Chart 7 shows the relationship between renewable
penetration and bid pricing in 2023 to date.
Chart 7 highlights that there is a correlation between higher
renewable penetration and lower bid prices in the Balancing
Mechanism. Renewable penetration is forecast to increase
year-on-year, which should lead to declining bid price over the
medium-term and higher potential earnings for BESS participating in
the Balancing Mechanism.
The volume of BESS actions in the BM has traditionally been
limited by National Grid ESO's technical ability to efficiently
call on a large number of smaller assets. There is growing industry
consensus that greater BESS participation in the Balancing
Mechanism can deliver a significant revenue opportunity whilst also
providing a more cost-efficient solution for National Grid ESO and,
by extension, consumers. This is a key focus area for National Grid
ESO, with a significant software development due to go live in
December 2023 and a number of additional process changes which are
already being rolled out to encourage BESS participation in the BM.
The Investment Adviser is actively engaged in positive dialogue
with National Grid ESO and is well positioned to benefit from these
improvements.
2-HOUR DURATION
Chart 8 shows relative performance of 2-hour duration BESS
relative to shorter duration BESS during the Reporting Period.
2-hour duration batteries continued to outperform 1-1.5-hour
duration BESS although, from January 2023 onwards, the gap narrowed
from the highs seen in 2022. This is predominantly a result of
lower spreads in the wholesale market combined with reduced
clearing prices in Dynamic Regulation. Even at its lowest point in
April 2023, this gap represents a 40 per cent higher revenue than
shorter duration BESS.
The Investment Adviser expects the difference in performance to
increase as Ancillary Services remain saturated and 2--hour
duration batteries increasingly pivot into wholesale markets and
the Balancing Mechanism activity.
FUTURE MARKET OUTLOOK
Flexibility and agility in revenue optimisation strategies will
continue to be key. Whilst Ancillary Services pricing is likely to
remain low, constantly assessing and comparing opportunities across
markets and actively stacking them will drive long--term value.
Having strong forecasting capabilities and choosing when to operate
in the wholesale or Ancillary Services markets will allow Revenue
Optimisers to differentiate themselves.
BESS revenue is expected to be become increasingly reliant on
the wholesale markets (a much larger/deeper market compared to
Ancillary Services) and we should start to see more BESS activity
on the Balancing Mechanism as National Grid ESO utilisation of this
platform for BESS increases.
The Company goes into the second half of 2023 with the largest
portfolio of 2-hour duration batteries in the UK listed market (by
MWh). The GB weighted average duration remains at 1.2-hours and
this is a key differentiator for the Company, which will have the
widest possible sources of revenues.
PRINCIPAL RISKS & UNCERTAINTIES
The Board monitors the key risks on an ongoing basis and takes
action to mitigate them as needed. Key risks, which were in
particular focus during the Reporting Period, included delays to
construction and volatility in power pricing and revenue
generation. The Investment Adviser has taken steps to mitigate
supplier concentration risk and supply chain issues by diversifying
our key suppliers as well as proactively managing procurement of
long lead-time equipment. In addition, the Investment Adviser has
observed a material reduction in key commodity prices
(specifically, lithium carbonate), although we continue to monitor
this closely. Looking ahead, regulatory changes and management of
third party suppliers have the potential to impact the Company's
NAV, share price, revenue and cost base and are therefore being
monitored closely.
Whilst the continuation of rising interest rates is an emerging
risk, given the existing level of debt and hedging which is in
place this is not currently considered material and the Investment
Adviser continues to assess appropriate hedging in relation to the
increased debt facility as well as benchmarking discount rates and
project valuations against market transactions.
The Board considers the following to be, respectively, the
principal and emerging risks and uncertainties facing the Company
as at the date of approval of the Interim Report.
EXISTING RISKS
Risk Description Possible Consequences Mitigating Actions
------------------- --------------------------------------------------------- -----------------------------------------------------------
Project supplier delivery delays
------------------------------------------------------------------------------ -----------------------------------------------------------
Delays in delivery
under existing * Increased costs. * Contingencies are built into the modelled project
supply timelines.
contracts; adverse
changes to * Delay to income generation.
estimated * Tender processes for future contracts are conducted
costs and delivery with suppliers with a strong track record.
timetable from key * Reduced NAV .
suppliers; battery
installation * EPC (or BESS supply) contracts contain robust
delays. obligations regarding price and delivery timetables.
* Contingency is included in project budgets.
* The Company makes efforts to ensure, so far as
practical, capital expenditures are fully contracted
prior to the Company making investment decisions.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Secondary market share price
------------------------------------------------------------------------------ -----------------------------------------------------------
Risk of shares
continuing * Inability to raise further equity capital. * Successful build out of portfolio to provide greater
to trade at a visibility of and confidence in relation to returns.
discount
to NAV on the * Shareholder dissatisfaction .
secondary * Consideration of share buybacks in line with stated
market. policy.
* Wide ning of shareholder base.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Cyber risk
------------------- --------------------------------------------------------- -----------------------------------------------------------
Risk of data loss;
risk of cyber * Increased costs. * The Company reviews all third-party service
attack. providers' and suppliers' IT security policies.
* Reputational damage.
* Reports will be required from suppliers on ISO
compliance, penetration testing and attempted
* Non-compliance with releva nt laws and regulations. attacks.
* Operational level equipment complies with Energy
Networks Association Cyber Security Connection.
Guidance and the Investment Adviser has multi-factor
authentication for its internal data platform.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Regulatory risk
------------------- --------------------------------------------------------- -----------------------------------------------------------
Reduced returns
from * Non-compliance with relevant laws and regulations. * The Company is well positioned to monitor and react
changes to to the energy policy and political landscape, and
applicable inputs to relevant energy industry consultations.
law; unfavourable * Reduced returns.
energy or power
network * Attendance at energy policy and regulatory seminars
policies; * Reputatio nal damage. and engagement with industry stakeholders and
noncompliance policymakers ensure up to date insights.
with legal and
regulatory
requirements for * The Company Secretary monitors compliance with all
investment trusts. applicable legal and financial legislation and
A specific example regulatory requirements.
is the ongoing
Review
of Electricity * An experienced AIFM has been appointed.
Market
Arrangements, which
was highlighted as * A ta x adviser is appointed to monitor tax law
an emerging risk changes.
in the 2021/22
Annual
Report.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Reliance on third
parties
------------------- --------------------------------------------------------- -----------------------------------------------------------
Risk that key
personnel * Delayed deployment of capital. * Performance of service providers is regularly
in the Investment monitored by the Investment Adviser and the
Adviser and other Management Engagement Committee.
third-party service * Reduced returns.
providers are not
properly * Termination periods for key service providers are
incentivised * Non-compliance with relevant laws and regu lations. negotiated to ensure sufficient time for tendering
or managed to and onboarding.
deliver
the Company goals.
* Independent power price forecasts and other industry
intelligence subscriptions are used to support NAV
calculations.
* Valuations are carried out by an independent
provider.
* Engagement of a Revenue Optimiser ensures revenue is
maximised. The Revenue Optimiser is engaged on a
rolling short-term contract to enable replacement in
the event of poor p erformance, and the fee is
structured to incentivise performance.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Project development and construction
risk
------------------------------------------------------------------------------ -----------------------------------------------------------
Risk of failure to
deliver Pipeline * Increased costs. * Harmony Energy Limited has an extensive track record
Projects and in development and delivery of renewable energy
incurrence projects and its project managers oversee the
of costs, including * Reduced returns. delivery of each site.
planning variation
delays, grid
connection * Delays to deployment of capital and/or income * The Company's investment policy prohibits the Company
delays, land generation. from acquiring projects which are not "shovel ready".
disputes. These qualifications are corroborated by independent
due diligence during the investment process.
* Non-comp liance with investment policy.
* Portfolio diversification and budget contingency
provide mitigation.
* The investment process allows the pipeline to be
controlled and acquire d with full visibility of the
capital deployment timetable.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Market risk
------------------- --------------------------------------------------------- -----------------------------------------------------------
Reduced growth of
renewables sector; * Reduced revenue. * Subscriptions to market intelligence services ensure
fluctuations in the Investment Adviser is aware of industry outlook
pricing and developments at the earliest stage.
of natural gas and * Reduced NAV.
carbon taxes.
* The Investment Adviser and Board regularly engage
with industry stakeholders and policymakers.
* Any changes to the market outlook are factored into
revenue forecasts and investment proposals.
* Additio nal contingency has been added to the
financial model to account for slow ramp-up of new
projects to full operational capability.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Environmental risk
------------------- --------------------------------------------------------- -----------------------------------------------------------
Risk of unexpected
environment-related * Unsafe working conditions. * Full due diligence is undertaken on proposed
costs and investments, including environmental due diligence.
liabilities.
* Reputational damage.
* This includes consideration of climate change related
risks including extreme weather events such as
* Increased costs. flooding.
* Non-compliance with rele vant laws and regulations. * Due diligence recommendations to mitigate
environmental risks are factored into investment
proposal costs and implemented on the projects.
* Projects are insured to cover delays to commencement
of operations an d other environmental risks,
including damage to assets from severe weather.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Conflicts of
interest
------------------- --------------------------------------------------------- -----------------------------------------------------------
Risk of acquiring
projects other than * Increased costs. * Mitigants of potential conflicts of interest are
at fair market built into the contractual structure, including a
price; significant portion of consideration for projects
risk of over * Reduced returns. being paid to Harmony Energy Limited in Company
valuing shares rather than cash.
assets to increase
share price; * Reputat ional damage.
conflicts * In addition , the Company has built mitigants into
of interest in its governance processes and commercial arrangements,
acquisition including the requirement to procure an independent
of projects from valuation and external due diligence prior to
a related party, acquisition. All acquisitions are subject to approval
Harmony Energy of the Board, who are independent.
Limited.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Changing macro-economic conditions
------------------------------------------------------------------------------ -----------------------------------------------------------
Changing economic
conditions may lead * Increased investor return requirement leading to * Successful build out of portfolio to provide greater
to increased costs reduced NAV. visibility of and confidence in relation to returns.
or lower returns
and could
contribute * Reduced returns. * Changes to the economic outlook are factored into
to shares trading revenue forecasts, valuations and investment
at a discount to proposals for future investments.
NAV. * Increased costs.
* As a relatively new asset class, BESS asset
* Reduc ed NAV. valuations are less directly linked to interest rate
movements than other renewable assets. Discount rates
have been coming down despite increasing interest
rates as investors become more comfortable with the
track record demonstrated by the sector.
* Supp ly of certain items of key equipment is priced
in USD, EUR or RMB. In these cases, the FX risk has
been passed to suppliers through the relevant supply
and installation contracts.
------------------- --------------------------------------------------------- -----------------------------------------------------------
Safety risk
------------------- --------------------------------------------------------- -----------------------------------------------------------
Risks to health and
safety during * Unsafe working conditions. * The Investment Adviser has appointed health and
construction safety advisers to undertake audits of all sites and
or operation. provide support to the Investment Adviser's project
* Workplace injuries. management team.
* Reputational damage. * The Investment Adviser and Board monitor health and
safety compliance and performance on a regular basis.
* For project SPVs, noncompliance with relevant laws
and regulati ons. * For projects under construction, the EPC/BOP
contracts contain obligations in respect of health
and safety on sites.
* Tesla has the role and responsibilities of Client
under the Construction (Design & Management)
Regulations, in relation to all projects, except
Wormald Green and Hawthorn Pit, for which the
relevant Company project SPV appoints the BOP
contractors directly.
* Procurement due diligence includes an assessment of
contractor health and safety track record and
compliance framework.
* Insurance policies are in place to provide cover
against certain losses.
------------------- --------------------------------------------------------- -----------------------------------------------------------
EMERGING RISKS
Risk Description Possible Consequences Mitigating Actions
---------------------- --------------------------------- -----------------------------------------------------------
Rising Interest Rates
---------------------- --------------------------------- -----------------------------------------------------------
Risk of interest rates
continuing to rise. * Increased borrowing costs. * Successful build out of portfolio to provide greater
visibility of and confidence in relation to returns.
* Reduced returns.
* The Company has hedging arrangements in place in
relation to certain amounts drawn under its debt
facilities. An expansion / restructure of such
hedging arrangements will be considered when
required.
* The Board, Independent Valuer and Investment Adviser
contin ue to monitor discount rates and benchmark
against market transactions to ensure valuations
reflect fair market.
---------------------- --------------------------------- -----------------------------------------------------------
RELATED-PARTY TRANSACTIONS
During the Reporting Period, the Company acquired three projects
from Harmony Energy Limited at fair value, in accordance with the
Company's Related Party policy. The independent valuer provided a
fair market opinion on all purchases at the time of acquisition and
consideration paid was considered by the independent valuer to be
within a fair market range.
Detailed information on related-party transactions can be found
in Note 21 to the Financial Statements.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) UPDATE
INTRODUCTION
The world urgently needs to transition to renewable energy to
lower global greenhouse gas emissions and stop climate change.
However, the increase in renewable energy sources presents a
challenge for electricity systems: the need to match varying demand
with intermittent supply.
BESS can be used to solve the problem of intermittency by
storing renewable electricity when demand is low and releasing it
back to the grid when it is needed most. BESS therefore provides
additional Flexibility to the ESO, supporting the integration of
renewable electricity onto the system and decarbonising the grid.
As such, BESS are key to enabling a low carbon energy system that
runs with an increasing proportion of renewable power. By providing
important services that support the electricity system's safety and
stability, while lowering grid carbon intensity, BESS can also
"make low carbon electricity systems more cost-effective"*, helping
to reduce energy prices for end-users.
On admission to the London Stock Exchange, the Company was
awarded the LSE's Green Economy Mark, recognising it as a
significant contributor to the transition to a net zero
economy.
Whilst the BESS assets the Company invests in are designed to
enable the transition to a cleaner, more affordable and secure
energy system, the Board of Directors and the Investment Adviser
understand that the Company has a duty to act responsibly and
address wider environmental, social and governance ("ESG") issues
across all aspects of its business. By effectively managing ESG,
The Company can help to build a more sustainable and resilient
future - for the business, as well as for the environment and
communities in which it operates.
OUR STRATEGY
The Company launched its ESG strategy in the 2021/22 Annual
Report, laying the foundation for its approach to ESG. The strategy
is focused on our priority issues of climate, nature, communities,
waste and resources, and human rights and labour. The United
Nations Sustainable Development Goals (SDGs) are the blueprint for
addressing global challenges, including climate change. Therefore,
the strategy is aligned to the SDGs most material to the business.
The Company has identified areas of potential influence, and ways
to maximise positive benefits and minimise adverse impacts of its
business across our investments and operations.
The Company is committed to actively identifying and managing
ESG related risks and opportunities throughout the investment
process. The continued development and successful implementation of
the Company's ESG strategy will help ensure its long-term success.
The year end Annual Report will contain a full update on the
development and implementation of the ESG strategy.
* IPCC AR6 Working Group III Full Report, p. 652: https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_FullReport.pdf
ESG PROGRESS HIGLIGHTS
The Company made strong progress on its ESG and responsible
investment objectives during the Reporting Period. Key highlights
include:
ENVIRONMENTAL
-- The Pillswood project - Europe's biggest battery energy
storage system (by MWh) - and the Broadditch project, were
successfully energised. With a total capacity of 218 MWh,
equivalent to the electricity needed to power around 333,000 UK
homes for two hours, these assets are making a real contribution to
the UK's 2050 net zero goal.
The Investment Adviser:
-- is undertaking climate and nature related risk and
opportunity assessments to better understand the impact of its
assets. The Company is on track to publish disclosures relating to
TCFD and TNFD in the 2022/23 Annual Report. These disclosures will
provide stakeholders with greater transparency over HEIT's climate
and nature related financial risks and opportunities.
-- engaged with key suppliers regarding the measurement and
management of environmental issues to drive sustainable change in
the supply chain. For example:
- engaging with battery suppliers on key topics such as GHG
emissions reductions, biodiversity and battery end of life
recyclability ; and
- working with contractors to further integrate sustainability
into the BESS site construction process;
-- is developing its approach to measuring the GHG impact of its
investments. This includes developing a methodology to measure GHG
emissions avoided by the BESS the Company invests in and working
with suppliers to assess upstream Scope 3 emissions.
SOCIAL
-- The Company continues to work closely with suppliers to
integrate ESG into the supply chain. Alongside sustainability
requirements embedded in the contracts with key suppliers, the
Company rolled out its Supplier Code of Conduct to key existing and
new suppliers. This will help ensure suppliers adhere to the
Company's ESG standards. The Company and the Investment Adviser
engaged with key suppliers on social sustainability impacts in the
battery supply chain such as human rights and working conditions.
In addition, the Company is implementing its supplier ESG audit
programme, starting with an ESG audit of a key supplier's BESS
production facility.
-- In line with plans at IPO, the Company added a second
community fund at the Broadditch site to the one launched
previously at Pillswood. The community funds will be used to
support local initiatives that matter to the communities in which
we operate and will help ensure the Company's activities are
benefitting the local population.
-- The Investment Adviser continued to strengthen health and
safety management, governance, and reporting. Zero health and
safety incidents were reported during the Reporting Period.
GOVERNANCE
-- The Investment Adviser strengthened its ESG capabilities by
appointing a Head of Sustainability with responsibility for shaping
and implementing the ESG and responsible investment strategy.
The Company:
-- has a dedicated Board ESG Committee with oversight of ESG
management. The ESG Committee met during the Reporting Period and
agreed the ESG priorities and roadmap for the year.
-- along with the Investment Adviser continued to integrate ESG
risk management into the wider risk management process. ESG risks,
including climate and nature related risks, were assessed both at
the Audit and Risk Committee meeting in February as well as the
Quarterly Board Meeting in March, along with the other risks.
-- is preparing its first UN PRI submission. This will be a
crucial step in increasing accountability and providing investors
with greater transparency.
-- is working with the Investment Adviser to expand the data
collection and disclosure processes for key performance indicators
that form a core part of the ESG strategy. This will enable
transparent measurement and reporting of progress against the
strategy.
GOVERNANCE REPORT
DIRECTORS' REPORT
THE DIRECTORS PRESENT THEIR REPORT TOGETHER WITH THE UNAUDITED
INTERIM REPORT FOR THE PERIOD FROM 1 NOVEMBER 2022 TO 30 APRIL 2023
(THE "REPORTING PERIOD").
PRINCIPAL ACTIVITY AND STATUS
Harmony Energy Income Trust Plc was incorporated in England and
Wales on 1 October 2021 with registered number 13656587. It is an
investment company within the meaning of Section 833(1) of the
Companies Act 2006.
The registered office of the Company is The Scalpel 18th Floor,
52 Lime Street, London, England EC3M 7AF. Its share capital is
denominated in British Sterling Pounds (GBP) and currently consists
of Ordinary Shares. The Company's principal activity is investing
in commercial scale battery energy storage systems ("BESS") and
renewable energy generation projects, with an initial focus on a
diversified portfolio of BESS located in Great Britain.
COMPANY PERFORMANCE
Details on the performance of the Company and its assets can be
found in the Chair's Statement and the Investment Advisor's
Report.
SHARE CAPITAL
On 31 January 2023, all C Shares in issue were converted into
new Ordinary Shares on a conversion ratio of 0.786735 new Ordinary
Share for every 1 C Share held. At 30 April 2023, the Company's
share capital comprised 227,128,295 Ordinary Shares of 1pence each
carrying one vote.
DISTRIBUTIONS - DIVID AND INTEREST
All Ordinary Shares are entitled to receive dividends, interim
dividends and interest distributions and during the Reporting
Period the Company has declared and paid dividends, as shown in the
table below.
The Company's dividend policy authorises the directors to
declare and pay all dividends as interim dividends, and for the
last dividend referable to a financial year not to be categorized
as a final dividend that is subject to shareholder approval. The
Company's dividend policy will be tabled for approval at each
annual general meeting. Dividends are not recognised in the
financial statements of the Company until paid. The results of the
Company are disclosed in the Unaudited Statement of Comprehensive
Income.
Period in
relation to Amount
which dividend Announcement Ex-dividend per Ordinary Interest
was paid date date Payment date Share Dividend Distribution Total amount
---------------- ------------- ------------- -------------- ------------- -------- ------------- ------------
31 October 23 November 1 December 16 December
2022 2022 2022 2022 1p 1p N/A 1p
---------------- ------------- ------------- -------------- ------------- -------- ------------- ------------
31 January 23 February
2023 2023 2 March 2023 17 March 2023 2p 1p 1p 2p
---------------- ------------- ------------- -------------- ------------- -------- ------------- ------------
30 April 2023 23 May 2023 1 June 2023 16 June 2023 2p 1p 1p 2p
---------------- ------------- ------------- -------------- ------------- -------- ------------- ------------
DIRECTORS
During the Reporting Period there were no changes in Directors.
All Directors are non-executive Directors. The Directors during the
Reporting Period and the fees paid to them during the Reporting
Period are set out below.
Received in
Annual fee Reporting Period
Director (GBP) (GBP)
----------------- ---------- -----------------
Norman Crighton 52,500 25,625
----------------- ---------- -----------------
Janine Freeman 47,250 23,062
----------------- ---------- -----------------
Hugh McNeal 42,000 20,499
----------------- ---------- -----------------
William Rickett 42,000 20,499
----------------- ---------- -----------------
Shefaly Yogendra 42,000 20,499
----------------- ---------- -----------------
In accordance with FCA Listing Rule 9.8.6(R)(1), Directors'
interests in the shares of the Company (in respect of which
transactions are notifiable to the Company under FCA Disclosure and
Transparency Rule 3.1.2(R)) as at 30 April 2023 are shown
below:
Percentage
of
Number of issued share
Ordinary capital
Director Shares held (per cent)
----------------- ------------ -------------
Norman Crighton 13,933 0.0061
----------------- ------------ -------------
Janine Freeman 14,292 0.0061
----------------- ------------ -------------
Hugh McNeal 13,933 0.0061
----------------- ------------ -------------
William Rickett 13,933 0.0061
----------------- ------------ -------------
Shefaly Yogendra 8,933 0.0039
----------------- ------------ -------------
The Company maintains GBP20 million of Directors' and Officers'
Liability Insurance cover for the benefit of the Directors and
Officers, which was in place throughout the Reporting Period, and
which continues in effect at the date of this report.
SIGNIFICANT SHAREHOLDINGS
As at 30 April 2023 and 23 June 2023, the latest practicable
date for inclusion in this report, the Company is aware, or had
been advised, in accordance with Rule 5 of the FCA's DTRs, of the
following holdings of voting rights in the Ordinary Share capital
of the Company:
Percentage
of issued share
Number of capital
Shareholder Ordinary Shares (per cent)
---------------------------------------- ---------------- ----------------
Schroders Plc 33,982,289 14.96
---------------------------------------- ---------------- ----------------
Harmony Energy Limited 27,338,696 12.50
---------------------------------------- ---------------- ----------------
Close Asset Management Limited 20,715,986 9.12
---------------------------------------- ---------------- ----------------
Handelsbanken Wealth & Asset Management 14,018,988 6.17
---------------------------------------- ---------------- ----------------
EQ Investors 11,786,950 5.19
---------------------------------------- ---------------- ----------------
Walker Crips Stockbrokers 9,887,156 4.35
---------------------------------------- ---------------- ----------------
Premier Miton Group 8,963,857 3.95
---------------------------------------- ---------------- ----------------
Bank of New York Mellon 8,431,564 3.71
---------------------------------------- ---------------- ----------------
Canaccord Genuity Group Inc 8,277,846 3.64
---------------------------------------- ---------------- ----------------
Waverton Investment Management Limited 6,904,893 3.04
---------------------------------------- ---------------- ----------------
ANNUAL GENERAL MEETING
The Company held its Annual General Meeting on 22 March 2023.
All resolutions proposed were voted on a poll and duly passed with
the requisite majority.
GOING CONCERN
The financial position of the Company, its cash flows, liquidity
position and borrowing facilities are described in the Financial
Statements and related notes. The Company has sufficient financial
resources and expectation of growth in the medium-term to meet its
financial obligations. As such, the Directors believe that the
Company has adequate resources to continue its operations for at
least 12 months from the date of signing these financial
statements. As such, the Directors have adopted the going concern
basis of preparation in preparing these Interim Financial
Statements.
POLITICAL CONTRIBUTIONS
The Company made no political contributions during the Reporting
Period.
DIRECTORS' RESPONSIBILITY STATEMENT
THE DIRECTORS ARE RESPONSIBLE FOR PREPARING THE INTERIM REPORT
AND FINANCIAL STATEMENTS IN ACCORDANCE WITH APPLICABLE LAW AND
REGULATIONS.
As a company traded on the London Stock Exchange, Harmony Energy
Income Trust Plc is subject to the FCA's Listing Rules and
Disclosure and Transparency Rules, as well as to all applicable
laws and regulations in England and Wales where it is
registered.
The Interim Report and Financial Statements have been prepared
in accordance with the UK-adopted International Financial Reporting
Standards ("IFRS"). Under company law, the Directors must not
approve the Financial Statements unless they are satisfied they
give a true and fair view of the state of affairs of the Company
and of the profit or loss for the Reporting Period. In preparing
these Financial Statements, the Directors should:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable;
-- specify which generally accepted accounting principles have
been adopted in their preparation; and
-- prepare the Financial Statements on the going concern basis,
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which are sufficient to show and explain the Company's
transactions and are to disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that the Financial Statements comply with the requirements
of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are also responsible for preparing the Interim
Report and Financial Statements and the Directors confirm that they
consider that, taken as a whole, the Interim Report and Financial
Statements is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's
performance, business model and strategy. In accordance with the
FCA's Disclosure and Transparency Rules DTR 4.2.7 and DTR 4.2.8,
the Directors confirm to the best of their knowledge that:
a) the Financial Statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company taken as a whole;
b) The Interim Report and accounts include a fair view of
important events that have occurred during the first period of the
Reporting Period, and their impact on the set of Financial
Statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
c) The Interim Report and accounts include the related party
transactions that have taken place in the Reporting Period and that
have materially affected the financial position or the performance
of the enterprise during that period.
The Directors have acknowledged their responsibilities in
relation to the Financial Statements for the Reporting Period.
Signed by order of the Board,
Norman Crighton
Chairman
Date: 27 June 2023
FINANCIAL STATEMENTS
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
1 November
2022 to
30 April
2023
Unaudited
GBP GBP GBP
Notes Revenue Capital Total
------------------------------------------------ ----- ----------- ------------ ------------
Net (loss) on investments at fair value
through profit and loss 8 - (10,957,006) (10,957,006)
Income 4 6,160,795 - 6,160,795
6,160,795 (10,957,006) (4,796,211)
------------------------------------------------ ----- ----------- ------------ ------------
Expenditure
Administrative and other expenses 5 (2,021,389) - (2,021,389)
------------------------------------------------ ----- ----------- ------------ ------------
Profit/(loss) before taxation 4,139,406 (10,957,006) (6,817,600)
Taxation 6 - - -
Profit/(loss) after tax and Total Comprehensive
Income for the Reporting Period 4,139,406 (10,957,006) (6,817,600)
Earnings per share (basic and diluted): 7 0.02 (0.05) (0.03)
------------------------------------------------ ----- ----------- ------------ ------------
1 October
2021 to
30 April
2022
Audited
GBP GBP GBP
Notes Revenue Capital Total
------------------------------------------------ ----- ----------- ---------- -----------
Net gain on investments at fair value
through profit and loss 8 - 22,808,488 22,808,488
Income 4 1,057,949 - 1,057,949
1,057,949 22,808,488 23,866,437
------------------------------------------------ ----- ----------- ---------- -----------
Expenditure
Administrative and other expenses 5 (2,073,929) - (2,073,929)
------------------------------------------------ ----- ----------- ---------- -----------
Profit/(loss) before taxation (1,015,980) 22,808,488 21,792,508
Taxation 6 - - -
Profit/(loss) after tax and Total Comprehensive
Income for the period (1,015,980) 22,808,488 21,792,508
Earnings per share (basic and diluted): 7 (0.01) 0.11 0.10
------------------------------------------------ ----- ----------- ---------- -----------
All Revenue and Capital items in the above statement are derived
from continuing operations.
The Total column of this statement represents the Company's
Income Statement prepared in accordance with UK adopted
international accounting standards. The return on ordinary
activities after taxation is the total comprehensive income and
therefore no additional statement of other comprehensive income is
presented.
The supplementary revenue and capital columns are presented for
information purposes in accordance with the Statement of
Recommended Practice issue by the Association of Investment
Companies.
UNAUDITED STATEMENT OF FINANCIAL POSITION
30 April 31 October
2023 2022
Unaudited Audited
Notes GBP GBP
------------------------------------------- ----- ----------- -----------
Non-current assets
Investments held at fair value 8 257,598,836 145,685,845
------------------------------------------- ----- ----------- -----------
257,598,836 145,685,845
------------------------------------------- ----- ----------- -----------
Current assets
Trade and other receivables 9 2,908,778 1,381,693
Loan to Shareholder 10 - 1,443,506
Cash and cash equivalents 11 6,211,154 124,571,626
------------------------------------------- ----- ----------- -----------
9,119,932 127,396,825
Total assets 266,718,768 273,082,670
------------------------------------------- ----- ----------- -----------
Current liabilities
Trade and other payables 12 826,628 730,364
Financial Liability at fair value 13 - 14,542,172
------------------------------------------- ----- ----------- -----------
Net current assets 8,293,304 112,124,289
------------------------------------------- ----- ----------- -----------
Total net assets 265,892,140 257,810,134
------------------------------------------- ----- ----------- -----------
Shareholders equity
Ordinary Share capital 17 4,277,136 2,100,000
Ordinary Share premium 17 19,365,036 -
Capital reduction reserve 17 198,479,263 202,693,046
Revenue reserve 18 1,647,620 (63,003)
Capital reserve 18 42,123,085 53,080,091
------------------------------------------- ----- ----------- -----------
Total Shareholders' equity 265,892,140 257,810,134
------------------------------------------- ----- ----------- -----------
Net asset value per Ordinary share (pence) 19 117.07 122.77
------------------------------------------- ----- ----------- -----------
The Financial Statements of Harmony Energy Income Trust Plc
(registered number 13656587) were approved by the Board of
Directors and signed on its behalf on 27 June 2023 by:
Norman Crighton
Chairman
27 June 2023
The notes form an integral part of these Financial
Statements.
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Share
premium: Capital Total
Ordinary Ordinary reduction Revenue Capital Shareholders'
Six months ended 30
April 2023 Share capital Shares reserve reserve reserve equity
Unaudited Notes GBP GBP GBP GBP GBP GBP
-------------------------- ----- ------------- ---------- ----------- ----------- ------------ -------------
Balance at 1 November
2022 2,100,000 - 202,693,046 (63,003) 53,080,091 257,810,134
Transactions with
owners:
Issue of share capital - - - - - -
C Share conversion
into Ordinary Shares 17 2,177,136 19,365,036 - - - 21,542,172
Dividends paid 17 - - (4,213,783) (2,428,783) - (6,642,566)
Total comprehensive
income for the Reporting
Period:
Profit/(loss) for the
Reporting Period - - - 4,139,406 (10,957,006) (6,817,600)
-------------------------- ----- ------------- ---------- ----------- ----------- ------------ -------------
Balance at 30 April
2023 4,277,136 19,365,036 198,479,263 1,647,620 42,123,085 265,892,140
-------------------------- ----- ------------- ---------- ----------- ----------- ------------ -------------
Share
premium: Capital Total
Ordinary Ordinary reduction Revenue Capital Shareholders'
Seven months ended Share
30 April 2022 capital Shares reserve reserve reserve equity
Audited Notes GBP GBP GBP GBP GBP GBP
------------------------ ----- --------- ------------- ----------- ----------- ---------- -------------
Balance at 1 October
2021 - - - - - -
Transactions with
owners:
Issue of share capital 17 2,100,000 207,900,000 - - - 210,000,000
Equity issue costs 17 - (3,106,954) - - - (3,106,954)
Transfer to capital
reduction reserve 17 - (204,793,046) 204,793,046 - - -
Total comprehensive
income for the period:
Profit/(loss) for the
period - - - (1,015,980) 22,808,488 21,792,508
Balance at 30 April
2022 2,100,000 - 204,793,046 (1,015,980) 22,808,488 228,685,554
------------------------ ----- --------- ------------- ----------- ----------- ---------- -------------
UNAUDITED STATEMENT OF CASH FLOWS
1 November 1 October
2022 to 2021 to
30 April 30 April
2023 2022
Unaudited Audited
Notes GBP GBP
----------------------------------------------------- ----- ------------- ------------
Cash flows from operating activities
(Loss)/Profit for the period (6,817,600) 21,792,508
Adjustments for non-cash items:
Net loss/(gain) on investments at fair value
through profit and loss 8 10,957,006 (22,808,488)
Investment Income 4 (5,299,492) (203,882)
Service fee income 4 (520,411) (854,067)
----------------------------------------------------- ----- ------------- ------------
Operating cash flows before movements in working
capital (1,680,497) (2,073,929)
----------------------------------------------------- ----- ------------- ------------
Increase in trade and other receivables 9 (83,581) (1,093,350)
Increase in trade and other payables 12 96,265 479,653
----------------------------------------------------- ----- ------------- ------------
Net cash outflow from operating activities (1,667,813) (2,687,626)
----------------------------------------------------- ----- ------------- ------------
Cash flows used in investing activities
Purchases of Investments (110,050,093) (16,621,759)
----------------------------------------------------- ----- ------------- ------------
Net cash outflow from investing activities (110,050,093) (16,621,759)
----------------------------------------------------- ----- ------------- ------------
Cash flows used in financing activities
Proceeds from issue of Ordinary Shares - 186,516,305
Share issue costs - (3,106,954)
Dividend paid (6,642,566) -
----------------------------------------------------- ----- ------------- ------------
Net cash (outflow)/inflow from financing activities (6,642,566) 183,409,351
----------------------------------------------------- ----- ------------- ------------
Net (decrease)/increase in cash and cash equivalents
for the period (118,360,472) 164,099,966
----------------------------------------------------- ----- ------------- ------------
Cash and cash equivalents at the beginning of
the period 124,571,626 -
----------------------------------------------------- ----- ------------- ------------
Cash and cash equivalents at the end of the
period 11 6,211,154 164,099,966
----------------------------------------------------- ----- ------------- ------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 NOVEMBER 2022 TO 30 APRIL 2023 (THE
"REPORTING PERIOD")
1. GENERAL INFORMATION
Harmony Energy Income Trust Plc was incorporated as a Public
Company, limited by shares, in England and Wales on 1 October 2021
with registered number 13656587. The registered office of the
Company is The Scalpel 18th Floor, 52 Lime Street, London, England
EC3M 7AF. Its share capital is denominated in British Pounds
Sterling and currently consists of Ordinary Shares. The Company's
principal activity is to invest in commercial scale battery energy
storage and renewable energy generation projects, with an initial
focus on a portfolio of utility scale battery energy storage
systems ("BESS"), located in diverse locations across Great
Britain.
2. BASIS OF PREPARATION
The unaudited Interim Report and Accounts have been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting'. The Condensed Financial Statements have been
prepared on a historical cost basis except for financial assets and
liabilities which are held at fair value through profit or loss.
The accounts have been prepared on a basis that is consistent with
accounting policies applied in the preparation of the Company's
Annual Financial Statements for 31 October 2022 and in conformity
with the requirements of the Companies Act 2006 and also considers
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts", issued by
the Association of Investment Companies, (the "AIC SORP") in April
2021.
In terms of the AIC SORP, the Company presents an Income
Statement which shows amounts split between those which are revenue
and capital in nature. The determination of the revenue or capital
nature of a transaction is determined by giving consideration to
the underlying elements of the transaction. Capital transactions
are considered to be those arising as a result of the appreciation
or depreciation in the value of assets due to the fair value
movements on investments held at fair value through profit and
loss. All other transactions are considered to be revenue
transactions.
The Company is an investment entity in accordance with IFRS 10
which holds all its subsidiaries at fair value and therefore
prepares separate accounts only. The Financial Statements are also
prepared on the assumption that approval as an investment trust
will continue to be granted.
These Condensed Financial Statements do not include all
information and disclosures required in the Annual Financial
Statements and should be read in conjunction with the Company's
audited financial statements for the year ended 31 October 2022
which were prepared in accordance with UK adopted international
accounting standards.
There are no new standards, amendments or interpretations at the
reporting date which have been issued but are not yet effective,
which could impact the Interim Report and Condensed Financial
Statements of the Company, and which are deemed to be material for
the Company.
FUNCTIONAL AND PRESENTATION CURRENCY
The currency of the primary economic environment in which the
Company operates (the functional currency) is British Pounds
Sterling which is also the presentation currency.
GOING CONCERN
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council.
As at 30 April 2023, the Company had current assets of
GBP9,119,932 including cash balances of GBP6,211,154 (excluding
cash balances within investee companies), which are sufficient to
meet the current liabilities at the balance sheet date as they fall
due.
The major cash outflows of the Company are the payment of
dividends and costs relating to the acquisition of new assets, both
of which are discretionary. The Company had no outstanding debt as
at 30 April 2023. The financial position of the Company, its cash
flows, and liquidity position are described in the Financial
Statements which comprise the Statement of Comprehensive Income,
the Statement of Financial Position, the Statement of Changes in
Equity, the Statement of Cash Flows and related notes (the
"Financial Statements"). All committed acquisitions at the end of
the Reporting Period are sufficiently covered through current cash
reserves and debt facilities. The Company had no outstanding debt
owing as at 30 April 2023.
As at 30 April 2023, the Company was a guarantor to its wholly
owned subsidiary, HEIT Holdings Ltd in respect of an undrawn GBP110
million debt facility and a partially drawn revolving credit
facility ("RCF"). The Company also provides parent company
guarantees to its indirect subsidiaries in relation to certain
construction and/or battery supply contracts. The Company has
determined that the likelihood of these guarantees being enforced
to be remote.
The Directors acknowledge their responsibilities in relation to
the financial statements for the Reporting Period to determine
whether the preparation of the financial statements on a going
concern basis remains appropriate.
Based on the analysis described above, the Company expects to be
able to meet its obligations as and when they fall due for at least
the next twelve months after the date of approval of the financial
statements.
As such, the Directors have adopted the going concern basis in
preparing the unaudited Financial Statements.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
During the Reporting Period the Directors considered the
following significant judgements, estimates and assumptions:
ASSESSMENT AS AN INVESTMENT ENTITY
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless their
main purpose and activities are providing services related to the
Company's investment activities. To determine that the Company
continues to meet the definition of an investment entity, the
Company is required to satisfy the following three criteria:
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
b) the Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Company meets the criteria as follows:
-- The Company's investment objective is to provide investors
with an attractive and sustainable level of income returns, with
the potential for capital growth, by investing in commercial scale
energy storage and renewable energy generation projects, with an
initial focus on a diversified portfolio of battery energy storage
systems located in Great Britain ("Projects");
-- the Company provides investment management services and has
several investors who pool their funds to gain access to
infrastructure related investment opportunities that they might not
have had access to individually; and
-- the Company has elected to measure and evaluate the
performance of all of its investments on a fair value basis. The
fair value method is used to represent the Company's performance in
its communication to the market, including investor presentations.
In addition, the Company reports fair value information internally
to Directors, who use fair value as the primary measurement
attribute to evaluate performance.
As at 30 April 2023, the Company had the following
subsidiaries;
-- HEIT Holdings Ltd,
-- Harmony HP (JV) Limited
-- Harmony WG (JV) Limited
-- Harmony RC Limited
Through its subsidiary HEIT Holdings Ltd, the Company holds the
following investments in subsidiaries indirectly:
-- Harmony (PW) Limited,
-- Harmony (PW) 2 Limited,
-- Harmony BD Limited,
-- Harmony FM Limited,
-- Harmony RH Ltd,
-- Daisy No.2 Limited,
-- Harmony BF Limited
In respect of the second criterion, the Company intends to
invest with a view to holding assets until the end of their useful
life. However, Projects may also be disposed of, or otherwise
realised, where Harmony Energy Advisors Limited (the "Investment
Adviser") recommends that such realisation is in the interests of
the Company. Such circumstances may include (without limitation)
disposals for the purposes of realising or preserving value, or of
realising cash resources for reinvestment or otherwise.
The Directors have evaluated whether the Company is an
investment entity and concluded that it meets the definition set
out in IFRS 10. The Directors are also of the opinion that the
Company meets the essential criteria of an Investment Entity
Therefore, its direct and indirect subsidiaries are measured at
fair value through profit or loss, in accordance with IFRS 9
'Financial Instruments'.
VALUATION OF INVESTMENTS
Significant estimates in the Company's Financial Statements
include the amounts recorded for the fair value of the investments.
These estimates and assumptions are subject to measurement
uncertainty by their nature. The impact on the Company's Financial
Statements of changes in future periods may be significant. These
estimates are further discussed in note 16.
4. INCOME
30 April 30 April
2023 2022
GBP GBP
--------------------- --------- ---------
Service fee income 520,411 854,067
Investment Income 5,299,492 203,882
Bank interest income 340,892 -
--------------------- --------- ---------
6,160,795 1,057,949
--------------------- --------- ---------
Refer to note 8 for further detail on interest on loans to
subsidiaries recognised in Investment income.
5. ADMINISTRATIVE AND OTHER EXPENSES
30 April 30 April
2023 2022
GBP GBP
----------------------------------------------------------- --------- ---------
Administrative fees 23,300 24,000
AIFM Fees 38,505 31,500
Director & officer insurance 12,507 24,858
Directors' fees 125,580 128,231
Fees payable to the auditor for the audit of the Company's
Financial Statements 70,000 70,000
Fees payable to the auditor for the audit of the Company's
Initial accounts - 100,000
Legal and Professional fees 453,611 464,294
Listing fees expensed - 377,035
Investment Adviser fees 1,201,609 782,083
Secretarial Fees 53,275 22,500
Sundry expenses 43,002 49,428
----------------------------------------------------------- --------- ---------
2,021,389 2,073,929
----------------------------------------------------------- --------- ---------
The Company has no employees and therefore no employee related
costs have been incurred.
6. TAXATION
The Company is recognised as an Investment Trust Company for
accounting periods beginning on or after 1 October 2021 and is
taxed at the main rate of 19 per cent. An ITC may claim a tax
deduction for the distribution of income that arises from interest
receipts on the loan notes. Based on the distributions currently
made there is a tax charge of GBP401,456 for the Reporting Period.
The company has made an interest distribution subsequent to period
end to reduce taxable profits for period ended 30 April 2023,
therefore, no corporation tax charge has been recognised.
30 April 30 April
2023 2022
GBP GBP
------------------------------------------------------ ----------- -----------
a) Tax charge in profit or loss
UK corporation tax - -
------------------------------------------------------ ----------- -----------
b) Reconciliation of the tax charge for the Reporting
Period
Profit before tax (9,123,346) 21,792,508
Tax at UK main rate of 19 per cent (1,824,898) 4,140,577
Tax effect of:
Non-taxable investment gains on investments 2,652,550 (4,457,395)
Non-deductible expenses 28,131 43,915
Unrecognised tax losses - 272,903
Tax deductible interest distributions paid (454,133) -
Future tax deductible interest distributions (401,650) -
------------------------------------------------------ ----------- -----------
Tax charge for the Reporting Period - -
------------------------------------------------------ ----------- -----------
c) Factors that affect future tax charges
ITCs which have been approved by HM Revenue & Customs are
exempt from UK corporation tax on their capital gains. Due to the
Company's status as an approved ITC, and the intention to continue
meeting the conditions required to maintain that approval for the
foreseeable future, the Company has not provided for deferred tax
in respect of any gains or losses arising on the revaluation of its
investments. Taxes are based on the UK Corporate tax rates which
existed as of the balance sheet date which was 19 per cent. The UK
Government confirmed their intention to increase the main rate of
corporation tax from 19 per cent to 25 per cent from 1 April 2023
for companies with profits over GBP250,000.
As at 30 April 2023 the Company had not provided deferred tax
assets or liabilities. At that date, based on current estimates and
including the accumulation of net allowable losses, the Company had
no unrelieved losses.
7. EARNINGS PER SHARE
Earnings per share amounts are calculated by dividing the profit
or loss for the Reporting Period attributable to ordinary equity
holders of the Company by the weighted average number of Ordinary
Shares in issue during the period. As there are no dilutive
instruments outstanding, basic and diluted earnings per share are
identical.
Weighted Weighted
average average
number Net loss number Net profit
attributable 30 April attributable 30 April
of ordinary to 2023 of ordinary to 2022
shares Shareholders GBP shares Shareholders GBP
---------------- ----------- ------------ -------- ----------- ------------ --------
Ordinary Shares 227,128,295 6,817,600 0.03 210,000,000 21,792,508 0.10
---------------- ----------- ------------ -------- ----------- ------------ --------
8. INVESTMENTS AT FAIR VALUE
The Company meets the definition of an investment entity.
Therefore, it does not consolidate its subsidiaries but, rather,
recognises them as investments at fair value through profit or
loss.
As at period end, the company held the following investments in
subsidiaries:
Place of Percentage
Subsidiaries business ownership
----------------------- --------------- ------------
HEIT Holdings Ltd North Yorkshire 100 per cent
Harmony HP (JV) Limited County Durham 100 per cent
Harmony WG (JV) Limited Yorkshire 100 per cent
Harmony RC Limited Surrey 100 per cent
----------------------- --------------- ------------
The Company owns 100 per cent of the share capital of HEIT
Holdings Limited which holds investments in the following
underlying subsidiaries:
Place of Percentage
Underlying Subsidiaries business ownership
----------------------- -------------------------- ------------
Harmony (PW) Limited Cottingham, East Yorkshire 100 per cent
Harmony (PW) 2 Limited Cottingham, East Yorkshire 100 per cent
Harmony BD Limited Broadditch, Kent 100 per cent
Harmony FM Limited Farnham, Surrey 100 per cent
Harmony RH Ltd Drax, North Yorkshire 100 per cent
Daisy No.2 Limited Lochgelly, Fife 100 per cent
Harmony BF Limited Ilmer, Buckinghamshire 100 per cent
----------------------- -------------------------- ------------
6-month
period Harmony Harmony Daisy HEIT Harmony Harmony
ending (PW) (PW) Harmony Harmony Harmony No.2 Harmony Holdings HP (JV) WG (JV) Harmony
30 April Limited 2 Limited BD Limited FM Limited RH Ltd Limited BF Limited Ltd Limited Limited RC Limited Total
2023 GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- --------- ----------- -------------
Opening
balance:
equity
and
loans 24,532,949 22,338,183 6,158,235 12,381,065 13,114,108 18,515,385 44,833,974 3,811,946 - - - 145,685,845
Equity
acquisitions
during
the
period - - - - - - - 91,105,212 5,804,622 2,424,772 13,043,740 112,378,346
Loans:
principal
advanced 31,665,923 30,910,090 4,359,933 8,156,640 14,996,848 (43,128) - 145,940,421 8,415,460 7,007,055 3,773,276 255,182,518
Loan
repayments (286,799) - (555,724) (838,922) (1,471,097) (686,605) (2,519,178) (7,853,748) - - - (14,212,073)
Loans:
Interest
charged 861,410 438,274 181,356 339,520 498,297 308,057 674,590 1,647,742 109,930 113,810 113,809 5,286,795
Net
Fair
value
movement 1,199,251 2,696,747 (11,703) (1,178,904) 2,819,684 1,253,664 123,466 (15,850,803) (379,942) (555,641) (1,072,825) (10,957,006)
Disposal
at Fair
Value (57,972,734) (56,383,294) (10,132,097) (18,859,399) (29,957,840) (19,347,373) (43,112,852) - - - - (235,765,589)
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- --------- ----------- -------------
Closing
balance:
equity
and
loans - - - - - - - 218,800,770 13,950,070 8,989,996 15,858,000 257,598,836
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- --------- ----------- -------------
12-month
period Harmony Harmony Harmony Daisy
ending (PW) (PW) BD Harmony Harmony No.2 HEIT
31 October Limited 2 Limited Limited FM Limited RH Ltd Limited Holdings Harmony
2022 GBP GBP GBP GBP GBP GBP Ltd BF Limited Total
------------- ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- -----------
Equity
acquisitions
during
the period 8,224,633 8,931,692 592,489 2,821,324 5,039,989 7,912,631 1 - 33,522,759
Loans:
principal
advanced 4,075,047 1,631,222 2,451,079 5,777,562 8,144,129 10,565,352 1,379,402 23,445,142 57,468,935
Loans:
Interest
charged 175,023 51,287 157,786 250,916 313,329 301,390 32,703 331,626 1,614,060
Cost at
31 October
2022 12,474,703 10,614,201 3,201,354 8,849,802 13,497,447 18,779,373 1,412,106 23,776,768 92,605,754
Net Fair
value
movement 12,058,246 11,723,982 2,956,881 3,531,263 (383,339) (263,988) 2,399,840 21,057,206 53,080,091
------------- ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- -----------
Closing
balance:
equity
and loans 24,532,949 22,338,183 6,158,235 12,381,065 13,114,108 18,515,385 3,811,946 44,833,974 145,685,845
------------- ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- -----------
On 15 December 2022 the Company announced the acquisition of
three "shovel ready" pipeline projects totalling 181.9 MW / 363.8
MWh, increasing the Company's portfolio to nine battery energy
storage system ("BESS") projects with a total capacity of c.500 MW
/ 1 GWh.
The Company has acquired the projects pursuant to a Pipeline
Agreement entered into on IPO which granted the Company a right of
first refusal of up to 1GW of BESS projects, from Harmony Energy
Limited ("HEL") and Ritchie Bland Energy No. 2 Ltd (together the
"Developers"). The total consideration for the three projects is c.
GBP21.5 million (supported by the independent valuation performed
by Mazars) being satisfied through the payment of c.14.5 million in
cash (being the net proceeds of the C Share issue by the Company as
announced on 12 October 2022) in conjunction with the issue of 7
million new C Shares to the Developers.
The three projects, known as Wormald Green, Hawthorn Pit and Rye
Common (Phases I and II), are expected to be energised in Q2 2024,
Q3 2024 and Q4 2024 financial year respectively, with grid offers
secured.
The Company provided parent company guarantees in relation to
the BESS supply agreements.
On 9 March 2023, the Company sold its investments in Harmony
(PW) Limited, Harmony (PW) 2 Limited, Harmony BD Limited, Harmony
FM Limited, Harmony RH Ltd, Daisy No.2 Limited, -and Harmony BF
Limited to its subsidiary HEIT Holdings Ltd for a total
consideration of GBP91,105,212, which HEIT Holdings Limited
satisfied by issuing and allotting 91,105,212 ordinary shares of
GBP1 each to the Company.
The Fair value measurements and sensitivities used to measure
these investments are disclosed in note 16.
9. TRADE AND OTHER RECEIVABLES
30 April 31 October
2023 2022
GBP GBP
--------------------------------- --------- ----------
Prepayments 48,659 35,172
VAT receivable 1,144,792 482,555
Intercompany loans receivable 523,775 482,925
Amounts due from related parties 1,191,552 381,041
--------------------------------- --------- ----------
2,908,778 1,381,693
--------------------------------- --------- ----------
10. LOAN TO SHAREHOLDER
30 April 31 October
2023 2022
GBP GBP
-------------------- -------- ----------
Loan to Shareholder - 1,443,506
-------------------- -------- ----------
- 1,443,506
-------------------- -------- ----------
On 14 December 2022 the loan to shareholder was repaid in
full.
11. CASH AND CASH EQUIVALENTS
30 April 31 October
2023 2022
GBP GBP
---------------------- --------- -----------
Cash at bank 6,211,154 105,471,626
Fixed Deposit account - 19,100,000
---------------------- --------- -----------
6,211,154 124,571,626
---------------------- --------- -----------
12. TRADE AND OTHER PAYABLES
30 April 31 October
2023 2022
GBP GBP
--------------------------------- -------- ----------
Creditors and Operating Accruals 270,882 301,013
Administrator fees 28,000 48,000
AIFM Fees 22,478 21,000
Audit fees 70,000 140,000
Investment Adviser Fee Accrual 435,268 220,351
--------------------------------- -------- ----------
826,628 730,364
--------------------------------- -------- ----------
13. FINANCIAL LIABILITY AT FAIR VALUE
30 April 31 October
2023 2022
GBP GBP
--------------------- -------- ----------
Convertible C Shares - 14,771,364
Less equity costs - (229,192)
--------------------- -------- ----------
- 14,542,172
--------------------- -------- ----------
On 26 January 2023, the Company announced the conversion of all
of its C Shares to Ordinary Shares at a ratio of 1;0.786735. The
total number of new Ordinary Shares created was 17,128,295.
14. CATEGORIES OF FINANCIAL INSTRUMENTS
30 April 31 October
2023 2022
GBP GBP
--------------------------------------------------- ----------- -----------
Financial assets
Financial assets at fair value through profit and
loss:
Investments 257,598,836 145,685,845
Financial assets at amortised cost:
Trade and other receivables 2,908,778 1,381,693
Loan to Shareholder - 1,443,506
Cash and Cash Equivalents 6,211,154 124,571,626
--------------------------------------------------- ----------- -----------
Total financial assets 266,718,768 273,082,670
--------------------------------------------------- ----------- -----------
Financial liabilities
Financial liabilities at fair value through profit
and loss:
Other financial liabilities - 14,542,172
Financial liabilities at amortised cost:
Trade and other payables 826,628 730,364
--------------------------------------------------- ----------- -----------
Total financial liabilities 826,628 15,272,536
--------------------------------------------------- ----------- -----------
At the balance sheet date, all financial assets and liabilities
were measured at amortised cost except for the investment in
subsidiary which is measured at fair value as further explained in
note 16. The carrying amount for the financial assets and
liabilities measured at amortised costs approximates fair
value.
15. FINANCIAL RISK MANAGEMENT
As at 30 April 2023 there have been no changes to the financial
instruments risk identified in the Annual Financial Statements of
31 October 2022.
The Company is exposed to certain risks through the ordinary
course of business and the Company's financial risk management
objective is to minimise the effect of these risks. The management
of risks is performed by the Directors of the Company and the
exposure to each financial risk considered potentially material to
the Company, how it arises and the policy for managing it is
summarised in the Annual Financial Statements of 31 October
2022.
The Company's only financial liabilities are trade and other
payables. The Company intends to hold sufficient cash across the
Company and subsidiaries' operating accounts to meet the working
capital needs.
The Company was also guarantor to its subsidiaries in the
Reporting Period in respect of a debt facility and in relation to
certain construction and/or battery supply contracts. Per the going
concern note, the Company has determined that the likelihood of
these guarantees being enforced to be remote.
As at 30 April 2023, the Company held cash at bank of
GBP6,211,154 and had trade and other payables totalling
GBP826,628.
The following table reflects the maturity analysis of financial
assets and liabilities.
<1 year 1 to 2 years 2 to 5 years >5 years Total
As at 30 April 2023 GBP GBP GBP GBP GBP
--------------------------------- --------- ------------ ------------ ----------- -----------
Financial assets
Financial assets at fair
value through profit and loss:
Loan investment to subsidiaries* - - - 160,679,860 160,679,860
Financial assets at amortised
cost:
Trade and other receivables 2,908,778 - - - 2,908,778
Cash at bank 6,211,154 - - - 6,211,154
--------------------------------- --------- ------------ ------------ ----------- -----------
Total financial assets 9,119,932 - - 160,679,860 169,799,792
--------------------------------- --------- ------------ ------------ ----------- -----------
<1 year 1 to 2 years 2 to 5 years >5 years Total
As at 30 April 2023 GBP GBP GBP GBP GBP
----------------------------------- ------- ------------ ------------ -------- ---------
Financial liabilities
Financial liabilities at amortised
cost:
Trade and other payables 826,628 - - - 1,228,084
----------------------------------- ------- ------------ ------------ -------- ---------
Total financial liabilities 826,628 - - - 1,228,084
----------------------------------- ------- ------------ ------------ -------- ---------
* Includes the interest on loans advanced and excludes the
equity portion of the investment.
<1 year 1 to 2 years 2 to 5 years >5 years Total
As at 31 October 2022 GBP GBP GBP GBP GBP
--------------------------------- ----------- ------------ ------------ ---------- -----------
Financial assets
Financial assets at fair
value through profit
and loss:
Loan investment to subsidiaries* - - - 59,082,995 59,082,995
Financial assets at amortised
cost:
Trade and other receivables 1,381,693 - - - 1,381,693
Cash at bank 124,571,626 - - - 124,571,626
--------------------------------- ----------- ------------ ------------ ---------- -----------
Total financial assets 125,953,319 - - 59,082,995 185,036,314
--------------------------------- ----------- ------------ ------------ ---------- -----------
<1 year 1 to 2 years 2 to 5 years >5 years Total
As at 31 October 2022 GBP GBP GBP GBP GBP
----------------------------------- ---------- ------------ ------------ -------- ----------
Financial liabilities
Financial liabilities at fair
value through
profit and loss:
Other Financial liabilities 14,542,172 - - - 14,542,172
Financial liabilities at amortised
cost:
Trade and other payables 730,364 - - - 730,364
----------------------------------- ---------- ------------ ------------ -------- ----------
Total financial liabilities 15,272,536 - - - 15,272,536
----------------------------------- ---------- ------------ ------------ -------- ----------
* Includes the interest on loans advanced and excludes the
equity portion of the investment.
16. FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT AND HIERARCHY
Fair value is the price that would be received on the sale of an
asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date. If a fair
value measurement uses observable inputs that require significant
adjustment based on unobservable inputs or any other significant
unobservable inputs, that measurement is a Level 3 measurement.
The following table analyses within the fair value hierarchy the
Company's assets measured at fair value at 30 April 2023:
Level 1 Level 2 Level 3
GBP GBP GBP
------------------------- ------- ------- -----------
Investment in subsidiary - - 257,598,836
------------------------- ------- ------- -----------
The valuation of investments in subsidiary at fair value through
profit or loss is a Level 3 measurement in the fair value hierarchy
and the reconciliation in the movement of these is presented below.
No transfers between levels took place during the Reporting
Period.
30 April 31 October
2023 2022
GBP GBP
----------------------------------------------------- ------------- -----------
Opening balance 145,685,845 -
Add: purchases during the period 358,635,586 92,605,754
Less: disposals during the period (235,765,589) -
Total fair value movement through the profit or loss (10,957,006) 53,080,091
----------------------------------------------------- ------------- -----------
Closing balance 257,598,836 145,685,845
----------------------------------------------------- ------------- -----------
The Company's policy is to recognise transfers into and
transfers out of fair value hierarchy levels as of the date of the
event or change in circumstances that caused the transfer.
VALUATION METHODOLOGY
The same valuation methodology and process is followed in these
Condensed Financial Statements as was applied in the preparation of
the Company's Annual Financial Statements for the year ended 31
October 2022.
The valuation of all the Company's investments excluding the
investment in HEIT Holdings Ltd, is based primarily on a discounted
cash flow methodology ("DCF"), "Income Approach", which indicates
value based on the sum of the economic income that an asset, or
group of assets, is anticipated to produce in the future. Free cash
flow to total invested capital is typically the appropriate measure
of economic income. The method discounts free cash flows using an
estimated discount rate Weighted Average Cost of Capital ("WACC").
The selected discount rate is supported by the benchmarking of
discount rates for assets in the same, or analogous sectors as the
Portfolio.
The valuation at 30 April 2023, reflecting the status of the
investments to date, was determined using the discounted cash flow
method whereby the value of a project is based on the projected
cash flows adjusted for time value of money and inherent risk of
the cash flows using an appropriate discount rate.
Included in the fair value of the investments is GBP12,718,679
in cash at project level.
The fair value of the investment in HEIT Holdings Ltd represents
its net assets at the balance sheet date.
There has been no change in the valuation methodology during the
Reporting Period.
VALUATION PROCESS
Valuations are the responsibility of the Board of Directors. The
Investment Adviser is responsible for submitting fair market
valuations of the Company's assets to the Directors. The Directors
review and approve these valuations following appropriate challenge
and examination. Valuations are carried out quarterly, with Mazars
acting as independent valuer providing a valuation report
semi-annually. The current portfolio consists of non-market traded
investments and valuations are based on a discounted cash flow
methodology.
The Investment Adviser's assessment of fair value of investments
is determined in accordance with the International Private Equity
and Venture Capital 2018 ("IPEVC") Valuation Guidelines, using
levered and unlevered discounted cash flow principles.
In the Reporting Period, the Company acquired battery storage
projects from Harmony Energy Limited which is a leading developer
of utility scale battery storage projects, alongside developing,
owning, and operating wind and solar projects.
As at 30 April 2023 ("Valuation Date"), the Company had
investments directly and indirectly in the following seven battery
energy storage systems projects in the UK - Pillswood 1, Pillswood
2, Broadditch, Farnham, Rusholme, Little Raith, Bumpers, Wormald
Green, Hawthorn Pit, and Rye Common. These projects, taken
together, have a combined total capacity of 494.9 MW/ 988.8 MWh of
which 109 MW/ 218 MWh (two projects) are operational.
As at the balance sheet date, two projects in the Portfolio were
operational, one was shovel ready and the rest under construction.
The Projects are expected to have an operational life of 30 years
with a repowering or cell replacement assumed after 15 years.
The Projects attract four different streams of revenues:
Arbitrage (wholesale trading and Balancing Mechanism ("BM")),
Ancillary Services (Dynamic Containment ("DC"), Dynamic Moderation
("DM") and Dynamic Regulation ("DR")), Capacity Market ("CM")
revenue and embedded benefits (Embedded Export Tariff ("EET")).
Revenue projections are supported by three independent
forecasts.
The Board, supported by the Audit and Risk Committee, reviews
the operating and financial assumptions, including the discount
rates, used in the valuation of the Company's underlying portfolio
and approves them based on the recommendation of the Investment
Adviser.
As at 30 April 2023, the fair value of all the investments held
within the portfolio, with the exception of the investment in HEIT
Holdings Ltd, has been independently reviewed and validated by
Mazars LLP.
SENSITIVITY ANALYSIS
The below tables reflect the range of sensitivities in respect
of the fair value movements. The individual project valuations are
disclosed in note 8.
The Directors consider the changes in inputs to be within a
reasonable expected range based on their understanding of market
transactions. This is not intended to imply that the likelihood of
change or that possible changes in value would be restricted to
this range.
Estimated
Investment Significant effect on
fair value Valuation input fair value
Investment Project GBP technique description Sensitivity GBP
----------------------- --------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony (PW) Limited Pillswood 1 49,049,204 DCF rate +1 per cent (3,159,233)
-1 per cent 3,639,949
Revenue +10 per cent 4,779,280
-10 per cent (4,831,991)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony (PW) 2 Limited Pillswood 2 48,548,399 DCF rate +1 per cent (3,159,510)
-1 per cent 3,640,388
Revenue +10 per cent 4,782,143
-10 per cent (4,833,766)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony BD Limited Broadditch 13,053,111 DCF rate +1 per cent (777,572)
-1 per cent 896,852
Revenue +10 per cent 1,125,656
-10 per cent (1,126,863)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony FM Limited Farnham 18,744,998 DCF rate +1 per cent (1,417,400)
-1 per cent 1,630,643
Revenue +10 per cent 1,999,697
-10 per cent (2,015,901)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony RH Ltd Rusholme 28,259,722 DCF rate +1 per cent (2,234,830)
-1 per cent 2,574,722
Revenue +10 per cent 3,346,970
-10 per cent (3,404,489)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Daisy No.2 Limited Little Raith 18,834,743 DCF rate +1 per cent (2,908,575)
-1 per cent 3,349,307
Revenue +10 per cent 4,489,913
-10 per cent (4,499,864)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony BF Limited Bumpers 41,981,880 DCF rate +1 per cent (6,586,769)
-1 per cent 7,590,435
Revenue +10 per cent 8,882,609
-10 per cent (9,021,512)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Harmony WG (JV) Discount
Limited Wormald Green 8,989,996 DCF rate +1 per cent (1,861,913)
-1 per cent 2,166,431
Revenue +10 per cent 2,956,300
-10 per cent (3,136,316)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Harmony HP (JV) Discount
Limited Hawthorne Pit 13,950,070 DCF rate +1 per cent (2,796,387)
-1 per cent 3,248,371
Revenue +10 per cent 4,277,862
-10 per cent (4,481,161)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
Discount
Harmony RC Limited Rye Common 1&2 15,858,000 DCF rate +1 per cent (5,144,483)
-1 per cent 5,999,217
Revenue +10 per cent 7,676,898
-10 per cent (8,123,347)
--------------------------------------- ----------- ---------- ------------ ------------ -----------
PORTFOLIO SENSITIVITY
The below table reflects a range of sensitivities which the
Directors consider having a significant impact on the portfolio of
investments held by the Company:
Estimated
effect
on fair value
Investment Sensitivity GBP
----------------------- -------------- --------------
Inflation +0.5 per cent 20,577,323
-0.5 per cent (17,398,003)
-------------------------------------- --------------
Construction Costs +15 per cent (18,715,162)
-15 per cent 16,678,740
-------------------------------------- --------------
Operating costs +15 per cent (10,686,370)
-15 per cent 10,609,918
-------------------------------------- --------------
Cell replacement costs +15 per cent (3,093,221)
-15 per cent 3,212,486
-------------------------------------- --------------
17. SHARE CAPITAL
Capital Total
Share Share reduction Shareholders'
Number of capital premium reserve equity
shares GBP GBP GBP GBP
--------------------------------- ----------- --------- ---------- ----------- --------------
As at 1 November 2022 210,000,000 2,100,000 - 202,693,046 204,793,046
Issue of fully paid Ordinary
shares at GBP1 - - - - -
C Share conversion into Ordinary
shares 17,128,295 2,177,136 19,365,036 - 21,542,172
Dividends paid - - - (4,213,783) (4,213,783)
--------------------------------- ----------- --------- ---------- ----------- --------------
As at 30 April 2023 227,128,295 4,277,136 19,365,036 198,479,263 222,121,435
--------------------------------- ----------- --------- ---------- ----------- --------------
Capital Total
Share Share reduction Shareholders'
Number of capital premium reserve equity
shares GBP GBP GBP GBP
------------------------------ ----------- --------- ------------- ----------- -------------
As at 1 October 2021 - - - - -
Issue of fully paid Ordinary
Shares at GBP1 210,000,000 2,100,000 207,900,000 - 210,000,000
Ordinary Shares Equity issue
costs - - (3,106,954) - (3,106,954)
Transfer to capital reduction
reserve - - (204,793,046) 204,793,046 -
Dividends paid - - - (2,100,000) (2,100,000)
------------------------------ ----------- --------- ------------- ----------- -------------
As at 31 October 2022 210,000,000 2,100,000 - 202,693,046 204,793,046
------------------------------ ----------- --------- ------------- ----------- -------------
SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND CAPITAL REDUCTION
RESERVE
On incorporation, the Board approved (subject to book building
and Admission) the proposed placing and offer for subscription
(together the Placing) of Ordinary Shares 1p nominal value each in
the capital of the Company at a price of GBP1.00 per Ordinary
Share. The Board also approved (subject to admission) the
acquisition of the Seed Portfolio (refer note 10), consideration
for which included the issue of 23,483,695 Ordinary Shares at a
price of GBP1.00 per ordinary share to Harmony Energy Limited. The
placing raised gross proceeds of GBP186,516,305, and therefore the
number of Ordinary Shares of GBP0.01 each issued by the Company and
admitted to trading was 210,000,000 in aggregate.
Following a successful application to the High Court and
lodgement of the Company's statement of capital with the Registrar
of Companies, the Company was permitted to cancel its share premium
account. This was effected on 15 December 2021 by a transfer of the
balance of GBP204,793,046 from the share premium account to the
capital reduction reserve. The capital reduction reserve is classed
as a distributable reserve and dividends to be paid by the Company
are to be offset against this reserve.
On 26 January 2023, the Company announced the conversion of its
C Shares. The total number of C Shares that was converted into new
Ordinary Shares with voting rights was 17,128,295. Immediately
following admission, the total number of the Ordinary Shares in
issue was 227,128,295.
18. RESERVES
The nature and purpose of each of the reserves included within
equity at 30 April 2023 are as follows:
-- Share premium reserve: represents the surplus of the gross
proceeds of share issues over the nominal value of the shares, net
of the direct costs of equity issues and net of conversion
amount.
-- Capital reduction reserve: represents a distributable reserve
created following a Court approved reduction in capital. This
reserve is distributable and may be used, where the Board considers
it appropriate, by the Company for the purpose of paying dividends
to Shareholders
-- Revenue reserve: represents a distributable reserve of
cumulative net gains and losses recognised in the Revenue account
of the Statement of Comprehensive Income.
-- Capital Reserves: represents a non-distributable reserve of
cumulative net capital gains and losses recognised in the Statement
of Comprehensive Income
The movements in these reserves during the Reporting Period are
disclosed in the statement of changes in equity.
19. NET ASSET VALUE PER SHARE
Basic Net Asset Value ("NAV") per share is calculated by
dividing the Company's net assets as shown in the statement of
financial position that are attributable to the ordinary equity
holders of the Company by the number of Ordinary Shares outstanding
at the end of the Reporting Period. As there are no dilutive
instruments outstanding, basic and diluted NAV per share are
identical.
Shares Pence Net Asset
in issue Assets Liabilities Profit/(Loss) per Share Value GBP
---------------------- ----------- ----------- ----------- ------------- ---------- -----------
Ordinary Shares at 30
April 2023 227,128,295 266,718,768 826,628 (6,817,600) 117.07 265,892,140
Ordinary Shares at 31
October 2022 210,000,000 273,082,670 15,272,536 53,017,088 122.77 257,810,134
---------------------- ----------- ----------- ----------- ------------- ---------- -----------
20. DIVIDS PER SHARE
Dividend per Share is a measure to show the distributions made
to shareholders during the period.
Dividend
per Total
Distributions paid during the period ended 30 April Ordinary
2023 Share GBP
---------------------------------------------------- --------- ---------
For the 6-month period ended 31 October 2022 1 pence 2,100,000
For the 3-month period ended 31 January 2023 2 pence 4,542,566
---------------------------------------------------- --------- ---------
The distributions paid during the Reporting Period were paid out
of the capital reduction reserve and revenue reserve. In relation
to distributions paid for the financial year ended 31 October 2022
(amounting to 2 pence per Ordinary Share), 1.85 pence per Ordinary
Share was declared as a dividend distribution and 0.15 pence per
Ordinary Share was declared as an interest distribution. In
relation to distributions paid for the period 1 November 2022 to 31
January 2023 (amounting to 2 pence per Ordinary Share), 1 pence per
Ordinary Share was declared as a dividend distribution and 1 pence
per Ordinary Share was declared as an interest distribution.
As disclosed in note 23, on 23 May 2023, the Company declared a
distribution of 2 pence per Ordinary Share (GBP4,542,566) in
relation to the period 1 February 2023 to 30 April 2023 which was
paid on or around 16 June 2023 to Shareholders on the register as
at the close of business on 2 June 2023.
No distributions were paid in the six-month period ended on 30
April 2022.
21. TRANSACTIONS WITH RELATED PARTIES
Following admission of the Ordinary Shares, the Company and the
Directors are not aware of any person who, directly or indirectly,
jointly or severally, exercises or could exercise control over the
Company. The Company does not have an ultimate controlling
party.
Details of related parties are set out below:
NON-EXECUTIVE DIRECTORS
Details of the fees paid to Directors in the Reporting Period
are set out in the Directors' Report.
Total Directors' fees of GBP125,580 (2022: GBP128,231) were
incurred in respect of the Reporting Period with none being
outstanding and payable at the end of the Reporting Period.
SUBSIDIARIES
On 15 December 2022, the Company announced the acquisition of
the Wormald Green, Hawthorn Pit and Rye Common projects from
Harmony Energy Limited at fair value, in accordance with the
Company's Related Party policy. The total consideration paid was c.
GBP21.5 million (GBP21.2 million as consideration for the projects
and GBP0.3 million to repay initial project costs incurred by the
Developers on behalf of the Company). This was satisfied partly in
cash and partly through the issue of 7 million new C Shares to the
Developers. See note 8 for relevant details. The independent valuer
provided a fair market opinion on all purchases at the time of
acquisition and consideration paid was considered by the
independent valuer to be within a fair market range.
On 9 March 2023, the Company sold its investments in Harmony
(PW) Limited, Harmony (PW) 2 Limited, Harmony BD Limited, Harmony
FM Limited, Harmony RH Ltd, Daisy No.2 Limited, Harmony BF Limited
to its subsidiary HEIT Holdings Ltd for a total consideration in
shares of GBP91,105,212, which HEIT Holdings Limited satisfied by
issuing and allotting 91,105,212 ordinary shares of GBP1 each to
the Company.
Loans to subsidiaries represent amounts due to the Company and
are disclosed in Note 8.
As described in the going concern note, the Company was a
guarantor to its wholly owned subsidiary, HEIT Holdings Ltd in
respect of the GBP110 million debt facility and the GBP20 million
RCF. The Company also provides parent company guarantees to
subsidiaries in relation to certain construction and/or battery
supply contracts.
INVESTMENT ADVISER
An advisory fee of GBP1,201,609 (2022: GBP782,083) was incurred
during the Reporting Period and GBP435,268 (2022: GBP189,101)
remained payable as at 30 April 2023.
Harmony Energy Limited is the parent of the Investment Adviser
and therefore an entity with significant control over the
Investment Adviser. Harmony Energy Limited is also a significant
shareholder of the Company.
LOAN TO SHAREHOLDER
On 1 July 2022, and in accordance with the Company's Related
Party policy, the Company granted a GBP5,000,000 revolving credit
facility to Harmony Energy Limited, for the purpose of funding next
stage grid connection payments in relation to near-term pipeline
projects. Upon acquisition of the three projects referred to above,
the outstanding loan principal and all interest accrued thereon,
was repaid in full. The availability period for this facility
expired on 31 December 2022. See note 10.
OTHER RELATED PARTIES
James Ritchie-Bland is a director of Harmony Energy Limited as
well as an indirect shareholder of Harmony Energy Limited through
Ritchie-Bland Energy (Number 1) Limited. He is also a director of
the Investment Adviser and a shareholder in the Company.
Ritchie-Bland Energy (Number 2) Limited, of which James
Ritchie-Bland is also a director and an indirect shareholder
(through Renewable Environmental Investments Limited) is party to a
joint venture agreement with Harmony Energy Limited in regard to
the three projects purchased by the Company during the Reporting
Period described above.
22. CAPITAL COMMITMENTS
The Company had no contingencies and no other significant
capital commitments at the reporting date.
23. POST BALANCE SHEET EVENTS
On 4 May 2023, the Company sold its investments in Harmony HP
(JV) Limited and Harmony WG (JV) Limited to its subsidiary HEIT
Holdings Limited at a purchase price of GBP6,150,960 and
GBP2,742,118 respectively, which HEIT Holdings Limited satisfied by
issuing and allotting 8,893,078 ordinary shares of GBP1 each to the
Company.
On 23 May 2023, the Company declared a distribution of 2 pence
per Ordinary Share in relation to the period 1 February 2023 to 30
April 2023 which was paid on or around 16 June 2023 to Shareholders
on the register as at the close of business on 2 June 2023.
On 1 June 2023, the Company announced that its 20 MW / 40 MWh
Farnham project (located in Surrey) has been successfully
energised. Indeed, the project was fully operational by mid- June
2023. The Farnham project is the Company's third project to be
energised and takes the total operational capacity within the
Company's portfolio to 129 MW / 258 MWh.
There were no further events after the reporting date which
require disclosure.
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END
IR FFFEFRSIDFIV
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