TIDMHEIT
RNS Number : 1376V
Harmony Energy Income Trust PLC
30 November 2023
30 November 2023
Harmony Energy Income Trust plc
(the "Company" or "HEIT")
Portfolio Update and Net Asset Value
Harmony Energy Income Trust plc, which invests in battery energy
storage system ("BESS") assets in Great Britain, announces its
unaudited Net Asset Value ("NAV") update, together with a portfolio
and operational update.
Highlights
-- 2 pence per Ordinary Share dividend was paid on 29 September
2023, meaning the Company has distributed 75% of the 8p target in
relation to the Financial Year 2023, in line with expectations.
-- The unaudited NAV as at 31 October was GBP262.12 million, or
115.40 pence per Ordinary Share, an increase of 0.61 pence per
Ordinary Share (+0.53%) compared to 31 July 2023.
-- 99 MW Rye Common project sold on 1 September 2023 at 1.5 per
cent. premium to carrying value (as at 30 April 2023, as per the
Company's interim results. Project sold at "shovel ready"
status).
-- Bumpers and Little Raith projects (combined 297 MWh / 148.5 MW) energised in October 2023.
-- As previously reported on 1 September 2023, the Company
procured a T-1 Capacity Market contract via the secondary market
booking GBP403k of contracted income - factored into this NAV
update.
-- Post period-end, additional T-1 Capacity Market contract
procured via the secondary market, creating a further GBP324k of
contracted revenue (not incorporated into this NAV update).
Portfolio Update
The Company's portfolio consists of eight 2-hour duration BESS
projects totalling 790.8 MWh / 395.4 MW (the "Portfolio"), of which
555 MWh / 227.5 MW (70% of the Portfolio) is operational.
The operational capacity of the Portfolio more than doubled
during the reporting period with the energisation (ahead of
schedule) of Bumpers and Little Raith (combined 297 MWh / 148.5
MW). The Bumpers project is the Company's largest BESS project, and
the joint-largest in Europe (by MWh), being 2 MWh larger in
capacity than the Company's Pillswood project. The Company now owns
two of the three largest operational BESS assets in Europe (by
MWh). The Rusholme project (70 MWh / 35 MW), has completed BESS
installation (defined as "Cold Commissioned") but grid connection
works continue to be delayed, with the modelled programme now
pushed out to early Q2 2024. The Wormald Green and Hawthorn Pit
projects have recently taken delivery of the first Envision battery
modules.
From 1 October, the Pillswood, Broadditch and Farnham projects
began to benefit from contracted T-1 Capacity Market payments, in
line with modelled cashflows. As reported in the Portfolio Update
published on 1 September 2023, early energisation of Little Raith
and Bumpers enabled the Company to procure a T-1 Capacity Market
contract via the secondary market to the value of GBP403k, now
factored into the NAV for this period. Post period-end, the Company
has procured another T-1 Capacity Market contract, realising a
further GBP324k over 11 months from November 2023 (to be factored
into the Company's NAV in the next update). Combined, the two
contracts represent GBP727k of additional contracted revenue for
the Company in relation to Financial Year 2024.
Operationally, the Portfolio continues to perform well relative
to peers (on a GBP/MW basis). As at the date of publication of this
Factsheet, the Company's Pillswood (Phase 1) project ranks #1
year-to-date (Source: Modo Energy).
Project MWh / MW Location Target Commercial Status
Operations Date
(1)
Pillswood 196 / 98 Yorkshire Operational Operational
----------- ------------- ----------------- ------------------
Broadditch 22 / 11 Kent Operational Operational
----------- ------------- ----------------- ------------------
Farnham 40 / 20 Surrey Operational Operational
----------- ------------- ----------------- ------------------
Bumpers 198 / 99 Bucks. Operational Operational
----------- ------------- ----------------- ------------------
Little Raith 99 / 49.5 Fife Operational Operational
----------- ------------- ----------------- ------------------
Rusholme 70 / 35 Yorkshire Q2 2024 Cold Commissioned
----------- ------------- ----------------- ------------------
Wormald Green 66 / 33 Yorkshire Q2 2024 Under Construction
----------- ------------- ----------------- ------------------
Hawthorn Pit 99.8 / 49.9 County Durham Q2 2024 Under Construction
----------- ------------- ----------------- ------------------
Total 790.8 /
395.4
-----------
(1) Dates are based on calendar year
External Debt Update
The Company currently benefits from GBP130 million of senior
debt facilities, consisting of a GBP20 million revolving credit
facility (unhedged) and a GBP110 million term loan facility (hedged
by way of an interest rate cap of 5.25% per annum). The high rate
of project construction completions during the reporting period has
meant that the Company has accelerated the rate of debt drawdowns
from such facilities. As at the end of the reporting period, total
debt drawn equated to GBP95 million, including GBP10.6 million
drawn under the revolving facility. This equates to 36% of current
NAV.
Market Commentary
Average GB BESS revenues were mixed over the quarter. Day-ahead
wholesale power market spreads narrowed to more seasonal norms in
August before increasing again in September and October (by 25% and
32% respectively). Continued depressed pricing in the ancillary
services markets encouraged greater participation (>50% of
Portfolio revenues during the period) in arbitrage revenue
strategies (wholesale trading and Balancing Mechanism), and it is
well documented that longer-duration BESS outperforms
shorter-duration BESS in such conditions. Of the ancillary
services, the preferred strategy of the Portfolio has been the
Dynamic Regulation ("DR") service (c.33% of Portfolio revenues
during the period). As previously reported, 2-hr duration BESS can
dedicate a greater proportion of their MW capacity to the DR
service than shorter-duration BESS, and DR has historically cleared
at a consistently higher price than other ancillary services. Using
a combination of DR and wholesale trading is a common strategy for
the Portfolio. DR provides opportunity for the BESS to either be
paid to charge or charge for free, and this in turn provides
opportunity to maximise the spread when the stored power is
exported later in the day via the wholesale markets. Post-reporting
period, the recent introduction by National Grid ESO of the
Enduring Auction Capability is expected to make DR less valuable.
However, the planned launch of the Open Balancing Platform by
National Grid ESO in December 2023 is expected to significantly
increase trading volumes for BESS via the Balancing Mechanism. This
combination should result in an increased weighting towards
arbitrage as the principal revenue strategy for the Portfolio. From
October, the Company's first T-1 Capacity Market contracts began
delivering additional revenues to the Portfolio. See the Company's
published Quarterly Factsheet for a graph showing average monthly
revenues by BESS duration across the GB fleet during 2023
(including the impact that a T-1 Contract would have had on such
revenues), and a pie chart depicting the proportionate levels of
revenue earned by the Portfolio across various strategies during
the period.
NAV Update 31 October 2023
As at 31 October 2023, the Company's unaudited NAV was
calculated to be GBP262.12 million (115.40 pence per Ordinary
Share). This represents an increase of 0.61 pence per Ordinary
Share (+0.53%) compared to 31 July 2023. The principal positive
drivers were (i) the roll forward effect as "under construction"
projects become closer to revenue generation (+2.94 pence per
Ordinary Share); and (ii) the energisation and subsequent
revaluation of Little Raith and Bumpers projects (combined 1.31
pence per Ordinary Share). Negative factors impacting the NAV
included (i) a further revision to the energisation date for the
Rusholme project together with one month extensions to the
construction timetables for Wormald Green and Hawthorn Pit
(aggregate -2.12 pence per Ordinary Share); and (ii) payment of the
quarterly dividend (-2.0 pence per Ordinary Share). Revenue
assumptions and discount rates have been revised, as further
detailed below.
Revised Revenue Assumptions and Discount Rates
Having analysed updated long term revenue forecasts published by
independent market commentators, and as agreed with the Company's
independent valuer, the Company is publishing updated forward
looking revenue assumptions used for performing asset valuations.
Compared to previous assumptions, this translates to a marginally
positive impact on NAV (0.01 pence per Ordinary Share), with
slightly lower headline revenue figures balanced against less
degradation losses over the long term. In addition, whilst the
discount rates applicable to "under construction" (10.50%) and
"operating" (10.00%) assets have not changed, the independent
valuer has recommended the introduction of a new discount rate
category of 10.25%, to apply to newly energised assets (less than 3
months operating track record). This withholds an element of
construction risk whilst the projects prove an absence of technical
teething issues over the initial 3 months of operations.
The Company's factsheet for 31 October 2023 (including, inter
alia, a NAV bridge and detailed long term revenue, cost and
inflation assumptions) is available on the Company's website at:
https://www.heitp.co.uk/investors/results-reports-and-presentations/
Norman Crighton, Chair of Harmony Energy Income Trust plc,
said:
"We have previously commented on the significant achievement by
the Investment Adviser's delivery team in energising 555 MWh /
277.5 MWh of the Company's assets by the second anniversary of IPO.
Having the third largest operating BESS portfolio (by MW) in GB
means the Company will make a material contribution to GB's energy
security and network stability during the coming winter months and
beyond".
END
For further information, please contact:
Harmony Energy Advisors Limited
Paul Mason
Max Slade
Peter Kavanagh
James Ritchie
info@harmonyenergy.co.uk
Berenberg
Ben Wright
Dan Gee-Summons +44 (0)20 3207 7800
Stifel Nicolaus Europe Limited
Mark Young
Edward Gibson-Watt
Rajpal Padam
Madison Kominski +44 (0)20 7710 7600
Camarco
Eddie Livingstone-Learmonth
Georgia Edmonds +44 (0)20 3757 4980
JTC (UK) Limited
Uloma Adighibe
Harmony.CoSec@jtcgroup.com +44 (0)20 3832 3877
LEI: 254900O3XI3CJNTKR453
About Harmony Energy Advisors Limited (the "Investment
Adviser")
The Investment Adviser is a wholly owned subsidiary of Harmony
Energy Limited.
The management team of the Investment Adviser have been
exclusively focussed on the energy storage sector (across multiple
projects) in Great Britain for over seven years, both from the
point of view of asset owner/developer and in a third-party
advisory capacity. The Investment Adviser is an appointed
representative of Laven Advisors LLP, which is authorised and
regulated by the Financial Conduct Authority.
Important Information
This announcement does not constitute an offer to sell or the
solicitation of an offer to acquire or subscribe for shares in the
Company in any jurisdiction. This distribution of this announcement
outside the UK may be restricted by law. No action has been taken
by the Company that would permit possession of this announcement in
any jurisdiction outside the UK where action for that purpose is
required. Persons outside the UK who come into possession of this
announcement should inform themselves about the distribution of
this announcement in their particular jurisdiction.
This announcement contains (or may contain) certain
forward-looking statements with respect to certain of the Company's
plans and/or the plans of one or more of its investee companies and
their respective current goals and expectations relating to their
respective future financial condition and performance and which
involve a number of risks and uncertainties. The Company's target
returns are a target only and there is no guarantee that these will
be achieved. This Company cautions readers that no forward-looking
statement is a guarantee of future performance and that actual
results could differ materially from those contained in the
forward-looking statements.
It should also be noted that any future NAV per Ordinary Share
announced by the Company in due course will, in addition to the
matters described in this announcement, also be affected by
valuation movements in the Company's Portfolio and other factors
including, without limitation, purchase prices of battery energy
storage systems and components, project development and
construction costs, income and pricing from contracts with National
Grid ESO and other counterparties, the potential for trading
profitability in the wholesale electricity markets and/or Balancing
Mechanism, performance of the Company's investments, and the
availability of projects which meet the
Company's minimum return parameters in accordance with the Company's investment policy .
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END
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November 30, 2023 02:00 ET (07:00 GMT)
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