Harmony Energy Income Share Discussion Threads

[craigso] 10/12/2024 09:05

Nick,

I didn't manage to spend any time on the power trading side of the business, but I know that there is substantial value to be gained from trading a portfolio of different technologies - rather than just price-taking in the wholesale market and letting others set the price.

There is also value to be had from selling totally "green" electricity to end users - data centres being particularly sensitive about the source of their electrons and less concerned about price. (within reason)

All that is to say that the right buyer can extract far more value from BESS than somebody simply letting an algorithm bid BESS into the BM and/or wholesale market.

[nickrl] 09/12/2024 18:42

Current bessanalytics has the portfolio running at c70k/MW over last 30 days and at c60k/MW for the year. This data is pretty reliable as HEIT have all their assets in the BM. 60k/MW will allow c2-2.5p divi but still relatively low yield even at the depressed share price That said GRID suggest their assets (mostly outside of the BM) are doing quite nicely trading in the wholesale mkt so maybe more could be achieved.

So not sure why anyone would want this at more than 70p unless the sites have the opportunity for further augmentation and they have access to capital to do this.

[cruelladeville] 09/12/2024 08:25

I agree. Easy to understand why folks are sceptical here. I'm one of the sceptics. I have had enough of BESS and I will not be reinvesting the proceeds from a HEIT sale in other BESS business. I need 88p to break even on HEIT. Would be nice to get out from here anywhere near that.

[craffert] 08/12/2024 23:27

It's priced at 60p cos imvestors have lost their shirts here over the years, and don't believe anything positive that management are guidi as an outcome. We will find out who the top bidder is shortly enough, and the end game price

[craigso] 08/12/2024 13:17

I don't think a partial sale would last long either. Because it appears that more than 1 bidder has been doing due diligence on the whole package, they could easily go hostile if necessary.

Shareholders would obviously snap up any offer in the 70s-80s if the alternative was letting HEIT limp onwards after a partial asset sale. And once somebody goes hostile, the other interested parties might have a go as well.

But I don't want to get tunnel vision with dreams of a 50% profit in 2 months, and not spend some time thinking about why the market is still pricing this at 60p...

[stargazerspark] 08/12/2024 10:28

Given the trust is always sub-scale a partial sale is unlikely to last long.

As per GRID though, in the short term the manager has the power to make foolish decisions that exacerbate the short term problems.

The investment manager here could have brought in a new private investor at NAV some time ago and asked shareholders if they’d like the cash. Good outcome for all, but life is full of surprises.

[craigso] 08/12/2024 09:31

To get the share price into the 70s or 80s before year-end, we need confirmation that the company is selling itself whole.

I would love for the final price to be in the 90s, but 95p seems quite unlikely to me. I doubt they would reduce NAV to 88.5p if they expected bids in the 90s.

I assume that the 60p share price is covering for the possibility that HEIT only sells an asset or two to "prove NAV", instead of selling itself whole.

[cruelladeville] 06/12/2024 16:37

I hope you're right but those numbers look a bit ambitious to me. Delighted to be wrong though.

[craffert] 06/12/2024 16:32

Closed >6op. Predicting >80p before the year is out and 85p-95p end of story in Feb 2025

[cruelladeville] 05/12/2024 16:48

Closing at >60p for the weekend?

[craigso] 04/12/2024 12:04

All investments are based on an NPV of future cash flows - and the market price is a balancing mechanism for individual opinions of future cash flows and discount rates...

There's nothing fundamentally wrong with a symbiotic relationship. The developer can sell developed projects to a fund of supposedly patient capital, instead of selling projects to third parties. And investors can access an asset class that they would otherwise be unable to access directly.

The only problem is that stock market investors now apply a much larger risk premium to these assets than other funds / power companies do. It's no surprise to me, as a former power company executive, that individual investors are more scared of power price curves than power companies are.

And to its credit, HEIT - acting appropriately and independently of the "developer" - has decided to sell some or all of its assets to investors that have a different view of the appropriate risk premium.

[lurker5] 03/12/2024 17:50

An 'NAV' composed of the NPV of a stream of future revenue is an absurdly high price for an investor to pay 'up front' - but punters have been bamboozled by the industry into doing so. It is just the same as buying an annuity to get an income comprising return of the initial cost, plus an annual return equal to the discount rate used to calculate it. Why on earth would an equity investor hoping to profit from a rising share price do that ? He'd might as well buy an annuity from an insurance company where he'd be guaranteed a return, - dull and boring though it might be. The only way to make a profit from an NAV dependent share is where interest/discount rates fall, so driving up asset prices. The opposite is why HEIT and peers have crashed over the last two years. The other, 'sensible' way is to pay well under any stated NAV - and depend on a dividend. Why else did the originators of these EIT's hive the assets off and list as separate companies to draw in the naive and deliver a large 'development' profit for themselves ? Look them up.

[cruelladeville] 03/12/2024 09:22

A bit of profit taking here today.

[cruelladeville] 02/12/2024 16:09

I think I will be mulling over at what price I would be happy to accept for a HEIT portfolio sale. Last time I was faced with a takeover I thought about it and put a limit sell order with the broker which triggered at the price I was happy with. I didn't get as much as if I had waited for the end game but I was happy enough with a profit. Here it's different because I was a mug buying at IPO. I have had enough of BESS and I'm satisfied to be able to get out of here with a smaller loss than I'd anticipated a few months ago. Just need to think where to pitch a limit sell order that gets me out without losing too much if it's triggered.

[stargazerspark] 02/12/2024 14:34

Clearly there are no sellers today, smallish volumes for a 10% jump.

My thoughts on likely exit prices:
I would be surprised if the sales price came out materially away from the NAV value.
Given they have "real" numbers from a multitude of bidders to mislead the market would put the board at risk of regulatory action. The DD likely exposed flaws such as Opex optimism now corrected and set market DM rates, again now corrected.
I suspect the late-stage DD is focussing on the land lease agreements and other long-term contracts as well as technical site DD.

Risks to value are things like:
Something bad in the land lease agreements, ie access, planning breach, term
Technical flaws in the installations
Environmental breaches, such as incorrect drainage
Most of which are limited scope in the BESS space

If it were an audited NAV then I'd expect a % of deal failure, and the probability of scenarios involving the underbidders price being the best, therefore some upside potential. However, as unaudited the valuation will have faced less scrutiny so may or may not.

Shame we have to wait until January, I had been hoping for an early Christmas present. ..

[craigso] 02/12/2024 14:18

I think it's higher than 75p. It's hard for a Board to recommend a 75p bid when they just said NAV was 88.5p.

But what's potentially a more interesting question - should the share price get there before Xmas - is whether to sell in the market at 75p or wait until the bid process reaches its conclusion.

[sleveen] 02/12/2024 14:00

That's are more realistic price, should it happen.

[cruelladeville] 02/12/2024 13:28

Hmm. Starting to get interesting here. What's the betting on a take out price for all the assets of the company? 75p?

[craigso] 02/12/2024 11:20

Any "gambler" would flip coins all day if it were "win £2 on heads, lose £1 on tails".

The market seems to be waking up today to that possibility with HEIT.

[craftyspeculator] 29/11/2024 17:08

I'm new into HEIT. Everyone who invests in individual shares is a gambler. I just like the odds here for a win...the share price is already cratered and well below NAV, the future is quite bright for BESS in the UK as more renewables come on stream, and yet there is also the strong prospect of someone else reaching those same conclusion before end of January 2025 and paying 50%-70% more per share than the price today. I like that possibility.

[yump] 29/11/2024 16:56

I wonder if some of the optimistic first ever posts are from gambling traders.

They usually have big-up-me usernames!

[craigso] 29/11/2024 15:37

A couple more things have me scratching my head today...

1. Other ITs have said "we can't publish a NAV because of ongoing sales processes" (at least asset-by-asset NAVs) yet HEIT comes out and says 88.5p. I can only assume that it's - at least in part - a strategy to stretch final bids from the low 80s to the high 80s or 90s. They know indicative bids and can't possibly accept one in the 70s now after this update...

2. Why hasn't the market bid this up higher? Is it too small for any big money to bother analysing / stake building? We've heard nothing but good news about the sales process and, if sold, the price will definitely be higher than 55p.

In any event, I sold something else today to put more money behind my words. In two months we're more likely than not to get 75-90+p per share...

[cruelladeville] 29/11/2024 14:39

I hope you're right!

[craftyspeculator] 29/11/2024 12:32

I have a decent insight into the sector and am confident that there will be significant upside surprise in the final bid for this unique portfolio.