Harmony Energy Income Share Discussion Threads

[cc2014] 23/8/2024 11:09

Based on today's price action it appears I am in a totally different place in relation to HEIT's performance than the market.

It made a loss in the quarter and will make another loss next quarter.
Further it hasn't generated enough cash to cover the interest payments and won't next quarter either. I suppose that is not new news.

I cannot actually anything positive in today's statement other than the reassurance that the remaining two assets will be energised in September or thereabouts. And if that is sufficient to move the share price up 8% I need to pack in investing and go find a beach.

[nickrl] 23/8/2024 09:32

@CC2014 nor any mention on the prognosis for the dividend being reinstated anytime soon. Anyhow they look close to finally getting last two assets commissioned which is essential as they have T-1 capacity contracts that kick in on 1st October. Looking at ability to cover a divi isn't easy with these constructs but the opcos in a full year at c50k/MW/yr would provide 20m of revenue. We know 9m of that is going out the door on debt at c1.5m on inv mgr fees. In HY report they also refer to SPV costs? (not explained presumably opex costs for running a site ie land rent, insurance and looking after batteries). This was at a run rate of 12k/MW/yr so that rolled across whole portfolio is 4.8m/yr. There there are HEIT costs - what are they? anyhow presuming there not one offs for buying developments off Harmony thats another 1m. So there is potential for free cash of £2.7m at 85% available for divis or c1p/share. If thats correct 50p is too high but of course very sensitive to what the revenue run rate is but needs to be >60k/MW/yr to get a 5% yield on current share price

Of course the other side of the equation here is can they sell assets at NAV and thus improve the balance sheet? Thats probably yes as any buyer gets an asset already connected to the grid and not left sitting around for a long period of time. So am feeling tempted at sub 50p to take up a few.

[cc2014] 23/8/2024 06:55

hmm. No mention of the balance sheet at all in the update

Operating free cash flow of 0.72p based on 277.5Mw

Scale up to 395.4Mw would given 1.03p per share.

Debt service and fund expenses of 1.42p per share.


I accept wind was low but even so. If you can't cover your operating expenses, then an asset sale is desperately needed.

[nickrl] 10/7/2024 22:18

Couple of intersting articles on Modo.com. The first is an overview of June which shows a bounce back from Mays reduction to 99k/MW/yr (excl CM) across the BM registered portfolio. HEIT will have done marginally better having 2hr batteries. Interesting that frequency response services has increased considerably looks like BESS providers are shifting to trading in wholesale mkt reducing units available for frequency response so prices going up. So far so good but 2nd article is about capacity or rather the significant shortfall in Q2 vs what was planned to be commissioned leaving 700ish MW to be deferred into Q3 or later. So we will have to see if pricing pressure returns as and when these assets come on line.

[cruelladeville] 03/7/2024 15:50

I agree. The assets are pretty much state of the art for now. And to build the portfolio today given lack of grid connections, increases in raw materials and construction costs, HEITs assets look pretty cheap to me. Hence why I'm wondering about sales progress. I've thought for a long time now that Harmony as a business is too small to survive on it's own. But there's no doubting the quality of the portfolio.

[nickrl] 03/7/2024 14:54

@CDV silence doesn't mean informal conversations have taken place. HEIT has the best 2hr portfolio in the UK currently but there not going to give it away.

[cruelladeville] 03/7/2024 13:20

Doesn't look to me like anyone is falling over themselves to buy HEIT's asset portfolio?

[nickrl] 01/7/2024 18:16

@erstwhile im not sure its amortising debt but it does have this qualification that my minimise how much can be paid out in dividends

"The structure allows for voluntary prepayments during the term (subject to a fee) and for cash sweeps in favour of the lenders in the event of material revenue outperformance above pre-agreed thresholds, enabling an acceleration of de-gearing in a cost-efficient manner whilst also reserving operational free cash flow for shareholder distributions"

[nickrl] 28/6/2024 10:28

Interims paint a picture of woe in getting the final sites energised and will drag on into Q3 now.

Looking ahead when is this going to generate enough free cash to fund the dividend remains uncertain - they say 2025 maybe. So extrapolating their table on income and assuming they maintain 57k/MW/yr (bess analytics says its 60k/MW/yr) that will generate 23m/pa. Currently the running costs at SPV level are taking 42% of revenue although given round trip efficiency is 88% that seems quite high to me but i will have to interrogate heit and see if they explain more. If correct leaves 13m of which 9m will go on interest charges. Then inv mgr wants their cut 1.8m directors 0.3m other exp although they ought to full away with full buildout. So maybe 1-1.5m free cash so less than 1p/share. What i might be missing here is that the above doesn't fully reflect the T-4 contracts commencing from October which would add in another 2m so maybe 3p/share is a possibility. Still fee share price is overvalued even on that basis but not by much.

[cruelladeville] 21/6/2024 15:48

Life after death here? Not so often shares go up.

[cruelladeville] 10/6/2024 18:21

Thanks. I've read the RNS again. Yes, you're right, the for sale has gone up. It might not be a bad thing entirely. Building BESS from a standing start now involves long waits for grid connections and much more expensive construction materials and labour costs. So a ready built set of almost new operating assets of 2 hour duration should be an attractive purchase. Certainly, for a pragmatic management, a complete portfolio sale should get some consideration. Anyway, HEIT is too small to survive long term on it's own, I think.

[nickrl] 10/6/2024 17:37

@CDV they did indicate this in the 30/5 RNS was a possibility if the price was right. Octopus are by far and a way the biggest domestic supplier and they are big on green credentials as well so batteries give them a way of ensuring they can time shift renewable energy when its over provided to being under provided so are credible bidder. The fact remains though is there is a huge pipeline of assets coming on line this years and this includes the mega batteries many of which have been strategically positioned to hoover up excess wind energy that currently gets constrained off so i would reckon Octopus will also be looking at those assets as potential providers.

[cruelladeville] 10/6/2024 16:07

Article in Citywire talking about Octopus and GRID says HEIT has put itself up for sale. The whole portfolio. I can't see anything from the company about that? Is it press speculation or something more solid?

[cc2014] 30/5/2024 08:38

It's the same issue as GRID. Until they get the remaining 3 assets on line generating revenue, the cashflow isn't enough to support a dividend.

[robertspc1] 30/5/2024 08:33

Interesting RNS. With the shares trading at half the latest reduced NAV, all the assets are on the block. That should be enough to tempt one of the larger trusts or a private asset manager to table a sensible bid. Not exactly great timing to sell but sector consolidation makes a lot of sense

[nickrl] 30/5/2024 07:52

So HEIT following in GRID footsteps and declaring no divi for 2024 now but expecting to be able pay out in 2025. Not really sure what is going to change over the next 6mths to improve the revenue position given what they are now saying about forward energy forecasts. Certainly taking a harsher line than GRID. They tell us that 100k/MW will support 8p divi which is useful to know but need to back fit the data.

They are soft marketing the portfolio and looks like if someone makes a sensible offer they will liquidate the lot.

[cc2014] 29/5/2024 19:07

That seems quite an aggressive move when I look at their website. I wonder if there is more to it than meets the eye

[nickrl] 29/5/2024 16:43

Primestone capital up 5 to 10% im guessing picked up someone else's holding.

[cruelladeville] 29/4/2024 18:48

Not understanding why GRID and HEIT share prices have moved in opposite directions?

[cruelladeville] 29/4/2024 10:39

All things considered, not a bad set of results by GRID. Hoping for at least as good to come from HEIT given their higher duration portfolio.

[cc2014] 21/4/2024 10:10

Additionally it seems unlikely they fill and discharge the batteries to 100 and 0 unless the spread was more like 100 due to battery degradation

[nickrl] 20/4/2024 22:21

@llef thats per MW though?

Would say that £30/MWh spread twice day isn't viable in the current market as when renewables have low penetration the spread closes considerably. They can get more in the BM if called on but that is the problem currently albeit improving.

[llef] 20/4/2024 16:37

@nickrl, ok thanks.

Just made a back of teh envelope calc, if you have a 2 hour battery, and charge o/n and release in morning peak, charge in pm and release in evening peak, and you make 30 quid margin each time, and you do that 365 days a year, then you generate 2*30*2*365=120*365 = £43,800 a year.

That would seem to me, to be as good as it could get for battery trading?

Would that on its own, be sufficient for HEIT to build out its pipeline, pay interest and pay a dividend?