Harmony Energy Income Share Discussion Threads

[elbrus55] 14/12/2022 16:07

They've bought some physical assets mainly from tesla and got the permissions to install. It would now cost a lot more to buy this equipment and also have a very long lead time due to high demand. You can go on Tesla's website and see the current megapack price. It is not surprising somebody who is at the front of the queue for something now in high demand has done well.Energy prices have gone up, so their expected income stream has gone up. Everybody wants wind generation due to Russia and that means demand for storage. (This is why everyone wants these assets.)They are now partly online so some of the development stage risk has passed. Offsetting this you have the interest rate rises and corporation tax rate rises.The recent attempted share raise was a different class of share. It was designed so it wouldn't hurt the existing share class holders. It wasn't very attractive for new shareholders to join the back of the queue and market timing was bad/unfortunate.It is a fairly straightforward business to understand - read their reports.

[74tom] 08/12/2022 13:02

Curious to see this trading 25% above the placing price paid in October, particularly given they appear to have been looking to raise £130m and had to make do with just ~£14.9m pre placing costs...

So to summarise what's happened here since IPO;

They raised gross capital of £224m (likely £215m net) and used it to buy 6 BESS projects which are at various stages of completion, plus another 3 projects which they've reserved pending the need for more funding to build them...

In just over 12 months this work has turned the ~£215m into a NAV of £277m...so they've booked an unrealised gain of £62m.

As lurker5 pointed our earlier in this thread there appears to be very little publicly available information with which to reconcile this gain, however I would be very sceptical indeed at that kind of NAV change in such a short period of time.

The biggest issue is that these are very long term revenue streams, I think we can all be assured that the current European energy crisis will result in market reforms which ensure it's like never happens again. They will take a few years to implement, however it will mean energy costs will mean revert to historic averages in the medium term.

Furthermore, given this company intends to give away ~10p a year in dividends, I can't see the merit in it trading at such a huge premium to deployed cash, certainly not before it actually generates tangible revenues.

It will be interesting to see how it develops, but it all feels a bit 'ponzi' to me.

[cruelladeville] 07/12/2022 09:57

Indeed, one of the better recent IPO outcomes. A real shame the additional capital raise was attempted at exactly the wrong time for HEIT.

[pottsypotts] 06/12/2022 18:48

Was lucky as got these at the IPO so nicely up

[cruelladeville] 06/12/2022 09:28

On the back of positive sentiment in today's The Times. If they had written the article a couple of weeks ago, Times readers would have made a nice little profit as well as securing an attractive income stream.

[pottsypotts] 06/12/2022 09:05

Year high ticking up nicely

[cruelladeville] 22/11/2022 16:15

Great news! "Harmony Energy Income Trust brings Europe's largest battery energy storage system online".

[lurker5] 08/11/2022 13:58

Good to see someone on these boards who actually understands the sums behind any investment. Most boards are overwhelmed by what seem the innumerate and the gullible. Unfortunately, partly due to the fCA, such pi's have no source of objective opinion.

[cc2014] 08/11/2022 13:18

When there's lots of money trying to find a home people will buy anything. It's only when money starts to get scarce people start to look a bit harder at what's under the bonnet.

I have very many concerns about a number of the renewable funds which I've written about before on various threads. Mostly about buying at the top of the market and overgearing.

The thing is, what do you do? We are here to make money and I've made some good money this year owning renewables even though I was uncomfortable with the above and the discount rates used. As posted on here and elsewhere I've sold out of all of them now except AEET which provides debt rather than buying assets. Pass the parcel if you like.

[lurker5] 08/11/2022 02:05

Haven't looked at these sorts of investment so far. Now that I have, it seems to me the basis for the NPV valuations is incredibly vague - bearing in mind that the share price might track them to some extent, rather than to be based on the only solid thing investors can count on which is the expected dividend. I say vague (having done a lot of work over 10 years on NPV's - what they are and what they aren't) because we haven't beeen shown any 'financial model' of the sort the valuer says it has based its calculations on. That model will have a large number of unknowns in the revenue to be expected (in turn based on a fluctuating reserve and balancing market and electricity prices) and, not least, a variable discount rate which itself is always a matter of opinion. Thats apart from a methodology which in effect expects investors to pay 'upfront' for income arising how long into the future ? (we haven't been told) At the very least the valuer ought to say how the NPV's will vary according to key assumptions about the electricity market. How reliable is it to base forward NPV's on todays market, and todays level of competition among BESS's given the newcomers who are flooding in. Just look, for instance at the enormous 'uplift' shown in the prospectus part 3.3 over the build cost 'once operating'. It all smacks to me of the commercial property market of 20-25 years ago when investors were bamboozled by enormous 'uplifts' on completions based on expected rents which, due to competition and economic downturns didn't materialise.
Investors are being drawn to this 'renewables' opportunity at the moment, and the prospect of a 8% dividend next year. And for a time the shares should do well. But in the medium term I think investors might become more wary.

[nickrl] 17/10/2022 19:06

They are late to the party as Dynamic Containment prices have dropped already as more BESS have come on line but with 2hr batteries they will be more competitive in the wholesale markets.

[elbrus55] 17/10/2022 18:11

They have 3 schemes in the pipeline and some debt facilities?If they only get one development away,.won't it be a win for all? The existing shareholders will at best.nenefit from not having a poke in the eye. But it is better than nothing. M

[cruelladeville] 14/10/2022 11:52

Extremely unfortunate timing. They should have delayed the C share offer. Pantheon infrastructure binned theirs a couple of weeks ago. Wisely in my opinion.

[damp seaweed] 13/10/2022 15:51

They have raised £15m in their C share scheme. It certainly looks like a fail to me.

Though in fairness the timing couldn’t really be worse.

[damp seaweed] 13/10/2022 15:49

They seem to have raised £15m for their C share plan. They never mentioned a target. But it sure looks like a fail to me.

[james2019] 05/10/2022 19:41

They need cash to fund the projects that should deliver a high premium to current NAV when they come online. Still looks a lot better value than others in the market and I like the two hours/tesla products! I'm buying

[damp seaweed] 05/10/2022 16:05

True, But with a conventional placing there is usually a discount to the prevailing share price of the principal company / trust. And the costs of the fund raise is buried and shared across the total share capital.
In this proposal there is neither a discount nor the absorption of the cost of the fund raise.
Overall, as I expressed initially, I can’t see the attraction.
I’ll be interested to see if they can get away with it though ;)

[cruelladeville] 05/10/2022 14:36

I guess same applies to brokers who take on the share issue for their customers too.

[damp seaweed] 05/10/2022 14:32

I should also add that the cost of this PrimaryBid bid fund raise will be charged to the ‘C’ shares asset valuation. I can’t believe that cost will be negligible.

[cruelladeville] 05/10/2022 13:31

If the shares are trading at a discount to NAV then I agree with you. Seems unnecessarily complicated way to raise bew funds.

[damp seaweed] 05/10/2022 12:55

This ‘C’ share malarkey seems very convoluted. I really can’t see a good reason to buy into this ‘C’ offer if all I’ll probably get is a conversion on the basis of the ‘C’ NAV. Why not just buy the current HEIT shares at a ~3% discount to NAV.
Am I missing something?

[cruelladeville] 04/10/2022 16:18

OK, this bit - "The C Shares will convert into Ordinary Shares on the basis of a conversion ratio calculated in accordance with the Articles (the "Conversion Ratio"). The Conversion Ratio is the ratio of the net asset value per C Share to the net asset value per Ordinary Share as at the Conversion Calculation Date. The net asset values will be calculated in accordance with the Articles." I think that's OK as the shares will convert at NAV so you won't be buying extra shares at a premium to NAV? Right?

[cruelladeville] 04/10/2022 16:02

Thanks for the heads up. Time to have a read and decide whether or not to put a few more quid into HEIT.

[james2019] 04/10/2022 15:22

https://www.londonstockexchange.com/news-article/HEIT/primarybid-offer/15657592