Harmony Energy Income Share Discussion Threads

[nickrl] 27/1/2024 18:19

@CDV according to other forums Jefferies put out a note on UK BESS can't access it but other sites suggest none of the trusts can cover their dividends and worse they say HEIT can barely cover its costs. For sure ancillary services income has been trashed from the heady days a few years back but BESS are able to access the BM now and the changes to dispatching mechanism has markedly lifted them being used. Then they have wholesale mkt which is pretty easy to exploit by buying low overnight as to how well they can sell into it as newcomers im not sure. Personally im not sure its as bleak as the Jefferies note says but without seeing its of course impossible to understand how they've arrived at this view.

Given the significant price movement you would have expected any of them to put out an RNS.

[cruelladeville] 27/1/2024 07:40

Recent Citywire article seems to have contributed to the share price rout here and elsewhere. Citywire seem to be saying HEIT's income stream is just covering costs and dividend cover is zero. I find this very hard to believe? Surely, company would telling this to shareholders, but they're silent. What to make of it?

[orm5] 25/1/2024 20:04

Hi all, what investment platform do you use to buy HEIT? I have Barclays and it doesn't show, same with GRID

[cc2014] 24/1/2024 15:47

Thanks Nick. I hadn't realised it was ancillary services only. It puts a different flavour on the numbers.

The thing is however you look at it, the problem must be UK specific because HEIT and GRID are down 5% today whereas GSF is very slightly up.

My suspicion is that GRID and HEIT should likely bounce from here but whether it will be a DCB or whether the bounce will hold I'm not sure.

[nickrl] 24/1/2024 15:34

@CC2014 interesting link i wint go into whether the investments represent vfm anyhow the 2Gwh is ancillary services which is why BESS need the income stream from the BM and arbritage trading in wholesale to be viable now. Both will generate income but as i say its not easy to work out to what level and im waiting on grid/heit to give an update before i dip my toe in here albeit the drop iver last couple of days is giving protection if divis are pared back.

[cc2014] 24/1/2024 13:36

Of course the challenge is figuring out how much is in the price.

[cc2014] 24/1/2024 13:16

I have posted this elsewhere


Figure 6 is interesting.

The annual demand forecast for stationary storage for 2024 is 2GWh
The same thing for 2026 is 4.2GWh

Modoenergy shows the installed capacity now at 4.6GWh. I.e. double what we need now and already enough to go right through to 2026.


To add to this the additional capacity that is planned to come on stream in Q1 alone is about another 1GWh. (about because I haven't written down the figure but it's about right). Everyone knows one third ish of that will be delayed into Q2 due to grid connection delays.


Which is why the share price is taking a beating on GRID and HEIT as there is too much battery storage in the UK relative to wind/solar.


For info GSF is different because only 19% of it's revenues come from the UK and their buildout continues to be focussed outside the UK where there is money to be made.

[nickrl] 24/1/2024 12:55

Broad brush articke across the infra space and i agree it applies equalky to the likes of HEIT/GRID but as per my ramble avove i believe uk BESS assets have sectir specific issues although probably not well understood outside of their inv mgrs.

[pottsypotts] 24/1/2024 11:53

Sector-specific criticismIf there is a sector criticism it is companies themselves are not being proactive enough in addressing the extent of discounts. The few asset disposals seen are confirming valuations at book value or modest premiums. Price weakness is in part down to supply and demand. The sector has raised large amounts of capital in recent decades. Meanwhile, cash and especially low-coupon gilts have encouraged multi-asset fund redemptions. A static supply and falling demand preys on prices.Yet investors have seen little by way of asset disposals to help fund meaningful share buyback programmes (including tender offers) and the return of capital to shareholders. Boards and managers, particularly of the larger companies, could do more in the interests of shareholders. Confirmation of book values being achieved would by itself help reassure sentiment. Otherwise, takeovers are the only catalysts. While straws in the wind suggest hope, more self-help is needed.

[pottsypotts] 24/1/2024 11:52

Sentiment versus fundamentalsHigher interest rates and gilt yields are competing for the attention of income-seeking investors, while higher discount rates that chip away at estimated asset values are hurting. The mantra 'higher for longer' has cast a long shadow – especially as the sector was previously considered a defensive asset. This is even though the theoretical erosion of net asset values (NAVs) courtesy of higher discount rates has been largely marginal, certainly when compared to share price declines.Sentiment has not been helped by governments appearing to temper their net-zero policies in the face of growing electorate scepticism about costs. This is at a time when energy security considerations following Ukraine are seeing new oil and gas projects being approved. News that the 1.4-gigawatt Norfolk Boreas offshore wind farm and two New Jersey wind projects have been shelved on grounds of high construction costs and poor profitability, the latter involving a $4bn (£3.3bn) impairment, have hardly been reassuring.To add to the woe, there are specific investment trust headwinds involving cost disclosure. An overzealous interpretation of regulations by the various authorities has resulted in companies having to roll up their corporate costs (administrative, finance, etc) with their fund managers' charges when declaring an overall figure, even though share prices reflect such information. Trusts managing costly assets such as renewable energy assets look especially expensive, and so are being shunned by wealth managers and platform providers alike.Yet I suggest sentiment is unduly bearish. For example, it is underestimating the extent to which many companies' strong revenue correlation with inflation will temper concerns over time about higher discount rates impacting asset values. Already, the asset sales there have been have seen book values achieved – and more. Meanwhile, the inflation-assisted cash flow very much remains real – and sustainable. It is currently helping to fund investment, increased dividends (which are making for attractive yields) and the smattering of share buybacks.And while governments may be tinkering somewhat with the pace of their climate change policies, the momentum behind the net-zero agenda cannot be halted. The evidence that we need to adopt more environmentally friendly policies is unquestionable, as previous columns have alluded to. There will be bumps in the road. Projects or policies will be abandoned or diluted. But this is a journey an increasingly large body of opinion recognises needs to be travelled – as is perhaps best illustrated by the Inflation Reduction Act in the US.As for the investment trust cost disclosure issue, Baroness Sharon Bowles, Baroness Ros Altmann and myself are working together with others, both above and below the radar screen, to obtain a speedy and just outcome. It is accepted within the corridors of power, including by the chancellor and economic secretary, that the double counting of costs is hurting the industry, does not happen in other countries, and is hindering investment in sectors such as renewable energy and infrastructure. A constructive dialogue is taking place.

[pottsypotts] 24/1/2024 11:28

I am not a subscriber to IC

[raymund] 24/1/2024 11:02

Many thanks pp for IC link. Any chance of posting full article for non IC subscriber?

[nickrl] 24/1/2024 10:39

@pottypots can't read all that article what are they saying?

As i say revenue stream is being squeezed currently especially from ancillary services which initially were very profitable fir the BESS providers. Wholesale arbritage should be worthwhile although exactly what delta they need on power prices to make that worthwhile im not sure. The ESO changes to the Balancing Mechanism will also drive throughput but my observation is the new OBP is instructing lots of BESS assets with small quantities but that should change when they remove the 15m restriction.

My biggest reservation is the amount of new build out in BESS means alk the players want a piece of the action and thats what drove down pricing in ancillary mkts over last year. So i reckon divi will come under pressure here and at GRID and how will mkt react to that?

New atl

[pottsypotts] 24/1/2024 09:34

Good article here explaining the falls in this sector I am tempted to buy in a bit more as looking long term for the dividends https://www.investorschronicle.co.uk/ideas/2023/11/15/why-renewable-investment-trust-doom-and-gloom-is-overdone/#:~:text=Renewable%20energy%20and%20environmental%20investment,headwinds%20have%20added%20to%20concerns.

[cruelladeville] 23/1/2024 17:07

Good question, GRID share price has dropped significantly for no real reason this month. It seems it has spread to HEIT now. I have no idea what's going on.

[dickiehh] 23/1/2024 13:30

Wtf is going on!

[pottsypotts] 23/1/2024 12:41

What source are you using to evaluate this as you seem pretty clued up

[nickrl] 23/1/2024 12:11

BESS income stream isn't looking good with ancillary services clearing at ever lower prices means that they need the balancing mechanism and wholesale market to drive revenues. Yes the revised BM dispatch algorithms is certainly boosting the use of batteries but there are a lot BESS assets now competing in that market and the other factor that maybe become a longer term issue is the batteries are being cycled more frequently so could undermine durability over the longer term. Although there are further changes coming that will remove the short term restriction (15mins) on use of BESS that may benefit the longer run duration providers.

As i see it they need 13m for the 8p divi have at least 100m at c8% loan cost so another 8m then Inv Mgr wants their cut c4m although with NAV dropping that may help. So are they generating 25m income out of these assets is hard to value as like GRID they don't give much away on operational performance of each asset. You can look at Modo and get an idea of run rate/MW but unless you know how much energy has been put into the grid you don't know what they are actually earning. The other problem is the trading subsidiaries accounts are always so out of date that they don't help either.

Everything has its price but will sit on fence until the next trading update.

[pottsypotts] 23/1/2024 11:01

Anyone still a holder of these like moi from the IPO, down now to near the year low

[nickrl] 30/11/2023 09:33

Latest NAV update sees the ship steady on NAV. Certainly cant see share price moving back further with their commentary about revenue streams still feeling the pressure on pricing and that even their more lucrative dynamic regulation income likely to be subject to downward pressure from another change of approach by ESO. The upside is the new bidding system for the Balancing Mkt should increase this revenue stream and BESS are in pole position to exploit the spread on electricity prices through the day.

[pottsypotts] 14/11/2023 14:16

Wonder if this is currently helping the share price upwardsSaw it on another boardhTtps://www.current-news.co.uk/battery-wholesale-trading-revenues-reach-highest-level-since-2022-in-october/

[cc2014] 23/10/2023 08:23

It's like they've all been told to buy some or the company as some others do recommend all directors hold a minimum amount and it's just been discovered they don't.

Frankly if not one of them has bought more than £2k it kind of suggests to me they have little confidence in HEIT.

[hugepants] 23/10/2023 08:07

5 directors collectively buy what, 13,000 shares? Not exactly a vote of confidence.

[nickrl] 18/10/2023 20:38

@CDV thats GRID trying to talk their share price back up to a degree as that info is just confirming what the ESO has already said would happen. Also you need the asset in the Balancing Mechanism to be able to participate that said it should certainly improve revenue for all the BESS suppliers but might end up like ancillary services and prices are driven down due the amount of batteries competing in that space. They will need to balance off not over cycling them in pursuit of revenue.

[cruelladeville] 18/10/2023 16:00

I expect arbitrage to be highly profitable this winter. And even more so as wind generation gets ever greater. The wind doesn't care.