Harmony Energy Income C share raises £15m against “a very challenging market backdrop”

Harmony Energy Income (HEIT) has announced the results of its C share issue that was announced on 28 September 2022 (click here to see our coverage of this). HEIT has raised gross proceeds for the C share issue of around £15m, which will be used to fund the acquisition of projects in its pipeline (totaling 182 MW / 364 MWh). It will also be issuing at least 7 million C shares (at an effective price of 100p per C share) as consideration shares to acquire projects in its pipeline. HEIT and its adviser have thanked investors for their support in what has been a very challenging environment (the issue had a maximum size of £130m). The issues around this were discussed in our recent QD view, which you can click here to read.

Right of first refusal

HEIT says that the fundraising will enable it to exercise its right of first refusal on the projects in its pipeline and will allow it to secure these at an attractive entry point. The acquisitions are subject to final due diligence and independent valuation, which will determine the acquisition value to be met through a combination of cash and additional C share issuance. HEIT’s investment adviser says that it has identified potential alternative funding options for construction, with the intention of progressing the projects within the existing grid energisation timeframes. This should the projects commence commercial operations in 2024.

HEIT’s portfolio

The new projects, when acquired, will increase HEIT’s portfolio to 9 BESS (battery energy storage systems) projects with a total capacity of around 500MW / 1GWh. The Company’s Pillswood project (99MW / 198 MWh) is scheduled to commence operations in November 2022 and is expected to be the UK’s largest operational BESS project by MWh.

Comments from Norman Crighton, HEIT’s chairman

“I would like to thank investors for all their engagement in the process and support for the proposition, whilst recognizing that the pressures from the market and economic uncertainty have severely limited their ability to commit capital currently. HEIT’s unique advantage of having a defined pipeline of an additional 500 MW / 1 GWh BESS projects with grid energisation timelines between now and the end of 2025 means it can continue to access very attractive 2-hour duration BESS projects which are not readily available on the open market at attractive pricing levels. The Company will now look to bring those projects into the Company’s portfolio in line with its right of first refusal.”

Comments from Paul Mason, Managing Director of Harmony Energy Advisors Limited

“It has been clear from our engagement with investors that there is consensus on the compelling case for acquiring the projects. We look forward to moving ahead with the projects.”

[QD comment: Given the turmoil in financial markets and the government’s latest U-turn, that is going to see it impose a windfall tax on renewable energy generators (despite the huge disincentive to invest this creates at a time when we need much much more renewable generating capacity) it is disappointing, but perhaps not surprising, that HEIT’s C share offering has raised just £15m. We are sure that the board, managers, and existing shareholders were hoping to see it grow by more, which would have been to the benefit of all stakeholders. The UK desperately needs more of the type of BESS systems that constitute HEIT’s pipeline and, if the current climate stops the market funding these sort of projects, society will lose as a whole. We hope that, as the dust settles, a more sensible energy policy emerges that will properly incentivise investment both in BESS systems, and renewable energy infrastructure more generally. If this proves to be the case, we hope that HEIT can return to the market in due course and expand. However, the greater risk, which has been seen in markets such as Spain, which changed the basis on which existing renewable energy investments were remunerated, is that the market takes a view that the rewards are no longer commensurate with the increased political risk and demands a far higher return – costing us all more in the long run. Cheap clean energy should be central to any developed country’s growth strategy and failure to manage this properly will put our chances of achieving our carbon reduction goals at serious risk.]

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