No dividends from Harmony this year as it looks for buyers for some or all of its assets

Harmony Energy Income says its has cancelled the (previously postponed) first FY2024 quarterly dividend and does not anticipate being in a position to declare a dividend in line with the new policy for the remainder of the current financial year, although based upon current market forecasts it is anticipated that a covered dividend will be paid in 2025.

In February, the board instructed the investment adviser to explore the potential for one or more asset sales. Having received informal expressions of interest from numerous third parties, the company has now engaged JLL with a mandate to seek offers for some or all of its assets, in order to maximise value and demonstrate the continuing disconnect with the share price. Any decision to divest the entire portfolio would only be taken in the event of a deliverable and credible offer being received at pricing which the board considers attractive to shareholders, and any such sale would be conditional upon shareholder approval.

In the event that the process results in the sale of one or more assets (but not the entire portfolio), the proceeds would be applied, at least partly, to reduce gearing. Depending on the level of proceeds, the board will also consider buying back shares if the significant discount to NAV persists.

[When the battery funds started to warn about the problems they were having with earning revenue (see our story here), we wondered whether an opportunistic bidder might emerge. So far, despite the prevalence of some really hefty discounts – almost 59% in Gresham House Energy Storage’s case and over 54% for Harmony – this has not happened. However, we still wouldn’t rule it out, especially since the Harmony board is actively soliciting bids. That does not necessarily mean that Harmony will end up being the target.]

Operational update

In an operational update covering the three months ended 30 April 2024, there is some better news in that revenue was up 48% over the previous quarter, driven by increasing wholesale spreads and increased occurrence of negative wholesale power prices.

The NAV has fallen by 7.5% to 96.21p. The decrease was driven by a reduction in third-party revenue forecasts. The company is expecting a 17% reduction in modelled revenue between 2024 and 2029, compared to the assumptions used in the 31 January 2024 NAV update.

There is a new dividend policy that promises to distribute a minimum of 85% of operational free cash flow.

Target commercial operations dates for the three remaining battery energy storage projects in the portfolio have been pushed back slightly. The projects are now expected to commence operations in Q3 2024. In respect of the Hawthorn Pit and Wormald Green projects the company has begun claiming liquidated damages from its contractor to compensate for lost revenue.

HEIT : No dividends from Harmony this year