Harmony Energy Income Trust PLC (LSE:HEIT) shares fell 20% after it postponed payment of its first quarterly dividend for 2024, mirroring a move by battery storage peer Gresham House Energy Storage Fund PLC (LSE:GRID) earlier in the week as the revenue backdrop for battery energy storage systems (BESS) deteriorated recently.
Harmony distributed a final 8p dividend to shareholders in relation to the year ended 31 October 2023, in line with its stated dividend policy, but the scheduled 2p first quarterly distribution for the 2024 financial year was expected to be declared later this month and paid in March.
The decision to postpone was made by the board with support from the investment adviser, it said.
BESS revenues for the past financial year were "markedly lower" than the strong trading seen in the same period in 2022, the investment trust said, which was not unexpected, but "the scale and the speed of the reduction has exceeded market expectations".
With the short-term outlook remaining uncertain, the trust said it recognises the importance of dividends to shareholders and so is preparing to restructure its debt facilities, coupled with "one or more" asset sales to reduce gearing and then to fund future dividends
Lower revenues reflect the "saturation" of the UK BESS market, with a high rate of new assets coming on stream that has driven clearing prices to record low levels, further exacerbated by a narrowing in wholesale power price volatility and spreads, which more affects Harmony as most of its portfolio are 2-hour duration batteries.
Wholesale spreads in the 2023 fiscal year and the past three months have narrowed due to a reduction in natural gas prices, as well as Britain importing a large volume of energy from Europe via interconnections, while consumer energy usage has dropped due to high consumer prices, the company said.
Looking forward, the company said wholesale price spreads are forecast to increase this year as consumer energy recovers, and beyond as electrification of the heating and transport sectors continues.
Harmony also expects to benefit from more consistent use of National Grid Energy System Operator's Open Balancing Platform (OBP), which has faced "implementation issues" and been used only intermittently, despite it being designed to help National Grid ESO with its aim to operate a net zero grid.
Harmony stated that its operating portfolio, despite the above conditions, continues to outperform peers, with all of its five operating assets in the top-10 leaderboard for January 2024.