MIDAS SHARE TIPS UPDATE: Harmony Energy Income Trust is a well-run business in a fast-growing industry
Energy storage is a complex business. Vanadium flow batteries are essential for long-term storage but short, sharp bursts of energy are also needed and that is where lithium-ion batteries come into their own.
Harmony Energy Income Trust builds and operates lithium battery storage plants, capable of storing and discharging electricity for up to two hours at a time.
The company floated on the stock market in October 2021 at £1 a share, promising to deliver six sites by the end of 2023 and pay an 8p dividend too. It is on track to achieve both ambitions.
Complex: Harmony Energy Income Trust builds and operates lithium battery storage plants
The company’s financial year runs to October 31 and dividends are paid quarterly. Managers Paul Mason and Max Slade have already paid out 4p for the six months to April 30 and are set to shell out another 4p for the rest of this financial year, payable in the autumn and early in 2024.
Operationally, three storage plants are already up and running, including Pillswood near Hull, the biggest battery storage facility in Europe.
Add in another three, set to go live this year, and Harmony’s plants will be able to power a million homes for two-hour spells.
The time period matters as demand for power tends to surge between 5pm and 7pm, when millions of people are coming home from work, putting the kettle on, having supper and watching TV.
Harmony has a further three projects in the pipeline too, which should come on stream next year, taking total capacity to nearly 500 megawatts, or enough to power more than 1.5 million homes over two hours.
The group’s plants are strategically located in areas where they can be plugged in to local networks swiftly and cost-effectively.
Most batteries are made by Tesla, which has a reputation for quality, despite its idiosyncratic boss, Elon Musk.
The batteries are safer than those of many competitors and storage capacity is also longer than that of most rivals.
Over time, Mason and Slade are keen to expand Harmony Energy, constructing more plants and increasing the amount of power at their disposal.
As the business grows, its valuation and share price should rise, along with the dividend. Interim results this week should reflect optimism about the future.
Harmony is targeting 10 per cent total returns for shareholders, through a mix of income and share price growth.
This should be achievable, despite tough stock market conditions.
Demand for storage is growing, while Mason and Slade benefit from a close relationship with private investment firm, Harmony Energy Ltd, which has given them exclusive rights over projects with a combined capacity of one gigawatt.
MIDAS VERDICT: Harmony Energy Income Trust is a well-run business in a fast-growing industry. Midas recommended the shares at flotation, since when they have risen by 5 per cent to £1.05 and paid out a stream of dividends, with more to come. Existing shareholders should stick with the business. New investors could also find the current price attractive.
Traded on: Main market Ticker: HEIT Contact: harmonyenergy.co.uk or 01423 799109
