HARMONY ENERGY
INCOME TRUST PLC
Annual Report and Accounts
For the year ended 31 October 2024
Harmony Energy Income Trust PLC Annual Report and Accounts for the year ended 31 October 2024
Strategic Report
1 Overview
4 Chair’s Statement
8 Investment Adviser’s Report
22 Alternative Investment Fund Manager’s Report
24 Strategic Report
30 Environmental, Social, and Governance Report
50
TCFD and TNFD Report
58 Principal Risks and Uncertainties
61 Section 172 Statement
63 Viability and Going Concern Statement
Governance Report
68 Board of Directors
70 Directors’ Report
72 Corporate Governance
77 Directors’ Responsibility Statement
78 Report of the Audit and Risk Committee
82 Report of the Remuneration and Nomination Committee
86 Report of the Management Engagement Committee
88 Independent Auditor’s Report
Financial Statements
96 Statement of Comprehensive Income
97 Statement of Financial Position
98 Statement of Changes in Equity
99 Statement of Cash Flows
100 Notes to the Financial Statements
117 Company Information
118 Glossary
www.heitp.co.uk
POWERING A
SUSTAINABLE
FUTURE
Overview
STRATEGIC REPORT
Operational Portfolio
100%
(2023: 70%)
790.8 MWh / 395.4 MW
(2023: 555 MWh / 277.5 MW)
Total Portfolio
790.8 MWh /
395.4 MW
(2023: 790.8 MWh / 395.4 MW)
NAV per Ordinary Share
88.52P
(2023: 115.40p)
COMPANY HIGHLIGHTS
AT 31/10/2024
As at the close of business
on 25 February 2025, the
latest practicable date
prior to the publication
of this document, the
price per Ordinary Share
was 63.7 pence, and the
NAV per Ordinary Share
was 88.52 pence as at
31October 2024.
Harmony Energy Income Trust plc (the “Company”) offers Shareholders the opportunity to participate
in the transition to net zero by investing in commercial scale battery energy storage systems (“BESS”)
and renewable energy generation projects, with a focus on a diversified portfolio of BESS assets located
in Great Britain (“GB”). As at 31 October 2024, the Company had a fully operational portfolio of eight
2-hour duration BESS projects, with a total capacity of 790.8 MWh / 395.4 MW (the “Portfolio”).
Tonnes of CO
2
e emissions
avoided
51,945 estimated
(2023: 15,415)
Adjusted NAV*
£201.05M
(2023: £262.12m)
Dividend declared and paid
in relation to the Period
N/A
(2023: 8 pence per Ordinary Share)
* See glossary for definition of Adjusted NAV.
Adjusted NAV and the Dividend per Ordinary Share are Alternative Performance Measures.
The full table of KPIs and Performance Measures is set out on page 20 of this report.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
1
The 40 MWh / 20 MW Farnham project
was the third in the Company’s portfolio
to be energised
A Diversified Portfolio Across Great Britain
Portfolio Composition as at the date of this report
6
7
8
1
4
2
5
3
PILLSWOOD
196 MWh / 98 MW
STATUS: OPER ATIONAL
1
WORMALD GREEN
66 MWh / 33 MW
STATUS: OPER ATIONAL
7
BROADDITCH
22 MWh / 11 MW
STATUS: OPER ATIONAL
2
HAWTHORN PIT
99.8 MWh / 49.9 MW
STATUS: OPER ATIONAL
8
FARNHAM
40 MWh / 20 MW
STATUS: OPER ATIONAL
3
RUSHOLME
70 MWh / 35 MW
STATUS: OPER ATIONAL
4
LITTLE RAITH
99 MWh / 49.5 MW
STATUS: OPER ATIONAL
6
BUMPERS
198 MWh / 99 MW
STATUS: OPER ATIONAL
5
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
2
Project Progress
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
3
PILLSWOOD
1
FARNHAM
3
BUMPERS
5
WORMALD GREEN
7
BROADDITCH
2
RUSHOLME
4
LITTLE RAITH
6
HAWTHORN PIT
8
NORMAN CRIGHTON
CHAIR
Chair’s Statement
Welcome, on behalf of the board
of directors (the “Board”), to
the third Annual Report and
Accounts of the Company
for the financial year (“FY”)
ending 31 October 2024
(the “Period”).
PORTFOLIO 100% OPERATIONAL
The Company’s remaining construction assets were
successfully energised during the Period, taking the Portfolio
to 100% operational. The Portfolio consists of eight 2-hour
duration BESS projects totalling 790.8 MWh / 395.4 MW,
the largest exclusively 2-hour duration operating BESS
portfolio in GB. The increase in operational capacity
coincided with a recovery in revenue levels over the final
quarter of the Period and this recovery has accelerated over
the first quarter of FY 2024/25.
DIVIDEND POLICY AND NAV IMPACTED BY
CHALLENGING REVENUE ENVIRONMENT
As has been well reported, a challenging environment
for GB BESS assets emerged during the first quarter
of the Period. Mild temperatures over the winter kept
consumer demand low, and this demand was sufficiently
met by moderate and consistent levels of wind generation.
This lack of volatility, coupled with low wholesale gas
prices, reduced wholesale spreads and Ancillary Service
prices. With GB BESS market revenues being significantly
weaker than short-term independent forecasts, the Board
resolved to take a prudent approach to capital allocation
and cash management, culminating in the cancellation
of the Q1 dividend for the Period and the amendment
of the Company’s dividend policy to be more aligned
with the Company’s performance. In addition, Harmony
Energy Advisors Limited (“HEAL”, the “IA” or the
“InvestmentAdviser”) promptly incorporated reduced
third-party revenue projections into asset valuations. These
reductions in third-party revenue projections are a key
driver of net asset value which reduced over the Period
from 115.40 pence per Ordinary Share (see glossary) to
88.52 pence per Ordinary Share – a 23% reduction.
SHARE PRICE PERFORMANCE
Despite a successful renegotiation of the Company’s debt
facilities in February 2024 to reflect the Portfolio’s evolution
from a construction portfolio into an operating one and to
reassure Shareholders of its continued solvency amidst a low
revenue environment, these lower revenues coupled with
rising government bond yields placed downward pressure
on the share price.
The share price recovered by circa 70% between February
2024 and June 2024 before stabilising at around 50 pence
per Ordinary Share during the final third of the Period. Post-
Period end, the share price has rallied further as investors
have reacted to positive updates regarding the Company’s
asset sale process (see below).
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
4
STRATEGIC REPORT
RECOVERY OF PORTFOLIO REVENUES
Portfolio revenues have also improved, with revenues
over the second quarter of the Period 48% above those
experienced in the first quarter. A key driver for this was
a threefold increase in captured Balancing Mechanism
(“BM”) volumes in the spring versus the winter, as software
and process enhancements at National Energy System
Operator (“NESO”) began to take effect. The Portfolio
continued to capture a high level of BM volumes over
the remainder of the Period. The Investment Adviser has
engaged with NESO (independently and in collaboration
with other industry stakeholders) to drive positive reform
aimed at maximising the utilisation of BESS, to create
efficiencies and cost savings for consumers. NESO
continues to design and launch new revenue products and
strategies which are targeting the improvement in BESS
utilisation, the latest being Quick Reserve launched in
November 2024.
Another key driver of revenue recovery was the high level
of renewable penetration during the second half of the
Period. The strong correlation between wind generation
and BESS revenues during this time is a compelling
illustration of the underlying long-term investment case for
2-hour duration BESS in GB: as wind and solar generation
increase their proportionate share of the GB electricity
“stack”, wholesale power spreads are becoming wider and
more volatile, increasing Arbitrage opportunities for BESS.
Multiple periods of high wind generation and low demand
created wide peak and off-peak power spreads, most
notably in April and August. Total net revenue generation
for the Period was £16.3 million (£58.2k/MW/Yr) based on
a weighted average operational capacity of 280.4 MW. The
portfolio is now fully operational, increasing the operating
capacity by 40% compared to the weighted average over
the Period, which is anticipated to result in a proportionate
rise in revenue generation in future periods.
POST-PERIOD END REVENUE
PERFORMANCE
The revenue recovery during the Period has since been
supplemented with strong revenue performance in the first
quarter of FY 2024/25 (£97. 8 k/MW/Yr), a stark contrast to
the same quarter in the Period (£46.3k/MW/Yr). The key
driver of this difference is a return to the more traditional
winter conditions where the system has experienced
periods of short-term tight supply margins, where there
is a risk of generation being insufficient to meet demand.
If a spell of cold weather (i.e. high power demand) coincides
with low wind output (low generation), NESO must rely
upon gas-fired power stations to meet demand. Given the
current relatively high wholesale gas prices, these tight
margin events create wide wholesale spreads. Interestingly,
in these conditions the correlation between wind output
and BESS revenues observed during the warmer months
is reversed, with BESS revenues inversely proportionate
to wind generation levels. This showcases the adaptability
of BESS and its potential to perform in multiple economic
and meteorological environments. Further analysis of these
trends is explored in the Investment Adviser’s report.
ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (“ESG”)
During the Period, BESS received both national and
international recognition for its vital role in global
decarbonisation. The Clean Power 2030 Action Plan
commits the UK to increase its energy storage capacity to
23-27 GW by 2030, with the majority to come from grid-
scale batteries. In addition, 58 countries signed the COP 29
Global Energy Storage and Grids Pledge, aiming to deploy
1,500 GW of energy storage capacity globally by 2030.
BESS assets play a critical role in mitigating climate change
by allowing the integration of more renewable electricity
into the grid network, reducing a country’s reliance on
fossil fuels and lowering the grid’s carbon intensity. During
the Period, the Company’s assets stored 96,073 MWh
of renewable energy, preventing approximately 51,945
tonnes of CO
2
e emissions from being released into the
atmosphere and demonstrating the Portfolio’s tangible value
to UK decarbonisation efforts.
The Company has always emphasised the importance of
developing and operating our assets safely and responsibly.
In furtherance of this, the Company continued to embed
its ESG strategy across its operations and supply chain. The
Company is proud to have published its first Environmental
Policy and its first Human Rights Policy during the Period.
67% of key suppliers signed our Supplier Code of Conduct,
and the majority of suppliers that have not signed have
confirmed they adhere to equivalent standards.
This year the Company met its goal to report its first
United Nations Principles for Responsible Investment
(“UNPRI”) Transparency Report. The Company also
reported for the first time in line with the UK’s newly
implemented Sustainability Disclosure Regulation (“SDR”)
and with the Sustainable Finance Disclosure Regulation
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
5
Chair’s Statement continued
(“SFDR”). The Company believes such disclosures are
important for demonstrating continuing commitment to
integrating sustainability risks, opportunities and potential
impacts across and beyond its operations.
EMERGING RISKS
Whilst the general GB BESS market appears to be turning
a corner, challenges remain, and new risks continue
to emerge as the market evolves. The merchant (and
therefore volatile) nature of the revenues remains a key
factor, and the Investment Adviser continues to explore
and analyse various revenue “tolling” products – an
emerging sub-market in this sector – which could provide
an element of fixed pricing in an otherwise volatile revenue
class. A higher-than-expected amount of asset downtime
caused by Distribution Network Operators’ (“DNOs”,
each a “DNO”) technical works at local substations has
suppressed revenue performance during the second half
of the Period and the Investment Adviser’s continued close
engagement with each DNO (with support from Tesla and
bp as the revenue optimisers to the Portfolio) remains
crucial for future performance. The Company has also
recently received unexpected and unwelcome increases in
network charges, increasing forecast opex for the current
financial year. This is a regulatory issue, and the Company
is engaging with Ofgem and the Department of Energy
Security and Net Zero (“DESNZ”) to ensure that BESS are
charged fairly and proportionately.
OUTLOOK AND ASSET SALE PROCESS
With 2-hour duration BESS continuing to demonstrate its
ability to outperform shorter-duration peers in Arbitrage
strategies, the Company and its assets remain well placed
to capitalise on the continuing trends of greater utilisation
of BESS and greater renewables penetration. Now that the
Portfolio is 100% operational, the Company has a more
secure foundation and positive outlook. If revenue levels
going forward are in line with assumptions used in the
Company’s valuation models, the Board would expect this
to allow a meaningful covered dividend in relation to this
financial year. However, the Company (along with the wider
renewable infrastructure listed sector) continues to trade
at a discount to published NAV, impacting shareholder
returns and limiting opportunities for capital raisings and
growth. After a prolonged period of trading at a significant
discount to NAV, the Board considered all strategic options
and proactively moved to maximise Shareholder value by
exploring the potential for one or more asset sales, with the
objective of proving that the true fair market value of the
assets is not fully reflected in the market capitalisation of
the Company.
On 19 December 2024, the Company announced that
it was progressing to a final stage of negotiations with a
preferred bidder on an exclusive basis and in relation to
the Company’s full Portfolio. The Company announced
on 20 February 2025 that the substantial due diligence
requirements of the preferred bidder had resulted in an
extension of exclusivity until 10 March 2025. Both parties
are continuing to progress towards the conclusion of
a definitive agreement which will be conditional upon
Shareholder approval. Should such agreement be approved
by Shareholders, the Company would seek to return net
sale proceeds to Shareholders via a members’ voluntary
liquidation process as soon as practicable.
The Company is required to hold an AGM on or before
30 April 2025 and I look forward to engaging with our
Shareholders at that meeting. In light of the Company’s
asset sale process, further details regarding the date and
location of the Company’s 2025 AGM will be published at
a later date. As set out in our Prospectus, a continuation
resolution will be put at that AGM if the sales process does
not progress.
Norman Crighton
Chair
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
6
Energised in August 2024, the 70 MWh / 35 MW Rusholme
project was the Company’s sixth to become operational
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
7
8
Investment
Adviser’s Report
The Investment Adviser
is pleased to deliver its
third annual Investment
Adviser’s Report.
235.8 MWh / 117.9 MW
energised during the Period, taking the Portfolio to
100% operational
First bp optimised assets commenced
trading
147% INCREASE
in operational revenue
driven by increased operational capacity
Current portfolio size:
790.8 MWh / 395.4 MW
Eight
BESS projects
51,945 tCO
2
e avoided (estimated)
HIGHLIGHTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
8
STRATEGIC REPORT
PAUL MASON
MANAGING DIRECTOR
MAX SLADE
COMMERCIAL DIRECTOR
PETER KAVANAGH
INVESTMENT DIRECTOR
JAMES RITCHIE-BLAND
INVESTMENT DIRECTOR
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
9
The 198 MWh / 99 MW Bumpers project won Grid-Scale
Standalone Energy Storage Project of the Year and Best UK
Project Under 100 MW at the 2024 Energy Storage Awards
Investment Adviser’s Report continued
OVERVIEW
The Period saw the Company hit a significant
milestone, with the final projects in the Portfolio
becoming operational, taking the full operational
capacity to 790.8 MWh / 395.4 MW. The Company
continues to operate the largest exclusively 2-hour
duration BESS portfolio, and the second largest BESS
portfolio (any duration, by MWh) in GB.
Whilst BESS revenues across GB have remained at
relatively low levels, there has been a recovery from
the lows seen in the 2023/24 winter (being the first
quarter of the Period), and it has been encouraging
to see multiple instances of strong revenue
performance during the Period, particularly during
spring and summer when high renewable generation
coincided with periods of low consumer demand.
Post-Period, the 2024/25 winter has also seen strong
revenue performance during periods when high
consumer demand has coincided with low renewable
generation. This demonstrates how BESS can perform
well in a variety of economic and meteorological
circumstances.
Portfolio revenues have continued to be derived more
from Arbitrage than Ancillary Services (see glossary for
further details on each), a trend which is expected to
continue, and which validates the Company’s focus on
2-hour duration BESS assets.
Throughout the Period, the Company’s shares
have continued to trade at a significant discount
to NAV, impacting shareholder returns and limiting
opportunities for capital raisings and growth. In
response to this, the Board resolved to explore the
sale of some or all of the Company’s assets. The IA
was encouraged by the responses received over two
phases of bidding via a highly competitive process.
On 19 December 2024, the Company announced
that it was progressing to a final stage of negotiations
with a preferred bidder on an exclusive basis and in
relation to the Company’s full Portfolio. The Company
announced on 20 February 2025 that the substantial
due diligence requirements of the preferred
bidder had resulted in an extension of exclusivity
until 10March 2025. Both parties are continuing
to progress towards the conclusion of a definitive
agreement which will be conditional upon Shareholder
approval. Should such agreement be approved by
Shareholders, the Company would seek to return
net sale proceeds to Shareholders via a members’
voluntary liquidation process as soon as practicable.
PORTFOLIO UPDATE
The Portfolio is now fully operational and consists of eight
2-hour duration BESS projects totalling 790.8 MWh /
395.4 MW.
As previously reported, the Company’s Wormald Green
and Hawthorn Pit projects suffered delays to energisation,
caused by the Balance-of-plant (see glossary) contractor
running behind schedule. The Company has successfully
settled a claim for liquidated damages, totalling
£1.5million across the two projects to compensate for the
lost revenue opportunity.
Hawthorn Pit and Wormald Green are the Company’s
first projects to be optimised by bp and the first to utilise
Envision Energy batteries. Whilst some initial challenges
relating to the technical interface between bp’s system
and the Envision Energy batteries were experienced
(delaying the ability to perform some Ancillary Services),
these challenges have now been overcome and the IA
is encouraged by the optimisation performance to date,
noting especially the significant volume of activity in the BM.
PORTFOLIO UPDATE
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
10
DEBT RESTRUCTURING
The Company drew down the balance of its £130 million
of senior debt facilities during the Period in order to fund
construction milestone payments.
On 21 February 2024, the Company successfully
completed an amendment and restatement of its debt
facilities with NatWest plc and Coöperatieve Rabobank
U.A. The revised structure was put in place in recognition
that the Portfolio would, during the Period, evolve from
a construction portfolio into an operating portfolio. The
previous term loan and revolving credit facility were
consolidated into a single long-term facility with the
following key terms:
• facility size of £130 million;
• an extension of the legal maturity date from June 2027
to February 2031;
• a reduction in margin to 275 bps over SONIA for
the first two years, rising over time to a maximum of
350 bps in the final year; and
• a re-sizing of market standard debt covenant ratios
against conservative revenue forecasts to ensure
sufficient headroom in the low revenue environment
experienced during the first quarter of the Period.
The structure allows for voluntary prepayments during the
term (subject to a fee) and for cash sweeps in favour of the
lenders in the event of material revenue outperformance
above pre-agreed thresholds, enabling an acceleration of
de-gearing in a cost-efficient manner whilst also reserving
operational free cash flow for shareholder distributions.
When coupled with the new interest rate swap referred to
below, the aggregate cost of debt equates to 6.85% per
annum for the first two years.
HEDGING
At the beginning of the Period, the Company benefitted
from an interest rate cap at a rate of 5.25%. As part of
the debt restructure described above, the Company
terminated its interest rate cap in February 2024 (receiving
a payment of £0.5 million) and replaced it with an interest
rate swap for the SONIA element of the loan. The new
interest rate swap fixes the SONIA element of the loan at a
rate of 4.101% per annum.
DIVIDEND POLICY
The Company announced a change to its dividend policy
on 30 May 2024. The updated policy replaces the previous
fixed 8 pence per Ordinary Share annual dividend target
with one more aligned with the Company’s performance.
See the Strategic Report for further details.
The Board further resolved to cancel the (previously
postponed) first FY 2023/24 quarterly dividend. As
reported elsewhere in this report, the Company has
experienced a recent recovery in revenue levels. If
revenues going forward are in line with assumptions used
in the Company’s valuation models, the Board would
expect this to allow a covered dividend of circa 4 pence
per Ordinary Share in relation to this current financial
year. This guidance will be reviewed at the financial year
end depending upon revenue performance and availability
of cash over the second half of the year.
INTRA-GROUP CAPITAL RESTRUCTURE
The Company has to date injected cash into subsidiaries
predominantly through shareholder loans, rather than
equity subscriptions. As a result of this structure, the
accounting income recorded by the Company, which
is driven mainly by accrued (but not necessarily paid)
interest on shareholder loans, may not match the actual
cash received from subsidiaries (which is dependent upon
Special Purpose Vehicle (“SPV”) / project income). As an
investment trust, the Company is required to distribute the
majority of gross income as dividends to shareholders.
In October 2024, the Company and its subsidiaries
(together, the “Group”) completed a restructuring of its
capital composition (comprising debt and equity), and
reduced interest income recognised by the Company by
writing off accrued but unpaid interest with the intention of:
a) optimising the Group’s tax position; and
b) more closely aligning the Company’s accounting
income to the underlying performance of its
subsidiaries and therefore ensuring any required
dividend payment under investment trust rules better
aligns to the cash generated through operations.
FINANCING UPDATE
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
11
Investment Adviser’s Report continued
MARKET COMMENTARY
OVERVIEW
A range of revenue streams is available to BESS projects in
GB. These can be split into three broad categories:
1. Capacity Market (“CM”) (see more detailed information
below): BESS projects receive an availability payment
for being ready to respond to a period of potential
energy shortfall, over a contract period of 1 – 15 years;
2. Wholesale Electricity Trading: Buying wholesale electricity
during cheap periods (e.g. overnight when demand is
low and wind generation is high), storing it for a period
of time and then selling when the price increases
(e.g. in the evening when gas-fired power stations
are being used). The spread between the “buy price”
and “sell price” determines the net revenue from the
trade. Typically, high renewable penetration increases
spreads as there are likely to be periods when renewable
electricity supply exceeds demand, pushing pricing
close to zero (and sometimes even negative), whilst gas-
fired power stations will still be required to cover peak
demand periods. This in turn leads to greater revenue
opportunities for BESS projects;
3. Balancing Mechanism: Wholesale markets close one
hour before delivery of power. At this point, NESO
analyses the supply and demand position and balances
this by buying and selling electricity. Spreads in the BM
are typically much wider than those seen in wholesale
markets, however BESS has traditionally struggled to
capitalise on this due to legacy systems used by NESO.
The Company has witnessed significant improvements
in BESS utilisation in the BM during the Period as a
result of new software developed by NESO. BESS still
has a relatively small share of this lucrative, and growing
market.
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
12
Bilateral OTC Forward Markets
1
Month Ahead Future Markets
2
Day Ahead Wholesale Market
3
Wholesale Intraday SPOT
4
Balancing Mechanism
6
BM Auction
5
Imbalance
8
Ancillary Services
7
Year
Ahead
Season/Month
Ahead
Day Ahead
(time of delivery
-24hr)
Gate 1 Closure
(time of delivery
-1hr)
Gate 2 Closure
(time of delivery
-0.5hr)
Delivery
(time of delivery
-0hr)
Settlement
(time of delivery
+0.5hr)
1. These over-the-counter (OTC) markets
involve direct agreements between buyers
and sellers to trade electricity for future
delivery. Contracts can be set years, months,
or weeks in advance.
2. Future contracts are traded for delivery in the
following month, providing opportunities to
hedge against market price volatility.
3. The Day-Ahead Market is a key revenue
stream for BESS. Each project bids to buy
electricity at low prices and sell later during
high-demand, high-price periods.
4. The Intraday Spot Market allows continuous
trading up to one hour before the start of
each Settlement Period (Gate 1 Closure).
Participants can adjust positions in response
to updated forecasts, system needs, or
changes in market demand.
5. Before Gate 2 Closure, the Balancing
Mechanism (BM) Auction allows participants
to submit bids and offers for balancing actions
to the system operator (NESO).
6. During the “Delivery” period (the 30-minute
Settlement Period), NESO uses the BM to
call on accepted bids and offers for balancing
actions. BESS is very useful for NESO in this
stage, providing fast response and precise
energy delivery to address unexpected
deviations in demand or supply and thus
enable NESO to continuously balance system
supply and demand.
7. Ancillary Services markets support
grid stability through services such as
(i) dynamic frequency response services
(DFR) (see glossary) and (ii) reserve services
(e.g., Balancing Reserve, Quick Reserve).
Procurement typically occurs on a day-ahead
basis. Fast response times and precise control
make BESS an efficient provider of Ancillary
Services, contributing to grid reliability with a
relatively low amount of cycling compared to
Arbitrage strategies.
8. Settlement of any imbalance occurs after
delivery, reconciling any differences between
contracted and actual energy delivery.
Participants face imbalance penalties or
rewards based on the system price for
deviations. BESS operators can minimise
exposure to imbalance charges by dynamically
adjusting their positions in the Intraday
and Balancing Mechanism stages, ensuring
compliance with contracted obligations.
Source: Harmony Energy Advisors Limited
CHART 1: MARKET PARTICIPATION TIMELINE FOR BESS
4. Ancillary Services: Short-term contracts with NESO to
provide grid stability.
a. Dynamic Frequency Response (“DFR”): Contracts
are awarded a day-ahead and are generally awarded
in 4-hour blocks. BESS projects receive an availability
payment in return for responding rapidly (either
charging or discharging) to deviations in frequency
of the electricity system. See the glossary for a
description of the principal types of DFR services.
b. Balancing Reserve (“BR”): Launched in March 2024,
this mechanism allows BESS projects to reserve their
capacity to be available via the BM. They receive an
availability payment for doing so and this commitment
gives NESO additional comfort that sufficient BESS
capacity will be available to respond to an imbalance
in the supply and demand of electricity throughout
the day.
c. Quick Reserve: Launched in November 2024, this
new service is similar in nature to BR but requires a
much faster response time meaning BESS is the only
technology currently able to provide this service.
See chart 1 on page 12 for a graphic depiction of the
various revenue streams described above.
GB BESS REVENUES
Revenues for 2-hour duration BESS over the Period were
on average 14% lower than the previous financial year.
January and February 2024 were the lowest revenue
months, predominantly as a result of low wholesale power
price spreads which in turn led to low Ancillary Service
pricing. Revenues recovered from these lows in the spring,
with April, June, August and October 2024 being the
highest revenue-generating months.
The low revenues at the beginning of the Period were
largely driven by low wholesale spreads as a result of low
gas and carbon pricing which in turn determined the
running cost of gas generators. Since gas was the marginal
fuel for electricity generation throughout the 2023/24
winter, these low commodity prices translated to relatively
low peak electricity prices, limiting the wholesale spread
(the difference between peak and off-peak pricing) and
therefore the revenue opportunity for BESS.
Over a typical winter, the wholesale spread is often
increased from time to time by extreme price spikes.
Price spikes are caused when the forecast margin between
electricity supply and demand is very low, and the system
relies on less efficient (and therefore more expensive)
sources of electricity generation in order to ensure the
lights stay on. Analysis by Modo Energy highlighted that
there were significantly fewer price spikes in the 2023/24
winter compared to the previous two winters.
CHART 2: AVERAGE REVENUE BY BATTERY DURATION (GB FLEET)
2hr BESS Index 2hr CM revenue 1hr CM revenue1hr BESS Index
71
63
55
48
63
69
53
65
46
72
56
70
43
37
33
32
39
48
36
47
35
51
44
55
0
10
20
30
40
50
60
70
80
2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr 2hr 1hr
Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24
Volume Weighted Average Revenue (£k/MW/yr)
Source: Modo Energy and Harmony Energy Advisors Limited
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
13
Investment Adviser’s Report continued
MARKET COMMENTARY
The lack of price spikes was a result of lower demand
during a mild winter (demand has generally been falling
year on year, though is predicted to increase in the future
as a result of the electrification of heat and transport as
well as rising demand from energy intense data centres),
coupled with (generally consistent) generation from wind
and interconnectors at levels sufficient to meet such
demand without the need to call on expensive sources of
electricity generation.
It was hoped that the launch of the Open Balancing
Platform (“OBP”) in December 2023 would unlock
significant additional value for BESS in the BM. However,
the initial launch in December 2023 was disrupted by some
software bugs resulting in a brief pause before a re-launch
in January 2024. OBP resulted in a modest increase in
BESS volume, however it was not until the launch of BR in
March 2024 that BM volume captured by BESS increased
to a meaningful extent, with 2-hour duration BESS seeing
the largest increase. This increase has been maintained
throughout the year with the BM becoming an increasingly
meaningful part of the Company’s revenue stack.
Whilst high wind output over the winter drove wholesale
spreads lower, the opposite occurred during the spring and
summer months. Electricity demand is typically lower during
warmer months, and we increasingly observe periods during
which demand is entirely met by renewable generation.
Normal market principles of supply and demand mean
that an oversupply of renewable (i.e. cheap) generation
drives wholesale prices lower, to discourage further supply.
However, since many renewable projects benefit from
government subsidies, it can make sense for generation to
continue even when wholesale pricing is negative – i.e. the
project will pay to generate power provided the subsidy
received is greater than the “cost” of such generation.
Negative power prices create wide wholesale spreads and
ideal trading conditions for the Company as BESS can
be paid to import as well as export electricity. Wholesale
prices were negative for a record 176 hours in 2024 – a 65%
increase compared to 2023.
Post-Period, revenues have increased further during
the first quarter of FY 2024/25. Wholesale spreads in
January 2025 hit their highest level since December
2022. In contrast to the 2023/24 winter, peak wholesale
pricing was driven up due to two key factors: (i) increased
commodity (i.e. gas) prices, which pushed up the spreads,
as described above; and (ii) low wind generation, which
caused increased use of gas peakers (which are relatively
small, less efficient gas-fired power stations designed to run
when the system is short of supply and prices are high).
This created multiple days of price spikes which were
absent during the 2023/24 winter. Wind generation levels
did increase in December 2024, but this was during the
Christmas period which typically sees very low demand,
leading to more instances of negative pricing, widening
spreads and boosting BESS revenues.
CHART 3: CORRELATION BETWEEN WIND GENERATION AND HISTORIC GB FLEET REVENUE
GB BESS revenue Wind Generation
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
0
50
100
150
200
250
300
Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24
Generation (GW)
GB BESS revenue (£k/MW/yr)
Wind output and BESS revenues closely
correlated in spring and summer
Source: Modo Energy
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
14
BALANCING MECHANISM, BALANCING RESERVE AND QUICK RESERVE
Reserve products are a different type of Ancillary Service procured by NESO, compared to the DFR suite of products
which have formed the bulk of BESS revenues in recent years. NESO procures two types of reserve:
BR launched in March 2024 and Quick Reserve launched
in November 2024. Both contracts allow BM participants
to receive (i) an “availability” fee to keep some capacity in
“reserve”, ready for instruction from NESO; and (ii) the
normal “pay-as-bid” price for utilisation in the BM (if/when
called upon). Participating BESS must store enough energy
to export/import in line with their contract requirements,
so BESS operators must manage their state of charge
carefully, and a 2-hour duration BESS is better placed to
do this than a shorter-duration BESS.
Since the launch of BR, the Portfolio has seen BM volume
increase by nearly 400%. The month of September 2024
is an exception to this, but this reduction in captured BM
volume was deliberate. Various assets in the Portfolio were
undergoing firmware upgrades during September and
required short periods of “resting” to balance the state of
charge of the individual battery cells in advance of routine
“state-of health” tests. The launch of Quick Reserve has
increased the volume of Ancillary Services being procured
by NESO and has provided welcome additional revenue
opportunities. However, as the period since the launch of
Quick Reserve has coincided with high wholesale spreads,
it is too early to assess the full impact.
REGULATORY UPDATE
In October 2024, the National Grid Electricity System
Operator was taken into public ownership and replaced
with NESO. On 5 November 2024, NESO published the
Clean Power 2030 (“CP30”) report outlining advice to
the Government on how to achieve a clean power system
by 2030 in which less than 5% of generation comes from
unabated gas (see glossary).
On 13 December 2024, DESNZ published the CP30
Action Plan setting out a pathway to a clean power system
by 2030. This ambitious plan requires an unprecedented
acceleration of renewable plant build-out. For example,
offshore wind deployment would need to accelerate by five
times. In addition, significant upgrades to the transmission
network would also be needed.
The IA believes that CP30 is broadly positive for BESS,
with 23-27 GW required by 2030 (compared to 4.9 GW
currently operational). CP30 highlights Northern England
and Southern England as priority areas for BESS which
aligns well with the Portfolio.
Modo Energy forecast that BESS revenues would be 10%
higher than their central forecast if CP30 is achieved.
The IA has engaged regularly with NESO since its launch
in 2024 and is encouraged by the attitude and approach
to industry collaboration – in particular the focus on
improving the use of BESS in the BM.
In addition to NESO, the IA has also been engaging with
Ofgem and DESNZ in order to highlight some of the
challenges faced by BESS in GB and identify areas for
future improvement. This dialogue has been constructive,
and we look forward to continuing this discussion in the
coming year.
CHART 4: HEIT PORTFOLIO – MONTHLY BM VOLUME
0
2000
4000
6000
8000
10000
12000
14000
16000
Nov-23 Dec-23 Jan-24
2,920 MWh
11,456 MWh
Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24
Volume (MWh)
4x increase in monthly total BM
volume since re-launch of OBP
and removal of '15-minute' rule
BM volumes were reduced to prepare
assets for Capacity and Extended
Performance testing in October
Source: Harmony Energy Advisors Limited
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
15
Investment Adviser’s Report continued
FINANCIAL PERFORMANCE
The NAV as at 31 October 2024 was £201.05 million
(88.52 pence per Ordinary Share), a reduction of
23.30% (-26.89 pence per Ordinary Share) from the
NAV reported as at 31 October 2023. The NAV total
return over the Period was -21.57%. NAV total return
since IPO is -2.43%.
Material factors which influenced the NAV over the
Period included:
a) lower revenue assumptions based on the latest
revenue forecasts published by independent
providers. The IA pre-emptively revised its revenue
forecast downwards in January 2024 (prior to the
release of updated third-party revenue curves).
However, subsequent revisions were also made
in April and October 2024. The revision to the
forecasts captures a reduction in near-term
electricity demand as well as lower commodity
pricing between 2024 and 2029 amounting to a
reduction of 21.11 pence per Ordinary Share;
b) “Other Project Assumptions” refers to increased
operating costs and delays in construction of the
Company’s remaining projects, which in aggregate
led to a reduction of 6.04 pence per Ordinary
Share. The changes to operating cost assumptions
relate largely to network charges which are set
by DNOs and are not within the control of the
Company;
CHART 5: NAV MOVEMENT ACROSS THE PERIOD
Source: Harmony Energy Advisors Limited
115.40
4.06
6.04
-0.70
-21.11
-6.04
-0.56
-4.65
-1.23
-2.00
-0.70
88.51
80
85
90
95
100
105
110
115
120
125
130
Opening
1-Nov-23
Operating
Free
Cash Flow
NAV Roll
Forward
Discount
Rate
Revenue
Assump-
tions
Other
Project
Assumptions
Derivatives Debt Fund
Costs
Dividends Other Closing
31-Oct-24
NAV per Ordinary Share (p/share)
c) a reduction in discount rates as projects were
revalued when they moved from construction
into operations was offset by a 25 bps increase in
discount rates applied across all projects, leading to
a net reduction of 0.70 pence per Ordinary Share;
d) positive movements from:
a. free cash flow generated by project operations
amounting to 4.06 pence per Ordinary Share;
and
b. the “NAV roll forward” impact (which captures
the time value of money as the projects progress)
amounting to 6.04 pence per Ordinary Share;
and
e) negative movements from:
a. interim dividend payments amounting to 2 pence
per Ordinary Share relating to the fourth quarter
of FY 2022/23;
b. debt service over the Period amounting to
4.65 pence per Ordinary Share;
c. a reduction in the mark-to-market value of the
Company’s interest rate swap amounting to
0.56 pence per Ordinary Share; and
d. fund costs and other impacts totalling
1.93 pence per Ordinary Share.
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
16
CHART 7: REVENUE SOURCES
Balancing Reserve
Capacity Market
Balancing Mechanism
Ancillary Services
Trading
55%
-9%
23%
27%
4%
-20%
0%
20%
40%
60%
80%
100%
120%
In FY'23/24 around 23% of revenue came from
the BM - Nearly 3 times higher than FY'22/23
Revenue
Source: Harmony Energy Advisors Limited
The modelling assumptions used for valuation purposes in relation to revenue and opex are shown in the chart below.
REVENUE DURING THE PERIOD
The Company’s operational Portfolio generated revenue
(net of all electricity import charges and state of
charge management costs) of £16.3 million over the
Period (£58.2k/MW/Yr). This is despite the Portfolio
encountering a higher-than-usual number of outage
events during the Period as described in more detail
below. The Investment Adviser estimates that, had the
Portfolio not suffered these outages, revenue would
have been around 13.5% higher (£63k/MW/Yr).
Revenue is expected to continue to increase throughout
the year, with the Portfolio now fully operational. Being
fully operational has increased the operating capacity
by 40% compared to the weighted average over the
Period, which is anticipated to result in a proportionate
rise in revenue generation. Based on the average
revenue during the Period, a fully operational portfolio
would have generated £23m in revenue.
CHART 6*: HEAL REVENUE & COST ASSUMPTIONS, 2 HOUR BATTERY (£K/MW/YR, REAL JAN 2024, NET OF DEGRADATION)
(24)
(25)
(23)
(23)
(24)
(26)
(26)
(25)
(26)
(26)
(28)
76
87
90
97
99
111
112
109
108
110
108
(40)
(20)
-
20
40
60
80
100
120
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
£k/MW/Yr
HEAL Project Revenue Projections (Post-degradation & Availability) (Oct 24) HEAL Projected Project Opex (Oct 24)
Increase from April ForecastDecrease from April Forecast
Source: Harmony Energy Advisors Limited
* this chart is for valuation purposes
TYPESETTING NOTE:
GRAPH ALREADY DONE. BUT PLEASE CHECK AGAINST
WORD FILE INCASE IT WAS CHANGED.
DELETE THIS NOTE!
CHART 8: HEIT PORTFOLIO – MONTHLY REVENUE STACK
(40)
(20)
-
20
40
60
80
100
120
Nov-23
Dec-23
Jan-24
Feb-24 Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24 Sep-24 Oct-24
Nov-24 Dec-24 Jan-25
Annualised Revenue – £k/MW/yr
Capacity Market Ancillary Services
Balancing Reserve
Trading
Balancing Mechanism Triads
Prior Period Adjustment
Reconciliation
Total Revenue
Source: Harmony Energy Advisors Limited
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
17
Investment Adviser’s Report continued
Capacity Contract
Value (£m)
2024-
25
2025-
26
2026-
27
2027-
28
2028-
29
2029-
30
2030-
31
2031-
32
2032-
33
2033-
34
2034-
35
2035-
36
2036-
37
2037-
38
2038-
39
2039-
40
2040-
41
Pillswood 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
Broadditch 0.1 0.1 0.1
Farnham 0.2 0.2 0.2
Rusholme 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
Little Raith 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Bumpers 0.8 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1
Wormald Green 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
Hawthorn Pit 0.4 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
Tot al 3.3 2.0 4.1 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 2.0
T-1 contract commencing October 2024
T-4 contract commencing October 2025
T-4 contract commencing October 2024 T-4 contract commencing October 2026
FINANCIAL PERFORMANCE
TABLE 1: OVERVIEW OF CM CONTRACT INCOME
Source: Harmony Energy Advisors Limited
Wholesale trading and BM accounted for 78% of Portfolio
revenue during the Period, compared to 42% for the
previous financial year. This increase is in line with the
IA’s expectation as the Ancillary Services markets remain
largely saturated.
Although only representing 4% of total revenue over the
Period, BR has helped to unlock some of the potential
within the BM since its launch in March 2024, reducing
the relative attractiveness of Ancillary Services.
Ancillary Services are now predominantly used to charge
the batteries, as this is often cheaper than procuring
electricity through wholesale markets. As a result of this
strategy, the net Ancillary Services revenue appears as a
negative element in the revenue stack.
The Portfolio continues to perform well in the context
of the market conditions and the wider GB BESS fleet.
According to BESS Analytics, over the 12-month period
from January 2024 to January 2025, the Portfolio achieved
an annualised weighted average revenue of £70k/MW/year.
This represents a 25.5% outperformance compared to the
weighted average annualised revenue of £55.9k/MW/year
recorded by the GB BESS fleet as a whole, highlighting
the value of 2-hour BESS. The Portfolio outperformed
comparable 2-hour BESS portfolios by 5.4%.
CAPACITY MARKET
T-4 Contract Status
All of the Company’s assets hold T-4 contracts as shown in
the table below. T-4 contracts are index-linked for a period
of up to 15 years. None of the Company’s projects are
participating in the T-4 Auction which is due to take place
in March 2025.
The IA has decided to reduce the term of T-4 contracts
for the Broadditch and the Farnham projects from 15 years
to 3 years. These projects were awarded T-4 contracts
on the basis of their full 2-hour duration, however testing
requirements have subsequently become more onerous
and the Company does not believe the ongoing cost
required to maintain this duration would represent value
for money. In relation to delivery years 2027-28 and
onwards, these projects will participate in auctions on an
annual basis.
Projects which secured T-4 contracts for delivery from
2025 onwards were awarded contracts on the basis
of 1.5-hour duration and therefore are expected to
comply with their obligations without incurring additional
expenditure. The IA is therefore not intending to reduce
the duration of T-4 contracts in relation to any other
projects.
T-1 Contract Status
As shown in the table below, the only projects which do
not have a CM contract in place for 2025/26 delivery are
Bumpers, Wormald Green and Hawthorn Pit. Bumpers
has successfully pre-qualified for the T-1 Auction due to
take place in March 2025 and it is anticipated that this will
result in additional CM revenue for the 2025/26 delivery
period. Unfortunately, due to CM qualification rules, the
Hawthorn Pit and Wormald Green projects were not
able to pre-qualify for this auction and will seek to secure
secondary CM contracts to provide additional income in
this period.
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
18
OPERATING FREE CASH FLOW
Average revenue per MW reduced from £65.8k/MW in FY
2023 to £58.2k/MW in the Period, a reduction of 11.6%.
Despite this, total revenue in the Period rose to £16.3m,
a £9.3m (147%) increase compared to the prior year,
driven by the higher operational capacity.
The final projects commenced commercial operations
in October 2024, bringing the operational capacity to
395.4 MW, which will lead to further revenue growth in the
coming financial year. This represents a 40% increase in
operational capacity compared to the weighted average for
the Period.
The increase in operational capacity will not increase
the Company’s operating costs or interest costs, so
operational free cash is expected to be positive in future
financial years, even under poor market conditions such as
those seen at times during the Period.
Post Period revenue per MW has been strong, and the first
quarter of FY 2025 has seen average revenue of £97.8k/
MW (a 70% increase compared to the average during
the Period and 97% higher than the same period during
the Period). As a result of higher operating capacity and
stronger market conditions, the Company has earned an
estimated £9.7m of revenue between 1 November 2024
and 31 January 2025, equal to 63% of the total revenue
earned during FY 2024.
TECHNICAL PERFORMANCE
The Portfolio suffered a number of outages due to DNO
technical works, predominantly impacting the March to
June 2024 period. As previously reported:
• the Company’s Little Raith project was curtailed by the
DNO during April whilst the DNO addressed reactive
power oscillation issues at the local substation; and
• the Bumpers project also experienced low availability in
March, May and June as the DNO performed a series
of scheduled outages required to connect a nearby
new solar farm.
Other projects in the Portfolio experienced short “rest”
periods whilst the Company’s equipment supplier, Tesla,
performed firmware upgrades, standard annual capacity
tests and Extended Performance Tests required to comply
with CM obligations.
As discussed, availability has been impacted by a number
of grid outages which predominantly related to connection
of neighbouring projects. This work is now complete and
these issues are not expected to repeat going forward.
Across the Portfolio, availability averaged 95% during
the Period (including grid outages), which is slightly
lower than the IA’s expectation of 98% under normal
operating conditions. Excluding grid outages, the Portfolio’s
equipment performed well, achieving greater than 99%
availability. The Portfolio’s round-trip efficiency was in line
with expectation at 88%.
“Cycles” are a common measure of battery utilisation,
with one cycle being equal to the battery discharging its
full energy capacity (for example, one cycle for a 50 MW,
2-hour duration battery is equal to 100 MWh). During the
Period, the Portfolio has averaged 0.95 cycles per day,
which is lower than assumed in the Company’s business
plan. Lower cycling leads to lower degradation, which in
turn increases the operational life of a project.
TABLE 2: UNAUDITED CONSOLIDATED FINANCIALS
FY2023 FY2024
Revenue 6,607,254
16,324,033
Liquidated Damages
–
1,500,000
SPV Costs (2,637,322) (6,389,061)
HEIT Costs (2,009,133) (1,713,494)
Management Fee (2,163,222) (1,093,542)
Interest Cost (3,248,173) (10,369,280)
Tax (26,624) (741,270)
Operational Free Cash Flow (3,477,219) (2,482,614)
Weighted Average Operational MW 100.4 280.4
Annualised Revenue / MW (£k/MW/Yr) 65,823 58,216
Annualised SPV Costs / MW (£k//MW/Yr) 26,274 22,785
Source: Harmony Energy Advisors Limited
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
19
Investment Adviser’s Report continued
MARKET OUTLOOK
The IA expects to see the continued correlation between
renewable penetration and BESS revenues as we move
through 2025. Following on from 2024’s record number
of negatively priced hours in the wholesale market, we
expect that this record will be broken in 2025, providing
continued opportunities for BESS.
The encouraging progress made in relation to BESS
activations in the BM is expected to continue with further
updates to NESO’s OBP system and greater transparency
in relation to decisions made by NESO’s control room.
The revenues generated in the first quarter of FY 2024/25
demonstrate the inherent value of the Portfolio but also
highlight its potential volatility (recovering from record lows
in January 2024). To this end the IA continues to explore
options to smooth this volatility whilst continuing to benefit
from market opportunities as they arise. This includes
continuously reviewing the trading and optimisation
arrangements across the Portfolio.
The BESS market is well-served by a large number of
specialist revenue optimiser service providers. These
companies employ large teams to ensure they can deliver
in an increasingly complex market with a growing number
of products. At the same time, the cost charged by
these third parties is reducing and there are increasingly
interesting opportunities for BESS to procure increased
revenue certainty through the strategic use of tolling or
other hedging agreements.
Whilst the IA has direct experience designing trading
algorithms for BESS, it does not believe that it is in
shareholder interest to bring this function in-house and
is therefore focussed on using its expertise to procure,
collaborate with and monitor strong optimisation partners.
FINANCIAL PERFORMANCE
TABLE 3: KEY PERFORMANCE INDICATORS
As at 31 October
2024
As at 31 October
2023
Key Performance Indicators
NAV (£) 201,047,350 262,108,092
NAV per Ordinary Share (p/share) 88.52 115.40
Dividends paid (£) 4,542,566 15,727,698
Dividends per Ordinary Share (p/share) 2p 7p
Alternative Performance Measures
Adjusted NAV (£) 201,039,406 262,108,092
Adjusted NAV Total Return (%) -21.6% 1.2%
Revenues from Operations (£) 15,963,023 6,698,540
Dividends per Ordinary Share declared and paid in relation to Period (p/share) 0p 8p
Other Performance Measures
Operational Capacity (Period end) (MWh / MW) 790.8 MWh / 395.4MW 555 MWh / 277.5 MW
Weighted Average Operational Capacity (MW) 280.4 100.5
Weighted Average Revenue per MW Operational (£/MW/Year) 58,217 66,631
Source: Harmony Energy Advisors Limited
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
20
Despite the positive market outlook, the Company
continues to trade at a discount to published NAV,
impacting shareholder returns and limiting opportunities
for capital raisings and growth. In order to explore
opportunities to deliver value to Shareholders, the Board
engaged Jones Lang LaSalle (“JLL”) in May 2024 with a
mandate to seek offers for some or all of the Portfolio.
This exercise attracted strong interest from multiple
bidders, reflecting the quality of the assets as well as their
scarcity value, with no other portfolio of 2-hour duration
operational assets available for sale in the GB market.
On 19 December 2024, the Company announced that
it was progressing to a final stage of negotiations with a
preferred bidder on an exclusive basis and in relation to
the Company’s full Portfolio. The Company announced
on 20 February 2025 that the substantial due diligence
requirements of the preferred bidder had resulted in an
extension of exclusivity until 10 March 2025. Both parties
are continuing to progress towards the conclusion of
a definitive agreement which will be conditional upon
Shareholder approval. Should such agreement be
approved by Shareholders, the Company would seek to
return net sale proceeds to Shareholders via a members’
voluntary liquidation process as soon aspracticable.
POST-PERIOD EVENTS
Harmony Energy Limited’s Senior Data Scientist,
Akbar Lutfullah, won Rising Star of the Year at the
Tamarindo Energy Storage Investment Awards 2024
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
21
BACKGROUND
The Alternative Investment Fund Manager’s Directive (the
“AIFMD”) came into force on 22 July 2013. The objective
of the AIFMD was to ensure a common regulatory regime
for funds marketed in or into the EU which are not
regulated under the UCITS regime. This was primarily
for investors’ protection and also to enable European
regulators to obtain adequate information in relation to
funds being marketed in or into the EU to assist their
monitoring and control of systemic risk issues.
JTC Global AIFM Solutions Limited (the “AIFM”) is a
non-EU Alternative Investment Fund Manager (a “Non-EU
AIFM”), the Company is a non-EU Alternative Investment
Fund (a “Non-EU AIF”) and the Company is currently
marketed only into the UK. Although the AIFM is a
non-EU AIFM, so the depositary rules in Article 21 of the
AIFMD do not apply, the transparency requirements of
Articles 22 (Annual report) and 23 (Disclosure to investors)
of the AIFMD do apply to the AIFM and therefore to the
Company. In compliance with those articles, the following
information is provided to the Company’s Shareholders by
the AIFM.
1. Material Changes in the Disclosures to Investors
During the financial year under review, there were no
material changes to the information required to be made
available to investors under Article 23 of the AIFMD
before they invest in the Company, from the information
set out in the Company’s prospectus dated 15 October
2021. The only exceptions are those disclosed below and
in certain sections of the annual financial report, being
the Chair’s Statement, Investment Adviser’s Report, the
sections headed “Environmental, Social, and Governance”,
“Principal Risks and Uncertainties”, “Section172
Statement” and “Viability and Going Concern”, the
Directors’ Report and Corporate Governance Report and
note 2 to the financial statements.
2. Risks and Risk Management Policy
The current principal risks facing the Company and the
main features of the risk management systems employed
by the AIFM and the Company to manage those risks
are set out in the section headed “Principal Risks and
Uncertainties”, the Directors’ Report, the Report of the
Audit and Risk Committee (the “ARC” or “Committee”)
and in note 15 to the financial statements.
3. Leverage and Borrowing
The Company is entitled to employ leverage in
accordance with its investment policy as set out in the
Company’s prospectus. At the start of the year under
review, the Company had via its subsidiaries £130 million
of senior debt facilities, consisting of a £20 million
unhedged revolving credit facility and a £110 million
term loan facility, hedged by way of an interest rate cap
of 5.25%. As part of the debt restructure detailed in the
Investment Advisor’s report, the Company terminated its
interest rate cap in February 2024, receiving a payment
of £0.5 million, and replaced it with an interest rate swap
for the SONIA element of the loan. The new interest rate
swap fixed the SONIA element of the loan at a rate of
4.101% per annum. As at the balance sheet date and as
at the date of this report, the Company’s subsidiary HEIT
Holdings Ltd had drawn down £130 million. Other than
the non-material amendment described in the paragraph
entitled “Borrowing Policy” in the Strategic Report, there
were no changes in the Company’s borrowing powers and
policies.
4. ESG
Because the AIFM is a non-EU AIFM and the Company is
not marketed into the European Economic Area (“EEA”),
the AIFM is not required to comply with Regulation (EU)
2019/2099 on Sustainability-Related Disclosures in the
Financial Services Sector (the “SFDR”). However, the
Company has voluntarily chosen to report in line with
Article 8 of the SFDR and details of the Company’s and its
advisers’ ESG objectives and actions taken are reported
on in the section of this annual financial report entitled
“Environmental, Social, and Governance.”
As a member of the JTC group of Companies, the AIFM’s
ultimate beneficial owner and controlling party is JTC Plc,
a Jersey-incorporated company whose shares have been
admitted to the Official List of the UK’s Financial Conduct
Authority (“FCA”) and to trading on the London Stock
Exchange’s Main Market for Listed Securities (mnemonic
JTC LN, LEI 213800DVUG4KLF2ASK33). In the conduct
of its own affairs, the AIFM is committed to best practice
in relation to ESG matters and has therefore adopted
JTC Plc’s ESG framework (the “ESG Framework”) and
a copy of the ESG Framework can be viewed online at
https://www.jtcgroup.com/esg/.
As at the date of this report, JTC Plc is a signatory of
the UN PRI. The JTC group is also carbon neutral, works
to support the achievement of various U.N. Sustainable
Development Goals and reports under the Task Force on
Climate-related Financial Disclosures (“TCFD”) and the
SASB framework.
Alternative Investment Fund Manager’s Report
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
22
The AIFM is also cognisant of the announcement
published by H.M. Treasury in the UK of its intention to
make mandatory by 2025 disclosures aligned with the
recommendations of the Task Force on Climate-Related
Disclosures, with a significant proportion of disclosures
mandatory by 2023. The AIFM also notes the roadmap
and interim report of the UK’s Joint Government-
Regulator TCFD Taskforce published by H.M. Treasury
on 9 November 2020. The AIFM continues to monitor
developments and intends to comply with the UK’s regime
to the extent either mandatory or desirable as a matter of
best practice.
The AIFM and Harmony Energy Advisors Limited (“HEAL”)
as the Company’s alternative investment fund manager
and investment adviser respectively do consider ESG
matters in their respective capacities, as explained in
the Company’s prospectus dated 15 October 2021, a
copy of which can be found on the AIFM’s website at
https://www.jtcgroup.com/services/funds/aifmd/harmony-
energy-income-trust-plc/.
Since the publication of those documents, the AIFM,
HEAL and the Company have continued to enhance
their collective approach to ESG matters and detailed
reporting on (a) enhancements made to each party’s
policies, procedures and operational practices and (b)our
collective future intentions and aspirations is included
in the TCFD report, the Task Force on Nature-related
Financial Disclosures (“TNFD”) report, the ESG section
and the Section 172 Statement.
The AIFM also has a comprehensive risk matrix (the
“Matrix”), which is used to identify, monitor and manage
material risks to which the Company is exposed, including
ESG and sustainability risks, the latter being an ESG event
or condition that, if it occurred, could cause an actual or
a potential material negative impact on the value of an
investment. We also consider sustainability factors, those
being environmental, social and employee matters, respect
for human rights, anti-corruption and anti-bribery matters.
5. Remuneration of the AIFM’s Directors and Employees
During the FY, no separate remuneration was paid by the
AIFM to two of its executive directors, Graham Taylor and
Kobus Cronje, because they were both employees of the
JTC group of companies, of which the AIFM forms part.
The third executive director, Matthew Tostevin, is paid a
fixed fee of £10,000 for acting as a director. Mr Tostevin
is paid additional remuneration on a time spent basis for
services rendered to the AIFM and its clients. Other than
the directors, the AIFM has no employees. The Company
has no agreement to pay any carried interest to the AIFM.
During the year under review, the AIFM paid £10,000 in
fixed fees and £40,050.79 in variable remuneration to
Mr Tostevin.
6. Remuneration of the AIFM Payable by the Company
The AIFM was during the Period paid a fee of
0.03%perannum of the equity capital raised by the
Company, subject to a minimum of £30,000 per annum,
such fee being payable quarterly in arrears. Subsequent
secondary issues of shares of the Company in the primary
market are supported on a time spent basis, subject to a
cap of £10,000 per each such issue. Other significant
non-routine work may be agreed between the AIFM and
the Company from time to time and charged for on a time
spent basis. The total fees paid to the AIFM during the
year under review were £67,434.
JTC Global AIFM Solutions Limited
Alternative Investment Fund Manager
25 February 2025
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
23
Strategic Report
INVESTMENT POLICY
The Company seeks to achieve its investment objective through investment in energy
storage and complementary renewable energy generation assets, with an initial focus on
commercial scale BESS located in diverse locations across Great Britain.
For the purposes of this policy, unless the context otherwise requires, words and
expressions defined in the Company’s Prospectus shall have the same meanings where
used in this policy.
The Company may invest in “operational”, “under construction” or “shovel ready”
projects, and may also provide development finance to pipeline projects.
STRATEGIC REPORT
INVESTMENT OBJECTIVE
The Company’s investment objective is to provide an attractive and
sustainable level of income returns, with the potential for capital
growth, by investing in commercial scale storage and renewable
energy generation projects, with an initial focus on a diversified
portfolio of BESS located in Great Britain (“Projects”).
completed lease, lease option or agreement for lease in relation to the land
upon which that project is situated;
planning permission enabling the construction of a suitable project on that land
(subject to any amendments to reflect final technical specifications);
an industry standard grid connection offer from a DNO or Transmission System
Operator (“TSO”); and
a BESS supply & installation contract with material terms agreed with a
reputable counterparty.
PROJECTS WHICH ARE “SHOVEL READY” WILL HAVE IN PLACE:
an agreed lease on satisfactory terms;
an accepted industry standard grid connection offer from a DNO or TSO, and
having made at least one milestone payment; and
a fully executed BESS supply & installation contract with a reputable counterparty.
PROJECTS WHICH ARE “UNDER CONSTRUCTION” WILL IN ADDITION,
HAVE IN PLACE:
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
24
PROJECTS WHICH ARE “OPERATIONAL” WILL, IN ADDITION, HAVE IN PLACE:
completed lease on satisfactory terms in relation to the land upon which that
project is situated;
an executed grid connection agreement with a DNO; and
satisfactory completion of relevant commissioning tests.
TARGET REVENUE SOURCES
It is intended that, once operational, the main revenue
streams from the Company’s portfolio of Projects will be
from the following sources:
• Ancillary Services – Projects may generate revenues
from short-term contracts procured via regular
competitive auctions through which the Company
and/or its subsidiaries will provide, on a firm basis,
dynamicor non-dynamic response services to NESO
as part of its efforts to cater for changes in network
system frequency, balancing the grid and avoiding
power outages;
• Asset optimisation – Projects may generate revenues
from importing and exporting power in the wholesale
market and the NESO-administered Balancing
Mechanism (“BM”); and
• Capacity Markets – Projects may generate revenues by
access to the benefit of contracts, or through entering
into new contracts, to provide back-up capacity power
to NESO as the Electricity Market Reform delivery
body via Capacity Market contracts of varying terms
between 1 year and 15 years in duration.
The contractual arrangements which the Company will
put in place in respect of its portfolio of Projects are
expected to benefit from diversification across a number
of different income streams with various contract lengths,
counterparties and return profiles.
These revenue sources will inevitably evolve as the UK
energy and energy storage markets and NESO policy
and practice develop, and as such the Company intends
to adapt its contractual arrangements to procure what it
considers to be the most advantageous revenue streams
as the market develops. If suitably attractive terms were
available, this could include the Company engaging
with third-party service providers to increase levels of
contracted income across the Portfolio.
BESS TECHNOLOGY
The Company intends to invest primarily in BESS projects
using 2-hour lithium-ion battery technology, as such
technology is believed by the Investment Adviser to offer
the most efficient operation and return profile and has
a number of advantages over shorter duration batteries.
However, the Company remains agnostic as to which
energy storage and generation technology is used by
the projects in which it invests and will monitor projects
and may invest in projects with alternative technologies
(including different duration batteries and combinations
and co-location of such technologies), where they meet
the Company’s investment objective and policy.
Each BESS project will contain a battery system with a
number of battery modules in each stack, each of which is
independent and can be replaced separately. This reduces
the impact of failure of one or more battery modules and
therefore offers protection against the potential risk of the
operation of a project being interrupted.
INVESTMENT IN AND OWNERSHIP OF
PROJECTS
The Company intends to invest with a view to holding
assets until the end of their useful life. However, projects
may also be disposed of, or otherwise realised, where the
Investment Adviser recommends that such realisation is
in the interests of the Company. Such circumstances may
include (without limitation) disposals for the purposes of
realising or preserving value, or of realising cash resources
for reinvestment or otherwise.
The Company may also consider investing in the re-powering
of projects by replacing degraded cells in order to extend
project cash flows or increasing the capacity of projects
where the grid connection is under-utilised.
The Company will typically achieve legal and operational
control of projects through direct or indirect stakes of
100% in the relevant Project Companies and may use
a range of investment instruments in the pursuit of its
investment objective, including but not limited to debt and
equity instruments.
In certain circumstances, the Company may participate
in joint ventures or co-investments, including (without
limitation) with other investors or entities with whom
members of the Harmony Group have developed assets,
where this approach enables the Company, within its
investment policy, to gain exposure to assets which
the Company would not otherwise be able to acquire
on a wholly-owned basis. In such circumstances the
Company will seek to secure its shareholder rights through
contractual and other arrangements to, inter alia, ensure
that the projects are operated and managed in a manner
that is consistent with the Company’s investment policy.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
25
DEVELOPMENT FINANCE
The Company may provide loan finance to Pipeline Projects
prior to an anticipated acquisition (“Pre- Acquisition
Development Loans”). Such finance may be for the
commissioning of design works, pre-construction studies
(including but not limited to geotechnical studies),
acquisition of equipment or other development costs for the
furtherance of the relevant project, provided that no more
than 10% of Gross Asset Value (calculated at the time that
finance is provided based on the latest available valuations)
may be exposed in aggregate to such loans.
The Company may also provide funding via loans or equity
contributions to Project Companies which are owned by
the Company (“Post-Acquisition Development Finance”)
for the purposes of:
a) evaluating and/or executing asset management
initiatives which the Investment Adviser reasonably
believes to be value accretive and supportive of the
Company’s overall target return, such as extension or
amendment of leases and/or renegotiation of consents
or grid connection agreements to increase import/
export capacity; or
b) developing complementary renewable generation
infrastructure to be owned and operated by the
relevant Project Company. This funding may be used
for any reasonable development expenses such as
preliminary design work, planning applications and/
or commercial studies, provided in all cases that no
more than 10% of Gross Asset Value (calculated at
the time that finance is provided based on the latest
available valuations) may be exposed in aggregate to
suchfinance.
The total aggregate exposure of the Company to Pre-
Acquisition Development Loans and Post-Acquisition
Development Finance will not exceed 15% of Gross Asset
Value (calculated at the time that finance is provided
based on the latest available valuations).
COMPLEMENTARY RENEWABLE
GENERATION ASSETS
Whilst the Company’s primary focus under its investment
policy is to invest in BESS and other energy storage
projects, the Company may also invest in renewable
generation assets where it would be attractive to do so.
This may include projects with co-located BESS and
solar PV generation sharing the same grid connection
or stand-alone solar PV projects, where these would be
complementary to the Company’s other investments and
support the Company’s overall target return, subject to
the investment restrictions below.
INVESTMENT RESTRICTIONS
The Company aims to achieve diversification principally
through investing in a range of projects benefitting from
different income streams with different counterparties and
located in different regions of Great Britain. The Company
will observe the following investment restrictions when
making investments:
• following the acquisition of the Seed Projects by the
Company, the acquisition price of any single project
shall not exceed 20% of the Company’s Gross Asset
Value measured at the time of investment;
• following the acquisition of the Seed Projects, the
Company will seek to ensure that it has holding
interests in not less than five separate projects at any
one time;
• no more than 35% of Gross Asset Value, calculated
immediately following each investment, will be invested
in Projects which are not BESS projects;
• no more than 25% of Gross Asset Value, calculated
immediately following each investment, will be invested
in assets in relation to which the Company does not
hold a direct or indirect stake of 100%;
• no more than 10%, in aggregate, of the value of the
total assets of the Company at Initial Admission will be
invested in UK listed closed-ended investment funds;
• the Company will not conduct any trading activity
which is significant in the context of the Group as a
whole; and
• no investments will be made in fossil fuel assets,
including fossil fuel-powered generators.
Compliance with the above restrictions will be measured
at the time of investment and non-compliance resulting
from changes in the price or value of assets following
investment will not be considered as a breach of the
investment restrictions.
Individual projects will be held within special purpose
vehicles into which the Company will invest through
equity and/or debt instruments. It is intended that each
Project Company will hold one project but a Project
Company may own more than one project.
The investment restrictions will be applied on a look-
through basis.
Strategic Report continued
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
26
BORROWING POLICY
The Company may raise debt and may consider having
leverage (at the Company level and/or the Project Company
level) provided that it has sufficient assets and to the extent
funding is available on acceptable terms. In addition, it may
from time-to-time use borrowing for short-term liquidity
purposes which could be achieved through a loan facility
or other types of collateralised borrowing instruments. The
Company is permitted to provide security to lenders in
order to borrow money, which may be by way of mortgages,
charges or other security interests or by way of outright
transfer of title to the Company’s assets. The Directors
will restrict borrowing (excluding letters of credit issued on
behalf of the Company in favour of either Elexon or EPEX)
to an amount not exceeding 49% of the Company’s net
asset value at the time of drawdown.
On 28 January 2025 the Board approved a non-material
amendment to the Company’s borrowing policy so that, in
the unlikely event of a call under any letter of credit issued
from time to time by the Company’s lenders in favour of
Elexon and/or EPEX (in relation to imbalance settlement
processing and/or trading collateral, respectively) such event
would not count towards the Company’s borrowing limit.
In circumstances where these aforementioned limits are
exceeded as a result of gearing of one or more Project
Companies in which the Company has a non-controlling
interest, the borrowing restrictions will not be deemed to
be breached. However, in such circumstances, the matter
will be brought to the attention of the Board who will
determine the appropriate course of action.
CURRENCY, HEDGING POLICY AND
DERIVATIVES
Efficient portfolio management techniques may be
employed by the Company, and this may include
(asrelevant) currency hedging, interest rate hedging
and power price hedging. Derivatives may be used for
currency, interest rate and power price hedging purposes
as set out below and for efficient portfolio management.
However, the Directors do not anticipate that extensive
use of derivatives will be necessary.
CASH MANAGEMENT
The Company may hold cash on deposit and may invest
in cash equivalent investments, which may include short-
term investments in money market type funds (“Cash and
Cash Equivalents”).
There is no restriction on the amount of Cash and Cash
Equivalents that the Company may hold and there may
be times when it is appropriate for the Company to have
a significant Cash and Cash Equivalents position. For
the avoidance of doubt, the restrictions set out above in
relation to investing in UK listed closed-ended investment
companies do not apply to money market type funds.
CHANGES TO AND COMPLIANCE WITH
THE INVESTMENT POLICY
Any material change to the Company’s investment policy
set out above will require the approval of Shareholders by
way of an ordinary resolution at a general meeting.
In the event of a breach of the investment guidelines and
the investment restrictions set out above, the AIFM shall
inform the Board upon becoming aware of the same and if
the Board considers the breach to be material, notification
will be made to a Regulatory Information Service.
For the purposes of the investment policy, “Gross
Asset Value” means the aggregate of (i) the fair value
of the Company’s underlying investments (whether or
not subsidiaries), valued on an unlevered basis, (ii) the
Company’s proportionate share of the cash balances
and cash equivalents of assets and non-subsidiary
companies in which the Company holds an interest and
(iii) other relevant assets and liabilities of the Company
(including cash) valued at fair value (other than third-party
borrowings) to the extent not included in (i) or (ii) above.
BUSINESS MODEL
The Company expects to invest predominantly in projects
at the “shovel ready” stage since these are likely to provide
the most attractive returns. The Company may also invest
in projects at the “operational” and “under construction”
stage where such projects are available for acquisition in
line with the Company’s investment policy.
The Company seeks to enhance further the efficacy of its
Portfolio by targeting 2-hour duration storage technologies.
The Company has the unfettered ability to purchase
qualifying assets from any seller. The Investment Adviser is
experienced in sourcing and advising on BESS transactions
and continues to evaluate potential opportunities on
the open market. However, at least over the near-term,
it is anticipated that the Company will continue to take
advantage of its exclusive arrangements described below.
The Company benefits from exclusive access to a well-
developed pipeline of BESS projects at various stages
of development in Great Britain. Each project within
this pipeline is controlled by Harmony Energy Limited
either solely or in conjunction with its joint venture
partner, Ritchie-Bland Energy (number 2) Ltd (“RBE”)
(the“Sellers”). This exclusivity is in the form of:
a) ROFR to acquire up to 1 GW of BESS projects from
the Sellers; and
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
27
b) a right of first offer (“ROFO”) in relation to (i) BESS
projects once the 1 GW ROFR threshold has been
reached; (ii) BESS projects co-located with solar
photovoltaics (“PV”); or (iii) stand- alone solar PV
projects.
The processes under which these rights are exercised are
set out in a pipeline agreement dated 14 October 2021
and entered into between the Company and the Sellers
(the “Pipeline Agreement”). The Sellers have an obligation
to keep the Company informed as to the development
progress of potential projects. This provides the Company
with an element of transparency which, in turn, allows the
Company a reasonable level of certainty around funding
timetable and portfolio growth planning.
The terms of the Pipeline Agreement provide that the
Sellers shall be prohibited from selling any qualifying
projects to any other party during the term of the
agreement without first offering them to the Company.
Upon any projects becoming “shovel ready”, the Sellers
shall give notice of such status to the Company. The
Company will then be entitled to either (i) if the ROFR
applies, acquire the relevant project pursuant to the terms
of the pro forma share purchase agreement (and subject
to a valuation calculated using a minimum discount rate);
or (ii) if the ROFO applies, make an offer to the Sellers
pursuant to the Pro Forma Share Purchase Agreement.
The Company has, as at the date of publication of this
report, either acquired or waived its right to acquire
630.6MW of “shovel ready” BESS projects, leaving
3 6 9. 4 MW still capable of acquisition under the ROFR.
All acquisitions are subject to satisfactory external due
diligence, independent valuation and board approval.
The Company will continue to target BESS projects with
2-hour duration capability. As demonstrated in the “Market
Commentary” section, the Investment Adviser believes
that 2-hour duration BESS offers potential for revenue
outperformance relative to a shorter-duration BESS across
a range of market conditions.
DIVIDEND POLICY
As previously reported, the Company announced a
change to its dividend policy on 30 May 2024. The new
policy replaced the previous fixed 8 pence per Ordinary
Share annual dividend target with a dynamic policy which
is more able to reflect the market at any given time. The
new dividend policy provides for an ongoing commitment
to distribute, by way of interim dividends and subject
to maintenance of a suitable working capital buffer,
aminimum of 85% of operational free cash flow, such
amounts to be determined by the Board, declared and
paid on a semi-annual basis.
The dividend policy will be reviewed on an ongoing and
regular basis and will be subject to shareholder approval at
the next annual general meeting of the Company.
Strategic Report continued
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
28
Energised in September 2024, the 66 MWh / 33 MW Wormald
Green and 99.8 MWh / 49.9 MW Hawthorn Pit projects were the
firstoperational Envision Energy batteries in Great Britain
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
29
bl1
Environmental, Social,
and Governance Report
30
POWERING A
SUSTAINABLE
FUTURE
The Rusholme project was developed by Harmony
Energy Limited with construction managed by Tesla
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
30
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
30
STRATEGIC REPORT
ESG HIGHLIGHTS
Published first
Environmental Policy
and Human Rights
Policy
Enhanced transparency and accountability
through ESG disclosure:
Published first SFDR Article 8 aligned
Disclosure
Published first UN PRI Transparency Report
Published second integrated TCFD and
TNFD Report
67% of key suppliers
signed Supplier Code
of Conduct
Improved
landscaping plans
to target 16%
biodiversity net gain
£35,000 donated
to 36 local causes
across five Community
Funds
96,073 MWh
renewable energy
stored
Estimated
51,945 tCO
2
e
avoided
Portfolio 100%
operational
with a total capacity of
790.8 MWh / 395.4 MW
Assets capable of powering
equivalent of
1.28 million
UK homes for two hours
Winner of Association of Investment Companies (“AIC”) Best
ESG Communication Award and shortlisted for ESG Initiative
Award at Tamarindo Energy Storage Investment Awards
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
31
I am pleased to present the Company’s ESG performance
within this report.
Together with the Board, I welcomed the increased ambition
of the UK Government and the international community on
BESS this year. The UK’s CP30 Action Plan and the COP 29
Global Energy Storage and Grids Pledge recognise the key
role that BESS can play in decarbonising the energy system.
With a fully operational Portfolio, the Company’s assets are
making a vital contribution to the UK’s net zero transition,
while supporting energy security and reducing energy costs.
Despite the challenging market environment, I am proud
to report that the Company made strong progress on
embedding ESG across the business, supporting the growth
and resilience of the Portfolio.
During the Period, the Company improved plans to deliver
a biodiversity net gain of 16% across all operational sites.
Additionally, it donated £35,000 to 36 local causes through
five Community Funds, while creating skilled jobs at the heart
of the energy transition.
The Investment Adviser increased collaboration with suppliers
and industry associations on key issues, such as human rights
and circularity. A total of 67% of key suppliers have now
signed our Supplier Code of Conduct, and the majority of
suppliers that have not signed have confirmed they adhere to
equivalent standards during the Period.
I want to specifically highlight the Company’s response to
growing regulatory and shareholder expectations around
transparency and accountability. This included disclosures
in line with SDR and SFDR Article 8, as well as publishing its
UNPRI Transparency Report.
I am delighted that the Company received industry
recognition for its ESG performance and reporting, winning
the AIC Best ESG Communication Award and being
shortlisted for the ESG Initiative Award at the Tamarindo
Energy Storage Investment Awards.
The Investment Adviser’s team continues to drive the
Company’s ESG performance, and I would like to thank
them for their hard work and dedication to powering a more
sustainable future.
Dr Shefaly Yogendra
Chair of the ESG Committee
Introduction from the
ESG Committee Chair
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
32
STRATEGIC REPORT
CLIMATE CHANGE
2024 was the hottest year on record and the first in which
average global temperatures at the surface of the planet
exceeded 1.5°C above pre-industrial levels.
2
To limit global
warming in line with the Paris Agreement, global greenhouse
gas (“GHG”) emissions need to decrease by at least 45% by
2030 compared to 2010 levels.
The UK has set one of the world’s most ambitious net zero
targets, aiming to lower GHG emissions by 78% by 2037
compared to 1990 levels.
3
The shift to renewable energy will
play a crucial role in decarbonising the energy system and
the wider economy.
As outlined in the CP30 Action Plan, the newly elected
Labour Government has accelerated the deadline for
achieving a net zero carbon electricity system from 2035
to 2030. Recognising the critical role of energy storage in
maximising renewable energy adoption and ensuring a stable,
resilient electricity system, NESO and DESNZ forecast that
the UK’s battery storage capacity must grow from the current
5 GW to between 23 and 27 GW to meet targets. The UK’s
plan builds upon the recent COP 29 Global Energy Storage
and Grids Pledge, which aims to deploy 1,500 GW of energy
storage capacity globally by 2030.
4
ENERGY SECURITY AND AFFORDABILITY
The UK’s ongoing reliance on volatile fossil fuel imports,
despite the rebalancing of energy markets following
Russia’s invasion of Ukraine in 2022, continues to raise
concerns about energy security and price stability.
BESS currently play a key role, and through further growth
and implementation, will have an even greater impact in
alleviating these concerns because they help maximise the
benefits of home-grown renewable energy production.
This in turn, reduces our reliance on fossil fuel imports,
which supports the UK to keep the lights on and secure
energy independence.
With renewable power becoming increasingly
cost-competitive with fossil fuels
5
, and capex costs
for batteries reducing, the investment case for BESS
continues to improve. This is enabling more batteries to
be built. More batteries mean more capacity to store
“Rapid expansion of batteries will be crucial to meet climate and energy security goals”
International Energy Agency
1
more power during off-peak times for use during peak
times, reducing curtailment of those renewable generators
operating during off-peak times. This, in turn, lowers
overall energy system costs and leads to lower energy bills
for homes and businesses.
ESG REGULATION CONTEXT
ESG regulation has continued to evolve at pace with the
introduction of the SDR in the Period.
SDR AND INVESTMENT LABELLING
The Company falls within the scope of SDR, and its
investment labelling regime as introduced through PS23/16
in the FCA Handbook. The sustainability investment
labelling regime aims to help investors find products that
have a specific sustainability goal.
The regime introduced four sustainable investment labels
that firms can apply to products on a voluntary basis.
The Company does not currently have a sustainable
investment label. In the context of wider sector challenges
during the Period and uncertainty regarding the outcome
of the Company’s asset sale process (see page 6 for
further information), the Board decided not to apply a
sustainable investment label at this time. This decision
will be reviewed when there is clarity on the outcome of
the Company’s asset sale process. This decision does not
detract from the Company’s core business, in line with
its investment objective of investing in grid scale BESS
projects which support the UK’s net zero transition. This is
underpinned by its investment strategy, investment policy
and associated sustainability strategy, initiatives, KPIs and
metrics, as described in the Article 23 Disclosure. For
further information, please see the Company’s website.
SFDR
In H1 2024, the Company voluntarily published its
inaugural SFDR Article 8 disclosure as well as disclosing
data against the full set of SFDR Principal Adverse Impact
indicators. This marks an important step in enhancing
transparency and accountability, ensuring investors have
the information needed to make informed investment
decisions aligned with a sustainable future.
Climate change and energy transition context
1 https://iea.blob.core.windows.net/assets/cb39c1bf-d2b3-446d-8c35-aae6b1f3a4a0/BatteriesandSecureEnergyTransitions.pdf
2 https://www.carbonbrief.org/state-of-the-climate-2024-sets-a-new-record-as-the-first-year-above-1-5c/
3 https://commonslibrary.parliament.uk/research-briefings/cbp-9888/
4 https://cop29.az/en/pages/cop29-global-energy-storage-and-grids-pledge
5 https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2024/Sep/IRENA_Renewable_power_generation_costs_in_2023.pdf
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
33
THE ROLE OF BESS IN MAINTAINING GRID STABILITY WHILE ENABLING THE INCREASED
INTEGRATION OF RENEWABLE ELECTRICITY INTO THE GRID
The operation of HEIT’s Pillswood 1 asset on 27August
2024 demonstrates the vital role BESS play in
supporting a clean and stable energy system.
During the first half of the day, power prices
plummeted due to an excess of electricity on the
grid driven by high wind and solar generation output,
combined with low consumer demand. Pillswood
1 took advantage of this period of negative pricing,
storing cheap, surplus and predominantly renewable
electricity and then discharging it back onto the
grid during the evening peak, which coincided with
declining renewable generation and higher electricity
prices. In doing so, this asset played a critical role in
balancing supply and demand, while reducing grid
carbon intensity by preventing the curtailment of
wind assets during the off-peak period and reducing
reliance on fossil fuel-based generation during the
peak period.
At the same time, the asset was contracted to provide
Ancillary Services to NESO, supporting the stability of
the grid. These services included:
• Frequency regulation: on days such as this with a
high proportion of renewable electricity generation
there is an elevated risk of grid frequency
deviations (see glossary). The asset was contracted
to respond to frequency deviations, either by
absorbing excess power or injecting additional
power into the grid to correct imbalances.
• Reserve capacity: the asset was on standby
to provide additional capacity in the event of
unexpected changes in generation patterns or
demand spikes, enhancing the reliability of the grid
during this period of higher renewable generation.
CASE STUDY
The chart above shows Pillswood 1 charging from 10:00 to 16:00, coinciding with the period where renewable
generation output was at its highest. It then discharges later in the day (18:30 to 23:30) when renewable
generation output is lower.
CHART 9: RELATIONSHIP BETWEEN PILLSWOOD 1 STATE OF CHARGE AND RENEWABLE GENERATION ON
27AUGUST 2024
Offshore Wind Onshore Wind Solar Pillswood 1 SOC
Pillswood 1
discharging period
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
0
5000
10000
15000
20000
25000
30000
00:00
00:30
01:00
01:30
02:00
02:30
03:00
03:30
04:00
04:30
05:00
05:30
06:00
06:30
07:00
07:30
08:00
08:30
09:00
09:30
10:00
10:30
11:00
11:30
12:00
12:30
13:00
13:30
14:00
14:30
15:00
15:30
16:00
16:30
17:00
17:30
18:00
18:30
19:00
19:30
20:00
20:30
21:00
21:30
22:00
22:30
23:00
23:30
SOC (%)
Generation (GW)
Time
Pillswood 1
charging period
Source: Harmony Energy Advisors Limited
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
34
Our investments in BESS assets support the UK’s net zero
ambition by enabling the integration of more electricity
from renewable sources into the electricity grid and
reducing reliance on fossil fuel-based power generation.
As well as contributing to climate change mitigation, our
BESS assets are also helping to secure a more resilient and
affordable domestic energy supply.
The Board and the Investment Adviser understand that the
Company has a duty to act responsibly and address wider
ESG issues across all aspects of its business. Combined
with good governance, the Company believes that
consideration of environmental and social factors is integral
to generating and sustaining long-term financial value.
The Company’s ESG strategy, which was informed by
a materiality assessment, provides a framework for the
Company to measure, manage and report ESG risks
effectively, and to generate positive environmental and
social impact. The Company identified workstreams to
maximise positive and minimise adverse impacts of the
business across our material ESG areas. The Investment
Adviser has implemented systems to measure, monitor
and report a set of indicators aligned to our material ESG
areas, enabling transparent measurement and reporting of
progress.
More information on our materiality assessment and ESG
strategy can be found in the 2022/23 Annual Report and
Accounts and on the website.
Approach to ESG
The Company generates value for Shareholders and
society by financing, building, and operating the energy
infrastructure needed to achieve a more sustainable
future.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
35
We generate value for Shareholders and society by financing, building and operating the energy infrastructure needed to achieve
a more sustainable future. Our assets play a vital role in delivering net zero, while contributing to energy security and affordability.
We strive to operate responsibly and promote positive environmental and social change. We aim to enhance biodiversity where we
operate to mitigate the twin biodiversity and climate challenges.
POWERING A SUSTAINABLE FUTURE
BEHAVING AND INVESTING RESPONSIBLY
We embed sustainability in our investment process to ensure that we use our capital to promote positive environmental
and social impact whilst delivering a superior return on investment.
FIGURE 1: ESG STRATEGY
Facilitating the increased adoption of
renewable power through net zero
infrastructure
Climate change mitigation
Greenhouse gas emissions
ENABLING A NET ZERO
ENERGY SYSTEM
Delivering net zero infrastructure
in a way that protects and enhances
biodiversity and nature
Biodiversity
Waste, resources and pollution
ENHANCING OUR NATURAL
ENVIRONMENT
Championing a fair transition to
net zero that benefits people,
workers and communities
Community impact
Employment, human and labour rights
PROMOTING POSITIVE
PEOPLE IMPACTS
UN PRI
The UN PRI are a set of voluntary principles which promote the integration
of ESG considerations into investment decision-making processes. The
Company and the Investment Adviser have been integrating these principles into
investment decision-making and ownership practices. The Company became a UN
PRI signatory in 2022 and published its first UN PRI Transparency Report in 2024.
ESG Integration
ESG considerations sit at the forefront of the Company’s
BESS investment strategy. The Board and the Investment
Adviser recognise the link between the sound management
of material ESG issues (both risks and opportunities) and
the creation of long-term investment value.
As such, the Company is committed to actively managing
ESG-related risks and opportunities by integrating ESG
considerations into the investment decision-making, as
outlined in the Company’s Responsible Investment Policy.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
36
STRATEGIC REPORT
ESG governance
The Board has ultimate responsibility for and oversight of
ESG performance and considers ESG matters as part of
investment decision making. Dr Shefaly Yogendra is the
Non-Executive Director with overall ESG responsibility as
Chair of the Company’s ESG Committee.
The Board has delegated certain aspects of ESG oversight
and operational decision making to the ESG Committee.
The role of the Committee is to monitor and review the
Company’s ESG-related performance and activities and
to make recommendations to the Board in relation to the
Company’s ESG strategy.
Furthermore, the Board has outsourced the day-to-day
investment management and asset management activities
to the Investment Adviser, with ESG considered as
part of these activities. The Head of Sustainability, a
representative of the Investment Adviser, is responsible
for implementing the ESG strategy defined by the
Board. Inaddition, the Company engages external ESG
consultants where specialist ESG expertise is required.
ESG is monitored through regular interactions between
the Board and the Investment Adviser, including quarterly
board meetings, quarterly board reports, ESG Committee
meetings, Committee papers, written updates and ad-hoc
meetings.
FIGURE 2: ESG GOVERNANCE STRUCTURE
HEIT BOARD
The Board has ultimate responsibility for and oversight of ESG and recognises the role of ESG in achieving long-term value. The
Board is responsible for promoting the success of the Company by setting the strategy through which shareholder value can be
generated, whilst creating a positive impact and minimising negative outcomes for the Company’s wider stakeholders. The Board has
delegated certain aspects of ESG oversight and operational decision-making matters to the Committees and the Investment Adviser.
The Head of Sustainability is responsible for integrating ESG into key business areas including Investment, Development, Engineering
and Asset Management.
BOARD COMMITTEES INVESTMENT ADVISER
HEIT ESG
Committee
Responsible for
monitoring the
Company’s ESG
performance
and making
recommendations to
the Board in relation
to the Company’s
ESG strategy.
HEIT Audit and Risk
Committee
Responsible for
ongoing robust
assessment of the
risk management
and internal controls
of the Company,
including ESG and
climate-related risks.
HEIT Management
Engagement
Committee
Responsible for
monitoring and
reviewing the
performance of key
service providers,
including monitoring
of ESG progress.
HEIT Remuneration
and Nomination
Committee
Responsible for
determining the
nomination and
remuneration of
the Directors of the
Company and the
Chairperson of the
Board to promote
the long-term
sustainable success
of the Company.
Investment
Adviser
Responsible
for investment
management and
asset management
activities. ESG is
considered as part
of these activities.
Reports to the Board
quarterly.
Head of
Sustainability
Responsible for
implementing the
ESG strategy defined
by the Board and
for engaging key
stakeholders and
business areas on
ESG. Reports to
the Board and ESG
Committee quarterly.
It is the Board’s responsibility to ensure successful oversight
and delivery of the Company’s investment strategy, which is
intrinsically sustainability focused.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
37
ENABLING A NET ZERO ENERGY SYSTEM
As an investor in BESS, the
Company’s most significant
contribution to a sustainable
future is through accelerating
the build-out of BESS,
which enables the critical
decarbonisation of the
electricity system.
The Company also takes
responsibility for measuring
and reducing the GHG
emissions associated with
its operations and supply
chain, and for managing
climate-related risks and
opportunities.
CLIMATE CHANGE MITIGATION
APPROACH
The Company’s BESS assets play a critical role in
mitigating climate change by integrating more renewable
electricity into the grid, reducing reliance on fossil fuels,
and lowering the grid’s carbon intensity.
By storing excess renewable energy and supplying it
during peak demand, BESS assets reduce the need for
curtailment of renewable generation and thus enhance the
contribution of renewables to the energy mix. Additionally,
they provide essential grid stability and balancing services,
reducing the requirement for such services to be provided
by fossil fuel-based flexible generation. This therefore
reduces GHG emissions.
Upon its admission to the London Stock Exchange,
the Company was awarded the Green Economy Mark,
recognising its significant contribution to the transition to
anet zero economy.
PROGRESS UPDATE
At the end of the Period, the Portfolio consisted
of eight operational BESS sites with an overall
capacity of 790.8 MWh / 395.4 MW, compared to
555 MWh / 277.5 MW at the end of the previous FY.
Thisrepresents a 40% year-on-year increase in operational
capacity compared to the weighted average for the Period.
The Company’s BESS assets stored 96,073 MWh of
renewable energy and avoided an estimated 51,945 tonnes
of CO
2
e emissions from entering the atmosphere during
the Period. This compares to 15,415 tonnes of CO
2
e
emissions avoided during the previous financial year.
The Investment Adviser has been proactive in supporting
the net zero transition by engaging policymakers to create
a policy environment which can enable the increased
adoption of renewable energy generation and storage
infrastructure. This includes responding to government
consultations, attending events, meeting with political
leaders, collaborating with peers and engaging through
industry trade bodies including the Electricity Storage
Network and Solar Energy UK. With the change of
UKGovernment in July 2024, and the formation of
DESNZ, the Company and its Investment Adviser has
begun to re-engage with the Government to continue
these efforts.
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
38
APPROACH
Though the Company’s assets support the decarbonisation
of the grid, it also takes responsibility for the GHG
emissions associated with its operations and supply chain
and is committed to managing, reducing and reporting its
GHG emissions annually.
PROGRESS UPDATE
GHG INVENTORY
The Company’s carbon footprint decreased from 154,930
tCO
2
e to 79,652 tCO
2
e between 2022/23 and 2023/24.
In line with the previous year, the Company had zero
Scope 1 GHG emissions during the Period due to having
no direct emissions from owned sources.
Scope 2 emissions associated with purchased electricity
increased from 1,323 tCO
2
e to 3,390 tCO
2
e due to the
increase in the number of operational assets and volume
of energy consumed by these assets. The Investment
Adviser is committed to working with partners, including
BESS equipment and optimisation providers, to reduce
Scope 2 emissions through improving the operational
efficiency of BESS assets as well as exploring opportunities
for optimising BESS based on carbon impact.
The majority of the Company’s emissions are attributed
to Scope 3, primarily driven by emissions associated with
purchased equipment and construction services. Scope3
emissions decreased from 153,607 tCO
2
e to 76,262
tCO
2
e year-on-year due to a reduction in the volume
of equipment procured and construction activity as the
Company moved towards a fully operational Portfolio
towards the end of the Period. The Investment Adviser
continued to collaborate with delivery partners and
suppliers to enhance GHG data collection processes,
enabling more accurate measurements and promoting
GHG emissions reduction across operations and
the supply chain. During the Period, the Investment
Adviser engaged with its key BESS equipment suppliers
regarding the measurement and management of supply
chain climate impacts. Cradle-to-gate carbon lifecycle
assessment data for BESS equipment was used in the
Company’s GHG inventory to enhance data accuracy.
Please refer to the Company’s TCFD Report on page 56
for its GHG inventory and carbon footprint calculation
methodology.
GHG LIFECYCLE ASSESSMENT
During the year, the Investment Adviser commissioned
a lifecycle assessment to estimate the GHG emissions
associated with a BESS asset across its lifetime. The results
of the analysis indicate that there can be a significant
carbon benefit from the installation and operation of BESS
projects, since emissions avoided through the operational
phase outweigh the emissions incurred during other
stages of the BESS project lifecycle over its life span. The
assessment highlighted the positive contribution that BESS
assets can make towards decarbonising the grid but also
provided increased visibility of the overall emissions impact
of a BESS asset, highlighting potential opportunities for
improvement.
GREENHOUSE GAS EMISSIONS
CLIMATE-RELATED RISKS AND
OPPORTUNITIES
The Company is committed to building climate
resilience within the Portfolio. During the year, the
Company undertook a second climate risk and
opportunity assessment. The Company’s approach
was strengthened through an enhanced screening
process to identify emerging risks or opportunities
for inclusion alongside an evaluation of those
identified in the prior years’ screening exercise.
Please refer to the Company’s TCFD report on
page50 for further details.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
39
The Company strives
to deliver net zero
infrastructure in a way that
protects and enhances
biodiversity and nature. We
take accountability for the
environmental impact of our
operations and supply chain,
including our impact on
biodiversity, resources, waste
and pollution.
APPROACH
In response to the threat global ecosystems are facing,
6
the Company aims to enhance and protect biodiversity
where we operate to ensure low carbon infrastructure has
a net positive impact on nature.
The Company has set a target to deliver a biodiversity
net gain at all existing sites and a minimum 10%
biodiversity net gain at newly acquired sites. To achieve
this, the Company incorporates nature and biodiversity
considerations at each stage of an asset’s lifecycle.
We work with environmental specialists and ecologists
to assess biodiversity impacts, dependencies and
enhancement opportunities. These assessments inform
asset-specific habitat creation and maintenance action
plans, which are designed to maximise biodiversity.
The Company’s sites are designed wherever possible
to deliver multi-functional land use, such as facilitating
agricultural activities, promoting biodiversity, increasing
habitats and supporting the recovery of land after intensive
farming.
PROGRESS UPDATE
During the year, the Investment Adviser oversaw the
implementation and maintenance of landscaping plans
across the Company’s sites. All sites are on track and set to
deliver a combined total biodiversity net gain of 16% across
the Portfolio once asset-level landscaping plans have been
implemented. Guidance was issued to landscapers to ensure
sustainable landscaping practices are implemented on the
Company’s sites, for instance the restricted use of herbicides.
During the Period, the Company published its first
Biodiversity Policy, embedded within the new Environmental
Policy, strengthening its environmental management system.
The Company undertook a second nature risk, opportunity,
impact and dependency assessment. Please refer to the
Company’s TNFD report on page 50.
PROTECTING AND ENHANCING OUR NATURAL ENVIRONMENT
BIODIVERSITY
Members of the Investment Adviser team visited Farnham in
July 2024 to monitor the landscaping and biodiversity net gain plan
6 https://wesr.unep.org/article/biodiversity-and-nature-loss
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
40
APPROACH
All the Company’s current BESS assets use lithium iron
phosphate battery technology, which contain critical raw
materials. We aim to reduce our reliance on critical raw
materials, carbon and other resource intensive processes.
The Investment Adviser engages with equipment
manufacturers to encourage sustainable and circular
practices in the upstream supply chain, as well as across
the lifecycle of our projects through to decommissioning.
The Investment Adviser also engages with contractors to
encourage the measurement and management of waste,
resources and pollution during BESS site construction and
operations.
PROGRESS UPDATE
In 2024, the Company introduced its first Environmental
Policy outlining its environmental commitments, including
in relation to waste, resources and pollution, and
strengthening its environmental management system.
The Investment Adviser continued to engage with key
suppliers and partners regarding the management of
environmental issues to drive sustainable change across
its activities. This included collaboration with BESS
suppliers to improve end-of-life processes and reporting
as well as site visits to support its contractors to improve
sustainability practices at the Wormald Green and
Hawthorn Pit BESS sites.
There were zero incidents that met the Environment
Agency definition of a reportable environmental incident
at the Company’s sites during the Period. However, there
was a non-reportable environmental incident at Wormald
Green following the unusually wet weather in H1 2024
involving sediment-laden water runoff into an adjacent
field. The delivery team of the Investment Adviser worked
with an independent water drainage advisor to identify and
implement mitigation measures to ensure runoff from the
site is appropriately managed.
WASTE, RESOURCES AND POLLUTION
The Company aims to enhance and
protect biodiversity wherever it operates
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
41
APPROACH
The Company considers the local communities in which
it operates throughout the project lifecycle and strives to
make a positive contribution to people that live and work
nearby.
The Company and the Investment Adviser engage closely
with a wide range of stakeholders throughout the project
lifecycle. HEL, the Company’s development partner, seeks
to build strong relationships with local communities by
keeping residents informed, consulted and empowered
through the development process. From the point of
acquisition, the Company creates and maintains open
channels of communication, keeping stakeholders
informed and ensuring they have opportunities to share
their views, ask questions and have feedback addressed
where possible.
The Company’s community funds support initiatives
that positively impact local communities or the
environment throughout a project’s lifetime. From the
start of commercial operations, the Company contributes
£100per MW annually, with a minimum of £5,000 per
site peryear.
To administer these funds, the Company continues to
partner with BizGive, a platform connecting funders with
community groups and third-sector organisations seeking
support. Funds are allocated to initiatives that benefit the
local area around each project and align with the priority
Sustainable Development Goals (“SDGs”) identified in the
materiality assessment.
PROGRESS UPDATE
Community funds for the Farnham, Broadditch, Pillswood,
Bumpers and Little Raith projects, totalling £35,000
annually, were distributed to 36 local organisations during
the Period, ensuring the Company’s activities benefit the
communities in which it operates. Additionally, members
of the Investment Adviser team volunteered their time
and skills to a local group supported by the Farnham
Community Fund, adding value to the community and
fostering positive relations with local stakeholders.
The Investment Adviser also facilitated educational
initiatives, such as talks and site visits for local schools and
universities, providing opportunities for people to learn
about renewable energy and biodiversity.
COMMUNITY IMPACT
PROMOTING POSITIVE PEOPLE IMPACTS
The Company champions a
fair and just transition to net
zero that benefits workers
and communities. We are
committed to reducing
negative outcomes, and
wherever possible, delivering
positive outcomes for people
impacted by the Company’s
direct and indirect activities.
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
42
In the Prospectus, the Board committed
to establishing an “ESG Fund” to support
environmental and social initiatives within the
wider investment trust and BESS industries
once the Company’s NAV exceeded
£250 million. The NAV has exceeded
£250 million, however, due to a challenging
commercial environment and lower than
expected revenues, the Board has decided to
defer the deployment of the ESG Fund. This
decision will be reviewed when there is clarity
on the outcome of the Company’s asset sale
process (see page 6 for further information).
The Company’s contribution towards the River Thame Conservation
Trust helped to equip volunteer “citizen scientists” to effectively
monitor the water quality of the chalk streams in Princes Risborough
BUMPERS COMMUNITY FUND – REVIVING RISBOROUGH CHALK STREAM
The Company launched its Bumpers Community Fund during the Period to support charities and community
initiatives located within a 5-mile radius of its Bumpers BESS.
Among the seven selected charities and community initiatives was the River Thame Conservation Trust, a charity
that works on the ground with communities across Buckinghamshire and Oxfordshire to improve, enhance and
restore the River Thame and its tributaries.
In Princes Risborough, where the Company’s Bumpers site is located, the River Thame Conservation Trust works
closely with volunteers from the Risborough Environment Group to protect the town’s rare and fragile chalk
streams, which are currently in poor ecological status due to pollution, through water quality monitoring and
education programmes.
The River Thame Conservation Trust said
“The funding from the HEIT Bumpers Community Fund will enable us to dedicate more
resources to raising public awareness of the importance of the local chalk streams, and to
equipping local volunteers as well-rounded citizen scientists.”
CASE STUDY
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
43
PROMOTING POSITIVE PEOPLE IMPACTS
APPROACH
The Company aims to promote local employment and
sustainable economic growth by encouraging contractors
to use local suppliers and to create skilled green job
opportunities for local people at the heart of the energy
transition.
PROGRESS UPDATE
The Investment Adviser strengthened its team during
the Period, creating four new jobs due to the Company’s
activities. Jobs have also been supported through the
construction of the Company’s sites, and additional
jobs created in the Company’s supply chain and at the
Company’s service providers.
The Investment Adviser regularly engages with its
31UK-based employees (as at the end of the Period),
seeking feedback through employee surveys and focus
groups. Inits annual employee engagement survey, the
Investment Adviser achieved an employee net promoter
score of 52 (on a range from -100 to +100), based on the
likelihood employees would recommend the organisation
to others as a place to work. This represented a reduction
from 76 the prior year, driven by an increase in ‘passives’
(i.e. employees that scored 7 or 8) and a slight decrease in
‘promoters’ (i.e. employees that scored 9 or 10). Last year’s
score was exceptionally high, and it has been challenging to
sustain this level of employee satisfaction through a period
of rapid growth. While scores above 50 are considered
to reflect high employee satisfaction and loyalty, the
Investment Adviser will continue to strive for improvements
in future.
WEALTH CREATION AND EMPLOYMENT
The Investment Adviser is committed to creating a culture
and working environment which encourages equality,
diversity and inclusion (“EDI”) and recognises the benefits
of a diverse workforce. During the Period, an externally
facilitated training session on EDI was delivered to all
the Investment Adviser’s employees, as well as inclusive
recruitment training for all hiring managers. The second
annual EDI survey was sent to all staff to better understand
the profile of the workforce, helping to identify any gaps or
issues and enable the Investment Adviser to work towards
improving them. Following the survey, the Harmony Energy
Group reviewed and strengthened certain key HR policies
and processes to support its commitment to building a
diverse, equitable and inclusive place to work. Updated
policies and processes included changes to the recruitment
process, and a new parental leave policy facilitating both
enhanced maternity and paternity pay. At the end of the
Period, 43% of the Investment Adviser’s employees were
female and 20% of employees were from ethnic minorities.
These proportions were broadly in line with the previous
financial year. Initiatives are planned to ensure inclusive
HRpractices continue to be developed.
Learning is promoted through internal knowledge share
sessions and externally facilitated training sessions, as well as
employer-funded access to external training programmes.
During the Period, an e-learning system was introduced to
facilitate training sessions on topics such as cyber security,
GDPR and anti-bribery. Overall, employee training hours
increased from 129 hours to 321 hours year-on-year.
LABOUR AND HUMAN RIGHTS
APPROACH
The renewable energy and storage industry has a responsibility
to uphold social standards to ensure that the transition to
a low carbon energy system is fair and just for workers and
communities. The BESS industry is associated with human
rights risks - from labour exploitation during the construction
of assets, to the violation of workers, communities and
indigenous peoples’ rights in upstream supply chains. The
Company recognises its responsibility to both understand and
reduce human rights risks associated with its activities. The
Company is committed to implementing robust due diligence
processes to address these.
PROGRESS UPDATE
HUMAN RIGHTS
During the Period, the Company introduced its first
Human Rights Policy, outlining its commitments to
strengthening its approach to upholding human rights.
ThePolicy is aligned to international standards and
Investment Adviser employees volunteered to assist a local
community group supported by the Farnham Community Fund
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
44
guidelines, notably the United Nations Guiding Principles
on Business and Human Rights.
Following adoption of the Human Rights Policy, focus has
turned to its implementation. This has included strengthening
the supplier due diligence process, as described in the
‘Promoting a more responsible and sustainable supply chain’
section. As part of the enhanced due diligence process, the
Investment Adviser conducted targeted engagement with
suppliers considered to have higher exposure to human
rights risks. This included conducting workshops with the
Company’s battery suppliers to understand and monitor
their existing policies, management systems and performance
relating to human rights and supply chain mapping and
traceability. The Investment Adviser will continue to
collaborate with suppliers to monitor and mitigate supply
chain human rights risks.
The Company’s Modern Slavery and Human Trafficking
Statement is available on its website.
HEALTH AND SAFETY
Health and safety (“H&S”) are high priority areas for the
Company, and it is committed to protecting workers as
well as the surrounding communities through maintaining
high H&S standards throughout the project lifecycle.
During the Period the Harmony Energy Group, which the
Investment Adviser is a part of, adopted an enhanced H&S
Policy as well as key procedures, such as the Emergency
Response Plan.
To support the Company in its continued improvement
regarding H&S, Harmony Energy Group engaged a
specialist H&S consultancy, Pearl Safety Solutions Ltd
in 2024. Pearl Safety have undertaken a deep dive gap
analysis into the existing H&S management system,
identifying areas for improvement. Subsequently,
atwo-year strategic H&S action plan was presented to
and has been approved by the HEL Board. A new H&S
management system has been developed in line with
ISO45001 with the intention to achieve certification
against the standard within 24 months.
The Investment Adviser regularly engages with contractors
on H&S matters. This engagement includes initial
assessment of competence using PAS91 formal assessment
criteria and meetings to discuss the responsibilities of each
supplier, periodic site visits with the aid of H&S specialists
and informal site visits by the Investment Adviser’s project
management team. In addition, the Investment Adviser
continued to implement initiatives for promoting effective
H&S reporting, such as the site observations campaign
offering monthly £50 vouchers to the staff member
who submits the most effective safety observation at
each site. During the Period, there was a high level of
LABOUR AND HUMAN RIGHTS CONTINUED
engagement with the safety observation campaign, with
402 observations submitted across the Portfolio, as well as
172 toolbox talks.
Five H&S incidents were recorded at the Company’s
sites during the Period. This included one incident that
attracted reporting to the Health and Safety Executive
(“HSE”) under the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations (“RIDDOR”), one lost
time incident and three incidents involving slips, trips, and
falls. All incidents have been promptly investigated and
closed, and appropriate mitigation measures put in place
to help prevent similar incidents occurring in future.
FOCUS ON FIRE SAFETY
The Company mitigates any fire safety risk through careful
planning and robust safety protocols, which reduce the
likelihood and severity of a fire occurring at any of our sites.
The Company’s BESS assets are operated and maintained
in line with stringent and regularly reviewed Emergency
Response Plans, informed by industry specific guidance,
equipment manufacturers maintenance procedures and fire
service engagement.
All BESS have inbuilt battery management systems to
remotely monitor the battery at all times. They include
internal thermal heat probes and sites have infrared
cameras installed around their perimeters. If there is any
detection of a temperature increase or sub-optimal battery
cell working, the system will notify the control centre and
the system will isolate and shut down the effected battery
automatically.
We work closely with the local fire services to familiarise
them with the technology and plan for all eventualities as
part of our safety planning. We are continuing to support
the development of industry best practice guidelines
and standards through working closely with stakeholders,
including the National Fire Chiefs Council and with other
stakeholders through the Electricity Storage Network Safety,
Sustainability and Supply Chain Working Group.
The Investment Adviser facilitated a site visit for the local
fire services as part of our fire prevention strategy
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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ETHICAL BEHAVIOUR AND GOVERNANCE
The Board drives success through well-informed decision-
making supported by robust debate. The diverse professional,
educational, socio-economic, and cultural backgrounds of
Board members provide a wealth of knowledge, perspectives,
and constructive challenge. Details on Board composition and
diversity are available in the Governance Report on page 75.
The Company takes a zero-tolerance approach to bribery,
fraud and corruption, and is committed to acting professionally,
fairly, transparently, ethically and with integrity in all business
dealings and relationships. The Supplier Code of Conduct
requires suppliers to adhere to anti-bribery and corruption
policies no less stringent than those of the Company, and
the Company monitors key service providers’ policies and
approaches through the annual Management Engagement
Committee service provider review process. For suppliers to the
project SPVs, the Investment Adviser seeks to ensure service
providers have appropriate policies in place and due diligence is
conducted as part of the procurement process.
Operating responsibly
The Company behaves and invests responsibly
to ensure positive impacts for all stakeholders,
including sustainable value for its investors.
We are committed to embedding responsible
sourcing practices to strengthen the
sustainability and resilience of the supply chain.
The multi-award-winning Pillswood project was the largest
BESS in Europe (by MWh) at the time of launch
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HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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STRATEGIC REPORT
PROMOTING A MORE RESPONSIBLE AND SUSTAINABLE SUPPLY CHAIN
The Company recognises the risks in its supply chain and
is working to embed responsible sourcing practices to
strengthen the sustainability and resilience of its supply
chain.
It has conducted a company-wide sustainability assessment
to determine areas material to the business and salient
to society and the environment. This assessment has
informed the Company’s supplier due diligence approach,
comprised of the following activities:
Risk assessment:
• Implementing targeted assessments of suppliers
with higher ESG risks. This includes requiring higher
risk suppliers to complete HEIT’s supplier ESG due
diligence questionnaire during the onboarding process
and annually thereafter;
• Conducting regular supplier workshops to understand
and monitor suppliers’ existing policies, management
systems and performance relating to ESG matters;
• Desk-based research incorporating non-governmental
organisation, academic and other stakeholder reports
to assess risk and inform business decisions;
• Maintaining awareness of geographic risks, trends, and
other factors through various sources.
Risk mitigation:
• Requiring suppliers to acknowledge HEIT’s Supplier
Code of Conduct at onboarding, and including ESG
clauses in supplier contracts;
• Engaging with suppliers who fail to meet the
requirements of HEIT’s policies to implement
corrective action plans to drive improvements,
including potential termination of contract as a
lastresort;
• Engaging in multi-stakeholder working groups, such
as the Energy Storage Network Sustainability working
group, through which we contribute to industry
standards to drive positive change in the battery
supplychain;
• Addressing any concerns raised through the
Investment Advisers’ publicly accessible grievance
mechanism.
Monitoring and reporting:
• Monitoring of supplier performance and corrective
actions through the annual supplier engagement and
review process.
The Investment Adviser is working with existing BESS
suppliers to better identify risks and mitigations,
particularly in respect of the mining, refining and
manufacturing stages of the BESS supply chain. In 2024,
the Company identified supply chain areas with the most
significant risk of adverse impact, considering factors
including country risk, product category risk, supplier
reputation and ownership. The Investment Adviser has
conducted targeted enhanced due diligence on suppliers
identified to be higher risk. This initiative is ongoing, but
encouraging progress has been made in increasing visibility
of the upstream supply chain through collaborating with
suppliers on mapping and traceability.
The Investment Adviser continued to roll out the Supplier
Code of Conduct during the Period. 67% of key suppliers
have signed our Supplier Code of Conduct, and the
majority of suppliers that have not signed have confirmed
they adhere to equivalent standards.
During the Period, the Company enhanced the ESG
sections of its annual service provider evaluation
questionnaire, strengthening its third-party due diligence
processes and supporting the implementation of the
Company’s Supplier Code of Conduct.
The Company recognises that no organisation can
solve supply chain sustainability challenges in isolation.
HEALis a member of trade bodies including Solar Energy
UKand the Electricity Storage Network, through which it
contributes to the development of industry standards in
sustainability alongside peers to drive positive change in
the supply chain.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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TABLE 4: ESG DATA
PILLAR ESG PRIORITIES AND ASSOCIATED METRICS 2022/23 DATA 2023/24 DATA
ENABLING A NET ZERO ENERGY SYSTEM
Climate change
mitigation
Storage capacity (MWh) 555 790.8
Storage capacity (MW) 2 7 7.5 395.4
Equivalent number of homes that could be powered for 2 hours (#) 833,000 1,282,853
Total renewable energy stored (MWh) 30,938 96,073
Share of energy from renewable sources, expressed as a percentage
of total energy stored (%)
36% 36%
Estimated annual GHG emissions avoided through BESS projects
HEIT invests in (tCO
2
e)
15,415 51,945
Greenhouse gas
emissions
Scope 1 GHG emissions (tCO
2
e) 0 0
Scope 2 GHG emissions (tCO
2
e) 1,323 3,390
Scope 3 GHG emissions (tCO
2
e) 153,607 76,262
Scope, 1, 2 and 3 GHG emissions (tCO
2
e) 154,930 7 9,6 5 2
GHG intensity relative to revenue (tCO
2
e/£m) 23,345 4,892
ENHANCING OUR NATURAL ENVIRONMENT
Nature
Number of reportable environmental incidents (#) 0 0
Share of investments in investee companies without a biodiversity
protection policy (%)
100% 0%
Biodiversity net gain (% habitat loss/gain) 15% 16%
Waste
Maximum share of BESS that is recyclable (% by weight) 95% 95%
PROMOTING POSITIVE PEOPLE IMPACTS
Communities
Investment in community projects (GBP) £10,000 £35,000
Wealth creation
and employment
Number of direct jobs created (#) 11.2 4
Number of hours of training provided to Investment Adviser employees (#) 129 321
Investment Adviser employee net promoter score (#) 76 52
Health, safety
and wellbeing
Total RIDDOR Reportable Incidents (#) 0 1
Site safety audits (#) 77 54
Labour and
human rights
Key suppliers committed to the Supplier Code of Conduct (%) 68% 67%
Share of investments in entities without a human rights policy (%) 100% 0%
Diversity,
equality and
inclusion
Representation on the Board (gender) (%) 40% 40%
Representation on the Board (ethnicity) (%) 20% 20%
Representation within the Investment Adviser (gender) (%) 41% 43%
Representation within the Investment Adviser (ethnicity) (%) 21% 20%
The Investment Adviser has implemented systems to measure, monitor and report a set of indicators aligned to the
Company’s material ESG areas. This will enable transparent measurement and reporting of progress over time. The table
contains the Company’s ESG data for the current and prior reporting Periods.
Metrics
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
48
Managing Director Paul Mason spoke at the Energy Transition
Summit 2024 (image credit – Financial Times Live)
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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Last year, the Company released its first combined
TCFD and TNFD report, which recognised the
interconnectedness of climate and nature, and the
importance of these areas to the Company’s core purpose
and mission.
Since publication of the Company’s inaugural report, the
UK has elected a new government with high sustainability
ambition, including the CP30 Action Plan committing the
UK to decarbonise the electricity grid and increase its
energy storage capacity to 23-27 GW by 2030, with the
majority expected to come from grid-scale BESS. From a
global perspective, the Global Energy Storage and Grids
Pledge, announced at COP 29 in November 2024, aims
to deploy 1,500 GW of energy storage capacity globally by
2030. Coupled with the UK’s targets, this reinforces the
importance of BESS in facilitating the transition to a net
zero carbon electricity system. The Company’s business
model supports and depends on a successful net zero
transition and thriving natural ecosystems, and so climate
and nature are integral to the Company’s strategy.
The Company does not currently fall within the scope of
the FCA’s mandatory reporting TCFD requirement but has
once again chosen to voluntarily report in line with both
the TCFD and TNFD frameworks. This year’s combined
disclosure outlines the progress the Company has made
in further embedding climate and nature as core strategic
priorities to support mitigation efforts and invest in a
sustainable future.
GOVERNANCE
The Company maintains robust decision-making processes
and oversight of climate and the natural environment,
with the Board continuing to hold responsibility for,
and oversight of, climate- and nature-related risks and
opportunities. The Board delegates certain aspects of ESG
oversight and operational decision making to the ESG
Committee, the role of which is to monitor and review the
Company’s ESG-related performance and activities and
make recommendations to the Board in relation to the
Company’s ESG Strategy. The day-to-day investment and
asset management is the responsibility of the Investment
Adviser, with the Head of Sustainability, a representative of
the Investment Adviser, responsible for implementation of
the ESG Strategy.
Further details on the roles and responsibilities associated
with these activities are outlined in the ESG governance
section on page 37 of this report.
STRATEGY
Emerging risks and opportunities are integral to future
growth and strategic direction
The new UK Government, elected in July 2024, brings
an ambitious sustainability agenda for the country which
complements the Company’s strategy. To capture risks and
opportunities that may emerge due to planned UK policies,
the Company has re-visited its screening exercise and
sought to integrate mitigation efforts that could enhance
resilience, or political commitments which may present
opportunities for growth and value creation.
Risks and opportunities considered material are presented
in Table 2, alongside prospective impacts as determined
by the Company, in collaboration with a third-party
global sustainability consultancy. To maintain consistency
and to enable efficient comparison between results, the
Company has maintained the structure and approach as
per 2022/23 Report. Risks/opportunities are complemented
by a description of the impact, dependency, or effect
(business model, including both direct operations and
value chain activities, and financial impact). Information on
the approach adopted to undertake this year’s screening
exercise is disclosed in the Risk Management section of
thisreport.
Impact on nature at the Company’s sites
The TNFD recommendations guide companies to conduct
location-specific analysis to identify and assess nature
impacts, dependencies, risks and opportunities, reflecting
the site-specific nature of biodiversity and ecosystems.
Inline with this approach, the Company continually
assesses material site-level nature impacts including in
relation to biodiversity, threatened species, flood risk, and
resources such as water and energy. These assessments
contribute to the development of site level environmental
management plans and inform the Company’s risk register.
Assessing nature-related issues, human rights policies,
stakeholder engagement activities in the supply chain
As an investment trust, the Company has no offices or
employees, but recognises the risks associated with nature
and all affected stakeholders across both its sites and supply
chain. HEIT has conducted a Company-wide sustainability
assessment to determine areas material to the business and
salient to society and the environment, including nature
and human rights related matters. In line with the Locate,
Evaluate, Assess and Prepare (“LEAP”) methodology,
supply chain impacts and dependencies were evaluated,
particularly in the upstream areas of mineral extraction,
refining, and manufacturing.
TCFD and TNFD Report
STRATEGIC REPORT
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This assessment has informed the Company’s sustainability
workstreams, such as the requirement for key suppliers
to sign the Supplier Code of Conduct in support of the
Company’s commitments to climate and nature across its
sites and supply chain. The Investment Adviser monitors
compliance with the Supplier Code of Conduct and
engages with key suppliers on an ongoing basis to ensure
risks are being adequately managed. Key stakeholders
include the local community, landowners, NESO, investors
and suppliers. More information on the risk identification
and mitigation strategy can be found in the ESG report.
Within its Human Rights Policy, the Company emphasises
a proactive approach to identifying and mitigating human
rights risks across its operations and value chain, with
particular attention to the upstream processes mentioned
previously. This strategy includes regular assessments of
potential risks and close engagement with stakeholders to
ensure alignment with internationally recognised human
rights frameworks. The Investment Adviser plays a pivotal
role in implementing this strategy, working collaboratively
with suppliers, communities, and other stakeholders to
uphold the Company’s zero-tolerance stance on human
rights violations and to drive improvements across the
supply chain.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
51
TCFD and TNFD Report continued
TABLE 5: PRIORITY CLIMATE AND NATURE RISKS/OPPORTUNITIES AS IDENTIFIED BY THE COMPANY THROUGH THE
2023/24 SCREENING EXERCISE.
RISK CAUSE RISK EVENT RISK EFFECT
BUSINESS
MODEL IMPACT
FINANCIAL
IMPACT
CLIMATE RISKS: PHYSICAL
CHRONIC
Extreme
heat
Batteries and cooling fans operating outside
designed temperature parameters, working
harder to maintain optimised temperatures
and wearing components faster.
Batteries operating outside designed
temperature parameters are less efficient and
fans may shut down if they overheat, both
resulting in increased maintenance costs.
Noise from fans leads to noise complaints,
damaging reputation and potential legal
resolution costs.
Operations P&L Cost
Mitigating action: The Company’s battery assets are designed to withstand operating temperatures of -30°C to 45°C.
All Company assets are in GB, so there is a lower risk of breaching the upper or lower limit of the temperature range.
Warranties for equipment performance and degradation are in place if equipment was to degrade due to operating in higher
temperatures. Noise complaints are addressed individually and BESS suppliers fed back to with the aim of collaboratively
reducing noise levels.
ACUTE
High winds Supporting infrastructure, such as grid
network power lines, may be damaged or
operations affected by storms or high wind
speeds.
Impedance to battery charge/discharge
resulting in reduced energy storage/supply
to the off-taker, and reduced revenue.
Operations Revenue
Mitigating action: HEAL works closely with DNOs to schedule outages to times that least affect revenues. In the event
of an unplanned outage on the grid network, the Company is exposed to the first 30 days of lost revenue. Thereafter, the
Company can lodge a business interruption claim with its insurance underwriter. On a more macro level, the Company’s
Portfolio is better hedged against this risk by having a larger number of 50 MW or lower sized sites that are geographically
spread, rather than a few 100MW+ sites.
Flash
floods
Flood waters may disrupt site construction
and operations, damage equipment and
result in unsafe working conditions.
During the construction phase, flooding
could result in equipment damage resulting
in costs to repair/replace equipment.
Flooding could also result in unsafe working
conditions, water run-off into adjacent
sites and delays to project timelines, which
could result in a loss of revenues and legal/
insurance fees.
During the operational phases, flooding
can contribute to damaged equipment.
Financial impacts could include costs
associated with equipment replacement/
repairs as well as loss of revenue while the
site is offline.
Construction,
Operations
Revenue
P&L Cost
Capital cost
Mitigating action: Pre-acquisition due diligence on potential target assets considers flood risk and mitigation measures to
ensure adequate protection is in place. Flood risk assessments are completed as part of the site selection process by HEL.
Mitigation measures are also incorporated into site design. For example, all sites have appropriate drainage, and equipment
is elevated on platforms at certain sites to alleviate flood risk. In addition, all sites have comprehensive insurance cover to
mitigate negative financial impacts associated with flooding.
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52
RISK CAUSE RISK EVENT RISK EFFECT
BUSINESS
MODEL IMPACT
FINANCIAL
IMPACT
NATURE RISKS: TRANSITION
REPUTATION
Negative
ESG
impacts in
the supply
chain
The Company is dependent on raw materials
such as lithium to produce BESS equipment.
Mining and processing raw materials can
result in negative ESG impacts, for example,
relating to the local community, indigenous
people, workers, water availability and quality,
biodiversity, resource consumption and
pollution.
Damage to reputation and costs to rectify if
the Company is linked with these activities.
Contracting P&L Cost
Mitigating action: The Investment Adviser conducts ESG due diligence on suppliers to help ensure supply chain risks are
being effectively identified and managed. The Company requires suppliers to sign its Supplier Code of Conduct setting out the
standards, principles, and values that suppliers are expected to uphold. The Investment Adviser monitors compliance with the
Supplier Code of Conduct and engages with suppliers to drive performance improvements.
OPPORTUNITIES
POLICY AND LEGAL
UK
net-zero
ambition
The UK Government’s ambitious net
zero target and CP30 target require
accelerated deployment of renewable
energy generation and energy storage
infrastructure.
The new labour Government’s Clean
Power 2030 Action Plan acts as an
enabler to the deployment of low carbon
infrastructure, supporting the UK’s net zero
ambition.
To achieve clean power by 2030, the
UK needs rapid, large-scale deployment
of renewable generation. An increasing
reliance on intermittent renewable
electricity generation presents an
opportunity for the Company’s BESS assets
to earn higher revenues due to increased
demand for grid balancing and stability
services and wider wholesale market
spreads.
Operations Revenue
Enabling action: As an investor in BESS and complementary renewable energy generation assets, the net zero transition
is at the core of the Company’s investment policy and climate-related opportunities are inherently considered in business,
strategic, and financial planning. The Company and the Investment Adviser engage with policy makers to promote the
creation of a policy and regulatory environment that supports increased deployment of BESS and renewable energy
infrastructure.
MARKET
Increased
renewables
An increase in intermittent renewable
energy sources supplying the grid can lead
to supply-demand imbalances.
Increased renewable penetration can
create wider wholesale market spreads,
which presents an opportunity for
enhanced revenues if the Company’s BESS
can effectively capture these spreads. It will
also increase demand for BESS to provide
grid balancing and stability services,
creating revenue opportunities for the
Company.
Operations Revenue
Enabling action: The growth rate of current and potential future renewables penetration is a key input into the Company’s
financial modelling. The Company and the Investment Adviser will work closely with optimisers to ensure that BESS are
optimised to maximise the revenue opportunities created by an increase in renewables on the system.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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RISK MANAGEMENT
Analysing the evolving risk and opportunity landscape
Recognising the economic, political and market changes
during the Period, the Company enlisted the support of
a third-party global sustainability consultancy to identify
emerging physical climate, transition and nature risks
or opportunities that may be relevant for inclusion
alongside an evaluation of those identified in the prior
year’s screening exercise. For example, the Company is
aware of the impact UK planned legislation may have on
business operations and so risks or opportunities related
to this have been factored into this year’s analysis. The
consultancy completed research and consulted internal
subject matter experts to determine which pledges and
political plans may impact the Company, and to what
magnitude, to integrate into the 2023/24 screening
exercise.
Additionally, building on its 2022/23 approach, the
Company conducted a review of the previously identified
climate- and nature-related risks, opportunities,
dependencies and impacts (across both direct operations
and value chain activities) to reevaluate materiality. Updates
have been incorporated based on changes to national
and global political pledges, the wider industry, economic
climate and the Company’s strategy. Learnings have also
been applied from the multiple stakeholder sessions that
contributed to the screening exercise of 2022/23.
In addition to the political landscape research conducted
and to remain abreast of market activity, the Company
instructed a consultancy to conduct a peer review. The
consultancy reviewed a nominated set of peers’ reports
available in the public domain and identified climate- and
nature-related risks and opportunities disclosed. Risks and
opportunities not captured in the Company’s existing list
of risks and opportunities were incorporated and rated,
based on likelihood and severity and with consideration
of the stages of the Company’s business model, with the
approach adopted consistent with that disclosed in the
2022/23 report.
Effective monitoring to support mitigation
Risk management continues to be an integral enabler
for the Company to deliver its strategic objectives, with
mitigation efforts paramount to successful transition
to a low carbon economy. Since conducting the initial
screening exercise to identify and assess climate- and
nature-related risks and opportunities as part of the
2022/23 disclosure, the Company has fully embedded
the results into its business-as-usual risk management
processes, further establishing effective monitoring
practices and enabling proactive management of risks
andopportunities.
The emergence of green policies and initiatives from
the UK Government presents enhanced opportunities
to the Company, which will be considered internally
and communicated via the governance structure and
mechanisms highlighted previously in this and the prior
year’s report. As per the existing approach to monitoring
and managing disclosed in the 2022/23 report, mitigation
measures and action plans will be put in place to manage
identified emerging risks, spanning the entirety of the
Company’s value chain (described in the 2022/23 report
using various stages of the Company’s business model).
This includes assigning owners within the Investment
Adviser to ensure accountability and recording of risks
and mitigations in site-level registers, reflected in the
Company-level risk register reviewed at least quarterly by
the Board.
TCFD and TNFD Report continued
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54
METRICS AND TARGETS
The Company has conducted a review of metrics previously disclosed, spanning both climate and nature, and is pleased
to include updated data points in this year’s report (Table 3). Nature and biodiversity metrics continue to be integral to
support the Company’s strategic direction and ensure awareness of the impact operations and value chain activity has
on the environment. Not all TNFD core indicators are included, as nature-related data is nascent, and the Company
continues to work towards capturing this information. The TNFD core indicators that do lack sufficient data for disclosure
currently are land use change, pollution, resource use and invasive alien species.
TABLE 6: TNFD AND SFDR DISCLOSURE INDICATORS, COUPLED WITH STATUS OF METRICS FOR
NATURE-RELATED DEPENDENCIES AND IMPACTS, AS APPLICABLE TO THE COMPANY.
CATEGORY INDICATOR STATUS
Climate change GHG Emissions The Company measures and discloses Scope 1, 2 and 3 emissions in line with
the GHG Protocol – see Table
7.
Carbon Avoidance ~51,945 tCO
2
e
Renewable Energy Stored 96,073 MWh
Weighted average carbon
intensity (WACI)
4,892 tCO
2
e/£m
Waste Waste generation and disposal 8,585 tonnes solid waste
40,520 m
3
wastewater
Biodiversity Activities negatively affecting
biodiversity sensitive areas
0% share of investments in investee companies with sites/operations located
in or near to biodiversity sensitive areas where activities of those investee
companies negatively affect those areas. (SFDR-PAI report)
Biodiversity net Gain +16% (habitat gain).
Natural species and protected
areas
0% share of investments in investee companies whose operations affect
threatened species.
100% share of investments in investee companies without a biodiversity
protection policy covering operational sites owned, leased, managed in,
oradjacent to, a protected area or an area of high biodiversity value outside
protected areas. (SFDR-PAI report)
Water Emissions to water 0 tCO
2
e/€M (Tonnes of emissions to water generated by investee companies
per million EUR invested, expressed as a weighted average). (SFDR-PAI report)
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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TABLE 7: PRIOR AND CURRENT YEAR GHG EMISSIONS
SCOPE AND CATEGORY
2022/23 DATA (tCO
2
e) 2023/24 DATA (tCO
2
e)
GHG Emissions
Scope 1 0 0
Scope 2 1,323 3,390
Scope 3 153,607 76,262
Total Scope 1, 2, and 3 154,930 7 9,6 5 2
TNFD requires reporting on risks and opportunities.
The core metrics required relate to the value of assets,
liabilities, revenue, and expenses that are assessed as
vulnerable to nature-related transition and physical
risks. For opportunities, key metrics relate to capital
expenditure, financing or investment deployed towards
nature-related opportunities, by type of opportunity,
and with reference to a government or regulator green
investment taxonomy or third-party industry or NGO
taxonomy, where relevant. At present, the Company does
not have these metrics available and acknowledges that
further assessment, such as quantitative scenario analysis
and the LEAP approach, is required to enable disclosure of
these metrics.
Scope 1, 2, and 3 GHG emissions
The Company is pleased to disclose its third year of
carbon footprint data, covering the period 2023/24, in line
with the World Resource Institute’s GHG Protocol in
Table 4.
The Company defines its organisational boundaries using
the equity share approach as per the GHG Protocol
Corporate Standard, whereby a company accounts for
GHG emissions from operations according to its share
of equity in the operation. This approach focuses on
including GHG emissions from activities that are under
the financial control of the reporting company, presenting
a more accurate picture of the Company’s environmental
impact by including GHG emissions from entities it
has a significant influence over. Under the equity share
approach, all SPVs are within the Company’s organisational
boundary, as they are fully owned subsidiaries. Under the
methodology used, the construction and materials’ GHG
emissions for a project will be recognised only once the
construction of that project is complete.
With no employees, physical offices or vehicles, the
Company had zero Scope 1 GHG emissions during the
Period. Emissions associated with the combustion of fossil
fuels at SPV-level BESS sites are attributed to third-party
suppliers and accounted for under Scope 3 accordingly.
To calculate Scope 2 emissions relating to the operation
of the batteries, NESO carbon intensity values are applied
to electricity consumption and losses data. Electricity
consumption and losses figures are calculated based on
the difference between half-hourly energy import and
export data.
When calculating Scope 3 GHG emissions, the relevant
categories for the Company include:
• Category 1: Purchased goods and services –
professional services purchased by the Company;
• Category 6: Business travel – Non-Executive Board
business travel.
Scope 3 GHG emissions for the Company that derive
from SPV-level activities include:
• Category 1: Purchased goods and services – goods and
services purchased by SPVs;
• Category 2: Capital goods – cradle-to-supplier
gate emissions of capital goods (e.g. battery packs
and transformers) purchased or acquired by SPVs.
Emissions from contractor activity during the
construction phase (e.g. fuel use, material use, and
waste generated);
• Category 3: Fuel and energy related activities – well-
to-tank and transmission and distribution emissions of
electricity consumed or lost on SPV sites;
• Category 11: Use of sold products – upstream
emissions of the electricity exported to the grid
(i.e.not consumed or lost on site).
Various levels of data quality are available across the
different GHG emission categories, therefore different
methodologies must be applied. The Company and
the Investment Adviser are committed to continuously
enhancing the accuracy emissions data and reducing
direct and indirect climate impacts where possible.
TCFD and TNFD Report continued
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
56
Renewable energy stored
The Company calculates the total renewable energy
stored for all operational sites in the Portfolio. This metric
allows the Company to measure the role of BESS in
facilitating the increased adoption of renewable power.
Renewable energy for this metric includes wind, solar,
biomass, geothermal, and hydroelectric generation, and
excludes coal, gas, nuclear, imported or ‘other’ energy
sources categorised by NESO’s API. Half-hourly asset-specific
energy data combined with energy generation mix data from
NESO was used to calculate the amount of energy from
renewable sources that was consumed by the BESS sites
relative to energy from non-renewable sources. For 2023/24,
a total of 96,073 MWh imported by the operational Portfolio
was derived from renewable sources, constituting 36% of the
total electricity imported.
Carbon avoidance
The Company calculates the GHG emissions avoidance
impact of its BESS assets. The BESS assets provide
essential grid services and operate across various modes,
including energy Arbitrage actions, BM actions, and
Ancillary Services actions. Each type of battery energy
action influences carbon impact by altering the net load
system dynamics resulting from the action. The calculated
metric measures carbon avoided for each of these
operational uses, the methodology of which can be found
in the Company’s previous TCFD disclosure.
In the absence of a standardised industry methodology
to calculate carbon avoidance from BESS operations, the
Company aligns itself with existing best practice guidelines,
including the GHG Protocol and the EU InnovFund
methodology for assessing avoided emissions from BESS.
The Investment Adviser is collaborating with other industry
stakeholders through the Electricity Storage Network to
develop an industry-wide approach for calculating avoided
emissions from BESS operations to improve the reliability
and comparability of carbon avoidance data in the sector.
The Company intends to adopt the industry methodology
once it has been established.
During the Period, the Company’s BESS assets avoided an
estimated 51,945 tCO
2
e from entering the atmosphere.
Climate- and nature-related targets
The Company has set a target to achieve a biodiversity net
gain of 10% or more across the Portfolio, in line with the
UK mandatory biodiversity net gain target. The reporting
year of 2022/23 is the baseline for this target, given that it
marks the first year of site operation for the Company.
The Company may consider setting climate-related targets
in the future.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
57
Principal Risks and Uncertainties
The Board recognises the importance of effective risk
management in enabling the Company to deliver its
strategic objectives. The investment policy, as set out in the
Prospectus and as amended from time to time, details the
risk boundaries within which the Board wishes to operate.
WHAT WE MONITOR
The Company’s risk register was prepared based on the
risks stated in the Prospectus and is regularly reviewed
by the Investment Adviser, the AIFM and the Board
and updated to reflect any emerging risks or changes
to the identified risks. Day-to-day ownership of risk sits
with named individuals at the Investment Adviser, who
monitor and assess both current and emerging risks. Risks
are categorised and assessed to determine likelihood
and impact. Ratings are applied to the risks before any
mitigating action and again following consideration of
the adequacy of mitigating actions. Mitigating actions are
summarised in the risk register and are subject to review
and monitoring.
HOW WE MONITOR RISK
The Board retains ultimate responsibility for the
Company’s activities and board meetings are held at
least four times a year, at which the risk register of the
Company is reviewed and updates are reported by the
AIFM on any changes to the risks or their ratings.
The ARC meets at least three times each year. The
Committee reviews the adequacy and effectiveness of the
Company’s internal controls and risk management systems
and every six months it carries out a reassessment of the
principal risks facing the Company.
The AIFM provides risk management services to the
Company, including implementation of risk management
policies to identify, measure, manage and monitor the
risks that the Company is or might be exposed to and
ensuring that the Company’s risk management policy and
implementation comply with applicable regulations.
Representatives of the AIFM meet with representatives
of the Investment Adviser at least quarterly to review
the risk register and discuss any changes proposed. The
proposed updates to the Company’s risk register are
further reviewed and approved by the AIFM’s internal Risk
Committee in advance of circulation to the Board.
The identified risk owners within the Investment Adviser
are responsible for formal quarterly reporting of current
and emerging risks and issues to the Investment Adviser’s
leadership. A formal quarterly review of the risk register
is carried out by the Investment Adviser and any
recommendations for updates are made to the AIFM.
Any major emerging risks and issues are escalated outside
of the quarterly review framework.
TABLE OF PRINCIPAL RISKS AND
UNCERTAINTIES
The Board considers the following to be the principal
risks and uncertainties facing the Company as at the date
of approval of the accounts. The risks are presented in
order of significance based on net residual risk, following
mitigations.
Due to the nature of the Company’s activities, climate and
the natural environment are central to its key strategic,
investment, and operational decisions. During the Period,
the Company conducted a screening assessment with
specialist third-party consultants to identify material
climate- and nature-related financial risks, opportunities,
dependencies and impacts. HEAL has worked closely with
the AIFM to integrate the risks identified as part of the
recent screening into the risk register. Following careful
consideration of these risks by the Board, none of the
risks identified was considered to be sufficiently material
to qualify as a principal risk. For further information about
the climate- and nature-related risk assessment, see
Table 2 on page 52.
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
58
EXISTING RISKS
RISK DESCRIPTION POSSIBLE CONSEQUENCES MITIGATING ACTIONS
MERCHANT NATURE OF BESS REVENUES
Lower-than-expected market price of
Ancillary Services, revenues generated
from wholesale trading and/or the BM.
NESO is responsible for the structure
and the operation of both the BM
and the Ancillary Service markets, and
wholesale trading prices are influenced
by factors outside of the Company’s
control. In addition, revenue optimisers
may not perform as effectively as
expected.
• Reduced revenue.
• Reduced NAV.
• Inability to declare future
dividends.
• Inability to pay debts as
they become due.
• Subscriptions to Aurora for long-term revenue forecasts,
regular market intelligence and understanding of macro-
drivers.
• Engagement with industry stakeholders and policymakers,
including NESO.
• Scrutiny of revenue optimiser performance to maintain high
standards. The Company uses various revenue optimisers,
reducing the impact of any one optimiser not performing as
effectively as expected.
• Close monitoring of cash flow levels and scenario modelling
to ensure mitigating actions can be implemented in a timely
manner to improve cash position if necessary.
CONTINUATION VOTE
By the end of 2024, HEIT’s NAV was
lower than £250m, which triggered a
continuation vote to be proposed at the
2025 AGM.
• Commencement of HEIT
managed wind down.
• The Board, the IA and the Joint Brokers continue to engage
with Shareholders to keep them abreast of the market
conditions and the Portfolio performance.
RELIANCE ON GRID NETWORK
Grid network power lines may fail.
Impedance to battery charge/discharge.
• Reduced revenue.
• Inability to declare future
dividends.
• Inability to pay debts as
they become due.
• Reduced energy storage/
supply to the off-taker.
• The Investment Adviser works closely with DNOs to manage
and schedule planned outages to times when they would
least affect revenues.
• Business interruption claims with its insurance underwriter
can be brought by HEIT after 30 days of inactivity.
• HEIT has several 50 MW or less sites that are spread
geographically rather than focusing on a few 100 MW+ sites.
RELIANCE ON THE HARMONY ENERGY GROUP
The Portfolio requires significant
management time and resources
provided by, among others, the IA
and HEL in order for HEIT to meet its
Investment Objective.
• In the case of loss of key
personnel, the quality of
the services provided by
the IA to HEIT may be
adversely affected.
• In the case of loss of key
personnel, the quality of
the Portfolio assets may
decline.
• The management of the IA and HEL have made significant
personal investment into the Company and have therefore
aligned their interests with those of Shareholders.
• The IA has committed to always have sufficient resources in
place to manage the Portfolio and failure to do so may result
in the Company appointing another investment adviser.
• The Management Engagement Committee is to ensure that
the management fees paid to Harmony are sufficient for
them to maintain appropriate staff.
GENERAL RISKS AFFECTING THE SHARES
The value of the shares in the secondary
market may fluctuate due to factors
outside the control of the Company.
It may be difficult for Shareholders to
realise their shares at close to NAV and
there may not be a liquid market. The
market price of the shares may not
reflect their underlying NAV.
Share buy backs may not adequately
influence the discount in the secondary
market.
• Inability to raise additional
equity capital.
• Inability to purchase
additional projects.
• Reduced returns to
investors.
• The Joint Brokers and Investment Adviser monitor the share
price daily in the secondary market and report to the Board
regularly and where necessary.
• The Board actively considers a range of options to address
the discount. These include, inter-alia: share buy backs, asset
sales, gearing reduction and increased marketing.
• The Board will discuss share buy backs at every quarterly
Board meeting whilst shares are trading at a significant
discount to NAV.
• Stifel and Panmure Liberum have been appointed as Joint
Brokers and there is an increased focus on marketing HEIT
to new investors. The Board, the Joint Brokers and the
Investment Adviser monitor the market on a regular basis
with a view to taking actions if and when it is necessary.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
59
RISK DESCRIPTION POSSIBLE CONSEQUENCES MITIGATING ACTIONS
VALUATION RISK
HEIT invests in unquoted assets and
valuations will involve the Investment
Adviser, AIFM and Board.
The Company is relying on the
judgement of the Investment Adviser.
Errors in valuations could lead to
shareholder complaints or suits for
losses and regulatory censure.
• The possible sale of assets
for less than market value.
• Errors in NAV calculations
and announcements.
• The Investment Adviser has subscribed to services from
Aurora to provide support for quarterly NAV valuations.
• Semi-annual valuations are provided by an Independent Valuer.
The Independent Valuer regularly updates its valuation of
each project based upon, among other things, recent market
comparables and the relative liquidity of the assets.
EMERGING RISKS
RISK DESCRIPTION POSSIBLE CONSEQUENCES MITIGATING ACTIONS
INCREASE IN NETWORK CHARGES
Unpredictable increased network
charges may result in increased capital
expenditure or lower net revenue.
• Reduced revenue.
• Inability to declare future
dividends.
• Reduced cash availability.
• This risk cannot be mitigated, as it is outside of the
Company’s control.
RELATED-PARTY TRANSACTIONS
Information on related-party transactions can be found on
page 115 of this report.
Principal Risks and Uncertainties continued
Harmony Energy Limited, developer of all the Company’s sites,
won Developer of the Year at the Energy Storage Awards 2024
STRATEGIC REPORT
60
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
Section 172 Statement
Under s172 of the Companies Act 2006, the Directors
have a duty to promote the success of the Company for
the benefit of its members as a whole, and in doing so to
have regard to a number of matters including:
• the likely consequences of any decision in the long
term;
• the interests of the Company’s employees;
• the need to foster the Company’s business
relationships with suppliers, customers and others;
• the impact of the Company’s operations on the
community and the environment;
• the desirability of the Company maintaining a
reputation for high standards of business conduct; and
• the need to act fairly as between members of the
Company.
As an externally managed investment company with no
employees, the Board considers its key stakeholders to
be its Shareholders, the Investment Adviser, other service
providers and the wider environment in which it operates.
The Company’s s172 statement summarises how the
directors have engaged with the Company’s primary and
secondary stakeholders and how the interests of those
stakeholders were considered in key decisions made
during the year.
SHAREHOLDERS
Engagement with Shareholders and potential investors is
key to the success of the Company. Regular communication
is made with Shareholders through interim and annual
financial statements, RIS announcements, quarterly
factsheets and publication of the Company’s NAV.
Information is also provided on the Company’s website.
The Company’s corporate brokers attend the scheduled
quarterly board meetings and provide regular updates to
the Board on dialogue with Shareholders and potential
shareholders. The Investment Adviser has held regular
meetings with current and potential investors, providing
updates on the status of the Portfolio as well as the BESS
market more generally. The Investment Adviser has held
analyst calls following key announcements and spoken on
relevant panels hosted by brokers and analysts. In addition
to direct Shareholder engagement the Investment Adviser
seeks to raise the profile of HEIT and reach a wider investor
base, by actively creating strong relationships with analysts.
THE INVESTMENT ADVISER
The Investment Adviser attends all board meetings,
provides regular detailed reporting on the Company’s
Portfolio to the Board and regularly interacts with the
Directors, both individually and collectively.
During the Period, the Investment Adviser had frequent,
regular interactions with the Board, the Joint Brokers and
the Company’s legal advisers in respect of the proposed
sale of one or more of the Company’s assets.
The Chair also has regular contact with the Investment
Adviser and the Joint Brokers.
The Board regularly reviews the Company’s performance
against its investment objectives, and the relationship
with the Investment Adviser is a key business relationship.
The Management Engagement Committee reviews the
performance of the Investment Adviser annually.
THE COMMUNITY AND THE
ENVIRONMENT
The Company considers the environment and
communities in which it operates throughout project
lifecycle and strives to make a positive local contribution.
HEL engages with the community before projects
are acquired. Post-acquisition, the Company, through
the Investment Adviser, continues this engagement
throughout the lifecycle of projects. The ESG Report on
pages 30 to 48 provides further details on engagement
with local communities and the actions taken in respect
of environmental matters. The Board receives quarterly
updates on ESG-related matters from the Investment
Adviser, including community and environmental initiatives
and issues.
OTHER SERVICE PROVIDERS
The Company recognises the important role played by
its suppliers in running its business. The Board, directly,
through its committees or the Investment Adviser, engages
with HEIT’s services providers and discusses their work on
an ongoing basis.
The Management Engagement Committee is responsible
for the annual review of the performance of service
providers and reports on its findings to the Board.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
61
CONTRACTORS, SUBCONTRACTORS
AND SUPPLIERS
The Investment Adviser, on behalf of the Company,
engages regularly with HEIT’s contractors, subcontractors
and suppliers. Engagement occurs by way of supplier
audits and assessments and involves a number of
matters, such as H&S and sustainability. The frequency
of engagement with the suppliers is dependent on their
significance and risk profile, and ranges from weekly to
ad-hoc meetings. The Investment Adviser reports on these
matters to the Board at each quarterly board meeting.
REGULATORS AND GRID OPERATORS,
INCLUDING NESO
During the Period, the Investment Adviser continued
its collaborative approach with DNOs and NESO. The
collaborations took the form of regular project meetings that
were specifically designed to ensure alignment among different
stakeholders, resulting in projects being constructed and
operated in an efficient and safe manner.
The Investment Adviser actively participates in
industry-wide consultations and working groups to provide
the Company’s views on the challenges and opportunities
facing its industry. These events also provide opportunities to
discuss market structures with NESO, and regulatory matters
with representatives of the main regulators such as Ofgem,
government departments such as DESNZ and industry
associations, including the Electricity Storage Network and the
Energy Networks Association.
KEY DECISIONS AND ACTIONS TAKEN DURING THE PERIOD
Key decisions and actions during the year which have required the Directors to have regard to applicable s172 factors
include:
DECISIONS AND ACTIONS STAKEHOLDER CONSIDERATION
Engaging JLL with a mandate to seek offers
for some or all of the Company’s assets.
The sale of one or more assets, if effectuated, may maximise value for Shareholders
and demonstrate the continuing disconnect with the share price.
Refinancing of the Company’s debt. The refinancing of the Company’s debt reduced cost and provided for an acceleration
of de-gearing in a cost-efficient manner whilst also reserving operational free cash flow
for Shareholder distributions.
Amendment of the dividend policy
(seepage 28 of this report).
The amendment to the dividend policy arose in the context of a challenging revenue
environment to ensure prudent cash management, for the benefit of the Company and
all of its stakeholders.
Appointment of Panmure Liberum as a
Joint Corporate Broker.
The appointment of Panmure Liberum, with its strong market knowledge and its
track record of growing the shareholder base of other renewable energy investment
trusts, enhanced the Board’s awareness of market conditions, including the demand
for its shares, and strengthened the Company’s ability to actively market its shares to
potential investors.
Enhanced transparency and accountability
through disclosure in line with key ESG
frameworks including SDR, SFDR, UN PRI,
TCFD and TNFD.
By providing insights into the Company’s ESG performance, these disclosures enhance
transparency and accountability, ensuring investors have the information needed to
make informed investment decisions aligned with a sustainable future.
£35,000 donated to local causes through
five Community Funds.
The Company via its SPVs provides donations to support initiatives that have a positive
impact on the local community or environment through its community funds.
Section 172 Statement continued
STRATEGIC REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
62
Viability and Going Concern Statement
GOING CONCERN
As at 31 October 2024, the Company and its subsidiaries
had net current assets of £10.9 million which was sufficient
to meet commitments made under construction contracts
signed by subsidiaries.
The Company is a guarantor to its wholly owned subsidiary
HEIT Holdings Ltd in respect of the debt facilities and
also provides parent company guarantees to subsidiaries
in relation to certain construction and/or battery supply
contracts. As at the date of publication the aggregate
outstanding value of such guarantees is £5.9 million.
As previously announced, the Company remains in
advanced negotiations in relation to the sale of the entire
Portfolio. Should negotiations conclude successfully,
the transaction would require an amendment to the
Company’s investment policy and the agreement of
Shareholders and would therefore be subject to a
Shareholder vote. The Directors have taken into account
the probability of negotiations concluding successfully and
the probability of a subsequent Shareholder vote passing,
which may result in a subsequent members’ voluntary
liquidation, in making their assessment.
The Company’s prospectus at the time of IPO commits
the Directors to put forward a continuation vote at the
subsequent annual general meeting of the Company if
NAV of the Company was below £250 million at the
end of 2024. The NAV of the Company was below £250
million at the end of 2024, and whilst it is possible that the
Shareholder vote in relation to the proposed asset sale
would remove the requirement for a continuation vote,
the possibility and the probability of a continuation vote
passing have also been taken into account by the Directors
in making their assessment.
The Directors are aware and understand that the
Company’s revenues can be volatile and therefore have
reviewed the results of financial models analysing the
expected position of the Company under a prudent
scenario as well as a reasonably possible worst case
scenario. Both scenarios take into account the availability
of cash reserves and receivables during the Going
Concern Period (seedefinition below).
The prudent scenario assumes revenue performance
of the Company’s operating projects are in line with
third-party forecasts of revenue. In previous assessments,
the IA had based the prudent scenario on a reduction to
third-party revenue forecasts, however as noted in the
description of NAV movements, these forecasts have
been reduced significantly over the past year and are now
deemed a prudent forecast for the coming year.
In addition, the Directors have considered a reasonably
possible worst case scenario which assumes non-
contracted revenue earned by underlying investee
companies is c.38% lower than in the prudent scenario.
Under both scenarios the financial model shows that
sufficient cash is expected to be available to meet the
Company’s obligations and commitments (including but
not limited to construction contracts, working capital
requirements and debt service).
Having considered the results of the modelled scenarios,
the Directors have a reasonable expectation that the
Company is able to manage cash flow and meet its
working capital and debt service commitments via a
combination of operating revenues, and/or contracted
revenue products over the Going Concern Period, and
are working with the Investment Adviser to assess the
optimal combination of such options so as to ensure that
the Company can maximise returns to Shareholders. The
Company also has the option of selling an asset(s) if it
wishes to do so. The Directors are confident that key risks
have been considered in this assessment.
The Directors have concluded that the Company’s
available funding and expected income are sufficient
for the Company to continue its operations for at
least 12 months from the date of signing these financial
statements (the “Going Concern Period”) and therefore
believe it remains appropriate to prepare the financial
statements on a going concern basis. However, when
taking into account probability of the Shareholder vote
passing in favour of a possible asset sale and susbsequent
members’ voluntary liquidation, the Directors note that
this represents a material uncertainty that may cast
significant doubt on the Company’s ability to continue
as a going concern during the Going Concern Period.
The financial statements do not include any adjustments
that would result from the basis of preparation being
inappropriate.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
63
The Wormald Green and Hawthorn Pit projects were
the first Envision Energy batteries used by the Company
VIABILITY STATEMENT
The Directors have considered the period to October
2026 for the purposes of assessing the Company’s viability
(the “Viability Period”). As noted above, the Company’s
revenues and revenue projections can be volatile and
the chosen period allows current market trends to be
taken into account when defining appropriate modelling
scenarios. The same prudent and reasonably possible
worst case scenarios described above have been reviewed
over the Viability Period.
The Directors note that a key mitigant against a sustained
period of low revenues is the sale of an individual asset,
with sales proceeds being used predominantly to reduce
leverage and therefore reduce debt service. Whilst the
Directors have not relied upon an asset sale in order to
reach their conclusion, this mitigant provides additional
comfort regarding the Company’s viability.
Having considered the Company’s principal risks and the
results of the financial models referenced above, also
taking into account projected debt covenants which could
impact the Company’s viability if triggered, the Directors
have a reasonable expectation that the Company will
continue to be able to operate and to meet its liabilities
as they fall due over the Viability Period or until the date
of a potential members’ voluntary liquidation (if earlier)
following either the possible asset sale transaction or a
continuation vote.
Viability and Going Concern Statement continued
STRATEGIC REPORT
64
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
Hawthorn Pit and Wormald Green are the Company’s first
projects to be optimised by bp
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
65
Governance Report
In this section
68 Board of Directors
70
Directors’ Report
72 Corporate Governance
77 Directors’ Responsibility Statement
78 Report of the Audit and Risk Committee
82 Report of the Remuneration and Nomination Committee
86 Report of the Management Engagement Committee
88 Independent Auditor’s Report
In 2023, the flagship Pillswood BESS won awards at the Energy Storage
Awards, Solar and Storage Live and the Humber Renewables Awards
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
66
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
67
Date of Appointment:
12 October 2021
Norman is an experienced public company
Chair with extensive fund experience
as both an investment banker and fund
manager. He is non-executive chair at
RM Infrastructure Income plc, AVI Japan
Opportunity Trust plc and is also a
director of Universal Umvelt Ltd.
Date of Appointment:
12 October 2021
Janine is a qualified Chartered
Accountant, qualifying at Deloitte &
Touche, and an experienced senior
energy industry executive with over
25years’ experience in the sector, 16 of
which were spent at National Grid plc.
She is an independent non-executive
director of Aquila Energy Efficiency
Trust plc, Chair of the Remuneration
Committee and a member of their Audit
and Risk, Nomination and Management
Engagement Committees; and a
director of Zoop Energy Limited and
Attika Holdings Limited. She is also an
independent non-executive director of
Phoenix Technologies Holdings Limited
and Executive Chair of Intelligent
Resource Management Ltd.
Board of Directors
JANINE FREEMAN
Chair of the Audit and Risk Committee and
Independent Non‑Executive Director
NORMAN CRIGHTON
Chair and Independent
Non‑Executive Director
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
68
Date of Appointment:
12 October 2021
Hugh has extensive industry experience
in the renewable energy sector and
is a non-executive director of Proserv
Investments Bidco Limited. He was the
CEO of Renewable UK from 2016-2021;
chief executive for the Office of Renewable
Energy Deployment at DECC from
2010-2014; and non-executive director
of the Offshore Renewable Energy
Catapult from 2016 until the end of
December2023.
Date of Appointment:
12 October 2021
Willy is an experienced industry
professional and chairman of Cambridge
Economic Policy Associates Ltd. He was
previously a civil servant working at board
level in various government departments,
including energy, transport and the
Cabinet Office, finishing as Director
General, Energy from 2006 to 2009. Since
then, he has worked as a non-executive
director on the boards of a number of
companies, including Greencoat UK Wind
plc, Eggborough Power Ltd, Helius Energy
plc and Impax Environmental Markets plc.
Date of Appointment:
12 October 2021
Shefaly is an experienced risk and
decision-making specialist with a career
working in the technology industry
including startups and investors. She is
an independent non-executive director at
JP Morgan US Smaller Companies Trust
plc, where she chairs the Remuneration
Committee; and Temple Bar Investment
Trust plc where she chairs the Nomination
and Management Engagement
Committees. She was previously an
independent non-executive director at
Witan Investment Trust plc.
DR HUGH MCNEAL
Chair of the Management Engagement
Committee and Independent
Non‑Executive Director
DR SHEFALY YOGENDRA
Chair of the ESG Committee and
Independent Non‑Executive Director
WILLIAM RICKETT, CB
Chair of the Remuneration andNomination
Committee and Independent
Non‑Executive Director
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
69
Directors’ Report
The Directors are pleased to Present their Annual Report
including the Company’s audited financial statements for
thePeriod.
The Corporate Governance Report on pages 72 to 76
formspart of this Directors’ Report.
PRINCIPAL ACTIVITY AND STATUS
The Company is a public limited company registered and
incorporated in England and Wales under the Companies
Act 2006 (the “Act”) on 1 October 2021 with registered
number company no. 13656587. The Company is registered
as an investment company under section 833 of the Act. The
Company’s principal activity is to invest in commercial scale
battery energy storage and renewable energy generation
projects, with an initial focus on a portfolio of utility scale
BESS, located in diverse locations across GB.
DIRECTORS
The Company has a Board comprising of five independent
non‑executive Directors. The Directors of the Company
during the Period and at the date of this report are Norman
Crighton (Chair), Janine Freeman, Hugh McNeal, William
Rickett and Shefaly Yogendra, all of whom were appointed
on12 October 2021.
Biographical details of the current Directors are given on
pages 68 and 69. The Company has no employees.
The Board manages the Company’s business and may
exercise all of the Company’s powers, subject to the Articles
of Association, the Act and any directions given by special
resolution. Amendments to the Company’s Articles of
Association require a special resolution to be passed by
Shareholders.
DIRECTORS’ INSURANCE AND INDEMNITY
Directors’ and Officers’ Liability Insurance cover is held by
the Company in respect of the Directors. The Company has
also granted indemnities to each of its Directors to the extent
permitted by law in respect of costs of defending claims
against them and third‑party liabilities.
SUBSTANTIAL SHAREHOLDINGS
As at 31 October 2024, the Company is aware of the
following substantial Shareholders who were directly or
indirectly interested in 3% or more of the total votes in the
Company’s issued capital:
As at 31 October 2024
Shareholder
Number of Ordinary
Sharesheld
Percentage of Issued
ShareCapital
Schroders plc 35,679,474 15.71
Harmony Energy Limited 27,338,696 12.04
PrimeStone Capital 25,486,450 11.22
Premier Miton Investors 12,130,751 5.34
EQ Investors Limited 11,938,677 5.26
Close Asset Management Limited 10,885,205 4.79
Waverton Investment Management Limited 7,391,148 3.25
Mr Nicholas Norman Cournoyer 6,840,830 3.01
Newton Investment Management 6,818,862 3.00
At the date of this report the Company has not been notified of any changes in holding of voting rights in the Company.
SHARE CAPITAL
On 31 October 2024, the Company’s issued share capital
comprised 227,128,295 Ordinary Shares with a nominal value
of £0.01 each representing 100% of the total issued share
capital. Each Ordinary Share entitles the holder to one vote
and there are no restrictions on those voting rights. Details of
the movement in the Company’s share capital can be found
in Note 17 on page 114.
On 14 October 2021, the Company entered into a Lock‑up
and Orderly Market Deed with Joh. Berenberg, Gossler &
Co. KG, London Branch, as broker, and certain Shareholders,
whereby each Shareholder that is party to the Deed has
agreed, with exceptions, that:
1. they will not dispose of their shareholding in the
Company for a period of five years commencing on the
date of Initial Admission; and
2. for a period of 12 months after the end of the five‑year
period they will not dispose of any interest in their
shareholding other than through the Company’s broker.
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
70
As at the end of the Period, 26,083,680 Ordinary Shares
were subject to the terms of the Lock‑up and Orderly Market
Deed. There are no other restrictions on the transfer of
shares other than as set out in the Articles of Association.
DIVIDENDS
All Ordinary Shares are entitled to receive dividends. Following
consultation with Shareholders and key advisers, in May 2024
the Board resolved to amend the Company’s dividend policy
to be an ongoing commitment to distribute, by way of interim
dividends and subject to maintenance of a suitable working
capital buffer, a minimum of 85% of operational free cash flow.
The updated policy replaced the annual fixed dividend target
of 8 pence per Ordinary Share, following which dividends
will be determined by the Board and declared and paid on a
semi‑annual basis, and therefore no dividends were declared in
respect of the Period.
During the Period, the Company declared and paid an interim
dividend of 2p per Ordinary Shares in relation to the period
1August 2023 to 31 October 2023.
RELATED-PARTY TRANSACTIONS
Any related‑party transactions during the Period can be found
in Note 21 to the Accounts on page 115.
FINANCIAL INSTRUMENTS
The Company’s financial instruments and principal risks are
disclosed in Note 14 to the Accounts on page 108.
INVESTMENT OBJECTIVE AND
INVESTMENT POLICY
The Company’s investment objective and investment policy is
detailed in the Strategic Report on page 24.
Subsidiary Companies
The Company has the following direct and indirect
subsidiaries, all of which are held 100%. Details on the
subsidiaries can be found in Note 10 on page 106.
• HEIT PW Limited;
• HEIT PW2 Limited;
• HEIT BD Limited;
• HEIT FM Limited;
• HEIT RH Limited;
• HEIT LR Limited;
• HEIT Holdings Ltd;
• HEIT BF Limited;
• HEIT WG Limited; and
• HEIT HP Limited.
FUTURE DEVELOPMENTS
Consideration of future developments are detailed in the
Chair’s Statement on page 4.
POST BALANCE SHEET EVENTS
Post balance sheet events are disclosed in Note 23 of the
financial statements on page 116.
ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE CONSIDERATIONS
The Board seeks to maintain high standards of conduct with
respect to ESG issues and to conduct the Company’s affairs
responsibly. The Company does not have any employees and
whilst the Board does not maintain specific policies regarding
employee issues, it has adopted an ESG Policy and ESG
strategy, further details of which are set out in the ESG section
on pages 30 to 48. The Company also expects the Investment
Adviser and its service providers to consider these issues when
fulfilling their roles and supplier performance in this area is
monitored by the Management Engagement Committee.
The Company has calculated and reported on its Scopes 1, 2
and 3 GHG emissions in line with the GHG Protocol as part
of our ESG metric reporting. Details of the approach used and
the carbon footprint are set out in the Strategic Report on
page 56.
CHANGE OF CONTROL
There are no significant agreements that the Company is a
party to that might be affected by a change of control of the
Company following a takeover bid.
ANNUAL GENERAL MEETING
At the date of publication of this report, the Company has
an obligation to hold an AGM on or before 30 April 2025.
Inlight of the Board’s decision to maximise Shareholder value
by marketing the Company’s assets, further details on the
date and location of the Company’s Annual General meeting
(“AGM”) (if required) will be published in the Company’s
AGM Notice.
INDEPENDENT AUDITOR
The Company’s auditors, Ernst & Young LLP (“EY” or
“Auditor”), has expressed its willingness to continue as
Auditor for the year ended 31 October 2025 and a resolution
proposing their re‑appointment will be submitted at the
2025AGM.
Signed on behalf of the Board by
Norman Crighton
Chair 25 February 2025
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
71
Corporate Governance
The Board has considered the Principles and Provisions of
the AIC Code of Corporate Governance (“AIC Code”).
TheAIC Code addresses the Principles and Provisions set
out in the UK Corporate Governance Code (“UK Code”),
as well as setting out additional Provisions on issues that are
of specific relevance to the Company. The Board considers
that reporting against the Principles and Provisions of the AIC
Code, which has been endorsed by the Financial Reporting
Council, provides more relevant information to Shareholders.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation of how the
AICCode adapts the Principles and Provisions set out in the
UK Code to make them relevant for investment companies.
The Board believes that the Company has complied with the
Principles and Provisions of the AIC Code with the exception
of the items outlined below:
1. The Company does not have a senior independent director.
After considering the Company’s particular characteristics,
objectives and Board structure, the Board has determined
that the appointment of a senior independent director is
not necessary or desirable to promote the open, equal and
shareholder‑facing board dynamic that the Board believes it
can achieve as a wholly non‑executive Board.
2. The Company does not have a Chief Executive Officer
(“CEO”).
Given the nature and circumstances of the Company as an
investment company managed by the Investment Adviser,
the Company does not consider it necessary to have
aCEO.
BOARD LEADERSHIP, CULTURE AND PURPOSE
The Chair, Norman Crighton, is responsible for leadership of
the Board including its strategy and in the achievement of its
objectives. The Board views its purpose as being to set and
execute its investment objective by working in partnership
with the Investment Adviser to invest in energy storage and
complementary renewable energy generation assets with
an initial focus on a diversified portfolio of utility scale BESS
located in diverse locations across GB.
The Chair has responsibility for the organisation of the
business of the Board, ensuring its effectiveness and setting
its agenda. The Company’s investment objective is detailed in
the Strategic Report on page 24.
The Board encourages a culture of openness, independence,
engagement and mutual respect of each member’s
experience and professionalism. The Board continually
monitors its own culture, practices and behaviour, and
the Chair encourages each Board member to question,
debate and challenge recommendations not only from the
Company’s key service providers (including the Investment
Adviser) but also from one another. Issues raised are
considered by the Board and any actions required are
monitored.
DIVISION OF RESPONSIBILITIES
Matters reserved for the Board
The Directors have adopted a formal schedule of matters
reserved for the Board which sets out the responsibilities of
the Board. These matters include:
• Overall leadership of the Company and setting of its
purpose, values, and standards;
• Investment/business strategy, including the ongoing
review of the Company’s investment objective and
investment policy. Approving all changes to the
Company’s investment objective and investment policy
and recommending to Shareholders the approval of any
material alterations thereto;
• Approval of risk management policies including, but
not limited to, insurance, hedging, borrowing limits
andcorporate security (following recommendation from
theARC);
• Ensuring the maintenance of a system of internal controls
and risk management, reviewing at appropriate intervals
the Company’s overall internal control arrangements
(following review and recommendation by the ARC);
• Receipt and review of regular reports on internal controls
processes and management by the ARC;
• Annual assessment of significant risks and effectiveness of
internal controls;
• Each instance of delegation of any portfolio management
function or risk management functions;
• Approval of the raising of new capital and major financing
facilities;
• Appointment or removal as required of the Company’s
principal advisers, including the Company’s AIFM, the
Investment Adviser, reporting accountants, Auditor
(following appropriate recommendation by the ARC),
tax advisers, the company secretary/administrator,
theregistrar, valuer, the brokers, PR firm and/or legal
counsel (following appropriate recommendation by the
Management Engagement Committee); and
• Approval of acquisitions.
The provision of administration and governance services has
been delegated to the Secretary and Administrator, JTC (UK)
Limited. The Board has delegated responsibility for day‑to‑day
operational decisions relating to the Company’s projects to
the Investment Adviser.
RELATIONSHIP WITH THE AIFM
The AIFM provides certain services in relation to the Company
and its Portfolio, which include risk management and investment
advice, based on recommendations from the Investment
Adviser, in accordance with the Company’s investment policy.
The AIFM’s duties under the AIFM Agreement dated 14 October
2021 include complying with the Company’s investment policy
and analysing the performance of the Company’s investments.
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
72
The AIFM is required to provide all risk management services to
the Company as required by the EU AIFM Directive and the UK
AIFM Regime including (i) the implementation of adequate risk
management systems to identify, measure, manage and monitor
appropriately all risks relevant to the Company’s investment
strategy and to which the Company is or may be exposed;
(ii)ensuring that the risks associated with each investment
position of the Company and their overall effect upon the
Company’s Portfolio can be properly identified, measured,
managed and monitored on an ongoing basis, including through
the use of appropriate stress testing procedures; (iii) advising
the Board on the establishment and adjustment of quantitative
and qualitative risk limits for the Company, taking into account
all relevant risks; and (iv) reviewing the risk management systems
at least annually and adapting them where necessary. The AIFM
also provides guidance to the Company on its compliance with
the requirements of the EU AIFM Directive and the UK AIFM
Regime that apply in respect of marketing of the Shares of the
Company in the UK and the EEA, as applicable.
For the period under review the Management Engagement
Committee evaluated the performance of the AIFM. The
Board accepted the Management Engagement Committee’s
recommendation that the continuing appointment of the AIFM
was in the best interests of the Company and its Shareholders.
RELATIONSHIP WITH THE INVESTMENT
ADVISER
The Investment Adviser provides investment advisory services
to the AIFM and certain other services to the Company
which are unrelated to investment advice and acts within
the strategic guidelines set out in the Company’s investment
policy. These services are defined in more detail below. The
Investment Adviser reports to the AIFM and the Company.
There is a clear division of responsibilities between the Board
and the Investment Adviser and the AIFM.
The Investment Advisory Agreement dated 14 October 2021
between (1) the Investment Adviser (2) the Company and
(3)the AIFM details the responsibilities of the Investment
Adviser which include, providing certain investment advisory
services to the AIFM copied to the Company, and certain
other services to the Company which are unrelated to
investment advice, including development and day‑to‑day
operation of the Company’s projects.
The Investment Adviser must: (a) advise the AIFM on
the Company’s investments in accordance with the
Company’s investment objective, investment policy and
investment restrictions and ESG policy, including making
recommendations based on its expert opinion to the AIFM
in respect of the purchase, sale or disposal of the Company’s
investments and arranging the purchase and sale of such
investments in accordance with the AIFM’s directions;
(b)assist in the preparation of periodic NAV calculations as
provided for in the Prospectus; and (c) prepare quarterly
reports to be provided to the AIFM and the Board, including
pursuant to the Company’s ESG policy and any applicable
KPIs pursuant to the Company’s ESG policy from time to
time and assisting the AIFM in respect of quarterly reporting
to the Company’s Board.
Investment Advisory services provided by the Investment
Adviser also include: (a) making recommendations regarding
the manner in which monies should be retained or realised
and advise on the use of borrowing in accordance with the
investment policy; (b) monitoring the performance of the
revenue optimiser(s) appointed in respect of the Company’s
assets and the revenue performance of the same and
advising the Company and/or the AIFM in respect of revenue
optimisation strategy; (c) providing assistance in respect of
the Company’s marketing endeavours, including attending
investor and other marketing meetings and assisting with
production of marketing materials for distribution to investors
and prospective investors; (d) assisting with implementation
of appropriate risk measurement and management standards
and procedures; (e) providing material for inclusion in annual
and other reports of the Company; and (f) monitoring
investment limits and restrictions and giving instructions for
the operation of bank accounts.
Regarding the other services, the Investment Adviser will:
(a) advise and facilitate the engagement by one or more
project companies of independent third‑party suppliers
and contractors to provide services to the construction,
commissioning, and ongoing management of the Company’s
projects; (b) provide certain project management and
supervision services; (c) provide certain community and
stakeholder services; (d) provide certain services regarding
permits, approvals, and compliance; (e) provide certain
occupational H&S and ESG services; and (f) provide certain
other technical and monitoring services.
Details of the management fee payable, in accordance with
the terms of the Investment Advisory Agreement, to the
Investment Adviser for the year ended 31 October 2024
are included in Note 7 of the Financial Statements. The
Investment Advisory Agreement is terminable on six months’
notice by the Company or the AIFM and twelve months’
notice by the Investment Adviser (or on immediate notice
in certain customary circumstances). On termination of
the Agreement, the Investment Adviser shall be entitled to
recover all costs and expenses incurred in accordance with
the Agreement, but not yet submitted for reimbursement.
For the year under review the Management Engagement
Committee evaluated the performance, and recommended
the continued appointment, of the Investment Adviser.
Further details are included in the Management Engagement
Committee Report on page 86. The Board accepted the
Management Engagement Committee’s recommendation that
the continuing appointment of the Investment Adviser was in
the best interests of the Company and its Shareholders.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
73
Corporate Governance continued
RELATIONSHIP WITH THE ADMINISTRATOR
JTC (UK) Limited is the appointed Company Secretary and
Administrator to the Company, providing company secretarial,
fund accounting and administration services. During the Period,
as Administrator, JTC (UK) Limited, on behalf of the Directors,
was responsible for the maintenance and management of
the financial books and records, all cash movements of
the Company and the calculation, in conjunction with the
Investment Adviser, of the Company’s NAV. As Company
Secretary, JTC (UK) Limited are responsible for regulatory
compliance, providing support to the Board’s corporate
governance processes and continuing obligations as well as
general secretarial functions required by the Act.
BOARD COMMITTEES
The Company has four committees: the Audit and Risk
Committee, the Remuneration and Nomination Committee, the
ESG Committee and the Management Engagement Committee.
Further details on the operation of these committees can be
found on pages 78 to 87. Details on the ESG Committee can be
found on page 37. The terms of references of these committees
are available on the Company’s website. During the Period
under review all the Directors served on all the committees as
independent non‑executive Directors.
BOARD AND COMMITTEE MEETINGS
The Board has a schedule of quarterly meetings with
additional meetings as required. The table below sets out
the number of Board and Committee meetings held and
attended by each Director during the Period.
Quarterly board
Meetings
Audit and Risk
Committee
ESG
Committee
Remuneration
and Nomination
Committee
Management
Engagement
Committee*
No. of Meetings Held 4 3 1 1 0
Norman Crighton 4 3 1 1 0
Janine Freeman 4 3 1 1 0
Hugh McNeal 4 3 1 1 0
William Rickett 4 3 1 1 0
Shefaly Yogendra 4 3 1 1 0
* Due to other commitments, the Management Engagement Committee meeting scheduled to be held during the year was
moved to 9 December 2024.
The Board also held 13 ad‑hoc Board meetings outside of
the scheduled meeting cycle. Matters discussed included
exploring the potential sale of one or more assets and
financial reporting. The quorum for Board meetings is two
Directors and, with the exception of one ad‑hoc meeting,
allmeetings were attended by the full Board.
The primary focus at board meetings has been on delivering
the strategy, monitoring performance against strategic
objectives, investor relations and asset allocation. This included:
• exploring the potential for one or more asset sales;
• reviewing updates from the Investment Adviser, which
included H&S, risk management and ESG; and
• reviewing updates from other key stakeholders including
the broker, Company Secretary and AIFM.
The Company maintains a register of Directors’ conflicts of
interest which is considered at all Board meetings and no
significant conflicts of interests were identified during the
Period. Board members are required to disclose changes or
potential new conflicts. The Company Secretary attends all
Board meetings and ensures that the Directors have access to
all relevant information. In line with the Board’s commitment
to reduce adverse environmental impacts from its business,
wherever possible it makes efficient use of technology.
Todate all the ad‑hoc meetings held have been virtual and all
Board papers are distributed electronically.
COMPOSITION, SUCCESSION AND
EVALUATION
The Board comprises of five Directors. Their biographies, on
pages 68 to 69, demonstrate the wide range of complementary
skills and experience they each bring to the Board. All the
Directors are non‑executive and, for the purpose of provision 12
of the AIC Code, are all considered to be independent with the
Chair being independent on appointment.
The Remuneration and Nomination Committee is responsible
for leading the process on appointments, ensuring there
are plans in place for orderly succession to the Board and
overseeing any other related matters as they arise. This includes
ensuring that any appointments and succession plans are
based on merit and objective criteria, and within this context,
promote diversity of gender, social and ethnic backgrounds,
and cognitive and personal strengths. Given that the Company
was incorporated in 2021, the Board did not consider that any
change to its composition were necessary during the Period.
The Remuneration and Nomination Committee carried out an
evaluation of the Board and Committees for the Period which
concluded that the Board has the right mix of skills and that the
Chair and the Directors are suitably qualified to undertake their
responsibilities and perform their duties in respect of managing
the Company. As this is the Company’s third year of operation,
after consideration, it was concluded that an externally facilitated
Board evaluation would not be carried out this year. However,
this would be kept under review.
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
74
BOARD DIVERSITY
The Board comprises five independent non‑executive directors
of whom 40% are female. The Board is committed to
diversity, which includes diversity of experience, background
and perspective, and meeting the recommendations of the
FTSEWomen Leaders’ Review of female representation
and gender imbalance on FTSE 350 boards and the Parker
Review into the ethnic diversity of UK boards. In line with the
objectives of the Diversity Policy adopted by the Board, the
Board will always appoint the best person for the job. It will not
discriminate on the grounds of gender, race, ethnicity, religion,
sexual orientation, age or physical ability. The Board considers
the real value of diversity comes from ensuring inclusion of
different views arising from lived experiences and skills.
In accordance with UK Listing Rule 6.6.6R 9, the Company is
required to include a statement in the annual financial report
setting out whether it has met the following targets on Board
diversity:
a)
at least 40% of the individuals on the Board are women;
b) at least one of the senior Board positions (defined by the
FCA as either the Chair, SID, CEO or CFO) is held by a
woman; and
c)
at least one individual on the Board is from an ethnic
minority background.
As at 31 October 2024, and the date of this report, the Board
meets UK Listing Rule 6.6.6R 9 criteria target a) as 40% of the
Board are women and target c) as one Board member is from
a minority ethnic background. With regard to target b)the
Company is externally managed, does not have executive
management functions and specifically does not have a
CEO, CFO or SID. However, notwithstanding this, the Board
considers that the roles of Board Chair and Chair of ARC are
senior positions. The role of Chair of the ARC is performed by
a woman.
The following tables set out the composition of the Board as at
31 October 2024 and the date of this report. The information
is based on voluntary self‑declaration made by the Directors.
Gender Diversity
No. of Board
Members % of the Board
No. of Senior
Positions on
the Board
Men 3 60 1
Women 2 40 1
Ethnic Diversity
No. of Board
Members % of the Board
No. of Senior
Positions on
the Board
White British or other White (including minority White groups) 4 80 2
Asian/Asian British 1 20 0
INTERNAL CONTROL AND RISK
MANAGEMENT
The Board acknowledges that it is responsible for establishing
and maintaining the Company’s system of risk management
and internal controls, which is reviewed fully for effectiveness
on an annual basis. This has been delegated to the ARC. The
Board has identified and assessed the principal and emerging
risks faced by the Company and how they are being mitigated.
These are set out in the Principal Risks and Uncertainties
section on pages 58 to 60. The Investment Adviser and the
AIFM regularly report to the Board on risk. During the Period,
the ARC reviewed and provided feedback to the Investment
Adviser and the AIFM on the full risk register.
The Board has delegated certain of its day‑to‑day activities to
the AIFM, the Investment Adviser and the Administrator, and
has clearly defined their roles, responsibilities and authorities.
The actions of these service providers are monitored at
quarterly and ad‑hoc board meetings and their performance
reviewed annually by the Management Engagement
Committee.
At each scheduled quarterly meeting, the Board receives
reports from the AIFM, the Administrator, the Company
Secretary and the Investment Adviser to provide it with
assurance that appropriate oversight is in place. The Board
is satisfied with the controls and risk management systems
currently in place for assessing, managing and monitoring risks
applicable to such service providers, including policies covering
whistleblowing and helping to prevent bribery, corruption
and fraud. The Board has also received reports to provide
it with assurance that appropriate and reasonable oversight
of controls to manage risks are
in place at its key third‑party
providers.
VIABILITY STATEMENT
The viability statement, under which the Directors assess the
prospects of the Group over a longer period, is contained on
page 64.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
75
RELATIONS WITH SHAREHOLDERS
The Board values interactions with Shareholders and welcomes
the views of Shareholders, who may contact the Board through
the Company’s brokers at: SNELHarmonyEnergy@stifel.com
and heit@liberum.com or the Company Secretary at
HarmonyEnergyIncomeTrustplc@jtcgroup.com. The Investment
Adviser regularly engages with principal Shareholders and key
sector analysts and is available to meet with Shareholders if
requested. The Chair has met with any Shareholder who
requested a meeting during the year and will continue to do so.
The Board receives comprehensive Shareholder reports
quarterly from the Company’s adviser and regularly monitors
the views of Shareholders and the Shareholder profile of the
Company.
The Company is required to hold an AGM on or before
30 April 2025 and the Board welcomes the opportunity to
engage with its Shareholders. In light of the Company’s asset
sale process, further details regarding the date and location
of the Company’s AGM (if required) will be published in the
Company’s Notice of AGM.
Separate resolutions will be proposed at the AGM on each
substantially separate issue. All voting at the AGM will be on
a poll with the results being announced as soon as practical
following the AGM via an RIS announcement.
RELATIONS WITH OTHER STAKEHOLDERS
Examples of stakeholder engagement and the effect on
stakeholders of principal decisions taken by the Company
during the year can be found in the s172 Statement on
pages61 and 62.
ADDITIONAL DISCLOSURES
Additional disclosures required by Schedule 7 of the Large
and Medium sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended) are contained in the
Directors’ Report on pages 70 and 71.
GOING CONCERN
Under the AIC Code, the Board is required to consider
whether it is appropriate to adopt the going concern basis
of accounting in preparing these Financial Statements. The
Board continues to adopt the going concern basis and the
detailed consideration is contained on page 63.
Approved on behalf of the Board by:
Norman Crighton
Chair
Corporate Governance continued
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
76
Directors’ Responsibility Statement
The Directors are responsible for preparing the Annual
Report and Financial Statements in accordance with
applicable law and regulations.
As a company traded on the London Stock Exchange,
the Company is subject to the FCA’s UK Listing Rules and
Disclosure Guidance and Transparency Rules, as well as to all
applicable laws and regulations in England and Wales where it
is registered.
The Annual Report and Financial Statements have been
prepared in accordance with UK‑adopted international
accounting standards. Under company law, the Directors
must not approve the Financial Statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Period.
In preparing these Financial Statements, the Directorsshould:
• select suitable accounting policies in accordance with
IAS8 and then apply them consistently;
• make judgements and estimates that are reasonable and
prudent;
• specify which generally accepted accounting principles
have been adopted in their preparation;
• prepare the Financial Statements on the going concern
basis, unless it is inappropriate to presume that the
Company will continue in business; and
• prepare a directors’ report, a strategic report and
directors’ remuneration report which comply with the
requirements of the Act.
The Directors are responsible for keeping proper accounting
records which are sufficient to show and explain the
Company’s transactions and disclose, with reasonable
accuracy at any time, the financial position of the Company
and enable them to ensure that the Financial Statements
comply with the requirements of the Act. They are also
responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. The Directors
are responsible for ensuring that the Annual Report
and Accounts, taken as a whole, are fair, balanced, and
understandable, and provide the information necessary
for Shareholders to assess the Company’s position and
performance, business model and strategy.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the Annual
Report and the Financial Statements are made available on
the Company’s website. Financial statements are published
on the Company’s website in accordance with legislation
in the UK governing the preparation and dissemination of
financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
financial statements contained therein.
DIRECTORS’ RESPONSIBILITY STATEMENT
PURSUANT TO DISCLOSURE GUIDANCE
AND TRANSPARENCY RULE 4
Each of the Directors, whose details can be found on pages
68 and 69, confirms to the best of their knowledge that:
• the financial statements have been prepared in
accordance with UK‑adopted international accounting
standards and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the
Company; and
• the Annual Report includes a fair review of the
development and performance of the business and
the financial position of the Company, together with a
description of the principal risks and uncertainties that
itfaces.
DISCLOSURE OF INFORMATION TO THE
AUDITOR
The Directors confirm that:
• so far as each Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware;and
• the Directors have taken all the steps that they ought
to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
Signed by order of the Board,
Norman Crighton
Chair
25 February 2025
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
77
Report of the Audit and Risk Committee
1. ROLE OF THE AUDIT AND RISK
COMMITTEE
The AIC Code recommends that the Board should
establish an ARC comprising at least three, or in
the case of smaller companies, two independent
non‑executive Directors. TheARCcomprises all the
independent non‑executive Directors.
The ARC examines the effectiveness of the Company’s
risk management and internal control systems. It reviews
the Company’s Interim Report and the Annual Report and
Accounts, receives reports and recommendations from the
AIFM and reports from the Investment Adviser. It also reviews
the scope, results, cost effectiveness, independence and
objectivity of the external auditor. The ARC reports formally
to the Board after any meeting held. The Committee reviews
its terms of reference at every meeting and any changes are
approved by the Board. The terms of reference are available on
the Company’s website.
2. MEMBERSHIP
The Chair of the ARC, Janine Freeman, is a Chartered
Accountant, qualifying at Deloitte & Touche. She is an
experienced senior energy industry executive and non‑executive
director. The Board is satisfied that Janine has recent and
relevant financial experience as required under the AIC Code.
The other members of the ARC are Norman Crighton, Hugh
McNeal, William Rickett and Shefaly Yogendra, all of whom
have extensive recent and relevant competence in the sector
in which the Company operates. The Board considers that
the appointment of Norman Crighton as a member of the
ARC, notwithstanding his appointment as Chair of the Board,
is appropriate, given that he was independent on his initial
appointment and has continued to be throughout his tenure.
The biographies of the Committee members are outlined on
pages 68 and 69 of this Annual Report.
As part of the annual Board evaluation process, the ARC and its
Chair were reviewed and found to be effective.
3. MEETINGS
The ARC met three times during the Period and meetings were
attended by all its members, as well as representatives of the
Investment Adviser, the AIFM and the Company Secretary. The
Company’s Auditor attended meetings relating to the Annual
Report and Accounts and held separate meetings with the ARC
Chair. Additional meetings are convened by the Company
Secretary at the request of the ARC Chair asnecessary.
4. EXTERNAL AUDITOR
EY were appointed as the Company’s Auditor on 27 June
2022. Mike Gaylor has been the lead audit partner since the
appointment date. The appointment of the Auditor is reviewed
annually by the ARC and the Board and is subject to approval
by Shareholders. In accordance with the Financial Reporting
Council’s guidance, the audit will be put out to tender within ten
years of the initial appointment. Additionally, the audit partner
must be rotated every five years and is therefore next eligible for
rotation in 2027.
The audit plan was presented to the ARC at its
September2024 meeting, ahead of the commencement
of the Company’s Period end audit. The audit plan sets
out the audit process, materiality scope and significant
risks. Inrespect of the Period, the ARC considered the
appointment, performance and remuneration of EY.
During the Period, prior to the preparation of the Annual
Report and Accounts, the ARC met with key members of the
audit team to discuss the audit scope and review and ensure its
robustness. Meetings were held with the Auditor to discuss the
details of the external audit and to consider and evaluate any
findings in depth.
As part of the annual reporting process, EY have formally
confirmed their independence. The ARC discussed the
effectiveness of the Auditor and is of the opinion that the audit
team assigned by EY to the Company has a good understanding
of the Company’s business. The ARC has recommended to
the Board that a resolution to reappoint EY is proposed to
Shareholders at the forthcoming AGM.
5. NON-AUDIT WORK
The ARC has implemented a policy for the supply of non‑audit
services provided by the Auditor, which is consistent with the
FRC Revised Ethical Standards, published in 2024, to ensure
there are no circumstances where a service provided could
constitute a conflict or potential conflict of interest that would
impair the objectivity and independence of the Auditor. The
policy sets out the specific activities that may be provided by the
Auditor which are closely related to the audit and/or required by
law or regulation, with all other activities being disallowed. During
the Period the policy was reviewed by the Committee.
The Auditor was not engaged to carry out any non‑audit work
for the Company during the Period.
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HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
78
6. FINANCIAL REPORTING AND
SIGNIFICANT ACCOUNTING MATTERS
The ARC is responsible for reviewing financial reporting
and advising the Board on whether the Annual Report and
Accounts are fair, balanced, and understandable, as required
by the AIC Code. It introduced a formal annual report
governance process which includes bi‑weekly meetings
attended by the Investment Adviser, Administrator and
the Auditor. At these meetings, updates were given on
the process implemented to produce the Annual Report,
which included a thorough assessment by all parties.
Comprehensive and transparent discussions were held on
the contents of the Annual Report and Account and drafts
werereviewed.
Separately, the ARC Chair held meetings with the Board on
progress as well as with individual stakeholders, such as the
Investment Adviser, Administrator and Auditor.
The ARC also met with the Investment Adviser, the
Administrator, and the Auditor to talk through the audit
process and query their findings and all parties confirmed
they were not aware of any material misstatements to the
Annual Report and Accounts.
Additionally, the ARC assesses the significant financial
reporting issues and judgments made when preparing
the Annual Report and Accounts and evaluates the
appropriateness of the accounting policies adopted. Due
to the materiality of related party transactions, the Board
considers them to be a significant accounting matter and has
carefully considered the adequacy of their disclosure in the
Annual Report.
As a result of the comprehensive reviews, feedback and
recommendation from the ARC, the Board has concluded
that the Annual Report and Accounts for the Period, taken
as a whole is fair, balanced and understandable and provides
the information necessary for Shareholders to assess
the Company’s position, performance, business model
andstrategy.
7. KEY ACCOUNTING JUDGEMENTS AND
ESTIMATES
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless their
main purpose and activities are providing services related to the
Company’s investment activities. The Committee has evaluated
whether the Company is an investment entity and has made the
judgement that it meets the definition set out in IFRS 10.
Investments are designated at fair value in accordance with the
Company’s accounting policy. As a result, the ARC examined the
procedures and application of valuation policies. The valuation
of these investments is the most significant area of estimate
in the Annual Report and Accounts. The income projections,
the discount rates used, the rate of inflation and the project
costs make up the main estimates and assumptions. The ARC
specifically questioned the appropriateness of the discount rate
used and carefully considered the impact of macroeconomic
and industry‑related factors on income recognition and
associated assumptions in relation to the valuation of the assets
that have been included in the 31 October 2024 valuation.
In the Company’s Annual Report and Accounts, the uncertainty
associated in determining the fair value of investment valuations
represents a significant risk. The fact that the Investment
Adviser’s fee is calculated based on the Company’s NAV or its
market capitalisation (whichever is the lowest), ensures that the
Investment Adviser’s interests and those of the Company (and
its stakeholders) remain aligned. This alignment mitigates the risk
of management override.
The Investment Adviser, with assistance from the Administrator,
is responsible for calculating the NAV prior to approval by
the Board. On a quarterly basis, the Investment Adviser
provides a detailed NAV analysis highlighting any movements
and assumption alterations to the prior quarter NAV. This is
supported by an independent valuation performed by the
independent valuer every six months. The ARC considers and
challenges the NAV prior to a recommendation for approval
being made to the Board.
At Period end, the independent valuer was engaged to support
the ARC in forming a view on the reasonableness of the
valuations. The ARC is satisfied that the key estimates and
assumptions used within the valuation model are appropriate
and that the investments have been fairly valued.
8. GOING CONCERN
The Committee also assessed the Company’s financial
resources and determined that using the going concern
basis was appropriate. However, when taking into account
the possibility of a Shareholder vote passing in favour of an
asset sale, the Directors note that this represents a material
uncertainty as disclosed in Note 2. The Committee reviewed
the going concern documents prepared by the Investment
Adviser, and concluded that adopting the going concern basis
continues to be appropriate and that suitable disclosure has
been provided in Note 2.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
79
9. INTERNAL AUDIT
The Committee has considered the need for an internal audit
function and considers that this is not appropriate given the
nature and circumstances of the Company as an investment
company with external service providers. The internal controls
framework for the Company has been developed and is
delivered primarily through the risk management process.
This process is described in detail in the Principal Risks and
Uncertainties section on pages 58 to 60 and ensures that
appropriate measures, controls, checks and balances are
implemented to manage and monitor all risks, including
internal and financial controls. In addition, the external Period
end audit has a strong focus on financial controls and the
processes and analysis behind the Investment Adviser and
AIFM recommendations. Any testing carried out by the
Auditors are followed up by the ARC. Finally, reports on the
internal controls of the Company’s key service providers are
reviewed by the Board at each quarterly board meeting.
10. WHISTLEBLOWING
The ARC has systems in place by which staff of the
Investment Adviser, Administrator and other service providers
may, in confidence, raise concerns about adherence to
relevant laws and regulations or something they consider
unethical or potentially harmful.
The ARC is satisfied that these arrangements allow for
proportionate and independent investigations of such matters
and for appropriate follow‑up action. These measures are
embedded into the Investment Adviser’s and Administrator’s
internal policies. There were no instances of whistleblowing
during the Period.
11. INTERNAL CONTROLS
In accordance with the AIC Code, the Board is required to
establish procedures to manage risk, oversee the internal
control framework and determine the nature and extent of
the principal risks the Company is willing to take in order
to achieve its long‑term strategic objectives. A principal role
of the Committee is to assist the Board in this regard and a
key responsibility is the development of the Company’s risk
management and internal controls framework.
Throughout the year, the Committee monitored the
framework’s effectiveness, implementing refinements as
necessary. The Company’s principal and emerging risks,
together with details on how the Board manages and mitigates
these can be found on pages 58 to 60. TheCommittee will
continue to evaluate opportunities for further improvements
to the Company’s overall control environment to ensure
continued compliance with the AICCode.
Janine Freeman
Chair of the Audit and Risk Committee
25 February 2025
Report of the Audit and Risk Committee continued
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
80 80
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
Hawthorn Pit utilises Envision Energy’s two-hour duration liquid-cooled
energy storage systems, which provide energy trading, capacity services
and frequency regulation services
81
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
Report of the Remuneration and
Nomination Committee
The Company’s Remuneration and Nomination Committee
is chaired by William Rickett and, given the size of the
Board, consists of all the Directors. Norman Crighton, as
Chair of the Board, is eligible to serve on the Committee
as on appointment, he was, and remains, independent. The
Remuneration and Nomination Committee meets at least once
a year and more often when required.
The Remuneration and Nomination Committee’s main
functions include:
• agreeing the policy for the remuneration of the Directors,
reviewing any proposed changes to the policy and making
recommendations to the Board on Directors’ fees;
• considering and, if necessary, appointing independent
professional remuneration advisers;
• making recommendations to the Board regarding Board
tenure and succession planning, taking into account the
existing balance of skills, knowledge and experience on the
Board and the advantages of diversity; and
• agreeing the arrangements for evaluating the performance
of the Board, its Committees and the Directors.
During the Period, the Committee met once, and all members
were present. The Committee discussed Board composition,
tenure and succession, its approach to promoting diversity,
the policy to be adopted on remuneration and the level
of Directors’ fees. The Committee also considered the
arrangements for evaluating Board performance, including the
option of an externally facilitated evaluation, but concluded
that an internal evaluation would be appropriate given the early
stage of the Company. The Committee agreed that the option
of an external evaluation should be kept under review.
As part of the overall Board evaluation, it was concluded that
there was a good balance of skills between the Directors on
the Committee. The Committee reports formally to the Board
after any meeting held. The Committee reviews its terms of
reference at every meeting and any changes are approved
by the Board. The terms of reference are available on the
Company’s website.
ANNUAL STATEMENT
This report sets out the Company’s remuneration policy
and explains how it has been implemented by the Board.
It also provides Shareholders with details of the Directors’
remuneration. During the year, the Directors’ remuneration
was increased by a rate below the level of inflation. An
increase of 3% was agreed for the financial year ending
31October2025.
The Board has applied, and continues to apply, Principle 9.1
of the AIC Code when considering Directors’ remuneration.
This requires the Board to develop its remuneration policy in
a formal and transparent way, with no Director being involved
in deciding their own remuneration outcome; design its
remuneration policy and practice to support the Company’s
strategy and promote its long-term sustainable success; and
ensure the Directors exercise independent judgement and
discretion when authorising remuneration outcomes, taking
account of Company and individual performance and wider
circumstances.
DIRECTORS’ REMUNERATION POLICY
The Company’s policy is to set Directors’ fees at a level which
will enable the Board to recruit and retain the skills required
to run the Company in the best interests of its Shareholders.
In judging the level of fees required to achieve this, the
Company will take account of the time commitment required
of Directors, the need to be competitive with the fees paid
to non-executive Directors of similar companies, the level of
inflation, the need to incur costs only where necessary and
other relevant factors. The Company may also periodically
choose to benchmark Directors’ fees by means of an
independent review, to ensure they remain fair and reasonable.
The aggregate remuneration of the Directors for their services
shall not exceed £400,000 per annum or such higher figure
as the Company may by ordinary resolution determine. Such
remuneration shall be deemed to accrue from day to day.
Only in exceptional circumstances, where the Directors are
involved in duties beyond those normally expected as part of
the Directors’ appointment, may additional Directors’ fees be
paid by the Company. The Board will determine the level of
additional remuneration and in such instances, the Board will
provide details of the events, duties and responsibilities that
gave rise to any additional Directors’ fees in the Company’s
annual report.
The Directors are entitled only to their annual fee and
their reasonable expenses. No element of the Directors’
remuneration is performance related, nor does any Director
have any entitlement to pensions, share options or any long-
term incentive plans from the Company.
The Directors hold their office in accordance with the Articles
of Association and their appointment letters. No Director has a
service contract with the Company, nor are any such contracts
proposed. The Directors’ appointments can be terminated in
accordance with the Articles and without compensation.
Under the Company’s Articles of Association, all Directors are
entitled to remuneration determined from time to time by
theBoard.
DIRECTORS’ REMUNERATION (AUDITED)
During the year, each Director was entitled to an annual
fee of £44,100 per annum. The Chair and ARC Chair were
paid an additional sum of £11,025 and £5,512.50 respectively
for the additional responsibility attached to their respective
roles. In the light of current inflation rates, the Board has
agreed, on the recommendation of the Remuneration and
Nomination Committee, that Directors’ fees should be
increased by 3% (rounded to the nearest £100) for the
year commencing 1 November 2024. From that date, the
Chair will be paid an annual fee of £56,800, the ARC Chair
£51,100 and all other Directors will be paid an annual fee
of £45,400. In determining the Directors’ remuneration,
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
82
neither the Company nor the Remuneration and Nomination
Committee has oversight of the remuneration arrangements
of its subsidiaries.
The total emoluments of each person who served as a
Director during the year are set out in the table below. There
are no performance-related elements to the Directors’ fees
and the Company does not operate any type of incentive,
share scheme, award or hold options to acquire shares in the
Company. There were no other remuneration fees or taxable
benefits paid to any Director during the Period. The table also
shows the fees expected to be paid to the Directors for the
year ended 31 October 2025.
For the Period ended 31 October 2024 For the Period ended 31 October 2023
Expected
Fees for the
year ended
31October 2025
£
Fees
£
Expenses
paid
£
Tot al
£
Fees
£
Expenses
paid
£
Tot al
£
Norman Crighton (Chair) 55,125 500.82* 55,125 52,500 – 52,500 56,800
Janine Freeman 49,612.50 – 49,612.50 47,250 610.73* 4 7, 8 61 .00 51,100
Hugh McNeal 44,100 – 44,100 42,000 – 42,000 45,400
William Rickett 44,100 – 44,100 42,000 – 42,000 45,400
Shefaly Yogendra 44,100 – 44,100 42,000 – 42,000 45,400
Tot al 237,037.50 500.82 237,037.50 225,750 610.73 226,361.00 244,100
* Reimbursement of travel and accommodation expenses relating to attendance at board meetings.
ANNUAL PERCENTAGE CHANGE IN THE DIRECTORS’ REMUNERATION
The annual percentage change in remuneration in respect of the financial years prior to the current year in respect of each
Director’s role is detailed in the table below. The annual percentage change is calculated based on the aggregate annual base
Directors’ remuneration plus any additional fees, where applicable, for additional corporate work or acting as either Chair of
either the Board or the ARC.
Director Role Date appointed 2022-2023 2023-2024
Norman Crighton Chair 12 October 2021 5% 5%
Janine Freeman ARC Chair 12 October 2021 5% 5%
Hugh McNeal Director 12 October 2021 5% 5%
William Rickett Director 12 October 2021 5% 5%
Shefaly Yogendra Director 12 October 2021 5% 5%
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the difference in actual spend between 31 October 2023 and 31 October 2024 on Directors’
remuneration in comparison to distributions by way of dividends and management fee and expenses.
Payments made during
the period ended
31October 2024
£
Payments made during
the period ended
31October 2023
£
Directors’ Remuneration 237,037.50 226,361
Dividends paid 4,542,566 15,727,698
Buyback of Ordinary Shares – –
Management fee and expenses 1,093,542 2,163,222
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
83
DIRECTORS’ SHAREHOLDINGS (AUDITED)
The Directors’ beneficial interests (including those of connected persons) at the Period end and at the date of this report in the issued
share capital of the Company are outlined below. There is no minimum holding requirement that the Directors need to adhere to.
As at 31 October 2023
As at 31 October 2024
and date of this report
Director Ordinary Shares
Percentage of issued
share capital Ordinary Shares
Percentage of issued
share capital
Norman Crighton 16,528 0.01% 16,528 0.01%
Janine Freeman 17,607 0.01% 2 9,8 2 3 0.01%
Hugh McNeal 16,633 0.01%
26,514
0.01%
William Rickett 16,633 0.01% 16,633 0.01%
Shefaly Yogendra 11,618 0.00% 11,618 0.00%
DIRECTORS’ SERVICE CONTRACTS
None of the Directors has a service contract with the
Company. Each of the Directors is engaged under a letter of
appointment with the Company that provides for a minimum
period of one month’s notice of termination by either party.
Those terms also provide that a Director may be removed
without notice and that, in certain circumstances,
compensation will not be due on leaving office.
In accordance with the AIC Code, all Directors are subject
to annual re-election at each AGM of the Company and,
accordingly, shall be submitting themselves for re-election
at the Company’s 2025 AGM. The Board believes, following
a formal performance and Board evaluation, as detailed
on page 74, that all the Directors continue to be effective,
providing considerable experience and demonstrating
commitment to their roles.
TOTAL SHAREHOLDER RETURN
In setting the Directors’ remuneration, consideration is given
to the size and performance of the Company. The graph
below shows the total shareholder return of the Company’s
Ordinary Shares since IPO against the FTSE All Share index,
which the Board has deemed to be the most appropriate
comparator for the Company’s performance, since it includes
smaller companies.
Report of the Remuneration and Nomination Committee continued
CHART 10: RELATIVE GROWTH OF STOCK PRICES FOR 09 NOVEMBER 2021 – 31 OCTOBER 2024
Nov 2021 Feb 2023
Total Shareholder Return (%)
Feb 2022 Aug 2022 Aug 2023May 2022 May 2023Nov 2022 Feb 2024 Aug 2024May 2024Nov 2023
HEIT.LFTSE All Share
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Source: Harmony Energy Advisors Limited
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
84
CONSIDERATION OF
SHAREHOLDERVIEWS
The 2025 AGM will give Shareholders an opportunity to vote
on remuneration.
COMMITTEE MEMBERSHIP
The membership, activities and role of the Committee are
discussed in the Remuneration and Nomination Committee
Report on pages 82 to 85.
STATEMENT OF VOTING AT GENERAL MEETING
At the Company’s AGM held in 2024, Shareholder votes were received as follows:
Votes For %
Votes
Against %
Total Votes
validly cast
Votes
Withheld
Resolution to approve Directors’
RemunerationReport
141,636,522 9 9.9 8 25,681 0.02 141,662,203 8,410
Under s439 of the Companies Act 2006, companies
are required to ask Shareholders to approve the annual
remuneration paid to directors every year and to formally
approve the directors’ remuneration policy on an annual
or on a three yearly basis. Shareholders had approved
the Directors’ Remuneration Policy at the AGM held on
22 March 2023. As the Board has agreed to propose this
resolution on a three yearly basis, the next proposal will be
atthe AGM in 2026.
An ordinary resolution will be put to Shareholders to receive
and adopt the Directors’ Remuneration Report at the
2025AGM.
Signed on behalf of the Board
William Rickett
Chair of the Remuneration and Nomination Committee
25 February 2025
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
85
The Company’s Management Engagement Committee
consists of all the Directors and is chaired by Hugh McNeal.
The Management Engagement Committee meets at least
once a year and more often when required.
The three principal duties of the Management Engagement
Committee are to:
• Consider the terms of appointment of the Investment
Adviser, the AIFM and other service providers;
• Annually review those appointments and the terms of
engagement, including ensuring fees paid are sufficient to
attract and retain staff; and
• Monitor, evaluate and hold to account the performance
of the AIFM, the Investment Adviser, the other service
providers and their key personnel against set criteria.
During the year, all key service providers were asked to
confirm their agreement to the Company’s Supplier Code
of Conduct. Requirements of the Supplier Code of Conduct
include adherence to anti-bribery and corruption policies that
align with those of the Company. As part of the evaluation
of the Company’s service providers, the Management
Engagement Committee also reviews the responses received
on ESG-related questions. The Committee supported
the implementation of the Supplier Code of Conduct by
enhancing the related sections of its annual service provider
evaluation questionnaire during the Period.
The Management Engagement Committee reviews its terms
of reference once a year and any changes are approved
by the Board. The terms of reference are available on the
Company’s website at https://www.heitp.co.uk/investors/
shareholder-documents/.
THE INVESTMENT ADVISER
Harmony Energy Advisors Limited has been appointed
as Investment Adviser under the terms of an Investment
Advisory Agreement with the Company. The Investment
Adviser is a wholly owned subsidiary of Harmony Energy
Limited, a leading UK battery energy storage project
developer with an established track record in developing,
funding and supervising the construction of such projects
and other renewable generation projects in GB. The
management team of the Investment Adviser have been
exclusively focussed on the energy storage sector (across
multiple projects) in GB for over eight years, both from the
point of view of asset owner/developer and in a third-party
advisory capacity. Asummary of the services provided to
the Company by, and fees paid to, the Investment Adviser
to the Company and fees paid are set out in the Corporate
Governance statement on pages 72 to 76.
EVALUATION OF THE INVESTMENT
ADVISER
The Management Engagement Committee reviewed the
Investment Adviser’s investment performance, its compliance
with the Investment Advisory Agreement as well as value
for money. The Committee also reviewed the Investment
Adviser’s internal control framework and the skills of its key
personnel.
It was a difficult year. The Investment Adviser has had to
work with lower fees and revenues than anticipated at IPO
because of the significant fall in the Company’s share price
and, at times, the Investment Adviser has found the heavy
workload to be challenging with more limited resources
than would have been ideal. However, there were successes,
notably the build-out of the Portfolio is complete and when
fully operational the Company’s assets are some of the best
performing in the market. The Investment Adviser has also
successfully diversified the asset management and revenue
optimisation for some of the Company’s assets as well
as won awards for the Company’s work and approach to
ESG. Following completion of the review, the Management
Engagement Committee was satisfied with the service
provided, that the remuneration paid was reasonable and
recommended to the Board that the continued engagement
of the Investment Adviser was in the best interests of
Shareholders, especially in light of the potential asset sale
(seepage 6 for further information).
EVALUATION OF THE ALTERNATIVE
INVESTMENT FUND MANAGER
In accordance with the terms of a Management Agreement,
JTC Global AIFM Solutions Limited has been appointed to
act as alternative investment fund manager, providing risk
management and portfolio services to the Company. The
AIFM is licensed and regulated by the Guernsey Financial
Services Commission. The Management Engagement
Committee reviewed the performance of the AIFM during
the year, which included reviewing value for money and the
quality of service provided. The Management Engagement
Committee was broadly satisfied with the service provided,
that the AIFM had complied with the relevant laws and
regulations and the level of remuneration paid, and
recommended to the Board that the AIFM’s continued
appointment was in the best interests of Shareholders,
especially in light of the potential asset sale (see page 6 for
further information).
Report of the Management Engagement
Committee
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
86
EVALUATION OF KEY SERVICE PROVIDERS
JTC (UK) Limited is appointed as Company Secretary and
Administrator and attends all Management Engagement
Committee meetings but is not present in discussions
regarding its own performance. The Management
Engagement Committee reviewed the performance of the
Administrator and Company Secretary and concluded
it was broadly satisfactory. The Board is responsible for
the appointment or removal of the Company Secretary.
The Management Engagement Committee carried out
an evaluation of the Company’s wider service providers,
including the registrars, broker, legal firms and consultants
providing specialist advice and support on ESG and
sustainability issues. The evaluation included value for money,
governance, cyber security and data protection, all legal
requirements, operating and internal controls as well as ESG
policies and achievement of policy goals. There are no issues
to report. The MEC agreed to continue to keep all service
providers under review.
SELF-EVALUATION
The Management Engagement Committee carried out a self-
evaluation and was satisfied that it was operating effectively.
Hugh McNeal
Chair of the Management Engagement Committee
25 February 2025
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
87
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF HARMONY ENERGY
INCOME TRUST PLC
Opinion
We have audited the financial statements of Harmony
Energy Income Trust Plc (the ‘Company’) for the year
ended 31 October 2024 which comprise the Statement of
Comprehensive Income, the Statement of Financial Position,
the Statement of Changes in Equity, the Statement of Cash
Flows, and the related notes 1 to 23 to the financial statements,
including material accounting policy information.
The financial reporting framework that has been applied in
their preparation is applicable law and UK adopted international
accounting standards.
In our opinion, the financial statements:
• give a true and fair view of the Company’s affairs as at
31October 2024 and of its loss for the year then ended;
• have been properly prepared in accordance with UK
adopted international accounting standards; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Company and we remain
independent of the Company in conducting the audit.
Material uncertainty relating to going concern
We draw attention to note 2 to the financial statements which
explains that the directors have announced the proposed
sale of the entire portfolio of operating BESS assets. This sale
is subject to shareholder’s vote. A favourable vote and sale
of assets is likely to lead to a voluntary members’ liquidation
of the Company. This represents a material uncertainty
which may cast significant doubt on the Company’s ability to
continue as a going concern. Our opinion is not modified in
respect of thismatter.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Company’s
ability to continue to adopt the going concern basis of
accounting included:
• Confirmation of our understanding of the Company’s
going concern assessment process and engagement with
the directors and the Company Secretary to determine
if all key factors were considered in their assessment. We
considered whether the items included in the directors’
assessment addressed those matters which we considered
important, including but not limited to the debt facilities
in place at the subsidiary company to which the Company
acts as guarantor, and the requirement to hold a
continuation vote if the NAV is below a certain threshold.
• Inspection of the directors’ assessment of going concern,
including the cash flow forecast, for the period to
28February 2026 which is at least twelve months from
the date these financial statements were authorised
for issue. In preparing the forecast, the Company has
concluded that it is able to continue to meet its ongoing
costs as they fall due.
• Review of the factors and assumptions, including the
impact of the current economic environment and other
significant events that could give rise to market volatility,
as applied to the cash flow forecast. We considered the
appropriateness of the methods used to calculate the
cash flow forecast and determined, through testing of the
methodology and calculations, that the methods, inputs
and assumptions utilised were appropriate to be able to
make an assessment for the Company. We also reviewed
the Company’s assessment of the investment portfolio
under stressed market conditions and determined the
impact of sensitivities in net asset value from the reverse
stress testing performed.
• Consideration of the mitigating factors included in the
cash flow forecast that are within the control of the
Company. We reviewed the Company’s assessment of the
liquidity of investments held and evaluated the Company’s
ability to sell those investments in order to cover working
capital requirements should revenue decline significantly.
• Consideration of the commitments that have been made,
including the loan facility and the possible continuation
vote, and assessed whether these have been appropriately
taken account of when preparing the cash flow forecast.
• Reviewed the board meeting packs and minutes which
included the Company’s plans to sell the investment
portfolio and subsequent members’ voluntary liquidation
of thebusiness.
• Review of the Company’s going concern disclosures
included in the Annual Report in order to assess whether
the disclosures were appropriate and in conformity with
the reporting standard.
Going concern has also been determined to be a key
auditmatter.
Independent Auditor’s Report
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
88
In relation to the Company’s reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors,
with respect to going concern are described in the relevant
sections of this report. However, because not all future
events or conditions can be predicted, this statement is not
a guarantee as to the Company’s ability to continue as a
goingconcern.
Overview of our audit approach
Key audit
matters
• Risk of inaccurate valuation of investments
and the resulting impact on the unrealised
gains/(losses) in the Statement of
Comprehensive Income
• Risk of inaccurate revenue recognition,
including service fee income
• Going concern
Materiality • Overall materiality of £2.01m which
represents 1% of net asset value as at
31October 2024
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit
scope for the Company. This enables us to form an opinion
on the financial statements. We take into account size, risk
profile, the organisation of the Company and effectiveness of
controls, the potential impact of climate change and changes
in the business environment when assessing the level of work
to be performed. All audit work was performed directly by
the audit engagement team.
Climate change
There has been increasing interest from stakeholders as to
how climate change will impact companies. The Company
has assessed the impact climate change could have on
its operations and investments. This is explained in the
ESG section on page 30, which forms part of the ‘Other
information’, rather than the audited financial statements.
We have not performed audit procedures on the metrics
disclosed by the Company in the ESG section of the Annual
Report and Accounts. Our procedures on the climate change
disclosures therefore consisted solely of considering whether
they are materially inconsistent with the financial statements
or our knowledge obtained in the course of the audit, or
otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused
on the adequacy of the Company’s disclosures in the financial
statements as set out in note 2 and conclusion that climate
risk does not materially impact the estimates and assumptions
used in determining the fair value of the investments.
Based on our work, we have not identified the impact of
climate change on the financial statements to be a key audit
matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the
financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
Our approach and observations in respect of the Going
Concern Key Audit Matter is described in the Going
Concern section above. Our approach and observations in
respect of the other Key Audit Matters are below:
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
89
Risk Our response to the risk
Key observations communicated
to the Audit and Risk Committee
Risk of inaccurate valuation of
investments and the resulting impact
on the unrealised gains/(losses) in the
Statement of Comprehensive Income
Refer to the Audit and Risk Committee
Report (page 79); Accounting policies
(page 103); and Note 10 of the Financial
Statements (pages 106 and 107)
The valuation of the investment portfolio
as at 31 October 2024 was £194.76m
(2023: £240.03m) consisting of the
Company’s investments in battery storage
assets through its subsidiaries.
The accurate valuation of investments is
fundamental to the Company’s financial
performance. The return generated by
the investment portfolio is a key driver
of the Company’s performance. Due to
the nature of the investment portfolio,
being unlisted investments with no directly
comparable listed investments, the
underlying assumptions that drive the value
of each asset are subjective. As a result,
the valuation of the portfolio is susceptible
to misstatement.
Unrealised gains or losses are calculated
as the difference between the fair value
of the investment and the book cost
and contribute to a significant portion
of the capital returns in the Statement
of Comprehensive Income. There
is a risk that the unrealised gain/loss
ismiscalculated.
The valuation principles used are based
on IFRS 13 Fair value and the International
Valuation Standards Council (‘IVSC’)
valuation guidelines, using a discounted
cash flow (“DCF”) methodology. In the
current year all the sites have become
operational and as such the incorporation
of actuals into the valuations, including
in respect of back testing, is a more
materialconsideration.
We performed the following procedures:
•
Gained an understanding of the Investment
Adviser, independent valuer and the directors’
processes and controls surrounding investment
valuations and the recognition of realised and
unrealised gains/(losses) on investments, by
performing a walkthrough to evaluate the design
and implementation of controls;
• Obtained and reviewed the valuation models to
validate that the valuation methodology adopted
is consistent with the requirements of UK
adopted international accounting standards and
IVSC guidelines. We corroborated key revenue
streams and other valuation model inputs
to supporting contracts and external pricing
forecasts, as applicable;
• Held discussions with the Investment Manager
to understand the key drivers of the cash flow
projections included in the valuation models and
assessed their appropriateness based on the
nature of the assets and our understanding of
the relevant markets;
• For all investments, engaged EY valuation
specialists to assist in challenging the
appropriateness of the discount rate used and
to assess the impact of macro-economic and
industry related factors in calculating the net
present value of the future cash flows.
• Obtained bid offers from third parties who
are willing to buy the Company’s assets
and considered these offers in valuing the
investments as at year end;
• Obtained relevant supporting documents such
as board minutes, subscription letters and
bank consent letters, to verify the reduction
in shareholder loan as a consideration for
additional subscription of shares; and
• Recalculated the unrealised gains/(losses) on
unquoted investments as at the year-end using
the book-cost reconciliation and reviewed the
level 3 fair value hierarchy disclosure.
Our audit procedures did
not identify any material
misstatements regarding the
risk of inaccurate valuation of
investments and the resulting
impact on the unrealised gains/
(losses) in the Statement of
Comprehensive Income.
Independent Auditor’s Report continued
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
90
Risk Our response to the risk
Key observations communicated
to the Audit and Risk Committee
Risk of inaccurate revenue recognition,
including service fee income
Accounting policies (page 101); and Note 6
of the Financial Statements (page 104)
For the year ended 31 October 2024, the
Company recognised service fee income
amounting to £1.47m (2023: £1.84m).
Service fee income represents fees charged
by the Company to its subsidiaries in
relation to project related matters. This
is calculated as a percentage of the total
operating expenditure based on the
proportion of time spent on such matters.
Due to the judgement involved in assessing
the proportion of the Company’s resources
spent on project matters, we consider these
fees to be susceptible to misstatement.
We performed the following procedures:
•
Obtained an understanding of how service fee
income and investment income is recognised
by performing walkthrough procedures to
evaluate the design and implementation
ofcontrols;
• Obtained the Company’s assessment of the
proportion of the Companies resources spent
on project related matters;
• Reviewed the reasonability of inputs and
assumptions in calculating the service
feeincome;
• Recalculated the service fee income based on
the intercompany services agreement;
• Obtained the support of Board’s review and
approval of the rate used during the year and
their approval of the expenditure used as basis
for service fee income;
• Traced the investment income receivable to
the investments balance schedule as no cash is
paid, and reviewed the supporting documents
in relation to the investment income write off;
• Recalculated the investment income relating to
loan interest attributable to the Company from
the SPVs, with reference to the contractual
agreements;
• Assessed whether service fee income and
investment income are being recognised in
accordance with UK adopted international
accounting standards.
Our audit procedures did
not identify any material
misstatements regarding the risk
of inaccurate revenue recognition.
In the prior year, we named the key audit matter as the risk of
inaccurate revenue recognition, including service fee income,
however, we have revised the risk this year to focus on service
fee income, hence, the revised key audit matter of the risk
of inaccurate revenue recognition in relation to service
feeincome.
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users
of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Company to be
£2.01million (2023: £2.62million), which is 1% (2023: 1%) of
net asset value. We believe that net asset value provides us
with materiality aligned to the key measure of the Company’s
performance.
Performance materiality
The application of materiality at the individual account
or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our
assessment of the Company’s overall control environment,
our judgement was that performance materiality was 50%
(2023: 50%) of our planning materiality, namely £1.01million
(2023: £1.31million). We have set performance materiality at
this percentage due to our past experiences of the audit that
indicates there is a higher risk of misstatement.
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we
would report to them all uncorrected audit differences in
excess of £0.10million (2023: £0.13million), which is set at
5% (2023:5%) of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
91
light of other relevant qualitative considerations in forming
our opinion.
Other information
The other information comprises the information included
in the Annual Report and Accounts other than the financial
statements and our auditor’s report thereon. The directors
are responsible for the other information contained within the
Annual Report and Accounts.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in this report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is
a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion the part of the Report of the Remuneration
and Nomination Committee to be audited has been properly
prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course
of the audit:
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the Strategic Report and Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
Strategic Report or Directors’ Report.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
• the financial statements and the part of the Report of the
Remuneration and Nomination Committee to be audited
are not in agreement with the accounting records and
returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code
specified for our review by the UK Listing Rules.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit:
• Directors’ statement with regards to the appropriateness
of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 63;
• Directors’ explanation as to its assessment of the
Company’s prospects, the period this assessment covers
and why the period is appropriate set out on page 63;
• Director’s statement on whether it has a reasonable
expectation that the Company will be able to continue in
operation and meets its liabilities set out on page 63;
• Directors’ statement on fair, balanced and understandable
set out on page 79;
• Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page 58;
• The section of the Annual Report and Accounts that
describes the review of effectiveness of risk management
and internal control systems set out on page 75; and;
• The section describing the work of the Audit and Risk
Committee set out on page 78.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 77, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Independent Auditor’s Report continued
GOVERNANCE REPORT
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
92
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention
and detection of fraud rests with both those charged with
governance of the Company and management.
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and
determined that the most significant are those that relate
to the reporting framework (UK adopted international
accounting standards, the Companies Act 2006, UK
Corporate Governance Code, AIC Code of Corporate
Governance and The Companies (Miscellaneous
Reporting) Regulations 2018) and Section 1158 of the
Corporation Tax Act 2010. In addition, we concluded
that there are certain significant laws and regulations
which may influence the determination of the amounts
and disclosures in the financial statements including the
Listing Rules of the UK Listing Authority.
• We understood how the Company is complying with
those frameworks by making enquiries of the Investment
Manager, Company Secretary, and also the directors
including the Chair of the Audit and Risk Committee.
We corroborated our understanding through our review
of board minutes, papers provided to the Audit and Risk
Committee and correspondence received from regulatory
bodies.
• We assessed the susceptibility of the Company’s financial
statements to material misstatement, including how fraud
might occur by considering the key risks impacting the
financial statements. We identified fraud and management
override risks in relation to estimation uncertainty relating
to the valuation of investments and service fee income.
Our audit procedures stated above in the ‘Key audit
matters section’ of this Auditor’s Report were performed
to address the fraud risk. We also performed journal
entry testing by specific risk criteria, with a focus on
manual journals and journals indicating large or unusual
transactions based on our understanding of the business.
• Based on this understanding we designed our audit
procedures to identify non-compliance with such laws
and regulations. Our procedures involved review of the
Company Secretary’s reporting to the directors with
respect to the application of the documented policies
and procedures and review of the financial statements to
ensure compliance with the reporting requirements of the
Company.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit and Risk
Committee, we were appointed by the Company on
27June 2022 to audit the financial statements for the
period ended 31 October 2022 and subsequent financial
years.
• The period of total uninterrupted engagement including
previous renewals and reappointments is 3 years, covering
the period ended 31 October 2022 to year ended
31October 2024.
• The audit opinion is consistent with the additional report
to the Audit and Risk Committee.
Use of our report
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Mike Gaylor (Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
25 February 2025
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
93
Financial Statements
In this section
96 Statement of Comprehensive Income
97
Statement of Financial Position
98
Statement of Changes in Equity
99 Statement of Cash Flows
100
Notes to the Financial Statements
117
Company Information
118
Glossary
The addition of Hawthorn Pit and Wormald Green to the Company’s
operational portfolio brought total capacity to 790.8 MWh / 395.4 MW
FINANCIAL STATEMENTS
94
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
95
Statement of Comprehensive Income
For the year ended 31 October 2024
Notes
Revenue
£
Capital
£
For the year
ended
31 October
2024
Tota l
£
Revenue
£
Capital
£
For the year
ended
31 October
2023
Tota l
£
Income
Net loss on investments at fair
value through profit and loss 10 – (63,833,218) (63,833,218) – (7,161,610) (7,161,610)
Service fee income 6 1,468,830 – 1,468,830 1,837,458 – 1,837,458
Investment Income 6 12,880,688 – 12,880,688 11,936,674 – 11,936,674
Investment income write off 6 & 10 (4,335,532) – (4,335,532)
Other income 6 389 – 389
10,014,375 (63,833,218) (53,818,843) 13,774,132 (7,161,610) 6,612,522
Expenses
Administrative and other
expenses 7 (2,699,333) – (2,699,333) (3,475,884) – (3,475,884)
Profit/(loss) before taxation 7,315,042 (63,833,218) (56,518,176) 10,298,248 (7,161,610) 3,136,638
Taxation 8 – – – – – –
Profit/(loss) after tax and Total
Comprehensive Income for the
year 7,315,042 (63,833,218) (56,518,176) 10,298,248 (7,161,610) 3,136,638
Earnings per share (basic and
diluted): Ordinary Shares 9 (0.25) 0.01
All Revenue and Capital items in the above statement are derived from continuing operations.
The Total column of this statement represents the Company’s Statement of Comprehensive Income prepared in accordance
with UK adopted international accounting standards (“IAS”). The return on ordinary activities after taxation is the total
comprehensive income and therefore no additional statement of other comprehensive income is presented.
The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of
Recommended Practice issue by the Association of Investment Companies (“AIC”).
The notes on pages 100 to 116 form an integral part of these Financial Statements.
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
96
Statement of Financial Position
As at 31 October 2024
Notes
31 October 2024
£
31 October 2023
£
Non–current assets
Investments held at fair value 10 194,764,869 240,025,781
194,764,869 240,025,781
Current assets
Cash and cash equivalents 12 4,211,249 18,093,379
Trade and other receivables 11 2,444,923 4,452,273
6,656,172 22,545,652
Total assets 201,421,041 262,571,433
Current liabilities
Trade and other payables 13 373,691 463,341
Net current assets 6,282,481 22,082,311
Total net assets 201,047,350 262,108,092
Shareholders’ equity
Share capital 17 2,271,283 2,271,283
Share premium 17 21,370,889 21,370,889
Capital reduction reserve 18 191,822,914 194,094,197
Revenue reserve 18 8,150,155 3,106,396
Capital reserve 18 (22,567,891) 41,265,327
Total Shareholders’ equity 201,047,350 262,108,092
Net asset value per Ordinary share (pence) 19 88.52 115.40
The Financial Statements of Harmony Energy Income Trust Plc (registered number 13656587) were approved by the Board of
Directors and signed on its behalf on 25 February 2025 by:
Norman Crighton
Chair
25 February 2025
The notes on pages 100 to 116 form an integral part of these Financial Statements.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
97
Statement of Changes in Equity
For the year ended 31 October 2024
Notes
Share
capital
£
Share
premium
£
Capital
reduction
reserve
£
Revenue
reserve
£
Capital
reserve
£
Tota l
Shareholders’
equity
£
Balance at 31 October 2022
2,100,000 – 202,693,046 (63,003) 48,426,937 253,156,980
Transactions with owners:
Conversion of C Shares to
Ordinary Shares
17 171,283 21,370,889 – – – 21,542,172
Dividends paid 20 – – (8,598,849) (7,128,849) – (15,727,698)
Total comprehensive income for
the year:
Profit/(loss) for the year – – 10,298,248 (7,161,610) 3,136,638
Balance at 31 October 2023
2,271,283 21,370,889 194,094,197 3,106,396 41,265,327 262,108,092
Transactions with owners:
Dividends paid 20 – – (2,271,283) (2,271,283) – (4,542,566)
Total comprehensive income for
the year:
Profit/(loss) for the year – – 7,315,042 (63,833,218) (56,518,176)
Balance at 31 October 2024 2,271,283 21,370,889 191,822,914 8,150,155 (22,567,891) 201,047,350
The notes on pages 100 to 116 form an integral part of these Financial Statements.
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
98
Statement of Cash Flows
For the year ended 31 October 2024
Notes
For the year ended
31 October 2024
£
For the year ended
31 October 2023
£
Cash flows from operating activities
(Loss)/profit for the year (56,518,176) 3,136,638
Adjustments for non-cash items:
Net loss on investments at fair value through profit and loss 10 63,833,218 7,161,610
Investment Income 6 (12,880,688) (11,582,996)
Investment income write off 6 4,335,532
Service fee income 6 (1,468,830) (1,837,458)
Operating cash flows before movements in working capital (2,698,944) (3,122,206)
Increase in trade and other receivables 11 (287,760) (1,233,122)
Decrease in trade and other payables 13 (89,650) (267,023)
Net cash outflow from operating activities (3,076,353) (4,622,351)
Cash flows used in investing activities
Loan to shareholder discharged – 1,443,506
Loan advanced to subsidiary 10 (6,263,212) –
Purchase of Investments 10 – (101,223,411)
Proceeds from sale of investment 10 – 13,651,707
Net cash outflow from investing activities (6,263,212) (86,128,198)
Cash flows used in financing activities
Dividends paid 20 (4,542,566) (15,727,698)
Net cash outflow from financing activities (4,542,566) (15,727,698)
Net decrease in cash and cash equivalents for the year
(13,882,130) (106,478,247)
Cash and cash equivalents at the beginning of the year 18,093,379 124,571,626
Cash and cash equivalents at the end of the year 12 4,211,249 18,093,379
The notes on pages 100 to 116 form an integral part of these Financial Statements.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
99
Notes to the Financial Statements
For the year from 1 November 2023 to 31 October 2024
1. GENERAL INFORMATION
Harmony Energy Income Trust Plc, (the “Company”) was incorporated as a public company, limited by shares, in England and
Wales on 1 October 2021 with registered number 13656587. The registered office of the Company is The Scalpel 18th Floor,
52 Lime Street, London, England EC3M 7AF. Its share capital is denominated in British Pounds Sterling (£) and currently
consists of Ordinary Shares. The Company’s principal activity is to invest in commercial scale battery energy storage and
renewable energy generation projects, with an initial focus on a portfolio of utility scale battery energy storage systems (“BESS”),
located in diverse locations across Great Britain.
2. BASIS OF PREPARATION
The audited Annual Report and Financial Statements have been prepared in accordance with UK-adopted international
accounting standards and in conformity with the requirements of the Companies Act 2006 and also considers the Statement of
Recommended Practice (“SORP”) “Financial Statements of Investment Trust Companies and Venture Capital Trusts”, updated
by the AIC in July 2022. The principal accounting policies are set out in Note 4.
In terms of the AIC SORP, the Company presents a Statement of Comprehensive Income, which shows amounts split
between balances which are revenue and capital in nature. The determination of the revenue or capital nature of a transaction
is determined by giving consideration to the underlying elements of the transaction. Capital transactions are considered to
be those arising as a result of the appreciation or depreciation in the value of assets due to the fair value movements on
investments held at fair value through profit and loss as well as any gains or losses occurred on the sale of investments. Revenue
transactions are all transactions, other than those which have been identified as capital in nature.
The Company is an investment entity in accordance with IFRS 10 ‘Consolidated Financial Statements’ which holds all its
subsidiaries at fair value and therefore only prepares separate accounts. The Financial Statements are also prepared on the
assumption that approval as an investment trust will continue to be granted.
The Directors considered the impact of climate change on the investments included in the Company’s Financial Statements and have
assessed that it does not materially impact the estimates and assumptions used in determining the fair value of the investments.
FUNCTIONAL AND PRESENTATION CURRENCY
The currency of the primary economic environment in which the Company operates (the functional currency) is British Pounds
Sterling (£) which is also the presentation currency.
GOING CONCERN
A fundamental principle of the preparation of financial statements in accordance with UK-adopted international accounting
standards is the judgement that an entity will continue in existence as a going concern for a period of at least 12 months from
signing of the Annual Report, which contemplates continuity of operations and the realisation of assets and settlement of liabilities
occurring in the ordinary course of business.
In reaching its conclusion, the Board has considered the risks that could impact the Company’s liquidity over the period for at least
12 months from the approval of the Annual Report (the “Going Concern Period”).
As at 31 October 2024, the Company and its subsidiaries had net current assets of £10.9 million which was sufficient to meet
commitments made under construction contracts signed by subsidiaries.
The Company is a guarantor to its wholly owned subsidiary HEIT Holdings Ltd in respect of the debt facilities and also provides
parent company guarantees to subsidiaries in relation to certain construction and/or battery supply contracts. As at the date of
publication the aggregate outstanding value of such guarantees is £5.9 million.
As previously announced, the Company remains in advanced negotiations in relation to the sale of the entire Portfolio. Should
negotiations conclude successfully, the transaction would require an amendment to the Company’s investment policy and the
agreement of Shareholders and would therefore be subject to a Shareholder vote. The Directors have taken into account the
probability of negotiations concluding successfully and the probability of a subsequent shareholder vote passing, which may result
in a subsequent members’ voluntary liquidation, in making their assessment.
The Company’s prospectus at the time of IPO commits the Directors to put forward a continuation vote at the subsequent annual
general meeting of the Company if the NAV of the Company is below £250 million at the end of 2024. The NAV of the Company
was below £250 million at the end of 2024, and whilst it is possible that a Shareholder vote in relation to the proposed asset sale
transaction would remove the requirement for a continuation vote, the possibility, and the probability of a continuation vote passing
have also been taken into account by the Directors in making their assessment.
The Directors are aware and understand that the Company’s revenues can be volatile and therefore have reviewed the results of
financial models analysing the expected position of the Company under a prudent scenario as well as a reasonably possible worst
case scenario. Both scenarios take into account the availability of cash reserves and receivables during the Going Concern Period.
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
100
The prudent scenario assumes that the revenue performance of the Company’s operating projects is in line with third-party
forecasts of revenue. In previous assessments, the IA had based the prudent scenario on a reduction to third-party revenue
forecasts, however as noted in the description of NAV movements, these forecasts have been reduced significantly over the past
year and are now deemed a prudent forecast for the coming year.
In addition, the Directors have considered a reasonably possible worst case scenario which assumes non-contracted revenue
earned by underlying investee companies is c.38% lower than in the prudent scenario.
Under both scenarios the financial model shows that sufficient cash is expected to be available to meet the Company’s obligations
and commitments (including but not limited to construction contracts, working capital requirements and debt service).
Having considered the results of the modelled scenarios, the Directors have a reasonable expectation that the Company is able
to manage cash flow and meet its working capital and debt service commitments via a combination of operating revenues, and/or
contracted revenue products over the Going Concern Period, and are working with the Investment Adviser to assess the optimal
combination of such options so as to ensure that the Company can maximise returns to Shareholders. The Company also has the
option of selling an asset(s) if it wishes to do so. The Directors are confident that key risks have been considered in this assessment.
The Directors have concluded that the Company’s available funding and expected income are sufficient for the Company to
continue its operations for at least 12 months from the date of signing these financial statements and therefore believe it remains
appropriate to prepare the financial statements on a going concern basis. However, when taking into account the probability of a
shareholder vote passing in favour of the proposed asset sale and subsequent members’ voluntary liquidation, the Directors note
that this represents a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern
during the Going Concern Period. The financial statements do not include any adjustments that would result from the basis of
preparation being inappropriate.
3. NEW AND REVISED STANDARDS AND INTERPRETATIONS
NEW AND REVISED STANDARDS AND INTERPRETATIONS
The below amendments came into force during the year. None of these had a material impact on these financial statements.
• IAS 1 (amended) – Amendment to IAS 1 – Non-Current liabilities with covenants – effective from 1 January 2024
NEW AND REVISED IFRS IN ISSUE BUT NOT YET EFFECTIVE
The following standards have been issued but are not effective for this accounting year and have not been adopted early:
• IFRS 18 – Presentation and Disclosures in Financial Statements – effective from 1 January 2027
• IAS 8 (amended) – Amendment to IAS 7 and IFRS 7 – Supplier finance – effective from 1 January 2024
Adoption of the new and revised standards and relevant interpretations in future periods is not expected to have a material
impact on the Financial Statement of the Company.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unless detailed below, the accounting policies used in the preparation of the Financial Statements have been consistently
applied during the year ended 31 October 2024.
The principal accounting policies applied in the preparation of the Financial Statements are set out below.
SEGMENTAL INFORMATION
The Board is of the opinion that the Group is engaged in a single segment business, being the investment in energy storage and
complementary renewable energy generation assets, with an initial focus in a diversified portfolio of utility scale BESS assets,
located in diverse locations across Great Britain.
INCOME
Income comprises Investment income and Service fee income. Investment income arising from fair value gains pertaining to
interest on the portfolio assets loan investments is recognised in the Revenue account of the Statement of Comprehensive
Income. The remaining fair value gains and losses are disclosed in net gain on investments at fair value through profit and loss
and recorded in the Capital account. Service fee income is recognised on an accruals basis from fees charged to each portfolio
company regarding the Company’s resources used for project related matters. The Service fee income is recognised in the
Revenue account of the Statement of Comprehensive Income.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
101
EXPENSES
Operating expenses are the Company’s costs incurred in connection with the ongoing management of the Company’s
investments and administrative costs. Operating expenses are accounted for on an accruals basis and charged to the Statement
of Comprehensive Income. Expenses are charged through the Revenue account except those which are capital in nature, these
include those which are incidental to the acquisition, disposal or enhancement of an investment, which are accounted for
through the Capital account. In terms of the AIC SORP the Company applies the general accounting basis and charges the full
Investment Adviser fees to revenue (“the non-allocation approach”). Costs directly relating to the issue of Ordinary Shares are
charged to share premium.
TAXATION
The Company is approved as an Investment Trust Company (“ITC”) under sections 1158 and 1159 of the Corporation Taxes
Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999 for accounting periods commencing on or after 25 May 2018.
The approval is subject to the Company continuing to meet the eligibility conditions of the Corporations Tax Act 2010 and the
Statutory Instrument 2011/29 99. The Company intends to ensure that it complies with the ITC regulations on an ongoing basis
and regularly monitors the conditions required to maintain ITC status.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank.
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised initially at fair value and subsequently stated at amortised cost less loss allowance
which is determined using the simplified approach to measuring expected credit losses, the effect of which is considered
immaterial.
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value and subsequently stated at amortised cost.
EQUITY
Equity instruments issued by the Company are recorded as the amount of the proceeds received, net of directly attributable
issue costs. Costs not directly attributable to the issue are immediately expensed in the Statement of Comprehensive Income.
FINANCIAL INSTRUMENTS
In accordance with IFRS 9, the Company classifies its financial assets and financial liabilities at initial recognition into the
categories of amortised cost or fair value through profit or loss. Derivative instruments are measured at fair value through profit
and loss.
FINANCIAL ASSETS
The Company’s financial assets, other than cash and cash equivalents and trade and other receivables, are measured at fair
value through profit or loss as they are held in the business model whose performance is evaluated and assessed on a fair value
basis.
FINANCIAL LIABILITIES MEASURED AT AMORTISED COST
The Company classifies all financial liabilities as financial liabilities at amortised cost.
RECOGNITION AND DERECOGNITION
Financial assets are recognised on trade date, the date on which the Company commits to purchase or sell an asset. A financial
asset is derecognised where the rights to receive cash flows from the asset have expired, or the Company has transferred its
rights to receive cash flows from the asset. The Company derecognises a financial liability when the obligation under the liability
is discharged, cancelled or expired.
IMPAIRMENT OF FINANCIAL ASSETS
The Company holds trade receivables with no financing component and which have maturities of less than 12 months at
amortised cost and, as such has chosen to apply the simplified approach to measuring expected credit losses, as permitted by
IFRS 9, which uses a lifetime expected loss allowance for all trade receivables.
DIVIDENDS PAYABLE
Dividends are recognised when they become legally payable, as a reduction in equity in the Financial Statements. Interim equity
dividends are recognised when paid. Dividends on the shares are paid in the form of interim dividends.
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
102
5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Financial Statements requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the year in
which the estimates are revised and in any future periods affected.
During the year the Directors considered the following significant judgements, estimates and assumptions:
SIGNIFICANT JUDGEMENT
Assessment as an Investment Entity
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless their main purpose and activities are providing services related to
theCompany’s investment activities. To determine that the Company continues to meet the definition of an investment entity,
the Company is required to satisfy the following three criteria:
a) the Company obtains funds from one or more investors for the purpose of providing those investors with investment
management services;
b) the Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation,
investment income, or both; and
c) the Company measures and evaluates the performance of substantially all of its investments on a fair value basis.
TheCompany meets the criteria as follows:
• the Company’s investment objective is to provide investors with an attractive and sustainable level of income returns, with
the potential for capital growth, by investing in commercial scale energy storage and renewable energy generation projects,
with an initial focus on a diversified portfolio of BESS projects located in Great Britain (“Projects”);
• the Company provides investment management services and has several investors who pool their funds to gain access to
infrastructure related investment opportunities that they might not have had access to individually; and
• the Company has elected to measure and evaluate the performance of all of its investments on a fair value basis. The fair
value method is used to represent the Company’s performance in its communication to the market, including investor
presentations. In addition, the Company reports fair value information internally to Directors, who use fair value as the
primary measurement attribute to evaluate performance.
In respect of the second criterion, Projects may also be disposed of, or otherwise realised, where the AIFM recommends
(actingupon advice given by the Investment Adviser) that such realisation is in the interests of the Company. Such
circumstances may include (without limitation) disposals for the purposes of realising or preserving value, or of realising cash
resources for reinvestment or otherwise. The Directors are responsible for the determination of the Company’s investment
policy and strategy and have overall responsibility for the Company’s activities including the review of investment activity and
performance. The Board will also make the decision to acquire or dispose of Projects, based on recommendations made by the
AIFM acting upon advice given by the Investment Adviser.
A further indicator of whether a Company is an investment entity is the expectation they hold more than one asset.
TheCompany holds one investment directly but several indirectly, as there is a portfolio of assets within HEIT Holdings Ltd.
The Directors have evaluated whether the Company is an investment entity and concluded that it meets the definition set out in IFRS
10. Therefore, its subsidiaries are measured at fair value through profit or loss, in accordance with IFRS 9 ‘Financial Instruments’.
ASSESSMENT OF HEIT HOLDINGS LTD AS AN INVESTMENT ENTITY
HEIT Holdings Ltd is not consolidated as the company is also considered to be an investment entity (see Note 10). The board of
directors of HEIT Holdings Ltd has considered the requirements of IFRS 10 as shown above and confirmed that HEIT Holdings Ltd
meets these criteria.
SIGNIFICANT ESTIMATION UNCERTAINTY
Valuation of Investments
Significant estimates in the Company’s Financial Statements include the amounts recorded for the fair value of the investments
in the subsidiary of the Company, HEIT Holdings Ltd. These estimates and assumptions are subject to measurement uncertainty
by their nature. The impact on the Company’s Financial Statements of changes in the next financial year may be significant.
These estimates and sensitivities are further discussed in note 16.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
103
6. INCOME
31 October 2024
£
31 October 2023
£
Service fee income 1,468,830 1,837,458
Investment Income 12,880,688 11,582,996
Bank interest income 389 340,939
Investment income write off (4,335,532) –
Interest income on loan to shareholder – 12,739
10,014,375 13,774,132
Refer to note 10 for further detail on interest on loan to subsidiary recognised in Investment income and the Investment income
write off.
7. ADMINISTRATIVE AND OTHER EXPENSES
31 October 2024
£
31 October 2023
£
Administrative fees 107,204 57,300
AIFM fees 67,434 67,424
Director and officer insurance 30,196 40,725
Directors’ fees 237,038 225,750
Fees payable to the auditor for the audit of the Company’s Financial Statements 222,550 184,000
Legal and professional fees 609,715 519,464
Investment adviser fees 1,093,542 2,163,222
Secretarial fees 56,250 82,097
Sundry expenses 275,404 135,902
2,699,333 3,475,884
The Company has no employees and therefore no employee related costs have been incurred.
The audit fees for the Company’s Financial Statements for the 2024 financial year totalled to £190,550 (2023: £184,000) as shown
in note in 13. During the year, £32,000 relates to the 2023 financial year audit fees. No non-audit fees were paid to the auditors.
During the year the year the audit fees relating to the statutory audits of HEIT Holdings Ltd and its subsidiaries totalled £74,907
(2023: £64,675).
ADMINISTRATIVE AND SECRETARIAL FEES
JTC (UK) Limited has been appointed to act as administrator and secretary for the Company through the Administration and
Company Secretarial Agreement with effect from 14 October 2021. JTC (UK) Limited is entitled to a minimum fee of £48,000
per annum for accounting and administration services to the Company as well as a minimum fee of £45,000 per annum for the
provision of Governance and Company Secretarial services.
During the year, fees incurred with JTC (UK) Limited amounted to £163,454 (2023: £139,397) and £5,007 (2023: £28,000)
remained payable as at 31 October 2024.
AIFM
JTC Global AIFM Solutions Limited has been appointed to act as the AIFM for the Company through the AIFM Agreement with
effect from 14 October 2021. The AIFM is entitled to charge an annual rate of 0.03% of the Company’s equity raised subject to
a minimum annual fee of £30,000.
During the year, fees incurred with the AIFM amounted to £67,434 (2023: £67,434) and £5,620 (2023: £5,620) remained
payable as at 31 October 2024.
INVESTMENT ADVISER
Investment Adviser fees are payable monthly in arrears. Details on how the fees are charged are disclosed in note 21.
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
104
8. TAXATION
The Company is recognised as an Investment Trust Company (“ITC”) for accounting years beginning on or after 1 October
2021 and is taxed at the main rate of 19% until 31 March 2023 and then at 25% until 31 October 2024. An ITC may claim a
tax deduction for the distribution of income that arises from interest receipts on the loan notes. Therefore, no corporation tax
charge has been recognised for the Company for the year ended 31 October 2024.
Revenue
£
Capital
£
31 October
2024
£
Revenue
£
Capital
£
31 October
2023
£
a) Tax charge in profit or loss UK
corporation tax
– – – – – –
b) Reconciliation of the tax charge for
the year
Profit before tax 7,315,042 (63,833,218) (56,518,176) 10,298,248 (7,161,610) 3,136,638
Tax at UK main rate of 25%
(2023: 22.52%)
1,828,761 (15,958,305) (14,129,544) (2,318,940) (1,612,638) 706,302
Tax effect of:
Non-taxable investment gains on
investments
– 15,958,305 15,958,305 – 1,612,638 1,612,638
Non-deductible expenses 1,084,656 – 1,084,656 56,343 – 56,343
Tax deductible interest distributions paid (1,290,639) – (1,290,639) (2,476,959) – (2,476,959)
Group relief claimed (1,590,893) – (1,590,893) – – –
Movement in deferred tax
notrecognised
(31,884) – (31,884) 101,676 101,676
Tax charge for the year – – – – – –
FACTORS THAT AFFECT FUTURE TAX CHARGES
ITCs which have been approved by HM Revenue & Customs are exempt from UK corporation tax on their capital gains. Due to the
Company’s status as an approved ITC, and the intention to continue meeting the conditions required to maintain that approval for
the foreseeable future, the Company has not provided for deferred tax in respect of any gains or losses arising on the revaluation of
its investments. Taxes are based on the UK Corporate tax rates which existed as of the balance sheet date which was 25%.
As at 31 October 2024, the Company had not provided deferred tax assets or liabilities. At that date, based on current estimates
and including the accumulation of net allowable losses, the Company had unrelieved losses of £Nil.
9. BASIC AND DILUTED EARNINGS PER SHARE
Earnings per share (“EPS”) amounts are calculated by dividing the profit or loss for the year attributable to ordinary equity
holders of the Company by the weighted average number of Ordinary Shares in issue during the year. As there are no dilutive
instruments outstanding, basic and diluted earnings per share are identical.
Weighted
average
number of
Ordinary Shares
Net loss
attributable
to Shareholders
£
EPS
31 October 2024
£
Ordinary Shares 227,128,295 (56,518,176) (0.25)
Weighted
average
number of
Ordinary Shares
Net profit
attributable to
Shareholders
£
EPS
31 October 2023
£
Ordinary Shares 223,045,660 3,136,638 0.01
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
105
10. INVESTMENTS HELD AT FAIR VALUE
The Company held the following investments in subsidiary at 31 October 2024:
Subsidiary Place of business Percentage ownership
Equity
£
Loan
£
Closing balance:
equity and loan
£
HEIT Holdings Ltd
Grimbald Crag Court,
Knaresborough
100% 122,638,125 72,126,744 194,764,869
The Company held the following investments in subsidiary at 31 October 2023:
Subsidiary Place of business Percentage ownership
Equity
£
Loan
£
Closing balance:
equity and loan
£
HEIT Holdings Ltd
Grimbald Crag Court,
Knaresborough
100% 84,185,808 155,839,973 240,025,781
The Company meets the definition of an investment entity. Therefore, it does not consolidate its subsidiaries but, rather,
recognises them as investments at fair value through profit or loss.
On 18 October 2024, the Company subscribed for 102,285,533 ordinary shares in HEIT Holdings Ltd for an amount of
£102,285,533, the consideration for which was settled by reducing the value of its loan to HEIT Holdings Ltd by the same
amount. Interest from the investment in subsidiary loan incurred amounted to £12,880,683, and £4,335,532 was written off.
During the year the Company settled £3,763,939 of outstanding management fees due from HEIT Holdings Ltd to the loan
account and made cash loan advances of £6,263,211.
On 31 March 2023, the Company sold its investments in HEIT PW Limited, HEIT PW 2 Limited, HEIT BD Limited, HEIT FM
Limited, HEIT RH Limited, HEIT LR Limited, HEIT BF Limited to its subsidiary HEIT Holdings Ltd for a total consideration of
£91,105,212, which was the fair value of the projects at the date of transfer. HEIT Holdings Ltd satisfied this transfer by issuing
and allotting 91,105,212 ordinary shares of £1 each to the Company.
On 4 May 2023, the Company sold two further investments in HEIT HP Limited and HEIT WG Limited to its subsidiary HEIT
Holdings Ltd for a total consideration of £8,893,079, which was the fair value of the projects at the date of transfer. HEIT
Holdings Ltd satisfied this transfer by issuing and allotting 8,893,079 ordinary shares of £1 each to the Company.
On 4 September 2023, the Company announced the sale of its investment Rye Common project, Harmony RC Limited,
toPulse Clean Energy Limited at a premium to its carrying value.
The table below summarises the movement of investments held at fair value for the year ended 31 October 2024:
31 October 2024
£
31 October 2023
£
Opening balance 240,025,781 141,032,691
Investments purchased during the year – 21,936,818
Investment in equity of HEIT Holdings Ltd 102,285,533 99,998,291
Loans advanced during the year 10,027,150 86,286,593
Loan converted to equity (102,285,533) –
Interest on loans 12,880,688 11,582,996
Loan interest written off (4,335,532) –
Sale of equity of subsidiaries to HEIT Holdings Ltd – (99,998,291)
Sale of Harmony RC Limited – (13,651,707)
Net loss on investments held at fair value through profit or loss (63,833,218) (7,161,610)
Closing balance 194,764,869 240,025,781
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
106
INVESTMENT HELD IN HEIT HOLDINGS LTD
The Company owns 100% of the ordinary share capital of HEIT Holdings Ltd which holds investments in the following underlying
subsidiaries. The Company has several indirectly held subsidiaries held by HEIT Holdings Ltd. The investment totalling £194,764,868
(31 October 2023: £240,025,781) in HEIT Holdings Ltd comprises of the underlying investments in the following subsidiaries. The fair
value measurements and sensitivities used to measure these investments are disclosed in note 16.
Underlying Subsidiaries Project Place of business
Percentage
ownership
Fair value
31 October
2024
£
Fair value
31 October
2023
£
HEIT PW Limited Pillswood 1
Grimbald Crag Court,
Knaresborough
100% 38,708,062 48,918,397
HEIT PW2 Limited Pillswood 2
Grimbald Crag Court,
Knaresborough
100% 38,025,163 49,012,689
HEIT BD Limited Broadditch
Grimbald Crag Court,
Knaresborough
100% 10,334,834 11,516,954
HEIT FM Limited Farnham
Grimbald Crag Court,
Knaresborough
100% 19,108,999 20,578,103
HEIT RH Limited Rusholme
Grimbald Crag Court,
Knaresborough
100% 27,770,369 27,130,822
HEIT LR Limited Little Raith
Grimbald Crag Court,
Knaresborough
100% 41,860,051 42,789,696
HEIT BF Limited Bumpers
Grimbald Crag Court,
Knaresborough
100% 90,935,939 87,028,196
HEIT HP Limited Hawthorn
Grimbald Crag Court,
Knaresborough
100% 33,748,519 27,508,395
HEIT WG Limited Wormald Green
Grimbald Crag Court,
Knaresborough
100% 20,300,944 17,402,843
Total fair value of projects 320,792,880 331,886,095
Working capital 3,971,988 3,196,508
Senior loan facility (130,000,000) (95,056,822)
Total investment 194,764,868 240,025,781
As at 31 October 2024 (“Valuation Date”), the Company’s subsidiary HEIT Holdings Ltd had live investments in the following
nine BESS projects in the UK – Pillswood 1, Pillswood 2, Broadditch, Farnham, Rusholme, Little Raith, Bumpers, Wormald Green
and Hawthorn Pit. These projects, taken together, have a combined rated power capacity of 395.4 MW and an energy storage
capacity of c.790.8 MWh.
Wormald Green (66 MWh / 33 MW) and Hawthorn Pit (99.8 MWh / 49.9 MW) were successfully energised during the Period
and have commenced trading, taking the Company’s total operational capacity to 790.8 MWh / 395.4 MW (100% of the
portfolio). Revenue for these projects is recognised from November 2024 onwards.
Two of these providers focus on long-term fundamental-based forecasts whereas one is focused on shorter-term battery specific
performance.
The projects attract four different streams of revenues: trading revenue (wholesale, Balancing Mechanism and churn), Ancillary
Services (Frequency Response Revenue, Dynamic Containment and Dynamic Regulation), CM revenue and embedded benefits
(via the Embedded Export Tariff).
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
107
11. TRADE AND OTHER RECEIVABLES
31 October 2024
£
31 October 2023
£
Prepayments 72,210 48,486
VAT receivable 1,493,988 1,367,690
Intercompany loans receivable 820,131 748,668
Amounts due from related parties 56,520 2,247,402
Other receivables 2,074 40,027
2,444,923 4,452,273
12. CASH AND CASH EQUIVALENTS
31 October 2024
£
31 October 2023
£
Cash at bank 4,211,249 18,093,379
4,211,249 18,093,379
13. TRADE AND OTHER PAYABLES
31 October 2024
£
31 October 2023
£
Trade creditors and operating accruals 85,504 101,599
Administrator fees 5,007 28,000
AIFM fees 5,620 5,621
Audit fees 190,550 184,000
Investment adviser fee accrual 87,010 144,121
373,691 463,341
14. CATEGORIES OF FINANCIAL INSTRUMENTS
31 October 2024
£
31 October 2023
£
Financial assets
Financial assets at fair value through profit and loss:
Investments 194,764,868 240,025,781
Financial assets at amortised cost:
Trade and other receivables 2,444,923 4,452,273
Cash and cash Equivalents 4,211,249 18,093,379
Total financial assets 201,421,040 262,571,433
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 373,691 463,341
Total financial liabilities 373,691 463,341
At the balance sheet date, all financial assets and liabilities were measured at amortised cost except for the investment in
subsidiary which is measured at fair value as further explained in note 16. The carrying amount for the financial assets and
liabilities measured at amortised costs approximates fair value.
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
108
15. FINANCIAL RISK MANAGEMENT
The Company is exposed to certain risks through the ordinary course of business and the Company’s financial risk management
objective is to minimise the effect of these risks. The management of risks is performed by the Directors of the Company and
the exposure to each financial risk considered potentially material to the Company, how it arises and the policy for managing it is
summarised below:
CREDIT RISK
The Company is exposed to third-party credit risk in several instances and the possibility that counterparties with which the
Company and its subsidiaries, together the “Group”, contracts may fail to perform their obligations in the manner anticipated
by the Group.
Counterparty credit risk exposure limits are determined based on the credit rating of the counterparty. Counterparties are
assessed and monitored on the basis of their ratings from Standard & Poor’s and/or Moody’s. No financial transactions are
permitted with counterparties with a credit rating of less than BBB- from Standard & Poor’s or Baa3 from Moody’s unless
specifically approved by the Board. Cash and bank deposits are held with major international financial institutions who each hold
a Moody’s credit rating of A2 or higher.
Cash and other assets that are required to be held in custody will be held at a bank. In the event of the insolvency of the bank,
the Company will rank as a general creditor in relation thereto and may not be able to recover such cash in full, or at all.
In addition, credit risk relating to receivables at subsidiary level is managed by diversifying exposures among a portfolio of
counterparties and through the setting and monitoring of credit limits.
The Company’s only financial liabilities are trade and other payables. The Company intends to hold sufficient cash across the
Company and subsidiaries’ operating accounts to meet the working capital needs.
CURRENCY RISK
The Company is not exposed to currency risk as all its assets, liabilities and transactions during the current year were
denominated in British Pound Sterling.
LIQUIDITY RISK
The objective of liquidity management is to ensure that all commitments which are required to be funded can be met out
of readily available and secure sources of funding. The Company’s only financial liabilities are trade and other payables.
TheCompany intends to hold sufficient cash across the Company and subsidiaries’ operating accounts to meet the working
capital needs.
As at 31 October 2024, the Company held cash at bank of £4,211,249 (2023: £18,093,379) and had trade and other payables
totalling £373,691 (2023: £463,341). The following table reflects the maturity analysis of financial assets and liabilities.
Although the Company has no direct external debt, it has indirect external debt through its subsidiary as described in note 2
under Going Concern and in the interest rate risk note. The Board and Investment Adviser review the projected cash flow for
the group on a regular basis to ensure that there is sufficient cash flow to cover the debt and interest repayments of the external
debt as they fall due.
As at 31 October 2024
<1 year
£
1 to 2 years
£
2 to 5 years
£
>5 years
£
Tota l
£
Financial assets
Financial assets at fair value through profit and loss:
Loan investment to subsidiary – – – 72,126,744 72,126,744
Financial assets at amortised cost:
Trade and other receivables 2,444,923 – – – 2,444,923
Cash at bank 4,211,249 – – – 4,211,249
Total financial assets 6,656,172 – – 72,126,744 78,782,916
As at 31 October 2024
<1 year
£
1 to 2 years
£
2 to 5 years
£
>5 years
£
Tota l
£
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 373,691 – – – 373,691
Total financial liabilities 373,691 – – – 373,691
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
109
As at 31 October 2023
<1 year
£
1 to 2 years
£
2 to 5 years
£
>5 years
£
Tota l
£
Financial assets
Financial assets at fair value through profit and loss:
Loan investment to subsidiary – – – 155,839,973 155,839,973
Financial assets at amortised cost:
Cash at bank 18,093,379 – – – 18,093,379
Total financial assets 18,093,379 – – 155,839,973 173,933,352
As at 31 October 2023
<1 year
£
1 to 2 years
£
2 to 5 years
£
>5 years
£
Tota l
£
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 463,341 – – – 463,341
Total financial liabilities 463,341 – – – 463,341
* Includes the interest on loans advanced and excludes the equity portion of the investment.
MARKET RISK
Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices.
Market risk reflects: (i) other price risks, and (ii) interest rate risk. The objective is to minimise market risk through managing and
controlling these risks to acceptable parameters, while optimising returns. The Company uses financial instruments in the ordinary
course of business in order to manage market risks. Further commentary on financial and market risks is provided in the Principal
Risks and Uncertainties section, including inflation.
(i) PRICE RISK
The Company’s investments are susceptible to market price risk arising from uncertainties about future values of its portfolio assets.
The Company’s Investment Adviser provides the Company with investment recommendations. The Company relies on market
knowledge of the Investment Adviser, the valuation expertise of the third-party valuer and the use of third-party market forecast
information to provide comfort with regard to fair market values of investments reflected in the Financial Statements.
Price risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices.
At 31 October 2024, if the valuation of investments had been 10% higher with all other variables held constant, the increase in
net assets attributable to Shareholders for the year would have been £19,475,427 (2023: £24,002,578) higher, arising due to the
increase in the fair value of financial instruments. A 10% decrease would have the equal and opposite effect.
The impact of changes in unobservable inputs to the underlying investments is considered in note 16.
(ii) INTEREST RATE RISK
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial
instruments.
The Company is exposed to interest rate risk on its cash balances held with counterparties, and through loans to related parties.
As at 31 October 2024 the Company held no fixed bank deposits. The loan to its subsidiary is carried at a fixed rate of interest.
Therefore, the Company is not exposed to changes in variable market rates of interest and has therefore not considered any
sensitivity to interest rates.
As described in the Going Concern note, the Company is guarantor to its wholly owned subsidiary, HEIT Holdings Ltd in respect of
the long-term facility of £130m.
HEIT Holdings Ltd uses interest rate swaps to mitigate the interest rate risk on its external borrowings. At the beginning of the
Reporting Period, HEIT Holdings Ltd benefitted from an interest rate cap at a rate of 5.25%. HEIT Holdings Ltd terminated its
interest rate cap in February 2024 (receiving a payment of £0.5 million) and replaced it with an interest rate swap for the SONIA
element of the loan. The new interest rate swap (the “Swap”) fixes the SONIA element of the loan at a rate of 4.101% per annum.
As at 31 October 2024, the swap in place in HEIT Holdings Ltd was fair valued as a liability of £413,349.
The interest rate cap previously held of 5.25% was put in place in relation to the variable SONIA element of the increased facility,
at a cost of £2.8 million.
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
110
The Company does not have any borrowings as at 31 October 2024 however the Company has access to a long-term facility
through its subsidiary HEIT Holdings Ltd. As at 31 October 2024 HEIT Holdings Ltd had successfully negotiated an amendment and
restatement of its debt facilities with NatWest and Rabobank. The term loan and revolving credit facility have been consolidated
into a single long-term facility with a facility size of £130,000,000, an extension of the legal maturity date from June 2027 to
February 2031 and a reduction in margin to 275bps over SONIA for the first two years, rising over time to a maximum of 350bps in
the final year. HEIT Holdings Ltd had drawdowns of £34,943,178 on its long-term facility during the year.
As at 31 October 2023, HEIT Holdings Ltd had drawn £10,629,073 on its RCF and £84,427,749 on its long-term facility. It was a
five-year facility with an initial margin of 300bps over SONIA, rising over time to a maximum of 375bps by year 5.
At 31 October 2024, the Company is indirectly exposed to interest rate risk through its investment in the subsidiary. The Company
may be exposed to changes in variable market rates of interest and this could impact the discount rate and therefore the valuation
of the projects that underpin the value of its investment in subsidiary. The sensitivity of the valuation of the investment projects due
to discount rates is disclosed in note 16.
CAPITAL RISK MANAGEMENT
The capital structure of the Company at year end consists of equity attributable to equity holders of the Company of £201,047,350
(2023: £262,108,092), comprising issued capital and reserves. The Board continues to monitor the balance of the overall capital
structure so as to maintain investor and market confidence. The Company is not subject to any external capital requirements.
16. FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT AND HIERARCHY
Fair value is the price that would be received on the sale of an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date. If a fair value measurement uses observable inputs that require significant adjustment
based on unobservable inputs or any other significant unobservable inputs, that measurement is a Level 3 measurement.
The following table analyses within the fair value hierarchy the Company’s assets measured at fair value at 31 October 2024:
Level 1
£
Level 2
£
Level 3
£
Investment in subsidiary – – 194,764,868
The following table analyses within the fair value hierarchy the Company’s assets measured at fair value at 31 October 2023:
Level 1
£
Level 2
£
Level 3
£
Investment in subsidiary – – 240,025,781
The Company only invests in assets at fair value through profit or loss that are Level 3 in the fair value hierarchy and the reconciliation in
the movement of this Level 3 investment is presented in note 10. No transfer between levels took place during the year.
The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or change
in circumstances that caused the transfer.
VALUATION METHODOLOGY
The fair value of the investment in HEIT Holdings Ltd represents its net assets as determined by the Company’s administrator
(reviewed by the Investment Adviser) and further presented by the Investment Adviser and reviewed by the Company’s Board of
Directors.
The Investment Adviser’s assessment of fair value of investments in the underlying projects in HEIT Holdings Ltd is determined
in accordance with the International Private Equity and Venture Capital 2022 (“IPEV”) Valuation Guidelines, using levered and
unlevered discounted cash flow principles.
The valuation of all the Company’s subsidiary’s investments is based primarily on a DCF methodology, “Income Approach”, which
indicates value based on the sum of the economic income that an asset, or group of assets, is anticipated to produce in the future.
Free cash flow to total invested capital is typically the appropriate measure of economicincome.
The method discounts free cash flows using an estimated discount rate Weighted Average Cost of Capital (“WACC”). The selected
discount rate is supported by the benchmarking of discount rates for assets in the same, or analogous sectors as the portfolio.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
111
VALUATION PROCESS
Valuations are the responsibility of the Board of Directors. The Investment Adviser is responsible for submitting fair market
valuations of the Company’s assets to the Directors. The Directors review and approve these valuations following appropriate
challenge and examination. Valuations are carried out quarterly, with Forvis Mazars acting as independent valuer providing a
valuation report semi-annually. The current portfolio consists of non-market traded investments and valuations are based on a
DCF methodology.
The Board, supported by the Audit and Risk Committee, reviews the operating and financial assumptions, including the discount
rates, used in the valuation of the Company’s underlying portfolio and approves them based on the recommendation of the
Investment Adviser.
The AIFM acts as an oversight function in order to ascertain whether the valuation risk is being appropriately managed.
As at 31 October 2024, the fair values of all the investments held within the portfolio of the Company’s subsidiary HEIT Holdings
Ltd, have been determined by Mazars LLP (reviewed by the Investment Adviser) and further presented by the Investment
Adviser and reviewed by the Company’s Board of Directors.
SENSITIVITY ANALYSIS
The following tables reflect the range of sensitivities in respect of the fair value movements of the underlying projects held by
HEIT Holdings Ltd. The individual project valuations are disclosed in note 10.
The Directors consider the changes in inputs to be within a reasonable expected range based on their understanding of market
transactions. This is not intended to imply that the likelihood of change or that possible changes in value would be restricted to this range.
Investment Project
Investment
fair value
£
Valuation
technique
Significant input
description Sensitivity
31 October
2024
Estimated
effect on
fair value
£
31 October
2023
Estimated
effect on
fair value
£
HEIT PW Limited Pillswood 1 38,708,062 DCF Discount rate +0.5% (1,659,098) (1,962,728)
-0.5% 1,783,978 2,116,324
Revenue +10% 4,320,222 5,061,300
-10% (4,500,514) (5,090,193)
HEIT PW2 Limited Pillswood 2 38,025,163 DCF Discount rate +0.5% (1,620,450) (1,918,210)
-0.5% 1,741,488 2,067,967
Revenue +10% 4,250,728 5,052,974
-10% (4,393,470) (5,096,376)
HEIT BD Limited Broadditch 10,334,834 DCF Discount rate +0.5% (433,936) (454,100)
-0.5% 466,655 488,989
Revenue +10% 1,088,471 1,135,280
-10% (1,107,223) (1,138,960)
HEIT FM Limited Farnham 19,108,999 DCF Discount rate +0.5% (818,743) (880,030)
-0.5% 881,149 947,875
Revenue +10% 2,094,519 2,136,741
-10% (2,061,817) (2,157,962)
HEIT RH Limited Rusholme 27,770,369 DCF Discount rate +0.5% (1,250,954) (1,356,277)
-0.5% 1,349,139 1,461,224
Revenue +10% 3,331,897 3,450,997
-10% (3,435,915) (3,503,648)
HEIT LR Limited Little Raith 41,860,051 DCF Discount rate +0.5% (1,745,884) (1,819,262)
-0.5% 1,877,039 1,957,919
Revenue +10% 4,745,004 4,941,061
-10% (4,825,519) (5,053,689)
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
112
Investment Project
Investment
fair value
£
Valuation
technique
Significant input
description Sensitivity
31 October
2024
Estimated
effect on
fair value
£
31 October
2023
Estimated
effect on
fair value
£
HEIT BF Limited Bumpers 90,935,939 DCF Discount rate +0.5% (3,889,947) (4,010,981)
-0.5% 4,183,997 4,318,710
Revenue +10% 9,881,199 9,685,739
-10% (10,022,580) (9,930,227)
HEIT HP Limited Hawthorne Pit 33,748,519 DCF Discount rate +0.5% (1,630,106) (1,733,055)
-0.5% 11,756,926 1,870,705
Revenue +10% 4,606,023 4,708,722
-10% (4,720,732) (4,804,294)
HEIT WG Limited Wormald Green 20,300,944 DCF Discount rate +0.5% (1,010,267) (1,154,003)
-0.5% 1,090,394 1,246,378
Revenue +10% 3,168,375 3,170,805
-10% (3,168,516) (3,354,679)
PORTFOLIO SENSITIVITY
The below table reflects a range of sensitivities which the Directors consider to have a significant impact on the portfolio of
investments held by the Company:
Investment Sensitivity
31 October
2024
Estimated
effect on fair
value
£
31 October
2023
Estimated
effect on fair
value
£
Inflation +0.5% 15,677,071 18,522,081
-0.5% (14,976,606) (18,269,983)
Construction Costs +15% – (9,880,088)
-15% – 11,205,647
Operating costs +15% (10,563,465) (9,251,227)
-15% 10,110,183 9,031,841
Cell replacement costs +15% (2,695,698) (2,769,237)
-15% 2,530,323 2,786,110
The capex sensitivity has been applied to projects which have not yet achieved substantial completion. The proportionate
change has been applied to the full capex budget even though most works have now been completed and the scope for increase
is therefore limited. In the context of capex increase, this is viewed as a highly conservative methodology, however it is consistent
with previously reported sensitivity results.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
113
17. SHARE CAPITAL, SHARE PREMIUM AND CAPITAL REDUCTION RESERVE
Number of
ordinary shares
Share capital
£
Share premium
£
Capital
reduction reserve
£
Tota l
£
As at 1 November 2023 227,128,295 2,271,283 21,370,889 194,094,197 217,736,369
Dividends paid – – – (2,271,283) (2,271,283)
As at 31 October 2024 227,128,295 2,271,283 21,370,889 191,822,914 215,465,086
Number of
ordinary shares
Share capital
£
Share premium
£
Capital
reduction reserve
£
Tota l
£
As at 1 November 2022 210,000,000 2,100,000 – 202,693,046 204,793,046
Conversion of C Shares to Ordinary Shares 17,128,295 171,283 21,370,889 – 21,542,172
Dividends paid – – – (8,598,849) (8,598,849)
As at 31 October 2023 227,128,295 2,271,283 21,370,889 194,094,197 217,736,369
SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND CAPITAL REDUCTION RESERVE
On 26 January 2023, the Company announced the conversion of its C Shares. The total number of C Shares that was
converted into new Ordinary Shares with voting rights was 17,128,295. Immediately following admission, the total number of the
Ordinary Shares in issue was 227,128,295.
There were no changes to the share capital during the year ended 31 October 2024.
18. RESERVES
The nature and purpose of each of the reserves included within equity at 31 October 2024 are as follows:
• Share premium: represents the surplus of the gross proceeds of share issues over the nominal value of the shares, net of the
direct costs of equity issues and net of conversion amount.
• Capital reduction reserve: represents a distributable reserve created following a Court approved reduction in capital. This
reserve is distributable and may be used, where the Board considers it appropriate, by the Company for the purpose of
paying dividends to Shareholders.
• Revenue reserve: represents a distributable reserve of cumulative net gains and losses recognised in the Revenue account of
the Statement of Comprehensive Income.
• Capital reserve: represents a non-distributable reserve of cumulative net capital gains and losses recognised in the
Statement of Comprehensive Income.
The movements in these reserves during the year are disclosed in the statement of changes in equity. The distributable reserves
as at 31 October 2024 were £199,967,619 (2023:£197,200,593).
19. NET ASSET VALUE PER SHARE
Basic Net Asset Value (“NAV”) per share is calculated by dividing the Company’s net assets as shown in the statement of financial
position that are attributable to the ordinary equity holders of the Company by the number of ordinary shares outstanding at the
end of the year. As there are no dilutive instruments outstanding, basic and diluted NAV per share are identical.
Shares in
issue
Assets
£
Liabilities
£
NAV
£
Pence per
Share
Ordinary Shares at 31 October 2024 227,128,295 201,421,041 373,691 201,047,350 88.52
Ordinary Shares at 31 October 2023 227,128,295 262,571,433 463,341 262,108,092 115.40
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
114
20. DIVIDENDS
Dividend per Share is a measure to show the distributions made or declared to shareholders during the year.
Dividend per share
31 October 2024
Total
£
For the 3-month period ended 31 October 2023 (paid 22 December 2023) 2 pence 4,542,566
Tot al 4,542,566
Dividend per share
31 October 2023
Total
£
For the 6-month period ended 31 October 2022 (paid December 2022) 1 pence 2,100,000
For the 3-month period ended 31 January 2023 (paid March 2023) 2 pence 4,542,566
For the 3-month period ended 30 April 2023 (paid June 2023) 2 pence 4,542,566
For the 3-month period ended 31 July 2023 (paid September 2023) 2 pence 4,542,566
Tot al 15,727,698
The distributions paid during the year were paid out of the capital reduction reserve and revenue reserve.
On 30 November 2023, the Company declared a distribution of 2 pence per Ordinary Share £4,542,566 in relation to the
period 1 August 2023 to 31 October 2023 which was paid on or around 22 December 2023 to Shareholders on the register as at
the close of business on 7 December 2023. There were no further dividends declared or paid for the financial year.
The table below sets out the final interim dividend, together with the interim dividends paid, in respect of the financial year,
which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered.
31 October 2024
£
31 October 2023
£
Interim dividends paid 2024 (2023: 6 pence) – 13,627,698
Final interim dividend for 2024 (2023: 2 pence) – 4,542,566
– 18,170,264
21. TRANSACTIONS WITH RELATED PARTIES
The Company and the Directors are not aware of any person who, directly or indirectly, jointly or severally, exercises or could
exercise control over the Company. The Company does not have an ultimate controlling party.
Details of related parties are set out below:
NON-EXECUTIVE DIRECTORS
Details of the fees paid to Directors in the year are set out in the Directors’ Report.
Total Directors’ fees of £237,038 (2023: £225,750) were incurred in respect of the year with none being outstanding and payable
at the end of the year. The cost for director and officer insurance for the year was £30,186 (2023: £40,725).
SUBSIDIARIES
Included in note 11 are amounts receivable from HEIT Holdings Ltd and its subsidiaries. These amounts are interest free and
repayable on demand.
On 18 October 2024, the Company subscribed for 102,285,533 ordinary shares at a nominal value of £1 per share, £102,285,533
from HEIT Holdings Ltd, which was settled via the loan and waived £4,335,532 of interest receivable.
HEIT Holdings Ltd subscribed for 83,434,981 ordinary shares from its wholly owned subsidiaries at the subscription price by the
release of the subsidiaries’ liability and waived £32,895,965 interest receivable.
As described in the going concern note in note 2, the Company was a guarantor to its wholly owned subsidiary, HEIT Holdings
Ltd in respect of the £130 million debt facility. The Company also provides parent company guarantees to subsidiaries in relation
to certain construction and/or battery supply contracts.
As at 31 October 2024, total committed funding to subsidiaries was £18 million.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
115
INVESTMENT ADVISER
The Investment Adviser is entitled to advisory fees under the terms of an investment advisory agreement dated 14 October
2021. The Company shall pay to the Investment Adviser an annual fee (exclusive of value added tax, which shall be added where
applicable) payable monthly in arrears calculated at the rate of:
a. one twelfth of 0.9% per calendar month of the lesser of the (i) NAV or (ii) Average Market Capitalisation of the Company up
to the threshold of £250,000,000; and
b. one twelfth of 0.8% per calendar month of the lesser of the (i) NAV or (ii) Average Market Capitalisation of the Company in
excess of £250,000,000
An advisory fee of £1,093,542 (2023: £2,163,222) was incurred during the year and £87,010 (2023: £144,121) remained payable
as at 31 October 2024.
Harmony Energy Limited is the parent of the Investment Adviser and therefore an entity with significant control over the
Investment Adviser. Harmony Energy Limited is also a significant shareholder of the Company. See transactions with subsidiaries
for further details.
OTHER RELATED PARTIES
James Ritchie-Bland is a director of Harmony Energy Limited as well as an indirect shareholder of Harmony Energy Limited through
Ritchie-Bland Energy (Number 1) Limited. He is also a director of the Investment Adviser and a shareholder in the Company.
Ritchie-Bland Energy (Number 2) Limited, of which James Ritchie-Bland is also a director and an indirect shareholder (through
Renewable Environmental Investments Limited) is party to a joint venture agreement with Harmony Energy Limited in regard to the
three projects of the Company.
22. CAPITAL COMMITMENTS
As described in the going concern note in note 2, the Company is a guarantor to its wholly owned subsidiary, HEIT Holdings Ltd in
respect of the £130 million debt facility.
The Company also provides parent company guarantees to subsidiaries in relation to certain construction and/or battery supply
contracts. As at 31 October 2024, total committed funding to subsidiaries was £18.0 million.
Other than as reported above, the Company had no contingent liabilities and no significant capital commitments at the reporting date.
23. POST BALANCE SHEET EVENTS
There were no events after the reporting date that require disclosure.
Notes to the Financial Statements continued
FINANCIAL STATEMENTS
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
116
DIRECTORS
Appointed: 12 October 2021
Norman Crighton
Janine Freeman
Dr Hugh McNeal
William Rickett CB
Dr Shefaly Yogendra
REGISTERED OFFICE
The Scalpel 18
th
Floor
52 Lime Street
London
EC3M 7AF
INVESTMENT ADVISER
Harmony Energy Advisors Limited
10 St James Business Park
Grimbald Crag Court
Knaresborough
North Yorkshire
HG5 8QB
Harmony Energy Advisors Limited is an appointed
representative of Laven Advisors LLP, which is authorised and
regulated by the Financial Conduct Authority.
INDEPENDENT AUDITOR
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London
E14 5EY
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
TAX ADVISERS
Grant Thornton UK LLP
30 Finsbury Square
London
EC2A 1AG
ADMINISTRATOR AND SECRETARY
JTC (UK) Limited
The Scalpel 18
th
Floor
52 Lime Street
London
EC3M 7AF
JOINT CORPORATE BROKERS
Panmure Liberum Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9LY
Stifel Nicolaus Europe Limited
150 Cheapside,
London
EC2V 6ET
ALTERNATIVE INVESTMENT FUND
MANAGER
JTC Global AIFM Solutions Limited
Ground Floor
Dorey Court Admiral Park
St Peter Port
Guernsey
GY1 2HT
INDEPENDENT VALUER
Forvis Mazars LLP
5
th
Floor 3 Wellington Place
Leeds
LS1 4AP
LEGAL ADVISERS
Fasken Martineau LLP
6
th
Floor
100 Liverpool Street
London
EC2M 2AT
Gowling WLG (UK) LLP
4 More London
Riverside
London
SE1 2AU
Company Information
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
117
Set out below is an explanation of some of the industry-specific and other terms used in this report:
2-hour duration “duration” in this context refers to the maximum length of time it is possible to fully discharge
(or charge) a battery at nameplate power capacity. The average duration of current operating
BESS projects in GB is c.1.3 hours. The Investment Adviser expects a 2-hour BESS project to
outperform a 1-hour BESS project in wholesale markets/Balancing Mechanism activity, whilst also
providing downside protection against the risk of Ancillary Service market saturation over the
longer term;
Adjusted NAV under IAS 32 the proceeds raised from the C Share issue (as announced on 12 October 2022)
are classified as liabilities rather than equity until converted. The Adjusted NAV shows the net
asset value of the Company with these proceeds shown as equity rather than as a liability in the
financial statements. The Adjusted NAV reported in the 31 October 2022 Annual Report and
Accounts was £272.4 million. Following the NAV correction and subsequent restatement in this
report, the Adjusted NAV for 31 October 2022 was £267.7 million. For the avoidance of doubt,
following the conversion of the C Shares in January 2023 the Adjusted NAV is equal to NAV;
Adjusted NAV Total Return the change in Adjusted NAV plus dividends paid over the Period;
Arbitrage wholesale trading and/or Balancing Mechanism;
Ancillary Services contracts and tools that NESO procures and uses to manage Frequency Deviation, balance
supply and demand (and otherwise maintain the stability of) the GB transmission network –
sometimes referred to as “balancing services”;
Balance-of-plant or BOP refers to those supporting or auxiliary technical, electronic and other components needed to
complete the project, other than the BESS itself. This would include transformers, inverters and
switchgear. The term is also used to encompass civil engineering works such as foundations and
work required to create trenches and lay cables;
Balancing Mechanism or BM NESO’s primary tool to balance supply and demand on Great Britain’s network. The Balancing
Mechanism is used to buy and procure the right amount of electricity required to balance the
system;
Balancing Settlement Code or
BSC
a document, as amended from time to time, setting out electricity balancing and settlement
arrangements for Great Britain (or part thereof applicable to BESS);
Capacity Market or CM a market introduced by the government’s Electricity Market Reform package, designed to ensure
security of electricity supply by providing capacity providers with a steady, predictable revenue
stream on which they can base their future investments. In return for such revenue, providers
must deliver energy (for up to 8 hours) upon notice at times of system stress or face penalties;
C Shares the C Shares of £0.10 each in the capital of the Company (converted to Ordinary Shares in
January 2023);
De-Rated or De-Rating in relation to Capacity Market contracts, technologies which have less than 8-hours duration are
paid less per MW, according to a “De-Rating” scale (i.e. the longer the duration, the higher net
proportion of the £/kw clearing price). Over the past few years, the De-Rating factor for BESS
has been increasing, reducing the potential net revenue for BESS despite high headline clearing
prices. For the 2024/25 T-1 Auction, a 2-hour duration BESS is De-Rated to 22.67%, whilst a
1-hour BESS is De-Rated to 11%;
Distribution Network Operator
or DNO
Distribution Network Operators are the owners of low voltage networks in Great Britain,
providing the local wires which take the electricity from the grid and move it through their own
network of power lines and underground cables, taking it to homes and businesses;
Dynamic Containment or DC one of NESO’s Ancillary Services, designed to operate post-fault, i.e. for deployment after a
significant network Frequency Deviation in order to slow the rate of change of frequency of the
network;
Dynamic Moderation or DM one of NESO’s Ancillary Services which operates similar to DC but for which the minimum
response times are longer, meaning less demanding technical requirements for participants;
Dynamic Regulation or DR one of NESO’s Ancillary Services, designed to operate pre- fault to correct continuous but small
deviations in network frequency;
Elexon the company which administers the BSC in the United Kingdom electricity market;
EPEX or European Power Exchange an electricity market that trades short-term power contracts in Europe;
Flexibility the capability of a power system to adjust supply and demand to achieve balance;
Glossary
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Frequency Deviation the electricity network in Great Britain operates at a frequency of 50Hz and one of NESO’s roles
is to manage and maintain the frequency of the network within 1% (0.5Hz) of the 50Hz level. The
system frequency is linked to the supply/demand balance of the network.
When energy demand rises/supply decreases, NESO can instruct its contracted Ancillary Service
providers to ramp up their energy production to prevent the frequency dropping. For a BESS
project, this would involve an instruction to export its stored energy. When demand is low/supply is
high, NESO may instruct providers to reduce generation in order to prevent frequency from spiking
too high. For a BESS project, this would be an instruction to import energy from the network;
National Energy System Operator
(NESO)
the National Electricity System Operator for Great Britain is the nationalised energy system operator
for the United Kingdom as of the 1 October 2024. It operates the electricity and gas distribution
systems. Prior to this, it was owned by National Grid plc, and known as National Grid ESO;
Ordinary Shares the Ordinary Shares of £0.01 each in the capital of the Company;
Revenue Optimiser a third-party company which provides revenue optimisation services to BESS projects (or other
technologies), including:
(i) market access;
(ii) optimisation of market selection;
(iii) submission of bid and offer pricing into a range of markets; and
(iv) the physical dispatch of the projects;
ROFR the exclusive right of first refusal which the Company enjoys over Harmony Energy Limited’s
pipeline of projects, as described in detail in the Company’s prospectus. The Company has, as at
the date of publication of this report, so far exercised this right in relation to 494.4 MW, leaving
at least 505.6 MW still to be acquired (subject to financing and compliance with the Company’s
Investment Policy);
Shovel ready a BESS project which has in place:
(i) a completed lease, lease option or agreement for lease in relation to the land upon which
that project is situated;
(ii) planning permission enabling the construction of a suitable project on that land (subject to
any amendments to reflect final technical specifications);
(iii) an industry standard grid connection offer from a DNO (or TSO); and
(iv) a BESS supply and installation contract with material terms in agreed form with a reputable
counterparty;
T-1 Auction a CM auction held in the year immediately prior to each delivery year to top up capacity for
the delivery year. Usually procures a much lower amount of capacity than a T-4 Auction. It is
not possible for a project to hold both a T-1 CM contract and a T-4 CM contract in relation to
the same delivery year. However, it is possible for projects to bid for, and deliver under, T-1 CM
contracts during the years prior to commencement of delivery for their T-4 CM contract;
T-4 Auction this is the main CM auction at which NESO buys most of the capacity needed for delivery in four
years’ time. This auction provides long-term returns and is designed to promote new investments;
TSO Transmission System Operator, being NESO;
Unabated gas Greenhouse gases that are released into the atmosphere from fossil fuels without any offsetting
or removal, contributing to global warming in the process;
Under construction a BESS project which has in place:
(i) an agreed lease on satisfactory terms in relation to the land upon which that project is situated;
(ii) an accepted industry standard grid connection offer from a DNO/TSO, and having made at
least one milestone payment; and
(iii) a fully executed BESS supply and installation contract with a reputable counterparty;
2022/2023 Report HEIT Annual Report and Accounts for the year ended 31 October 2023.
HARMONY ENERGY INCOME TRUST PLC ANNUAL REPORT 2024
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The Bumpers Community Fund launched during the Period
and supported seven community initiatives located within a
5-mile radius of the Bumpers BESS
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6
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HARMONY ENERGY
INCOME TRUST PLC
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