TIDMJLEN
RNS Number : 5349G
Jlen Environmental Assets Grp
26 November 2020
26 November 2020
JLEN Environmental Assets Group Limited
Announcement of half-year results for the period to 30 September
2020
The Directors of JLEN Environmental Assets Group Limited (the
"Company" or "JLEN") are pleased to announce the Company's
half-year results to 30 September 2020.
Financial highlights
- Portfolio valuation as at 30 September 2020 of GBP552.9m (31 March 2020: GBP537.1m)
- NAV per ordinary share of 96.1 pence as at 30 September 2020
(31 March 2020: 97.5 pence), reduction primarily driven by the
effect of the reduction in long-term electricity and gas price
forecasts
- Further interim dividend of 1.69 pence per share declared
making total dividend declared for the six months to 30 September
2020 of 3.38 pence, in line with the target set out in the 2020
Annual Report. Cash dividend cover of 1.1 times on dividends
declared during the period
- Share price total return for the period since IPO of 69.8% (8.5% annualised)
Portfolio highlights
- Two acquisitions completed this period in the anaerobic
digestion (AD) and Hydropower sectors, increasing the Company's
diversification
- Diversified portfolio now 34% wind, 27% AD, 22% Solar, 15%
waste and wastewater and 2% Hydro and battery by value
- Operating performance of the portfolio during the six-month
period was strong across most of the portfolio, with exceptions
mainly driven by the Covid-19 pandemic or grid operator maintenance
or constraints
- Wind, Solar, AD and Hydro portfolios generation all above budget for the six-month period
- Bio Collectors food waste project operating well but gas
production negatively impacted by Covid-19 pandemic as waste
volumes fall
Other highlights
- Joined the FTSE 250 in June 2020
- Strong pipeline of assets for further growth
Dividend Timetable
Ex-dividend date 3 December 2020
Record date 4 December 2020
Payment date 30 December 2020
Richard Morse, Chairman of JLEN, said:
"JLEN's portfolio has operated well for the period under review
and the market outlook for the Company is positive. This is despite
the wider challenges brought on by the global pandemic. The
infrastructure and renewables markets remain favourable in both
context of global and UK government policy and financial support
for decarbonisation initiatives. Our acquisition pipeline presents
further scope for diversification, following this decarbonisation
agenda."
Half-year report
A copy of the half-year report has been submitted to the
National Storage Mechanism and will shortly be available at
www.morningstar.co.uk/uk/NSM. The annual report will also be
available on the Company's website at www.jlen.com where further
information on JLEN can be found.
Details of the conference call for analysts and investors
A webinar for the annual results will be held at 10:00 a.m. (UK
time) on 26 November, hosted by Chris Holmes and Chris Tanner,
Co-lead Investment Advisers to JLEN. To register for the webinar,
please contact Newgate Communications on +44 (0)20 3757 6880 or by
email at JLEN@newgatecomms.com.
Presentation materials will be posted on the Company's website,
www.jlen.com, from 9.00am.
For further information, please contact:
Foresight Group +44(0)20 3667 8100
Chris Tanner
Chris Holmes
Winterflood Investment Trusts +44(0)20 3100 0000
Neil Langford
Chris Mills
Newgate Communications +44(0) 20 3757 6880
Elisabeth Cowell
Ian Silvera
Megan Kovach
ABOUT US
JLEN Environmental Assets Group Limited ("JLEN", the "Company"
or the "Fund") is an environmental infrastructure investment fund
which aims to provide shareholders with a sustainable, progressive
dividend, paid quarterly, and to preserve the capital value of its
portfolio on a real basis over the long term through the
reinvestment of cash flows not required for the payment of
dividends.
JLEN's investment policy is to invest in a diversified portfolio
of environmental infrastructure projects that have the benefit of
long--term, predictable, wholly or partially inflation--linked cash
flows supported by long--term contracts or stable regulatory
frameworks.
At 30 September 2020, the portfolio included onshore wind, PV
solar, anaerobic digestion, waste & wastewater processing and
hydropower projects in the UK and two onshore wind projects in
France. The wind, solar, anaerobic digestion and hydropower
projects are supported by the UK's and France's commitment to
low-carbon energy generation targets whilst the waste &
wastewater processing projects benefit from long--term contracts
backed by the UK Government.
OUR PURPOSE
JLEN aims to invest in a diversified portfolio of environmental
infrastructure projects that support more environmentally friendly
approaches to economic activity whilst generating a sustainable
financial return. It seeks to integrate consideration of
sustainability and environmental, social and governance ("ESG")
management into its activities, which help to manage risks and
identify opportunities.
AT A GLANCE AT 30 SEPTEMBER 2020
Our results for the six -- month period ended 30 September
2020.
HY 2020 FY 2020 Change
-------------------------- --------- --------- ------
Market capitalisation GBP647.9m GBP606.9m +6.8%
Share price 118.5p 111.0p +6.8%
Net Asset Value GBP525.3m GBP533.0m -1.4%
Net Asset Value per share 96.1p 97.5p -1.4%
Portfolio value GBP552.9m GBP537.1m +2.9%
-------------------------- --------- --------- ------
HY 2020 HY 2019 Change
----------------------------- ------- ------- ------
Half-year dividend per share 3.38p 3.33p +1.5%
----------------------------- ------- ------- ------
-- Dividend of 3.38 pence per share declared for the six months
to 30 September 2020 (six months to 30 September 2019: 3.33 pence).
Cash dividend cover of 1.1x in the period
-- Two acquisitions completed in the period, giving a total of 32 assets
-- NAV per share 96.1 pence, down from 97.5 pence per share at
31 March 2020 mainly due to the reduction in long--term electricity
and gas price forecasts
-- Total shareholder return since IPO to 30 September 2020 of 69.8% (8.48% annualised)
-- Profit before tax for the period of GBP10.7 million
(six--month period ended 30 September 2019: GBP16.2 million)
-- The portfolio has operated well despite the challenges of the Covid-19 pandemic
-- Strong pipeline of assets for future growth
PORTFOLIO AT A GLANCE
JLEN's portfolio comprises a diversified mix of environmental
infrastructure assets.
Wind
Ownership
interest
-------------------------------------------------------------------------------------------- ---------
Bilsthorpe
10.2MW 1.0 ROC wind farm. Five MM82 Senvion turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Burton Wold Extension
14.4MW 0.9 ROC wind farm. Nine General Electric 1.6MW--100 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Carscreugh
15.3MW 0.9 ROC wind farm. 18 Gamesa G52 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Castle Pill
3.2MW 1.0 ROC wind farm. Three 900kW EWT and one 0.5MW Nordtank turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Dungavel
26MW 0.9 ROC wind farm. 13 Vestas 2MW V80 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Ferndale
6.4MW 1.0 ROC wind farm. Eight 800kW Enercon turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Hall Farm
24.6MW 1.0 ROC wind farm. 18 MM82 Senvion turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Le Placis Vert
4MW FiT accredited wind farm. Five Enercon E-53 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Llynfi Afan
24MW 0.9 ROC wind farm. 12 Gamesa 2MW G80 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Moel Moelogan
14.3MW wind farm. Nine Siemens SWT-62-1.3MW and two Bonus--1.3MW turbines. 1.0 ROC on both
turbine types. 100%
-------------------------------------------------------------------------------------------- ---------
New Albion
14.4MW 0.9 ROC wind farm. Seven MM92 Senvion turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Plouguernével
4MW FiT accredited wind farm. Five Enercon E-53 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
Wear Point
8.2MW 0.9 ROC wind farm. Four Senvion MM82 turbines. 100%
-------------------------------------------------------------------------------------------- ---------
13 assets
169.0 MW
Anaerobic digestion
Ownership
interest
------------------------------------------------------------------------------------------------ ---------
Biogas Meden
Biogas--to--grid anaerobic digestion plant. Accredited under both the Renewable Heat Incentive
("RHI") and Feed--in Tariff ("FiT"), c.5MWth and 0.4MWe. 100%
------------------------------------------------------------------------------------------------ ---------
Egmere Energy
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.5MWe. 100%
------------------------------------------------------------------------------------------------ ---------
Grange Farm
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.5MWe. 100%
------------------------------------------------------------------------------------------------ ---------
Icknield Farm(1)
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.4MWe. 53%
------------------------------------------------------------------------------------------------ ---------
Merlin Renewables
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.5MWe. 100%
------------------------------------------------------------------------------------------------ ---------
Peacehill Farm
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.25MWe. 49%
Vulcan Renewables
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.5MWe. 100%
------------------------------------------------------------------------------------------------ ---------
Warren Energy
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MWth and 0.5MWe. 100%
------------------------------------------------------------------------------------------------ ---------
8 assets
40.0 MW
(1) JLEN also provides a senior secured loan facility to the project.
Solar
Ownership
interest
------------------------------------------------------------------------------------------------ ---------
Amber
9.8MW comprising two separate sites: Five Oaks (4.8MW) and Fryingdown (5MW). Both accredited
under the pre--August 2011 UK FiT regime. 100%
------------------------------------------------------------------------------------------------ ---------
Branden
14.7MW comprising two separate sites: Luxulyan & Tredinnick (8.9MW) and Victoria (5.8MW),
both accredited for two ROCs. 100%
------------------------------------------------------------------------------------------------ ---------
CSGH
33.5MW combined capacity comprising four sites: Higher Tregarne (4.9MW) accredited for 1.6
ROCs, Crug Mawr (7.5MW), Golden Hill (6.3MW) and Shoals Hook (14.8MW) accredited for 1.4 ROCs. 100%
------------------------------------------------------------------------------------------------ ---------
Monksham
Total generating capacity of 10.7MW. Accredited for 1.6 ROCs. 100%
------------------------------------------------------------------------------------------------ ---------
Panther - small-scale solar portfolio
6.5MW portfolio of 1,099 systems of domestic rooftop, commercial rooftop and ground mount
solar installations, distributed across England, Scotland and Wales. Accredited under the
UK FiT regime. 100%
------------------------------------------------------------------------------------------------ ---------
Pylle Southern
Total generating capacity of 5MW. Accredited under the UK FiT regime. 100%
------------------------------------------------------------------------------------------------ ---------
6 assets
80.2 MW
Waste & wastewater
Ownership
interest
------------------------------------------------------------------------------------------------ ---------
Bio Collectors
The Bio Collectors food waste anaerobic
digestion plant processes around
100,000 tonnes of food waste each
year. The Bio Collectors waste collection
business collects food waste from
in and around Greater London. 70%
------------------------------------------------------------------------------------------------ ---------
ELWA
The ELWA project processes around 440,000 tonnes of household waste each year from four London
boroughs. 80%
------------------------------------------------------------------------------------------------ ---------
Tay
The Tay wastewater treatment project services the equivalent of around 250,000 people from
the Dundee and Arbroath areas. 33%
------------------------------------------------------------------------------------------------ ---------
3 assets
11.7 MW
Hydro (and battery storage)
Ownership
interest
---------------------------------------------------------------------------------------------- ---------
Northern Hydropower
Two run-of--river hydro plants and an operational battery storage system. Both hydro plants
accredited under FiT, combined capacity between both hydro plants and the battery storage
system is 1.8MW. 100%
---------------------------------------------------------------------------------------------- ---------
Yorkshire Hydropower
Two run--of--river hydro plants and an operational battery storage system. Both hydro plants
accredited under FiT, combined capacity between both hydro plants and the battery storage
system is 2MW. 100%
---------------------------------------------------------------------------------------------- ---------
2 assets
3.8 MW
FEIP
FEIP Skaftåsen Vindkraft AB
35 turbine wind farm under construction.
-------------------------------------------------------------------------------------------
FEIP Torozos
94MW wind farm, which comprises 27 SGRE 132m, 3.5MW wind turbines spread across two sites.
-------------------------------------------------------------------------------------------
MARKET AND OPPORTUNITIES
The transition to a low-carbon economy presents a variety of
investment opportunities in environmental infrastructure that JLEN
is well positioned to access.
Low-carbon solutions for heat and transport are also considered
crucial to meet net zero targets; infrastructure will be necessary
to facilitate this transition.
Through JLEN's diversified mandate the Board believes that the
Company is well positioned to capture investment opportunities
across these evolving markets as the build out of sustainable
infrastructure takes on new forms, technology and financing
structures. The benefits of diversification, whether through
climatic conditions, market dynamics or technology type, are
expected to create a resilient portfolio.
Market developments Investment policy Investment outlook
---------------------------------- ----------------------------- ------------------------------
Against the backdrop The Company invests in
of international collaboration environmental infrastructure
to limit further climate projects, being those
change, the decarbonisation that utilise natural
of the energy system or waste resources or
is an integral part of support more environmentally
developing a sustainable friendly approaches to
future. To make this economic activity.
happen a significant
investment into new environmental
infrastructure will be
required.
---------------------------------- ----------------------------- ------------------------------
Global investment into Generation of renewable Within the UK, a recent
renewable energy generation energy Government announcement
will be significant to to support up to double
meet climate targets. the capacity of renewable
55% of the EU's energy energy in the next Contracts
consumption will need for Difference auction,
to come from renewable opening in late 2021,
sources by 2030, requiring demonstrates the commitment
some EUR400 billion of to this sector. Although
investment. Increasing offshore wind is at the
electrification of end heart of this near-term
users will drive increased strategy, an important
power demand to be met contribution will come
from renewable sources. from other sectors. Within
Europe, countries are
establishing their intentions
on how to meet their
climate objectives.
---------------------------------- ----------------------------- ------------------------------
Energy efficiency is Projects that promote Low-carbon investment
an integral part of addressing energy efficiency opportunities could encompass
climate change. Within combined heat and power
the UK, widespread deployment systems, batteries storage
of energy efficiency and flexible generation,
measures will be required low-carbon agriculture,
to meet the net zero co-location of battery
target now enshrined storage with existing
in law. New infrastructure assets, electric vehicle
will be required that and low--carbon transport
either offers a more infrastructure such as
efficient way to generate biofuels.
or distribute energy
or a means to reduce
the demand of energy
users.
---------------------------------- ----------------------------- ------------------------------
Water deficits are expected Supply and treatment Following waste reduction
to become more prevalent of water and processing measures, further investment
in the UK with wetter of waste into materials recycling
winters and drier summers. will be required; new
The UK water industry legislation for food
has pledged to achieve waste collection is expected
net zero carbon emissions to generate demand for
by 2030. Diverting biodegradable new and expanded anaerobic
waste from landfill remains digestion facilities.
a key policy and the Energy from waste facilities
use of carbon capture are being developed to
and storage alongside reduce residual waste
bioenergy facilities to landfill.
will play a future role
in meeting climate objectives.
---------------------------------- ----------------------------- ------------------------------
The scale of the climate Geographic spread of JLEN's mandate supports
challenge has resulted investments geographic diversification,
in government policy reducing its exposure
drivers on a global scale. to the UK power market,
Technologies and commercial regulatory framework
partners can provide and weather systems.
continuity across jurisdictions The Investment Adviser
whilst more localised can take advantage of
climate conditions and in-country presence across
market dynamics present Europe and Australia
diversification opportunities. to generate investment
opportunities outside
of the UK.
---------------------------------- ----------------------------- ------------------------------
CHAIRMAN'S STATEMENT
JLEN's portfolio has operated well, despite Covid-19, which has
adversely affected electricity prices. Our acquisition pipeline
presents further scope for diversification, supporting a
lower-carbon economy.
On behalf of the Board, I am pleased to present the Half-year
Report of JLEN Environmental Assets Group Limited for the six
months ended 30 September 2020.
Timeline
March 20
-- Paid a dividend of 1.665 pence per share (relating to the
three-month period ended 31 December 2019)
April 20
-- Investment into Peacehill Farm anaerobic digestion plant for
an aggregate amount of c.GBP11 million
June 20
-- Paid a dividend of 1.665 pence per share (relating to the
three-month period ended 31 March 2020)
-- Announced the appointment of Stephanie Coxon as non--executive Director
-- JLEN joins FTSE 250
September 20
-- JLEN Annual General Meeting
-- Announced the resignation of Denise Mileham as non--executive Director
-- Paid a dividend of 1.69 pence per share (relating to the
three--month period ended 30 June 2020)
-- Acquisition of Northern Hydropower comprising two operational
hydropower stations and a battery storage system for a total
consideration, including working capital, of GBP4.74 million
Results
During the period under review, the Company's renewables
portfolio has operated well, with the wind, solar and anaerobic
digestion ("AD") portfolios all exceeding their generation budget.
This is despite the challenges of operating during the ongoing
Covid-19 pandemic, which continues to impact unfavourably on energy
prices. The Company has made two investments in UK projects during
the period: the acquisition of a minority shareholding in an AD
facility and the 100% acquisition of a hydro portfolio with
co-located battery.
Each acquisition sees us build onto existing asset classes in
the portfolio, allowing JLEN to benefit further from its existing
presence in these markets. Hydro and AD assets have high levels of
subsidy support, reducing exposure to electricity and gas prices,
and have demonstrated resilience in the face of the Covid-19
pandemic.
The Board, meanwhile continues to be pleased with the way in
which the Investment Adviser transfer to Foresight has gone. The
greater origination network of Foresight has led to more
opportunities being considered.
JLEN's profit before tax for the six-month period to 30
September 2020 was GBP10.7 million (six months to 30 September
2019: GBP16.2 million) and earnings per share for the period was
2.0 pence (six months to 30 September 2018: 3.3 pence). The Board
remains positive that the portfolio is well positioned to deliver
the targeted dividends to shareholders and reaffirms its guidance
of 6.76 pence for the year to 31 March 2021.
The Net Asset Value ("NAV") per share at 30 September 2020 was
96.1 pence, down from 97.5 pence at 31 March 2020 mainly due to the
reduction in long--term electricity and gas price forecasts.
Cash received from the portfolio by way of distributions, which
includes interest, loan repayments and dividends, was GBP24.4
million (six months to 30 September 2019: GBP22.8 million). Net
cash inflows from the investment portfolio (after operating and
finance costs) of GBP20.1 million (six months to 30 September 2019:
GBP18.5 million) cover the interim dividends of GBP18.3 million
paid in the half--year period by approximately 1.1 times (six
months to 30 September 2019: GBP16.4 million; 1.1 times). On a
dividend-declared basis for the half year, dividend cover was 1.1
times.
Dividend policy
For the year to 31 March 2020, the Company achieved its target
dividend of 6.66 pence per share by the payment of four interim
dividends.
In line with the total target for the year ending 31 March 2021
of 6.76 pence per share set out in our 2020 Annual Report, a
quarterly dividend of 1.69 pence per share was paid in September
2020 for the quarter to 30 June 2020. I am pleased to announce that
the Board has declared an interim dividend of 1.69 pence per share
for the quarter to 30 September 2020, payable on 30 December 2020,
to shareholders on the register as at 4 December 2020. The
ex-dividend date will be 3 December 2020. As noted in the 2020
Annual Report, for years after the current year ending 31 March
2021 the Directors intend to follow a progressive dividend
policy.
Portfolio performance
Total generation for the period from JLEN's diverse renewables
portfolio (excluding the Bio Collectors food waste plant) was
463GWh, 2.5% above budget. The three main constituents of the
portfolio - wind, solar and AD - all delivered generation ahead of
budget.
The AD portfolio is now the largest producer of energy on a GWh
basis for the half--year period covering the summer months of April
to September (50% by GWh energy generated). Gas generation
(measured in GWh energy generated) was 230GWh, 1.8% ahead of
budget. The majority of plants comfortably exceeded their budgets,
with the only material exceptions being the Vulcan and Meden plants
that experienced downtime relating to equipment failures which have
since been rectified. As reported in the Annual Report 2020, the
Vulcan upgrade project to double the capacity of the plant has now
been completed and a further expansion to the plant's capacity is
being implemented to increase the capacity by a further 25-30%.
Feedstock buffer levels have been increased across the portfolio to
protect against downtime should there be a poor harvest or further
impacts caused to the feedstock supply by the Covid--19
pandemic.
The wind portfolio (37% by GWh energy generated) performed well
and production was 2.1% above budget, generating 172GWh. Wind
resource was in line with expectations while availability was
generally good across the whole portfolio and the Directors are
pleased to note that the warranted availability of the Siemens
Gamesa Renewable Energy ("SGRE") sites, which were formerly Senvion
sites, has increased by 4% since January 2020. During the period,
the technical wind asset management services underwent a
competitive tender process, reducing costs to the portfolio and
increasing the scope of the asset management contracts.
The solar portfolio (13% by GWh energy generated) generated 6.7%
above budget on irradiation that was 5.6% higher during the period
than the long-term average. The main detractor from performance was
a planned grid constraint in Shoals Hook from August to September.
Adjusting for this, generation would have been 9.0% above budget.
Performance for the rest of the portfolio was generally
satisfactory. The Directors are pleased to see the solar portfolio
perform well during a period of high irradiation following a focus
on resolving residual operational issues on certain assets.
Both concession-based projects have continued to perform in line
with expectations. The ELWA waste management project has continued
to exceed its key contractual targets although waste recycling
percentages have been marginally impacted by Covid-19. The Tay
wastewater project experienced low flows in early spring, but
rainfall in more recent months has improved and the project
continues to perform well financially.
Bio Collectors, the food waste collection and treatment plant,
has experienced a reduction in food waste tonnages as a result of
Covid-19 and while this is having a material impact on its gas
production throughput, the plant is operating well and management
is taking this opportunity of low throughput to make process
improvements to the plant. As the trend for lower levels of waste
due to the pandemic is expected to continue for some months,
management is also sourcing alternative feedstocks for the plant to
help mitigate some of the shortfall.
Acquisitions
During the period under review, the Company announced
investments into two further project vehicles, bringing the total
capacity of the renewable energy assets in the portfolio to 304.7MW
at the period end. As with the Company's other assets, they have a
proven operational history and are supported by a high proportion
of inflation--linked revenues backed by government subsidy regimes.
The investments are:
Peacehill Farm anaerobic digestion plant
On 2 April 2020, the Company announced an investment into
Peacehill Farm AD plant, located in Wormit, Fife in Scotland, for
an aggregate amount of c.GBP11 million. The investment comprises
the provision of a debt facility and subscription for a minority
equity stake in JLEAG AD Limited which holds, through its wholly
owned subsidiary Peacehill Gas Limited, the rights and operational
assets at the Peacehill Farm AD plant. The plant has a thermal
capacity of c.5MWth and predominantly produces biomethane to be
injected into the national gas grid. In addition, the plant also
has a 0.25MWe CHP engine and is accredited under the Renewable Heat
Incentive ("RHI") and Feed--in Tariff ("FiT") schemes.
Peacehill is JLEN's eighth investment into agricultural
gas--to--grid AD plants and continues to build upon the Company's
considerable presence in this part of the market.
Northern Hydropower portfolio
On 17 September 2020, the Company acquired two operational
hydropower assets for GBP4.74 million, including working capital.
The plants are located in Yorkshire and Cornwall and the
Yorkshire-based asset includes a co--located battery storage
system. The assets acquired are:
-- De Lank hydro, a 99kW hydro project located on the De Lank
River, commissioned in October 2011;
-- Knottingley hydro, a 500kW dual turbine hydro project located
on the River Aire, which was commissioned in October 2017; and
-- a 1.2MW battery co-located at Knottingley, commissioned in January 2018.
Both hydro projects are accredited under the 20-year FiT scheme.
The battery storage project at Knottingley is trading under a
dispatch agreement with Limejump Ltd. This is the Company's second
investment into hydro projects with co-located battery storage,
further increasing the diversification profile of the
portfolio.
In January 2020, JLEN announced a commitment of EUR25 million to
Foresight Energy Infrastructure Partners SCSp ("FEIP"), a
Luxembourg limited partnership investment vehicle. In addition to
the GBP1.4 million investment made in the previous reporting
period, a further investment of GBP4.8 million has been provided to
the vehicle for investment into a construction stage Swedish wind
farm - Skaftåsen Vindkraft AB - and Torozos, an operational 94MW
wind farm in Spain.
These investments are included in the analysis of JLEN's
portfolio on a look-through basis. The Board is pleased that its
investment in FEIP is delivering the objective of providing JLEN
with an effective means of diversifying into European markets
without being overly concentrated in individual assets.
Post the period end, John Laing Group plc ("JLG") informed the
Company of its intention to terminate the First Offer Agreement
("FOA"), under which the Company had a right of first offer to
acquire environmental infrastructure investments in certain
European countries that JLG wishes to sell. This right will
terminate on the 13 November 2021.
While the FOA was useful to the Company in securing pipeline in
the early years of its existence, its importance in recent years
has been negligible. The last asset acquired from JLG under the FOA
was the Llynfi Afan wind farm in December 2017, nearly three years
ago. The Company was not planning for any further acquisitions
through this route and JLG has stated publicly that it plans to
move away from renewable energy investment in future. As additional
context, the Investment Adviser role transferred from John Laing
Capital Management Ltd (a subsidiary of JLG) to Foresight Group LLP
in June 2019. I would like to thank JLG for all its support during
the early years of the Company and wish it success in the
future.
Debt facilities
JLEN benefits from a committed revolving credit facility ("RCF")
of GBP170 million which matures in June 2022. At the date of
issuing this report, GBP127.6 million is undrawn and available to
fund acquisitions. The RCF is provided by HSBC, NIBC, ING and
Santander.
Share capital
The Company has not issued new equity in the period. Investor
appetite for the renewable infrastructure sector has remained
strong and JLEN has traded at a significant premium to NAV. This
has been supported by the Company's prudent approach to valuations
and low portfolio volatility due to diversification of risks across
technologies. However, as outlined above, JLEN has significant
funding capacity for new acquisitions and the Directors are mindful
of the cash drag effect on performance from raising money from
shareholders without having an immediate use for that cash. The
Directors consider that the Company is in a strong position and
will only consider raising new equity when it is in the best
interests of shareholders as a whole.
Valuation
The Net Asset Value at 30 September 2020 is GBP525.3 million,
comprising GBP552.9 million portfolio valuation, GBP12.8 million of
cash held by the Group, together with outstanding revolving credit
debt of GBP42.4 million and a positive working capital balance of
GBP2.0 million.
The Investment Adviser has prepared a fair market valuation of
the portfolio as at 30 September 2020. This valuation is based on a
discounted cash flow analysis of the future expected equity and
loan note cash flows accruing to the Group from each portfolio
investment. This valuation uses key assumptions which are
recommended by the Investment Adviser using its experience and
judgement, having considered available comparable market
transactions and financial market data in order to arrive at a fair
market value.
To provide assurance to the Board with respect to the valuation,
an independent verification exercise of the methodology and
assumptions applied by Foresight is performed by a leading
accountancy firm and an opinion is provided to the Directors. The
Directors have satisfied themselves as to the methodology used and
the assumptions adopted and have approved the valuation of GBP552.9
million for the portfolio of 32 investments as at 30 September
2020.
In light of continued uncertainty around the impacts of Covid-19
on power prices and the recent volatility of projections, the Board
has approved the adoption of a third consultant's forecasts in its
valuations at 30 September 2020. This amendment to the blended
curve has already been adopted by a number of peer funds, and
provides a robust valuation methodology that reduces the risk of
volatility from a single consultant deviating from general
consensus. The revised blended curve is shown within the investment
portfolio and valuation section below.
Risks and uncertainties
The principal risks facing the Company are set out in the Annual
Report 2020 and these are all still considered relevant. In the
period under review and in the near term, the Investment Adviser
considers that Covid-19 is a dominant risk facing the Company with
various indirect additional risks caused by the pandemic to
consider. To date, the Company has proved to be resilient in this
challenging environment and most assets have continued to perform
well. Where assets have experienced a downturn in response to the
pandemic, the Investment Adviser has been able to overcome or
partially mitigate the difficulties through various methods, which
are expanded upon in the operational review section of this
report.
One of the consequences of the pandemic was a dramatic reduction
in the national demand for electricity during the first "lockdown"
period. This impacted the wholesale price of electricity and led to
the Company's generation assets earning less from sale of
electricity than expected. The Company is protected to some degree
from electricity price volatility by its diversified portfolio,
which features several revenue streams that are not connected to
the electricity price. The Investment Adviser has also hedged
against price risk by taking out short--term fixed price
arrangements with PPA providers. The Company has fixed price
arrangements in place for 55% of the wind and solar portfolio by
generation for the winter 2020 season and 41% of the portfolio for
the summer 2021 season.
Finally, the Board and Investment Adviser continue to monitor
the situation with Brexit negotiations and while it is not expected
that they will significantly impact the portfolio, which is 98%
based in the UK, they remain alert to possible impacts on the
supply chain for spare parts for the portfolio assets and European
off-taking arrangements relating to JLEN's waste assets.
Environmental, social and governance
JLEN's purpose is to invest in projects which support more
environmentally friendly approaches to economic activity and, by
virtue of this, has always had a good environmental profile. As the
Fund has grown in size and influence, social and governance
criteria have developed because of JLEN's focus on these areas as
an integral part of its investment process for identifying high
quality infrastructure assets and best practice in their
governance.
The Board, as advised by the Investment Adviser, considers ESG
matters to be important to promote responsible and ethical
investment and as a tool to ensure effective asset management,
reduce risks and increase the resilience of the portfolio over the
long term. In the Annual Report 2020, JLEN articulated a set of ESG
objectives and committed to developing a number of key performance
indicators ("KPIs") to inform these objectives in a way which is
meaningful and transparent. Work on these KPIs is ongoing and more
information on their development can be found in the ESG section
below.
The Covid-19 pandemic has arguably brought ESG matters to the
forefront of public awareness and JLEN's strong ESG credentials
have helped to mitigate some of the downsides caused by the
pandemic. Our Investment Adviser, Foresight, continues to recommend
and implement processes to prioritise the health, safety and
wellbeing of staff at our sites and Foresight's own staff.
Outlook
The market outlook for the Company is positive. This is despite
wider challenges brought on by the global pandemic. The
infrastructure and renewables markets remain favourable in both the
context of global and UK Government policy and financial support
for decarbonisation initiatives. This is echoed by strong activism
at a grassroots level and by funds under management targeting this
sector.
In recent months, the UK Government has demonstrated its
commitment to a low-carbon economy by announcing its support for
doubling the capacity of renewable energy in the next Contracts for
Difference auction which opens in late 2021. A commitment to
develop a new bioenergy strategy has also been announced, details
of which will follow in the Energy White Paper, expected to be
released by the end of 2020.
The Company has not experienced any Covid-related adverse impact
to its pipeline, which remains robust, as demonstrated by the two
assets acquired in the period. The Company continues to see an
advantage to shareholders in surveying the wider environmental
infrastructure market, where the Directors anticipate superior
risk-adjusted returns than core market sectors.
While renewable energy generation remains our principal interest
and focus, the Company will also consider eco-friendly
opportunities in sectors such as transport and low--carbon heat
that have the characteristics of infrastructure investments such as
inflation-linked cash flows and stable revenues, supported by
long-term contracts or regulatory support. We anticipate
continental Europe becoming a more active market for investigation
of new opportunities over the coming period.
In the same vein, the Directors expect to see an increase in
allocation to construction stage assets within the overall limit of
15% of NAV. In part this is due to the Company's existing
commitment of EUR25 million to Foresight Energy Infrastructure
Partners being progressively drawn down as that fund continues to
invest in a diversified portfolio of greenfield European renewables
projects. The Company also aims to make some direct investments in
projects that feature an element of construction risk for assets
with a short build period and a proven, standardised design. Value
enhancement activity within JLEN's current portfolio also
continues, with construction projects underway at three of the AD
projects to increase gas yield.
Board matters
Further to the AGM results announcement on 3 September 2020,
where opposition was received to the enlarged general authority for
the Board to issue shares representing an additional 10% of the
Company's issued share capital on a non-pre-emptive basis (over and
above the 10% issuance which was approved by shareholders at the
AGM), we have not been made aware of any concerns regarding the
Company or its operations from our dialogue with key investors. The
opposition we received is understood to reflect the general stance
taken by shareholder governance groups and is not directly related
to the Company.
As announced in the notice of AGM circulated on 30 June 2020,
Denise Mileham did not stand for re--election at the AGM on 3
September 2020. My fellow Directors and I are extremely grateful
for Denise's contribution to the Board, having served as a Director
since the Company's launch in 2014 and having demonstrated an
exceptional commitment to the role during her tenure. We wish
Denise the very best for the future.
As set out in the 31 March 2020 Annual Report, the Board remains
focused on taking forward its succession planning arrangements,
which will include addressing the balance of gender diversity
represented on the Board.
It only remains for me to thank my fellow Directors and our
advisers for all their efforts. We may face uncertain times but the
Company is well set up to meet the challenges ahead robustly and
successfully.
Richard Morse
Chairman
25 November 2020
FUND OBJECTIVES
The Fund's key objectives and the measures against which they
are assessed are summarised below:
Financial
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Objectives KPIs Principal risks (for Outlook for 2021
details see pages
28 to 36 of the 2020
Annual Report)
----------------- -------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
Predictable 3.38p
income dividend declared * Volume of resource * Weak outlook for UK power prices weighs on revenues
growth for for the half year
shareholders
Provide investors * 3.38 pence dividend declared for half year to 30 * Power prices * Progressive dividend policy announced at the full
with a dividend September 2020 year
of
6.76 pence per * Inflation
share * 6.76 pence dividend target(1) for year to 31 March
for the year to 2021, up 1.5% from 2020
31 * Changes in the legislative and regulatory framework
March 2021. that affect renewables and PPP projects
* Operational risks in the portfolio
----------------- -------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
Preservation of GBP525.3m
capital Net Asset Value * Valuation risks (volume/energy * Speed of recovery in demand for electricity showing
over the longer 96.1p prices/inflation/feedstock costs/operational encouraging signs but remains uncertain given
term Net Asset Value per performance) Covid-19
To preserve the share
capital
value of the * NAV GBP525.3 million, down 1.4% from GBP533.0 mill * Lack of future pipeline and/or funding * Assets demonstrating resilience in the face of
portfolio ion Covid-19 are likely to be attracting a premium value
over the long at 31 March 2020
term * Increased competition
on a real basis
through * Net Asset Value per share 96.1 pence, down 1.4 pen
active management ce * Changes in the legislative and regulatory framework
of the portfolio against 97.5 pence at 31 March 2020 that affect renewables and PPP projects
and the
reinvestment
of cash flows not
required for the
payment of
dividends.
----------------- -------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
Investment, 32
growth project investments * Lack of future pipeline and/or funding * Increased demand for renewable energy to meet global
and GBP552.9m green targets
diversification portfolio value
To invest in 304.7MW * Increased competition
environmental total diversified
infrastructure capacity
projects * Changes in the legislative and regulatory framework
in accordance * Portfolio value GBP552.9 million, up 2.9% from that affect renewables and PPP projects
with GBP537.1 million at 31 March 2020
the Company's
investment
policy with * Predominantly UK portfolio balanced by sector: 34%
established wind, 27% AD, 22% solar, 15% waste & wastewater an
technologies, d
operational 2% hydro
track records and
that have the
benefit * 32 project investments
of long--term,
predictable,
wholly or * Largest individual asset 7.9% (limit 25%)
partially
inflation--linked
cash flows * Revenue mix: 25% merchant power, 61% green benefit
supported s,
by long--term 14% PFI
contracts
or stable
regulatory
frameworks.
----------------- -------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
Environmental, social and governance
Promote the Develop positive Ensure effective,
efficient relationships with ethical governance * Over the next full year 2020/21 a series of KPIs will
use of resources the communities in across the portfolio be developed to help the Fund track the portfolio's
To invest into which JLEN works To manage portfolio performance against each of the three ESG objectives
projects To encourage positive assets in a way that set out here; more information is on pages 31 to 35
that manage the relationship--building promotes ethical, of the Half-year Report
availability between portfolio effective governance.
of natural assets and the communities
resources, in which they sit.
whether through
utilisation
of renewable
resources,
increasing
resource
or energy
efficiency,
or reusing or
recovering
waste.
----------------- -------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
RISKS AND RISK MANAGEMENT
JLEN has a comprehensive risk management framework.
The Company's approach to risk governance and its risk review
process are set out in the risks and risk management section of the
Annual Report 2020.
The principal risks to the achievement of the Company's
objectives are unchanged from those reported on pages 28 to 36 of
the Annual Report 2020. Developments in relation to these principal
risks, particularly those which could potentially have a short to
medium-term impact during the period to 31 March 2021, are outlined
below.
Covid-19
Since the start of the first lockdown in March 2020, the Company
has experience of how the assets have performed in light of the
challenges presented by the Covid--19 pandemic. The main short-term
risk has been the impact on power prices referred to below.
Operationally, the portfolio has proven to be resilient, as
demonstrated by the encouraging energy generation results from the
renewables portfolio. The pandemic has presented some specific
issues to individual projects such as Bio Collectors and the
Directors are of the view that these risks are understood and
assessed where possible. The longer-term macro risks associated
with Covid-19 are not yet clear but could include measures such as
higher taxes and/or higher inflation to deal with increased
government borrowing incurred to counter the pandemic.
Power prices
The Covid-19 pandemic and the associated reduction in economic
activity related to counter-measures have significantly affected
power prices due to the reduction in demand for electricity and
gas. This is a risk in the short to medium term; however, it is not
certain that prices will recover to previously forecast levels.
This risk is somewhat mitigated by the large percentage of the
portfolio which is subsidised and by power price and gas price
hedges which are in place. Beyond Covid-19, the long--term build
out of renewable energy infrastructure may change the balance
between supply and demand in energy markets which may result in low
power prices at times of high generation due, for example, to
favourable wind conditions or solar irradiation.
Political risk - Brexit
On 31 January 2020, the UK ceased to be a member of the European
Union, entering a limited transition period until 31 December 2020.
At this stage it is not clear what the precise impact on the UK
environmental infrastructure sector will be once the UK ceases to
be subject to EU regulation and to have the same degree of market
access. The UK Government remains committed to UK infrastructure
development and whilst the UK Government may not in future be bound
by EU-set renewable obligations, the UK is still bound by national
and international renewable obligations, including the commitment
to "net zero" carbon emissions by 2050. While Brexit is a
short-term to medium--term risk that must be considered, more than
98% of the portfolio by value is located in the UK, and should not
be directly affected by the transition. The Investment Adviser
continues to monitor possible disruptions to European supply
chains.
Climate risk and Task Force on Climate-related Financial
Disclosures ("TCFD") reporting
At the beginning of the year the Financial Conduct Authority
("FCA") issued a proposal that would require all premium listed
companies to align their reporting to the TCFD framework for
companies with a financial year end from December 2021. The
implementation of this proposal has been delayed due to Covid-19;
however, the Investment Adviser is working towards reporting
climate risk and considerations that will satisfy the TCFD
requirements, in accordance with the FCA's proposed timelines.
As a long-term investor, JLEN is able to manage risk with a
long-term perspective. This means it can take long-term views on
climate risk in its portfolio. With altering weather patterns
brought on by climate change, resource availability and security of
the assets is a key area of focus for the Fund. The diversification
of the technologies that the Fund invests in means that the Fund is
not wholly reliant on any one weather resource, which spreads the
climate risk across the portfolio and helps to mitigate
unpredictable weather patterns in both the short and long term.
INVESTMENT PORTFOLIO AND VALUATION
Portfolio value increased to GBP552.9 million at 30 September
2020 from GBP537.1 million at 31 March 2020.
Investment portfolio
At 30 September 2020, the Group's investment portfolio comprised
interests in 32 project vehicles:
Capacity Commercial operations
Asset Location Type Ownership (MW) date
---------------------- ---------- -------------------- --------- -------- ---------------------
Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Burton Wold Extension UK (Eng) Wind 100% 14.4 Sep 2014
Carscreugh UK (Scot) Wind 100% 15.3 Jun 2014
Castle Pill UK (Wal) Wind 100% 3.2 Oct 2009
Dungavel UK (Scot) Wind 100% 26.0 Oct 2015
Ferndale UK (Wal) Wind 100% 6.4 Sep 2011
Hall Farm UK (Eng) Wind 100% 24.6 Apr 2013
Le Placis Vert France Wind 100% 4.0 Jan 2016
Llynfi Afan UK (Wal) Wind 100% 24.0 Mar 2017
Jan 2003 & Sep
Moel Moelogan UK (Wal) Wind 100% 14.3 2008
New Albion UK (Eng) Wind 100% 14.4 Jan 2016
Plouguernével France Wind 100% 4.0 May 2016
Wear Point UK (Wal) Wind 100% 8.2 Jun 2014
---------------------- ---------- -------------------- --------- -------- ---------------------
Biogas Meden UK (Eng) Anaerobic digestion 100% 5.0(1) Mar 2016
Egmere Energy UK (Eng) Anaerobic digestion 100% 5.0(2) Nov 2014
Grange Farm UK (Eng) Anaerobic digestion 100% 5.0(2) Sep 2034
Icknield Farm UK (Eng) Anaerobic digestion 53% 5.0(1) Dec 2014
Merlin Renewables UK (Eng) Anaerobic digestion 100% 5.0(2) Dec 2013
Peacehill Farm UK (Scot) Anaerobic digestion 49% 5.0(3) Dec 2015
Vulcan Renewables UK (Eng) Anaerobic digestion 100% 5.0(2) Oct 2013
Warren Energy UK (Eng) Anaerobic digestion 100% 5.0(2) Dec 2015
---------------------- ---------- -------------------- --------- -------- ---------------------
Amber UK (Eng) Solar 100% 9.8 Jul 2012
Branden UK (Eng) Solar 100% 14.7 Jun 2013
CSGH UK (Eng) Solar 100% 33.5 Mar 2014 & 2015
Monksham UK (Eng) Solar 100% 10.7 Mar 2014
Panther UK (Eng) Solar 100% 6.5 2011-2014
Pylle Southern UK (Eng) Solar 100% 5.0 Dec 2015
---------------------- ---------- -------------------- --------- -------- ---------------------
Bio Collectors UK (Eng) Waste management 70% 11.7 Dec 2013
ELWA UK (Eng) Waste management 80% n/a 2006
Tay UK (Scot) Wastewater 33% n/a Nov 2001
---------------------- ---------- -------------------- --------- -------- ---------------------
Oct 2017 & Oct
Northern Hydropower UK (Eng) Hydropower 100% 1.8(4) 2011
Oct 2015 & Nov
Yorkshire Hydropower UK (Eng) Hydropower 100% 2.0(4) 2016
---------------------- ---------- -------------------- --------- -------- ---------------------
FEIP Skaftåsen
Vindkraft AB Sweden Wind n/a n/a Under construction
FEIP Torozos Spain Wind n/a n/a Dec 2019
---------------------- ---------- -------------------- --------- -------- ---------------------
Total 304.7
------------------------------------------------------ --------- -------- ---------------------
(1) MWth (thermal) and an additional 0.4MWe CHP engine for on-site power provision.
(2) MWth (thermal) and an additional 0.5MWe CHP engine for on-site power provision.
(3) MWth (thermal) and an additional 0.25MWe CHP engine for on-site power provision.
(4) Includes a 1.2MW battery storage.
The JLEN portfolio comprises a diversified range of assets
across different geographies, sectors, technologies and revenue
types, as illustrated in the analysis below as at 30 September 2020
(by portfolio value and distributions from projects):
Portfolio value split by sector
Wind: 34%
Anaerobic digestion: 27%
Solar: 22%
Waste & wastewater: 15%
Hydro: 2%
Portfolio value split by geography
UK: 98%
Rest of Europe: 2%
Portfolio value split by remaining asset life
Up to 10 Years: 9%
11 to 20 years: 50%
More than 20 years: 41%
Weighted average remaining asset life of the portfolio is 18.9
years.
Portfolio distributions split by inflation linkage(1)
Inflation linked: 76%
Non-inflation linked: 24%
Portfolio distributions split by revenue type(1)
Merchant power: 24%
Green benefits: 62%
PFI:14%
Portfolio operator exposure (percentage of portfolio value)
Future Biogas: 22%
Siemens Gamesa: 21%
ROC Energy: 11%
Renewi: 7%
Vestas: 6%
Other: 33%
(1) Based on project revenues from volumes/generation during the
period and assumes project cash flow distributions reflect revenue
split at each project.
Portfolio valuation
The Investment Adviser is responsible for carrying out the fair
market valuation of the Company's investments, which is presented
to the Directors for their approval and adoption. The valuation is
carried out on a quarterly basis as at 30 June, 30 September, 31
December and 31 March each year.
The Directors' valuation of the portfolio at 30 September 2020
was GBP552.9 million, compared to GBP537.1 million at 31 March
2020. The increase of GBP15.8 million is the net impact of new
acquisitions, cash received from investments, changes in
macroeconomic, power price and discount rate assumptions, and
underlying growth in the portfolio. A reconciliation of the factors
contributing to the growth in the portfolio during the period is
shown in the chart on page 19 of the Half-year Report.
The movement in value of investments during the six-month period
ended 30 September 2020 is shown in the table below:
30 Sept 31 Mar
2020 2020
GBPm GBPm
---------------------------------------------------------------------------------------------------- ------- ------
Valuation of portfolio at opening balance 537.1 523.6
Acquisitions in the period/year (including post-acquisition adjustments and deferred consideration) 24.9 57.9
Cash distributions from portfolio (24.4) (45.0)
---------------------------------------------------------------------------------------------------- ------- ------
Rebased opening valuation of portfolio 537.6 536.5
Changes in forecast power prices (12.0) (56.9)
Changes in economic assumptions (1.6) (13.1)
Changes in discount rates 8.8 19.6
Changes in exchange rates 0.1 0.1
Balance of portfolio return 20.0 50.9
---------------------------------------------------------------------------------------------------- ------- ------
Valuation of portfolio 552.9 537.1
Fair value of intermediate holding companies (27.7) (4.2)
---------------------------------------------------------------------------------------------------- ------- ------
Investments at fair value through profit or loss 525.2 532.9
---------------------------------------------------------------------------------------------------- ------- ------
Allowing for investments of GBP24.9 million (including
post-acquisition adjustments and deferred consideration) and cash
receipts from investments of GBP24.4 million, the rebased valuation
is GBP537.6 million. The portfolio valuation at 30 September 2020
is GBP552.9 million (31 March 2020: GBP537.1 million), representing
an increase over the rebased valuation of 2.8% during the
period.
Valuation assumptions
The investments in JLEN's portfolio are valued by discounting
the future cash flows forecast by the underlying assets' financial
models.
Each movement between the rebased valuation and the 30 September
2020 valuation is considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 30
September 2020 reflect contractual fixed price arrangements under
PPAs, where they exist, and short--term market forward prices for
the next two years where they do not. The Company maintains a
programme of rolling price fixes for its wind and solar projects,
typically having the majority of projects on fixed price
arrangements for the next six to 12 months in order to reduce the
revenue risk from price volatility.
Where generating projects in the portfolio do not have a fixed
price under their PPAs, JLEN has reflected the prices in the table
below (gross of PPA discounts):
Avg. GBP/MWh Summer Winter
------------- ------- -------
Electricity 44 (34) 51 (43)
Gas 12 (9) 14 (13)
------------- ------- -------
At 30 September 2020, 75% of the renewable energy portfolio's
electricity price exposure was subject to a fixed price or a floor
arrangement for the winter 2020/21 season and 78% for the summer
season 2021.
After the initial two-year period, the project cash flows assume
future electricity and gas prices in line with a blended curve
informed by the central forecasts from three established market
consultants, adjusted by the Investment Adviser for
project-specific arrangements and price cannibalisation as
required. The Company believes the addition of a third market
consultant's curve into the blended curve provides a more robust
forecast that reduces volatility arising from short--term changes
in any individual consultant's projections.
JLEN has recognised a decrease in lifetime electricity price
expectations across the portfolio. Compared to the assumptions used
in the valuation at 31 March 2020, on a time-weighted average
basis, the net decrease in the electricity price assumptions is
approximately 3.5% over the period to 2050 (being an average
increase of 9% over the next three years offset by a 6% reduction
per annum thereafter).
The overall change in forecasts for future electricity and gas
prices compared to forecasts at 31 March 2020 has decreased the
valuation of the portfolio by GBP12.0 million.
The graph at the top of the page 21 of the Half-year Report
represents the blended weighted power curve used by the Company,
reflecting the forecast of three leading market consultants,
adjusted by the Investment Adviser to reflect its judgement of
capture discounts and a normalised view across the portfolio of
expectations of future price cannibalisation resulting from
increased penetration of low marginal cost, intermittent generators
on the GB network.
Revenue analysis
The graph at the bottom of the page 21 of the Half-year Report
shows the way in which the revenue mix of the renewables portfolio
changes over time, given the assumptions made regarding future
power prices set out above. As one would expect, merchant power
revenues increase in later years as the subsidies that projects
currently enjoy expire.
On a net present value basis (using the discount rate applicable
to each project), the relative significance of each revenue
category (including PFI) is as follows:
Contribution
to
portfolio
Revenue type value
--------------------------------- ------------
PPA/FiT with floor arrangement 20%
ROC buyout 18%
ROC recycle 1%
Ancillary revenues 1%
PPA market revenue (electricity) 23%
PPA market revenue (gas) 5%
PFI 10%
Short-term fixed price under PPA <1%
RHI 22%
--------------------------------- ------------
According to this analysis, the proportion of Fund revenues that
come from the sale of wholesale electricity and gas is 23% and 5%
respectively. This is a low proportion of merchant power revenue
relative to peers and reflects the broader diversification of
JLEN's portfolio.
Economic assumptions
Macroeconomic assumptions in respect of inflation, corporation
tax and deposit interest rates have remained relatively stable
during the period. RPI inflation rates assumed in the valuation at
30 September 2020 are 2.17% in 2020 (31 March 2020: 2.17%) stepping
to 2.75% from 2025 onwards (31 March 2020: 2.75%), whilst CPI is
assumed at a long-term rate of 2% for UK assets, and 1.5% for 2020
and all subsequent years (31 March 2020: 1.5%) for the French
assets.
The long--term UK corporation tax rate assumed is 19% (31 March
2020: 19%). The equivalent rate for the French assets is 28% (31
March 2020: 28%) stepping down to 26.5% in 2021 and 25% from 2022
(31 March 2020: step down to 26.5% in 2021 and 25% in 2022).
UK deposit rates assumed in the valuation are 0.5% to 2023 and
1.5% thereafter (31 March 2020: 1.75% in 2020 with a gradual
increase to a long--term rate of 2.5%). French deposit rates are
assumed at 0.5% (31 March 2020: 0.5%).
The euro/sterling exchange rate used to value the
euro--denominated investments in France was EUR1.10/GBP1 at 30
September 2020 (EUR1.12/GBP1 at 31 March 2020).
The overall reduction in value resulting from changes to
economic assumptions in the period is GBP1.6 million.
Discount rates
The discount rates used in the valuation exercise represent the
Investment Adviser's and the Board's assessment of the rate of
return in the market for assets with similar characteristics and
risk profile. The discount rates are reviewed on a regular basis
and updated to reflect changes in the market and in the project
risk characteristics.
During the period since 31 March 2020, there has continued to be
strong demand for income--producing infrastructure assets. The
Investment Adviser, based on its experience of bidding in the
secondary market, has proposed a reduction in the discount rate
used for valuing UK solar and wind assets. This reduction reflects
market discount rate observations and the reduction in risk driven
by lower forecast merchant power prices described above.
The discount rate used for asset cash flows which have received
lease extensions beyond the initial investment period of 25 years
retains a premium of 1% for subsequent years, reflecting the
merchant risk of the expected cash flows beyond the initial 25-year
period.
The overall increase in value resulting from changes to discount
rates in the period is GBP8.8 million.
Taking the above into account and reflecting the change in mix
of the portfolio during the year, the overall weighted average
discount rate ("WADR") of the portfolio was 7.3% at 30 September
2020 (31 March 2020: 7.4%).
Balance of portfolio return
This represents the balance of valuation movements in the year
excluding the factors noted above. The balance of the portfolio
return mostly reflects the impact on the rebased portfolio value,
all other measures remaining constant, of the effect of the
discount rate unwinding and also some additional valuation
adjustments from updates to individual project revenue assumptions.
The total represents an uplift of GBP20.0 million.
Valuation sensitivities
The Net Asset Value of the Company is the sum of the discounted
value of the future cash flows of the underlying asset financial
models, the cash balances of the Company and UK HoldCo, and the
other assets and liabilities of the Group less Group debt.
The portfolio valuation is the largest component of the Net
Asset Value and the key sensitivities are considered to be the
discount rate applied in the valuation of future cash flows and the
principal assumptions used in respect of future revenues and
costs.
A broad range of assumptions is used in our valuation models.
These assumptions are based on long--term forecasts and are not
affected by short--term fluctuations in inputs, whether economic or
technical. The Investment Adviser exercises its judgement in
assessing both the expected future cash flows from each investment
based on the project's life and the financial models produced by
each project company and the appropriate discount rate to
apply.
The key assumptions are as follows:
Discount rate
The WADR of the portfolio at 30 September 2020 was 7.3% (31
March 2020: 7.4%). A variance of plus or minus 0.5% is considered
to be a reasonable range of alternative assumptions for discount
rates.
Volumes
Base case forecasts for intermittent renewable energy projects
assume a "P50" level of electricity output based on reports by
technical consultants. The P50 output is the estimated annual
amount of electricity generation (in MWh) that has a 50%
probability of being exceeded - both in any single year and over
the long term - and a 50% probability of being underachieved. Hence
the P50 is the expected level of generation over the long term.
The P90 (90% probability of exceedance over a 10--year period)
and P10 (10% probability of exceedance over a 10--year period)
sensitivities reflect the future variability of wind and solar
irradiation and the uncertainty associated with the long--term data
source being representative of the long--term mean.
Separate P10 and P90 sensitivities are determined for each asset
and historically the results presented on the basis they are
applied in full to all wind and solar assets. This implies
individual project uncertainties are completely dependent on one
another; however, a Portfolio Uncertainty Benefit analysis
performed by a third-party technical adviser identified a positive
portfolio effect from investing in a diversified asset base. That
is to say that the lack of correlation between wind and solar
variability means P10 and P90 sensitivity results should be
considered independent. Therefore, whilst the overall P90
sensitivity decreases NAV by 6.6 pence, the impact from solar and
wind separately is only 1.4 pence and 5.2 pence respectively, as
shown in the chart on page 25 of the Half-year Report.
Agricultural anaerobic digestion facilities do not suffer from
similar deviations as their feedstock input volumes (and
consequently biogas production) are controlled by the site
operator.
For the waste & wastewater processing projects, forecasts
are based on projections of future flows and are informed by both
the client authorities' own business plans and forecasts and
independent studies where appropriate. Revenues in the PPP projects
are generally not very sensitive to changes in volumes due to the
nature of their payment mechanisms.
Electricity and gas prices
Electricity and gas price assumptions are based on the
following: for the first two years, cash flows for each project use
forward electricity and gas prices based on market rates unless a
contractual fixed price exists, in which case the model reflects
the fixed price followed by the forward price for the remainder of
the two--year period. For the remainder of the project life, a
long--term blend of central case forecasts from three established
market consultants and other relevant information is used, and
adjusted by the Investment Adviser for project-specific
arrangements and price cannibalisation. The sensitivity assumes a
10% increase or decrease in power prices relative to the base case
for each year of the asset life after the first two--year period.
While power markets can experience movements in excess of +/-10% on
a short-term basis, the sensitivity is intended to provide insight
into the effect on the NAV of persistently higher or lower power
prices over the whole life of the portfolio. The Directors feel
that +/-10% remains a realistic range of outcomes over this very
long time horizon, notwithstanding that shocks will occur from time
to time.
Feedstock prices
Feedstock accounts for over half of the operating costs of
running an AD plant. As feedstocks used for AD are predominantly
crops grown within existing farming rotation, they are exposed to
the same growing risks as any agricultural product. The sensitivity
assumes a 10% increase or decrease in feedstock prices relative to
the base case for each year of the asset life.
Inflation
Each project in the portfolio receives a revenue stream which is
either fully or partially inflation--linked. The inflation
assumptions are described in the macroeconomic section above. The
sensitivity assumes a 0.5% increase or decrease in inflation
relative to the base case for each year of the asset life.
Euro/sterling exchange rates
As the proportion of the portfolio assets with cash flows
denominated in euros represented approximately less than 2% of the
portfolio value at 30 September 2020, the Directors consider the
sensitivity to changes in euro/sterling exchange rates to be
insignificant.
Corporation tax
The UK corporation tax assumptions applied in the portfolio
valuation are outlined in the notes to the condensed unaudited
financial statements. The sensitivity below assumes a 2% increase
or decrease in the rate of UK corporation tax relative to the base
case for each year of the asset life.
Sensitivities - impact on NAV at 30 September 2020
The chart on page 25 of the Half-year Report shows the impact of
the key sensitivities on Net Asset Value per share, with the GBP
labels indicating the impact of the sensitivities on portfolio
value
OPERATIONAL REVIEW
The renewables portfolio has operated well, with the wind,
solar, hydro and AD portfolios all exceeding their generation
targets.
Total generation for the period from the portfolio (excluding
the Bio Collectors food waste plant) was 463GWh, 2.5% above budget.
The three main constituents of the portfolio - wind, solar and AD -
all delivered generation ahead of budget. The dividend remains well
covered despite lower power prices than a year ago.
Investment performance
The change in total NAV reflects the updates for recent
operational performance, changes in assumptions for future
electricity and gas prices and value enhancements. The Directors
have also considered the discount rates seen in the secondary
markets for environmental infrastructure assets in arriving at the
forecasts used in the valuation.
The NAV per share at 30 September 2020 was 96.1 pence, down from
97.5 pence at 31 March 2020, mainly due to a reduction of
long--term electricity and gas price forecasts.
JLEN has announced an interim dividend of 1.69 pence per share
for the quarter ended 30 September 2020, payable on 30 December
2020, in line with the full--year target of 6.76 pence per share
for the year ending 31 March 2021 as set out in the 2020 Annual
Report.
Portfolio performance
Operating performance of the environmental infrastructure
portfolio during the six-month period ended 30 September 2020 was
strong across most of the portfolio, with exceptions mainly driven
by the Covid-19 pandemic or grid operator maintenance or
constraints. During the period, the renewables segment of the
portfolio produced 463GWh (six months to 30 September 2019: 375GWh)
of green energy (excluding the Bio Collectors food waste plant).
Wind generation was 2.1% above budget (six months to 30 September
2019: -2.1% variance from budget) and solar generation was 6.7%
above budget (six months to 30 September 2019: 0.6% below budget),
driven by solar irradiation above long-term average and strong
operational performance. The AD portfolio continued to show a
positive variance to budget of 2% (six months to 30 September 2019:
2.7% above budget).
Wind
Electricity generation from the wind assets of 173GWh (which
represent 37% of the portfolio energy generation for the period)
was 2.1% above budget. Performance was consistently strong across
the portfolio with the majority of material downtime attributable
to scheduled maintenance and grid operator outages. Operational
availability was above budget while wind resource over the
six-month period was in line with expectations. The turnaround in
performance on the four Senvion assets is particularly noteworthy.
Since SGRE announced their acquisition of Senvion in January 2020,
warranted availability has increased by 4%. Response times,
communication and resource have all improved significantly.
Turbine control software optimisation packages were installed
and have been activated on two sites in the previous six months.
Both are still in the validation stage, but initial indications
suggest they will have a material impact on production for both
sites. Further data is required before the uplift can be quantified
definitively, currently anticipated in Q1 2021. Further upgrades
are planned for 2021, allowing for Covid-19 restrictions.
Following a competitive tender process for technical asset
management services, contracts for the majority of the wind
portfolio have been awarded to Greensolver at a reduced cost and
improved scope.
Solar
Generation from the solar assets (represents 13% of the
portfolio energy generation for the period) at 59GWh was 6.7% above
budget. Performance was good across the majority of the sites in
the portfolio with operational availability above budget and
irradiance volumes which were 5.6% above expected levels. The
majority of material downtime on the ground-mounted portfolio could
be attributed to grid constraints and grid operator maintenance
works while the Panther rooftop portfolio experienced some downtime
related to Covid-19 restrictions which prevented the Operations and
Maintenance provider from supplying some spare parts and
resources.
Notably strong performance was achieved at the Monksham site in
Somerset which performed 15.5% above budget. The strong performance
is linked to the high irradiation levels experienced in the area
and a programme of upgrades to the way in which panels are
connected to each other, undertaken at the beginning of the
period.
The loss experienced in Q3 2019/20 at the CSGH Higher Tregarne
site due to an HV equipment failure has now been successfully
recovered from the insurance company.
As reported in the Annual Report 2020, lease extensions have
been put in place on five of the solar assets and the Investment
Adviser continues to progress work on further extensions where
considered accretive to value.
Anaerobic digestion
The AD portfolio generation for the half year was 1.8% above
budget in energy generation terms, continuing the trend of reliable
performance now seen over several years. Notable strong performers
were Grange, Icknield and the most recent acquisition, Peacehill.
Vulcan and Meden experienced some unplanned downtime related to
equipment issues that detracted from their generation. Improvements
have been made to both of these assets in terms of spare parts
availability.
Feedstock quality and availability continues to be an important
aspect for the AD portfolio. Across the portfolio plans have been
implemented to increase stock buffer levels. This will allow
greater control of feedstock and avoid possible shortages should
yields be impacted this coming autumn harvest. Harvest commenced in
September and will continue into the autumn period. Warren AD plant
has also diversified its feedstock types as a result of a
third-party supplier of extruded straw feedstock no longer trading.
The Investment Adviser and the operator are working on feedstock
diversification opportunities.
During the half year, wholesale gas prices dropped to amongst
the lowest levels for several years, reaching as low as 0.5
pence/kWh. Wholesale gas prices dropped sharply in the UK as a
result of a mild winter, healthy stocks and a further reduction in
prices during the initial months of Covid--19. All the AD assets
have hedged gas prices with volume ranges from 50% to 80% going
into winter 2020, summer 2021 and some assets out to winter 2021.
The average fixed price for summer 2020 was GBP11/MWh.
Value enhancement initiatives have progressed during the half
year with the deal approval received for a further expansion at the
Vulcan AD plant. The plant expansion will aim to be completed by
the year end and will provide a further 25-30% uplift in throughput
for this asset. Greater resilience for digestate storage is also
being rolled out across the portfolio, with a number of digestate
storage lagoons and facilities being implemented.
Waste & wastewater concessions
Waste tonnages at the ELWA waste project have continued at
levels above target. Operational performance targets are
consistently exceeded with diversion from landfill at 99.97%,
substantially ahead of the 67% contract target. Recycling, at
26.69%, was affected slightly by the Covid-19 closure of RRC sites
during April, but is still ahead of the 22% contract target. The
insurance market for waste assets is thin and this has led to some
issues in placing cover, which the Investment Adviser is following
closely. This has involved work towards implementing enhanced fire
protection measures to satisfy insurers. All parties are committed
to putting these measures in place, but they are complex and
progress is not as swift as hoped.
Rainfall at Tay, a key driver of wastewater flows through the
treatment plant, has improved in the later months of the period,
following a dry spring. The plant has also performed well over the
period, with few issues requiring unplanned spending. As a result,
the asset's financial performance has been good, and this is
expected to continue.
Bio Collectors, JLEN's first food waste collection business and
treatment plant, has been impacted by Covid--19 during the half
year as a result of reduced food waste tonnages. Part of the
business' food waste is derived from the hospitality and retail
sector in and around London. As a result of the lockdown measures
that were introduced, the business collection tonnages were
significantly reduced. The impact of lockdown has been ongoing, and
the business is expecting this to carry on going into 2021. The
business is working on a recovery strategy which has been
implemented. Other feedstocks, including some crops, residues and
by-products, are being sourced and biogas production has recovered
well, albeit at a higher cost. Operationally, the treatment plant
is performing well, with the operations team taking advantage of
the period of lower throughput to make process improvements.
Hydro and battery storage
The hydro portfolio generated 1.9GWh, representing a 7.4%
positive variance against budget. Availability throughout the
period exceeded expectations. However, regional rainfall in the
first quarter was the lowest in recorded history. Output has
steadily increased from the end of May as rainfall has
increased.
Since expiry of the long--term Firm Frequency Response ("FFR")
agreements in December 2018, the battery assets have consistently
been used to support frequency response, bidding into month ahead
or week ahead auctions with varying results. Demand for these
ancillary services remains depressed with mild temperatures and
Covid-19 restrictions suppressing electricity consumption.
Apart from the issues noted above, all other projects have
achieved good levels of technical and operational availability
during the period, with no significant operational disruption
experienced. Overall, the generation of the renewable energy assets
in the portfolio since IPO is summarised as follows:
Total
since
Portfolio generation 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 HY 2020/21 IPO
-------------------------------------------- ------- ------- ------- ------- ------- ------- ---------- ------
Wind portfolio actual generation (GWhe) 82 184 217 399 406 458 173 1,919
Variation from budget(1) -7% +11% -15% 0% -9% +4% +2% -2%
-------------------------------------------- ------- ------- ------- ------- ------- ------- ---------- ------
AD portfolio actual generation (GWhth) - - - 51 262 352 230 895
Variation from budget - - - +8% +4% +4% +2% +3%
Solar portfolio actual generation (GWhe) 10 30 40 64 79 75 59 358
Variation from budget(1) --1% --2% -12% -9% +2% -3% +7% -3%
-------------------------------------------- ------- ------- ------- ------- ------- ------- ---------- ------
Hydro portfolio actual generation (GWhth)(2) - - - - - 3 2 5
Variation from budget - - - - - -17% +7% -8%
-------------------------------------------- ------- ------- ------- ------- ------- ------- ---------- ------
(1) Budgets adjusted to reflect operational energy yield
assessments carried out under contracted true-up mechanisms post
IPO.
(2) Includes generation from Northern Hydropower Limited from 31 March 2020.
The average all-in price received by the differing technology
classes in the UK for their energy volumes generated in the
six-month period ended 30 September 2020 was GBP75 per MWhe for
onshore wind (year ended 31 March 2020: GBP88 per MWhe), GBP185 per
MWhe for solar (year ended 31 March 2020: GBP186 per MWhe) and
GBP76 per MWhth for AD (year ended 31 March 2020: GBP96 per
MWhth).
Acquisitions
Since 31 March 2020, the Company has acquired two new projects
and injected further capital into FEIP (GBP4.8 million) and into
existing projects to fund value enhancements (GBP1.4 million). The
total consideration of acquisitions and capital injections was
GBP22.6 million in the period. The aggregate investments were
funded through cash available and drawdowns under the Company's
revolving credit facility, of which the outstanding balance is
GBP42.4 million at 30 September 2020, with GBP127.6 million still
available to finance further acquisitions. The assets acquired were
as follows:
Peacehill Farm
In April 2020, the Company announced an investment in the
Peacehill Farm anaerobic digestion plant for an aggregate amount of
c.GBP11 million. The investment consists of the provision of a debt
facility and subscription for a minority equity stake in JLEAG AD
Limited, which holds, through its wholly owned subsidiary Peacehill
Gas Limited, the rights and operational assets at the Peacehill
Farm AD plant.
The Peacehill Farm AD plant, located in Wormit, Fife, Scotland,
was commissioned in December 2015. The plant has a thermal capacity
of c.5MWth and predominantly produces biomethane exported to the
national gas grid. In addition, the plant also has a 0.25MWe CHP
engine on site. The Peacehill Farm AD plant is accredited under the
Renewable Heat Incentive ("RHI") and Feed-in Tariff ("FiT")
schemes.
Northern Hydropower Limited
In September 2020, the Company acquired two operational low head
hydropower stations and an operational battery storage system for a
total consideration, including working capital, of GBP4.74 million.
The assets are located in Yorkshire and Cornwall.
The acquisition of Northern Hydropower Holdings Limited ("NHHL")
which owns 100% of the equity in Northern Hydropower Limited
("NHL") represents the Company's second investment in run-of-river
hydro and battery storage, further increasing the diversification
profile of the Company's portfolio of environmental infrastructure
projects.
The Yorkshire-based assets are:
-- Knottingley hydro, a 500kW dual turbine hydro project located
on the River Aire, which was commissioned in October 2017; and
-- a 1.2MW battery co-located at Knottingley, commissioned in January 2018.
The Cornish-based asset is:
-- De Lank hydro, a 99kW hydro project located on the De Lank
River, commissioned in October 2011.
Both hydro projects are accredited under the 20-year FiT
scheme.
NHHL was acquired from a group of high-net-worth investors,
which provided the original funding under the Enterprise Investment
Scheme.
Other investments
FEIP
In January 2020, JLEN announced a commitment of EUR25 million to
Foresight Energy Infrastructure Partners SCSp ("FEIP"), a
Luxembourg limited partnership investment vehicle. In addition to
the GBP1.4 million investment made in the previous reporting
period, a further investment of GBP4.8 million has been provided to
the vehicle for investment into a construction stage Swedish wind
farm - Skaftåsen Vindkraft AB. This investment will see the
construction of a 35-turbine wind farm in Central Sweden. The
investment will also be allocated to Torozos - an operational 94MW
wind farm, which comprises 27 SGRE 132m, 3.5MW wind turbines spread
across two sites in the Castile and León region of Spain.
Value enhancements
During the period GBP1.4 million was injected into various
projects for value enhancement initiatives.
Financing
Since June 2017, the Fund has benefited from a three-year
facilities agreement from a three-year facilities agreement with
HSBC, NIBC, ING and Santander. The facility has been extended
twice, in June 2018 and May 2019, and will expire in June 2022. The
facility currently provides for a committed revolving credit
facility of GBP170 million and for a remaining uncommitted
accordion facility of up to GBP20 million. The facility margin is
200 to 225 bps (depending on the loan-to-value ratio for the Fund)
over LIBOR.
This facility provides JLEN an increased source of flexible
funding outside of equity raisings at a lower cost. It will be used
to make future acquisitions of environmental infrastructure
projects to add to JLEN's current portfolio of wind, solar,
anaerobic digestion, and waste & wastewater processing assets
on a timely basis, reducing the performance drag associated with
holding excess cash. As at 30 September 2020, drawings under the
RCF were GBP42.4 million. Under its investment policy, JLEN may
borrow up to 30% of its NAV.
In addition to the revolving credit facility, several of the
projects have underlying project-level debt which is not reflected
in these financial statements. There is an additional gearing limit
in respect of such debt of 85% of the aggregate gross project value
(being the fair market value of such portfolio companies increased
by the amount of any financing held within the projects) for
PFI/PPP projects and 65% for renewable energy generation
projects.
The project-level gearing at 30 September 2020 across the
portfolio was 29.6% (31 March 2020: 31.9%) being 25.5% (31 March
2020: 26.7%) for the renewable energy assets and 51.8% (31 March
2020: 52.4%) for the PFI processing assets. Taking into account the
amount drawn down under the revolving credit facility of GBP42.4
million, the overall fund gearing at 30 September 2020 was 33.6%
(31 March 2020: 35.3%).
As at 30 September 2020, the Group, which comprises the Company
together with its intermediate holding companies, the UK Holdco and
HWT Limited, had cash balances of GBP12.8 million (31 March 2020:
GBP22.0 million).
SUSTAINABILITY AND ESG
AT A GLANCE(1)
2 new investments
Environmental performance 2020/21: half --year results
>450,000 MWh renewable energy generated by our portfolio
new assets will avoid 6,925 tCO2e emissions per year
>70,000 waste recycled (tonnes)
c.240,000 waste diverted from landfill (tonnes)
>15 billion wastewater treated (litres)
Social performance 2020/21: half --year results
22 SPV health and safety audits
(1) These statistics exclude FEIP.
ESG PERFORMANCE
Environmental
Portfolio electricity and carbon performance
This year, JLEN's portfolio projects have generated 463GWh
electricity (excluding Bio Collectors), equivalent to the annual
electricity demand of 124,000 households. Detailed information on
portfolio energy performance is provided in the Operational Review
above.
A summary of the greenhouse gas benefits delivered by the new
assets JLEN has invested in this year is provided in the table
below.
Greenhouse gas emissions reduction
tCO(2) e
Average annual Remaining lifetime
emissions avoided emissions avoided
--------------------------------- ----------------- ------------------
New assets: forecast performance 6,925 126,359
--------------------------------- ----------------- ------------------
JLEN's new investments are forecast to deliver, per year 4,692
MWh electricity
And 45,629 MWh biomethane
And avoid emissions of 6,925 tCO(2) e
equivalent to 3,088 cars off the road
The carbon avoidance associated with all of JLEN's assets is
independently assessed and these reports are available on the JLEN
website.
Social
In the first half of the year 22 health and safety audits have
been carried out on JLEN's assets
The Company encourages its operators to form positive
relationships with the communities in which it works. During the
October 2020 ESG KPI workshop the conversation was wide ranging and
covered a broad range of community engagement concepts that JLEN's
assets are, or have been, supporting. These include:
-- apprenticeships associated with local colleges;
-- employment of local people;
-- hotel stays and visitor economy spend for visiting contractors in remote areas;
-- charity events and community funding;
-- university research projects; and
-- school visits.
Imagine 2050: The future leaders
Veolia's Tay wastewater treatment plant has partnered with
Arbroath High School for the past two years to deliver a Young
Leaders programme to give young people:
-- leadership skills;
-- awareness of the circular economy;
-- awareness of resource efficiency; and
-- the opportunity to develop resilience skills and teamwork skills.
Governance
The Fund's principles and governance are aligned with the UK
Corporate Governance Code. Third-party service providers are
required to provide confirmation that appropriate controls are in
place to promote effective governance across the Fund's
investments.
JLEN is able to appoint directors to the boards of the SPVs that
hold its assets. These directors will act in the best interest of
the SPV, for the benefit of JLEN and other stakeholders in the
project.
The expertise of project company board members is of critical
importance to JLEN to help ensure the continued technical and
financial performance of its assets.
JLEN expects its third-party service providers to implement, and
to regularly review, anti-bribery policies and practices for each
asset within its portfolio. The existence of these policies, as
well as a record of when they were last reviewed, is held by
Foresight on behalf of JLEN.
Additionally, JLEN commissions independent audits and reviews of
core governance processes such as tax and health and safety
management.
JLEN'S ESG TIMELINE
Over the past two years, JLEN has formalised and strengthened
its ESG processes as described below.
JLEN's ESG journey
2014
-- Fund inception
2014-2018
-- Investment in GBP500 million environmental assets
2019
-- First ESG report, integrated into Annual Report
October 2019
-- Award of the London Stock Exchange Green Economy Mark
2020
-- Second ESG report including new ESG objectives
November 2020
-- Development of KPIs to inform the ESG objectives
2021
-- Third ESG report including publication of ESG KPIs
First ESG report
In 2019 JLEN commissioned its first ESG report with the aim of
demonstrating and articulating the Fund's existing commitment to
ESG. This included a mapping exercise to formalise the processes
that the Fund applied consistently throughout its investment
lifecycle, which were then documented in the Annual Report to help
track improvements over time and report on progress going
forward.
Award of the Green Economy Mark
The work undertaken to formalise JLEN's approach to ESG, and
particularly through reporting its contribution to carbon
avoidance, contributed to JLEN being awarded the Green Economy Mark
by the London Stock Exchange, which identifies industrial sectors
and subsectors that are contributors to a greener, more sustainable
economy.
Second ESG report
Following the formalisation of JLEN's existing processes in
2019, the Fund's second ESG report in 2020 provided an opportunity
to enhance the ESG offering through development and publication of
three ESG objectives which sit alongside the Fund's strategic
objectives. These objectives are to:
-- promote the efficient use of resources;
-- develop positive relationships with the communities in which JLEN works; and
-- ensure effective, ethical governance across the portfolio.
Additionally, the Fund moved to Foresight in July 2019,
resulting in the integration of Foresight's well-established ESG
processes into JLEN's activities.
Development of ESG KPIs
In October 2020, the Foresight team responsible for managing the
JLEN Fund and its assets attended a virtual workshop to discuss and
identify KPIs that would assist the Fund in monitoring and managing
ESG performance across its investment and asset management
activities. This process included a deep dive into metrics that
JLEN currently collects or has access to, as well as a broad
ranging discussion around additional metrics that could help to
inform the ESG objectives. These KPIs are anticipated to be
finalised in Q3 2020/21 and tested in Q4 before being published in
the 2021 Annual Report.
FINANCIAL REVIEW
Analysis of financial results
The financial statements of the Company for the six--month
period ended 30 September 2020 are set out below.
The Company prepared the condensed unaudited financial
statements for the six--month period to 30 September 2020 in
accordance with IAS 34 as adopted by the EU and issued by the
International Accounting Standards Board. In order to continue
providing useful and relevant information to its investors, the
financial statements also refer to the "Group", which comprises the
Company, its wholly owned subsidiary (JLEN Environmental Assets
Group (UK) Limited ("UK HoldCo")) and the indirectly held wholly
owned subsidiary HWT Limited (which holds the investment interest
in the Tay project).
Net assets
Net assets reduced slightly from GBP533.0 million at 31 March
2020 to GBP525.3 million at 30 September 2020.
The net assets of GBP525.3 million comprise GBP552.9 million
portfolio value of environmental infrastructure investments and the
Company's cash balances of GBP1.6 million, partially offset by
GBP27.7 million of intermediate holding companies' net liabilities
and other net liabilities of GBP1.5 million.
The intermediate holding companies' net liabilities of GBP27.7
million comprise a GBP42.4 million credit facility loan, partially
offset by cash balances of GBP11.2 million and other net assets of
GBP3.5 million.
Analysis of the Group's net assets at 30 September 2020
At 30 Sep At 31 Mar
All amounts presented in GBPmillion (except as noted) 2020 2020
---------------------------------------------------------- ----------- -----------
Portfolio value 552.9 537.1
Intermediate holding companies' cash 11.2 20.2
Intermediate holding companies' revolving credit facility (42.4) (29.3)
Intermediate holding companies' other assets 3.5 4.9
---------------------------------------------------------- ----------- -----------
Fair value of the Company's investment in UK HoldCo 525.2 532.9
---------------------------------------------------------- ----------- -----------
Company's cash 1.6 1.8
Company's other liabilities (1.5) (1.7)
---------------------------------------------------------- ----------- -----------
Net Asset Value 525.3 533.0
---------------------------------------------------------- ----------- -----------
Number of shares 546,720,025 546,720,025
Net Asset Value per share 96.1p 97.5p
---------------------------------------------------------- ----------- -----------
At 30 September 2020, the Group (the Company plus intermediate
holding companies) had a total cash balance of GBP12.8 million (31
March 2020: GBP22.0 million), including GBP1.6 million in the
Company's statement of financial position (31 March 2020: GBP1.8
million) and GBP11.2 million in the intermediate holding companies
(31 March 2020: GBP20.2 million), which is included in the
Company's statement of financial position within "investments at
fair value through profit or loss".
At 30 September 2020, UK HoldCo had drawn GBP42.4 million of its
revolving credit facility (31 March 2020: GBP29.3 million) which is
included in the Company's statement of financial position within
"investments at fair value through profit or loss".
The movement in the portfolio value from 31 March 2020 to 30
September 2020 is summarised as follows:
Six months
ended Year ended
30 Sep 31 Mar
All amounts presented in GBPmillion (except as noted) 2020 2020
----------------------------------------------------------------------------- ---------- ----------
Portfolio value at start of the period/year 537.1 523.6
Acquisitions/further investments (net of post-acquisition price adjustments) 24.9 57.9
Distributions received from investments (24.4) (45.0)
Growth in value of portfolio 15.3 0.6
----------------------------------------------------------------------------- ---------- ----------
Portfolio value 552.9 537.1
----------------------------------------------------------------------------- ---------- ----------
Further details on the portfolio valuation and an analysis of
movements during the year are provided in the investment portfolio
and valuation section above.
Profit before tax
The Company's profit before tax for the six--month period was
GBP10.7 million (six--month period ended 30 September 2019: GBP16.2
million), generating earnings of 2.0 pence per share (six--month
period ended 30 September 2019: 3.3 pence per share).
Six months Six months
ended ended
30 Sep 30 Sep
All amounts presented in GBPmillion (except as noted) 2020 2019
------------------------------------------------------ ---------- ----------
Interest received on UK HoldCo loan notes 14.4 14.4
Dividend received from UK HoldCo 7.2 5.0
Net losses on investments at fair value (7.7) (0.1)
------------------------------------------------------ ---------- ----------
Operating income 13.9 19.3
------------------------------------------------------ ---------- ----------
Operating expenses (3.2) (3.1)
------------------------------------------------------ ---------- ----------
Profit before tax 10.7 16.2
------------------------------------------------------ ---------- ----------
Earnings per share 2.0p 3.3p
------------------------------------------------------ ---------- ----------
In the six months to 30 September 2020, the operating income was
GBP13.9 million, including the receipt of GBP14.4 million of
interest on the UK HoldCo loan notes, GBP7.2 million of dividends
also received from UK HoldCo, offset by a net loss on investments
at fair value of GBP7.7 million.
The operating expenses included in the income statement for the
period were GBP3.2 million, in line with expectations. These
comprise GBP2.7 million of Investment Adviser fees and GBP0.5
million operating expenses. The details on how the Investment
Adviser fees are charged are set out in note 14 to the condensed
unaudited financial statements.
Ongoing charges
The "ongoing charges" ratio is an indicator of the costs
incurred in the day-to-day management of the Fund. JLEN uses the
Association of Investment Companies ("AIC") recommended methodology
for calculating this ratio, which is an annual figure.
For the year ended 31 March 2020, the ratio was 1.22% and it is
anticipated that the full-year ratio for the year ended 31 March
2021 will continue to decrease. The ongoing charges percentage is
calculated on a consolidated basis and therefore takes into
consideration the expenses of UK HoldCo as well as the
Company's.
Cash flow
The Company had a total cash balance at 30 September 2020 of
GBP1.6 million (31 March 2020: GBP1.8 million). The breakdown of
the movements in cash during the period is shown below.
Cash flows of the Company for the period (GBPmillion):
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
------------------------------------------------ ---------- ----------
Cash balance at 1 April 1.8 1.9
Expenses from previous share issues (0.2) -
Investment in UK HoldCo (equity and loan notes) - -
Interest on loan notes received from UK HoldCo 14.4 14.4
Dividends received from UK HoldCo 7.2 5.0
Directors' fees and expenses (0.1) (0.1)
Investment Adviser fees (2.7) (2.7)
Administrative expenses (0.5) (0.3)
Dividends paid in cash to shareholders (18.3) (16.4)
------------------------------------------------ ---------- ----------
Company cash balance at 30 September 1.6 1.8
------------------------------------------------ ---------- ----------
The Group had a total cash balance at 30 September 2020 of
GBP12.8 million (31 March 2020: GBP22.0 million) and borrowings
under the revolving credit facility of GBP42.4 million (31 March
2020: GBP29.3 million). The breakdown of the movements in cash
during the period is shown below.
Cash flows of the Group for the period (GBPmillion):
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
----------------------------------------------------------------- ---------- ----------
Cash distributions from environmental infrastructure investments 24.4 22.8
Administrative expenses (0.6) (0.8)
Directors' fees and expenses (0.1) (0.1)
Investment Adviser fees (2.7) (2.6)
Financing costs (net of interest income) (0.9) (0.8)
----------------------------------------------------------------- ---------- ----------
Cash flow from operations 20.1 18.5
Expenses from previous share issues (0.2) -
Acquisition of investment assets and further investments (22.6) (21.5)
Reduction in acquisition price - 0.1
Acquisition costs (including stamp duty) (0.7) (0.7)
Short-term projects debtors (0.5) (0.7)
Debt arrangement fee cost - (0.8)
Proceeds from borrowings under the revolving credit facility 13.0 19.2
Dividends paid in cash to shareholders (18.3) (16.4)
----------------------------------------------------------------- ---------- ----------
Cash movement in the period (9.2) (2.3)
Opening cash balance 22.0 11.4
----------------------------------------------------------------- ---------- ----------
Group cash balance at 30 September 12.8 9.1
----------------------------------------------------------------- ---------- ----------
During the period, the Group received cash distributions of
GBP24.4 million from its environmental infrastructure investments,
in line with the distributions expected by the Group after
adjusting for acquisitions during the period.
Cash received from investments in the period adequately covered
the operating and administrative expenses and financing costs, as
well as the dividends declared to shareholders in respect of the
six--month period ended 30 September 2020. Cash flow from
operations of the Group of GBP20.1 million covered dividends paid
in the six--month period to 30 September 2020 of GBP18.3 million by
1.1x. The dividend cover based on dividends declared in respect of
the six--month period to 30 September 2020 was 1.1x.
The Group anticipates that future revenues from its
environmental infrastructure investments will continue to be in
line with expectations and therefore will continue to cover future
costs as well as planned dividends payable to its shareholders(1)
.
Dividends
During the period, the Company paid a final dividend of 1.665
pence per share in June 2020 (GBP9.1 million) in respect of the
quarter to 31 March 2020. Interim dividends of 1.69 pence per share
were paid in September 2020 (GBP9.2 million) in respect of the
quarter to 30 June 2020.
On 25 November 2020, the Company declared an interim dividend of
1.69 pence per share in respect of the quarter ended 30 September
2020 (GBP9.2 million), which is payable on 30 December 2020.
In line with the 2020 Annual Report, the target dividend for the
year to 31 March 2021 is 6.76 pence per share(1) .
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
RESPONSIBILTY STATEMENT
We confirm that to the best of our knowledge:
-- the condensed set of unaudited financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU and issued by the IASB and in accordance with the
accounting policies set out in the audited Annual Report to 31
March 2020; and
-- the Chairman's statement and Investment Adviser's report meet
the requirements of an interim management report and include a fair
review of the information required by:
a) DTR 4.2.7R, being an indication of important events during
the first six months of the financial year and a description of
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.
This responsibility statement was approved by the Board of
Directors on 25 November 2020 and is signed on its behalf by:
Richard Morse
Chairman
25 November 2020
INDEPENT REVIEW REPORT
to the members of JLEN Environmental Assets Group Limited
We have been engaged by the Company to review the condensed set
of financial statements in the half--yearly financial report for
the six months ended 30 September 2020 which comprises the
condensed income statement, the condensed statement of financial
position, the condensed statement of changes in equity, the
condensed cash flow statement and related notes 1 to 18. We have
read the other information contained in the half--yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half--yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half--yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with IFRS as adopted by the
European Union and IFRS as issued by the International Accounting
Standards Board ("IASB"). The condensed set of financial statements
included in this half--yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union and issued by
the IASB.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half--yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half--yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and issued by the IASB and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Recognised Auditor,
Guernsey, Channel Islands
25 November 2020
CONDENSED UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2020
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
(unaudited) (unaudited)
Notes GBP'000s GBP'000s
-------------------------- ----- ----------- -----------
Operating income 8 13,879 19,323
Operating expenses 4 (3,164) (3,135)
-------------------------- ----- ----------- -----------
Operating profit 10,715 16,188
-------------------------- ----- ----------- -----------
Profit before tax 10,715 16,188
Tax 5 - -
-------------------------- ----- ----------- -----------
Profit for the period 10,715 16,188
-------------------------- ----- ----------- -----------
Earnings per share
Basic and diluted (pence) 7 2.0 3.3
-------------------------- ----- ----------- -----------
The accompanying notes form an integral part of the condensed
set of financial statements.
All results are derived from continuing operations.
There are no items of other comprehensive income in either the
current or preceding period, other than the profit for the period,
and therefore no separate statement of comprehensive income has
been presented.
CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION
as at 30 September 2020
30 Sep 31 Mar
2020 2020
(unaudited) (audited)
Notes GBP'000s GBP'000s
------------------------------------------------- ----- ----------- ---------
Non-current assets
Investments at fair value through profit or loss 8 525,230 532,941
------------------------------------------------- ----- ----------- ---------
Total non-current assets 525,230 532,941
------------------------------------------------- ----- ----------- ---------
Current assets
Trade and other receivables 9 42 31
Cash and cash equivalents 1,555 1,762
------------------------------------------------- ----- ----------- ---------
Total current assets 1,597 1,793
------------------------------------------------- ----- ----------- ---------
Total assets 526,827 534,734
------------------------------------------------- ----- ----------- ---------
Current liabilities
Trade and other payables 10 (1,536) (1,720)
------------------------------------------------- ----- ----------- ---------
Total current liabilities (1,536) (1,720)
------------------------------------------------- ----- ----------- ---------
Total liabilities (1,536) (1,720)
------------------------------------------------- ----- ----------- ---------
Net assets 525,291 533,014
------------------------------------------------- ----- ----------- ---------
Equity
Share capital account 12 548,848 548,943
Retained earnings 13 (23,557) (15,929)
------------------------------------------------- ----- ----------- ---------
Equity attributable to owners of the Company 525,291 533,014
------------------------------------------------- ----- ----------- ---------
Net assets per share (pence per share) 96.1 97.5
------------------------------------------------- ----- ----------- ---------
The accompanying notes form an integral part of the condensed
set of financial statements.
The condensed set of unaudited financial statements were
approved by the Board of Directors and authorised for issue on 25
November 2020.
They were signed on its behalf by:
Richard Morse
Chairman
Peter Neville
Director
CONDENSED UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2020
Six months ended 30 Sep
2020 (unaudited)
---------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
----------------------------------------------------- ----- ------------- -------- --------
Balance at 1 April 2020 548,943 (15,929) 533,014
----------------------------------------------------- ----- ------------- -------- --------
Profit and total comprehensive income for the period - 10,715 10,715
Expenses of issue of equity shares 12 (95) - (95)
Dividends paid 6, 13 - (18,343) (18,343)
----------------------------------------------------- ----- ------------- -------- --------
Balance at 30 September 2020 548,848 (23,557) 525,291
----------------------------------------------------- ----- ------------- -------- --------
Six months ended 30 Sep
2019 (unaudited
---------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
----------------------------------------------------- ----- ------------- -------- --------
Balance at 1 April 2019 492,670 27,669 520,339
----------------------------------------------------- ----- ------------- -------- --------
Profit and total comprehensive income for the period - 16,188 16,188
Issue of share capital 12 - - -
Expenses of issue of equity shares 12 - - -
Dividends paid 6, 13 - (16,364) (16,364)
----------------------------------------------------- ----- ------------- -------- --------
Balance at 30 September 2019 492,670 27,493 520,163
----------------------------------------------------- ----- ------------- -------- --------
The accompanying notes form an integral part of the condensed
set of financial statements.
CONDENSED UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2020
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
(unaudited) (unaudited)
Notes GBP'000s GBP'000s
------------------------------------------------------------- ----- ----------- -----------
Profit from operations 10,715 16,188
Adjustments for:
Interest received (14,390) (14,390)
Dividends received (7,200) (5,000)
Net loss on investments at fair value through profit or loss 7,711 67
------------------------------------------------------------- ----- ----------- -----------
Operating cash flows before movements in working capital (3,164) (3,135)
(Increase)/decrease in receivables (11) 2
(Decrease)/increase in payables (184) 19
------------------------------------------------------------- ----- ----------- -----------
Net cash outflow from operating activities (3,359) (3,114)
------------------------------------------------------------- ----- ----------- -----------
Investing activities
Interest received 14,390 14,390
Dividends received 7,200 5,000
------------------------------------------------------------- ----- ----------- -----------
Net cash generated from investing activities 21,590 19,390
------------------------------------------------------------- ----- ----------- -----------
Financing activities
Expenses relating to issue of shares 12 (95) -
Dividends paid 6 (18,343) (16,364)
------------------------------------------------------------- ----- ----------- -----------
Net cash outflow from financing activities (18,438) (16,364)
------------------------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (207) (88)
Cash and cash equivalents at beginning of period 1,762 1,849
------------------------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of period 1,555 1,761
------------------------------------------------------------- ----- ----------- -----------
The accompanying notes form an integral part of the condensed
set of financial statements.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
for the six months ended 30 September 2020
1. General information
JLEN Environmental Assets Group Limited (the "Company" or
"JLEN") is a closed--ended investment company domiciled and
incorporated in Guernsey, Channel Islands, under Section 20 of the
Companies (Guernsey) Law, 2008. The shares are publicly traded on
the London Stock Exchange under a premium listing. The condensed
unaudited financial statements of the Company are for the
six--month period ended 30 September 2020 and have been prepared on
the basis of the accounting policies set out below. The financial
statements comprise only the results of the Company as its
investment in JLEN Environmental Assets Group (UK) Limited ("UK
HoldCo") is measured at fair value as detailed in the significant
accounting policies below. The Company and its subsidiaries invest
in environmental infrastructure projects that utilise natural or
waste resources or support more environmentally friendly approaches
to economic activity.
2. Significant accounting policies
(a) Basis of preparation
The condensed set of financial statements were approved and
authorised for issue by the Board of Directors on 25 November 2020.
The condensed set of financial statements included in this
Half--year Report have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU and issued by the
IASB. The accounting policies, significant judgements, key
assumptions and estimates are consistent with those used in the
latest audited financial statements to 31 March 2020 and should be
read in conjunction with the Company's annual audited financial
statements for the year ended 31 March 2020.
As a result of adopting the amendments to IFRS 10, IFRS 12 and
IAS 28 first adopted in the Company's Annual Report to 31 March
2015, the Company is required to hold its subsidiaries that provide
investment services at fair value, in accordance with IFRS 9
Financial Instruments: Recognition and Measurement, and IFRS 13
Fair Value Measurement.
The Company accounts for its investment in its wholly owned
direct subsidiary UK HoldCo at fair value. The Company, together
with its wholly owned direct subsidiary UK HoldCo and the
intermediate holding subsidiary HWT Limited, comprise the Group
(the "Group") investing in environmental infrastructure assets.
The net assets of the intermediate holding companies (comprising
UK HoldCo and HWT Limited), which at 30 September 2020 principally
comprise working capital balances, the bank loan and investments in
projects, are required to be included at fair value in the carrying
value of investments.
The condensed unaudited financial statements incorporate the
financial statements of the Company only.
(b) Going concern
The Directors, in their consideration of going concern, have
reviewed comprehensive cash flow forecasts prepared by the
Company's Investment Adviser, Foresight Group, which are based on
prudent market data and believe, based on those forecasts and an
assessment of the Company's subsidiary's banking facilities, that
it is appropriate to prepare the financial statements of the
Company on the going concern basis.
In arriving at their conclusion, the impact of the Covid-19
pandemic on operations and going concern has been assessed by the
Directors. To date, there has not been a material impact on the
Group's operations or supply chain. The Directors have noted that
there has been a negative impact on power prices and that this is
expected to continue in the short term and is largely due to a
reduction in demand for electricity; however, this is not expected
to be significant enough to cause any going concern issue. The
Directors also considered that the Company has adequate financial
resources, and were mindful that the Group had unrestricted cash of
GBP12.8 million (including GBP1.6 million in the Company) as at 30
September 2020 and a revolving credit facility (available for
investment in new or existing projects and working capital) of
GBP170 million and an uncommitted accordion facility of up to GBP20
million expiring in June 2021.
As at 30 September 2020, the Company's wholly owned subsidiary
UK HoldCo had borrowed GBP42.4 million under the facility. All key
financial covenants under this facility are forecast to continue to
be complied with for at least 12 months from the date of signing of
the condensed unaudited financial statements.
The Directors are satisfied that the Company has sufficient
resources to continue to operate for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing these financial statements.
(c) Segmental reporting
The Board is of the opinion that the Company is engaged in a
single segment of business, being investment in environmental
infrastructure to generate investment returns while preserving
capital. The financial information used by the Board to allocate
resources and manage the Company presents the business as a single
segment comprising a homogeneous portfolio.
(d) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey)
Law, 1987 the Company is a registered closed--ended investment
scheme. As a registered scheme, the Company is subject to certain
ongoing obligations to the Guernsey Financial Services Commission,
and is governed by the Companies (Guernsey) Law, 2008 as
amended.
3. Seasonality
Neither operating income nor profit are impacted significantly
by seasonality. While meteorological conditions resulting in
fluctuation in the levels of wind and sunlight can affect revenues
of the Company's environmental infrastructure projects, due to the
diversified mix of projects, these fluctuations do not materially
affect the Company's operating income or profit.
4. Operating expenses
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
(unaudited) (unaudited)
GBP'000s GBP'000s
----------------------------- ----------- -----------
Investment advisory fees 2,672 2,685
Directors' fees and expenses 133 125
Administration fee 52 51
Other expenses 307 274
----------------------------- ----------- -----------
3,164 3,135
----------------------------- ----------- -----------
5. Tax
Income tax expense
The Company has obtained exempt status from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989. JLEN is charged an annual exemption fee of GBP1,200.
The income from its investments is therefore not subject to any
further tax in Guernsey, although the investments provide for and
pay taxation at the appropriate rates in the jurisdictions in which
they operate. The underlying tax within the subsidiaries and
environmental infrastructure assets, which are held as investments
at fair value through profit or loss, is included in the estimate
of the fair value of these investments.
6. Dividends
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
(unaudited) (unaudited)
GBP'000s GBP'000s
------------------------------------------------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity holders during the period (pence per share):
Final dividend for the year ended 31 March 2020 of 1.665 (31 March 2019: 1.6275) 9,103 8,089
Interim dividend for the quarter ended 30 June 2020 of 1.690 (30 June 2019: 1.665) 9,240 8,275
------------------------------------------------------------------------------------------- ----------- -----------
18,343 16,364
------------------------------------------------------------------------------------------- ----------- -----------
A dividend for the quarter to 30 September 2020 of 1.69 pence
per share was approved by the Board on 25 November 2020 and is
payable on 30 December 2020. The dividend has not been included as
a liability at 30 September 2020.
7. Earnings per share
Earnings per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of ordinary shares in issue during the period:
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
(unaudited) (unaudited)
GBP'000s GBP'000s
-------------------------------------------------------- ----------- -----------
Earnings
Earnings for the purposes of basic and diluted earnings
per share, being net profit attributable to owners
of the Company 10,715 16,188
Number of shares
Weighted average number of ordinary shares for the
purposes of basic and diluted earnings per share 546,720,025 497,018,205
-------------------------------------------------------- ----------- -----------
The denominator for the purposes of calculating both basic and
diluted earnings per share is the same, as the Company has not
issued any share options or other instruments that would cause
dilution.
Six months Six months
ended ended
30 Sep 30 Sep
2020 2019
(unaudited) (unaudited)
--------------------------------------------- ----------- -----------
Basic and diluted earnings per share (pence) 2.0 3.3
--------------------------------------------- ----------- -----------
8. Investments at fair value through profit or loss
As set out in note 1, the Company accounts for its interest in
its 100% owned subsidiary UK HoldCo as an investment at fair value
through profit or loss. UK HoldCo in turn owns investments in
intermediate holding companies and environmental infrastructure
projects.
The table below shows the movement in the Company's investment
in UK HoldCo as recorded on the Company's statement of financial
position:
30 Sep 31 Mar
2020 2020
(unaudited) (audited)
GBP'000s GBP'000s
------------------------------------------------------- ----------- ---------
Fair value of environmental infrastructure investments 552,943 537,094
Fair value of intermediate holding companies (27,713) (4,153)
------------------------------------------------------- ----------- ---------
Total fair value of investments 525,230 532,941
------------------------------------------------------- ----------- ---------
Reconciliation of movement in fair value of portfolio of
assets
The table below shows the movement in the fair value of the
Company's portfolio of environmental infrastructure assets. These
assets are held through other intermediate holding companies. The
table below also presents a reconciliation of the fair value of the
asset portfolio to the Company's condensed unaudited statement of
financial position as at 30 September 2020, by incorporating the
fair value of these intermediate holding companies.
Six months to 30 Sep
2020 (unaudited) Year to 31 Mar 2020 (audited)
---------------------------------- ----------------------------------
Cash, working Cash, working
capital capital
and and
debt in debt in
intermediate intermediate
Portfolio holding Portfolio holding
value companies Total value companies Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------- --------- ------------- -------- --------- ------------- --------
Opening balance 537,094 (4,153) 532,941 523,558 (3,526) 520,032
Acquisitions
Portfolio of assets
acquired/further investment 24,911 - 24,911 60,276 - 60,276
Post-acquisition price
adjustments - - - (2,407) - (2,407)
----------------------------- --------- ------------- -------- --------- ------------- --------
24,911 - 24,911 57,869 - 57,869
Growth in portfolio(1) 15,383 - 15,383 629 - 629
Cash yields from portfolio
to intermediate holding
companies (24,445) 24,445 - (44,962) 44,962 -
----------------------------- --------- ------------- -------- --------- ------------- --------
Yields from intermediate
holding companies
Interest on loan notes(1) - (14,390) (14,390) - (28,701) (28,701)
Dividends from UK HoldCo
to the Company(1) - (7,200) (7,200) - (10,600) (10,600)
----------------------------- --------- ------------- -------- --------- ------------- --------
- (21,590) (21,590) - (39,301) (39,301)
Other movements
Investment in working
capital in UK HoldCo - (11,874) (11,874) - 11,189 11,189
Administrative expenses
borne by intermediate
holding companies(1) - (1,504) (1,504) - (4,819) (4,819)
Drawdown of UK HoldCo
revolving credit facility
borrowings - (13,037) (13,037) - (12,658) (12,658)
----------------------------- --------- ------------- -------- --------- ------------- --------
Fair value of the Company's
investment in UK HoldCo 552,943 (27,713) 525,230 537,094 (4,153) 532,941
----------------------------- --------- ------------- -------- --------- ------------- --------
(1) The net loss on investments at fair value through profit or
loss for the period ended 30 September 2020 is GBP7,711,000 (year
ended 31 March 2020: loss of GBP43,491,000, six-month period ended
30 September 2019: loss of GBP67,000). This, together with interest
received on loan notes of GBP14,390,000 (year ended 31 March 2020:
GBP28,701,000, six-month period ended 30 September 2019:
GBP14,390,000) and dividend income of GBP7,200,000 (year ended 31
March 2020: GBP10,600,000, six-month period ended 30 September
2019: GBP5,000,000) comprises operating income in the condensed
income statement.
The balances in the table above represent the total net movement
in the fair value of the Company's investment. The "cash, working
capital and debt in intermediate holding companies" balances
reflect investment in, distributions from or movements in working
capital and are not value generating.
Fair value of portfolio of assets
The Investment Adviser has carried out fair market valuations of
the investments as at 30 September 2020. The Directors have
satisfied themselves as to the methodology used and the discount
rates applied for the valuation. Investments are all investments in
environmental infrastructure projects and are valued using a
discounted cash flow methodology, being the most relevant and most
commonly used method in the market to value similar assets to the
Company's. The Company's holding of its investment in UK HoldCo
represents its interest in both the equity and debt instruments.
The equity and debt instruments are valued as a whole using a
blended discount rate and the value attributed to the equity
instruments represents the fair value of future dividends and
equity redemptions in addition to any value enhancements arising
from the timing of loan principal and interest receipts from the
debt instruments, while the value attributed to the debt
instruments represents the principal outstanding and interest due
on the loan at the valuation date.
In light of continued uncertainty around the impacts of Covid-19
on power prices and the recent volatility of projections, the Board
has approved the adoption of a third consultant's forecasts in its
valuations at 30 September 2020. This amendment to the blended
curve, along with adjustment to reflect capture discounts, provides
a robust valuation methodology that reduces the risk of volatility
from a single consultant deviating from general consensus. The
other valuation techniques and methodology have been applied
consistently with the valuation performed since the launch of the
Fund in March 2014.
Discount rates applied to the portfolio of assets range from
5.5% to 9.2% (weighted average 7.3%) (at 31 March 2020: from 6.0%
to 9.2% - weighted average 7.4%).
The following economic assumptions were used in the discounted
cash flow valuations:
30 Sep 2020 (unaudited) 31 Mar 2020 (audited)
---------------------------- ----------------------- ------------------------
UK - inflation rates 2.17% for 2020 2.17% for 2020 gradually
increasing to increasing to 2.75%
2.75% from 2025 from 2025
France - inflation rates 1.5% 1.5%
UK - deposit interest rates 1.75% for 2020,
0.5% to 2023 and gradually rising
1.5% thereafter to 2.5% from 2021
France - deposit rates 0.5% 0.5%
Euro/sterling exchange rate 1.10 1.12
---------------------------- ----------------------- ------------------------
The UK corporation tax rate assumed in the 30 September 2020
portfolio valuation is 19%, in line with market practice. The
equivalent rate for the French assets is 28%, stepping down to
26.5% in 2021 and 25.0% from 2022 (31 March 2020: step down to
26.5% in 2021 and 25% in 2022).
The assets in the intermediate holding companies substantially
comprise working capital, cash balances and the outstanding
revolving credit facility debt; therefore, the Directors consider
the fair value to be equal to the book values.
Details of investments made during the period
In April 2020, the Group announced an investment in the
Peacehill Farm anaerobic digestion plant, located in Wormit, Fife,
Scotland, for an aggregate amount of c.GBP11 million.
In September 2020, the Group acquired two operational low head
hydropower stations and an operational battery storage system for a
total consideration, including working capital, of GBP4.74 million.
The assets are located in Yorkshire and Cornwall.
In addition to the GBP1.4 million investment made in the
previous reporting period into FEIP, a further investment of GBP4.8
million has been provided to the vehicle for investment into a
construction stage Swedish wind farm and an operational Spanish
wind farm.
During the period, the Group also invested a further GBP1.4
million into existing projects to finance value enhancements.
9. Trade and other receivables
30 Sep 31 Mar
2020 2020
(unaudited) (audited)
GBP'000s GBP'000s
---------------- ----------- ---------
Prepayments 42 31
---------------- ----------- ---------
Closing balance 42 31
---------------- ----------- ---------
10. Trade and other payables
30 Sep 31 Mar
2020 2020
(unaudited) (audited)
GBP'000s GBP'000s
---------------- ----------- ---------
Accruals 1,536 1,720
---------------- ----------- ---------
Closing balance 1,536 1,720
---------------- ----------- ---------
11. Loans and borrowings
The Company had no outstanding loans or borrowings at 30
September 2020 (31 March 2020: none), as shown in the Company's
condensed statement of financial position.
The Company's immediate subsidiary, UK HoldCo, as Borrower, and
the Company, as Guarantor, benefit from a three--year revolving
credit facility (extended twice by one year) with HSBC, ING, NIBC
and Santander which provides for a committed revolving credit
facility of GBP170 million and an uncommitted accordion facility of
up to GBP20 million, expiring in June 2022. The facility margin is
200 to 225 bps (depending on the loan-to-value ratio for the Fund)
over LIBOR. The facility will be used to finance the acquisitions
of environmental infrastructure projects and to cover working
capital requirements.
As at 30 September 2020, UK HoldCo had an outstanding balance of
GBP42.4 million under the facility (31 March 2020: GBP29.3
million). The loan bears interest of LIBOR + 200 to 225 bps and is
intended to be repaid by proceeds from future capital raises.
As at 30 September 2020, the Company held loan notes of GBP318.9
million which were issued by UK HoldCo (31 March 2020: outstanding
amount of GBP318.9 million).
There were no other outstanding loans and borrowings in either
the Company, UK HoldCo or HWT at 30 September 2020.
12. Share capital account
30 Sep 2020 (unaudited) 31 Mar 2020 (audited)
------------------------- -----------------------
Number Number
of of
shares GBP'000s shares GBP'000s
----------------------------------- -------------- --------- ------------- --------
Opening balance 546,720,025 548,943 497,018,205 492,670
Shares issued in the period/year - - 49,701,820 57,157
Expenses of issue of equity shares - (95) - (884)
----------------------------------- -------------- --------- ------------- --------
Closing balance 546,720,025 548,848 546,720,025 548,943
----------------------------------- -------------- --------- ------------- --------
All new shares issued rank pari passu and include the right to
receive all future dividends and distributions declared, made or
paid.
13. Retained earnings
30 Sep 31 Mar
2020 2020
(unaudited) (audited)
GBP'000s GBP'000s
---------------------------------- ----------- ---------
Opening balance (15,929) 27,669
Profit/(loss) for the period/year 10,715 (10,683)
Dividends paid (18,343) (32,915)
---------------------------------- ----------- ---------
Closing balance (23,557) (15,929)
---------------------------------- ----------- ---------
14. Transactions with Investment Adviser and other related
parties
Transactions between the Company and its subsidiaries, which are
related parties of the Company, are fair valued and are disclosed
within note 8. Details of transactions between the Company and
other related parties are disclosed below.
This note also details the terms of the Company's engagement
with Foresight Group as Investment Adviser.
Transactions with the Investment Adviser
The Investment Adviser, Foresight Group, is entitled to a base
fee equal to:
a) 1.0% per annum of the Adjusted Portfolio Value(1) of the
Fund(2) up to and including GBP500 million; and
b) 0.8% per annum of the Adjusted Portfolio Value of the Fund in excess of GBP500 million.
The total Investment Adviser fee charged to the condensed
unaudited income statement for the six months ended 30 September
2020 was GBP2,672,000 (six-month period ended 30 September 2019:
GBP2,685,000) of which GBP1,339,000 remained payable as at 30
September 2020 (31 March 2020: GBP1,367,079).
(1) Adjusted Portfolio Value is defined in the Investment Advisory Agreement as:
a) the fair value of the investment portfolio; plus
b) any cash owned by or held to the order of the Fund; plus
c) the aggregate amount of payments made to shareholders by way
of dividend in the quarterly period ending on the relevant
valuation day, less
i. any other liabilities of the Fund (excluding borrowings); and
ii. any uninvested cash.
(2) Fund means the Company and JLEN Environmental Assets Group
(UK) Limited together with their wholly owned subsidiaries or
subsidiary undertakings (including companies or other entities
wholly owned by them together, individually or in any combination,
as appropriate) but excluding project entities.
Other transactions with related parties
The Directors of the Company, who are considered to be key
management, received fees for their services for the six--month
period of GBP132,254 (six-month period ended 30 September 2019:
GBP122,198). The Directors were paid expenses of GBP355 in the
six-month period (six-month period ended 30 September 2019:
GBP3,203).
The Directors held the following shares:
Total number Total number
of shares of shares
held held
at 30 Sep at 31 Mar
2020 2020
(unaudited) (audited)
---------------------------------------------- ------------ ------------
Richard Morse 103,535 103,535
Denise Mileham (resigned on 3 September 2020) - 32,340
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
Hans Joern Rieks - -
Stephanie Coxon - -
---------------------------------------------- ------------ ------------
All of the above transactions were undertaken on an arm's length
basis.
The Directors were paid dividends in the period of GBP7,367
(six-month period ended 30 September 2019: GBP8,214).
15. Financial instruments
Financial instruments by category
The Company held the following financial instruments at fair
value at 30 September 2020. There are no non--recurring fair value
measurements.
30 Sep 2020 (unaudited)
----------------------------------------------------------------------
Financial Financial
assets
Financial at fair
assets held value through liabilities
Cash and at amortised profit at amortised
bank balances cost or loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------------------------- -------------- ------------- -------------- ------------- --------
Levels 3
Non-current assets
Investments at fair value through profit or
loss - - 525,230 - 525,230
Current assets
Trade and other receivables - 42 - - 42
Cash and cash equivalents 1,555 - - - 1,555
---------------------------------------------- -------------- ------------- -------------- ------------- --------
Total financial assets 1,555 42 525,230 - 526,827
---------------------------------------------- -------------- ------------- -------------- ------------- --------
Current liabilities
Trade and other payables - - - (1,536) (1,536)
---------------------------------------------- -------------- ------------- -------------- ------------- --------
Total financial liabilities - - - (1,536) (1,536)
---------------------------------------------- -------------- ------------- -------------- ------------- --------
Net financial instruments 1,555 42 525,230 (1,536) 525,291
---------------------------------------------- -------------- ------------- -------------- ------------- --------
31 Mar 2020 (audited)
--------------------------------------------------------------
Financial Financial
assets liabilities
Financial at fair at
assets
Cash and held at value through amortised
amortised profit
bank balances cost or loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------------------- ------------- --------- ------------- ----------- --------
Levels 3
Non-current assets
Investments at fair value through profit or loss - - 532,941 - 532,941
Current assets
Trade and other receivables - 31 - - 31
Cash and cash equivalents 1,762 - - - 1,762
------------------------------------------------- ------------- --------- ------------- ----------- --------
Total financial assets 1,762 31 532,941 - 534,734
------------------------------------------------- ------------- --------- ------------- ----------- --------
Current liabilities
Trade and other payables - - - (1,720) (1,720)
------------------------------------------------- ------------- --------- ------------- ----------- --------
Total financial liabilities - - - (1,720) (1,720)
------------------------------------------------- ------------- --------- ------------- ----------- --------
Net financial instruments 1,762 31 532,941 (1,720) 533,014
------------------------------------------------- ------------- --------- ------------- ----------- --------
The tables above provide an analysis of financial instruments
that are measured subsequent to their initial recognition at fair
value as follows:
-- Level 1: fair value measurements derived from quoted prices
(unadjusted) in active markets for identical assets or
liabilities;
-- Level 2: fair value measurements derived from inputs other
than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
-- Level 3: fair value measurements derived from valuation
techniques that include inputs to the asset or liability that are
not based on observable market data (unobservable inputs).
There were no transfers between Level 1 and 2, Level 1 and 3, or
Level 2 and 3 during the period.
In the above tables, financial instruments are held at carrying
value as an approximation to fair value unless stated
otherwise.
Reconciliation of Level 3 fair value measurement of financial
assets and liabilities
An analysis of the movement between opening to closing balances
of the investments at fair value through profit or loss is given in
note 8.
The fair value of the investments at fair value through profit
or loss includes the use of Level 3 inputs. Please refer to note 8
for details on the valuation methodology.
Sensitivity analysis of the portfolio
The discount rate is considered the most significant
unobservable input through which an increase or decrease would have
a material impact on the fair value of the investments at fair
value through profit or loss.
The sensitivity of the portfolio to movements in the discount
rate is as follows:
30 Sep 2020 (unaudited)
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 7.3% Plus 0.5%
Change in portfolio valuation Increases GBP20.0m GBP552.9m Decreases GBP18.4m
Change in NAV per share Increases 3.7p 96.1p Decreases 3.4p
----------------------------- ------------------ --------- ------------------
31 Mar 2020 (audited)
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 7.4% Plus 0.5%
Change in portfolio valuation Increases GBP19.6m GBP537.1m Decreases GBP18.5m
Change in NAV per share Increases 3.6p 97.5p Decreases 3.4p
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in long-term
inflation rates is as follows:
30 Sep 2020 (unaudited)
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 1.75% Plus 0.5%
Change in portfolio valuation Decreases GBP20.3m GBP552.9m Increases GBP21.2m
Change in NAV per share Decreases 3.7p 96.1p Increases 3.9p
----------------------------- ------------------ ---------- ------------------
31 Mar 2020 (audited)
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP21.4m GBP537.1m Increases GBP22.3m
Change in NAV per share Decreases 3.9p 97.5p Increases 4.1p
----------------------------- ------------------ ---------- ------------------
Wind and solar assets are subject to electricity price and
electricity generation risks. The sensitivities of the investments
to movements in the level of electricity output and electricity
price are as follows:
The fair value of the investments is based on a "P50" level of
electricity generation for the renewable energy assets, being the
expected level of generation over the long term.
The sensitivity of the portfolio to movements in energy yields
based on an assumed "P90" level of electricity generation (i.e. a
level of generation that is below the "P50", with a 90% probability
of being exceeded) and an assumed "P10" level of electricity
generation (i.e. a level of generation that is above the "P50",
with a 10% probability of being achieved) is as follows:
30 Sep 2020 (unaudited)
----------------------------- ------------------ --------- ------------------
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP28.4m GBP552.9m Increases GBP28.7m
Change in NAV per share Decreases 5.2p 96.1p Increases 5.2p
----------------------------- ------------------ --------- ------------------
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP7.8m GBP552.9m Increases GBP8.3m
Change in NAV per share Decreases 1.4p 96.1p Increases 1.5p
----------------------------- ----------------- --------- -----------------
31 Mar 2020 (audited)
----------------------------- ------------------ --------- ------------------
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP28.7m GBP537.1m Increases GBP29.0m
Change in NAV per share Decreases 5.2p 97.5p Increases 5.3p
----------------------------- ------------------ --------- ------------------
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP8.0m GBP537.1m Increases GBP8.3m
Change in NAV per share Decreases 1.5p 97.5p Increases 1.5p
----------------------------- ----------------- --------- -----------------
The sensitivity of the portfolio to movements in electricity and
gas prices is as follows:
30 Sep 2020 (unaudited)
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP29.4m GBP552.9m Increases GBP29.3m
Change in NAV per share Decreases 5.4p 96.1p Increases 5.4p
----------------------------- ------------------ --------- ------------------
31 Mar 2020 (audited)
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP26.8m GBP537.1m Increases GBP26.7m
Change in NAV per share Decreases 4.9p 97.5p Increases 4.9p
----------------------------- ------------------ --------- ------------------
Waste & wastewater assets (excluding Bio Collectors) do not
have significant volume and price risks and therefore are not
included in the above volume and price sensitivities.
The sensitivity of the portfolio to movements in AD feedstock
prices is as follows:
30 Sep 2020 (unaudited)
----------------------------- ----------------- --------- -----------------
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases GBP8.0m GBP552.9m Decreases GBP8.1m
Change in NAV per share Increases 1.5p 96.1p Decreases 1.5p
----------------------------- ----------------- --------- -----------------
31 Mar 2020 (audited)
----------------------------- ----------------- --------- -----------------
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases GBP6.8m GBP537.1m Decreases GBP7.6m
Change in NAV per share Increases 1.2p 97.5p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
The sensitivity of the portfolio to movements in corporation tax
rates is as follows:
30 Sep 2020 (unaudited)
----------------------------- ----------------- --------- -----------------
Corporation tax Minus 2% Base 19% Plus 2%
Change in portfolio valuation Increases GBP7.7m GBP552.9m Decreases GBP7.6m
Change in NAV per share Increases 1.4p 96.1p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
31 Mar 2020 (audited)
----------------------------- ----------------- --------- -----------------
Corporation tax Minus 2% Base 19% Plus 2%
Change in portfolio valuation Increases GBP7.4m GBP537.1m Decreases GBP7.6m
Change in NAV per share Increases 1.4p 97.5p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
Euro/sterling exchange rate sensitivity
As the proportion of the portfolio assets with cash flows
denominated in euros represented less than 2% of the portfolio
value at 30 September 2020, the Directors consider the sensitivity
to changes in the euro/sterling exchange rate to be
insignificant.
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
16. Guarantees and other commitments
As at 30 September 2020, the Company has provided a guarantee
under the Company's wholly owned subsidiary UK HoldCo's GBP170
million revolving credit facility, due to expire in June 2022.
The Company had no other commitments or guarantees.
17. Subsidiaries
The following subsidiaries have not been consolidated in these
financial statements as a result of applying the requirements of
"Investment Entities: Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and IAS 27)":
Place of Registered Ownership Voting
Name Category business office interest rights
---------------------------------------------------- --------------------- --------- ----------- --------- ------
JLEN Environmental Assets Group (UK) Limited(1) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Operating subsidiary UK C 100% 100%
Croft Solar PV Limited Operating subsidiary UK C 100% 100%
Cross Solar PV Limited Operating subsidiary UK C 100% 100%
Domestic Solar Limited Operating subsidiary UK C 100% 100%
Ecossol Limited Operating subsidiary UK C 100% 100%
Hill Solar PV Limited Operating subsidiary UK C 100% 100%
Share Solar PV Limited Operating subsidiary UK C 100% 100%
Tor Solar PV Limited Operating subsidiary UK C 100% 100%
Residential PV Trading Limited Operating subsidiary UK C 100% 100%
South-Western Farms Solar Limited Operating subsidiary UK C 100% 100%
Angel Solar Limited Operating subsidiary UK C 100% 100%
Project holding
Easton PV Limited company UK D 100% 100%
Project holding
Pylle Solar Limited company UK D 100% 100%
Second Energy Limited Operating subsidiary UK D 100% 100%
Project holding
ELWA Holdings Limited company UK E 80% 80%
ELWA Limited(2) Operating subsidiary UK E 80% 81%(2)
Project holding
JLEAG Wind Holdings Limited company UK A 100% 100%
Project holding
JLEAG Wind Limited company UK A 100% 100%
Project holding
Amber Solar Parks (Holdings) Limited company UK F 100% 100%
Amber Solar Park Limited Operating subsidiary UK F 100% 100%
Operating subsidiary
Fryingdown Solar Park Limited (dormant) UK F 100% 100%
Operating subsidiary
Five Oaks Solar Parks Limited (dormant) UK F 100% 100%
Bilsthorpe Wind Farm Limited Operating subsidiary UK G 100% 100%
Project holding
Ferndale Wind Limited company UK G 100% 100%
Project holding
Castle Pill Wind Limited company UK G 100% 100%
Wind Assets LLP Operating subsidiary UK G 100% 100%
Hall Farm Wind Farm Limited Operating subsidiary UK G 100% 100%
Project holding
Branden Solar Parks (Holdings) Limited company UK F 100% 100%
Branden Solar Parks Limited Operating subsidiary UK F 100% 100%
KS SPV 3 Limited Operating subsidiary UK F 100% 100%
KS SPV 4 Limited Operating subsidiary UK F 100% 100%
Carscreugh Renewable Energy Park Limited Operating subsidiary UK G 100% 100%
Wear Point Wind Limited Operating subsidiary UK G 100% 100%
Project holding
Monksham Power Ltd company UK F 100% 100%
Frome Solar Limited Operating subsidiary UK F 100% 100%
BL Wind Limited Operating subsidiary UK G 100% 100%
Burton Wold Extension Limited Operating subsidiary UK G 100% 100%
New Albion Wind Limited Operating subsidiary UK G 100% 100%
Dreachmhor Wind Farm Limited Operating subsidiary UK G 100% 100%
Project holding
France Wind GP Germany GmbH company DE K 100% 100%
Project holding
France Wind Germany GmbH & Co. KG company DE K 100% 100%
Parc Eolien Le Placis Vert SAS Operating subsidiary FR I 100% 100%
Energie Eolienne de Plouguernével SAS Operating subsidiary FR J 100% 100%
Project holding
CSGH Solar Limited company UK A 100% 100%
Project holding
CSGH Solar (1) Limited company UK A 100% 100%
Project holding
sPower Holdco 1 (UK) Limited company UK D 100% 100%
Project holding
sPower Finco 1 (UK) Limited company UK D 100% 100%
Higher Tregarne Solar (UK) Limited Operating subsidiary UK D 100% 100%
Crug Mawr Solar Farm Limited Operating subsidiary UK D 100% 100%
Project holding
Golden Hill Solar (UK) Limited company UK D 100% 100%
Golden Hill Solar Limited Operating subsidiary UK D 100% 100%
Shoals Hook Solar (UK) Limited Operating subsidiary UK D 100% 100%
Project holding
CGT Investment Limited company UK L 100% 100%
CWMNI GWYNT TEG CYF Operating subsidiary UK L 100% 100%
Project holding
Moelogan 2 (Holdings) Cyfyngedig company UK L 100% 100%
Moelogan 2 C.C.C. Operating subsidiary UK L 100% 100%
Vulcan Renewables Limited Operating subsidiary UK M 100% 100%
Llynfi Afan Renewable Energy Park (Holdings) Limited Dormant UK G 100% 100%
Llynfi Afan Renewable Energy Park Limited Operating subsidiary UK G 100% 100%
Project holding
Bio Collectors Holdings Limited company UK H 70% 70%
Bio Collectors Limited Operating subsidiary UK H 70% 70%
Riverside Bio Limited Operating subsidiary UK H 70% 70%
Riverside AD Limited Operating subsidiary UK H 70% 70%
Project holding
Green Gas Oxon Limited company UK N 52.6% 52.6%
Icknield Gas Limited Operating subsidiary UK N 52.6% 52.6%
Egmere Energy Limited Operating subsidiary UK M 100% 100%
Grange Farm Energy Limited Operating subsidiary UK M 100% 100%
Biogas Meden Limited Operating subsidiary UK M 100% 100%
Project holding
Yorkshire Hydropower Holdings Limited company UK G 100% 100%
Yorkshire Hydropower Limited Operating subsidiary UK G 100% 100%
Project holding
Northern Hydropower Holdings Limited company UK G 100% 100%
Northern Hydropower Limited Operating subsidiary UK G 100% 100%
Project holding
Warren Power Limited company UK M 100% 100%
Warren Energy Limited Operating subsidiary UK M 100% 100%
Merlin Renewables Limited Operating subsidiary UK M 100% 100%
Project holding
JLEAG AD Limited company UK A 100% 100%
JLEN Holdings (Sky Blue) Limited Dormant UK A 100% 100%
FS 3 Holdco Limited Dormant UK A 100% 100%
---------------------------------------------------- --------------------- --------- ----------- --------- ------
(1) JLEN Environmental Assets Group (UK) Limited is the only entity directly held by the Company.
(2) ELWA Holdings Limited holds 81% of the voting rights and a
100% share of the economic benefits in ELWA Limited.
Registered offices
A. C/O Foresight Group LLP, The Shard, 32 London Bridge Street, London SE1 9SG, United Kingdom
B. 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ, United Kingdom
C. C/O Freetricity, 1 Filament Walk, Suite 203, Wandsworth, London SW18 4GQ, United Kingdom
D. Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF, United Kingdom
E. Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU, United Kingdom
F. Long Barn, Manor Courtyard, Stratton-on-the-Fosse, Radstock BA3 4QF, United Kingdom
G. C/O Res White Limited, Beaufort Court, Egg Farm Lane, Kings Langley WD4 8LR, United Kingdom
H. 10 Osier Way, Mitcham, Surrey CR4 4NF, United Kingdom
I. Parc Eolien le Placis Vert, Rue du Pre Long 35770 Vern Sur Seiche, France
J. 3 Rue Benjamin Delessert, 56104 Lorient Cedex 04, France
K. Steinweg 3-5, Frankfurt am Main, 60313, Germany
L. Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy LL28 5UN, United Kingdom
M. 10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD, United Kingdom
N. Friars Ford, Manor Road, Goring, Reading RG8 9EL, United Kingdom
18. Events after balance sheet date
A dividend for the quarter ended 30 September 2020 of 1.69 pence
per share was approved by the Board on 25 November 2020. Please
refer to note 6 for further details.
There are no other significant events since the year end which
would require to be disclosed.
COMPANY SUMMARY
Company information JLEN Environmental Assets Group Limited is a Guernsey--registered
closed--ended investment
company (registered number 57682) with a premium listing on the London Stock
Exchange
--------------------------------------- -----------------------------------------------------------------------------
Registered address Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR
--------------------------------------- -----------------------------------------------------------------------------
Ticker/SEDOL JLEN/BJL5FH8
--------------------------------------- -----------------------------------------------------------------------------
Company year end 31 March
--------------------------------------- -----------------------------------------------------------------------------
Dividend payments Quarterly in March, June, September and December
--------------------------------------- -----------------------------------------------------------------------------
Investment Adviser Foresight Group LLP, No OC300878, registered in England and Wales and
authorised and regulated
by the Financial Conduct Authority
--------------------------------------- -----------------------------------------------------------------------------
Company Secretary and Administrator Praxis Fund Services Limited, a company incorporated in Guernsey on 13 April
2005 (registered
number 43046)
--------------------------------------- -----------------------------------------------------------------------------
Market capitalisation GBP647.9 million at 30 September 2020
--------------------------------------- -----------------------------------------------------------------------------
Investment Adviser fees 1.0% per annum of the Adjusted Portfolio Value of the investments up to
GBP0.5 billion, falling
to 0.8% per annum for investments above GBP0.5 billion.
No performance or acquisitions fees
--------------------------------------- -----------------------------------------------------------------------------
ISA, PEP and SIPP status The ordinary shares are eligible for inclusion in PEPs and ISAs (subject to
applicable subscription
limits) provided that they have been acquired in the market, and they are
permissible assets
for SIPPs
--------------------------------------- -----------------------------------------------------------------------------
AIFMD status The Company is classed as a self--managed Alternative Investment Fund under
the European Union's
Alternative Investment Fund Managers Directive
Non-mainstream pooled investment status The Board conducts the Company's affairs, and intends to continue to conduct
the Company's
affairs, such that the Company would qualify for approval as an investment
trust if it were
resident in the United Kingdom. It is the Board's intention that the Company
will continue
to conduct its affairs in such a manner and that independent financial
advisers should therefore
be able to recommend its ordinary shares to ordinary retail investors in
accordance with the
FCA's rules relating to non--mainstream investment products
--------------------------------------- -----------------------------------------------------------------------------
FATCA The Company has registered for FATCA and has a GIIN number
2BN95W.99999.SL.831
--------------------------------------- -----------------------------------------------------------------------------
Investment policy The Company's investment policy is set out on pages 37 to 39 of the 2020
Annual Report and
is detailed on page 65 of the Company's Prospectus dated 23 February 2018
--------------------------------------- -----------------------------------------------------------------------------
Website www.jlen.com
--------------------------------------- -----------------------------------------------------------------------------
DIRECTORS AND ADVISERS
Directors
Richard Morse (Chairman)
Peter Neville
Richard Ramsay
Hans Joern Rieks
Stephanie Coxon
Denise Mileham (resigned on 3 September 2020)
Administrator to the Company, Company Secretary and registered
office
Praxis Fund Services Limited
Sarnia House
Le Truchot
St Peter Port
Guernsey GY1 1GR
Channel Islands
Registrar
Link Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
UK transfer agent
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent B43 4TU
United Kingdom
Auditor
Deloitte LLP
Regency Court
Glategny Esplanade
St Peter Port
Guernsey GY1 3HW
Channel Islands
Investment Adviser
Foresight Group LLP
The Shard
32 London Bridge Street
London SE1 9SG
United Kingdom
Public relations
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE
United Kingdom
Corporate broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Corporate bankers
HSBC
PO Box 31
St Peter Port
Guernsey GY1 3AT
Channel Islands
GLOSSARY OF KEY TERMS
AD
anaerobic digestion
AIFM Directive
the EU Alternative Investment Fund Managers Directive (No.
2011/61/EU)
bps
basis points
Brexit
the UK referendum on 23 June 2016 in which a majority of voters
voted to exit the EU
the Company or JLEN or the Fund
JLEN Environmental Assets Group Limited (formerly John Laing
Environmental Assets Group Limited)
EU
European Union
FiT
the Feed--in Tariff
Foresight Group or Foresight
Foresight Group LLP
gross project value
the fair market value of the investment interests held in a
project as increased by the amount of any financing in the relevant
project entity
Group
JLEN Environmental Assets Group Limited and its intermediate
holding companies UK HoldCo and HWT Limited
GWh
gigawatt hour
intermediate holding companies
companies within the Group which are used as pass-through
vehicles to invest in underlying environmental infrastructure
assets, namely UK HoldCo and HWT Limited
Investment Adviser
Foresight Group (since 1 July 2019)
IPO
Initial Public Offering
IRR
internal rate of return
MWe
megawatt electric
MWh
megawatt hour
MWth
megawatt thermal
NAV
Net Asset Value
portfolio
the 32 assets in which JLEN had a shareholding as at 30
September 2020
portfolio valuation
the sum of all the individual investments' net present
values
PPAs
Power Purchase Agreements
PPP/PFI
the Public Private Partnership procurement model
price cannibalisation
the depressive influence on the wholesale power price at timings
of high output from intermittent weather-driven generation such as
solar and wind
PV
photovoltaic
RHI
Renewable Heat Incentive
ROCs
Renewables Obligation Certificates
SPV
special purpose vehicle
total shareholder return
total shareholder return combines the share price movement and
dividends since IPO expressed as an annualised percentage
UK HoldCo
JLEN Environmental Assets Group (UK) Limited, wholly owned
subsidiary of JLEN Environmental Assets Group Limited
WADR
the weighted average discount rate
CAUTIONARY STATEMENT
Pages 01 to 39 of the Half-year Report, including about us, our
purpose, at a glance, portfolio at a glance, market opportunities,
the Chairman's statement, fund objectives, risk and risk
management, investment portfolio and valuation, operational review,
sustainability and ESG and financial review (together, the review
section) have been prepared solely to provide additional
information to shareholders to assess JLEN's strategies and the
potential for those strategies to succeed. These should not be
relied on by any other party or for any other purpose.
The review section may include statements that are, or may be
deemed to be, "forward-looking statements". These forward--looking
statements can be identified by the use of forward--looking
terminology, including the terms "believes", "estimates",
"anticipates", "forecasts", "projects", "expects", "intends",
"may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology.
These forward--looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this report and include statements regarding the intentions,
beliefs or current expectations of the Directors and the Investment
Adviser concerning, amongst other things, the investment objectives
and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity,
prospects, opportunities and distribution policy of the Company and
the markets in which it invests.
These forward--looking statements reflect current expectations
regarding future events and performance and speak only as at the
date of this report. By their nature, forward--looking statements
involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the
future.
Forward--looking statements are not guarantees of future
performance or results and will not necessarily be accurate
indications of whether or not or the times at or by which such
performance or results will be achieved. The Company's actual
investment performance, results of operations, financial condition,
liquidity, prospects, opportunities, distribution policy and the
development of its financing strategies may differ materially from
the impression created by the forward--looking statements contained
in this report.
Subject to their legal and regulatory obligations, the Directors
and the Investment Adviser expressly disclaim any obligations to
update or revise any forward--looking statement contained herein to
reflect any change in expectations with regard thereto or any
change in events, conditions or circumstances on which any
statement is based.
In addition, the review section may include target figures for
future financial periods. Any such figures are targets only and are
not forecasts.
This Half--year Report has been prepared for the Group as a
whole and therefore gives greater emphasis to those matters which
are significant to JLEN Environmental Assets Group Limited and its
subsidiary undertakings when viewed as a whole.
END
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END
IR KKPBKOBDDKDB
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