TIDMJLEN
RNS Number : 1345U
Jlen Environmental Assets Grp
21 November 2019
21 November 2019
JLEN Environmental Assets Group Limited (formerly John Laing
Environmental Assets Group Limited)
Announcement of half-year results for the period to 30 September
2019
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 2019]
Financial Highlights
-- Portfolio valuation as at 30 September 2019 of GBP543.6 m (31 March 2019: GBP523.6m)
-- NAV per ordinary share of 104.7 pence as at 30 September 2019
(31 March 2019: 104.7 pence), main growth drivers include portfolio
value enhancement and good portfolio performance offset by
reduction of energy price forecast
-- Further interim dividend of 1.665 pence per share declared
making total dividends declared for the six months to 30 September
2019 of 3.33 pence per share, in line with target set out in the
2019 Annual Report
-- Dividend cover of 1.1x on dividends declared during the period
-- Share price total return since IPO to 30 September 2019 of 59.8% (8.90% annualised)
Portfolio Highlights
-- One additional anaerobic digestion plant and a hydro /
battery storage project acquired during the period, further
diversifying the Company's portfolio
-- Diversified portfolio now 42% wind, 24% AD, 23% solar, 10%
waste and wastewater and 1% hydropower by value
-- Overall satisfactory portfolio performance and generation in
line with budget over the six months period
Financing Activity
-- Borrowing capacity increased to GBP170m in the period and
available until June 2022, of which GBP35.9m currently drawn
Dividend Timetable
Ex-dividend date 28 November 2019
Record date 29 November 2019
Payment date 20 December 2019
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 half-year report can also be
found 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
An analyst briefing will be held at 09:00 a.m. on 21 November
2019. To register for the briefing, 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
Chris Tanner
Chris Holmes +44(0)20 3667 8100
Winterflood Investment Trusts
Neil Langford
Chris Mills +44(0)20 3100 0000
Newgate Communications
Elisabeth Cowell
Ian Silvera
Megan Kovach +44(0) 20 3757 6880
About us
JLEN Environmental Assets Group Limited ("JLEN" or the
"Company") is an environmental infrastructure investment fund which
aims to provide shareholders with a sustainable dividend, paid
quarterly, that increases progressively in line with inflation, 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 2019, the portfolio included onshore wind, PV
solar, anaerobic digestion, waste and 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 and
wastewater processing projects benefit from long--term contracts
backed by the UK Government.
AT A GLANCE AT 30 SEPTEMBER 2019
GBP586.5m
Market capitalisation
118.0p
Share price
3.33p
Half-year dividend per share
GBP520.2m
Net Asset Value
104.7p
Net Asset Value per share
GBP543.6m
Portfolio value
Highlights
-- Dividend of 3.33 pence per share declared for the six months
to 30 September 2019 (six months to 30 September 2018: 3.255
pence). Dividend cover of 1.1x in the period
-- NAV per share 104.7 pence, unchanged from 104.7 pence per share at 31 March 2019
-- Profit before tax for the period of GBP16.2 million
(six--month period ended 30 September 2018: GBP16.1 million)
-- Total shareholder return since IPO to 30 September 2019 of 59.8% (8.90% annualised)
-- Performance of portfolio satisfactory. Positive contribution
from growing anaerobic digestion segment
-- Two acquisitions completed and capital upgrade investments
during the period totalling c.GBP21.5 million giving a total of 30
investments
-- Major capital upgrade of c.GBP8.5 million near completion for
the Vulcan Renewables plant. Expected to be fully operational later
in 2019. Further enhancements of the AD portfolio planned
-- Strong pipeline of environmental infrastructure assets for further growth
Portfolio at a GlancE
JLEN's portfolio comprises a fully operational and diversified
mix of environmental infrastructure assets.
Wind Ownership interest
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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
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 Feed--in Tariff ("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
Anaerobic digestion Ownership interest
-------------------------------------------------------------------------------------------------- ------------------
Biogas Meden
Biogas--to--grid anaerobic digestion plant. Accredited under both the Renewable Heat Incentive
("RHI") and FiT, c.5MW(th) and 0.4MWe. 100%
-------------------------------------------------------------------------------------------------- ------------------
Egmere Energy
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MW(th) and 0.5MW(e) . 100%
-------------------------------------------------------------------------------------------------- ------------------
Grange Farm
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MW(th) and 0.5MW(e) . 100%
-------------------------------------------------------------------------------------------------- ------------------
Icknield Farm(1)
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MW(th) and 0.4MW(e) . 53%
-------------------------------------------------------------------------------------------------- ------------------
Merlin Renewables
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MW(th) and 0.5MW(e) . 100%
-------------------------------------------------------------------------------------------------- ------------------
Vulcan Renewables
Agricultural biogas--to--grid anaerobic digestion plant. Accredited under both the RHI and
FiT, c.5MW(th) and 0.5MW(e) . 100%
-------------------------------------------------------------------------------------------------- ------------------
Warren Energy
Produces biomethane to be injected to the national gas grid with a thermal capacity of c.5MW(th)
. 100%
-------------------------------------------------------------------------------------------------- ------------------
7 assets
35.0 MW
Waste & wastewater Ownership interest
------------------------------------------------------------------------------------------------ ------------------
Dumfries & Galloway ("D&G")
Project in liquidation. 80%
------------------------------------------------------------------------------------------------ ------------------
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
Hydro Ownership interest
-------------------------------------------------------------------------------------------- ------------------
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%
-------------------------------------------------------------------------------------------- ------------------
1 asset
2 MW
(1) JLEN also provides a senior secured loan facility to the project.
Fund objectives
The Fund's key objectives and the measures against which they
are assessed are summarised below:
Strategic PRINCIPAL RISKS for details see pages 52 to 58 of the
objectives Key Performance Indicators 2019 Annual Report
----------------- ---------------------------------------------------------- ----------- ---------------------------------------------------------
Predictable 3.33p
income growth for * Dividend uplifted by 2.3% for inflation from 1 April dividend * Volume of resource
shareholders 2019 declared
Provide investors for half
with a dividend year to 30 * Power prices
of 6.66 pence per * 3.33 pence dividend declared for the half year September
share for the 2019
year to 31 March 6.66p * Inflation
2020, thereafter dividend
increasing target for
progressively in year to 31 * Changes in the legislative and regulatory framework
line with March 2020 that affect renewables and PPP projects
inflation.
* Operational risks in the portfolio
----------------- ---------------------------------------------------------- ----------- ---------------------------------------------------------
Preservation of GBP520.2m
capital over the * NAV per share 104.7 pence, unchanged from 104.7 penc Net Asset * Valuation risks (volume/energy
longer term e Value prices/inflation/feedstock costs/operational
To preserve the at 31 March 2019 104.7p performance)
capital value of Net Asset
the portfolio Value per
over the long * Portfolio value GBP543.6 million, up 3.8% from share * Lack of future pipeline and/or funding
term on a real GBP523.6 million at 31 March 2019
basis through
active management * Increased competition
of the portfolio * Main growth drivers include portfolio value
and the enhancement and good portfolio performance, offset b
reinvestment of y * Changes in the legislative and regulatory framework
cash flows not reduction of energy price forecast that affect renewables and PPP projects
required for the
payment of
dividends.
----------------- ---------------------------------------------------------- ----------- ---------------------------------------------------------
Investment, 30 GBP543.6m
growth and project investments portfolio * Lack of future pipeline and/or funding
diversification value
To invest in * Predominantly UK portfolio balanced by sector: 42% 286.2MW
operational wind, 24% AD, 23% solar, 10% waste & wastewater and total * Increased competition
environmental 1% hydropower diversified
infrastructure capacity
projects in OECD * Changes in the legislative and regulatory framework
countries with * 30 project investments that affect renewables and PPP projects
established
technologies,
operational track * Largest individual asset 8% (limit 25%)
records and that
have the benefit
of long--term, * Revenue mix: 36% merchant power, 50% green benefits,
predictable, 14% PFI
wholly or
partially
inflation--linked
cash flows
supported by
long--term
contracts or
stable
regulatory
frameworks.
----------------- ---------------------------------------------------------- ----------- ---------------------------------------------------------
Underpinned by: Generation of total return to shareholders over the longer term.
Environmental, social and governance ("ESG") read more Target an IRR of 7.5% to 8.5% (net of fees and expenses) on the
below and corporate governance read more on pages 72 to 95 of the 2019 Annual original issue price of the
Report. shares over the longer term.(1)
----------------------------------------------------------------------------- ----------------------------------------------------------------------
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
Chairman's statement
JLEN has had another six months of solid underlying performance
combined with share price growth. The inclusion of hydro and
battery assets strengthens JLEN's position as the most diversified
fund within the listed renewable infrastructure sector.
Timeline
May 19
-- Extended the rolling credit facility for a further year to
June 2022 and increased borrowing capacity by GBP40 million to
GBP170 million
June 19
-- Announced target dividend of 6.66 pence for 2019/20, increased from 6.51 pence for 2018/19
-- Paid a dividend of 1.6275 pence per share (relating to the
three-month period ended 31 March 2019)
July 19
-- Completed the acquisition of two operational low head
hydropower stations and a battery storage system for a total
consideration of GBP4.3 million. This represents the Company's
first investment in two new sectors
August 19
-- Completed the acquisition of Warren Energy anaerobic
digestion plant for an initial consideration of GBP14.8 million
subject to additional deferred payments up to GBP0.8 million
September 19
-- Paid a dividend of 1.665 pence per share (relating to the
three-month period ended 30 June 2019)
October 19
-- JLEN has been awarded the new Green Economy Mark by the
London Stock Exchange, which identifies London-listed companies and
funds that generate between 50% and 100% of total annual revenues
from products and services that contribute to the global green
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 2019.
Results
During the period under review, the Company's portfolio has
performed satisfactorily. The Company has acquired two UK projects
during the period covering three asset classes - one which combines
hydro with battery storage and an additional anaerobic digestion
("AD") project. Both have high levels of subsidy support, reducing
exposure to electricity and gas prices, which can be volatile, as
evidenced by further reductions in future forecasts.
JLEN's profit before tax for the six-month period to 30
September 2019 was GBP16.2 million (six months to 30 September
2018: GBP16.1 million) and earnings per share for the period was
3.3 pence (six months to 30 September 2018: 4.1 pence). The Board
continues to believe that the portfolio is well positioned to
deliver the target returns to shareholders.
The Net Asset Value ("NAV") per share at 30 September 2019 was
104.7 pence, unchanged from 104.7 pence at 31 March 2019 despite
reductions 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 GBP22.8
million (six months to 30 September 2018: GBP20.7 million).
Net cash inflows from the investment portfolio (after operating
and finance costs) of GBP18.5 million (six months to 30 September
2018: GBP16.7 million) cover the interim dividends paid in the
half-year period of GBP16.4 million by approximately 1.1 times (six
months to 30 September 2018: GBP12.6 million; 1.3 times). On a
dividend-declared basis for the half year, dividend cover was 1.1
times.
In recognition of the fact that JLEN derives 100% of its annual
revenues from assets that contribute to the global green economy, I
am pleased to note that the Company has been accredited with the
London Stock Exchange's Green Economy Mark. This will assist
investors in identifying companies that make such a contribution
and we continue to explore ways to emphasise the ways that JLEN's
assets have a positive impact.
Dividend policy
For the year to 31 March 2019, the Company achieved its target
dividend of 6.51 pence per share by the payment of four interim
dividends.
In line with the total inflation adjusted target for the year
ending 31 March 2020 of 6.66 pence per share set out in our 2019
Annual Report, a quarterly dividend of 1.665 pence per share was
paid in September 2019 for the quarter to 30 June 2019. I am
pleased to announce that the Board has declared an interim dividend
of 1.665 pence per share for the quarter to 30 September 2019,
payable on 20 December 2019 to shareholders on the register as at
29 November 2019. The ex-dividend date will be 28 November
2019.
Portfolio performance
Total generation for the period from JLEN's diverse renewables
portfolio was 375GWh, 0.1% above budget. Above--budget performance
from the AD assets offset slightly below-budget generation from the
wind portfolio. The solar portfolio was broadly on budget.
The AD portfolio is now the second largest producer of energy
for the portfolio (40% by GWh energy generated) with the majority
of these assets performing well during the period. All plants were
around or ahead of their generation budgets with the exception of
Biogas Meden, which experienced some downtime for periods of
unplanned maintenance that should not reoccur. Generation figures
do not include the Warren Energy AD plant that was acquired at the
end of August. The Vulcan upgrade project to double the capacity of
the plant has made good progress and commenced performance testing
post the period end. This is a prime example of how JLEN can
enhance its operations and grow NAV post acquisition. It is due to
be completed later in 2019.
The wind portfolio (44% by GWh energy generated) experienced
poor wind conditions in the first part of the period, with May in
particular being a low wind speed month. The wind resource improved
in the second quarter, leaving the wind portfolio 2.1% below
budget. Availability was generally good across the portfolio, with
the exception of the sites operated by the German turbine
manufacturer Senvion, which entered insolvency proceedings during
the period. This was anticipated by the Company and a provision was
made at the start of the period for lower availability. Adjusting
for these sites, generation would have been on budget. The
Directors are pleased to see that a deal for Senvion's O&M
business seems to be progressing with Siemens Gamesa, and expect
performance to improve in due course once that deal has
completed.
The solar portfolio (15% by GWh energy generated) generated in
line with budget on irradiation that was 3.4% higher during the
period than the long-term average. The main detractor from
performance was a planned grid outage at Shoals Hook in April and
grid constraints in June and July for which a provision was made.
Adjusting for this, generation would have been 1.3% above budget.
The Branden sites also experienced various outages during the
period, the majority of which are expected to be covered by
insurance proceeds. The Investment Adviser continues to make
improvements to the Branden site to improve its resilience.
Performance for the rest of the portfolio was generally
satisfactory.
The run-of-river hydro assets acquired during the period have a
negligible impact on overall portfolio generation (<1% by GWh
energy generated). Nevertheless, performance has been strong and we
look forward to gaining more experience of the co--located battery
storage system at the Yorkshire-based site that may offer a model
for enhancing value on other grid--connected sites throughout the
portfolio.
Both concession-based waste management projects have continued
to perform in line with expectations. The ELWA waste management
project has continued to meet its key contractual targets. The ELWA
project relies in part on European off-takers for refuse--derived
fuel and recent developments, including the prospect of Brexit,
have put some pressure on this aspect. However, the project company
is protected by the contractual structure and this remains the
operator's risk. The Tay wastewater project experienced low flows
in the first part of the period, with high rainfall in more recent
months reversing this trend.
Investment Adviser
On 1 July 2019, the Investment Adviser to the Company changed
from John Laing Capital Management to Foresight Group. The existing
team that has been providing investment advice since JLEN's launch
in 2014 also transferred to Foresight Group. Although it is early
in our relationship with Foresight Group, the Directors have been
encouraged by Foresight Group's commitment to supporting the
existing team in their ongoing roles. The Company has also started
seeing the benefit of Foresight Group's greater depth of resource
in areas such as asset management, health and safety, and
origination, and we look forward to this continuing in the
future.
Acquisitions
During the period under review, the Company announced the
acquisitions set out below. JLEN has maintained price discipline in
considering new acquisitions, adding assets that have attractive
risk-adjusted returns against a backdrop of fierce competition
particularly in mainstream parts of the environmental
infrastructure market.
Yorkshire Hydropower portfolio
On 18 July 2019, the Company acquired the following assets for
GBP4.3 million including working capital:
-- Kirkthorpe hydro, a 500kW single turbine hydro project
located on the River Calder, which was commissioned on 21 November
2016;
-- Thrybergh hydro, a twin screw 260kW hydro project located on
the River Don, commissioned on 26 October 2015; and
-- a 1.2MW battery co-located at Thrybergh, commissioned in January 2018.
Both hydro projects are accredited under the 20-year Feed-in
Tariff scheme. The battery storage project at Thrybergh is
currently dedicated to a Firm Frequency Response contract but is
likely to switch to a trading strategy in the coming months.
Warren Energy Limited
On 28 August 2019, the Company acquired the Warren Energy AD
plant, located in Methwold, Norfolk. The plant was commissioned in
December 2015 and became operational in March 2016. The plant has a
thermal capacity of c.5MWth and predominantly produces biomethane
to be injected to the national gas grid. In addition, the plant
also has a 0.5MWe CHP engine and is accredited under the Renewable
Heat Incentive ("RHI") and FiT schemes.
Warren is JLEN's seventh investment into crop-fed gas--to-grid
AD plants and gives the Company considerable presence in this part
of the market. The Investment Adviser places particular emphasis on
operating track record in assessing opportunities, and this is
reflected in the performance of the AD portfolio to date.
Financing
JLEN benefits from a revolving credit facility ("RCF") with
HSBC, NIBC, ING and Santander that provides valuable flexibility
for the funding of asset acquisitions and consequent timing of
capital raising. During the period, in May 2019, JLEN further
extended the maturity of the facility for another year to June
2022, and increased the facility amount by GBP40 million. The RCF
is now a GBP170 million committed facility, putting JLEN in a
strong position when competing in the market for environmental
infrastructure assets.
At the date of issuing this report, GBP134.1 million is undrawn
and available to fund acquisitions.
Share capital
The Company has not issued new equity in the period. Investor
appetite for the renewable infrastructure sector has been strong
and JLEN has traded at a significant premium to NAV. This has been
supported by its 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 2019 is GBP520.2 million,
comprising GBP543.6 million portfolio valuation, GBP9.1 million of
cash held by the Group, together with outstanding revolving credit
debt of GBP35.9 million and a positive working capital balance of
GBP3.4 million.
The Investment Adviser has prepared a fair market valuation of
the portfolio as at 30 September 2019. 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.
For this valuation date, the Company has been able to draw upon
the current experience of Foresight Group in competing in relevant
environmental infrastructure markets. This has informed the
decision to lower the discount rate used to value JLEN's portfolio
of UK wind farms, which are established, conservatively geared
assets with demonstrable track records and so very attractive in
the current competitive environment. The Directors note increased
competition in other markets too, most notably the AD market where
new entrants are active, attracted by the high level of
inflation-linked subsidy revenues available to projects, but have
not changed discount rates. This will be reviewed at the next
valuation date, when the results of market sales processes will be
known.
The Directors have satisfied themselves as to the methodology
used and the assumptions adopted and have approved the valuation of
GBP543.6 million for the portfolio of 30 investments as at 30
September 2019.
Outlook
The outlook for the Company is positive and it is pleasing to
note that the Company's strategy of diversification has contributed
to a solid performance for the first six months of the year.
Despite complications in some parts of the portfolio, overall
performance has been in line with expectations as other parts of
the portfolio have compensated. Similarly, while power prices have
continued to decrease over the period from the highs seen in 2018,
the Company's strategy of targeting assets with relatively high
levels of subsidy revenues looks astute.
Diversification will remain important. In the period, two new
technologies in hydropower and battery storage were added to the
portfolio, and the Investment Adviser continues to assess
opportunities that would add to this, such as food waste projects,
biomass and energy from waste. We will not pursue diversification
for its own sake however, and will ensure that any new
opportunities that we pursue look sensible on a risk-adjusted
basis.
The greater investment management resources of Foresight Group
also open up other avenues for the Company. Foresight Group has a
footprint in several European countries and the Investment Adviser
is assessing whether environmental infrastructure assets in these
markets compare favourably to similar assets in the UK market. Wind
and solar assets remain expensive in most mature European markets,
but the Company's mandate provides the breadth to consider other
technologies. In doing so, proper consideration of how the assets
will be managed will be taken.
The Company may also consider a small allocation to construction
stage assets. This may include further upgrade projects to existing
assets such as the Vulcan upgrade, but also construction of
greenfield assets in sectors where construction risk is well
understood and commissioning risk is generally not great. We expect
these assets to provide higher returns and to contribute to
dividend cover once the initial construction period is complete.
There may also be scope to target larger assets in partnership with
other Foresight-managed funds. The maximum allocation to
construction stage assets is 15% of NAV however, and any investment
in this area will be comfortably within that constraint.
The Investment Adviser also continues to look for value
enhancements across the portfolio. Upgrades are now underway for
most of the wind assets within the portfolio and a range of small
enhancements to increase gas yield are also being pursued across
the AD portfolio. The Board continues to encourage the Investment
Adviser in this respect, and we remain committed to improving
returns from the existing portfolio, which we believe retains
significant potential.
Richard Morse
Chairman
20 November 2019
OPERATIONAL AND FINANCIAL REVIEW
Financial and operating performance of the portfolio has been
satisfactory, and steady progress has been made on matters
including the upgrade work at Vulcan and the future O&M
arrangements for windfarms currently serviced by Senvion.
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 2019 was 104.7 pence,
unchanged from 104.7 pence at 31 March 2019, despite reductions in
long--term electricity and gas price forecasts.
JLEN has announced an interim dividend of 1.665 pence per share
for the quarter ended 30 September 2019, payable on 20 December
2019, in line with the full--year target of 6.66 pence per share
for the year ending 31 March 2020 as set out in the 2019 Annual
Report.
Portfolio performance
Operating performance of the environmental infrastructure
portfolio during the six-month period ended 30 September 2019 was
generally satisfactory, with some exceptions. During the period,
the renewables segment of the portfolio produced 375GWh (six months
to 30 September 2018: 333GWh) of green energy. Wind generation was
2.1% below budget (six months to 30 September 2018: 12.7% negative
variance from budget), primarily due to poor availability for wind
farms where Senvion provides operations and maintenance services.
Solar generation was 0.6% below budget (six months to 30 September
2018: 1.6% above budget), driven by solar irradiation above
long--term average throughout the period and particularly in May
and August. The AD portfolio continued to outperform, with gas
generation 2.7% above budget (six months to 30 September 2018: 4.6%
above budget).
Wind
Electricity generation from the wind assets of 165GWh (which
represent 44% of the portfolio energy generation for the period)
was 2.1% below budget. Operational availability and average wind
speeds were largely in line with budget, with lower averages in the
first part of the period offset by better wind resource in the
second quarter. The four Senvion wind farms remained the primary
exceptions.
A number of turbines suffered prolonged outages as Senvion
struggled to provide satisfactory resources given their
well-publicised financial difficulties. The Company had anticipated
weaker performance of these assets at the start of the year and had
made a provision equivalent to a reduction in availability of 5%.
In the event that these wind farms had achieved normal levels of
availability, the wind portfolio would have achieved the budgeted
level of electricity production.
In recent weeks there has been a marked improvement since the
emergence of a potential agreement with Siemens Gamesa Renewable
Energy ("SGRE") for the sale of Senvion's European Onshore Services
business. The Investment Adviser continues to monitor the situation
closely but views the pending acquisition by SGRE as a positive
outcome. SGRE have a strong servicing presence throughout the UK, a
robust supply chain and a good performance record on the other
assets they manage within the JLEN portfolio.
Turbine optimisation packages were installed on a number of wind
farms during the period. While initial analysis indicates a clear
performance improvement as a result, further data is required
before the uplift can be definitively quantified. In addition to
those installed, agreement has been reached for a similar package
on an additional site. Timing of installation for that package
remains to be agreed and similar opportunities for the remaining
sites continue to be explored.
Operational life of one site was extended to reflect the
underlying land rights, in accordance with JLEN policy. Cost
reduction and rationalisation continue to play a major role in
driving operational efficiency. Increasingly competitive markets
for O&M and asset management services have seen a marked cost
reduction. As such, assumptions for post--contractual periods have
been reduced for both categories of service.
The Investment Adviser continues to explore additional
opportunities to enhance value, including data--driven turbine
performance management systems, continued cost reductions, battery
co-location, further life extension options, and financial hedging
opportunities to protect against volatile electricity pricing.
Solar
Generation from the solar assets (which represent 15% of the
portfolio energy generation for the period), at 56GWh, was 0.6%
below budget. The Investment Adviser worked to minimise the impact
of planned outages and grid constraints scheduled for the summer
months at Shoals Hook with the distribution network operator
("DNO"), for which a provision was made at the beginning of the
period. The eventual lost generation was about half that associated
with the original plans, and the solar portfolio would have been
1.3% above budget if Shoals Hook had not been affected.
Irradiation for the solar portfolio was 3.4% higher than the
long-term average forecast for the portfolio. The main reasons for
the discrepancy between irradiation and generation, apart from the
DNO works, were high temperatures negatively impacting the
performance of key components such as panels and inverters, and
some site-level performance issues where recovery is expected from
operators or insurers as appropriate. The majority of the issues
were experienced at the Branden sites, where the Investment Adviser
has now overseen significant improvement works, including
replacement of all dry-cast transformers and refurbishment of
inverter modules. Excluding the Branden sites, generation would
have been 3.4% above budget.
Anaerobic digestion
Overall, the AD portfolio generation performance for the half
year was 2.7% above budget in energy generation terms, with
generally good availability of the assets throughout the period.
Icknield continued to maintain its strong performance throughout
the period, exceeding budgeted performance by over 10%. Similarly,
Merlin, Grange and Vulcan also maintained strong overperformance
against budget. Vulcan in particular has shown good performance,
notwithstanding it has undergone a major construction activity on
site to facilitate its expansion project.
Biogas Meden, which was acquired in December 2018, has
experienced unplanned downtime during the half year, notably an
engine failure. The failure required a new engine replacement by
the service provider and returned to operational status in less
than two weeks. Overall, the generation performance for the half
year has been slightly below budget with a 1% negative
variance.
Wholesale gas price fixing has been achieved for over 60% of the
gas volumes for a number of sites with price hedging from December
2018 to December 2019, where gas prices peaked at favourable rates
(around 2.1 pence/kWh) versus current market wholesale prices of
just over 0.8 pence/kWh. A large portion of the portfolio will be
ending its hedged volume towards the end of December 2019 and
therefore the market for hedging future gas volumes has been
closely monitored. Gas prices, however, have remained suppressed
throughout the period. It is expected that prices will rise as the
UK enters the winter period.
Given the agricultural nature of the feedstock for the AD
plants, availability and cost of feedstock continues to be an
important aspect for the AD portfolio. After a difficult 2018
growing season for AD agricultural crops, as updated in the last
Annual Report, the outlook for 2019 has improved moderately. This
has been as a result of having reasonably good crop establishment
conditions in the early part of 2019, followed by a growing season
of spring and summer with on--target rainfall and heat units to
allow the crop to grow. Harvest commenced in September and it is
expected that the yields will be broadly in line with budget.
The Investment Adviser is also progressing on various
initiatives to improve feedstock cost resilience, as noted in the
Annual Report. This includes agreeing capital investment in
feedstock treatment technologies which will improve the conversion
efficiency of the feedstock into gas, agreeing capital investments
in centralised storage facilities for feedstocks to allow a "hub
and spoke" model for feedstock availability across the portfolio,
and ensuring long--term partnerships are formed and maintained with
key feedstock counterparty suppliers.
Waste and wastewater concessions
The PFI-backed waste and wastewater assets now represent only
10% of the portfolio by value. Waste tonnages at the ELWA waste
project have continued to be slightly above target. Operational
performance targets were exceeded with diversion from landfill at
99.69%, substantially ahead of the 67% contract target, and
recycling at 27.31%, also ahead of the 22% contract target. While
the operator has reported some off-take issues with disposing of
the project's residual refuse-derived fuel to European
counterparties, this remains the operator's risk. 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.
Rainfall at Tay, a key driver of wastewater flows through the
treatment plant, improved in the later months of the period. 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.
As reported in the 2019 Annual Report, the Dumfries and Galloway
project has been terminated and the Company expects to receive
proceeds from the winding up of the project company. BDO were
appointed as liquidators of the project company in July. It is
anticipated that the winding up process should be completed by the
end of JLEN's financial year. The Board expects Dumfries and
Galloway to be removed from the portfolio once this occurs.
Hydropower
The hydro portfolio was acquired during the period and has
generated c. 1 GWh in the period. This is 6.6% above the budget for
the assets, and although the level of generation is small given the
scale of JLEN's renewable generation portfolio, hydro introduces
further diversification in exposure to different weather resources.
The presence of a co-located battery storage system on one of the
hydro sites is also an interesting development and it is already
providing information relevant to assessing the feasibility of
rolling out further battery systems at other sites in the
portfolio.
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:
Portfolio generation 2014/15 2015/16 2016/17 2017/18 2018/19 HY 2019/20 Total
------------------------------------------------- ------- ------- ------- ------- ------- ---------- -----
Wind portfolio actual generation (GWh(e) ) 82 184 217 399 405 165 1,452
Variation from budget(1) -7% +11% -15% 0% -9% -2% -5%
------------------------------------------------- ------- ------- ------- ------- ------- ---------- -----
Solar portfolio actual generation (GWh(e) ) 10 30 40 64 79 56 279
Variation from budget(1) -1% -2% -12% -9% +2% -1% -4%
------------------------------------------------- ------- ------- ------- ------- ------- ---------- -----
AD portfolio actual generation (GWh(th) ) - - - 51 262 153 466
Variation from budget - - - +8% +4% +3% +4%
------------------------------------------------- ------- ------- ------- ------- ------- ---------- -----
Hydropower portfolio actual generation (GWh(e) ) - - - - - 1 1
Variation from budget - - - - - +7% +7%
------------------------------------------------- ------- ------- ------- ------- ------- ---------- -----
(1) Budgets adjusted to reflect operational energy yield
assessments carried out under contracted true-up mechanisms post
IPO.
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 2019 was GBP86 per MWh(e) for
onshore wind (year ended 31 March 2019: GBP92 per MWh(e) ), GBP185
per MWh(e) for solar (year ended 31 March 2019: GBP190 per MWh(e) )
and GBP106 per MWh(th) for AD (year ended 31 March 2019: GBP101 per
MWh(th) ).
The effects of monthly variability and seasonality in production
expected in a portfolio of intermittent renewables projects are
reduced by the overall technology diversification in JLEN's
portfolio. Although agricultural AD plants have some indirect
exposure to weather patterns through the yield of harvests
(feedstock), it is unlikely to impact on their gas volumes. The
environmental processing assets, apart from Tay, have revenues
independent of weather and all have revenues that vary little with
changes in volume of waste and wastewater processed. The inclusion
of hydro assets introduces further diversification around climatic
conditions. As noted in the Annual Report, the "volumes"
sensitivity illustrating the impact of different levels of weather
resource on portfolio valuation no longer aggregates wind and
solar, as there is no indication that these weather resources are
positively correlated.
Acquisitions
Since 31 March 2019, the Company has acquired two new projects
for a total consideration of GBP19.1 million. The investments were
funded through cash available and drawdowns under the Company's
revolving credit facility. The assets were as follows:
Warren Energy Limited
In August 2019, the Company completed the acquisition of Warren
Power Limited ("WPL") for an initial consideration, including
working capital, of GBP14.8 million subject to additional deferred
payments up to GBP0.8 million. WPL owns 100% of the equity in
Warren Energy Limited ("WEL"), which holds the rights and
operational assets that make up the anaerobic digestion plant.
The Warren AD plant is located in Methwold, Norfolk, was
commissioned in December 2015 and became operational in March 2016.
The plant has a thermal capacity of c.5MWth and predominantly
produces biomethane to be injected to the national gas grid. In
addition, the plant also has a 0.5MWe CHP engine and is accredited
under the Renewable Heat Incentive and Feed--in-Tariff schemes.
The Warren AD plant has been acquired from EIS funds managed by
Amersham Investment Management Ltd and minority shareholders,
Future Biogas Ltd ("FBL"). FBL will continue to provide management,
operations and maintenance services to the AD plant after the
acquisition.
Yorkshire Hydropower Limited
In July 2019, the Company acquired two operational low head
hydropower stations and an operational battery storage system for a
total consideration, including working capital, of GBP4.3
million.
The acquisition of Yorkshire Hydropower Holdings Limited
("YHHL"), which owns 100% of the equity in Yorkshire Hydropower
Limited ("YHL"), represents the Company's first investment in two
new sectors, run-of-river hydro and battery storage, further
diversifying the Company's portfolio of environmental
infrastructure projects.
The Yorkshire-based projects acquired are:
-- Kirkthorpe hydro, a 500kW single turbine hydro project
located on the River Calder, which was commissioned on 21 November
2016;
-- Thrybergh hydro, a twin screw 260kW hydro project located on
the River Don, commissioned on 26 October 2015; and
-- a 1.2MW battery co-located at Thrybergh, commissioned in January 2018.
YHHL was acquired from a group of high-net-worth investors,
which provided the original funding under the Enterprise Investment
Scheme.
Financing
The Fund has benefits 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 digester, hydro, and waste and wastewater processing
assets, on a timely basis, reducing the performance drag associated
with holding excess cash. As at the period end, drawings under the
RCF were GBP35.9 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 2019 across the
portfolio was 32.7% (31 March 2019: 33.7%) being 27.3% (31 March
2019: 28.1%) for the renewable energy assets and 52.3% (31 March
2019: 52.7%) for the PFI processing assets. Taking into account the
amount drawn under the revolving credit facility of GBP35.9
million, the overall fund gearing at 30 September 2019 was 36.9%
(31 March 2019: 35.7%).
As at 30 September 2019, the Group, which comprises the Company
and the intermediate holding companies, had cash balances of GBP9.1
million (31 March 2019: GBP11.4 million).
Analysis of financial results
The financial statements of the Company for the six--month
period ended 30 September 2019 are set out below.
The Company prepared the condensed unaudited financial
statements for the six--month period to 30 September 2019 in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the EU and IFRS as 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 (John Laing Environmental
Assets Group (UK) Limited ("UK HoldCo")) and the indirectly held
wholly owned subsidiaries HWT Limited (which holds the investment
interest in the Tay project) and JLEAG Solar 1 Limited (which holds
the investment interest in the Panther solar portfolio).
Net assets
Net assets remain steady from GBP520.3 million at 31 March 2019
to GBP520.2 million at 30 September 2019.
The net assets of GBP520.2 million comprise GBP543.6 million
portfolio value of environmental infrastructure investments and the
Company's cash balances of GBP1.8 million, partially offset by
GBP23.7 million of intermediate holding companies' net liabilities
and other net liabilities of GBP1.5 million.
The intermediate holding companies' net liabilities of GBP23.7
million comprises a GBP35.9 million revolving credit facility loan,
partially offset by cash balances of GBP7.3 million and other net
assets of GBP4.9 million.
Analysis of the Group's net assets
At 30 Sep At 31 Mar
All amounts presented in GBPmillion (except as noted) 2019 2019
---------------------------------------------------------- ----------- -----------
Portfolio value 543.6 523.6
Intermediate holding companies' cash 7.3 9.5
Intermediate holding companies' revolving credit facility (35.9) (16.7)
Intermediate holding companies' other assets 4.9 3.6
---------------------------------------------------------- ----------- -----------
Fair value of the Company's investment in UK HoldCo 519.9 520.0
---------------------------------------------------------- ----------- -----------
Company's cash 1.8 1.9
Company's other liabilities (1.5) (1.6)
---------------------------------------------------------- ----------- -----------
Net Asset Value 520.2 520.3
---------------------------------------------------------- ----------- -----------
Number of shares 497,018,205 497,018,205
Net Asset Value per share 104.7p 104.7p
---------------------------------------------------------- ----------- -----------
At 30 September 2019, the Group (the Company plus intermediate
holding companies) had a total cash balance of GBP9.1 million (31
March 2019: GBP11.4 million), including GBP1.8 million in the
Company's balance sheet (31 March 2019: GBP1.9 million) and GBP7.3
million in the intermediate holding companies (31 March 2019:
GBP9.5 million), which is included in the Company's balance sheet
within "investments at fair value though profit or loss".
At 30 September 2019, UK HoldCo had drawn GBP35.9 million of its
revolving credit facility (31 March 2019: GBP16.7 million) which is
included in the Company's balance sheet within "investments at fair
value through profit or loss".
The movement in the portfolio value from 31 March 2019 to 30
September 2019 is summarised as follows:
Six months
ended Year ended
30 Sep 31 Mar
All amounts presented in GBPmillion (except as noted) 2019 2019
----------------------------------------------------------------------------- ---------- ----------
Portfolio value at start of the period/year 523.6 429.5
Acquisitions/further investments (net of post-acquisition price adjustments) 21.9 77.5
Distributions received from investments (22.8) (43.6)
Growth in value of portfolio 20.9 60.2
----------------------------------------------------------------------------- ---------- ----------
Portfolio value 543.6 523.6
----------------------------------------------------------------------------- ---------- ----------
Further details on the portfolio valuation and an analysis of
movements during the period are provided in the investment
portfolio and valuation section below
Profit before tax
The Company's profit before tax for the six--month period was
GBP16.2 million (six--month period ended 30 September 2018: GBP16.1
million), generating earnings of 3.3 pence per share (six--month
period ended 30 September 2018: 4.1 pence per share).
Six months Six months
ended ended
30 Sep 30 Sep
All amounts presented in GBPmillion (except as noted) 2019 2018
------------------------------------------------------ ---------- ----------
Interest received on UK HoldCo loan notes 14.4 10.3
Dividend received from UK HoldCo 5.0 -
Net gains on investments at fair value (0.1) 8.6
------------------------------------------------------ ---------- ----------
Operating income 19.3 18.9
------------------------------------------------------ ---------- ----------
Operating expenses (3.1) (2.8)
------------------------------------------------------ ---------- ----------
Profit before tax 16.2 16.1
------------------------------------------------------ ---------- ----------
Earnings per share 3.3p 4.1p
------------------------------------------------------ ---------- ----------
In the six months to 30 September 2019, the operating income was
GBP19.3 million, including the receipt of GBP14.4 million of
interest on the UK HoldCo loan notes, GBP5.0 million of dividends
also received from UK HoldCo and a loss on investments at fair
value of GBP0.1 million.
The operating expenses included in the income statement for the
period were GBP3.1 million, in line with expectations. These
comprise GBP2.7 million Investment Adviser fees and GBP0.4 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 2019 the ratio was 1.26% and it is
anticipated that the full--year ratio for the year ended 31 March
2020 will 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 2019 of
GBP1.8 million (31 March 2019: GBP1.9 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
2019 2018
----------------------------------------------- ---------- ----------
Cash balance at 1 April 1.9 5.5
Net proceeds from share issues - (0.3)
Interest on loan notes received from UK HoldCo 14.4 10.3
Dividends received from UK HoldCo 5.0 -
Directors' fees and expenses (0.1) (0.1)
Investment Adviser fees (2.7) (2.2)
Administrative expenses (0.3) (0.4)
Dividends paid in cash to shareholders (16.4) (12.6)
----------------------------------------------- ---------- ----------
Company cash balance at 30 September 1.8 0.2
----------------------------------------------- ---------- ----------
The Group had a total cash balance at 30 September 2019 of
GBP9.1 million (31 March 2019: GBP11.4 million) and borrowings
under the revolving credit facility of GBP35.9 million (31 March
2019: GBP16.7 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
2019 2018
----------------------------------------------------------------- ---------- ----------
Cash distributions from environmental infrastructure investments 22.8 20.7
Administrative expenses (0.8) (0.4)
Directors' fees and expenses (0.1) (0.1)
Investment Adviser fees (2.6) (2.2)
Financing costs (net of interest income) (0.8) (1.3)
----------------------------------------------------------------- ---------- ----------
Cash flow from operations 18.5 16.7
Net proceeds/(expenses) from share issues - (0.3)
Acquisition of investment assets and further investments (21.5) (58.7)
Reduction in acquisition price 0.1 -
Acquisition costs (including stamp duty) (0.7) (1.7)
Short-term projects debtors (0.7) -
Debt arrangement fee cost (0.8) (0.4)
Proceeds from borrowings under the revolving credit facility 19.2 55.2
Dividends paid in cash to shareholders (16.4) (12.6)
----------------------------------------------------------------- ---------- ----------
Cash movement in the period (2.3) (1.8)
Opening cash balance 11.4 11.8
----------------------------------------------------------------- ---------- ----------
Group cash balance at 30 September 9.1 10.0
----------------------------------------------------------------- ---------- ----------
During the period, the Group received cash distributions of
GBP22.8 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 covers
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 2019. Cash flow from
operations of the Group of GBP18.5 million covers dividends paid in
the six--month period to 30 September 2019 of GBP16.4 million by
1.1x. The dividend cover based on dividends declared in respect of
the six--month period to 30 September 2019 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 fully cover
future costs as well as planned dividends payable to its
shareholders(1).
Dividends
During the period, the Company paid a final dividend of 1.6275
pence per share in June 2019 (GBP8.1 million) in respect of the
quarter to 31 March 2019. Interim dividend of 1.665 pence per share
was paid in September 2019 (GBP8.3 million) in respect of the
quarter to 30 June 2019.
On 20 November 2019, the Company declared an interim dividend of
1.665 pence per share in respect of the quarter ended 30 September
2019 (GBP8.3 million), which is payable on 20 December 2019.
In line with the 2019 Annual Report, the target dividend for the
year to 31 March 2020 is 6.66 pence per share(1).
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
Investment portfolio and valuation
Portfolio value increased to GBP543.6 million at 30 September
2019 from GBP523.6 million at 31 March 2019.
Investment portfolio
At 30 September 2019, the Group's investment portfolio comprised
of interests in 30 project vehicles:
Commercial
Type Asset Location Type Ownership Capacity (MWs) operations date
------------------ ------------------- ---------- ------------------- --------- -------------- -----------------
Solar 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 & 15
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
------------------- ---------- -------------------------------------- --------- -------------- -----------------
Wind Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Burton Wold
Extension UK (Eng) Wind 100% 14.4 Sept 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
Moel Moelogan UK (Wal) Wind 100% 14.3 2003 & 08
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
------------------- ---------- -------------------------------------- --------- -------------- -----------------
Anaerobic
digestion Biogas Meden UK (Eng) Anaerobic digestion 100% 5.0(1) Mar 2016
Egmere UK (Eng) Anaerobic digestion 100% 5.0(2) Nov 2014
Grange UK (Eng) Anaerobic digestion 100% 5.0(2) Sept 2034
Icknield UK (Eng) Anaerobic digestion 53% 5.0(1) Dec 2014
Merlin UK (Eng) Anaerobic digestion 100% 5.0(2) Dec 2013
Vulcan UK (Eng) Anaerobic digestion 100% 5.0(2) Oct 2013
Warren UK (Eng) Anaerobic digestion 100% 5.0(2) Mar 2016
------------------- ---------- -------------------------------------- --------- -------------- -----------------
Waste management Dumfries & Galloway UK (Scot) Waste management 80% n/a 2007
ELWA UK (Eng) Waste management 80% n/a 2006
Tay UK (Scot) Wastewater 33% n/a Nov 2001
------------------ ------------------- ---------- ------------------- --------- -------------- -----------------
Yorkshire Yorkshire
hydropower Hydropower UK (Eng) Hydropower 100% 2.0(3) Oct 2015/Nov 2016
------------------ ------------------- ---------- ------------------- --------- -------------- -----------------
Total 286.2
--------------------------------------------------------------------- --------- -------------- -----------------
(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) Includes a 1.2MW battery storage dedicated to a Firm Frequency Response contract.
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 2019
(by portfolio value and distributions from projects):
Portfolio value split by sector %
Solar: 23
Wind: 42
Anaerobic digestion: 24
Waste & wastewater: 10
Hydro: 1
Portfolio value split by geography %
UK: 99
France: 1
Portfolio value split by remaining asset life
Up to 10 years: 8
11 to 20 years: 47
21 to 30 years: 45
Weighted average remaining asset life of the portfolio is 19.6
years.
Portfolio distributions split by inflation linkage(1) %
Inflation linked: 64
Non-inflation linked: 36
Portfolio distributions split by revenue type(1)
Merchant power: 36
Green benefits: 50
PFI: 14
Portfolio operator exposure (percentage of portfolio value)
Future Biogas: 21
Siemens Gamesa: 15
Senvion: 12
ROC Energy: 11
Renewi: 8
Other: 33
(1) Based on project revenues from volumes/generation during the
year 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 2019
was GBP543.6 million, compared to GBP523.6 million at 31 March
2019. The increase of GBP20.0 million is the net impact of new
acquisitions, cash received from investments, changes in
macroeconomic assumptions, power price and discount rate
assumptions, and underlying growth in the portfolio.
The movement in value of investments during the six-month period
ended 30 September 2019 is shown in the table below:
30 Sep 31 Mar
2019 2019
GBPm GBPm
---------------------------------------------------------------------------------------------------- ------ ------
Valuation of portfolio at opening balance 523.6 429.5
Acquisitions in the period/year (including post-acquisition adjustments and deferred consideration) 21.9 77.5
Cash distributions from portfolio (22.8) (43.6)
---------------------------------------------------------------------------------------------------- ------ ------
Rebased opening valuation of portfolio 522.7 463.4
Changes in forecast power prices (14.0) 4.8
Changes in economic assumptions 0.2 (0.9)
Changes in discount rates 10.2 11.6
Changes in exchange rates 0.1 (0.1)
Balance of portfolio return 24.4 44.8
---------------------------------------------------------------------------------------------------- ------ ------
Valuation of portfolio 543.6 523.6
Fair value of intermediate holding companies (23.6) (3.6)
---------------------------------------------------------------------------------------------------- ------ ------
Investments at fair value through profit or loss 520.0 520.0
---------------------------------------------------------------------------------------------------- ------ ------
Allowing for investments of GBP21.9 million (including
post-acquisition adjustments and deferred consideration) and cash
receipts from investments of GBP22.8 million, the rebased valuation
is GBP522.7 million. The portfolio valuation at 30 September 2019
is GBP543.6 million (31 March 2019: GBP523.6 million), representing
an increase over the rebased valuation of 4% during the six--month
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
2019 valuation is considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 30
September 2019 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 typically puts in
place short-term fixed price arrangements for the next six to 12
months for some projects in the portfolio in order to reduce the
revenue risk from price volatility. The proportion of the portfolio
that is hedged in this manner will depend upon the outlook for
future prices and is expected to differ between summer and winter
seasons.
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 48 (46) 54 (55)
Gas 15 (14) 17 (18)
------------- ------- -------
As at 30 September 2019, 51% of the renewable energy portfolio's
electricity price exposure was subject to a fixed or floor price
arrangement for the winter 2019 season and 20% for the summer 2020
season. The Investment Adviser expects to enter into further fixed
price arrangements for the summer 2020 season before the end of the
Company's financial year.
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 two established market
consultants, adjusted by the Investment Adviser for
project-specific arrangements and price cannibalisation as
required.
JLEN has recognised a decrease in lifetime electricity price
expectations across the portfolio. Compared to the assumptions used
in the valuation at 31 March 2019, on a time-weighted average
basis, the net decrease in the electricity price assumptions is
approximately 4.5% over a 25-year period (being a simple average
decrease over 25 years of approximately 2.3% slightly offset by an
increase in market forward prices (gross of any discounts under
PPAs) over the next two years of 0.6%).
The overall change in forecasts for future electricity and gas
prices compared to forecasts at 31 March 2019 has decreased the
valuation of the portfolio by GBP14.0 million.
The Company uses slightly different curves for wind and solar
projects based on the generation profile, the Company's experience
of actual capture rates, and expectations of future price
cannibalisation resulting from increased penetration of low
marginal cost, intermittent generators on the GB network. The graph
on page 26 of the Half-year Report 2019 represents the blended
curve used by the Company for wind and solar projects, weighted
according to generation.
Illustrative blended power price curve
The annual real rate of price growth on a constant basis from 1
April 2020 is 0.8%.
Economic assumptions
Macroeconomic assumptions in respect of inflation, corporation
tax and deposit interest rates have remained relatively constant
during the period and the overall movement in valuation is not
significant. RPI inflation rates assumed in the valuation at 30
September 2019 are 2.7% in 2019 (31 March 2019: 3.2%) stepping to
2.75% from 2024 onwards (31 March 2019: 2.75%), whilst CPI is
assumed at a long-term rate of 2% for UK assets, and 1.5% for 2019
and all subsequent years (31 March 2019: 1.5%) for the French
assets.
The UK corporation tax rate assumed is 19%, stepping down to 17%
from April 2020 onwards, reflecting the rates enacted by
legislation and in line with market practice. The political
situation in the UK remains unclear in the aftermath of the EU
referendum of 2016, and the makeup of the UK government post the
upcoming General Election on December 12th is hard to predict. Both
main parties have proposed increases to future UK corporation tax
rates along with other measures that may affect UK businesses in
positive and negative ways, although the details and timings of
such changes will be determined after the Election. For
information, a 1% increase in the long-term corporation tax rate
assumption is expected to have a negative impact on portfolio value
of c. GBP3.6m. The equivalent rate for the French assets is 28% (31
March 2019: 28%) stepping down to 26.5% in 2021 and 25% from 2022
(31 March 2019: step down to 26.5% in 2021 and 25% in 2022).
Deposit rates assumed in the valuation reflect a range of
deposit rates in the UK from 1.5% in 2019 with a gradual increase
to a long-term rate of 2.5% thereafter (31 March 2019: 2.5%). For
the French assets, the rate assumed is 0.5% (31 March 2019: 0.5%).
The euro/sterling exchange rate used to value the euro-denominated
investments in France was EUR1.12/GBP1 at 30 September 2019
(EUR1.16/GBP1 at 31 March 2019).
Discount rates
The discount rates used in the valuation exercise represent the
Investment Adviser's and 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 2019, there has continued to be
strong demand for income--producing infrastructure assets,
including environmental infrastructure projects, as investors
continue to identify the sector as an area for significant capital
deployment given wider global trends. The Investment Adviser, based
on its experience of bidding in the secondary market and as flagged
within the 31 March 2019 Investment Adviser report, has proposed a
reduction in the discount rate used for valuing levered UK solar
assets, as well as a reduction to both levered and unlevered UK
wind assets. The Investment Adviser will also continue to monitor
UK agricultural AD projects for future valuations, as recent market
transactions suggest new entrants are applying downward pressure on
discount rates.
Taking the above into account and reflecting the change in mix
of the portfolio during the period, the overall weighted average
discount rate ("WADR") of the portfolio was 7.6% at 30 September
2019 (31 March 2019: 7.9%).
Balance of portfolio return
This represents the balance of valuation movements in the period
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 GBP24.4 million.
Of this, the key valuation adjustments include an uplift of
GBP2.5 million (0.5 pence per share) from the recognition of life
extensions on projects where the Company has land rights that
permit an additional period of operations, an uplift of GBP1.7
million (0.3 pence per share) from the ongoing transition through
construction to operations for a significant upgrade package at the
Vulcan AD project, and an uplift of GBP2.1 million (0.4 pence per
share) from recognition of cost savings across the portfolio driven
by various tendering processes being conducted in the period.
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 2019 was 7.6% (31
March 2019: 7.9%). 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 recent 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 8.7 pence, the impact from solar and
wind separately is only 1.6 pence and 6.5 pence respectively, as
shown in the chart overleaf.
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 and 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 two established
market consultants and other relevant information is used, and
adjusted by the Investment Adviser for project-specific
arrangements. 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.
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 1% of the
portfolio value at 30 September 2019, the Directors consider the
sensitivity to changes in euro/sterling exchange rates to be
insignificant.
Sensitivities - impact on NAV at 30 September 2019
The following chart shows the impact of the key sensitivities on
Net Asset Value per share, and the GBP labels indicating the impact
of the sensitivities on portfolio value:
Environmental, Social and Governance
AT A GLANCE
2 Moved to Foresight Group
new investments
Environmental performance 2019/20: half--year results
375 GWh renewable energy generated by our portfolio New assets will avoid 6,000 t CO(2) e emissions per year
--------------------------------------------------------
63,853 waste recycled (tonnes) 233,082 waste diverted from landfill (tonnes)
--------------------------------------------------------
21,400,000,000 wastewater treated (litres)
--------------------------------------------------------
Social performance 2019/20: half--year results
24 health and safety audits
--------------------------------------------------------
INTRODUCTION
July 2019 marked the move of JLEN to Foresight, joining our team
with one that has broad experience and geographical reach across a
wide range of environmental sectors.
Green Economy Mark
JLEN has been awarded the new Green Economy Mark by the London
Stock Exchange, which identifies London-listed companies and funds
that generate between 50% and 100% of total annual revenues from
products and services that contribute to the global green
economy.
The Green Economy Mark is calculated using the Green Revenues
taxonomy developed by FTSE Russell as part of the FTSE
Environmental Markets Classification System. It identifies
industrial sectors and subsectors that are contributors to a
greener, more sustainable economy. JLEN is proud to be one of the
first holders of this accolade, which demonstrates our commitment
to investing in environmental assets.
Guiding continuous improvement in ESG
With the Investment Adviser being part of Foresight Group,
JLEN's commitment to achieving positive environmental impact
through its investments is aligned with, and strengthened by,
Foresight's Sustainability Principles(1) and associated
Sustainability and ESG policy. This policy, as well as Foresight's
commitment to the United Nations Principles for Responsible
Investment and other globally recognised responsible investing
standards, provides JLEN with a robust framework through which to
direct our commitment to continuous improvement. Sustainability
considerations are deeply embedded throughout the JLEN investment
process and asset management procedures, from initial investment
screening through due diligence and into ongoing monitoring and
reporting.
(1)
https://www.foresightgroup.eu/about-us/corporate-responsibility/five-principles-for-sustainable-infrastructure/
Environmental
Portfolio electricity and carbon performance
This year, our portfolio projects have generated 375 GWh of
energy. Of that, 222 GWh was electricity, equivalent to the annual
electricity demand of almost 60,000 households. Detailed
information on portfolio energy performance is provided above in
the operational and financial review section.
A summary of the greenhouse gas benefits delivered by the new
assets we have 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 5,966 132,739
--------------------------------- ----------------- ------------------
Our new investments are forecast to deliver, per year
7,370 MWh electricity 40,000 MWh biomethane
And avoid the emissions of almost 6,000 t CO(2) e
Equivalent to >2,500 cars off the road
The environmental impact of all of JLEN assets are independently
assessed and these reports are available on the JLEN website.
Social
In order to maintain its social licence to operate, Foresight
believes that engagement and consultation with local stakeholders
are important features of infrastructure projects at each stage of
their lifecycle.
JLEN's investment approach reflects Foresight's policies.
Criteria that Foresight assesses as standard include:
-- health and wellbeing - health and safety approaches;
-- local economic impact - local sourcing of materials and labour;
-- local social impact - noise, visual and other community impacts;
-- community engagement - how the project plans to engage with
the local community and maintain community relations; and
-- community benefits - does the project contribute financially to the local community?
Additionally, JLEN actively encourages and works with the
projects within our portfolio to maintain close ties with the local
community. Often, this includes community support measures through
community and charity fundraising.
In the first half of this year we have carried out 24 health and
safety audits within our portfolio
Governance
Foresight believes that one of the key themes which will shape
investment returns in the 21st century is the continued evolution
of business and investment governance standards to safeguard the
interests of all stakeholders.
As part of this, Foresight's processes, which JLEN adheres to,
include evaluation of the following governance criteria when
assessing investments:
-- compliance with laws;
-- employment and human rights;
-- anti-bribery and corruption;
-- management structure; and
-- board independence and expertise.
Examples of key performance data collected include breaches of
legal and permitting requirements, adoption (or otherwise) of best
practice policies, and ESG governance structures.
RESPONSIBILITy 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 and
in accordance with the accounting policies set out in the audited
Annual Report to 31 March 2019; 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 20 November 2019 and is signed on its behalf by:
Richard Morse
Chairman
20 November 2019
Independent review report
to JLEN Environmental Assets Group Limited
We have been engaged by the Company to review the condensed set
of financial statements in the Half-year Report for the six months
ended 30 September 2019 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-year Report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
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 Financial
Reporting Council. 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.
Directors' responsibilities
The Half-year Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the Half-year 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 IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this Half-year Report has been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting"
as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Half-year 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 Financial Reporting Council 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-year Report for the six months ended 30 September 2019
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Guernsey, Channel Islands
20 November 2019
Condensed unaudited income statement
for the six months ended 30 September 2019
Six months Six months
ended ended
30 Sep 2019 30 Sep 2018
(unaudited) (unaudited)
Notes GBP'000s GBP'000s
-------------------------- ----- ----------- -----------
Operating income 8 19,323 18,951
Operating expenses 4 (3,135) (2,853)
-------------------------- ----- ----------- -----------
Operating profit 16,188 16,098
-------------------------- ----- ----------- -----------
Profit before tax 16,188 16,098
Tax 5 - -
-------------------------- ----- ----------- -----------
Profit for the period 16,188 16,098
-------------------------- ----- ----------- -----------
Earnings per share
Basic and diluted (pence) 7 3.3 4.1
-------------------------- ----- ----------- -----------
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 2019
30 Sep 2019 31 Mar 2019
(unaudited) (audited)
Notes GBP'000s GBP'000s
------------------------------------------------- ----- ----------- -----------
Non-current assets
Investments at fair value through profit or loss 8 519,965 520,032
------------------------------------------------- ----- ----------- -----------
Total non-current assets 519,965 520,032
------------------------------------------------- ----- ----------- -----------
Current assets
Trade and other receivables 9 19 21
Cash and cash equivalents 1,761 1,849
------------------------------------------------- ----- ----------- -----------
Total current assets 1,780 1,870
------------------------------------------------- ----- ----------- -----------
Total assets 521,745 521,902
------------------------------------------------- ----- ----------- -----------
Current liabilities
Trade and other payables 10 (1,582) (1,563)
------------------------------------------------- ----- ----------- -----------
Total current liabilities (1,582) (1,563)
------------------------------------------------- ----- ----------- -----------
Total liabilities (1,582) (1,563)
------------------------------------------------- ----- ----------- -----------
Net assets 520,163 520,339
------------------------------------------------- ----- ----------- -----------
Equity
Share capital account 12 492,670 492,670
Retained earnings 13 27,493 27,669
------------------------------------------------- ----- ----------- -----------
Equity attributable to owners of the Company 520,163 520,339
------------------------------------------------- ----- ----------- -----------
Net assets per share (pence per share) 104.7 104.7
------------------------------------------------- ----- ----------- -----------
The accompanying notes form an integral part of the condensed
set of financial statements.
The condensed set of unaudited financial statements was approved
by the Board of Directors and authorised for issue on 20 November
2019.
They were signed on its behalf by:
Richard Morse Peter Neville
Chairman Director
Condensed unaudited statement of changes in equity
for the six months ended 30 September 2019
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
Expenses of issue of equity shares - - -
Dividends paid 6 - (16,364) (16,364)
----------------------------------------------------- ----- ------------------ ----------- -----------
Balance at 30 September 2019 492,670 27,493 520,163
----------------------------------------------------- ----- ------------------ ----------- -----------
Six months ended 30 Sep 2018 (unaudited)
--------------------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
----------------------------------------------------- ----- ------------------ ----------- -----------
Balance at 1 April 2018 389,262 3,125 392,387
----------------------------------------------------- ----- ------------------ ----------- -----------
Profit and total comprehensive income for the period - 16,098 16,098
Expenses of issue of equity shares (124) - (124)
Dividends paid 6 - (12,630) (12,630)
----------------------------------------------------- ----- ------------------ ----------- -----------
Balance at 30 September 2018 389,138 6,593 395,731
----------------------------------------------------- ----- ------------------ ----------- -----------
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 2019
Six months Six months
ended ended
30 Sep 2019 30 Sep 2018
(unaudited) (unaudited)
Notes GBP'000s GBP'000s
-------------------------------------------------------------------- ----- ----------- -----------
Profit from operations 16,188 16,098
Adjustments for:
Interest received (14,390) (10,329)
Dividends received (5,000) -
Net loss/(gain) on investments at fair value through profit or loss 67 (8,622)
-------------------------------------------------------------------- ----- ----------- -----------
Operating cash flows before movements in working capital (3,135) (2,853)
Decrease/(increase) in receivables 2 (3)
Increase/(decrease) in payables 19 (58)
-------------------------------------------------------------------- ----- ----------- -----------
Net cash outflow from operating activities (3,114) (2,914)
-------------------------------------------------------------------- ----- ----------- -----------
Investing activities
Interest received 14,390 10,329
Dividends received 5,000 -
-------------------------------------------------------------------- ----- ----------- -----------
Net cash generated from investing activities 19,390 10,329
-------------------------------------------------------------------- ----- ----------- -----------
Financing activities
Expenses relating to issue of shares 12 - (124)
Dividends paid 6 (16,364) (12,630)
-------------------------------------------------------------------- ----- ----------- -----------
Net cash used in financing activities (16,364) (12,754)
-------------------------------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (88) (5,339)
Cash and cash equivalents at beginning of period 1,849 5,509
-------------------------------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of period 1,761 170
-------------------------------------------------------------------- ----- ----------- -----------
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 2019
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 2019 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 John Laing Environmental Assets Group (UK) Limited
("UK HoldCo") is measured at fair value as detailed in the key
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 was approved and
authorised for issue by the Board of Directors on 20 November 2019.
The condensed set of financial statements included in this
Half--year Report has been prepared in accordance with IAS 34
Interim Financial Reporting. The accounting policies, critical
accounting judgements, estimates and assumptions are consistent
with those used in the latest audited financial statements to 31
March 2019 and should be read in conjunction with the Company's
annual audited financial statements for the year ended 31 March
2019.
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, the intermediate
holding subsidiary HWT Limited and JLEAG Solar 1 Limited, comprise
the Group (the "Group") investing in environmental infrastructure
assets.
The net assets of the intermediate holding companies (comprising
UK HoldCo, HWT Limited and JLEAG Solar 1 Limited), which at 30
September 2019 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
that the Company has adequate financial resources, the Directors
were mindful that the Group had unrestricted cash of GBP9.1 million
(including GBP1.8 million in the Company) as at 30 September 2019
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 2022.
As at 30 September 2019, the Company's wholly owned subsidiary
UK HoldCo had borrowed GBP35.9 million under the facility.
All key financial covenants 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 2019 30 Sep 2018
(unaudited) (unaudited)
GBP'000s GBP'000s
----------------------------- ----------- -----------
Investment advisory fees 2,685 2,383
Directors' fees and expenses 125 121
Administration fee 51 49
Other expenses 274 300
----------------------------- ----------- -----------
3,135 2,853
----------------------------- ----------- -----------
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.
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, are included in the estimate
of the fair value of these investments.
6. Dividends
Six months Six months
ended ended
30 Sep 2019 30 Sep 2018
(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 2019 of 1.6275 (31 March 2018: 1.5775) 8,089 6,216
Interim dividend for the quarter ended 30 June 2019 of 1.665 (30 June 2018: 1.6275) 8,275 6,414
------------------------------------------------------------------------------------------- ----------- -----------
16,364 12,630
------------------------------------------------------------------------------------------- ----------- -----------
A dividend for the quarter to 30 September 2019 of 1.665 pence
per share was approved by the Board on 20 November 2019 and is
payable on 20 December 2019. The dividend has not been included as
a liability at 30 September 2019.
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 2019 30 Sep 2018
(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 16,188 16,098
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings
per share 497,018,205 394,077,029
-------------------------------------------------------------------------------------------- ----------- -----------
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 2019 30 Sep 2018
(unaudited) (unaudited)
--------------------------------------------- ----------- -----------
Basic and diluted earnings per share (pence) 3.3 4.1
--------------------------------------------- ----------- -----------
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 2019 31 Mar 2019
(unaudited) (audited)
GBP'000s GBP'000s
------------------------------------------------------- ----------- -----------
Fair value of environmental infrastructure investments 543,587 523,558
Fair value of intermediate holding companies (23,622) (3,526)
------------------------------------------------------- ----------- -----------
Total fair value of investments 519,965 520,032
------------------------------------------------------- ----------- -----------
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 2019, by incorporating the
fair value of these intermediate holding companies.
Six months to 30 Sep 2019 (unaudited) Year to 31 Mar 2019 (audited)
----------------------------------------- ----------------------------------
Cash, working Cash, working
capital and capital 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 523,558 (3,526) 520,032 429,494 (41,026) 388,468
Acquisitions
Portfolio of assets acquired/further
investment 21,863 - 21,863 77,666 - 77,666
Post-acquisition price adjustments - - - (163) - (163)
--------------------------------------- ------------ ---------------- --------- --------- ------------- --------
21,863 - 21,863 77,503 - 77,503
Growth in portfolio(1) 20,973 - 20,973 60,143 - 60,143
Cash yields from portfolio to
intermediate holding companies (22,807) 22,807 - (43,582) 43,582 -
--------------------------------------- ------------ ---------------- --------- --------- ------------- --------
Yields from intermediate holding
companies
Interest on loan notes(1) - (14,390) (14,390) - (24,063) (24,063)
Dividends from UK HoldCo to the
Company(1) - (5,000) (5,000) - (7,300) (7,300)
--------------------------------------- ------------ ---------------- --------- --------- ------------- --------
- (19,390) (19,390) - (31,363) (31,363)
Other movements
Investment in working capital in UK
HoldCo - (2,663) (2,663) - (5,553) (5,553)
Administrative expenses borne by
intermediate holding companies(1) - (1,650) (1,650) - (896) (896)
Drawdown of UK HoldCo revolving credit
facility borrowings - (19,200) (19,200) - 31,730 31,730
--------------------------------------- ------------ ---------------- --------- --------- ------------- --------
Fair value of the Company's investment
in UK HoldCo 543,587 (23,622) 519,965 523,558 (3,526) 520,032
--------------------------------------- ------------ ---------------- --------- --------- ------------- --------
(1) The net loss on investments at fair value through profit or
loss for the period ended 30 September 2019 is GBP67,000 (year
ended 31 March 2019: gain of GBP27,884,000, six-month period ended
30 September 2018: gain of GBP8,622,000). This, together with
interest received on loan notes of GBP14,390,000 (year ended 31
March 2019: GBP24,063,000, six-month period ended 30 September
2018: GBP10,329,000) and dividend income of GBP5,000,000 (year
ended 31 March 2019: GBP7,300,000, six-month period ended 30
September 2018: GBPnil) 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 2019. 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.
The valuation techniques and methodologies 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
6.5% to 9.2% (weighted average 7.6%) (at 31 March 2019: from 6.5%
to 9.2% - weighted average 7.9%).
The following economic assumptions were used in the discounted
cash flow valuations:
30 Sep 2019 31 Mar 2019
---------------------------- ------------------------------------------- -------------------------------------------
UK - inflation rates 2.7% for 2019 increasing to 2.75% from 2024 2.8% for 2019 decreasing to 2.75% from 2021
France - inflation rates 1.5% 1.5%
UK - deposit interest rates 1.5% for 2019, gradually rising to 2.5% 1.5% for 2019, gradually rising to 2.5%
from 2021 from 2020
France - deposit rates 0.5% 0.5%
Euro/sterling exchange rate 1.12 1.16
---------------------------- ------------------------------------------- -------------------------------------------
The UK corporation tax rate assumed in the 30 September 2019
portfolio valuation is 19%, stepping down to 17% from April 2020 in
line with market practice. The equivalent rate for the French
assets is 28%, stepping down to 25% from 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
During the period, the Group invested a further GBP2.2 million
in the Vulcan Renewables anaerobic digestion plant upgrade.
On 12 July 2019, the Group acquired two operational hydro
projects and an operational battery storage system, Yorkshire
Hydropower Limited, for a total consideration of GBP4.3
million.
On 28 August 2019, the Group acquired an anaerobic digestion
asset, Warren Power Limited, for a total consideration of GBP14.8
million.
9. Trade and other receivables
30 Sep 2019 31 Mar 2019
(unaudited) (audited)
GBP'000s GBP'000s
---------------- ----------- -----------
Prepayments 19 21
---------------- ----------- -----------
Closing balance 19 21
---------------- ----------- -----------
10. Trade and other payables
30 Sep 2019 31 Mar 2019
(unaudited) (audited)
GBP'000s GBP'000s
---------------- ----------- -----------
Accruals 1,582 1,563
---------------- ----------- -----------
Closing balance 1,582 1,563
---------------- ----------- -----------
11. Loans and borrowings
The Company had no outstanding loans or borrowings at 30
September 2019 (31 March 2019: 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 with HSBC, ING, NIBC and Santander which provides
for a revolving credit facility of GBP130 million and an accordion
facility of up to GBP60 million. On 8 May 2019, the facility was
extended by one year to June 2022 and the accordion facility was
exercised for up to GBP40 million, increasing the borrowing
facility to GBP170 million. 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 2019, UK HoldCo had an outstanding balance of
GBP35.9 million under the facility (31 March 2019: GBP16.7
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 2019, the Company held loan notes of GBP318.9
million which were issued by UK HoldCo (31 March 2019: outstanding
amount of GBP318.9 million).
There were no other outstanding loans and borrowings in either
the Company, UK HoldCo, HWT or JLEAG Solar 1 at 30 September
2019.
12. Share capital account
30 Sep 2019 (unaudited) 31 Mar 2019 (audited)
------------------------- -----------------------
Number of Number of
shares GBP'000s shares GBP'000s
----------------------------------- -------------- --------- ------------- --------
Opening balance 497,018,205 492,670 394,077,029 389,262
Shares issued in the period - - 102,941,176 105,000
Expenses of issue of equity shares - - - (1,592)
Closing balance 497,018,205 492,670 497,018,205 492,670
----------------------------------- -------------- --------- ------------- --------
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 2019 31 Mar 2019
(unaudited) (audited)
GBP'000s GBP'000s
--------------------------- ----------- -----------
Opening balance 27,669 3,125
Profit for the period/year 16,188 53,352
Dividends paid (16,364) (28,808)
Closing balance 27,493 27,669
--------------------------- ----------- -----------
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 John Laing Capital Management (for the period from 1 April to
30 June 2019) and Foresight Group (from 1 July to 30 September
2019) as respective Investment Adviser following the change
announced on 5 June and effective 1 July 2019.
Transactions with the Investment Advisers
The Company operated a change of Investment Adviser from John
Laing Capital Management to Foresight Group, effective from 1 July
2019. The material terms, fees and provisions of the Investment
Advisory Agreement with Foresight Group are the same as applied to
John Laing Capital Management, as summarised below.
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
2019 was GBP2,685,000 (six-month period ended 30 September 2018:
GBP2,383,000) of which GBP1,364,000 remained payable as at 30
September 2019 (31 March 2019: GBP1,341,000).
(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 John Laing 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 GBP122,198 (six-month period ended 30 September 2018:
GBP119,650). The Directors were paid expenses of GBP3,203 in the
six-month period (six-month period ended 30 September 2018:
GBP1,009).
The Directors held the following shares:
Total number Total number
of shares of shares
held held
at 30 Sep 2019 at 31 Mar 2019
------------------------------------------ -------------- --------------
Richard Morse 103,535 103,535
Christopher Legge (resigned 13 June 2019) 29,896 29,896
Denise Mileham 32,340 32,340
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
Hans Joern Rieks - -
------------------------------------------ -------------- --------------
All of the above transactions were undertaken on an arm's length
basis.
The Directors were paid dividends in the period of GBP8,214
(six-month period ended 30 September 2018: GBP7,205).
15. Financial instruments
Financial instruments by category
The Company held the following financial instruments at fair
value at 30 September 2019. There have been no transfers of
financial instruments between levels of the fair value hierarchy.
There are no non--recurring fair value measurements.
30 Sep 2019 (unaudited)
-----------------------------------------------------------------
Financial Financial
assets liabilities
at fair at
Cash and Loans and value through amortised
bank balances receivables profit 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 - - 519,965 - 519,965
Current assets
Trade and other receivables - 19 - - 19
Cash and cash equivalents 1,761 - - - 1,761
------------------------------------------------- ------------- ----------- -------------- ----------- --------
Total financial assets 1,761 19 519,965 - 521,745
------------------------------------------------- ------------- ----------- -------------- ----------- --------
Current liabilities
Trade and other payables - - - (1,582) (1,582)
------------------------------------------------- ------------- ----------- -------------- ----------- --------
Total financial liabilities - - - (1,582) (1,582)
------------------------------------------------- ------------- ----------- -------------- ----------- --------
Net financial instruments 1,761 19 519,965 (1,582) 520,163
------------------------------------------------- ------------- ----------- -------------- ----------- --------
31 Mar 2019 (audited)
--------------------------------------------------------------------
Financial Financial
assets at fair liabilities at
Cash and Loans and value through amortised
bank balances receivables profit or loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Non-current assets
Investments at fair value through profit or loss - - 520,032 - 520,032
Current assets
Trade and other receivables - 21 - - 21
Cash and cash equivalents 1,849 - - - 1,849
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Total financial assets 1,849 21 520,032 - 521,902
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Current liabilities
Trade and other payables - - - (1,563) (1,563)
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Total financial liabilities - - - (1,563) (1,563)
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Net financial instruments 1,849 21 520,032 (1,563) 520,339
------------------------------------------------ ------------- ----------- -------------- -------------- --------
The above table provides an analysis of financial instruments
that are measured subsequent to their initial recognition at fair
value as follows:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those 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 are those 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 table above, 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 2019 (unaudited)
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 7.6% Plus 0.5%
Change in portfolio valuation Increases GBP19.4m GBP543.6m Decreases GBP18.3m
Change in NAV per share Increases 3.9p 104.7p Decreases 3.7p
----------------------------- ------------------ --------- ------------------
31 Mar 2019
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 7.9% Plus 0.5%
Change in portfolio valuation Increases GBP18.6m GBP523.6m Decreases GBP17.6m
Change in NAV per share Increases 3.7p 104.7p Decreases 3.5p
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in long-term
inflation rates is as follows:
30 Sep 2019 (unaudited)
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP22.6m GBP543.6m Increases GBP23.8m
Change in NAV per share Decreases 4.5p 104.7p Increases 4.8p
----------------------------- ------------------ ---------- ------------------
31 Mar 2019
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP20.7m GBP523.6m Increases GBP22.0m
Change in NAV per share Decreases 4.2p 104.7p Increases 4.4p
----------------------------- ------------------ ---------- ------------------
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 2019 (unaudited)
----------------------------- ------------------ --------- ------------------
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP32.4m GBP543.6m Increases GBP32.1m
Change in NAV per share Decreases 6.5p 104.7p Increases 6.5p
----------------------------- ------------------ --------- ------------------
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP8.1m GBP543.6m Increases GBP8.3m
Change in NAV per share Decreases 1.6p 104.7p Increases 1.7p
----------------------------- ------------------ --------- ------------------
The sensitivity of the hydro asset is not material.
31 Mar 2019
----------------------------- ------------------ --------- ------------------
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP30.8m GBP523.6m Increases GBP30.4m
Change in NAV per share Decreases 6.2p 104.7p Increases 6.1p
----------------------------- ------------------ --------- ------------------
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP9.6m GBP523.6m Increases GBP10.2m
Change in NAV per share Decreases 1.9p 104.7p Increases 2.1p
----------------------------- ------------------ --------- ------------------
Comparative sensitivity results are not applicable for 31 March
2019 for hydropower assets as the Fund acquired its first project
in this sector during this period.
The sensitivity of the portfolio to movements in electricity and
gas prices is as follows:
30 Sep 2019 (unaudited)
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP30.0m GBP543.6m Increases GBP30.1m
Change in NAV per share Decreases 6.0p 104.7p Increases 6.1p
----------------------------- ------------------ --------- ------------------
31 Mar 2019
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP28.9m GBP523.6m Increases GBP29.1m
Change in NAV per share Decreases 5.8p 104.7p Increases 5.9p
----------------------------- ------------------ --------- ------------------
Waste and wastewater assets do not have significant volume and
price risks.
The sensitivity of the portfolio to movements in AD feedstock
prices is as follows:
30 Sep 2019 (unaudited)
----------------------------- ----------------- --------- -----------------
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases GBP7.4m GBP543.6m Decreases GBP7.7m
Change in NAV per share Increases 1.5p 104.7p Decreases 1.6p
----------------------------- ----------------- --------- -----------------
31 Mar 2019
----------------------------- ----------------- --------- -----------------
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases GBP7.0m GBP523.6m Decreases GBP7.2m
Change in NAV per share Increases 1.4p 104.7p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
Euro/sterling exchange rate sensitivity
As the proportion of the portfolio assets with cash flows
denominated in euros represented less than 1% of the portfolio
value at 30 September 2019, 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 2019, the Company has provided a guarantee
under the Company's wholly owned subsidiary UK HoldCo's GBP130
million revolving credit facility. Following an increase in the
committed amount and a further one-year extension signed in May
2019, the RCF has increased to GBP170 million and is now due to
expire in June 2022.
The Company has 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
--------------------------------------- ------------------------------- --------- ----------- --------- ------
John Laing Environmental Assets
Group (UK) Limited(1) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Intermediate holding UK A 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%
Easton PV Limited Project holding company UK D 100% 100%
Pylle Solar Limited Project holding company UK D 100% 100%
Second Energy Limited Operating subsidiary UK D 100% 100%
ELWA Holdings Limited Project holding company UK E 80% 80%
ELWA Limited(2) Operating subsidiary UK E 80% 81%(2)
JLEAG Wind Holdings Limited Project holding company UK A 100% 100%
JLEAG Wind Limited Project holding company UK A 100% 100%
Amber Solar Parks (Holdings) Limited Project holding company UK F 100% 100%
Amber Solar Park Limited Operating subsidiary UK F 100% 100%
Fryingdown Solar Park Limited Operating subsidiary (dormant) UK F 100% 100%
Five Oaks Solar Parks Limited Operating subsidiary (dormant) UK F 100% 100%
Bilsthorpe Wind Farm Limited Operating subsidiary UK F 100% 100%
Ferndale Wind Limited Project holding company UK F 100% 100%
Castle Pill Wind Limited Project holding company UK F 100% 100%
Wind Assets LLP Operating subsidiary UK F 100% 100%
Shanks Dumfries and Galloway
Holdings Limited Project holding company UK G 80% 80%
Shanks Dumfries and Galloway Limited Operating subsidiary UK G 80% 80%
Hall Farm Wind Farm Limited Operating subsidiary UK F 100% 100%
Branden Solar Parks (Holdings) Limited Project holding company UK F 100% 100%
Branden Solar Parks Limited Operating subsidiary UK F 100% 100%
--------------------------------------- ------------------------------- --------- ----------- --------- ------
(1) John Laing 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.
Place of Registered Ownership Voting
Name Category business office interest rights
------------------------------------------- ------------------------ --------- ----------- --------- ------
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 F 100% 100%
Wear Point Wind Limited Operating subsidiary UK F 100% 100%
Monksham Power Ltd Project holding company UK D 100% 100%
Frome Solar Limited Operating subsidiary UK D 100% 100%
BL Wind Limited Operating subsidiary UK F 100% 100%
Burton Wold Extension Limited Operating subsidiary UK F 100% 100%
New Albion Wind Farm
(Holdings) Limited Project holding company UK F 100% 100%
New Albion Wind Limited Operating subsidiary UK F 100% 100%
Dreachmhor Wind Farm Limited Operating subsidiary UK F 100% 100%
France Wind GP Germany GmbH Project holding company DE K 100% 100%
France Wind Germany GmbH & Co. KG Project holding 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%
CSGH Solar Limited Project holding company UK A 100% 100%
CSGH Solar (1) Limited Project holding company UK A 100% 100%
Catchment Tay Holdings Limited Project holding company UK H 33.3% 33.3%
Catchment Tay Limited Operating subsidiary UK H 33.3% 33.3%
sPower Holdco 1 (UK) Limited Project holding company UK D 100% 100%
sPower Finco 1 (UK) Limited Project holding 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%
Golden Hill Solar Farm Limited Project holding 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%
CGT Investment Limited Project holding company UK L 100% 100%
CWMNI GWYNT TEG CYF Operating subsidiary UK L 100% 100%
Moelogan 2 (Holdings) Cyfyngedig Project holding 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 Project holding company UK A 100% 100%
Llynfi Afan Renewable
Energy Park Limited Operating subsidiary UK A 100% 100%
Green Gas Oxon Limited Project holding 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%
Merlin Renewables Limited Operating subsidiary UK M 100% 100%
Biogas Meden Limited Operating subsidiary UK M 100% 100%
Yorkshire Hydropower Holdings Limited Project holding company UK O 100% 100%
Yorkshire Hydropower Limited Operating subsidiary UK O 100% 100%
Warren Power Limited Project holding company UK M 100% 100%
Warren Energy Limited Operating subsidiary UK M 100% 100%
------------------------------------------- ------------------------ --------- ----------- --------- ------
Registered offices
A. The Shard, London Bridge Street, London SE1 9SG
B. 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ
C. Calder & Co, 16 Charles II Street, London SW1Y 4NW
D. Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF
E. Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU
F. 8 White Oak Square, London Road, Swanley, Kent BR8 7AG
G. 16 Charlotte Square, Edinburgh EH2 4DF
H. Infrastructure Managers Limited, 2nd floor, 11 Thistle Street, Edinburgh EH2 1DF
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
M. 10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD
N. Friars Ford, Manor Road, Goring, Reading RG8 9EL
O. Brook House, Ann Valley, Andover, Hampshire SP11 7NG
18. Events after balance sheet date
A dividend for the quarter ended 30 September 2019 of 1.665
pence per share was approved by the Board on 20 November 2019.
Please refer to note 6 for further details.
There are no other significant events since the period end which
would require to be disclosed.
Directors and Advisers
Directors
Richard Morse (Chairman)
Denise Mileham
Peter Neville
Richard Ramsay
Hans Joern Rieks
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
Sub 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
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
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, HWT Limited and JLEAG Solar 1
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, HWT Limited and JLEAG Solar 1 Limited
Investment Adviser
Foresight Group (since 1 July 2019) and John Laing Capital
Management Limited (for the period from 1 April 2019 to 30 June
2019)
IPO
Initial Public Offering
IRR
internal rate of return
John Laing
John Laing Group plc and its subsidiary companies
MW(e)
megawatt electric
MWh
megawatt hour
MWth
megawatt thermal
NAV
Net Asset Value
OECD
Organisation for Economic Co--operation and Development
portfolio
the 30 assets in which JLEN had a shareholding as at 30
September 2019
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
total shareholder return
total shareholder return combines the share price movement and
dividends since IPO expressed as an annualised percentage
UK HoldCo
John Laing Environmental Assets Group (UK) Limited, wholly owned
subsidiary of JLEN Environmental Assets Group Limited
WADR
weighted average discount rate
END
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END
IR CKKDKBBDBQDB
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November 21, 2019 02:01 ET (07:01 GMT)
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