TIDMJLEN
RNS Number : 5081X
John Laing Environmental Assets Grp
20 November 2014
20 November 2014
JOHN LAING ENVIRONMENTAL ASSETS GROUP LIMITED
("JLEN" or "the Company")
Interim results for the period ended 30 September 2014 and
Dividend Announcement
JLEN is pleased to announce the publication of its interim
results and an interim dividend of 3.0 pence per share for the
period ended 30 September 2014.
JLEN is an environmental infrastructure fund which aims to
provide investors with a target dividend of 6 pence per share
increasing progressively in line with inflation. The Company has a
stated aim of generating a net IRR of 7.5% to 8.5%, while seeking
to preserve the capital value of its Portfolio of assets.
Highlights
-- Successful Initial Public Offering (IPO) in March 2014 raising GBP160m
-- IPO proceeds fully invested in seven environmental
infrastructure assets comprising nine operational sites
-- Net Asset Value (NAV) per share of 101.2 pence up from 98.0 pence at IPO
-- Financial performance of portfolio in line with expectations
and ELWA contract performance maintained despite fire disruption at
key facility
-- Revolving Credit Facility of GBP50m signed in October 2014
giving flexibility for further acquisitions
-- Profit before tax of GBP4.6m
-- Interim dividend of 3.0 pence per share to be paid in
December 2014 in line with our dividend policy
-- Strong pipeline of assets for further growth including First
Offer Agreement with John Laing plc
Richard Morse, Chairman of JLEN, said:
"We were delighted by the success of the IPO and to have secured
the initial portfolio of assets which meant we were fully invested
shortly after listing. The results announced today and the interim
dividend to be paid in December 2014 demonstrate that the Company
is delivering on the commitments made at the time of the IPO. JLEN
has identified a number of opportunities to expand the portfolio
and the successful signing of our GBP50m revolving credit facility
offers funding flexibility to take advantage of these
opportunities."
Dividend Timetable
Ex-dividend date 27 November 2014
Record date 28 November 2014
Payment date 19 December 2014
Details of the conference call for analysts and investors:
There will be a call at 9.30am today for analysts and investors.
To register for the call please contact Redleaf PR on +44 (0)20
7382 4769, or by email on JLEN@RedleafPR.com.
Presentation materials will be posted on the Company's website,
www.jlen.com, from 9.00am.
Ends
For Further Details Contact:
John Laing Capital Management Limited
David Hardy
Chris Tanner 020 7901 3559
Redleaf PR
Rebecca Sanders-Hewett
Charlie Geller 020 7382 4769
About JLEN
JLEN's investment policy is to invest in 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.
Environmental Infrastructure is defined by the Company as
infrastructure projects that utilise natural or waste resources or
support more environmentally-friendly approaches to economic
activity. This could involve the generation of renewable energy
(including solar, wind, hydropower and biomass technologies), the
supply and treatment of water, the treatment and processing of
waste, and projects that promote energy efficiency.
Further details of the Company can be found on its website
www.jlen.com
John Laing Environmental Assets Group Limited
Interim Report 2014
At a glance as at 30 September 2014
-- Successful IPO in March 2014 raised GBP160m
-- IPO proceeds fully invested in 7 environmental infrastructure
assets comprising 9 operational sites
-- NAV per share of 101.2p up from 98.0p at IPO
-- Financial performance of Portfolio in line with expectations
-- Revolving Credit Facility of GBP50m signed in October 2014
giving flexibility for further acquisitions
-- Profit before tax of GBP4.6m
-- Interim dividend of 3p to be paid in December 2014 in line with our dividend policy
-- Strong pipeline of assets for further growth including First
Offer Agreement with John Laing plc
Highlights
-- 160,000,000 Ordinary shares in issue
-- GBP161.9m Net Asset Value
-- GBP154.8m Portfolio value
-- 101.2p Net Asset Value per share
-- GBP166.4m Market capitalisation
-- 104.0p Share price
-- GBP7.4m Net cash
-- 3.0p Dividend per share
-- 9 Number of operational sites
Chairman's statement
On behalf of the Board, I am delighted to present the first set
of financial results for John Laing Environmental Assets Group
Limited
Richard Morse
Chairman
On 31 March 2014, the Company successfully raised GBP160 million
through an initial public offering ("IPO") and its Ordinary Shares
were listed on the Main Market of the London Stock Exchange. JLEN
completed the acquisition of 100% of the initial portfolio set out
in the IPO Prospectus on 22 April 2014. As a result, the Group is
now fully invested in a diversified Portfolio of seven operational
UK--based solar, onshore wind, waste processing and wastewater
projects.
Results
The Net Asset Value ("NAV") per share was 101.2 pence at 30
September 2014, an increase of 3.3% on the 98.0 pence NAV per share
upon admission on 31 March 2014. After taking into account the
interim dividend declared on 20 November 2014, to be paid on 19
December 2014, NAV per share at 30 September 2014 was 98.2
pence.
The Company has prepared financial statements for the period
from 12 December 2013 (the date of incorporation) to 30 September
2014, although the initial Portfolio was not acquired until shortly
after admission on 31 March 2014.
Cash received from the Portfolio by way of distributions, which
includes interest, loan repayments and dividends, was GBP7.5
million. Net cash inflows from the investment Portfolio (after
operating costs) of GBP6.9 million cover the declared interim
dividend of 3.0 pence per share by approximately 1.4 times.
Dividend policy
Our dividend policy is, subject to market conditions, and also
the Company's performance, financial position and financial
outlook, to pay an annualised dividend to shareholders of 6.0 pence
per Ordinary Share, increasing progressively in line with
inflation. (1)This is a target only and not a profit forecast.
There can be no assurance that this target will be met.
I am pleased to announce that, in line with this policy, the
first interim dividend of 3.0 pence per Ordinary Share for the
period from admission to 30 September 2014 will be paid on 19
December 2014 to shareholders on the register as at 28 November
2014. The ex--dividend date will be 27 November 2014.
Portfolio performance
The Company invests 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.
The current Portfolio includes onshore wind, PV solar, and waste
and wastewater processing projects in the UK. Wind and Solar
projects are supported by the UK's commitment to support
low--carbon electricity targets and the waste and wastewater
processing projects have operating track records of more than five
years and benefit from long--term contracts backed by the UK
government.
The Portfolio has produced results broadly in line with
expectations at the time of the IPO, as reflected in the progress
of the net asset valuation during the period.
The results from the renewable energy assets within the
Portfolio are dependent in part on the level of power prices, which
have trended lower since the IPO, and also on the weather which can
be predicted with some degree of confidence over the long term but
may vary over the short term. This variation has been observed
during the six months following the IPO - with wind speeds somewhat
below expectations, but solar irradiation at or above
expectations.
For the waste and wastewater processing assets, financial
performance has been broadly in line with projections. This is in
spite of the fire at the Frog Island facility (part of the ELWA
project), which affected a significant portion of the operating
capacity and will continue to do so for several months. Despite the
severity of the fire, the Frog Island facility has now recommenced
operations on a partial basis and in conjunction with ELWA's other
facilities, the contract with East London Waste Authority continues
to be fulfilled.
Notwithstanding the impact of lower power prices and the fire at
ELWA, the Net Asset Value of JLEN has moved forward during the
reporting period, which demonstrates the benefits of JLEN's
portfolio diversity across a range of environmental infrastructure
projects and its robustness to operational challenges.
Valuation
The Net Asset Value at 30 September 2014 is GBP161.9 million and
is made up of GBP154.8 million Portfolio Valuation, Company's and
intermediate holdings' cash of GBP7.4 million and negative working
capital balances of GBP0.3 million.
The Investment Adviser has prepared a fair market valuation of
the Portfolio as at 30 September 2014. 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 set by
the Investment Adviser using its experience and judgement, having
taken into account available comparable market transactions and
financial market data in order to arrive at a fair market value.
The Directors have satisfied themselves as to the methodology used
and the assumptions adopted and have approved the valuation of
GBP154.8 million for the Portfolio of seven investments as at 30
September 2014.
Board
The Board comprises myself and four experienced Directors, three
based in Guernsey and one in the UK. I would like to express my
thanks for their support in the successful IPO of the Company and
for their work leading and participating in the Board and Committee
meetings.
The Company has adopted the Association of Investment Companies
(the "AIC") Code of Corporate Governance which has been endorsed by
the Financial Reporting Council. In 2014, the Company became a
member of the AIC so that the Company can benefit from the ongoing
development of best practice in the industry.
All of the Directors offered themselves for re--election at the
Annual General Meeting held on 14 August 2014 and were duly
re--elected.
Outlook
Following the successful IPO, the Board is encouraged by the
progress JLEN has made during the first six months of trading.
The Board continues to work closely with the Investment Adviser
in assessing the risks and opportunities in the environmental
infrastructure market, covering the key risk areas of volume,
energy price, inflation and interest rates, lack of future pipeline
and/or funding, increased competition, changes to the PPP and
energy regulatory and legislative framework and operational risks
in the Portfolio. The Board considers that the principal risks and
uncertainties for JLEN have not materially altered from those
commented on in the IPO Prospectus issued in February 2014. A
detailed explanation of the principal risks and uncertainties can
be found on pages 22 to 49 of the IPO Prospectus.
The Board is actively seeking suitable projects to add to its
Portfolio both from John Laing and third parties. JLEN has the
benefit of a First Offer Agreement with John Laing plc over a
significant pipeline of environmental infrastructure projects which
supports its growth plans in the next few years. To support JLEN's
acquisition activities John Laing Environmental Assets Group (UK)
Limited was pleased to enter into a three--year GBP50 million
Revolving Credit Facility with HSBC and NIBC to fund asset
purchases and to provide working capital.
Conclusion
It is pleasing to be able to deliver an initial set of results
that fulfils our aim of declaring a dividend in line with
expectations, as well as enhancement of the Company's Net Asset
Value. Our stated objective is to generate a net IRR of 7.5% to
8.5% (1), while at the same time preserving the capital value of
our Portfolio of assets. The acquisition pipeline looks healthy and
our recently negotiated debt facility offers us additional
flexibility to make acquisitions.
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met
Richard Morse
Chairman
19 November 2014
Investment Adviser's report
The financial performance of the Portfolio has been in line with
the Investment Adviser's expectations during the reporting period
and JLEN has announced an interim dividend of 3.0 pence per share
for the period ended 30 September 2014, payable in December 2014,
in line with the target set out in the IPO Prospectus.
About the Investment Adviser
JLEN is advised by John Laing Capital Management Limited
("JLCM"). JLCM, a wholly--owned subsidiary of John Laing plc, acts
as Investment Adviser to the Company. JLCM was incorporated in
England and Wales on 19 May 2004 under the Companies Act 1985
(registered number 5132286) and has been authorised and regulated
in the UK by the FCA (previously FSA) since December 2004.
The Portfolio
The Company's IPO on 31 March 2014 raised GBP160 million (before
expenses) and JLEN was fully invested shortly after listing. The
initial portfolio comprised seven investment vehicles containing
nine distinct operational onshore wind, PV solar and waste and
water processing project sites in the UK. These are summarised as
follows:
Capacity Operations
Asset Type Ownership (MWs) date
--------------------- ------------- ---------- --------- -----------
Amber Solar 100% 9.8 Jul 2012
Bilsthorpe Wind 100% 10.2 Mar 2013
Oct 2009
Castle Pill & and Sep
Ferndale Wind 100% 9.6 2011
Hall Farm Wind 100% 24.6 Apr 2013
Dumfries & Galloway Waste mgnt. 80% n/a 2007
ELWA Waste mgnt. 80% n/a 2006
Tay Wastewater 33% n/a Nov 2001
--------------------- ------------- ---------- --------- -----------
Investment performance
JLEN's Net Asset Value ("NAV") as at 30 September 2014 increased
to GBP161.9 million from GBP156.8 million at IPO on 31 March 2014,
representing an uplift of 3.3%. On a per share basis it increased
from 98.0 to 101.2 pence.
This uplift has been primarily driven by the generation of cash
from the Portfolio, while also reflecting updates for recent
operational performance and changes in forecast electricity prices.
The Directors have considered recent weakness in electricity and
gas markets as well as reports from market consultants in arriving
at the forecasts used in the valuation.
JLEN has announced an interim dividend of 3.0 pence per share
for the period ended 30 September 2014, payable in December 2014,
in line with the target set out in the Prospectus.
Portfolio performance
In general, during the period ended 30 September 2014 the
financial performance of the Portfolio has been in line with
expectations and, apart from the disruption due to a fire at one of
the ELWA facilities discussed below, there are no material issues
that are affecting performance of the assets.
The wind farms and the solar parks have averaged availability
ahead of budget and the environmental processing plants have also
had no issues with unavailability, apart from the ELWA fire which
we reported in August. The fire occurred at the Frog Island
Mechanical Biological Treatment ("MBT") facility at the ELWA waste
project. We are pleased to report that despite the severity of the
fire, the Frog Island facility has been operating on an interim
basis since early November. In conjunction with the project's other
facilities, the contract with East London Waste Authority continues
to be fulfilled and operated, and diversion targets met. A
reinstatement plan of the full facilities has been prepared and
full reinstatement is expected to take a year. On the basis of
insurance cover this incident has not had a material impact on the
valuation of the Portfolio.
The wind projects experienced good wind conditions over the
winter of 2013--14, leading to generation ahead of budget. However,
for the six--month period to 30 September 2014, this position
reversed with June and September in particular being low
wind--speed months, illustrating that wind conditions can vary
significantly over individual months. Overall generation for the
twelve months to 30 September 2014 was 8.8% below budget.
Solar irradiation was as expected for the twelve months to 30
September 2014 and generation from the solar assets was slightly
ahead of budget.
Waste and wastewater flows have been in line with budget for the
period. The environmental processing projects are relatively
insensitive to volume changes due to the presence of banded payment
arrangements that see the projects make little additional profit
for a marginal unit of waste.
In September we successfully held an auction of the power for
the solar project sites for winter 2014--15 and achieved a positive
outcome slightly ahead of our expectations. The wind farms remain
under long--term Power Purchase Agreements with a mixture of fixed
and variable pricing arrangements.
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 2014
was GBP154.8 million, compared to GBP156.4 million at IPO on 31
March 2014. The decrease of GBP1.6 million is the net impact of
cash received from investments, changes in macroeconomic and power
price assumptions and underlying growth in the Portfolio. A
reconciliation of the factors contributing to the growth in the
Portfolio during the period is shown in the chart below.
The total movement of investments during the period ended 30
September 2014 is shown in the table below:
GBPm
----------------------------------------- ------
Valuation of Portfolio at 12 December
2013 -
Acquisitions in the period 156.4
Cash distributions from Portfolio (7.5)
----------------------------------------- ------
Rebased opening valuation of Portfolio 148.9
Movement in fair value of the Portfolio 5.9
----------------------------------------- ------
Valuation of Portfolio at 30 September
2014 154.8
Fair value of intermediate holding
companies 3.9
----------------------------------------- ------
Investments at fair value through
profit or loss 158.7
----------------------------------------- ------
Valuation assumptions
Discount rate
The assets in JLEN's Portfolio are valued by discounting the
future cash flows forecast by the underlying asset financial
models. The discount rate applied to the asset cash flows is
therefore a key determinant of the valuation. The discount rates
used in the valuation exercise represent the Investment Adviser's
and the Board's assessment of the rate of return in the market for
assets with similar characteristics and risk profile. The discount
rates are reviewed on a regular basis and updated, where
appropriate, to reflect changes in the market and in the project
risk characteristics. This is the same method as applied at the
time of the IPO.
The Weighted Average Discount Rate ("WADR") of the Portfolio at
30 September 2014 was 9.2% (at IPO on 31 March 2014: 9.5%).
The sensitivity of the Portfolio to movements in the discount
rate is as follows:
Minus Base Plus
Discount rate 0.5% 9.2% 0.5%
--------------------- ---------- ----------- ----------
Change in Increases Decreases
Portfolio Valuation GBP6.1m GBP154.8m GBP5.7m
Change in Increases Decreases
NAV per share 3.8p 101.2p 3.6p
--------------------- ---------- ----------- ----------
Other assumptions
A broad range of assumptions are used in our valuation models.
These assumptions are based on long--term forecasts and are not
affected by short--term fluctuations in inputs, be it 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:
Volumes
Base case forecasts for renewable energy projects assume a "P50"
level of power output for the renewable energy assets. 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
under achieved. Hence the P50 is the expected level of generation
over the long term. For the waste and water 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.
The sensitivity of the Portfolio to movements in energy yield is
as follows:
P90 Base P10
Energy yield (10 year) P50 (10 year)
--------------------- ---------- ---------- ----------
Change in Decreases Increases
Portfolio Valuation GBP13.4m GBP154.8m GBP12.7m
Change in Decreases Increases
NAV per share 8.4p 101.2p 7.9p
--------------------- ---------- ---------- ----------
Power prices
Power price assumptions are based on long--term forecasts from
an established market consultant and other relevant information,
and adjusted by the Investment Adviser for project specific
arrangements.
The sensitivity of the Portfolio to movements in power prices is
as follows:
Minus Plus
Power price 10% Base 10%
--------------------- ---------- ---------- -----------
Change in Decreases Increases
Portfolio Valuation GBP5.1m GBP154.8m GBP4.5m
Change in Decreases Increases
NAV per share 3.2p 101.2p 2.8p
--------------------- ---------- ---------- -----------
Tax rates
The long--term UK corporation tax rate assumed in the 30
September 2014 valuation is 20% and reflects the rate enacted by
legislation which is in line with market practice.
Interest rates
Deposit rates assumed in the valuation reflect a range of
deposit rates from 0.75% in 2014 with a gradual increase to a
long--term rate of 3.5% with effect from 2019 onwards.
Inflation
The long--term inflation assumption used in the valuation as at
30 September 2014 is 2.75%. Each project in the Portfolio receives
a revenue stream which is either fully or partially inflation
linked.
The sensitivity of the Portfolio to movements in inflation rates
is as follows:
Minus Plus
Inflation rate 0.5% Base 0.5%
--------------------- ---------- ---------- ----------
Change in Decreases Increases
Portfolio Valuation GBP6.4m GBP154.8m GBP6.0m
Change in Decreases Increases
NAV per share 4.0p 101.2p 3.7p
--------------------- ---------- ---------- ----------
Financing
At IPO on 31 March 2014 the Company issued 160,000,000 Ordinary
Shares at an issue price of 100 pence with net issue proceeds of
GBP156.9 million. No further shares have been issued since this
date.
Post the reporting period to 30 September 2014, on 9 October
2014, John Laing Environmental Assets Group (UK) Limited entered
into a three--year GBP50 million Revolving Credit Facility with
HSBC and NIBC to fund new acquisitions and to provide working
capital. This type of short term financing is limited to 30% of the
Net Asset Value. Borrowings under the facility will be repaid
through cash received from its investment assets and future equity
raisings.
In addition to the Revolving Credit Facility, several of the
projects have underlying project level debt. There is an additional
gearing limit in respect of such non--recourse debt of 85% of the
Gross Project Value for PFI/PPP projects and 65% for renewable
energy generation projects.
The project--level gearing at 30 September 2014 across the
portfolio was 51.0%, being 19.0% for the renewable energy assets
and 65.0% for the PFI processing assets.
Profit before tax
Profit before tax ("PBT") for the period was GBP4.6 million.
Earnings per share ("EPS") for the period were 2.85 pence per
share.
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
AIC recommended methodology for calculating this ratio, which is an
annual figure. The annualised ratio for the six months to 30
September 2014 was 1.34%. JLCM believes this to be competitive for
the market in which JLEN operates and the stage of development and
size of the Fund, and demonstrates that management of the Fund is
efficient with minimal expenses incurred in its ordinary
operation.
Net assets
The Net Asset Value at 30 September 2014 is GBP161.9 million and
is comprised of GBP154.8 million Portfolio Valuation, Company's and
intermediate holdings' cash of GBP7.4 million and negative working
capital balances of GBP0.3 million.
Cash flow
As at 30 September 2014, the Fund had overall net cash of GBP7.4
million, excluding cash held in investment project companies as
working capital or otherwise. This comprises cash balances in the
Company of GBP3.8 million and GBP3.6 million in intermediate
holding companies. The Company had no outstanding borrowing at 30
September 2014.
A summary of the movements in cash during the period is shown
below.
Cash flows of the Company and intermediate holding companies for
the period to 30 September 2014:
GBPm
------------------------------- --------
Net issue proceeds from IPO
(1) 156.9
Acquisition of investment
assets(1)(1) (156.4)
Cash received from investment
assets 7.5
Operating and other costs (0.6)
------------------------------- --------
Total cash balances 7.4
------------------------------- --------
(1) Actual net issue proceeds compared to IPO estimate of
GBP156.8m.
(1)(1) Initial Portfolio acquisition value per IPO Prospectus of
GBP156.58m adjusted for working capital balances at acquisition
The Company has declared an interim dividend of GBP4.8 million
(3.0 pence per share), which is payable in December 2014. The
dividend is expected to be paid from current cash balances. Any
remaining cash will be used to partially fund future
acquisitions.
Outlook
The secondary market for environmental infrastructure projects
remains both active and significant. The Investment Adviser
continues to investigate potential markets and investments and has
seen a steady flow of opportunities across all JLEN's asset classes
since IPO. UK solar has been a particularly active sector during
the period, as developers and investors have pushed to complete
transactions before new large--scale solar photo--voltaic
installations cease to be eligible for ROCs from April 2015 and
instead must compete under the new FIT - Contracts for Difference
("FIT CfD") regime.
The Investment Adviser continues to monitor European markets
with stable regulatory frameworks as permitted under the Fund's
investment policy. We have seen a number of opportunities in
onshore wind, both in the UK and Europe, which we will continue to
evaluate.
Although smaller in number and scale, the Investment Adviser has
been pleased with the level of environmental infrastructure
opportunities outside of wind and solar that it has seen. The
Investment Adviser believes that the Company is an attractive
counterparty for developers and early--stage investors seeking to
recycle capital from environmental infrastructure projects.
JLEN also has the benefit of a First Offer Agreement with John
Laing plc over a significant pipeline of environmental
infrastructure projects which supports its growth plans in the next
few years. The Company expects that pursuant to the First Offer
Agreement, Environmental Infrastructure projects that are in
accordance with it's Investment Policy with a combined value of
approximately GBP245 million (as estimated by John Laing) will
become available for acquisition by the Fund within the next three
years.
JLEN invests in environmental infrastructure assets which are
long--term in nature. Whilst the Investment Adviser expects to see
the sort of short term variability in performance witnessed in
recent months, the outlook for the initial Portfolio remains
unchanged following the first 6 months operating period and, other
than in respect of power prices, there are no changes to our
long--term assumptions underlying the cash flow projections and
valuation of the Portfolio. A key strength of JLEN is its
diversified Portfolio and the spread of risks across a variety of
technologies.
Responsibility statement
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting; and
- the Chairman's Statement and Investment Adviser's Report meets
the requirements of an interim management report, and includes a
fair review of the information required by:
- a) DTR 4.2.7R, being an indication of important events during
the period from incorporation on 12 December 2013 to 30 September
2014 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.
By order of the Board
R Morse
Chairman
19 November 2014
Independent review report to John Laing Environmental Assets
Group Limited
We have been engaged by the Company to review the condensed set
of financial statements in the interim financial report for the
period from incorporation on 12 December 2013 to 30 September 2014
which comprises the condensed income statement, the condensed
statement of comprehensive income, the condensed statement of
changes in equity, the condensed balance sheet, the condensed cash
flow statement and related notes 1 to 14. We have read the other
information contained in the interim financial 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 Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Company will be prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this interim financial 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 interim financial
report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) 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 interim financial report for the period since incorporation
on 12 December 2013 to 30 September 2014 is not prepared, in all
material respects, in accordance with International Accounting
Standard 34 and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Deloitte LLP Chartered Accountants
Guernsey, Channel Islands
19 November 2014
Condensed balance sheet
as at 30 September 2014
2014
Notes GBP'000s
---------------------------------------------- ------ ---------
Non--current assets
Investments at fair value through profit
or loss 7 158,711
---------------------------------------------- ------ ---------
Total non--current assets 158,711
---------------------------------------------- ------ ---------
Current assets
Trade and other receivables 8
Cash and cash equivalents 3,814
---------------------------------------------- ------ ---------
Total current assets 3,822
---------------------------------------------- ------ ---------
Total assets 162,533
---------------------------------------------- ------ ---------
Current liabilities
Trade and other payables (616)
---------------------------------------------- ------ ---------
Total current liabilities (616)
---------------------------------------------- ------ ---------
Total liabilities (616)
---------------------------------------------- ------ ---------
Net assets 161,917
---------------------------------------------- ------ ---------
Equity
Equity reserves 9 157,352
Retained earnings 4,565
---------------------------------------------- ------ ---------
Equity attributable to owners of the Company 161,917
---------------------------------------------- ------ ---------
Net assets per share (pence per share) 101.2
---------------------------------------------- ------ ---------
The financial statements were approved by the Board of Directors
and authorised for issue on 19 November 2014. They were signed on
its behalf by:
R Morse C Legge
Chairman Director
Condensed income statement
period from incorporation on 12 December 2013 to 30 September
2014
2014
Notes GBP'000s
----------------------------------------------- ------ ---------
Interest income 4,061
Net gain on investments at fair value through
profit or loss 7 1,841
----------------------------------------------- ------ ---------
Operating income 5,902
----------------------------------------------- ------ ---------
Operating expenses 3 (1,337)
----------------------------------------------- ------ ---------
Operating expenses (1,337)
----------------------------------------------- ------ ---------
Operating profit 4,565
----------------------------------------------- ------ ---------
Profit before tax 4,565
Tax 4 -
Profit for the period 4,565
----------------------------------------------- ------ ---------
Attributable to:
Owners of the Company 4,565
Earnings per share
From continuing operations
Basic and diluted (pence) 6 2.85
----------------------------------------------- ------ ---------
All results are derived from continuing operations.
Condensed statement of comprehensive income
period from incorporation on 12 December 2013 to 30 September
2014
2014
GBP'000s
------------------------------------------------------ ---------
Profit for the period 4,565
------------------------------------------------------ ---------
Total recognised income and expenditure attributable
to equity shareholders 4,565
------------------------------------------------------ ---------
Attributable to:
Owners of the Company 4,565
------------------------------------------------------ ---------
Condensed statement of changes in equity
period from incorporation on 12 December 2013 to 30 September
2014
Period ended 30 September
2014
Equity Retained
reserves reserves Total
GBP'000s GBP'000s GBP'000s
-------------------------------- --------- --------- ---------
Balance at incorporation - - -
Profit for the period - 4,565 4,565
-------------------------------- --------- --------- ---------
Total comprehensive income for
the period - 4,565 4,565
Equity reserves 157,352 - 157,352
-------------------------------- --------- --------- ---------
Balance at 30 September 2014 157,352 4,565 161,917
-------------------------------- --------- --------- ---------
Condensed cash flow statement
period from incorporation on 12 December 2013 to 30 September
2014
2014
GBP'000s
-------------------------------------------------- ----------
Profit from operations 4,565
Adjustments for:
Increase in accrued interest income -
Net gain on investments at fair value through
profit or loss (1,841)
-------------------------------------------------- ----------
Operating cash flows before movements in working
capital 2,724
Increase in receivables (8)
Increase in payables 616
-------------------------------------------------- ----------
Cash inflow from operations 3,332
-------------------------------------------------- ----------
Net cash inflow from operating activities 3,332
-------------------------------------------------- ----------
Investing activities
Investments in subsidiaries (66,870)
Loan to subsidiaries (90,000)
-------------------------------------------------- ----------
Net cash used from investing activities (156,870)
-------------------------------------------------- ----------
Financing activities
Proceeds on issue of share capital 160,000
Expenses relating to issue of shares (2,648)
-------------------------------------------------- ----------
Net cash from financing activities 157,352
-------------------------------------------------- ----------
Net increase in cash and cash equivalents 3,814
Cash and cash equivalents at beginning of the
period -
-------------------------------------------------- ----------
Cash and cash equivalents at end of period 3,814
-------------------------------------------------- ----------
Cash and cash equivalents comprise cash and short--term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets is approximately equal to fair
value.
Notes to the condensed set of financial statements
period from incorporation on 12 December 2013 to 30 September
2014
1. General information
John Laing Environmental Assets Group Limited (the Company) is a
closed--ended investment company domiciled and incorporated in
Guernsey, Channel Islands, under Section 20 of the Companies
(Guernsey) Law. The shares are publicly traded on the London Stock
Exchange under a Premium Listing. The interim condensed unaudited
financial statements of the Company (the interim statements) are
for the period from incorporation on 12 December 2013 to 30
September 2014 and have been prepared on the basis of the
accounting policies set out below. The Company invests 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 financial statements were approved and authorised for issue
by the Board of Directors on 19 November 2014. The condensed set of
financial statements included in this interim financial report has
been prepared in accordance with IAS 34 Interim Financial
Reporting.
The Company has early adopted the Investment Entities amendments
to IFRS 10, IFRS 12 and IAS 27. As a result of adopting the
amendments, the Company recognises its investment in its subsidiary
John Laing Environmental Assets Group (UK) Limited at fair value
through profit or loss. The fair value estimate of John Laing
Environmental Assets Group (UK) Limited includes the fair value of
both this company and all of the Company's subsidiaries.
Applicability of the guidance concerning Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27)
The Investment Entities standard introduced an exception to the
principle that all subsidiaries shall be consolidated. The
amendments require an investment entity to measure its subsidiaries
through profit or loss, in accordance with IAS 39 Financial
Instruments: Recognition and Measurement instead of consolidating
those subsidiaries.
To determine that the Company meets the definition of an
investment entity, further consideration is given to the following
characteristics of an investment entity that are demonstrated by
the Company.
(a) it has more than one investment;
(b) it has more than one investor;
(c) it has investors that are not related parties;
(d) it has ownership interests in the form of equity or similar
interests; and
(e) it holds its investments for a limited period only, i.e. it
has an exit strategy for its investments.
The Directors have considered that the Company demonstrates
these characteristics and meets the requirements to be considered
as an investment entity.
(b) Going concern
The Directors, in their consideration of going concern have
reviewed comprehensive cash flow forecasts prepared by the
Investment Advisers, which are based on prudent market data and
believe, based on those forecasts and an assessment of the
Company's subsidiary's new committed 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 Company and its subsidiaries had unrestricted cash
of GBP7.4 million as at 30 September 2014 and a banking facility
signed on 9 October 2014 (available for investment in new or
existing projects and working capital) of GBP50 million, which
expires in October 2017.
As at 30 September 2014, there was no amount drawn under the
facility. In addition, all key financial covenants are forecast to
continue to be complied with throughout the next year.
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 the condensed financial statements.
(c) Revenue recognition
(i) Interest income
Interest income is recognised when it is probable that the
economic benefits will flow to the Company and the amount of income
can be measured reliably. Interest income is accrued on a
time--apportioned basis, using the effective interest rate of the
instrument concerned as calculated at the acquisition or
origination date. Interest income is recognised gross of
withholding tax, if any.
(ii) Dividend income
Dividend income is recognised when the Company's right to
receive the payment has been established (provided that it is
probable that the economic benefits will flow to the Company and
the amount of revenue can be measured reliably). Dividend income is
recognised gross of withholding tax, if any, and only when approved
and paid by its subsidiary.
(d) Gains on investments at fair value through profit or
loss
Gains or losses that arise from the movement in the fair value
of the Company's investment in John Laing Environmental Assets
Group (UK) Limited ("JLEAG UK") are presented separately from
dividend income and interest income above.
(e) Taxation
Under the current system of taxation in Guernsey, the Company
itself is exempt from paying taxes on income, profits or capital
gains. Dividend income and interest income received by the Company
may be subject to withholding tax imposed in the country of origin
of such income. The underlying intermediate holding companies and
project companies in which the Company invests provide for and pay
taxation at the appropriate rates in the countries in which they
operate. This is taken into account when assessing the value of the
subsidiaries.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held
on call with banks and other short--term highly liquid deposits
with original maturities of three months or less. Bank overdrafts
that are repayable on demand are included as a component of cash
and cash equivalents for the purpose of the cash flow statements.
Deposits held with original maturities of greater than three months
are included in other financial assets.
(g) Financial instruments
Financial assets and financial liabilities are recognised on the
Company's balance sheet when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are
derecognised when the contractual rights to the cash flows from the
instrument expire or the asset is transferred and the transfer
qualifies for derecognition in accordance with IAS 39 'Financial
Instruments: Recognition and Measurement'.
a) Financial assets
The Company classifies its financial assets as either fair value
through profit or loss or loans and receivables. The classification
depends on the purpose for which the financial assets were
acquired. The Company determines the classification of its
financial assets at initial recognition.
i) Investments at fair value through profit or loss
As an investment entity, the Company is required to measure its
investments in its subsidiary JLEAG UK at fair value through profit
or loss. The Company's policy is to fair value both the equity and
debt investment in its subsidiary together. Subsequent to initial
recognition, the Company measures its investments on a combined
basis at fair value in accordance with IAS 39 Financial
Instruments: Recognition and Measurement and IFRS 13 Fair Value
Measurement. Interest and dividends are recognised on the basis as
described in note 2c, with the remaining gains/losses shown
separately as set out in note 2d.
ii) Loans and receivables
Trade receivables, loans and other receivables that are
non--derivative financial assets and that have fixed or
determinable payments that are not quoted in an active market are
classified as 'loans and other receivables'. Loans and other
receivables are measured at amortised cost using the effective
interest method, less any impairment. They are included in current
assets, except where maturities are greater than 12 months after
the Balance Sheet date in which case they are classified as
non--current assets. The Company's loans and receivables comprise
'trade and other receivables' and 'cash and cash equivalents' in
the Balance Sheet.
b) Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
i) Equity instruments
Ordinary shares are classified as equity. Costs directly
attributable to the issue of new shares or associated with the
establishment and listing of the Company that would otherwise have
been avoided are written off against the balance of the Equity
Reserves.
ii) Financial liabilities
Financial liabilities are classified as other financial
liabilities, comprising:
-- Loans and borrowings are recognised initially at fair value
of the consideration received, less transaction costs. Subsequent
to initial recognition, loans and borrowings are stated at
amortised cost with any difference between cost and redemption
value being recognised in the income statement over the period of
the borrowings on an effective interest basis.
-- Other non--derivative financial instruments are measured at
amortised cost using the effective interest method less any
impairment losses.
c) Effective interest method
The effective interest rate is that rate that exactly discounts
estimated future cash payments or receipts through the expected
life of the financial instrument to the relevant asset's carrying
amount.
d) Fair value estimation for investments at fair value
The Company's investments at fair value are not traded in active
markets.
Fair value is calculated by discounting at an appropriate
discount rate future cash flows expected to be received by the
Company's intermediate holdings, from investments in both equity
(dividends and equity redemptions), subordinated and intercompany
loans (interest and repayments). The discount rates used in the
valuation exercise represent the Investment Adviser's and the
Board's assessment of the rate of return in the market for assets
with similar characteristics and risk profile. The discount rates
are reviewed on a regular basis and updated, where appropriate, to
reflect changes in the market and in the project risk
characteristics. The discount rates that have been applied to the
financial assets at 30 September 2014 were in the range 7.7% to
11.5%. Refer to note 7 for details of the areas of estimation in
the calculation of the fair value.
For subsidiaries which provide management / investment--related
services, the fair value is estimated to be the net assets of the
relevant companies, which principally comprise cash and working
capital balances.
On 2 July 2013, the UK Government announced its intention to
reduce the main corporation tax rate by a further 1% to 20% from 1
April 2015. The reduction to 20% from 1 April 2015 is reflected in
the fair value of the investments.
Loans and borrowings are held at amortised cost. The carrying
value less impairment provision of trade receivables and payables
are assumed to approximate their fair values.
(h) Segmental reporting
The Directors and the Investment Adviser are 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. As a result, the Company presents
the business as a single segment comprising a homogeneous
portfolio.
(i) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey)
Law, 1987 the Company is a registered Closed--Ended Investment
Scheme. As an authorised scheme, the Company is subject to certain
ongoing obligations to the Guernsey Financial Services
Commission.
3. Operating expenses
Period ended
30 September
2014
GBP'000s
------------------------------ -------------
Investment Advisory fees 815
Directors' fees and expenses 153
Administration fee 42
Other expenses 327
------------------------------ -------------
1,337
------------------------------ -------------
4. 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 countries in which
they operate. The underlying tax liabilities / assets within the
subsidiaries and Environmental and PPP assets, which are held as
investments at fair value through profit and loss, are included in
the estimate of the fair value of these investments.
5. Dividends
An interim dividend for the period ended 30 September 2014 of
3.0 pence per share, amounting to GBP4.8 million, was approved by
the Board in November 2014 and is payable in December 2014. The
dividend has not been included as a liability at 30 September
2014.
6. Earnings Per Share
The calculation of the basic and diluted Earnings Per Share is
based on the following data:
Period ended
30 September
2014
GBP'000s
--------------------------------------------------- -------------
Earnings
Earnings for the purposes of basic and diluted
Earnings Per Share being net profit attributable
to owners of the Company 4,565
Number of shares
Weighted average number of Ordinary Shares for
the purposes of basic and diluted Earnings Per
Share 160,000,000
--------------------------------------------------- -------------
The denominator for the purposes of calculating
both basic and diluted Earnings Per Share are
the same as the Company had not issued any share
options or other instruments that would cause
dilution.
Pence
--------------------------------------------------- -------------
Basic and diluted Earnings Per Share 2.85
--------------------------------------------------- -------------
7. Investments at fair value through profit or loss
As set out in note 1, the Company accounts for its interest in
its 100% subsidiary JLEAG UK as an investment at fair value through
profit or loss. JLEAG UK in turn owns investments in environmental
and PPP projects as detailed in note 13.
The table below shows the movement in the Company's investment
in JLEAG UK in the period as recorded on the Company balance
sheet:
30 September
2014
GBP'000s
---------------------------------- -------------
Opening balance at incorporation -
Debt investments 90,000
Equity investments 66,870
Movement in fair value* 1,841
---------------------------------- -------------
Fair value at 30 September
2014 158,711
---------------------------------- -------------
*Net gain on investments at fair value through profit or loss
for the period ended 30 September 2014 is GBP1,841,000.
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 and PPP assets. These assets
are held either by JLEAG UK or through other intermediate holding
companies. The table below also presents a reconciliation of the
fair value of the asset portfolio to the Company balance sheet as
at 30 September 2014, by incorporating the fair value of these
intermediate holding companies.
30 September
2014
GBP'000s
----------------------------------------------------- -------------
Opening balance at incorporation -
Portfolio of assets acquired 156,367
Dividends received from portfolio assets (575)
Interest received from portfolio assets (3,341)
Loans and equity repayments received from portfolio
assets (3,633)
Movement in accrued interest 73
Growth in value from portfolio assets 5,899
----------------------------------------------------- -------------
Fair value of portfolio of assets at 30 September
2014 154,790
----------------------------------------------------- -------------
Cash held in intermediate holding companies 3,545
Fair value of other net assets in intermediate
holding companies 376
----------------------------------------------------- -------------
Fair value of Company's investment in JLEAG
UK at 30 September 2014 158,711
----------------------------------------------------- -------------
Fair value of portfolio of assets
The Investment Adviser has carried out fair market valuations of
the investments as at 30 September 2014. The Directors have
satisfied themselves as to the methodology used, the discount rates
applied and the valuation. Investments are all investments in
environmental and PPP projects and are valued using a discounted
cash flow methodology. The Company's holding of an investment
represents its interest in both the equity and debt instruments of
the investment. 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 for the purposes of the
Prospectus for the IPO.
Discount rates applied to the portfolio of assets range from
7.7% to 11.5% (weighted average 9.2%) (at IPO on 31 March 2014:
from 7.7% to 12.2% - weighted average 9.5%).
The following economic assumptions were used in the discounted
cash flow valuations:
30 September
2014
UK - Inflation rates 2.75%*
UK - Deposit interest 0.75% for 2014, gradually rising
rates to 3.5% from 2019*
---------------------- ---------------------------------
*Unchanged from IPO assumptions.
The long term UK corporation tax rate assumed in the 30
September 2014 Portfolio Valuation is 20%, in line with the rate
enacted by legislation and with market practice.
Fair value of intermediate holding companies
The assets in the intermediate holding companies substantially
comprise working capital and cash balances, therefore the Directors
consider the fair value to be equal to the book values.
8. Loans and borrowings
At 30 September 2014, there were no outstanding loans and
borrowings within the Company.
9. Equity reserves
30 September
2014
GBP'000s
------------------------------------------------- -------------
Opening balance on incorporation -
Shares issued in the period (160,000,000 shares
@ GBP1 per share) 160,000
Expenses of issue of equity shares (2,648)
------------------------------------------------- -------------
At 30 September 2014 157,352
------------------------------------------------- -------------
At 30 September 2014, the Company's share capital is composed of
160,000,000 Ordinary Shares of GBP1.00 each.
All new shares issued rank pari passu and include the right to
receive all future dividends and distributions declared, made or
paid.
10. 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 not
disclosed in this note. Details of transactions between the Company
and other related parties are disclosed below. This note also
details the terms of engagement by the Company with John Laing
Capital Management Limited (JLCM) as Investment Adviser together
with the details of investment acquisitions from John Laing plc, of
which JLCM is a wholly owned subsidiary.
JLCM is the Company's Investment Adviser. JLCM's appointment as
Investment Adviser is governed by an Investment Advisory Agreement
which may be terminated after an initial four year term, starting
31 March 2014, by either party giving one year's written
notice.
JLCM is entitled to a base fee equal to a) 1.0 per cent per
annum of the Adjusted Portfolio Value* of the Fund** up to and
including GBP500 million; and b) 0.8 per cent per annum of the
Adjusted Portfolio Value of the Fund in excess of GBP500
million.
The total Investment Adviser fee charged to the Income Statement
for the period to 30 September 2014 was GBP815,000 of which
GBP410,000 remained payable at the period end.*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
(i) any Uninvested Cash.
**Fund means the Company and John Laing Environmental Assets
Group (UK) Limited together with their wholly owned subsidiaries or
subsidiary undertaking (including companies or other entities
wholly owned by them together, individually or in any combination,
as appropriate) but excluding project entities.
As part of the Initial Public Offering in March 2014, John Laing
Investments Limited, 100% subsidiary of John Laing plc subscribed
63,496,731 shares (39.69% of the Company's total shares issued).
There have been no further transactions with John Laing Investments
Limited post IPO.
Of the initial Portfolio, 6 Assets were acquired from John Laing
Investments Limited, wholly owned subsidiary of John Laing plc.
Prior to the Company's listing, Laing Investments Management
Services Limited, 100% subsidiary of John Laing plc, funded GBP0.4
million of issue costs which were subsequently reimbursed by the
Company to Laing Investments Management Services.
The Directors of the Company, who are considered to be key
management, received fees for their services during the period of
GBP150,000 and were paid GBP2,546 of expenses.
As part of the Initial Public Offering in March 2014, the
Directors subscribed for and were issued with the following number
of Ordinary Shares.
Number of shares Consideration
------------------ ----------------- --------------
Richard Morse 50,000 GBP50,000
Richard Ramsay 45,000 GBP45,000
Christopher Legge 25,000 GBP25,000
Denise Mileham 20,000 GBP20,000
Peter Neville 25,000 GBP25,000
------------------ ----------------- --------------
All of the above transactions were undertaken on an arm's length
basis.
11. Financial instruments
Financial Instruments by category
The Company held the following financial instruments at fair
value at 30 September 2014. There have been no transfers of
financial instruments between levels of the fair value hierarchy.
There are no non--recurring fair value measurements.
30 September 2014
Financial
assets at
fair Financial
Loans liabilities
Cash and and value through at
profit or amortised
bank balances receivables loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- -------------- ------------ -------------- ------------ ---------
Non--current
assets
Investments at
fair value through
profit or loss
(Level 3) - - 158,711 - 158,711
Current assets
Trade and other
receivables - 8 - - 8
Cash and cash
equivalents 3,814 - - - 3,814
--------------------- -------------- ------------ -------------- ------------ ---------
Total financial
assets 3,814 8 158,711 - 162,533
Current liabilities
Trade and other
payables - - - (616) (616)
--------------------- -------------- ------------ -------------- ------------ ---------
Total financial
liabilities - - - (616) (616)
--------------------- -------------- ------------ -------------- ------------ ---------
Net financial
instruments 3,814 8 158,711 (616) 161,917
--------------------- -------------- ------------ -------------- ------------ ---------
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 Level 1 assets or liabilities during the period.
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 7.
The fair value of the investments at fair value through profit
or loss includes the use of level 3 inputs. Please refer to note 7
for details on the valuation methodology.
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.
An increase of 0.5% in the discount rate would cause a decrease
in fair value of the investments of GBP5.7 million and a decrease
of 0.5% in the discount rate would cause an increase in fair value
of the investments of GBP6.1 million.
The sensitivity of the investments to movement in inflation
rates is as follows:
A decrease of 0.5% in inflation rates would cause a decrease in
the fair value of the investments of GBP6.4 million and an increase
of 0.5% in inflation rates would cause an increase in the fair
value of the investments of GBP6.0 million.
Wind and solar assets are subject to power price and power
generation risks. The sensitivities of the investments to movement
in level of power output and power price are as follows:
-- The fair value of the investments is based on a "P50" level
of power output being the expected level of generation over the
long term. An assumed "P90" level of power output (i.e. a level of
generation that is below the "P50", with a 90% probability of being
exceeded) would cause a decrease in the fair value of the
investments of GBP13.4 million and an assumed "P10" level of power
output (i.e. a level of generation that is above the "P50", with a
10% probability of being achieved) would cause an increase in the
fair value of the investments of GBP12.7 million.
-- A decrease of 10% in power price would cause a decrease in
fair value of the investments of GBP5.1 million and an increase of
10% in power price would cause an increase in the fair value of the
investments of GBP4.5 million.
Waste and wastewater assets do not have significant volume and
price risks.
The directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statement are approximately equal to their
fair values.
Capital risk management
Capital management
The Group, which comprises the Company and its non-consolidated
subsidiaries manages its capital to ensure that it will be able to
continue as a going concern while maximising the return to
stakeholders through the optimisation of the debt and equity
balances. The capital structure of the Group principally consists
of equity, recourse and non-recourse debt, cash and cash
equivalents. The Group aims to deliver its objective by investing
available cash and using leverage whilst maintaining sufficient
liquidity to meet ongoing expenses and dividend payments.
Gearing ratio
The Company's Investment Adviser reviews the capital structure
of the Company and the Group on a semi-annual basis. The Company
and its subsidiaries intend to make prudent use of leverage for
financing acquisitions of investments and working capital purposes.
Under the Company's articles, and in accordance with the Company's
Investment Policy, the Company's outstanding borrowings, excluding
the debts of underlying Assets, will be limited to 30% of the
Company's Net Asset Value.
As at the Balance Sheet date, the Company had no outstanding
debt, however as set out in note 14, the Company's subsidiary JLEAG
UK raised a revolving credit facility in October 2014.
Financial risk management
The Group's activities expose it to a variety of financial
risks: capital risk, liquidity risk, market risk (including
interest rate risk, inflation risk and power price risk) and credit
risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
For the Company and its recourse subsidiaries, financial risks
are managed by the investment advisers who operate within the Board
approved policies. For the non-recourse investments, due to the
nature of the investments, certain financial risks (typically
interest rate and inflation risks) are hedged at the inception of a
project. All risks continue to be managed by the Investment
Adviser. The various types of financial risk are managed as
follows:
Financial risk management - Company only
The Company accounts for its investments in it subsidiaries at
fair value. Accordingly, to the extent there are changes as a
result of the risks set out below, these may impact the fair value
of the Company's investments.
Capital risk
The Company has implemented an efficient financing structure
that enables it to manage its capital effectively. The Company's
capital structure comprises equity only (refer to the Statement of
Changes in Equity). As at 30 September 2014 the Company had no
recourse debt.
Liquidity risk
The Directors monitor the Company's liquidity requirements to
ensure there is sufficient cash to meet the Company's operating
needs.
The Company's liquidity management policy involves projecting
cash flows and forecasting the level of liquid assets necessary to
meet these. Due to the nature of its investments, the timing of
cash outflows is reasonably predictable and, therefore, is not a
major risk to the Company.
The Company was in a net cash position and had no outstanding
debt at the Balance Sheet date.
Market risk - foreign currency exchange rate risk
As at 30 September 2014 the Company has only invested in UK
projects denominated in pound sterling.
Where investments are made in currencies other than pound
sterling, the Company will consider whether to hedge currency risk
in accordance with the Company's currency and hedging policy as
determined from time to time by the Directors. A portion of the
Company's underlying investments may be denominated in currencies
other than pound sterling. However, any dividends or distributions
in respect of the Ordinary Shares will be made in pound sterling
and the market prices and Net Asset Value of the Ordinary Shares
will be reported in pound sterling. Currency hedging may be carried
out to seek to provide some protection to the level of pound
sterling dividends and other distributions that the Company aims to
pay on the Ordinary Shares, and in order to reduce the risk of
currency fluctuations and the volatility of returns that may result
from such currency exposure. Such currency hedging may include the
use of foreign currency borrowings to finance foreign currency
assets and forward foreign exchange contracts.
Financial risk management - Company and non-consolidated
subsidiaries
The following risks impact the Company's subsidiaries and in
turn may impact the fair value of investments held by the
Company.
Market risk - interest rate risk
Interest rate risk arises in the Company's subsidiaries on the
Credit Facility borrowings and floating rate deposits. Borrowings
issued at variable rates expose those entities to variability of
interest payment cash flows. Interest rate hedging may be carried
out to seek to provide protection against increasing costs of
servicing debt drawn down by the Company's subsidiary John Laing
Environmental Assets Group (UK) Limited, as part of its Credit
Facility. This may involve the use of interest rate derivatives and
similar derivative instruments.
Each asset investment hedges their interest rate risk at the
inception of a project. This will either be done by issuing fixed
rate debt or variable rate debt which will be swapped into fixed
rate by the use of interest rate swaps.
Market risk - inflation risk
Some of the Company's investments will have part of their
revenue and some of their costs linked to a specific inflation
index at inception of the project. In most cases this creates a
natural hedge, meaning a derivative does not need to be entered
into in order to mitigate inflation risk.
Market risk - power price risk
The wholesale market price of electricity is volatile and is
affected by a variety of factors, including market demand for
electricity, the generation mix of power plants, government support
for various forms of power generation, as well as fluctuations in
the market prices of commodities and foreign exchange. Whilst some
of the Company's environmental projects benefit from fixed prices,
others have revenue which is in part based on wholesale power
prices.
A decrease and/or prolonged deterioration in economic activity
in the UK, for any reason, could result in a decrease in demand for
electricity in the market. Short term and seasonal fluctuations in
electricity demand will also impact the price at which the
investments can sell electricity. The supply of electricity also
impacts the wholesale electricity price. Supply of electricity can
be affected by new entrants to the wholesale power market, the
generation mix of power plants in the UK, government support for
various generation technologies, as well as the market price for
fuel commodities.
Volume risk - power generation risk
Meteorological conditions poorer than forecast can result in
generation of lower electricity volumes and lower revenues than
anticipated.
Credit risk
Credit risk is the risk that a counterparty of the Company or
its subsidiaries will default on its contractual obligations it
entered into with the Company or its subsidiaries. Credit risk
arises from cash and cash equivalents, derivative financial
instruments and deposits with banks and financial institutions, as
well as credit exposures to customers. The Company and its
subsidiaries mitigate their risk on cash investments and derivative
transactions by only transacting with major international financial
institutions with high credit ratings assigned by international
credit rating agencies.
The Company's asset investments receive regular, long term,
partly or wholly index-linked revenue from government departments,
public sector, local authority or clients under the Renewables
Obligation and Feed-in Tariff regimes. The Directors believe that
the Group is not significantly exposed to the risk that the
customers of its investments do not fulfil their regular payment
obligations because of the Company's policy to invest in
jurisdictions with satisfactory credit ratings.
Given the above factors, the Board does not consider it
appropriate to present a detailed analysis of credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group adopts a
prudent approach to liquidity management by ensuring it maintains
adequate reserves and banking facilities by continuously monitoring
forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities.
The Directors monitor the Company's liquidity requirements to
ensure there is sufficient cash to meet the Company's operating
needs.
The Company's liquidity management policy involves projecting
cash flows and forecasting the level of liquid assets necessary to
meet these. Due to the nature of its investments, the timing of
cash outflows is reasonably predictable and, therefore, is not a
major risk to the Group.
Debt raised by Assets investments from third parties is without
recourse to the Group.
12. Guarantees and other commitments
As at 30 September 2014 the Company had no commitments.
13. Subsidiaries
The following subsidiaries have not been consolidated in these
financial statements as a result of applying Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27):
Place
of Ownership Voting
Name Category business interest rights
John Laing Environmental Intermediate
Assets Group (UK) Limited Holdings UK 100% 100%
Intermediate
HWT Limited Holdings UK 100% 100%
ELWA Holdings Limited Operating Subsidiary UK 80% 80%
ELWA Limited* Operating Subsidiary UK 80% 81%
Amber Solar Parks (Holdings)
Limited Operating Subsidiary UK 100% 100%
Amber Solar Park Limited Operating Subsidiary UK 100% 100%
Bilsthorpe Wind Farm
Holdings Limited Operating Subsidiary UK 100% 100%
Bilsthorpe Wind Farm
Limited Operating Subsidiary UK 100% 100%
Ferndale Wind Limited Operating Subsidiary UK 100% 100%
Castle Pill Wind Limited Operating Subsidiary UK 100% 100%
Wind Assets LLP Operating Subsidiary UK 100% 100%
Shanks Dumfries and
Galloway Holdings Limited Operating Subsidiary UK 80% 80%
Shanks Dumfries and
Galloway Limited Operating Subsidiary UK 80% 80%
JL Hall Farm Holdings
Limited Operating Subsidiary UK 100% 100%
Hall Farm Wind Farm
Limited Operating Subsidiary UK 100% 100%
------------------------------ ----------------------- ---------- ---------- -------
*ELWA Holdings Limited holds 81% of the voting rights and 100%
share of the economic benefits in ELWA Limited.
14. Events after balance sheet date
On 9 October, the Company's immediate subsidiary, John Laing
Environmental Assets Group (UK) Limited entered into a three--year
revolving credit facility of GBP50 million with HSBC and NIBC. This
facility will be used to make acquisitions of environmental
infrastructure projects and to cover working capital requirements.
The facility margin is 250bps over LIBOR.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VKLFFZFFXFBK
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