TIDMJLEN
RNS Number : 4743B
John Laing Environmental Assets Grp
17 June 2016
17 June 2016
John Laing Environmental Assets Group Limited
Announcement of final results for the year ended 31 March
2016
The Directors of John Laing Environmental Assets Group Limited
(the "Company" or "JLEN") are pleased to announce the Company's
final results for the year ended 31 March 2016.
Financial Highlights
-- Portfolio valuation as at 31 March 2016 of GBP264.5m (31 March 2015: GBP197.7m)
-- NAV per ordinary share of 96.7 pence as at 31 March 2016 (31
March 2015: 101.2 pence). On an ex-dividend basis, NAV per ordinary
share at 31 March 2016 is 95.2 pence compared to 98.2 pence at 31
March 2015, with the movement in the year reflecting primarily a
reduction in forecast electricity prices
-- Total dividends declared of 6.054 pence per ordinary share
for year to 31 March 2016, in line with target set out in the 2015
Annual Report
-- Quarterly dividends introduced from the end of calendar year
2015, with the first payment made in March 2016 in respect of the
three months to 31 December 2015
-- Share price total return for the period since IPO of 9.8%
Portfolio Highlights
-- Robust operational and financial performance for the year to 31 March 2016
-- Five acquisitions during the year, bringing the total number
of assets in the portfolio to 15 and the capacity of the renewable
energy assets in the JLEN portfolio to 129MW
-- Strong pipeline of assets for further growth, both under the
First Offer Agreement with the John Laing Group and from third
parties
Financing Activity
-- Successful equity fund raise in July 2015 raising gross proceeds of GBP65.0m
-- Revolving credit facility increased from GBP50.0m to GBP65.0m
in March 2016; GBP54.8m drawn at year end
-- Successfully refinanced the bank debt in the wind asset
portfolio on beneficial terms in March 2016
-- Further equity raise under existing placing programme
concluded in May 2016 raising gross proceeds of GBP35.2m and used
to partially repay the revolving credit facility and provide for
future acquisitions
Richard Morse, Chairman of JLEN, said:
"The Company has achieved its objectives in its second year
since IPO, delivering dividends in line with expectations and
further developing its portfolio through acquisitions. Performance
has been resilient despite challenging market conditions, further
demonstrating the benefits of JLEN's diversified portfolio of
environmental infrastructure projects. The acquisition pipeline is
healthy and we look forward to the present year with some
confidence."
Annual report
A copy of the annual report has been submitted to the National
Storage Mechanism and will shortly be available at
www.morningstar.co.uk/uk/NSM. The annual report will also be
available on the Company's website at www.jlen.com where further
information on JLEN can be found.
Details of the conference call for analysts and investors
There will be a call at 9.30am today for analysts and investors.
To register for the call please contact Redleaf Communications 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.
For further information, please contact:
John Laing Capital Management
Limited
David Hardy
Chris Tanner +44(0)20 7901 3559
Winterflood Investment Trusts
Joe Winkley
Neil Langford +44(0)20 3100 0000
Readleaf Communications
Charlie Geller
Harriet Lynch +44(0)20 7382 4769
Chairman's statement
On behalf of the Board, I am pleased to present the Annual
Report of the Company for the year ended 31 March 2016.
Results
The Company has continued to make good progress in the
development of its portfolio of environmental infrastructure assets
during its second full year of trading since IPO, producing a good
operational performance against a backdrop of continued falls in
electricity prices and a further expansion of the portfolio, with
five acquisitions totalling GBP75.5 million. As a result, at the
year end JLEN has a diversified portfolio of 15 operational
UK--based solar, onshore wind, waste and wastewater processing
projects.
The Net Asset Value ("NAV") per share at 31 March 2016 was 96.7
pence, compared with 101.2 pence NAV per share at 31 March 2015.
After taking into account the quarterly dividend declared on 12 May
2016, to be paid on 24 June 2016, the ex--dividend NAV per share at
31 March 2016 was 95.2 pence, a decrease of 3.1% on the
ex--dividend NAV per share of 98.2 pence at 31 March 2015. The
reduction in NAV per share was due primarily to the Government's
removal of the Climate Change Levy exemption for electricity from
renewable sources from August 2015, announced in the July 2015 UK
budget, together with the continued fall in the outlook for UK
electricity prices, both of which have affected all renewable
energy funds. As set out in the investment portfolio and valuation
section of the strategic report, the diversification in JLEN's
portfolio means that we have a relatively low exposure to
electricity price movements compared with our peer group.
Profit after tax for the year was GBP6.2 million resulting in
earnings per share of 3.0 pence. The Directors have recommended and
declared a total dividend in respect of the year ended 31 March
2016 of 6.054 pence per share, above the earnings per share level
of 3.0 pence for the year. The level of earnings per share of the
Company in the current year is the result of the impact on the
portfolio valuation of the lower electricity prices and the removal
of LECs during the year as described above. However, taking account
of the cash generation of the portfolio, the Board continues to
believe that the portfolio is well positioned to deliver the target
returns to shareholders.
Cash received from the portfolio assets by way of distributions,
which includes interest, loan repayments and dividends, was GBP18.6
million during the year. Cash flow from operations of the Company
of GBP14.3 million covered the declared interim dividends
applicable to the year of 6.054 pence per share 1.05 times.
Dividends
It is the Directors' intention to pay shareholders a sustainable
dividend, paid quarterly, that increases progressively in line with
inflation, subject to market conditions, performance, financial
position and outlook.
The Company met the initial IPO target of 6.0 pence per share
for the year ended 31 March 2015 and will meet its target dividend
for the year to 31 March 2016 of 6.054 pence per share being the
initial target of 6.0 pence per share adjusted for inflation.
An interim dividend in respect of the six months to 30 September
2015 of 3.027 pence per share was paid in December 2015. The
Company commenced paying quarterly dividends from January 2016,
with the first payment of 1.5135 pence per share paid in March 2016
in respect of the three months to 31 December 2015. The Board is
pleased to confirm the quarterly dividend in respect of the quarter
to 31 March 2016 of 1.5135 pence per share, which was approved on
11 May 2016 and will be paid on 24 June 2016, bringing the total to
the target of 6.054 pence per share for the full year.
The Company is targeting a full year dividend for the year
ending 31 March 2017 of 6.14 pence per share.(1)
Portfolio performance
During the year under review the performance of the portfolio
has been robust and in line with expectations, with the wind assets
showing generation slightly above budget, due to strong wind speeds
during the winter after previously reported poor wind speed months
during the summer, and the solar assets being slightly below budget
due to lower than expected irradiation during the winter period. In
terms of operational availability, the assets have performed at or
above expectations and operational efficiencies are being realised
as the portfolio expands.
The results from the renewable energy assets within the
portfolio are dependent in part on the weather, which can be
predicted with some degree of confidence over the long--term but
may vary over the short--term. The Company's exposure to both solar
and wind assets provides a degree of protection against variability
and seasonality in resource as solar tends to be more productive at
times when wind is less productive and vice versa.
The results from our renewable energy assets are also dependent
in part on the level of electricity prices, which have trended
noticeably lower, both spot and forward, since IPO. The impact on
the Company continues to be mitigated by the fact that the Company
has a relatively low exposure to electricity prices in its ROC and
FiT operating projects compared to other portfolios held by peer
funds and the waste and wastewater processing assets are not
affected by the level of electricity prices. As previously
reported, the announcements contained in the July 2015 Budget had a
small net negative impact on the Company's NAV of approximately 0.4
pence per share, with the loss of revenue from Levy Exemption
Certificates being partially offset by a reduction in the
corporation tax rate. The limited impact on JLEN from the Budget
reflected the benefits of diversification in the Company's
portfolio with a number of assets being net beneficiaries of the
corporation tax changes announced in the Budget. In our December
2015 NAV announcement we reported further significant falls in both
short and longer term electricity price forecasts which caused a
3.3 pence reduction in NAV per share at 31 December 2015. During
the final quarter of the financial year, further falls in
electricity price forecasts have been experienced, producing a
small reduction in NAV, although as discussed below this has been
offset by the beneficial impact on NAV of the project debt
refinancing.
For the waste and wastewater processing assets, financial
performance has been broadly in line with expectations and volumes
have been at or above expected levels. I am pleased to report that
the facilities impacted by a fire at the Frog Island facility (part
of the ELWA project) in August 2014 are anticipated to be restored
to full operation in late June 2016, and during the period when
operations were affected, the contract with East London Waste
Authority continued to be fulfilled with no impact on distributions
to the Company.
The relative resilience of the Company's NAV during the year,
despite the impact of LECs and falling electricity prices noted
above, demonstrates the benefits of the Company's portfolio
diversification across a range of environmental infrastructure
projects and its operational robustness.
Investment performance
Over the 12 month period to 31 March 2016 shareholders have seen
a share price total return of --2.5% whilst over the same period
the NAV total return per share was +3.1%. The discrepancy is
largely due to the reduction in the premium of share price to NAV
from 8.2% at 31 March 2015 to 2.6% at 31 March 2016.
Acquisitions
During the period under review, the Company announced the
following acquisitions:
Monksham solar
Monksham solar is a 10.7MW solar park located near Frome in
Somerset. In July 2015, JLEN acquired a significant economic
interest in Monksham, which represented our first third party
acquisition.
Branden solar
In March 2015, JLEN acquired a 64% stake in Branden solar. In
July 2015, the Company acquired the remaining 36% stake. This was
purchased from John Laing under the First Offer Agreement,
underlining its continuing importance to the Company's acquisition
pipeline.
Panther small scale solar portfolio
The Panther portfolio was acquired in two separate transactions
and comprises 6.5MW of fully operational domestic rooftop,
commercial rooftop and ground mount solar installations, with a
total of 1,099 systems distributed across England, Scotland and
Wales.
The two transactions, in October 2015 and November 2015,
comprise 796 systems with 4.2MW of generation and 303 systems with
2.3MW of generation respectively.
Burton Wold Extension
Burton Wold Extension is a 14.4MW wind farm located near Burton
Latimer in Northamptonshire. 100% of the project was acquired from
John Laing under the First Offer Agreement in December 2015.
Pylle Southern solar
Pylle Southern solar is a 5MW solar park located near Shepton
Mallet in Somerset. JLEN acquired 100% of the project from the
original investors and Green Nation, the latter who were also
developers of the Monksham solar park, in March 2016.
These acquisitions bring the total capacity of the renewable
energy assets in the JLEN portfolio to 129MW.
Post the year end, on 9 May 2016, JLEN entered into an agreement
to acquire 100% of the Parc Éolien Le Placis Vert wind farm from
the German developer Energiequelle GmbH ("Energiequelle"), its
first non--UK acquisition. The project, operational since January
2016 and located in the municipality of Saint--Gouéno in the
Côtes--d'Armor region of Brittany in north-western France, has a
total generating capacity of 4MW and benefits from a 15--year
Feed--in Tariff ("FiT") regime at a fixed rate adjusted annually
for inflation. This acquisition, which is expected to complete in
the coming weeks (subject to the customary consents), represents
JLEN's entry into the French market and is consistent with JLEN's
strategy of diversification. This marks JLEN's first collaboration
with Energiequelle, an established German developer and operator of
wind projects. We are in discussion with Energiequelle on
acquisitions of a further 10MW of capacity in France, and we look
forward to future partnering opportunities with Energiequelle.
Share issues and financing
In July 2015, we were delighted by the response from investors
to our first equity fund raise since IPO, with JLEN successfully
raising gross proceeds of GBP60 million through the issue of
59,405,940 ordinary shares at 101 pence per share, pursuant to a
significantly oversubscribed Placing and Offer for Subscription. At
the same time the Company launched a Placing Programme of up to 150
million new shares and in light of investor demand at this time the
Company elected to undertake a first close under its Placing
Programme for GBP5 million through the issue of 4,950,495 ordinary
shares at 101 pence per share. The net proceeds of the issues were
used to repay amounts drawn down on the Company's revolving credit
facility and to fund the acquisitions of the remaining 36% stake in
Branden solar from John Laing and the Monksham solar park as noted
above.
The Company's revolving credit facility gives it the flexibility
to acquire further assets on a timely basis, reducing the
performance drag associated with holding excess cash. Post the
equity raise in July 2015, the facility was used to finance the
purchase of the last five acquisitions set out above and to assist
this programme the facility was extended from its original level of
GBP50 million to GBP65 million in March 2016.
Post the year end, in May 2016, JLEN successfully raised further
equity under its Placing Programme, raising gross proceeds of
GBP35.2 million through the issue of 36 million ordinary shares at
97.75 pence per share. This has enabled JLEN to reduce the balance
outstanding on its revolving credit facility and to help fund the
strong pipeline of opportunities available to the Company during
the foreseeable future.
In my half--year statement, I reported that the Company was
investigating the possible refinancing of the project debt in its
wind asset portfolio. I am pleased to report that the refinancing
was successfully concluded with The Bank of Tokyo--Mitsubishi UFJ
Ltd, a member of MUFG, in March 2016. There was no increase in the
gearing of the wind portfolio apart from an amount to cover the
costs associated with the transaction and the refinancing has
secured more beneficial terms for the portfolio which has had a
positive impact on NAV. This is discussed further in the strategic
report.
Valuation
The Net Asset Value at 31 March 2016 is GBP216.9 million,
comprising GBP264.5 million portfolio valuation, GBP6.2 million of
cash held by the Group, less GBP54.8 million drawn on the Company's
immediate subsidiary's revolving credit facility, together with
positive working capital balances of GBP1 million.
The Investment Adviser has prepared a fair market valuation of
the portfolio as at 31 March 2016. 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 taken into account available comparable market
transactions and financial market data in order to arrive at a fair
market value.
To provide assurance to the Board with respect to the valuation,
an independent verification exercise of the methodology and
assumptions applied by JLCM is performed by a leading accountancy
firm and an opinion provided to the Directors.
The Directors have satisfied themselves as to the methodology
used and the assumptions adopted and have approved the valuation of
GBP264.5 million for the portfolio of 15 investments as at 31 March
2016.
Risks and uncertainties
While it is the Investment Adviser who manages the risks facing
the Company on a day--to--day basis, it is the Board of the Company
which retains ultimate responsibility. The Company's Risk and Audit
Committees, which report to the Board, were formed to review the
effectiveness of the Company's (and that of the Investment Adviser,
Administrator and other third party service providers as it deems
fit) internal control policies and procedures for the
identification, assessment and reporting of risks.
The Board considers that the principal risks and uncertainties
for JLEN have not materially altered from those set out in the
Company's prospectus dated 4 June 2015. The full prospectus is
available on JLEN's website, and a summary of the principal risks
and uncertainties is included in the risks and risk management
section of the strategic report. This specifically discusses the
risks associated with the Base Erosion and Profit Shifting project
("BEPS"), a recent initiative between OECD countries, that has
become relevant to our industry. In the UK Budget in March 2016 it
was announced that measures to address the issue of interest
deductibility and BEPS would be introduced from 1 April 2017 and
the Treasury would consult with industry on the exact measures to
be put in place. On 12 May 2016, HM Treasury issued its
consultation document on detailed policy design and implementation,
which is due to conclude in August 2016. The Investment Adviser
will continue to lend its support to and participate alongside
industry peers in the consultation processes run by HMRC but
analysis based on the proposals set out in the consultation
document shows no material impact on the projects in which JLEN
invests.
Annual general meeting
The annual general meeting will be held on 17 August 2016 at
10am at the Company's registered office in Guernsey.
Outlook
The Board continues to work closely with the Investment Adviser
in assessing the risks and opportunities in the environmental
infrastructure market and reviewing the operational and financial
performance of the Company. As discussed above, during the last
year of trading we have seen a reduction in cash generation due to
the removal of the Levy Exemption Certificate and continuing falls
in UK wholesale electricity prices. Notwithstanding this, JLEN
achieved a cash dividend cover of 1.05 times and is targeting an
increase in its dividend for the year to 31 March 2017 in line with
inflation.
Whilst there remains increased uncertainty in the wider UK
renewable energy market following changes to reduce support to the
sector under the Renewable Obligation Scheme and the Feed--in
Tariff regime, these will have no impact on JLEN's existing assets
or the short--term pipeline of acquisition opportunities.
The Board, through its Investment Adviser JLCM, actively
continues to seek 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 over a significant pipeline of
environmental infrastructure projects which supports its growth
plans in the next few years. Despite an increasingly competitive
marketplace, the Company has acquired three assets from third
parties during the year and continues to see a steady stream of
attractive opportunities across the breadth of its investment
mandate.
A key strength of the Company remains its strategy of
diversification across a range of sectors and revenue sources
within the environmental infrastructure space. This strategy has
demonstrated resilience in the two years since IPO in the light of
seasonal weather volatility and a downward shift in electricity
prices. The Board believes the Company is well positioned to
continue to deliver on its promises to its shareholders and is
confident in its ability to fund the strong pipeline of
environmental infrastructure opportunities available as we continue
to build the portfolio.
Richard Morse
Chairman
16 June 2016
(1) This is a target only and not a profit forecast. There can
be no assurance that this target will be met.
STRATEGIC REPORT
This strategic report has been prepared to clearly set out to
shareholders the objectives, strategy, performance and principal
risks of JLEN.
Investment objectives
To provide investors with a sustainable dividend per share, paid
quarterly, that increases in line with inflation, and to preserve
the capital value of its portfolio over the long term.
The Company aims to provide its investors with a sustainable
dividend per share, paid quarterly, that increases progressively in
line with inflation, and to preserve and where possible enhance the
capital value of its portfolio on a real basis through the
reinvestment of cash flows not required for the payment of
dividends. The dividend per share for the first year of trading to
31 March 2015 was 6.0 pence, as targeted in the IPO Prospectus. The
dividend for the year ended 31 March 2016 is 6.054 pence per share,
representing an inflationary increase over the 6.0 pence per share
for the year to 31 March 2015. Over the longer term, the Company
targets an IRR of 7.5% to 8.5% (net of fees and expenses) on the
IPO issue price of 100 pence per share through investment in a
diversified portfolio of environmental infrastructure projects(1)
.
The Company seeks to maintain strong relationships with all its
stakeholders and those of its investments, including investors,
funders, key contractors and partners, national and local
government and local communities.
1 This is a target only and not a profit forecast. There can be
no assurance that this target will be met.
Strategy and investment policy
Investment in a diversified portfolio of operational
environmental infrastructure projects.
The Company seeks to achieve its objectives by investing in a
diversified portfolio of environmental infrastructure projects:
-- that have the benefit of long--term, predictable, wholly or
partially inflation--linked cash flows;
-- that are supported by long--term contracts or stable and
well--proven regulatory and legal frameworks; and
-- that feature well--established technologies, demonstrable
operational performance and a track record of producing long--term
predictable revenues.
JLEN defines environmental infrastructure 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.
The Company will invest in environmental infrastructure projects
either directly or through holding or other structures that give
the Company an investment exposure to environmental infrastructure
projects.
Whilst there are no restrictions on the amount of the Company's
assets that may be invested in any individual type of environmental
infrastructure, the Company will, over the long term, seek to
invest in a diversified spread of investments both geographically
(although the UK will always represent a minimum of 50% of the
portfolio by value) and across different types of environmental
infrastructure in order to achieve a broad spread of risk in the
Company's portfolio.
The projects comprising the current portfolio are underpinned by
well--established technologies, and it is intended that the
equipment and systems used by the assets in the portfolio will not
rely substantially on new technology and that they will have a
significant track record of use in other projects. On acquisition,
the relevant equipment will also have demonstrated operational
performance. However, as environmental infrastructure is a
relatively new asset class and the technologies that underpin it
may be subject to technological advancements in the future, the
actual investment allocation will depend on the development of the
environmental infrastructure market, underlying technologies and
the judgement of the Directors (on the advice of the Investment
Adviser) as to what is in the best interests of the Company at the
time of investment.
Investment restrictions
With the objective of achieving a spread of risk, the following
investment restrictions will apply to the acquisition of investment
interests in the portfolio:
-- the substantial majority of projects in the portfolio by
value and number will be operational. The Fund will not acquire
investment interests in any project if as a result of such
investment, 15% or more of the NAV is attributable to projects that
are in construction and are not yet fully operational;
-- at least 50% of the portfolio (by value) will be based in the
UK and the Fund will only invest in projects that are located in
OECD countries;
-- it is intended that investment interests in any single
project acquired will not have an acquisition price greater than
25% of the NAV immediately post--acquisition. In no circumstances
will a new acquisition exceed a maximum limit of 30% of the NAV
immediately post--acquisition;
-- the Company will make use of short--term debt financing to
facilitate the acquisition of investments. Borrowing may be secured
against the assets comprising the portfolio. It is intended that
such debt will be repaid periodically by the raising of new equity
finance by the Company. The level of such debt is limited to 30% of
the Company's Net Asset Value immediately after the acquisition of
any further investment. Such debt will not include (and will be
subordinate to) any project level gearing, which shall be in
addition to any borrowing at Fund level; and
-- the Fund may acquire investment interests in respect of
projects that have non--recourse project finance in place at the
project entity level. The Company is limited to aggregate
non--recourse financing attributable to renewable energy generation
and PPP projects not exceeding 65% and 85% respectively of the
aggregate gross project value of such projects.
Hedging
Where investments are made in currencies other than pounds
sterling, the Fund will consider whether to hedge currency risk in
accordance with the Fund's currency and hedging policy as
determined from time to time by the Directors. Interest rate
hedging may be carried out to provide protection against increasing
costs of servicing debt drawn down by the Fund to finance
investments. This may involve the use of interest rate derivatives
and similar derivative instruments. Hedging against inflation may
also be carried out and this may involve the use of RPI swaps and
similar derivative instruments. The currency, interest rate and any
inflationary hedging policies will be reviewed by the Directors on
a regular basis to ensure that the risks associated with movements
in foreign exchange rates, interest rates and inflation are being
appropriately managed.
Cash balances
Pending reinvestment or distribution of cash receipts, cash
received by the Fund will be invested in cash, cash equivalents,
near--cash instruments, money market instruments and money market
funds and cash funds. The Fund may also hold derivative or other
financial instruments designed for efficient portfolio management
or to hedge interest, inflation or currency rate risks. The Company
and any other member of the Group may also lend cash which it holds
as part of its cash management policy.
Origination of further investments
Each of the investments comprising the portfolio complies with
the Company's investment policy and further investments will only
be acquired if they comply with the Company's investment
policy.
The Company has the contractual right of first offer (in
accordance with the First Offer Agreement) for environmental
infrastructure projects in the UK, Ireland, Sweden and any other
country in the European Union or the European Free Trade
Association, which John Laing wishes to dispose of and that are
consistent with the Company's investment policy. Subject to due
diligence and agreement on price, the Fund will seek to acquire
those projects that fit the investment objectives and investment
policy of the Company.
The Fund will also seek out and review acquisition opportunities
not connected with John Laing and will, where appropriate, carry
out the necessary due diligence. If, in the opinion of the
Directors the risk characteristics, valuation and price of the
investment interests in the project or projects for sale is
acceptable and is consistent with the Company's investment
objective and investment policy, then (subject to the Fund having
sufficient sources of capital) an offer will be made (without
seeking the prior approval of shareholders) and, if successful, the
investment interests in the relevant project or projects will be
acquired by the Fund.
Amendments to and compliance with the investment policy
Material changes to the investment policy of the Company may
only be made in accordance with the approval of the shareholders by
way of ordinary resolution and (for so long as the ordinary shares
are listed on the official list maintained by the UK Listing
Authority) in accordance with the Listing Rules. Minor changes to
the investment policy must be approved by the Directors.
The investment restrictions detailed above apply at the time of
the acquisition of investment interests and the values of existing
investment interests shall be as at the date of the most recently
published NAV of the Company unless the Directors believe that such
valuation materially misrepresents the value of the Fund's
investment interests at the time of the relevant acquisition. The
Fund will not be required to dispose of investment interests and to
rebalance its portfolio as a result of a change in the respective
valuations of investment interests.
Key performance measures
The key performance measures used by the Company to assess its
performance over time against the objectives and strategy set out
above are as follows:
-- market capitalisation;
-- dividend per share (declared);
-- share price;
-- total shareholder return for the period (share price basis);
-- Net Asset Value;
-- Net Asset Value per share;
-- Net Asset Value growth (adjusting for dividends);
-- portfolio value;
-- number of investments; and
-- largest single investment as a percentage of portfolio value.
The key performance measures for the year ended 31 March 2016
are set out in the operational and financial review of the
strategic report.
Business model
Guernsey--registered investment company with a premium listing
on the London Stock Exchange.
Introduction
The Company is a Guernsey--registered investment company with a
premium listing on the London Stock Exchange. The Company makes its
investments via a group structure involving John Laing
Environmental Assets Group (UK) Limited ("UK HoldCo"), an English
limited company and wholly owned subsidiary of the Company, and
additional intermediate holding companies for certain projects (the
Company and UK HoldCo, together with their wholly owned
intermediate holding companies, the "Group"). Through the Group
structure, at 31 March 2016 the Company owns a portfolio of 15
environmental infrastructure investments in the UK. The Company has
a 31 March year end and announces half-year results in November and
full year results in June. The Company commenced paying quarterly
dividends from January 2016, with the first payment in March 2016
in respect of the three--month period to 31 December 2015.
The Company is a self--managed Alternative Investment Fund under
the European Union's Alternative Investment Fund Managers
Directive. The Company has a Board of five independent
non--executive Directors (details of whom can be found in the
governance section) whose role is to manage the governance of the
Company in the interests of shareholders and other stakeholders. In
particular, the Board approves and monitors adherence to the
investment policy, determines the risk appetite of the Group, and
sets Group policies. The Board meets a minimum of four times per
year for regular Board meetings and there are a number of ad hoc
meetings dependent upon business need. In addition, the Board has
three committees covering Audit, Risk and Nomination. Investment
decisions are delegated to an Investment Committee comprising all
members of the Board. The Board fulfils the responsibilities
typically undertaken by a remuneration committee.
The Board as a whole also fulfils the functions of an investment
advisory engagement committee. The Board will review and make
recommendations on any proposed amendment to the Investment
Advisory Agreement, keeps under review the performance of the
Investment Adviser and manages the risks of the delegation of
certain activities to the Investment Adviser. The Board also
performs a review of the performance of the other key service
providers to the Fund and meets to conduct these reviews at least
once a year.
The Board takes advice from the Investment Adviser, John Laing
Capital Management Limited ("JLCM"), on matters concerning the
market, the portfolio and new investment opportunities.
Day--to--day management of the Group's portfolio is delegated to
the Investment Adviser. The Company has an Investment Advisory
Agreement in place with JLCM which can be terminated at 12 months'
notice from 31 March 2018.
The key roles of the Investment Adviser are as follows:
-- monitoring financial performance against Group targets and forecasts;
-- advising the Board on investment strategy and portfolio
composition to achieve the desired target returns within the agreed
risk appetite;
-- sourcing, evaluating and implementing the pipeline of new investments for the portfolio;
-- monitoring the operational management of, and managing the
investment cash flows from, the Group's investments;
-- minimising cash drag (having uninvested cash on the balance
sheet) and improving cash efficiency generally;
-- managing the process and analysis for semi--annual valuations
of the Group's portfolio submitted to the Board for approval;
-- ensuring good financial management of the Group, having
regard to accounting, tax, and debt covenants;
-- hedging non--sterling investments; and
-- managing the Company's investor reporting and investor relations activities.
Further details on the Investment Adviser are set out in the
governance section and in note 15 to the financial statements on
with respect to fees.
Praxis Fund Services Limited has been appointed as Company
Secretary and Administrator. Other key service providers to the
JLEN Group include Winterflood Securities and Barclays as joint
brokers, Redleaf Communications as financial public relations
advisers, Mourant Ozannes as legal advisers as to Guernsey law,
Hogan Lovells as legal advisers as to English law, Capita
Registrars as registrars, Deloitte LLP as auditor, and NIBC and
HSBC as lenders to the Group via the GBP65 million revolving credit
facility.
The Board reviews the performance of all key service providers
on an annual basis.
Acquisitions
As noted above it is expected that further investments will
include investments that will be acquired from John Laing under the
terms of the First Offer Agreement entered into at IPO as well as
investments purchased from non--related parties.
The Company has established procedures to deal with any
potential conflicts of interest that may arise from individuals at
John Laing both advising the Directors on the "buy--side" (for the
Fund) and acting on the "sell--side" (for John Laing and its
subsidiaries) in relation to any acquisition of projects from John
Laing. These procedures include:
-- the creation of a separate "buy--side" committee
(representing the interests of the Fund as purchaser) and a
separate "sell--side" committee (representing the interests of the
relevant John Laing company as seller), with each member of the
"buy--side" committee having the benefit of a release from his or
her duties as a John Laing employee to the extent that these duties
conflict with their duties to act in the interests of the Fund as a
member of the "buy--side" committee;
-- a requirement for the "buy--side" committee to conduct due
diligence on the investment interests proposed to be purchased
which is separate from and independent of any due diligence
conducted for John Laing, and for a report on the fair market value
of the investment interests to be obtained from an independent
expert; and
-- the establishment of information barriers between members of
the "buy--side" and "sell--side" committees to ensure
confidentiality and integrity of commercially sensitive
information, and for individuals with economic interests in the
investment interests to abstain from participating in committee
discussions and votes on the relevant projects.
The Fund will seek to acquire further investments going forward
both from John Laing and from the wider market. In selecting the
projects to acquire, the Investment Adviser and the Directors will
be obliged to ensure that these projects meet the Company's
investment policy.
The Investment Adviser will be subject to the overall
supervision of the Board and all decisions on the acquisition of
new investments and the disposal of existing investments will be
subject to the approval of the Directors, all of whom are
independent of John Laing. To the extent that any Director is
appointed to the Board in the future who is not independent from
John Laing, any such Director will not participate in any decision
to acquire investments from or sell investments to John Laing.
In view of the procedures and protections set out above and the
fact that it is a key part of the Company's investment policy to
acquire assets from John Laing, the Company will not seek the
approval of shareholders for acquisitions of assets from John Laing
in the ordinary course of the Company's investment policy.
The Registered Collective Investment Scheme ("RCIS") Rules
require that any arrangements between a relevant person (as defined
in the RCIS Rules) and the Company are at least as favourable to
the Company as would be any comparable arrangement effected on
normal commercial terms negotiated at arm's length between the
relevant person and an independent party.
Potential disposal of investments
Whilst the Directors may elect to retain investment interests in
the portfolio projects that the Fund acquires and any other further
investments made by the Fund over the long term, the Investment
Adviser will regularly monitor the valuations of such projects and
any secondary market opportunities to dispose of investment
interests and report to the Directors accordingly. The Directors
only intend to dispose of investments where they consider that
appropriate value can be realised for the Fund or where they
otherwise believe that it is appropriate to do so. Proceeds from
the disposal of investment interests may be reinvested or
distributed at the discretion of the Directors.
Discount management
By special resolution of the shareholders of the Company, passed
on 13 August 2015, the Company has been granted shareholder
authority (subject to the Listing Rules and all other applicable
legislation and regulations) to purchase in the market up to 14.99%
per annum of the ordinary shares in issue immediately following the
passing of the resolution. This authority will expire at the
conclusion of the next annual general meeting of the Company in
August 2016. The Directors intend to seek renewal of this authority
from shareholders at each annual general meeting.
It is the Company's investment objective to return value to
shareholders in the form of dividends and capital distributions.
The Company intends to distribute net income in the form of
dividends. Furthermore, in normal market circumstances the
Directors intend to favour pro rata capital distributions ahead of
ordinary share repurchases in the market. However, if the ordinary
shares have traded at a significant discount to NAV for a prolonged
period the Board will seek to prioritise the use of net income
after the payment of dividends on market repurchases over other
uses of capital.
As part of the Company's discount management policies, the Board
intends to propose a continuation vote if the ordinary shares trade
at a significant discount to Net Asset Value per share for a
prolonged period of time. If, in any financial year, the ordinary
shares have traded, on average, at a discount in excess of 10% to
the Net Asset Value per share, the Board will propose a special
resolution at the Company's next annual general meeting that the
Company ceases to continue in its present form. If such a vote is
passed, the Board will be required to formulate proposals to be put
to shareholders within four months to wind up or otherwise
reconstruct the Company, bearing in mind the illiquid nature of the
Company's underlying assets.
The discount prevailing on each business day will be determined
by reference to the closing market price of ordinary shares on that
day and the most recently published Net Asset Value per share.
Operational and financial review
The financial performance of the portfolio has been robust
despite lower electricity prices during the year and operational
availability has been at or above expectations.
Operational and financial review for the period
Key performance measures
The key performance measures for the year ended 31 March 2016
(compared to the previous period from incorporation on 12 December
2013 to 31 March 2015, an effective trading period of 12 months
from IPO on 31 March 2014) are summarised below:
Year ended Period to
31 March 31 March
2016 2015
---------------------------------- ---------- ---------
Market capitalisation GBP222.7m GBP175.2m
Dividend per share (declared) 6.054p 6.0p
Share price 99.25p 109.5p
Total shareholder return
for the period (share price
basis) --2.5% +12.6%
Net Asset Value GBP216.9m GBP161.9m
Net Asset Value per share 96.7p 101.2p
Net Asset Value growth (adjusting
for dividends) --3.1% +0.2%
Portfolio value GBP264.5m GBP197.7m
Number of investments 15 11
Largest single investment
as % of portfolio value 16.6% 21.4%
---------------------------------- ---------- ---------
Portfolio performance
Operating performance of the portfolio during the year ended 31
March 2016 was robust and in line with expectations, with the wind
assets showing generation 2% above budget due to strong wind speeds
during the winter after previously reported poor wind speed months
during the summer, and the solar assets being 2% below budget due
to lower than expected irradiation during the winter period. In
terms of operational availability, the assets have performed at or
above expectations and operational efficiencies are being realised
as the portfolio expands.
All of the projects have achieved the budgeted level of
availability with the exception of the Carscreugh wind farm, which
has experienced higher than expected downtime due to turbine
set--up issues. We are working with the turbine supplier to resolve
these and we continue to benefit from availability warranties where
faults are not rectified.
The environmental processing plants have also achieved full
availability during the period, save for the ELWA fire which we
reported in the 2015 Annual Report. The fire occurred at the Frog
Island Mechanical Biological Treatment facility at the ELWA waste
project. We are pleased to report that the Frog Island facility has
continued to operate on an interim basis and in conjunction with
the project's other facilities, the contract with East London Waste
Authority continued to be fulfilled and operated, diversion from
landfill targets met and distributions made in line with budgets
during the year. The facilities affected have now been reinstated
and full operations are anticipated to recommence in late June
2016.
The year under review has been categorised by variable weather
patterns in the British Isles, with the wind projects experiencing
good wind conditions over the winter of 2015--16, leading to
generation ahead of budget. However, during the summer of 2015, the
UK experienced several low wind--speed months, illustrating that
wind conditions can vary significantly over individual months. For
the year ended 31 March 2016, generation from the renewable energy
portfolio was in line with budget, with generation from the wind
assets 2% above expectations and that from the solar assets being
2% below budget. This situation is contrasted with financial year
2015, when extremely low winds speeds during the summer of 2014 led
to a significant shortfall in budgeted generation, with winter
2014/2015 showing on--budget performance. Overall generation across
the portfolio of wind and solar assets since IPO for the 24 months
to 31 March 2016 was approximately 6% and 2% below budget
respectively, which is well within the range of expectations.
Overall the generation of the renewable energy assets in the
portfolio is summarised as follows:
Portfolio generation 2014--15 2015--16 Total
(GWh)
----------------------- -------- -------- -----
Wind portfolio actual
generation 82 185 267
Variation from budget --20% +2% --6%
----------------------- -------- -------- -----
Solar portfolio actual
generation 10 30 40
Variation from budget --1% --2% --2%
----------------------- -------- -------- -----
Waste and wastewater flows have been in line with budget for the
year. 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.
During the year, the UK has experienced a rapid and sustained
reduction in both short--term market prices and long--term
forecasts for electricity prices, with a simple average reduction
over 25 years of 12% from corresponding levels at the start of the
financial year. In response to this, where no fixed price
arrangements exist for a project, we reflect market forward pricing
for the next two years before reverting to a current long--term
forecast provided by a market consultant.
In January, we auctioned the electricity for some of the solar
project sites for summer 2016 and winter 2016--17 and achieved an
outcome in line with our expectations given market conditions. The
wind farms remain under long--term electricity purchase agreements
with a mixture of fixed and variable pricing arrangements.
Overall, 29% of the portfolio distributions are exposed to
market electricity prices. Over 50% of the generation of the
renewable energy assets is covered by fixes under existing PPAs for
at least six months with the balance being at floating rates.
The impact on revenues and portfolio valuation is discussed in
more detail in the analysis of financial results and investment
portfolio and valuation sections below.
The effects of monthly variability and seasonality in production
expected in a portfolio of intermittent renewables projects are
substantially reduced by the overall technology diversification in
JLEN's portfolio. In particular 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.
Acquisitions
During the year ended 31 March 2016, the Company made five
acquisitions with a total investment value of GBP75.5 million. The
assets were as follows:
Monksham solar
Monksham solar is a 10.7MW solar park located near Frome in
Somerset. In July 2015, JLEN acquired a significant economic
interest in Monksham, which represented its first third party
acquisition.
Branden solar
In March 2015, JLEN acquired a 64% stake in Branden solar. In
July 2015, the Company acquired the remaining 36% stake. This was
purchased from John Laing under the First Offer Agreement,
underlining its continuing importance to the Company's acquisition
pipeline.
Panther small scale solar portfolio
The Panther portfolio was acquired in two separate transactions
and comprises 6.5MW of fully operational domestic rooftop,
commercial rooftop and ground mount solar installations, with a
total of 1,099 systems, distributed across England, Scotland and
Wales.
The two transactions, in October 2015 and November 2015,
comprise 796 systems with 4.2MW of generation and 303 systems with
2.3MW of generation respectively.
The domestic portfolio comprises 1,033 individual systems with a
total installed generating capacity of 3.4MW. The commercial
portfolio consists of 66 installations totalling 3.1MW and is split
between 52 ground mounted installations at farms located in the
south--west of England and Wales, and 14 rooftop installations
distributed across schools in England, Wales and Scotland. All
installations are accredited under the UK Feed--in Tariff
regime.
Burton Wold Extension
Burton Wold Extension is a 14.4MW wind farm located near Burton
Latimer in Northamptonshire. 100% of the project was acquired from
John Laing under the First Offer Agreement in December 2015.
Pylle Southern solar
Pylle Southern solar is a 5MW solar park located near Shepton
Mallet in Somerset. JLEN acquired 100% of the project in March
2016.
These acquisitions bring the total capacity of the renewable
energy assets in the JLEN portfolio to 129MW.
Post the year end, on 9 May 2016, JLEN entered into an agreement
to acquire 100% of the Parc Éolien Le Placis Vert wind farm from
the German developer Energiequelle GmbH ("Energiequelle"), its
first non--UK acquisition. The project, operational since January
2016 and located in the municipality of Saint--Gouéno in the
Côtes--d'Armor region of Brittany in north-western France, has a
total generating capacity of 4MW and benefits from a 15--year
Feed--in Tariff ("FiT") regime at a fixed rate adjusted annually
for inflation. This acquisition, which is expected to complete in
the coming weeks (subject to the customary consents), represents
JLEN's entry into the French market and is consistent with JLEN's
strategy of diversification.
Financing
In July 2015, JLEN successfully raised gross proceeds of GBP60
million through the issue of 59,405,940 ordinary shares at 101
pence per share pursuant to a significantly oversubscribed Placing
and Offer for Subscription. At the same time the Company launched a
Placing Programme of up to 150 million new shares and in light of
investor demand at this time, the Company elected to undertake a
first close under its Placing Programme for GBP5 million through
the issue of 4,950,495 ordinary shares at 101 pence per share. The
net proceeds of the issues were used to repay amounts drawn down on
the Company's revolving credit facility and to fund the
acquisitions of the remaining 36% stake in Branden solar from John
Laing and the Monksham solar park as noted above.
In October 2014, UK HoldCo 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. The
intention is that borrowings under the facility will be repaid
through cash received from the Company's investment assets and
future equity raisings, as was the case following the equity fund
raise in July 2015 noted above. In March 2016, the facility was
extended to GBP65 million on the same terms. At 31 March 2016 the
balance drawn on the revolving credit facility was GBP54.8
million.
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.
In the half--year report, we noted that given the current
favourable banking market for renewable energy assets, and the
improvement in terms which might be possible at the time, the
Investment Adviser was reviewing the funding options for the
portfolio with a view to JLEN implementing a refinancing of, in
particular, the debt in its wind portfolio. In March 2016, the
Company completed a refinancing of the external debt in its
portfolio of seven wind farms. The new arrangement with The Bank of
Tokyo--Mitsubishi UFJ Ltd is for a GBP76.5 million loan, fully
amortising over 16 years with a refinancing at year five, and for a
GBP3.3 million standby debt service facility. Interest rate hedging
has been taken out for the full term to cover the long--term
amortisation profile. No additional debt was raised apart from as
required to cover transaction costs and the breaking of existing
hedging arrangements.
The refinancing has lowered the finance costs of the wind
portfolio. It has also improved other terms, in particular removing
cash sweeps which were a feature of the original project finance
arrangements that have now been terminated.
The project--level gearing at 31 March 2016 across the portfolio
was 43.6% (31 March 2015: 47.3%) being 27.1% (31 March 2015: 25.0%)
for the renewable energy assets and 62.2% (31 March 2015: 64.5%)
for the PFI processing assets. Taking into account the amount drawn
down under the revolving credit facility, the overall fund gearing
at 31 March 2016 was 53.9% (31 March 2015: 57.0%).
As at 31 March 2016, the Group, which comprises the Company and
the intermediate holding companies, had cash balances of GBP6.2
million (31 March 2015: GBP8.6 million).
Analysis of financial results
The Company prepared the financial statements for the year ended
31 March 2016 in accordance with International Financial Reporting
Standards ("IFRS") as published by the EU. 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) and the indirectly held wholly owned
subsidiary HWT Limited (which holds the investment interest in the
Tay project).
Basis of accounting
The Company applies IFRS 10 and Investment Entities: Amendments
to IFRS 10, IFRS 12 and IAS 28 which states that investment
entities should measure all their subsidiaries that are themselves
investment entities at fair value. The Company accounts for its
interest in its wholly owned direct subsidiary John Laing
Environmental Assets Group (UK) Limited as an investment at fair
value through profit or loss.
The primary impact of this application in comparison to
consolidating subsidiaries, is that the cash balances, the working
capital balances and borrowings in the intermediate holding
companies are presented as part of the Company's fair value of
investments.
The Company's intermediate holding companies provide services
that relate to the Company's investment activities on behalf of the
parent which are incidental to the management of the portfolio.
These companies are recognised in the financial statements at their
fair value which is equivalent to their net assets.
The Group holds investments in the 15 portfolio assets which
make distributions comprising returns on investments (interest on
loans and dividends on equity) together with repayments of
investments (loan repayments and equity redemptions).
Result for the year ended 31 March 2016
Period from
12 December
Year ended 2013 to
All amounts presented in GBPmillion 31 March 31 March
(except as noted) 2016 2015
------------------------------------ ----------- -----------
Net assets(1) 216.9 161.9
Portfolio value(2) 264.5 197.7
Intermediate holding companies
net liabilities(2) (50.1) (38.6)
Operating income 9.3 12.0
Net assets per share 96.7p 101.2p
Distributions, repayments and
fees from portfolio 18.6 13.8
Profit before tax 6.2 9.4
------------------------------------ ----------- -----------
(1) Also referred to as Net Asset Value or "NAV".
(2) Classified as investments at fair value through profit or
loss on the statement of financial position.
Net assets
Net assets increased from GBP161.9 million at 31 March 2015 to
GBP216.9 million at 31 March 2016, primarily driven by the capital
raise in July 2015.
The net assets of GBP216.9 million comprise GBP264.5 million
portfolio value of environmental infrastructure investments and the
Company's cash balances of GBP3.3 million, offset by GBP50.1
million related to the fair value of the intermediate holding
companies and by other net liabilities of GBP0.8 million.
The intermediate holding companies' negative fair value of
GBP50.1 million comprises cash balances of GBP2.9 million, offset
by net liabilities of GBP53.0 million principally comprising the
GBP54.8 million credit facility loan.
Analysis of the Group's net assets at 31 March 2016
All amounts presented in GBPmillion At 31 March At 31 March
(except as noted) 2016 2015
------------------------------------ ----------- -----------
Portfolio value 264.5 197.7
Intermediate holding companies
cash 2.9 5.0
Intermediate holding companies
revolving credit facility debt (54.8) (43.7)
Intermediate holding companies
other assets 1.8 0.1
------------------------------------ ----------- -----------
Fair value of the Company's
investment in UK HoldCo 214.4 159.1
------------------------------------ ----------- -----------
Company's cash 3.3 3.6
Company's other liabilities (0.8) (0.8)
------------------------------------ ----------- -----------
Net Asset Value at 31 March 216.9 161.9
------------------------------------ ----------- -----------
Number of shares 224,356,435 160,000,000
Net Asset Value per share 96.7p 101.2p
------------------------------------ ----------- -----------
At 31 March 2016, the Group (Company plus intermediate holding
companies) had a total cash balance of GBP6.2 million (31 March
2015: GBP8.6 million), including GBP3.3 million in the Company's
balance sheet (31 March 2015: GBP3.6 million) and GBP2.9 million in
the intermediate holding companies (31 March 2015: GBP5.0 million),
which is included in the Company's balance sheet within "investment
at fair value though profit or loss".
At 31 March 2016, UK HoldCo had drawn GBP54.8 million of its
revolving credit facility debt (31 March 2015: GBP43.7 million)
which is included in the Company's balance sheet within investment
at fair value through profit or loss.
The movement in the portfolio value from 31 March 2015 to 31
March 2016 is summarised as follows:
Period from
12 December
Year ended 2013 to
All amounts presented in GBPmillion 31 March 31 March
(except as noted) 2016 2015
-------------------------------------- ---------- -----------
Portfolio value at start of
the year/at incorporation 197.7 -
Acquisitions (net of post acquisition
adjustments) 73.7 198.3
Distributions received from
investments (18.6) (13.8)
Growth in value of portfolio 11.7 13.2
-------------------------------------- ---------- -----------
Portfolio value at 31 March 264.5 197.7
-------------------------------------- ---------- -----------
Further details on the portfolio valuation and an analysis of
movements during the year are provided in the investment portfolio
and valuation section in the strategic report.
Income
The Company's profit before tax for the year ended 31 March 2016
is GBP6.2 million, generating an earnings per share of 3.0
pence.
Period from
12 December
Year ended 2013 to
All amounts presented in GBPmillion 31 March 31 March
(except as noted) 2016 2015
------------------------------------ ---------- -----------
Interest received on UK HoldCo
loan notes 10.2 8.1
Dividend received from UK HoldCo 7.5 1.7
Net (losses)/gains on investments
at fair value (8.4) 2.2
------------------------------------ ---------- -----------
Operating income 9.3 12.0
------------------------------------ ---------- -----------
Operating cost (3.1) (2.6)
------------------------------------ ---------- -----------
Profit before tax 6.2 9.4
------------------------------------ ---------- -----------
Earnings per share 3.0p 5.9p
------------------------------------ ---------- -----------
In the year to 31 March 2016, the operating income was GBP9.3
million, including the receipt of GBP10.2 million interest on the
UK HoldCo loan notes, GBP7.5 million of dividends also received
from UK HoldCo and a net loss on investments at fair value of
GBP8.4 million.
The operating costs included in the income statement for the
year were GBP3.1 million, in line with expectations. These include
GBP0.7 million of operating expenses and GBP2.4 million of
Investment Adviser fees. Investment Adviser fees are charged at 1%
of Adjusted Portfolio Value as set out in more detail in note 15 to
the financial statements.
As noted earlier, the dividend in respect of the year ended 31
March 2016 is 6.054 pence per share while the earnings per share
for the year is 3.0 pence. Profitability during the year was
adversely affected by the impact of lower electricity prices and
the removal of LECs. However, as noted in the cash flow section
below, cash receipts from the portfolio for the year after
operating, administrative and financing costs, cover the dividend
declared for the year 1.05 times.
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 ongoing charges percentage for the year to 31 March 2016 was
1.5% (period ending 31 March 2015: 1.4%). The ongoing charges have
been calculated, in accordance with AIC guidance, as annualised
ongoing charges (i.e. excluding acquisition costs and other
non--recurring items) divided by the average published undiluted
Net Asset Value in the period. The ongoing charges percentage has
been calculated on the consolidated basis and therefore takes into
consideration the expenses of UK HoldCo as well as the Company's.
Adjusting for the impact of the drawdown amount under the revolving
credit facility, the ongoing charge ratio would be 1.4% (31 March
2015: 1.4%). 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.
Cash flow
The Company had a total cash balance at 31 March 2016 of GBP3.3
million. The breakdown of the movements in cash is shown below.
Cash flows of the Company for the year (GBPmillion):
Period from
12 December
Year ended 2013 to
31 March 31 March
2016 2015
----------------------------------------- ----------- -----------
Cash balance at 1 April/at incorporation 3.6 -
Net issue proceeds from equity
raise 63.8 157.3
Investment in UK HoldCo (equity
and loan notes) (63.8) (156.9)
Interest on loan notes received
from UK HoldCo 10.2 8.1
Dividends received from UK HoldCo 7.5 1.7
Directors' fees and expenses (0.2) (0.2)
Investment Adviser fee (2.3) (1.2)
Administrative expenses (0.5) (0.4)
Dividends paid in cash to shareholders (15.0) (4.8)
----------------------------------------- ----------- -----------
Company cash balance at 31 March 3.3 3.6
----------------------------------------- ----------- -----------
The Group had a total cash balance at 31 March 2016 of GBP6.2
million (2015: GBP8.6 million) and borrowings under the revolving
credit facility of GBP54.8 million (2015: GBP43.7 million). The
breakdown of the movements in cash is shown below.
Cash flows of the Group for the year (GBPmillion):
Period from
12 December
Year ended 2013 to
31 March 31 March
2016 2015
--------------------------------------- ----------- -----------
Cash received from environmental
infrastructure investments 18.6 13.8
Administrative expenses (0.6) (0.4)
Directors' fees and expenses (0.2) (0.2)
Investment Adviser fee (2.3) (1.2)
Financing costs (net of interest
income) (1.2) (0.2)
--------------------------------------- ----------- -----------
Cash flow from operations 14.3 11.8
Net proceeds from share issues 63.8 157.3
Acquisition of investment assets (75.7) (198.9)
Reduction in acquisition price - 0.6
Acquisition costs (including
stamp duty) (0.8) (0.6)
Debt arrangement fee cost (0.1) (0.5)
Proceeds from borrowings under
the revolving credit facility 11.1 43.7
Dividends paid in cash to shareholders (15.0) (4.8)
--------------------------------------- ----------- -----------
Cash movement in the period (2.4) 8.6
Opening cash balance 8.6 -
--------------------------------------- ----------- -----------
Group cash balance at 31 March 6.2 8.6
--------------------------------------- ----------- -----------
During the year, the Group received cash distributions of
GBP18.6 million from its environmental infrastructure investments,
approximately GBP0.4 million below the distributions expected by
the Group after adjusting for acquisitions during the year. This is
due primarily to the impact, as discussed earlier, on the
anticipated revenues from the renewable energy assets due to the
removal of LECs from August 2015 and the impact of lower
electricity prices throughout the year on projects where price
fixes are not in place.
Notwithstanding this shortfall in distributions, cash received
from investments in the year more than covers the operating and
administrative expenses and financing costs as well as the
dividends declared to shareholders in respect of the year ended 31
March 2016. Cash flow from operations of the Company of GBP14.3
million covers dividends declared in respect of the year to 31
March 2016 of GBP13.6 million by 1.05 times.
The Company anticipates 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 year, the Company paid a final dividend for the
period ended 31 March 2015 of 3.0 pence per share on 12 June 2015
(GBP4.8 million) in respect of the six month period to 31 March
2015.
An interim dividend of 3.027 pence per share was paid on 18
December 2015 (GBP6.8 million), in respect of the six month period
to 30 September 2015, and a second interim dividend of 1.5135 pence
per share on 24 March 2016 (GBP3.4 million) in respect of the
quarter to 31 December 2015. The Company has declared an interim
dividend of 1.5135 pence per share in respect of the quarter ended
31 March 2016 (GBP3.4 million), which is payable on 24 June
2016.
The target dividend for the year to 31 March 2017 is 6.14 pence
per share, being the amount declared in respect of the year to 31
March 2016 of 6.054 pence per share, adjusted for inflation.(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 GBP264.5 million at 31 March 2016
from GBP197.7 million at 31 March 2015.
Investment portfolio
At 31 March 2016, the Group's investment portfolio comprised of
interests in 15 project vehicles, all located in the UK:
Commercial
Capacity operations
Asset Location Type Ownership (MWs) date
---------------------- ---------- ----------- --------- -------- ----------
Amber UK (Eng) Solar 100% 9.8 Jul 2012
Branden UK (Eng) Solar 100% 14.7 Jun 2013
Monksham UK (Eng) Solar (1) 10.7 Mar 2014
Pylle Southern UK (Eng) Solar 100% 5.0 Dec 2015
2011
Panther UK (Eng) Solar 100% 6.5 - 14
Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Sept
Burton Wold Extension UK (Eng) Wind 100% 14.4 2014
Carscreugh UK (Scot) Wind 100% 15.3 Jun 2014
Castle Pill UK (Wal) Wind 100% 3.2 Oct 2009
Ferndale UK (Wal) Wind 100% 6.4 Sep 2011
Hall Farm UK (Eng) Wind 100% 24.6 Apr 2013
Wear Point UK (Wal) Wind 100% 8.2 Jun 2014
Dumfries & Galloway UK (Scot) Waste 80% n/a 2007
mgnt.
ELWA UK (Eng) Waste 80% n/a 2006
mgnt.
Tay UK (Scot) Wastewater 33% n/a Nov 2001
---------------------- ---------- ----------- --------- -------- ----------
(1) 100% of "B" shares plus 100% of loans to the project. The
"A" shareholders, investors under the Enterprise Investment Scheme,
remain invested in the project. Including the loans, JLEN held an
effective economic interest over 87% of the value of the project's
cash flow (as calculated at acquisition).
The JLEN portfolio comprises a diversified range of assets
across different sectors, technologies and revenue types.
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 31 March 2016 was
GBP264.5 million, compared to GBP197.7 million at 31 March 2015.
The increase of GBP66.8 million is the net impact of new
acquisitions, cash received from investments, changes in
macroeconomic and electricity price assumptions, the refinancing of
wind portfolio debt and underlying growth in the portfolio.
The total movement of investments during the year ended 31 March
2016 is shown in the table below:
GBPm
--------------------------------------------- ------
Valuation of portfolio at 31 March 2015 197.7
Acquisitions in the year (net of post
acquisition adjustments) 73.7
Cash distributions from portfolio (18.6)
--------------------------------------------- ------
Rebased opening valuation of portfolio 252.8
Changes in forecast electricity prices (16.6)
Changes in economic assumptions (0.3)
Changes in discount rates 7.2
Net impact of wind portfolio refinancing 4.0
Discount rate unwind 17.4
--------------------------------------------- ------
Valuation of portfolio at 31 March 2016 264.5
Fair value of intermediate holding companies (50.1)
--------------------------------------------- ------
Investments at fair value through profit
or loss 214.4
--------------------------------------------- ------
Allowing for investments of GBP75.5 million (less GBP1.8 million
recovered under the terms of acquisition agreements) and cash
receipts from investments of GBP18.6 million, the rebased valuation
is GBP252.8 million. The valuation at 31 March 2016 is GBP264.5
million (2015: GBP197.7 million), representing an increase over the
rebased valuation of 4.6% over the year.
Each movement between the rebased valuation and the 31 March
2016 valuation is considered below:
Forecast electricity prices
The project cash flows used in the portfolio valuation at 31
March 2016 reflect contractual fixed price arrangements under PPAs
where they exist and short--term market forward prices where they
do not for the next two years. Thereafter, the project cash flows
assume future electricity prices in line with central forecasts
from an established market consultant, adjusted by the Investment
Adviser for project specific arrangements if required.
In common with generators selling into the wholesale market,
JLEN has experienced a continuing downward trend in electricity
prices during the year. Compared to the assumptions used in the
valuation at 31 March 2015, on a time weighted average basis, the
reduction in the power price assumptions is approximately 13% over
a 25-year period (being a simple average reduction over 25 years of
approximately 12%, including a reduction in market forward prices
over the next two years of nearly 30%, down to an average of
GBP37/MWh for winter (2015: GBP46) and GBP32/MWh (2015: GBP42) for
summer).
The reduction in forecasts for future electricity prices
compared to forecasts at 31 March 2015 and the update to forecast
revenues from the renewable energy assets to reflect the
announcement of the loss of the Climate Change levy exemption for
renewable electricity in the July 2015 budget and the consequent
loss of revenue from LECs, has reduced the valuation of the
portfolio by GBP16.6 million.
Economic assumptions
Macroeconomic assumptions in respect of inflation, corporation
tax and deposit interest rates have remained relatively constant
during the year and the movement in valuation is therefore not
significant. Inflation rates assumed in the valuation at 31 March
2016 are 2.20% in 2016 with 2.75% for all subsequent years. The
long--term UK corporation tax rate assumed is 20%, stepping down to
19% in April 2017 and 17% from April 2020 onwards, reflecting the
rates enacted by legislation or included in the Finance Bill 2016,
which is in line with market practice. Deposit rates assumed in the
valuation reflect a range of deposit rates from 1.00% in 2016 with
a gradual increase to a long--term rate of 3.25% with effect from
2019 onwards.
Discount rates
The discount rates used in the valuation exercise represent the
Investment Adviser's and the Board's assessment of the rate of
return in the market for assets with similar characteristics and
risk profile. The discount rates are reviewed on a regular basis
and updated, where appropriate, to reflect changes in the market
and in the project risk characteristics.
During the year since 31 March 2015, there has continued to be
strong demand for income--producing infrastructure assets,
including environmental infrastructure projects as the market
matures, resulting in a reduction in the prevailing discount rates
applied for operating projects. The Investment Adviser, based on
its experience of bidding in the secondary market for onshore wind
and solar PV projects and the discount rates achieved on
transactions in those sectors, has reduced the discount rates
applied to the wind and solar assets to reflect the current market
rates in the year--end portfolio valuation.
In addition, during the year further ungeared solar assets were
acquired and the proportion of solar as a percentage of the
portfolio valuation increased from 28% to 41%. Lower valuation
discount rates are applied to solar projects reflecting the lower
risk apportioned by the market to this asset class.
Taking the above factors into account, and the change in mix of
the portfolio during the year, the overall Weighted Average
Discount Rate ("WADR") of the portfolio has reduced to 8.2% at 31
March 2016 (9.1% at 31 March 2015).
Net impact of wind portfolio refinancing
In March 2016, the Company completed a refinancing of the
project debt in its wind asset portfolio. The refinancing was
concluded with The Bank of Tokyo--Mitsubishi UFJ Ltd, and whilst
there was no increase in the gearing of the wind portfolio apart
from an amount to cover the costs associated with the transaction,
the refinancing secured more beneficial terms for the wind
portfolio.
As part of the refinancing, updated operational energy yield
assessments were obtained for all the wind assets and reflected in
future revenue assumptions. JLEN was also able to make a claim
related to the updated energy yield assessments under a Sale and
Purchase Agreement, and the vendor has paid GBP2.0 million in
settlement of that claim.
The portfolio valuation reflects the terms of the refinancing
and the updated energy yield assessments. Together with the
associated settlement amount of GBP2.0 million, which is included
in the fair value of intermediate holding companies, the net
outcome of the refinancing is an increase in NAV of GBP4.0
million.
Discount rate unwind
This represents the impact on the rebased portfolio value, all
other measures remaining constant, of the effect of discount rate
unwinding and represents an uplift of GBP17.4 million.
Valuation assumptions and 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, 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 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:
Discount rate
The WADR of the portfolio at 31 March 2016 was 8.2% (9.1% at 31
March 2015). 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 renewable energy projects assume a "P50"
level of power output. 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.
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.
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 prices
Electricity price assumptions are based on the following: for
the first two years cash flows for each project use forward
electricity 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 long--term central
case forecasts from an established market consultant 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 electricity prices relative to the
base case for each year of the asset life after the first two--year
period.
Inflation
The inflation assumptions used in the valuation as at 31 March
2016 are 2.2% for 2016 and 2.75% (31 March 2015: 2.75%) for the
long--term. Each project in the portfolio receives a revenue stream
which is either fully or partially inflation--linked.
Market outlook
Based on the current outlook for the portfolio and the markets
in which it operates, the Board believes that the current portfolio
is well--positioned to continue to deliver the target returns of
the Company.
The global renewable energy market remains strong and despite
other political priorities, climate change remains one of the
important areas of focus for governments and policymakers across
the globe. Governments continue to promote policies and investment
priorities to reduce greenhouse gas emissions in the near future
and in December 2015, the UN Climate Change Conference held in
Paris (COP 21) provided further support for decarbonisation
initiatives on an increasingly co--ordinated basis, including the
further build--out of renewable generation capacity and supporting
technologies. At the conclusion of the conference the participating
195 countries agreed, by consensus, to the final global pact, the
"Paris Agreement", to reduce emissions as part of the method for
reducing greenhouse gas. In the document, the members agreed to
reduce their carbon output "as soon as possible" and to do their
best to keep global warming "to well below 2 degrees celcius". And
whilst some have criticised the fact that significant sections are
"promises" or aims and not firm commitments by the countries,
others believe the plan to be "ambitious and balanced" and an
"historic turning point" in the goal of reducing global
warming.
The UK renewable energy market continues to attract significant
investments and for the EU the European Environmental Agency
forecasts that production from renewable sources of electricity is
expected to continue to experience significant growth. This
increasing contribution from renewables is also mainly driven by a
generally supportive policy framework and governments' incentives
for renewables, which reinforce investors' appetite for this type
of asset. In the UK, whilst the reduced levels of support for new
solar PV and onshore wind projects following the election of the
new government in May 2015 were largely anticipated given the
strength of historic investment, and will impact on developers of
new developments in these areas, the government has indicated its
continued support for future investment in newer areas of renewable
technologies such as offshore wind, tidal and combined heat and
power, all areas within the investment remit of JLEN for the
future.
This support has been reinforced most recently by the
announcement by the Energy Secretary in November 2015 that a second
round Contracts for Difference ("CfD") FiT programme will be
launched in by the end of 2016. This follows the successful launch
in February 2015 of the first competitive auction, which awarded
CfD subsidies to 27 renewable energy projects to deliver over 2GW
of new renewable energy capacity across England, Scotland and
Wales. The first allocation round attracted a high level of
interest, with developers' bids significantly below market
expectations and administrative strike prices set by the
government.
The UK and European renewables markets in 2015 and 2016 have
continued to be affected by low electricity prices, mainly driven
by consistently falling oil and gas prices since the end of 2014.
This commodity environment has primarily impacted conventional
power generation but also renewables companies most exposed to
electricity prices. In addition, in the UK the revenues of
renewable generators were impacted by the early removal of LECs in
the July 2015 budget. The ongoing weakness in wholesale electricity
prices has resulted in both lower historic revenues and also lower
forecasts of short and longer term electricity prices, which in
turn has impacted on the NAV of all renewable energy funds. JLEN
has been less affected by market conditions than its peers, due to
its diversified portfolio (including waste management and
wastewater), the inclusion of market forward prices for the next
two years in the portfolio valuation and the extent of ROC and FiT
revenues in its portfolio, which reduce its exposure to electricity
prices. In 2016 and beyond, while the possibility of further falls
in wholesale electricity prices cannot be dismissed, there may be
upside potential for the portfolio if electricity prices recover
over time. The timing and extent of changes to electricity prices
will depend on a range
of factors, including the impact of continued pressure on the UK
capacity margin due to planned closures of coal--fired generation
plants and the continued delay in the commissioning of new nuclear
plants. The Board and the Investment Adviser will continue to
monitor markets and forecasts quarterly and reflect this in the
reported NAV as appropriate.
Whilst in the UK the PFI programme for new waste and wastewater
projects is now largely completed, there remain a large number of
projects which continue to be held on corporate balance sheets
which should provide an active secondary market for JLEN in the
future.
Despite the issues noted above, 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 during the year. In
particular, JLEN has the benefit of a First Offer Agreement with
John Laing 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 its investment policy with a combined investment
value for the Fund of approximately GBP360 million at 31 December
2015 (as estimated by John Laing) will become available for
acquisition by the Fund within the period to 31 December 2018.
Based on the current outlook for the portfolio and the markets
in which it operates, the Board believes that JLEN is
well--positioned to continue to deliver the target returns of the
Company, although it should be noted that delivery of the
long--term IRR targets will depend to an extent on the recovery of
electricity prices from the current levels. The Board and the
Investment Adviser also seek opportunities to improve the
performance ahead of target through the delivery of additional
operational scale efficiencies and through prudent portfolio and
financial management.
Risks and risk management
JLEN has a comprehensive risk management framework overseen by
the Risk Committee comprising independent non--executive
Directors.
Risk is the potential for events to occur that may result in
damage, liability or loss. Such occurrences could adversely impact
the Group's business model, reputation or financial standing.
Alternatively, under a well--formed risk management framework,
potential risks can be identified in advance and can either be
mitigated or possibly even converted into opportunities.
The Company's prospectus dated 4 June 2015 details all the
potential risks that the Directors consider are material that could
occur in an environmental infrastructure project and in particular
those in relation to renewable energy generation and PPP/PFI
projects.
Given that the Company delegates certain activities to the
Investment Adviser and Administrator, reliance is also placed on
the controls of the Group's service providers.
In the normal course of business, each project will have
developed a rigorous risk management framework including a
comprehensive risk register that is reviewed and updated regularly
and approved by its Board. The purpose of JLEN's risk management
policies and procedures is not to eliminate risk completely as this
is possible but not commercially advisable. Rather it is to reduce
the likelihood of occurrence and to ensure that JLEN is adequately
prepared to deal with risks so as to minimise their impact should
they materialise.
Risk identification and monitoring
JLEN has a separate Risk Committee comprised of three
non--executive Directors which is responsible for overseeing and
advising the Board on the current and potential risk exposures of
the Fund, with particular focus on the Group's principal risks,
being those with the greatest potential to influence shareholders'
economic decisions, and the controls in place to mitigate those
risks.
The identification, assessment and management of risk are
integral aspects of the Investment Adviser's and Administrator's
work in both managing the existing portfolio on a day--to--day
basis and pursuing new investment opportunities (though the Board
has ultimate responsibility for the risk management activities of
the Group). The Investment Adviser and Administrator have
established internal controls to manage these risks and they review
and consider the Group's key risks with the Risk Committee on a
quarterly basis, including new risks arising and/or changes in the
likelihood of any particular risk occurring.
The Board's investment advisory engagement committee reviews the
performance of the Investment Adviser and Administrator, as well as
other key service providers, annually.
JLEN has a comprehensive risk management framework and risk
register that assesses a) the probability of each identified risk
materialising and b) the impact it may have on JLEN. This is
captured by a rating system assigning a 1, 2 or 3 to the
probability and a 1, 2 or 3 to the magnitude of the impact (with 1
being the least probable/smallest impact and 3 being the most
probable/greatest impact). The product of these two values
represents the overall severity of the risk. The following
red--amber--green system is used to prioritise and focus JLEN's
risk management policies and procedures:
-- red (score 6 - 9) very likely to occur or has occurred in the
recent past; significant potential impact on the Group's
stakeholders, reputation and/or financial standing if the risk
occurred;
-- amber (score 3 - 5) likely to occur, with a medium impact if the risk did occur; and
-- green (score 1 - 2) unlikely to occur and only minor impact should the risk materialise.
Mitigation actions have been developed with respect to each risk
so as first to reduce the likelihood of such risk occurring and
secondly to minimise the severity of its impact in the case that it
does occur.
The risk register is a "live" document that is reviewed and
updated regularly by the Risk Committee as new risks emerge and
existing risks change. The principal risk register is formally
reviewed by the Risk Committee at each quarterly meeting and a
report from the Committee is presented to the Board for
consideration and approval. Each of the underlying projects is
overseen by an experienced general manager who reports to their
individual project board. The general managers maintain strong
relationships between clients, sub--contractors and other
stakeholders. This ensures effective management of potential
risks.
JLEN's risk register covers five main areas of risk:
-- strategic, economic and political;
-- operational;
-- financial and taxation;
-- compliance and legal; and
-- asset specific.
Each of these areas, together with the principal risks within
that category, are summarised in the table overleaf, followed by a
detailed discussion of the mitigating factors.
Strategic, economic and political
-----------------------------------------------------------------------------------------
Risk Potential impact Mitigation
----------------- ----------------------------- ---------------------------------------
Inflation The underlying Returns from the assets
and assets in the portfolio in the portfolio are highly
interest and therefore the correlated with inflation
rates returns expected due to revenues from PFI
from them have assets, green benefits
some exposure to for renewable energy assets
inflation. and most operational costs
The Company has being directly linked
some interest rate to an inflation index.
exposure, through This results in a "natural
its own cash deposits hedge", removing the need
and bank funding for the use of derivatives
and deposits and to mitigate inflation
funding within risk.
the projects themselves. Through the use of interest
rate swaps and fixed rate
loans, finance costs are
fixed at the time of the
contract being signed,
substantially reducing
interest rate risk.
----------------- ----------------------------- ---------------------------------------
Acquisitions JLEN's intention JLEN benefits from a First
and pipeline is to grow the Offer Agreement with John
portfolio through Laing giving it the right
the acquisition of first offer over a
of further environmental pipeline of environmental
infrastructure infrastructure projects,
projects. However, valued by John Laing at
there is a risk approximately GBP360 million
that a pipeline at 31 December 2015, in
of acquisitions the period to 31 December
does not materialise. 2018. In addition, JLEN
continually receives and
seeks opportunities from
the wider secondary market
and developers, both in
the UK and overseas.
----------------- ----------------------------- ---------------------------------------
Funding There is a risk JLEN has a three--year,
of that JLEN is unable GBP65 million revolving
acquisitions to achieve its credit facility providing
and stated ambition short--term finance to
future of growing the pursue acquisitions. This
equity portfolio by acquiring is used to finance acquisitions
fundraising new assets due prior to raising capital,
to a lack of funding, mitigating the risk of
both from corporate inadequate funding affecting
debt and equity growth.
capital from investors. Investors have been supportive
of the infrastructure
class in general and the
environmental infrastructure/renewable
energy class in particular
and recent capital raises
by JLEN and other listed
infrastructure funds confirm
the appetite investors
have for infrastructure
as an asset class.
----------------- ----------------------------- ---------------------------------------
Competition JLEN, in pursuing JLEN differentiates itself
investment opportunities from its peer group in
and in seeking a number of ways, including
to raise further its investment policy
capital, competes of investing in a diversified
against a number range of environmental
of other listed infrastructure technologies
and private infrastructure and revenue streams, its
funds. There is aim to only raise capital
a risk that such against committed investments
competition could and through its First
limit growth of Offer Agreement with John
the fund. Laing.
----------------- ----------------------------- ---------------------------------------
Future Under its investment Should either of these
of UK capital policy, JLEN is risks materialise, the
spending required to hold immediate impact on JLEN
at least 50% of and the secondary PPP/renewable
its portfolio by energy market would be
value in UK assets. small as there is sufficient
JLEN therefore deal flow in the UK market
has a significant to sustain this space
interest in the in the short to medium
future of UK infrastructure term, as primary participants
spending. Government seek to recycle equity
financial support to reinvest in new infrastructure
for new renewable projects.
energy and environmental In addition, JLEN has
processing assets the ability to mitigate
has reduced significantly the impact of a slowdown
in recent years in UK deal flow through
and there is a overseas acquisitions
risk that spending in order to diversify
is either reduced the portfolio and reduce
or stopped altogether its reliance on the UK
or that the model for investment opportunities.
used to procure
environmental infrastructure
and/or renewable
energy projects
offers a risk profile
that would not
allow JLEN to invest
under its investment
policy.
----------------- ----------------------------- ---------------------------------------
UK referendum There are three At this stage it is not
on EU membership risks: firstly, clear what the precise
that following impact on the UK environmental
announcement of infrastructure industry
the 'in--out' referendum will be of an exit from
in respect of EU the EU. With evidence
membership to be that investors see listed
held on 23 June infrastructure as a "safe
2016, there is haven" in times of market
a period of volatility turbulence, JLEN could
in the markets in fact benefit while
in the months preceding any uncertainty remains,
due to the uncertainty; although it is not unreasonable
secondly, that to expect greater volatility
the UK could ultimately in the share price over
decide to exit the coming months.
the EU with potential At 31 March 2016, there
for impact on UK are no project--specific
gilt rates and risks relating to a UK
the credit rating exit from the EU faced
of the UK Government; by any asset in the JLEN
and thirdly that portfolio. Any impact
a UK exit could of the post year end acquisition
trigger momentum of the Saint--Gouéno
for a second Scottish wind farm in France is
independence referendum. not material to the Group.
There is a risk
that market turbulence
or an exit from
the EU will produce
volatility in JLEN's
markets.
----------------- ----------------------------- ---------------------------------------
Operational
----------------- ----------------------------------------------------------------------
Risk Potential impact Mitigation
----------------- ----------------------------- ---------------------------------------
Volume By the very nature For renewable energy projects
of resource of environmental there is a degree of protection
infrastructure from this variability
projects, their in weather resource from
financial performance portfolio diversification,
is dependent on as solar is more productive
the volume of resource in the summer and wind
available, be it more productive in the
solar irradiation, winter, with the absolute
wind, waste or level of resource being
water. These are uncorrelated.
factors outside In addition, the waste
the control of and wastewater projects
JLEN or the projects benefit from "banded"
themselves, with volumetric payment arrangements
the risk of a significant that mean the projects
effect on performance are relatively insensitive
if the outcome to falling volumes. The
is significantly projects also benefit
different from from contractual exclusivity
the assumptions over the available waste
made in forecasting or water stream and, in
revenue and costs the case of the waste
and hence returns projects, minimum guaranteed
to JLEN. volumes, further mitigating
this risk.
On all projects, technical
consultants are employed
to advise on the assumptions
which should be made regarding
volume and its impact
on performance for each
individual asset.
----------------- ----------------------------- ---------------------------------------
Electricity The revenues of The risk of exposure to
prices the renewable energy variations in electricity
solar and wind prices from assumptions
assets are dependent made is mitigated by JLEN
to some extent in the following ways:
on the market price (i) short--term PPAs are
of electricity used to fix prices for
which is out of between one and three
the control of years depending on market
JLEN. There is conditions and many have
a risk that the floor prices; (ii) forward
actual prices received prices based on market
vary significantly rates are used for the
from the model first two years where
assumptions leading no fix is in place; (iii)
to a shortfall quarterly reports from
in anticipated an independent established
revenues to JLEN. market consultant are
used to inform the electricity
prices over the longer
term used in the financial
models.
Due to the diversification
in the portfolio, JLEN
has relatively low exposure
to electricity prices
for the sector.
----------------- ----------------------------- ---------------------------------------
Financial and taxation
-----------------------------------------------------------------------------------------
Risk Potential impact Mitigation
----------------- ----------------------------- ---------------------------------------
Valuation The discount rates The discount rates are
used in the valuation reviewed on a regular
exercise represent basis and updated, where
the Investment appropriate, to reflect
Adviser's and the changes in the market
Board's assessment and in the project risk
of the rate of characteristics.
return in the market In general, independent
for assets with forecasters expect UK
similar characteristics wholesale electricity
and risk profile. prices to continue to
Increased underlying rise in real terms over
gilt rates may the long term, based on
lead to increased tighter UK capacity margins
discount rates in the short term and
being applied by global energy supply and
the market and demand in the long term.
a consequential To provide additional
decrease in the assurance to both the
portfolio value. Board and JLEN's shareholders
Asset values may with respect to the valuation,
not run in parallel an independent verification
to evolving forecasts exercise of the methodology
for future electricity and assumptions applied
prices and investors by JLCM is performed by
should expect some a leading accountancy
variation in asset firm and an opinion provided
valuation from to the Directors.
period to period,
as and when a material
movement from prior
expectations is
identified.
----------------- ----------------------------- ---------------------------------------
Base Erosion JLEN values its The Company, along with
Profit portfolio based others in the infrastructure
Shifting on current enacted industry, has and will
corporation tax continue to take part
rates and tax rules. in consultation on the
Changes to these development of detailed
rates or rules proposals with UK HMRC.
in the future could Whilst it is still unknown
impact the valuation exactly how the UK will
of the portfolio. implement the BEPS recommendations,
In October 2015, based on the proposals
the OECD published set out in the most recent
its final report consultation document
on Base Erosion issued in May 2016 by
Profit Shifting HMRC, the Investment Adviser's
("BEPS"). The report initial assessment is
recommends member that the impact on the
states adopt a Company's NAV is not expected
"fixed ratio rule", to be material.
which limits net There can be no certainty
deductions of interest that the effect of such
to a percentage rules will be in accordance
of EBITDA. Infrastructure with the Investment Adviser's
investments are assessment of the information
particularly at currently available. JLEN
risk from this, continues to monitor and
by virtue of their participate in the consultation
high gearing. As processes with the UK
with other broad--based HMRC and to assess the
regulatory initiatives, impact of any proposed
it is likely much new legislation on the
will change before Company.
the eventual implementation
of the rules, which
as announced in
the March 2016
budget will be
introduced in April
2017. UK HMRC has
recently published
recommendations
and continues to
consult with UK
companies on the
detail of the application
and implementation
of the general
principles of BEPS.
The most important
of the BEPS recommendations
from an infrastructure
investments perspective
relates to restrictions
on the deductibility
of interest costs.
----------------- ----------------------------- ---------------------------------------
Compliance and legal
-----------------------------------------------------------------------------------------
Risk Potential impact Mitigation
----------------- ----------------------------- ---------------------------------------
Regulatory JLEN is required Through a comprehensive
- general to comply with compliance monitoring
certain London programme, JLEN ensures
Stock Exchange, that it remains well informed
UK Listing Authority as to the legislation,
and Guernsey regulatory regulation and guidance
requirements, regulations relevant to both the Company
under the Alternative itself as well as the
Investment Fund project entities in which
Managers Directives it invests. The Board
("AIFMD") and the monitors compliance information
Foreign Account provided by the Administrator,
Tax Compliance Company Secretary, Investment
Act ("FATCA"). Adviser and legal counsel
There is a risk and monitors ongoing compliance
that failure to developments in the Channel
comply with any Islands and with the London
of the relevant Stock Exchange and Financial
rules could result Conduct Authority.
in a negative reputational
or financial impact
on the Company.
----------------- ----------------------------- ---------------------------------------
Regulatory Changes in Government The Government has evolved
- support policy to new renewable the regulatory framework
for renewables energy have resulted for new projects being
in changes to, developed but has consistently
and in some cases, stood behind the framework
early closure of, that supports operating
the Renewables projects as it understands
Obligation and the need to ensure investors
Feed--in Tariff can trust regulation.
regime. If these This principle of "grandfathering"
were applied retrospectively was confirmed in the Energy
to current operating Act 2013.
projects including
those in the Group's
portfolio, this
could adversely
impact the market
price for renewable
energy or the value
of the green benefits
earned from generating
renewable energy.
----------------- ----------------------------- ---------------------------------------
Asset specific
-----------------------------------------------------------------------------------------
Risk Potential impact Mitigation
----------------- ----------------------------- ---------------------------------------
Operational JLEN invests in The portfolio is constantly
risks projects where monitored by the Investment
the majority of Adviser to address risks
operational risk as they are identified.
is retained by The use of a diverse range
the public sector of service providers supplying
counterparty (relevant management, operational
to PFI projects) and maintenance services
or passed down ensures any failure of
to sub--contractors. a single service provider
However, in all has a minimal impact on
cases, some risk the portfolio as a whole.
is retained by This risk is mitigated
the project as in part by the diversification
set out above and represented by JLEN's
identified in the portfolio of assets.
Company's prospectus
dated 4 June 2015.
In the event of
a single project
suffering from
a material issue,
distributions to
the Fund could
possibly be impacted
absolutely or for
a period of time
whilst the issue
is resolved.
----------------- ----------------------------- ---------------------------------------
Corporate social responsibility
The business of the Company is to invest in environmental
infrastructure projects. JLEN recognises the business imperative
and moral obligation to carry out its activities in a socially
responsible, safe and environmentally sustainable manner, with due
consideration to human rights.
JLEN recognises the environmental, social and economic needs of
the communities in which it works and looks for suitable
opportunities to engage and support communities. The commitment to
corporate social responsibility ("CSR") is delivered through
programmes directly supported by JLEN and through the activities of
JLCM, Praxis and JLEN's other partners who manage the projects and
provide facilities management services to the portfolio assets.
JLEN actively encourages its partners to engage with the local
communities in which our projects are located. It is the engagement
of these teams that operate our assets on a daily basis and support
the communities in which they operate that makes the greatest
difference. Examples of how the assets and partners have
contributed to achieving JLEN's CSR ambitions are provided
below:
Bilsthorpe wind farm
Bilsthorpe wind farm supports local employment and suppliers. In
addition, it provides an annual contribution to the parishes of
Eakring and Bilsthorpe in the form of a local community fund.
Burton Wold Extension wind farm
The Burton Wold Extension wind farm employs local suppliers and
provides an annual contribution to the parishes of Cranford St John
and Burton Latimer.
Amber solar park
The Amber solar parks project provides donations to support
local causes on an ad hoc basis.
Wear Point wind farm
Wear Point wind farm has made a GBP4.5 million contribution to
the Welsh economy by awarding contracts to Welsh businesses,
including companies local to the site. The wind farm has also
benefited the local community by the upgrading and refurbishing of
Waterston's playing field. A further contribution has been made
toward Pembrokeshire County Council's planned upgrading of the
Pembrokeshire Coastal Path.
Carscreugh wind farm
Carscreugh wind farm was completed in June 2014 and employed
local construction companies and suppliers during the development.
Now that the wind farm is operational, Carscreugh has committed to
providing funding to support local economic, social and
environmental benefits in the community. To this end, Carscreugh is
working with Foundation Scotland and Old Luce Community Council who
have established a fund to bring together community funds from
adjacent schemes for the benefit of the wider community.
John Laing
The John Laing Group's community investment strategy is
delivered through its employees and a number of partners.
Since 2006 John Laing has been an active Patron of the Prince's
Trust, which has allowed them to support disadvantaged and
vulnerable young people across the UK, to help them move into work,
education or training. The Group encourages its staff to become
involved in activities and initiatives that benefit local
communities and environments.
The John Laing Charitable Trust ("JLCT") supports the work of
welfare visitors who look after the needs of former employees and
their surviving partners. Its trustees set aside considerable funds
each year to provide financial help and assistance. All John Laing
employees or members of their immediate family directly involved in
a charity are able to apply to JLCT for a grant to support a good
cause and additionally JLCT is able, within certain limits, to
match charitable donations raised by employees.
Praxis Fund Services
The PraxisIFM Group supports the local communities in which it
operates, focusing on equipping people with the skills they need to
lead successful and rewarding lives by supporting initiatives which
provide learning, training and development opportunities and/or
encourage people to lead healthy lifestyles. In Guernsey, this
includes sponsoring the Guernsey Rugby Academy and the Delancey
Flyers cycling league.
Health and safety
The physical location, operation and maintenance of
environmental infrastructure projects may, if inappropriately
assessed and managed, pose health and safety risks to those
involved. The operation and maintenance of facilities may result in
bodily injury or industrial accidents. If an accident were to occur
in relation to one or more of the Group's investments and if the
Group were deemed to be at fault, the Group could be liable for
damages or compensation to the extent such loss is not covered
under insurance policies. In addition, adverse publicity or
reputational damage could ensue.
The JLEN, UK HoldCo and individual project entity boards have
health and safety policies and review health and safety at each of
their respective scheduled Board meetings. The Group engages the
Investment Adviser to carry out a rolling programme of independent
audits of the health and safety policies and compliance of its
projects and all major suppliers.
Environment
JLEN takes its environmental responsibilities very seriously and
seeks to ensure effective environmental management, not only of its
own direct activities but also the indirect aspects and impacts
resulting from the occupation and use of its environmental
infrastructure projects.
This strategic report is approved by the Board of Directors.
Richard Morse
Chairman
16 June 2016
GOVERNANCE
Board of Directors
Members of JLEN's Board of Directors, all of whom are
non--executive and independent of the Investment Adviser, are
listed below.
Richard Morse
Chairman
Richard has more than 30 years' experience in energy and
infrastructure, including environmental energy. He is a partner at
Opus Corporate Finance where he leads the environmental energy
practice and his boardroom experience includes roles with Thames
Tideway Tunnel, Private Infrastructure Development Group and Howard
de Walden Estates Limited.
Past experience
Richard trained as an investment banker, becoming Deputy Head of
Corporate Finance and head of the utilities and energy team at
Dresdner Kleinwort Wasserstein, before taking up senior roles in
the energy and utilities practices at Goldman Sachs and Greenhill
International, and a Senior Adviser role at Matrix Corporate
Capital.
Committee memberships
Nomination Committee
Christopher Legge
Director
Chris was head of Audit and Accountancy for eight out of the 20
years he worked for Ernst & Young in Guernsey. He was
responsible for multiple audits of banking, insurance, investment
fund, property fund and other financial clients before being
appointed managing partner in 1998.
Past experience
Since retiring from Ernst & Young in 2003, Chris has held
numerous non--executive directorships in the UK listed financial
services sector, including BH Macro Limited (FTSE 250), Third Point
Offshore Investors Limited and Ashmore Global Opportunities Limited
where he also chairs the Audit Committee. He is a Fellow of the
Institute of Chartered Accountants in England and Wales.
Committee memberships
Audit Committee
Risk Committee
Denise Mileham
Director
Denise has acted in non--executive director roles for the past
seven years and previously sat on the board of Resolution Limited,
the FTSE 100 listed company. She was previously an executive
director at Kleinwort Benson (Channel Islands) Fund Services,
acting as Head of Fund Administration and Deputy Head of Fund
Services.
Past experience
In Denise's early career she undertook numerous roles at Credit
Suisse including Compliance Officer in the fund administration
department. A Fellow of the Securities and Investment Institute
since 2006, she is also a member of the Institute of Directors, the
Guernsey NED Forum and Guernsey Investment Fund Association and
previously sat on their Technical Committee.
Committee memberships
Nomination Committee
Risk Committee
Peter Neville
Director
Peter has more than 36 years' experience in the financial
services and financial services regulatory sectors in the UK and
overseas. He has worked in merchant banking and corporate finance
in the UK and the Far East, undertaking IPOs, corporate
restructurings, mergers and acquisitions and project finance. In
addition to his other non--executive positions, Peter currently
serves as a non--executive director of both Kleinwort Benson
(Channel Islands) Limited, the Guernsey based bank, and its holding
company.
Past experience
Peter was Director General of the Guernsey Financial Services
Commission from 2001 until 2009. His boardroom experience has
included acting as a non--executive director of Mytrah Energy
Limited and as a member of the Board and Chairman of the Audit and
Risk Committee of the Channel Islands Competition and Regulatory
Authorities.
Committee memberships
Risk Committee
Audit Committee
Nomination Committee
Richard Ramsay
Senior Independent Director
Richard is a chartered accountant with considerable experience
in the energy sector including: leading the Barclays de Zoete Wedd
team that privatised the Scottish electricity industry; Managing
Director - Finance and Regulation for a period at Ofgem; and
Director of the Shareholder Executive, principally involved with
government businesses in the nuclear sector. He is currently
chairman of Seneca Global Income & Growth Trust plc. He also
currently chairs a managing agency focused on the global nuclear
insurance market.
Past experience
At Ivory & Sime, Barclays de Zoete Wedd and at Intelli
Corporate Finance he worked in the closed--end funds sector,
completing over GBP2.5 billion of transactions.
Committee memberships
Audit Committee
The Investment Adviser
JLEN is advised by John Laing Capital Management Limited
("JLCM"). JLCM is a wholly owned subsidiary of John Laing Group
plc.
David Hardy
Investment Adviser
David is a Director of JLCM with over 20 years' corporate
finance, M&A, fundraising and deal closure experience spanning
infrastructure, PFI and renewables projects.
Joining John Laing in 2005, he led the equity investment of
numerous UK PFI/PPP projects across various sectors. From 2011 he
was responsible for the divestment of mature projects for the John
Laing Group. Prior to joining John Laing, David was a Corporate
Finance partner at KPMG.
David has a BSc in Management Sciences from Manchester
University and is a member of the Institute of Chartered
Accountants in England and Wales.
Chris Tanner
Investment Adviser
Chris is a Director of JLCM with over 15 years' experience in
infrastructure including PPPs, economic infrastructure and
renewables.
Prior to joining John Laing, he was a Principal in Henderson's
private equity infrastructure team. In the 18 months prior to
joining JLCM he was on secondment to John Laing as Corporate
Finance Director. Preceding Henderson, Chris worked at
PricewaterhouseCoopers for 11 years.
Chris is a member of the Institute of Chartered Accountants in
England and Wales and has an MA in Politics, Philosophy and
Economics from Oxford University.
Jane Tang
Senior Investment Manager
Jane is a Chartered Financial Analyst with over 15 years'
experience in corporate finance, including working on numerous PFI
and infrastructure deals.
Prior to joining John Laing in 2007, she was an Assistant
Director at PricewaterhouseCoopers in London and, prior to that, in
Singapore.
Jane is a member of the Institute of Chartered Financial
Analysts and has a BA in Business Administration from the National
University of Singapore.
Muxin Ma
Senior Investment Manager
Muxin is a Chartered Financial Analyst with over 9 years'
experience in infrastructure investment, with a focus on
concession--based PPP and PFI projects and renewable energy
generation projects.
Prior to joining John Laing in July 2015, Muxin was a Principal
in the private equity team of Henderson Global Investors.
Before this, Muxin worked on London Underground's GBP30 billion
Tube PPP programme at Transport for London and was previously in
the Transaction Services team at Deloitte.
Muxin is a CFA charterholder and has an MSc in Investment
Management from Cass Business School in the UK, an ESCP degree in
Finance and a BA from Peking University in China.
Corporate governance statement
The Board recognises the importance of a strong corporate
governance culture.
Introduction
The Listing Rules and the Disclosure and Transparency Rules
("Disclosure Rules") of the UK Listing Authority ("UKLA") require
listed companies to disclose how they have applied the principles
and complied with the provisions of the Corporate Governance Code
to which the issuer is subject. The provisions of the UK Corporate
Governance Code ("UK Code"), as issued by the Financial Reporting
Council ("FRC") in September 2012, and updated in September 2014,
are applicable to the year under review and can be viewed at
www.frc.org.uk.
The related Code of Corporate Governance (the "AIC Code"),
issued by the Association of Investment Companies ("AIC") in
February 2013, provides specific corporate governance guidelines to
investment companies. The AIC issued their revised code in February
2015. The FRC has confirmed that AIC member companies who report
against the AIC Code and who follow the AIC's Corporate Governance
Guide for Investment Companies ("AIC Guide") will be meeting their
obligations in relation to the UK code and the associated
disclosure requirements of the Disclosure Rules. The AIC Code can
be viewed at www.theaic.co.uk.
The Guernsey Financial Services Commission ("GFSC") has issued a
Finance Sector Code of Corporate Governance. The Code comprises
Principles of Guidance, and provides a formal expression of good
corporate practice against which shareholders, boards and GFSC can
better assess the governance exercised over companies in Guernsey's
finance sector. Companies which report against the UK Code or the
AIC Code are also deemed to meet the Guernsey Code.
Statement of compliance with the AIC Code and Guide
The Board recognises the importance of a strong corporate
governance culture that meets the Listing Rules of the UKLA. The
Board has put in place a framework for corporate governance which
it believes is appropriate for the Company. All Directors
contribute to Board discussions and debates. The Board believes in
providing as much transparency for shareholders as is reasonably
possible. It should be noted that most of the Company's
day--to--day responsibilities are delegated to third parties and
the Company has no employees.
The Company is a member of the AIC and has considered the
principles and recommendations of the AIC Code and has decided to
follow the AIC Guide. The Company has complied with the
recommendations of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating to the role of the
Chief Executive, executive Directors' remuneration and the need for
an internal audit function. For the reasons set out in the AIC
Guide, and as explained in the UK Code, the Board considers these
provisions are not relevant to the position of the Company, as it
has no executive Directors, employees or internal operations. The
Company has therefore not reported further in respect of these
provisions.
AIFM Directive
The Company is categorised as an internally managed non--EEA AIF
for the purposes of the AIFM Directive and as such neither it nor
the Investment Adviser is required to seek authorisation under the
AIFM Directive. The Board retains responsibility for the majority
of the Company's risk management and portfolio management
functions, and performs a number of its management functions
through the various committees described below.
The Board delegates certain activities to the Investment
Adviser, but actively and continuously supervises the Investment
Adviser in the performance of its functions and reserves the right
to take decisions in relation to the investment policies and
strategies of the Company or to change the Investment Adviser
(subject to the terms of the Investment Advisory Agreement). The
Board retains the right to override any advice given by the
Investment Adviser if acting on that advice would cause the Company
not to be acting in the best interests of investors, and more
generally to provide overriding instructions to the Investment
Adviser on any matter within the scope of the Investment Adviser's
mandate. The Board also has the right to request additional
information or updates from the Investment Adviser in respect of
all delegated matters, including in relation to the identity of any
sub--delegates and their sphere of operation.
AIFM Directive Disclosures
As explained in Part 11 of the Company's prospectus dated 4 June
2015, the Company is required, pursuant to Article 42(1)(a) of the
AIFM Directive, to make certain specified disclosures to
prospective investors prior to their investment in the Company, in
accordance with Article 23 of the AIFM Directive (the "Article 23
Disclosures").
As at the date of this report, the material updates to the
Article 23 Disclosures contained in Part 11 of the Company's
prospectus dated 4 June 2015 are as follows:
-- as detailed further in this report and in an announcement
made by the Company on 17 March 2016, the revolving credit facility
entered into by (inter alia) UK HoldCo and the Company on 9 October
2014 has been extended, on the same terms, from GBP50 million to
GBP65 million; and
-- the Investment Adviser has entered into a side letter with a
shareholder to rebate part of the base fee (which is described in
note 15 to the financial statements) attributable to that
shareholder's shares. Winterflood Securities has entered into a
similar arrangement in respect of a rebate of a proportion of its
placing commission attributable to the same shareholder. The
Investment Adviser and/or Winterflood Securities may enter into
similar arrangements with investors in the future without the prior
approval of, or disclosure of the detail of, those terms to
shareholders. The types of investors who may benefit are investors
making significant or strategic investments.
The Company has published an investor disclosure document on its
website (www.jlen.com) for the purposes of making the Article 23
Disclosures available to prospective investors prior to their
investment in the Company.
The Board
The Board consists of five Directors, all of whom are
non--executive and independent of the Company's Investment Adviser.
The Directors' details are contained in the board of Directors
section in the governance part and set out the range of investment,
financial and business skills and experience represented. Richard
Morse has been appointed Chairman and Richard Ramsay Senior
Independent Director. The Board meets at least four times a year
and, should the nature of the activity of the Company require it,
additional meetings may be scheduled, some at short notice. Between
meetings there is regular contact with the Investment Adviser and
the Administrator and the Board requires information to be supplied
in a timely manner by the Investment Adviser, the Company Secretary
and other advisers in a form and of a quality appropriate to enable
it to discharge its duties.
The tenure of Directors is expected to not exceed nine years
unless exceptional circumstances warrant such as to allow for
phased Board appointments and retirements. The Company intends that
each Director will stand for re--election at the annual general
meeting of the Company at intervals of no more than three years.
The Board has adopted a policy for any long--standing Directors who
have held office for nine years or longer to stand for re--election
annually.
The Board is mindful and supportive of the principle of widening
the diversity of its composition. It is also committed to
appointing the most appropriate available candidate based on merit,
taking into account the skills and attributes of both existing
members and potential new recruits and thereby the balance of
skills, experience and approach of the Board as a whole which will
lead to optimal Board effectiveness.
The terms and conditions of appointment of the Directors are
available for inspection at the Company's registered office.
Performance and evaluation
The JLEN Board has adopted a process to review its performance
on a regular basis and such reviews are carried out internally on
an annual basis, with external facilitation expected to take place
every three years. The annual evaluation of the Board and the
individual committees has taken the form of questionnaires and
discussion to assess Board effectiveness and individual Director
performance in various areas.
The Board carried out its first evaluation in September 2015
following the completion of the first year's trading and the issue
of the Company's first Annual Report since IPO. Reviews by the
Audit, Risk and Nomination Committees were carried out in July
2015. The results of the evaluation process concluded that the
Board was functioning effectively and the Board and its committees
provided a suitable mix of skills and experience.
Any new Directors will receive an induction from the Investment
Adviser and the Administrator as part of their induction process.
All Directors will receive other relevant training as necessary,
including site visits.
Duties and responsibilities
The Board is responsible to shareholders for the overall
management of the Company. The Board has adopted a set of reserved
powers which set out the particular areas where the Board wishes to
retain control. Such reserved powers include decisions relating to
the determination of investment policy and approval of investments,
strategy, capital raising, statutory obligations and public
disclosure, financial reporting and entering into any material
contracts by the Company.
The Directors have access to the advice and services of Praxis
Fund Services Limited, the Company Secretary and Administrator, who
is responsible to the Board for ensuring that Board procedures are
followed and that it complies with Guernsey Law and applicable
rules and regulations of the Guernsey Financial Services Commission
and the London Stock Exchange.
An Investment Advisory Agreement between the Company and the
Investment Adviser sets out the matters over which the Investment
Adviser has delegated authority including monitoring and managing
the existing investment portfolio, and also the limits on cost and
expenditure above which Board approval must be sought. All other
matters are reserved for the approval by the Board of
Directors.
Where necessary, in carrying out their duties, the Directors may
seek independent professional advice at the expense of the Company.
The Company maintains appropriate Directors' and Officers'
liability insurance in respect of legal action against its
Directors on an ongoing basis.
The Board has responsibility for ensuring that the Company keeps
proper accounting records which disclose with reasonable accuracy
at any time the financial position of the Company and which enable
it to ensure that the financial statements comply with The
Companies (Guernsey) Law, 2008, as amended. It is the Board's
responsibility to present a fair, balanced and understandable
assessment, which extends to interim and other price--sensitive
public reports.
Committees of the Board
The Board has not deemed it necessary to appoint a remuneration
committee as, being comprised of five Directors, it considers that
such matters may be considered by the whole Board. The remuneration
of the Board has been fixed after consultation with independent
external advisers and as noted in the Directors' remuneration
report was subject to further review during the year.
The Company has established an Audit Committee, chaired by
Christopher Legge, which operates within clearly--defined terms of
reference and comprises three non--executive Directors: Christopher
Legge, Peter Neville and Richard Ramsay whose qualifications and
experience are noted in the board of Directors section. The Audit
Committee meets at least three times a year at times appropriate to
the financial reporting calendar.
The duties of the Audit Committee in discharging its
responsibilities include reviewing the Annual Report and financial
statements; the Interim Report and financial statements; the system
of internal controls; and the terms of appointment of the auditor,
together with their remuneration. It is also the forum through
which the auditor reports to the Board. The Audit Committee also
reviews the objectivity of the auditor along with the terms under
which the external auditor is engaged to perform non--audit
services. The provisions in place to maintain the independence and
objectivity of the auditor include the requirement to replace the
lead audit partner every five years, and restrictions on the
delivery of non--audit services to the Company, with such services
and the terms under which these are to be provided, considered by
the Audit Committee on a case by case basis. Notwithstanding such
services, the Audit Committee considers Deloitte LLP to be
independent of the Company and that the provision of such
non--audit services is not a threat to the objectivity and
independence of the conduct of the audit.
The Company has also established a Risk Committee, which is
chaired by Peter Neville and comprises three non--executive
Directors: Peter Neville, Christopher Legge and Denise Mileham. The
duties of the Risk Committee include the identification,
measurement, management and monitoring appropriately and regularly
of all risks relevant to the Company's investment strategy and to
which the Company is or may be exposed. It is the responsibility of
the Risk Committee to advise the Board on the overall risk
appetite, tolerance and strategy of the Company, and to oversee the
Company's current risk exposures and the controls in place to
mitigate those risks. The Risk Committee meets at least four times
per year.
The Company has also established a Nomination Committee, chaired
by Denise Mileham and which comprises three non--executive
Directors: Denise Mileham, Richard Morse and Peter Neville. The
Nomination Committee's main function is to regularly review the
structure, size and composition of the Board and to consider
succession planning for Directors. The Nomination Committee meets
at least twice per year.
Separate reports from the Audit, Risk and Nomination Committees
on their activities for the period are set out in the governance
section.
The Board as a whole performs the functions typically undertaken
by an Investment Committee. The Board ensures compliance with the
terms of the investment policy of the Company and will consider and
decide on any changes to the investment policy (subject to
obtaining the relevant shareholder approvals), including
geographical and sectorial spread of investments, risk profile,
investment restrictions and the approach to project selection. The
Board also makes discretionary management decisions in respect of
the investment portfolio (with reference as necessary to advice
provided by the Investment Adviser), but may appoint
sub--committees to meet on an ad hoc basis to consider potential
acquisitions and disposals of particular investments.
The Board as a whole also fulfils the functions of an Investment
Advisory Engagement Committee.
The Board will review and make recommendations on any proposed
amendment to the Investment Advisory Agreement and keeps under
review the performance of the Investment Adviser. The Investment
Advisory Engagement Committee also performs a review of the
performance of other key service providers to the Fund and meets at
least once a year.
The attendance record of Directors for the year to 31 March 2016
is set out below.
Board Audit Risk Nomination
Meeting Committee Committee Committee
------------------- ------- --------- --------- ----------
Number of meetings
held 4 4 4 2
------------------- ------- --------- --------- ----------
Richard Morse 4 n/a n/a 2
Christopher Legge 2 4 2 n/a
Denise Mileham 4 n/a 4 2
Peter Neville 4 4 4 2
Richard Ramsay 4 4 n/a n/a
------------------- ------- --------- --------- ----------
A total of 11 other unscheduled Board meetings were held during
the year for specific purposes which were attended by some but not
all of the Directors.
Relations with shareholders
The Company welcomes the views of shareholders and places great
importance on communication with its shareholders. The Investment
Adviser produces a regular factsheet which is available on the
Company's website. Senior members of the Investment Adviser make
themselves available, as practicable, to meet with principal
shareholders and key sector analysts. Feedback from these meetings
is provided to the Board on a regular basis. The Board is also kept
fully informed of all relevant market commentary on the Company by
the Company's financial PR agency, as well as receiving relevant
updates from the Investment Adviser and the Company's brokers.
All shareholders can address their individual concerns to the
Company in writing at its registered address. The annual general
meeting of the Company provides a forum for shareholders to meet
and discuss issues with the Directors and the Investment
Adviser.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Directors'
report and financial statements in accordance with applicable laws
and regulations. Company law (the Companies (Guernsey) Law, 2008)
requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to
prepare the financial statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and IFRS as issued by the International Accounting Standards
Board ("IASB"). Under Company law the Directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period.
In preparing these financial statements, International
Accounting Standard 1 requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
-- make an assessment of the Company's ability to continue as a going concern; and
-- make judgements and estimates that are reasonable and prudent.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and which enable them to ensure
that the financial statements comply with the Companies (Guernsey)
Law, 2008. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with these
requirements in preparing the financial statements.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Guernsey and the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company;
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings taken as a whole, together with a
description of the principal risks and uncertainties that we face;
and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
By order of the Board
Richard Morse
Chairman
16 June 2016
Report of the Directors
The Directors are pleased to submit their report and the audited
financial statements of the Company for the year ended 31 March
2016.
Principal activities
John Laing Environmental Assets Group Limited is a company
incorporated and registered in Guernsey under the Companies
(Guernsey) Law, 2008. The Company was incorporated on 12 December
2013 with the Company register number 57682.
At 31 March 2015 the total number of ordinary shares of the
Company in issue was 160,000,000. The number of ordinary shares in
issue was increased in July 2015 by 59,405,940 shares pursuant to a
Placing and Offer for Subscription and by 4,950,495 shares pursuant
to a first close under the Company's Placing Programme. At 31 March
2016 the total number of ordinary shares of the Company in issue
was 224,356,435.
The Company is a registered fund under the Registered Collective
Investment Scheme Rules 2015 and is regulated by the Guernsey
Financial Services Commission and, during the year, its principal
activity was as an investor in environmental infrastructure
projects that utilise natural or waste resources or support more
environmentally friendly approaches to economic activity.
Business review
The Company is required to present a fair review of its business
during the year ended 31 March 2016, its position at the year end
and a description of the principal risks and uncertainties it
faces.
This information is contained within the strategic report.
Disclosure of information under Listing Rule 9.8.4
The Company is required to disclose information on any contract
of significance subsisting during the period under review:
-- to which the Company, or one of its subsidiary undertakings,
is a party and in which a Director of the Company is or was
materially interested; and
-- between the Company, or one of its subsidiary undertakings, and a controlling shareholder.
Details can be found in note 15 of the financial statements.
The Directors note that no shareholder has waived or agreed to
waive any dividends.
Results and dividends
The results for the year are set out in the financial
statements. On 12 May 2016, the Directors declared a dividend in
respect of the period 1 January 2016 to 31 March 2016 of 1.5135
pence per share to shareholders on the register as at the close of
business on 20 May 2016.
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the strategic report. The financial position of the
Company, its cash flows and its liquidity position are described in
the strategic report. In particular, the current economic
conditions have created a number of risks and uncertainties for the
Company and these are set out in the risks and risk management
section in the strategic report. The financial risk management
objectives and policies of the Company and the exposure of the
Company to credit risk, market risk and liquidity risk are
discussed in note 16 of the financial statements.
The Company continues to meet its requirements and day--to--day
liquidity needs through both its own cash resources and those of
its investment entities, to which it has full recourse.
In October 2014, JLEN secured a three--year GBP50 million
multi--currency revolving credit facility with NIBC and HSBC. The
facility was extended on the same terms to GBP65 million in March
2016. The facility is used primarily to fund acquisitions, and is
repaid through raising equity in the market. The facility is
intended to be additional resource and not structural
financing.
At 31 March 2016, the Company had net current assets of GBP2.5
million (31 March 2015: GBP2.9 million), including a cash balance
of GBP3.3 million (31 March 2015: GBP3.6 million). At UK HoldCo
level, the GBP65 million revolving credit facility was drawn to a
level of GBP54.8 million (31 March 2015: GBP43.7 million), with the
balance available for future acquisitions and working capital. JLEN
has sufficient cash balances to meet other current obligations as
they fall due while all key financial covenants are forecast to
continue to be complied with.
The Directors have reviewed Company forecasts and projections
which cover a period of not less than 12 months from the date of
the Annual Report, taking into account reasonably likely changes in
investment and trading performance, which show that the Company has
sufficient financial resources.
On the basis of this review, and after making due enquiries, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.
Long term viability statement
The Directors have assessed the viability of the Group over the
three--year period to March 2019, taking account of the Group's
current position and the potential impact of the principal risks
documented in the strategic review. Based on this robust
assessment, the Directors have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the period to March 2019.
In making this statement, the Directors have considered and
challenged the reports of the Investment Adviser in relation to the
resilience of the Group, taking account of its current position,
the principal risks facing it in severe but reasonable scenarios,
the effectiveness of any mitigating actions and the Group's risk
appetite. Sensitivity analysis has been undertaken to consider the
potential impacts of such risks on the business model, future
performance, solvency and liquidity over the period, both on an
individual and combined basis. In particular, this has considered
the achievement of budgeted energy yields, the level of future
electricity prices, continued government support for renewable
energy subsidy payments and the impact of a significant proportion
of the PFI portfolio not yielding. The sensitivity analysis was
premised on a number of assumptions, including that the Group's
current revolving credit facility remains in place and that there
will be sufficient liquidity within the market to raise new capital
as and when required,
The Directors have determined that a three--year look forward to
March 2019 is an appropriate period over which to provide its
viability statement. This is consistent with the outlook period
used in economic and other medium term forecasts regularly prepared
for the Board by the Investment Adviser and the discussion of any
new strategies undertaken by the Board in its normal course of
business. These reviews consider both the market opportunity and
the associated risks, principally the ability to raise third party
funds and invest capital.
Internal controls review
Taking into account the information on principal risks and
uncertainties provided in the risks and risk management section of
the strategic report and the ongoing work of the Audit and Risk
Committees in monitoring the risk management and internal control
systems on behalf of the Board, the Directors:
-- are satisfied that they have carried out a robust assessment
of the principal risks facing the Company, including those that
would threaten its business model, future performance, solvency or
liquidity; and
-- have reviewed the effectiveness of the risk management and
internal control systems and no significant failings or weaknesses
were identified.
Share capital
The issued ordinary share capital of the Company was increased
in July 2015 through the issue of shares pursuant to a Placing and
Offer for Subscription and a first close under the Company's
Placing Programme.
The Company has one class of ordinary shares which carries no
rights to fixed income. On a show of hands, each member present in
person or by proxy has the right to one vote at general meetings.
On a poll, each member is entitled to one vote for every share
held.
The issued nominal value of the ordinary shares represents 100%
of the total issued nominal value of all share capital. There are
no specific restrictions on the size of a holding nor on the
transfer of shares, which are both governed by the general
provisions of the Articles of Incorporation and prevailing
legislation. The Directors are not aware of any agreements between
holders of the Company's shares that may result in restrictions on
the transfer of securities or on voting rights. No person has any
special rights of control over the Company's share capital and all
issued shares are fully paid.
The Company's Memorandum and Articles of Incorporation contain
details relating to the rules that the Company has about the
appointment and removal of Directors or amendment to the Company's
Articles of Incorporation which are incorporated into this report
by reference.
Authority to purchase own shares
A resolution to provide the Company with authority to purchase
its own shares will be tabled at the annual general meeting on 17
August 2016. This shareholder authority was renewed at the 2015
annual general meeting.
Major interests in shares and voting rights
As at 31 March 2016, the Company had been notified, in
accordance with chapter 5 of the Disclosure and Transparency Rules,
of the following interests in 5% or more of the voting rights as a
shareholder in the Company.
Percentage
of voting Number of
rights
and issued ordinary
Shareholder share capital shares
--------------------------------- ------------- ----------
John Laing Pension Trust Limited 21.3% 47,840,000
John Laing Investments Limited 6.98% 15,656,731
Baillie Gifford & Co Limited 7.09% 15,900,000
--------------------------------- ------------- ----------
Board of Directors
The Board members that served during the year and up until the
date of this report, all of whom are non--executive Directors and
independent of the Investment Adviser, are listed below. Their
biographical details are shown in the board of Directors
section.
Name Function
-------------- --------
Richard Morse Chairman
Christopher Director
Legge
Denise Mileham Director
Peter Neville Director
Richard Ramsay Director
-------------- --------
Re--election of Directors
At the first annual general meeting of the Company on 14 August
2014 all of the Directors offered themselves for re--election and
were duly re--elected. In subsequent years one third of the Board
will stand for re--election and at the annual general meeting to be
held on 17 August 2016, Richard Ramsay and Peter Neville will put
themselves forward for re--election. Each of the Directors has a
letter of appointment rather than a service contract.
Directors' interests
Directors who held office during the year and had interests in
the shares of the Company as at 31 March 2016 were:
Ordinary Ordinary
shares shares
of no par of no par
value value
each held each held
at at
Name 31 March 31 March
2016 2015
------------------ ---------- ----------
Richard Morse 83,042 50,000
Christopher Legge 29,896 25,000
Denise Mileham 28,160 20,000
Peter Neville 29,896 25,000
Richard Ramsay 53,813 45,000
------------------ ---------- ----------
There have been no changes in the Directors' interests from 31
March 2016 to the date of this report.
Annual general meeting
The Company's annual general meeting will be held at 10am on 17
August 2016 at Sarnia House, Le Truchot, St Peter Port, Guernsey,
Channel Islands. Details of the business to be conducted are
contained in the notice of annual general meeting.
Appointment of the Investment Adviser
John Laing Capital Management acts as the Investment Adviser to
the Company. A summary of the contract between the Company, its
subsidiaries and joint ventures and JLCM in respect of services
provided is set out in note 15 to the financial statements. It is
the Directors' opinion, based upon the performance in the year
ended 31 March 2016, that the continuing appointment of JLCM on the
agreed terms is in the best interests of the shareholders as a
whole.
Events after the balance sheet date
In May 2016, JLEN entered into an agreement to acquire a 100%
interest in the 4MW Saint--Gouéno wind farm in Brittany, France
from Energiequelle GmbH for a total consideration, including
working capital, of EUR2.5 million. The acquisition, which is
expected to complete in the coming weeks (subject to the customary
consents), represents JLEN's first investment outside of the UK and
was financed using JLEN's revolving credit facility.
In April 2016, JLEN announced a proposal to issue further shares
under its Placing Programme. The issue, in May 2016, resulted in
gross proceeds of GBP35.2 million through the issue of 36.0 million
ordinary shares at 97.75 pence per share. The proceeds of the issue
were used to repay part of the amounts drawn under the revolving
credit facility.
A dividend for the quarter ended 31 March 2016 of 1.5135 pence
per share, amounting to GBP3.4 million, was approved by the Board
on 11 May 2016 for payment on 24 June 2016.
Auditor
The Audit Committee reviews the appointment of the external
auditor, its effectiveness and its relationship with the Company
and its subsidiaries and joint ventures, which includes monitoring
use of the auditor for non--audit services and the balance of audit
and non--audit fees paid. Following a review of the independence
and effectiveness of the auditor, a resolution will be proposed at
the 2016 annual general meeting to reappoint Deloitte LLP.
Each Director believes that there is no relevant information of
which our auditor is unaware. Each has taken all steps necessary,
as a Director, to be aware of any relevant audit information and to
establish that Deloitte LLP is made aware of any pertinent
information. This confirmation is given and should be interpreted
in accordance with the provisions of Section 249 of the Companies
(Guernsey) Law, 2008.
By order of the Board
Richard Morse
Chairman
16 June 2016
Directors' remuneration report
Introduction
The Board has not deemed it necessary to appoint a remuneration
committee as, being comprised of five Directors, it considers that
such matters may be considered by the whole Board.
The Board determines and agrees the policy for the remuneration
of the Directors of the Company, including the approval of any ad
hoc payments in respect of exceptional work required (e.g. for the
work involved with the issue of prospectuses and equity fund
raises).
As all Directors of the Company are non--executive, they receive
an annual fee appropriate for their responsibilities and time
commitment but no other incentive programmes or performance related
emoluments.
At IPO the remuneration of the Board was fixed after
consultation with independent external advisers. During the year
the Board reviewed the remuneration levels appropriate for the
Company and received industry comparison information from the
Investment Adviser in respect of Directors' remuneration.
The Board has agreed that an independent professional consultant
is appointed during 2016 to review Directors' Remuneration and
consider the appropriate levels to apply from 2017 onwards.
Remuneration policy
Each Director receives a xed fee per annum based on their role
and responsibility within the Company and the time commitment
required. It is not considered appropriate that Directors'
remuneration should be performance related and none of the
Directors are eligible for pension bene ts, share options, long
term incentive schemes or other bene ts in respect of their
services as non--executive Directors of the Company. The total
remuneration of non--executive Directors has not exceeded the
GBP300,000 per annum limit set out in the Articles of Incorporation
of the Company.
The Company's Articles of Incorporation empower the Board to
award additional remuneration where any Director has been engaged
in exceptional work on a time spent basis to compensate for the
additional time spent over their expected time commitment.
All of the Directors have been provided with letters of
appointment which stipulate that their initial term shall be for
three years, subject to re--election. The Articles of Incorporation
provide that Directors retire and offer themselves for re--election
at the rst annual general meeting after their appointment and at
least every three years thereafter. A Director's appointment may at
any time be terminated by and at the discretion of either party
upon three months' written notice. A Director's appointment will
automatically end without any right to compensation whatsoever if
they are not re--elected by the shareholders. A Director's
appointment may also be terminated with immediate effect and
without compensation in certain other circumstances.
The terms and conditions of appointment of non--executive
Directors are available for inspection at the Company's registered
of ce.
Details of individual remuneration
During the year the Board, with assistance from the Investment
Adviser and the Administrator, reviewed the Board performance and
remuneration levels appropriate for the Company and considered
these alongside the levels set for other similar investment
companies and recommended that a one--off increase from 1 April
2016 was appropriate for the Chairman of the Board to align his
remuneration closer to that of the comparator group and that a cost
of living increase was appropriate for the other Directors.
For comparative purposes the table below sets out the Directors'
remuneration approved and actually paid for the year to 31 March
2016, as well as that proposed for the year ending 31 March
2017.
Additional
fees
Base proposed Base for fund Total fees
paid raising for
Director Role for 2016/2017 2015/2016 in 2015/2016 2015/2016
-------------- --------------------- ------------- --------- ------------ ----------
Richard
Morse Chairman 61,000 50,000 5,000 55,000
Richard Senior Independent
Ramsay Director 46,000 45,000 5,000 50,000
Christopher Audit Committee
Legge Chairman 36,000 35,000 5,000 40,000
Denise Nomination Committee
Mileham Chairman 36,000 35,000 5,000 40,000
Risk Committee
Peter Neville Chairman 36,000 35,000 5,000 40,000
-------------- --------------------- ------------- --------- ------------ ----------
Total 215,000 200,000 25,000 225,000
------------------------------------- ------------- --------- ------------ ----------
Where the Company requires Directors to work on specific
corporate actions such as further equity raisings, an additional
fee will be appropriately determined. Additional fees payable to
the Directors for the year ended 31 March 2016 relate to the
fundraising programme launched in the year. In June 2015, the
Company launched a Placing and Offer for Subscription and
established a Placing Programme that would permit the Company to
issue up to 150 million new shares over the period of 12 months
from the date of publication of the Company's prospectus dated 4
June 2015.
Directors are entitled to claim reasonable expenses which they
incur attending meetings or otherwise in performance of their
duties relating to the Company. The total amount of Directors'
expenses paid for the year ended 31 March 2016 was GBP3,741 (31
March 2015: GBP3,969).
Approval of report
The Board will seek approval at the annual general meeting in
August 2016 for both the Remuneration Policy and the annual
Directors' fees for routine business for the year ended 31 March
2016 and fees for additional specific exceptional work, as set out
above.
Audit Committee report
Summary of the roles and responsibilities of the Audit
Committee
The Audit Committee is appointed by the Board from the
non--executive Directors of the Company. The Audit Committee,
chaired by Christopher Legge, operates within clearly defined terms
of reference and includes all matters indicated by Disclosure and
Transparency Rule 7.1 and the UK Corporate Governance Code. The
terms of reference are considered annually by the Audit Committee
and are then referred to the Board for approval. A copy of the
terms of reference is available upon request from the Company
Secretary.
The main roles and responsibilities of the Audit Committee
are:
-- monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the Company's
financial performance and reporting to the Board on significant
financial reporting issues and judgements contained therein;
-- reviewing the content of the Half--year and Annual Reports
and financial statements and advising the Board on whether, taken
as a whole, it is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy;
-- reviewing, in conjunction with the Risk Committee, the
adequacy and effectiveness of the Company's internal financial
controls and internal control and risk management systems;
-- reviewing the adequacy and security of the Company's
arrangements for regulatory compliance, whistleblowing and
fraud;
-- making recommendations to the Board, to be put to
shareholders for approval at the annual general meeting, in
relation to the appointment, re--appointment and removal of the
Company's external auditor;
-- assessing annually the external auditor's independence and
objectivity taking into account relevant professional and
regulatory requirements and the relationship with the auditor as a
whole, including the provision of any non--audit services and the
effectiveness of the audit process; and
-- reviewing any public statements concerning the long--term viability of the Company.
The Audit Committee reports formally to the Board on its
proceedings on all matters within its duties and responsibilities
and how it has discharged its responsibilities.
Composition of the committee
The members of the Audit Committee are:
-- Christopher Legge (Chairman);
-- Peter Neville; and
-- Richard Ramsay.
Meetings
The Audit Committee meets at least three times a year and at
such other times as the Audit Committee Chairman shall require.
Other Directors and third parties may be invited by the Audit
Committee to attend meetings as and when appropriate.
Annual general meeting
The Audit Committee Chairman attends the annual general meeting
to answer shareholder questions on the Committee's activities.
Significant issues
The Audit Committee considered the following significant issues
in relation to the financial statements:
Valuation of investments
The Company is required to calculate the fair value of its
investments. Whilst there is a relatively active market for
investments of this nature there is not a suitable listed, or other
public market in these investments against which their value can
benchmarked. As a result, a valuation is performed based on a
discounted cash flow methodology in line with IAS 39 Financial
Instruments: Recognition and Measurement and IFRS 13 Fair Value
Measurement.
The calculation of the fair value of the investments carries
elements of risks, mainly in relation to the assumptions and
factors such as:
-- the determination of the appropriate macroeconomic
assumptions underlying the forecast investment cash flows;
-- the determination of the appropriate assumptions regarding
future electricity prices, energy generation and volumes underlying
the forecast investment cash flows;
-- the impact of project specific matters on the forecast cash flows for each investment;
-- the determination of the appropriate discount rate for each
investment that is reflective of current market conditions;
-- the future provisions in the UK regarding the tax
deductibility of interest expense once the BEPS recommendations are
implemented;
-- the underlying project financial models may not reflect the
underlying performance of the investment;
-- the cash flows from the underlying financial models may not
take into account current known issues; and
-- the updates performed on the underlying financial models result in errors in forecasting.
The Audit Committee is satisfied that the Administrator and
Investment Adviser's assumptions have been reviewed and challenged
for:
-- the macroeconomic assumptions, including the comparison of
these assumptions to observable market data and actual results;
-- the electricity price, energy generation and volume
assumptions, including the comparison of these assumptions to
observable market data and actual results; and
-- the build--up of the discount rates for consistency and
reasonableness, benchmarking against market data and peers.
The Audit Committee is also satisfied that the portfolio
valuation and associated disclosures has been audited for
mechanical accuracy, ensuring that the investments are brought on
balance sheet at fair value and that the independent valuation
carried out by an independent firm has been reviewed and challenged
by the auditor.
Internal control
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness, and the Board has
therefore established an ongoing process designed to meet the
particular needs of the Company in managing the risks to which it
is exposed.
The process is based on a risk--based approach to internal
control through a matrix which identifies the key functions carried
out by the Investment Adviser, Administrator and other key service
providers, the various activities undertaken within those
functions, the risks associated with each activity and the controls
employed to minimise and mitigate those risks. The Audit Committee
works in close co--operation with the Risk Committee, with the
prime responsibility of the Audit Committee being the review of
internal controls and processes and of the Risk Committee being the
principal risks and uncertainties facing the Company. A separate
report on the activities of the Risk Committee is set out in the
governance section.
Internal audit
The Audit Committee considers at least once a year whether or
not there is a need for an internal audit function. Currently, the
Audit Committee does not consider there to be a need for an
internal audit function specific to the Company, given that there
are no employees in the Company and the systems and procedures
employed by the Administrator and Investment Adviser, including
their own internal controls and procedures in place in relation to
the Company, provide sufficient assurance that a sound system of
internal control, which safeguards the Company's assets, is
maintained. In addition, internal audits of the projects are
performed periodically by the Investment Adviser who reports
findings to the Audit Committee.
External audit
Deloitte LLP has been the Company's auditor since incorporation
on 12 December 2013 and these are the second set of financial
statements on which it has expressed an audit opinion.
As a result of its work during the year, the Audit Committee has
concluded that it has acted in accordance with its terms of
reference.
The Audit Committee has assessed the quality and the
effectiveness of the audit process. To draw its conclusions, the
Audit Committee reviewed:
-- the scope of the audit, the audit fee and the external
auditor's fulfilment of the agreed audit plan;
-- the degree of diligence demonstrated by them in the course of
their interaction with the Board, the Audit Committee and the
Administrator and Investment Adviser;
-- the auditor assessment of the Group's main risks; and
-- the report highlighting the matters that arose during the
course of the audit and the recommendations made by the external
auditor.
The Audit Committee has noted the revisions to the UK Corporate
Governance Code introduced by the Financial Reporting Council in
September 2012 and updated in September 2014, and the AIC Code of
Corporate Governance issued in February 2013 and revised in
February 2015, and in particular the recommendation, in each, to
put the external audit out to tender every five to 10 years. The
Audit Committee has also noted the requirements of The Competition
and Markets Authority with respect to external auditor services and
retendering.
The Audit Committee is satisfied with the effectiveness and
independence of the audit process and as such recommended to the
Board that Deloitte LLP be re--appointed as external auditor for
the year ending 31 March 2016. The Audit Committee also recommended
the audit appointment is retendered every 10 years, with the audit
partner changing every five years.
Non--audit services
The Audit Committee considered the extent of non--audit services
provided by the external auditor. The external auditor's
objectivity and independence is safeguarded through limiting
non--audit services to their role as reporting accountants for
capital raising services.
Activities of the Audit Committee
The Audit Committee met on four occasions during the year ended
31 March 2016. Matters considered at these meetings included but
were not limited to:
-- review of the appointment of the external auditor;
-- review of the effectiveness of the external auditor;
-- approval of the external audit fees;
-- consideration and agreement of the terms of reference of the
Audit Committee for approval by the Board;
-- review of the proposed accounting policies and format of the financial statements;
-- review of the audit plan and timetable for the preparation of
the Annual Report and Financial Statements; and
-- review of the 2015 Annual Report and Financial Statements and the 2015 Half--year Report.
Approval
On behalf of the Audit Committee:
Christopher Legge
Chairman of the Audit Committee
16 June 2016
Risk Committee report
The Board of Directors has established a Risk Committee from the
non--executive Directors of the Company. The Risk Committee,
chaired by Peter Neville, operates within clearly defined terms of
reference and works closely with the Audit Committee in monitoring
the internal controls and risk management of the Company. The terms
of reference are considered annually by the Risk Committee and are
then referred to the Board for approval. A copy of the terms of
reference is available upon request from the Company Secretary.
The main roles and responsibilities of the Risk Committee
are:
-- when requested to do so, advise the Board on the overall risk
appetite, tolerance and strategy of the Fund, taking account of the
current and prospective macroeconomic, financial and regulatory
environment, including relevant stakeholder issues;
-- oversee and advise the Board on the current risk exposures of
the Fund with particular focus on the Fund's principal risks, being
those which could influence shareholders' economic decisions, and
the controls in place to mitigate those risks;
-- keep under review the Fund's overall risk identification and
assessment processes and, in conjunction with the Audit Committee,
review the adequacy and effectiveness of the risk management
systems;
-- in conjunction with the Audit Committee, ensure that a
framework of strong corporate governance and best practice is in
place, which enables the Company to comply with the main
requirements of the Guernsey Code, UK Corporate Governance Code or
the AIC Code where considered appropriate;
-- when requested to do so, advise the Board on proposed
strategic transactions including acquisitions or disposals,
ensuring that a due diligence appraisal of the proposition is
undertaken, focusing in particular on risk aspects and implications
for the risk appetite and tolerance of the Fund, and taking
independent external advice where appropriate and available;
and
-- oversee the remit of the risk management function, its resources, access to information and independence.
The members of the Risk Committee are:
-- Peter Neville (Chairman);
-- Christopher Legge; and
-- Denise Mileham.
The Risk Committee reports formally to the Board on its
proceedings on all matters within its duties and responsibilities
and how it has discharged its responsibilities. The Committee meets
at least four times a year and at such other times as the Risk
Committee Chairman shall require. Other Directors and third parties
may be invited by the Risk Committee to attend meetings as and when
appropriate.
In order to assist it in fulfilling its role on behalf of the
Board, the Committee has established in conjunction with the
Investment Adviser an ongoing process designed to meet the
particular needs of the Company in managing the risks to which it
is exposed. This is a risk--based approach through the maintenance
of a register which identifies the key risk areas faced by the
Company and the controls employed to minimise and mitigate those
risks. Scoring based on a traffic light system for likelihood and
impact is used to assess the significance to the Fund of each
individual risk. The register is updated quarterly and the
Committee considers all material changes to the risk ratings and
the action which has been, or is being, taken. By their nature,
these procedures will provide a reasonable, but not absolute,
assurance against material misstatement or loss.
Nomination Committee report
The Board of Directors has established a Nomination Committee
from the non--executive Directors of the Company. The Nomination
Committee, chaired by Denise Mileham, operates within clearly
defined terms of reference which are considered and are then
referred to the Board for approval. A copy of the terms of
reference is available upon request from the Company Secretary.
The main terms of reference of the Committee are:
-- regularly review the structure, size and composition of the
Board and make recommendations to the Board with regard to any
changes (including skills, knowledge and experience in accordance
with Principle 6 of the AIC Code);
-- give full consideration to succession planning for Directors
taking into account the challenges and opportunities facing the
Company; and
-- be responsible for identifying and nominating for the
approval of the Board, candidates to fill Board vacancies as and
when they arise.
The members of the Nomination Committee are:
-- Denise Mileham (Chairman);
-- Richard Morse; and
-- Peter Neville.
The Nomination Committee reports formally to the Board on its
proceedings on all matters within its duties and responsibilities
and how it has discharged its responsibilities. The Committee meets
at least twice a year and at such other times as the Nomination
Committee Chairman shall require. Other Directors and third parties
may be invited by the Nomination Committee to attend meetings as
and when appropriate.
All members of the Board were recruited in the summer of 2013
and appointed to the Board on incorporation of the Company on 12
December 2013. The Chairman Richard Morse was appointed by John
Laing and in conjunction with the Investment Adviser undertook a
comprehensive recruitment process for the remaining members of the
Board, with the aim of establishing a Board with the skills,
knowledge and experience necessary for the proposed listing of the
Company and its subsequent management and operation.
The Nomination Committee met twice during the year, in June and
August 2015. Matters considered at these meetings included but were
not limited to:
-- the results of the Committee self--evaluation carried out in July 2015;
-- the results of the review of the composition of the Board and
the appropriateness of the current mix of skills, knowledge and
experience for its current activities;
-- Director succession planning;
-- governance of subsidiaries; and
-- consideration and agreement of the terms of reference of the
Nomination Committee for approval by the Board.
Based on its review of the composition of the Board, the
Committee concluded that the current mix of skills, knowledge and
experience is appropriate for its current activities. The Committee
noted that the Board was satisfied with the evaluations process
conducted for 2015 and a similar process would be repeated in 2016.
It was expected that an external evaluation would be arranged for
2017.
Independent auditor's report
to the members of John Laing Environmental Assets Group
Limited
Opinion on financial statements of John Laing Environmental
Assets Group Limited
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2016 and of its profit for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union; and
-- have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008.
The financial statements comprise the statement of financial
position, income statement, the statement of changes in equity, the
cash flow statement and the related notes 1 to 19. The financial
reporting framework that has been applied in their preparation is
applicable law and IFRS as adopted by the European Union.
Separate opinion in relation to IFRS as issued by the IASB
As explained in note 2 to the financial statements, in addition
to applying IFRS as adopted by the European Union, the Company has
also applied IFRS as issued by the International Accounting
Standards Board (IASB).
In our opinion the financial statements comply with IFRS as
issued by the IASB.
Going concern and the Directors' assessment of the principal
risks that would threaten the solvency or liquidity of the
Company
As required by the Listing Rules we have reviewed the Directors'
statement regarding the appropriateness of the going concern basis
of accounting contained within note 2 to the financial statements
and the Directors' statement on the longer--term viability of the
Company contained within the Report of the Directors.
We have nothing material to add or draw attention to in relation
to:
-- the Directors' confirmation in the report of the Directors
that they have carried out a robust assessment of the principal
risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity;
-- the disclosures in the risks and risk management section that
describe those risks and explain how they are being managed or
mitigated;
-- the Directors' statement in note 2 to the financial
statements about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Company's
ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;
-- the Directors' explanation in the report of the Directors as
to how they have assessed the prospects of the Company, over what
period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We agreed with the Directors' adoption of the going concern
basis of accounting and we did not identify any such material
uncertainties. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the
Company's ability to continue as a going concern.
Independence
We are required to comply with the Financial Reporting Council's
Ethical Standards for Auditors and we confirm that we are
independent of the Company and we have fulfilled our other ethical
responsibilities in accordance with those standards. We also
confirm we have not provided any of the prohibited non--audit
services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are
those that had the greatest effect on our audit strategy, the
allocation of resources in the audit and directing the efforts of
the engagement team.
Risk How the scope of our
audit responded to the
risk
--------------------------------------------------------- -----------------------------------------------------------
Valuation of investments We obtained assurance
at fair value over the appropriateness
As described in the accounting of the Directors' judgement
policies in note 2 to applied in determining
the financial statements, the fair value of the
the fair value of the portfolio by:
Company's investments * challenging the discount rates and the forecast cash
is determined using a flows, including the macroeconomic assumptions
discounted cash flow underpinning them;
methodology, as there
is no liquid market for
these projects. The complexity * assessing the performance of the portfolio in the
of this methodology, period against prior period forecasts;
as well as a number of
significant judgements,
mean there is a risk * using our valuation specialists to support our
that the fair value of challenge of the valuation of investments, the
these environmental infrastructure appropriateness of the Directors' judgements, and
assets is not appropriate. challenging their independent specialists; and
As shown in the statement
of financial position,
the total fair value * using our tax specialists to assess the impact of tax
of the Company's investments developments.
as at 31 March 2016 was
GBP214.4 million.
The key judgements included With respect to the wind
in the valuation are: refinancing, we challenged:
* discount rates which must be reflective of current * the treatment of the wind portfolio as a single asset
market conditions; and for valuation purposes;
* macroeconomic assumptions - including forward * the forecast cash flows, including the macroeconomic
electricity prices, energy yields, corporation tax, assumptions underpinning them, in particular the
and inflation. revised energy yields, by reference to competent
person reports, observable market data and forecasts;
In addition, during the
year, the Company refinanced * the refinancing assumptions, including the potential
its wind portfolio under refinancing risk; and
a new subgroup with a
single holding company.
The Company now values * the appropriateness of the use of a single discount
all wind assets under rate applied to the wind portfolio, and comparing to
a single portfolio valuation, relevant peers and recent market transactions.
and as a result, the
Investment Adviser has
consolidated the wind We also reviewed the
assets, reassessing the appropriateness of the
future cash flows based disclosures in the financial
on updated energy yield statements in relation
assessments and applied to the refinancing and
a single discount rate the resultant impact
to the wind portfolio on the Company's results.
as a whole. The total
fair value of the Company's
wind portfolio investment
as at 31 March 2016 was
GBP97 million.
--------------------------------------------------------- -----------------------------------------------------------
Last year our report included one other risk which is not
included in our report this year: Application of Investment
Entities Standards. This has not been included this year as there
have been no further clarifications or amendments to the Investment
Entities Standards, following initial adoption in the prior
year.
Additionally, the risk concerning the Valuation of Investments
at Fair Value includes focus on the wind portfolio valuation, as a
result of the refinancing during the year.
The description of risks above should be read in conjunction
with the significant issues considered by the Audit Committee
discussed in the Audit Committee report.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined materiality for the Company to be GBP4.3 million
(2015: GBP3.2 million), which is 2% of investments at fair value
through profit or loss. We believe this is the most appropriate
benchmark as the fair value of investments is considered to be one
of the principal considerations for members of the Company in
assessing financial performance.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of GBP214,000 (2015:
GBP60,000), as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds. We also
report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial
statements.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the entity
and its environment, including internal control, and assessing the
risks of material misstatement. Audit work to respond to the risks
of material misstatement was performed directly by the audit
engagement team.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Corporate governance statement
Under the Listing Rules we are also required to review part of
the corporate governance statement relating to the Company's
compliance with certain provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we
are required to report to you if, in our opinion, information in
the Annual Report is:
-- materially inconsistent with the information in the audited financial statements; or
-- apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Company acquired in the
course of performing our audit; or
-- otherwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the Directors' statement that they consider
the Annual Report is fair, balanced and understandable and whether
the Annual Report appropriately discloses those matters that we
communicated to the Audit Committee which we consider should have
been disclosed. We confirm that we have not identified any such
inconsistencies or misleading statements.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). We
also comply with International Standard on Quality Control 1 (UK
and Ireland). Our audit methodology and tools aim to ensure that
our quality control procedures are effective, understood and
applied. Our quality controls and systems include our dedicated
professional standards review team and independent partner
reviews.
This report is made solely to the Company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non--financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
John Clacy, FCA
For and on behalf of Deloitte LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
16 June 2016
Income statement
for the year ended 31 March 2016
Period
from
incorporation
on
12 Dec
2013
2016 to 31
Mar 2015
Notes GBP'000s GBP'000s
--------------------------- ----- -------- -------------
Operating income 9 9,317 11,973
--------------------------- ----- -------- -------------
Operating expenses 5 (3,118) (2,617)
--------------------------- ----- -------- -------------
Operating profit 6,199 9,356
--------------------------- ----- -------- -------------
Bank interest income - 1
--------------------------- ----- -------- -------------
Profit before tax 6,199 9,357
Tax 6 - -
Profit for the year/period 6,199 9,357
--------------------------- ----- -------- -------------
Earnings per share
Basic and diluted (pence) 8 3.01 5.85
--------------------------- ----- -------- -------------
The accompanying notes form an integral part of the financial
statements.
All results are derived from continuing operations.
There is no other comprehensive income in either the current
year or the preceding period, other than the profit for the
year/period and therefore no separate statement of comprehensive
income has been presented.
Statement of financial position
as at 31 March 2016
2016 2015
Notes GBP'000s GBP'000s
---------------------------------- ----- -------- --------
Non--current assets
Investments at fair value through
profit or loss 9 214,400 159,043
---------------------------------- ----- -------- --------
Total non--current assets 214,400 159,043
---------------------------------- ----- -------- --------
Current assets
Trade and other receivables 10 31 14
Cash and cash equivalents 3,312 3,622
---------------------------------- ----- -------- --------
Total current assets 3,343 3,636
---------------------------------- ----- -------- --------
Total assets 217,743 162,679
---------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 11 (852) (770)
---------------------------------- ----- -------- --------
Total current liabilities (852) (770)
---------------------------------- ----- -------- --------
Total liabilities (852) (770)
---------------------------------- ----- -------- --------
Net assets 216,891 161,909
---------------------------------- ----- -------- --------
Equity
Share capital account 13 221,122 157,352
Retained earnings (4,231) 4,557
---------------------------------- ----- -------- --------
Equity attributable to owners
of the Company 216,891 161,909
---------------------------------- ----- -------- --------
Net assets per share (pence
per share) 96.7 101.2
---------------------------------- ----- -------- --------
The accompanying notes form an integral part of the financial
statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 16 June 2016. They were signed on its
behalf by:
Richard Morse Christopher Legge
Chairman Director
Statement of changes in equity
for the year ended 31 March 2016
Year ended 31 Mar 2016
----------------------------
Share Retained
capital
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
------------------------------- ----- -------- -------- --------
Balance at 1 April 2015 157,352 4,557 161,909
Profit for the year - 6,199 6,199
------------------------------- ----- -------- -------- --------
Profit and total comprehensive
income for the year - 6,199 6,199
Issue of share capital 13 65,000 - 65,000
Expenses of issue of equity
shares 13 (1,230) - (1,230)
Dividends paid - (14,987) (14,987)
------------------------------- ----- -------- -------- --------
Balance at 31 March 2016 221,122 (4,231) 216,891
------------------------------- ----- -------- -------- --------
Period from incorporation
on
12 Dec 2013 to 31 Mar
2015
-----------------------------
Share Retained
capital
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
------------------------------- ----- --------- -------- --------
Balance at incorporation - - -
Profit for the period - 9,357 9,357
------------------------------- ----- --------- -------- --------
Profit and total comprehensive
income for the period - 9,357 9,357
Issue of share capital 13 160,000 - 160,000
Expenses of issue of
equity shares 13 (2,648) - (2,648)
Dividends paid - (4,800) (4,800)
------------------------------- ----- --------- -------- --------
Balance at 31 March
2015 157,352 4,557 161,909
------------------------------- ----- --------- -------- --------
The accompanying notes form an integral part of the financial
statements.
Cash flow statement
for the year ended 31 March 2016
Period
from
incorporation
on
12 Dec
2013
2016 to 31
Mar 2015
GBP'000s GBP'000s
------------------------------------------- -------- -------------
Profit from operations 6,199 9,356
Adjustments for:
Investment interest (10,210) (8,100)
Dividend received (7,500) (1,700)
Net loss/(gain) on investments at fair
value through profit or loss 8,393 (2,173)
------------------------------------------- -------- -------------
Operating cash flows before movements
in working capital (3,118) (2,617)
Increase in receivables (17) (14)
Increase in payables 82 770
------------------------------------------- -------- -------------
Net cash outflow from operating activities (3,053) (1,861)
------------------------------------------- -------- -------------
Investing activities
Investments in subsidiaries (30,750) (66,870)
Loan to subsidiaries (33,000) (90,000)
Investment interest 10,210 8,100
Dividend received 7,500 1,700
Net finance income - 1
------------------------------------------- -------- -------------
Net cash used in investing activities (46,040) (147,069)
------------------------------------------- -------- -------------
Financing activities
Proceeds on issue of share capital 65,000 160,000
Expenses relating to issue of shares (1,230) (2,648)
Dividends paid (14,987) (4,800)
------------------------------------------- -------- -------------
Net cash from financing activities 48,783 152,552
------------------------------------------- -------- -------------
Net (decrease)/increase in cash and
cash equivalents (310) 3,622
Cash and cash equivalents at beginning
of the year/period 3,622 -
------------------------------------------- -------- -------------
Cash and cash equivalents at end of
year/period 3,312 3,622
------------------------------------------- -------- -------------
The accompanying notes form an integral part of the financial
statements.
Notes to the financial statements
for the year ended 31 March 2016
1. General information
John Laing 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 audited
financial statements of the Company are for the year ended 31 March
2016 and have been prepared on the basis of the accounting policies
set out below. The financial statements comprise only the result 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.
During the year, the Company successfully raised gross proceeds
of GBP65 million through the issue of ordinary shares and continued
to manage its investment in UK HoldCo, adding three solar projects,
a wind project and an additional stake in an existing solar project
to its portfolio of environmental infrastructure assets.
2. Significant accounting policies
(a) Basis of preparation
The financial statements were approved and authorised for issue
by the Board of Directors on 16 June 2016. The set of financial
statements included in this financial report has been prepared in
compliance with the Companies (Guernsey) Law, 2008 and in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and IFRS as issued
by the International Accounting Standard Board ("IASB") using the
historical cost basis, except that the financial instruments
classified at fair value through profit or loss are stated at their
fair value.
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 IAS 39
Financial Instruments: Recognition and Measurement, and IFRS 13:
Fair Value Measurement. The Company accounts for its investment in
its wholly owned direct subsidiary UK HoldCo at fair value. The
Company, together with its wholly owned direct subsidiary UK HoldCo
and the intermediate holding subsidiary HWT Limited, comprise the
Group (the "Group") investing in environmental infrastructure
assets.
The net assets of the intermediate holding companies (comprising
UK HoldCo and HWT Limited), which at 31 March 2016 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.
Consequently, the Company does not consolidate its subsidiaries
or apply IFRS 3 Business Combinations when it obtains control of
another entity as it is considered to be an Investment Entity under
IFRS. Instead, the Company measures its investment in its
subsidiary at fair value through profit or loss.
The financial statements incorporate the financial statements of
the Company only.
UK HoldCo is itself an investment entity. Consequently, the
Company need not have an exit strategy for its investment in UK
HoldCo.
Each investment indirectly held (subordinated debt together with
equity) has a finite life. For the PPP assets, the subordinated
debt will mature towards the end of the concession, and at the end
of the concession the investment will be dissolved. In the case of
renewable energy assets, the life of the project is based on the
expected asset life and or the land lease term, after which the
investment will also be dissolved. The exit strategy is that
investments will normally be held to the end of the concession
unless the Company sees an opportunity in the market to dispose of
investments. John Laing Capital Management Limited, the Company's
Investment Adviser and the Company's Board regularly consider
whether any disposals should be made.
The Directors continue to consider that the Company demonstrates
the characteristics and meets the requirements to be considered as
an investment entity.
The following Standards which have not been applied in these
financial statements were in issue but not yet effective:
-- IFRS 9 Financial Instruments
-- FRS 14 Regulatory Deferral Accounts
-- IFRS 15 Revenue from Contracts with Customers
-- IFRS 16 Leases
-- Amendments to IAS 7: Disclosure Initiative
-- Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses
-- Amendments to IAS 1: Disclosure Initiative
-- Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
-- Amendments to IAS 27: Equity Method in Separate Financial Statements
-- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation
-- Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations
-- Annual Improvements to IFRSs: 2012--2014 Cycle
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Company in future periods.
(b) Going concern
The Directors, in their consideration of going concern, have
reviewed comprehensive cash flow forecasts prepared by the
Company's Investment Adviser, John Laing Capital Management
Limited, 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 GBP6.2 million (including GBP3.3 million in
the Company) as at 31 March 2016 and a revolving credit facility
signed on 9 October 2014 and amended on 1 March 2016 (available for
investment in new or existing projects and working capital) of
GBP65 million, which expires in October 2017.
As at 31 March 2016, the Company's wholly owned subsidiary UK
HoldCo had borrowed GBP54.8 million under the facility to finance
the facility cost and the acquisition of environmental
infrastructure projects.
After the balance sheet date, the Company raised gross proceeds
of GBP35.2 million through the issue of ordinary shares. This has
enabled JLEN to reduce the balance outstanding on its revolving
credit facility.
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 these financial statements.
(c) Revenue recognition - Operating income
Operating income in the income statement represents gains or
losses that arise from the movement in the fair value of the
Company's investment in UK HoldCo, dividend income received from UK
HoldCo and interest income accrued in accordance with the loan note
agreement. Refer to note 9 for details.
(d) 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 fair value
of the Company's investments.
(e) 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.
(f) 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 and IFRS 13 Fair Value
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. Management determines the classification of its financial
assets at initial recognition.
(i) Investments at fair value through profit or loss
Investments at fair value through profit or loss are recognised
upon initial recognition as financial assets at fair value through
profit or loss in accordance with IFRS 10. In these financial
statements, investment at fair value through profit or loss is the
fair value of the Company's subsidiary UK HoldCo which comprises
the fair value of UK HoldCo and HWT Limited and the environmental
infrastructure investments.
The intermediate holding companies' net assets (UK HoldCo and
HWT Limited) are mainly composed of cash, working capital balances
and borrowings under the Company's wholly owned direct subsidiary's
revolving credit facility, and are recognised at fair value which
is equivalent to their net assets.
The Company's investment in UK HoldCo comprises both equity and
loan notes. Both elements are exposed to the same primary risk,
being performance risk. This performance risk is taken into
consideration when determining the discount rate applied to the
forecast cash flows. In determining fair value, the Board
considered observable market transactions and have measured fair
value using assumptions that market participants would use when
pricing the asset including assumptions regarding risk. The loan
notes and equity are considered to have the same risk
characteristics. As such the debt and equity form a single class of
financial instrument for the purposes of disclosure. The Company
measures its investment as a single class of financial asset at
fair value in accordance with IFRS 13 Fair Value Measurement.
(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 reporting 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 statement of financial position.
The loan notes issued by the Company's wholly owned subsidiary
UK HoldCo are held at fair value, which is included in the balance
of the investments at fair value through profit or loss in the
statement of financial position.
(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 of the Company that would otherwise have been avoided
are written off against the balance of the share capital account as
permitted by Companies (Guernsey) Law, 2008.
(ii) Financial liabilities
Financial liabilities are classified as other financial
liabilities, comprising:
-- loans and borrowings which are recognised initially at the
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; and
-- other non--derivative financial instruments , including trade
and other payables, 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 31 March 2016 were in the range 6.5% to 9.6%
(31 March 2015: 7.0% to 11.0%). Refer to note 9 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, loans and
working capital balances.
(g) 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.
During the year, all revenues were generated in the UK.
(h) 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. Critical accounting judgements, estimates and assumptions
In the application of the Company's accounting policies, which
are described in note 2, the Directors are required to make
judgements, estimates and assumptions about the fair value of
assets and liabilities that affect reported amounts. Actual results
may differ from these estimates.
Key sources of estimation uncertainty
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Investments at fair value through profit or loss
Fair value of intermediate holdings companies
The Directors consider that the carrying value of the financial
assets and financial liabilities recorded at amortised cost in the
financial statements are approximately equal to their fair
value.
Fair value of environmental infrastructure investments
Fair values for those investments for which a market quote is
not available are determined using the income approach which
discounts the expected cash flows at the appropriate rate. In
determining the discount rate, regard is had to risk free rates,
specific risks and the evidence of recent transactions. Underlying
assumptions and discount rates are disclosed in note 9.
Critical accounting judgements
Equity and debt investment in UK HoldCo
The Directors have satisfied themselves that the equity and debt
investments in UK HoldCo share the same investment characteristics
and as such constitute a single asset class for IFRS 7 disclosure
purposes. Please refer to the accounting policies in note 2 for
further detail.
Investment entities
The Directors consider that the Company demonstrates the
characteristics and meets the requirements to be considered as an
investment entity. Please refer to the accounting policies in note
2 for further detail.
4. 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.
5. Operating expenses
Year ended Period
ended
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
----------------------------- ---------- --------
Investment advisory fees 2,446 1,735
Directors' fees and expenses 203 254
Administration fee 82 85
Other expenses 387 543
----------------------------- ---------- --------
3,118 2,617
----------------------------- ---------- --------
The Company had no employees during the year. There was no
Directors' remuneration for the year other than Directors' fees as
detailed in note 15.
Included within other expenses is an amount of GBP79,000, which
was accrued or paid to Deloitte LLP in the year for Deloitte LLP's
review of the Company's half year financial information and for the
audit of the Company for the year ended 31 March 2016 (period ended
31 March 2015: GBP104,000).
The Company paid GBP58,500 (period ended 31 March 2015:
GBP409,000) to Deloitte LLP in respect of non--audit services
related to the Company's capital raise on 16 July 2015.
6. 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 within the subsidiaries and
environmental infrastructure 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.
7. Dividends
Year Period
ended ended
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
------------------------------------------- -------- --------
Amounts recognised as distributions
to equity holders during the year/period:
Final dividend for the period ended
31 March 2015 of 3.0 pence per share 4,800 -
Interim dividend for the six months
ended 30 September 2015 of 3.027 pence
per share (30 September 2014: 3.0 pence
per share) 6,791 4,800
Interim dividend for the quarter ended
31 December 2015 of 1.5135 pence per
share 3,396 -
------------------------------------------- -------- --------
A dividend for the quarter ended 31 March 2016 of 1.5135 pence
per share, amounting to GBP3.4 million, was approved by the Board
on 11 May 2016 and is payable on 24 June 2016. The dividend has not
been included as a liability at 31 March 2016.
8. Earnings per share
Earning per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average of the number of ordinary shares in issue during the
year:
Year ended Period
ended
31 Mar 31 Mar
2016 2015
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 6,199 9,357
Number of shares
Weighted average number of ordinary
shares for the purposes of basic and
diluted earnings per share 205,717,686 160,000,000
-------------------------------------- ----------- -----------
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.
Pence Pence
------------------------------------- ----- -----
Basic and diluted earnings per share 3.01 5.85
------------------------------------- ----- -----
9. 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:
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
------------------------------------------- -------- --------
Fair value of environmental infrastructure
investments 264,486 197,717
Fair value of intermediate holding
companies (50,086) (38,674)
------------------------------------------- -------- --------
Fair value 214,400 159,043
------------------------------------------- -------- --------
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 also presents a reconciliation of the fair value of the asset
portfolio to the Company's statement of financial position as at 31
March 2016, by incorporating the fair value of these intermediate
holding companies.
Cash, working Cash, working
capital and capital and debt
debt
in intermediate in intermediate
Portfolio holdings Total Portfolio holdings Total
value value
31 Mar 31 Mar 2016 31 Mar 31 Mar 31 Mar 2015 31
2016 2016 2015 Mar
2015
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------- --------- ---------------- --------- --------- ---------------- --------
Opening balance/at
incorporation 197,717 (38,674) 159,043 - - -
Acquisitions
Portfolio of assets
acquired 75,506 - 75,506 198,905 - 198,905
Post acquisition price
adjustments (1,835) - (1,835) (611) - (611)
---------------------------- --------- ---------------- --------- --------- ---------------- --------
73,671 - 73,671 198,294 - 198,294
Growth in portfolio
Growth from discount
rate movements* 7,239 - 7,239* 6,741 - 6,741*
Growth from discount
rate unwind* 17,390 - 17,390* 12,524 - 12,524*
Changes in economic
assumptions* (274) - (274)* (769) - (769)*
Wind assets refinancing* 3,955 3,955* - - -*
Changes in LECs and
forecast electricity
prices* (16,618) - (16,618)* (5,300) - (5,300)*
---------------------------- --------- ---------------- --------- --------- ---------------- --------
11,692 - 11,692 13,196 - 13,196
Yields from portfolio
to intermediate holding
companies
Dividends received
from portfolio assets (1,119) 1,119 - (688) 688 -
Interest received
from portfolio assets (9,143) 9,143 - (6,619) 6,619 -
Loans and equity repayments
received from portfolio
assets (8,215) 8,215 - (6,466) 6,466 -
Other fees (117) 117 - - - -
---------------------------- --------- ---------------- --------- --------- ---------------- --------
(18,594) 18,594 - (13,773) 13,773 -
Yields from intermediate
holding companies
Interest on loan notes* (10,210) (10,210)* - (8,100) (8,100)* -
Dividend payment from
UK HoldCo to the Company* - (7,500) (7,500)* - (1,700) (1,700)*
---------------------------- --------- ---------------- --------- --------- ---------------- --------
- (17,710) (17,710) - (9,800) (9,800)
Other movements
Investment in working
capital in UK HoldCo - (766) (766) - 2,256 2,256
Increase in debtor
related to the agreed
settlement on updated
energy yield assessments
under Sale and Purchase
Agreements - 1,985 1,985 - - -
Administrative expenses
borne by intermediate
holding companies* - (2,375) (2,375)* - (1,223) (1,223)*
Drawdown of UK HoldCo
revolving credit facility
borrowings - (11,140) (11,140) - (43,680) (43,680)
---------------------------- --------- ---------------- --------- --------- ---------------- --------
Fair value of the
Company's investment
in UK HoldCo 264,486 (50,086) 214,400 197,717 (38,674) 159,043
---------------------------- --------- ---------------- --------- --------- ---------------- --------
* The net loss on investments at fair value through profit or
loss for the year ended 31 March 2016 is GBP8,393,000 (31 March
2015: gain of GBP2,173,000). This, together with interest received
on loan notes of GBP10,210,000 (31 March 2015: GBP8,100,000) and
dividend income of GBP7,500,000 (31 March 2015: GBP1,700,000)
comprises operating income in the income statement.
The table opposite shows 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 31 March 2016. 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 valuations performed since the launch of the
Fund in March 2014.
Discount rates applied to the portfolio of assets range from
6.5% to 9.6% (31 March 2015: 7.0% to 11.0%). The weighted average
discount rate of the portfolio at 31 March 2016 is 8.2% (31 March
2015: 9.1%).
The following economic assumptions have been used in the
discounted cash flow valuations:
31 Mar 2016 31 Mar 2015
--------------- ---------------------- ----------------------
UK - inflation 2.2% for 2016 and 2% for 2015 and
rates 2.75% from 2017 2.75% from 2016
UK - deposit 1% for 2016, gradually 1% for 2015, gradually
interest rates rising to 3.25% from rising to 3.5% from
2019 2019
--------------- ---------------------- ----------------------
The long term UK corporation tax rate assumed in the 31 March
2016 portfolio valuation is 20%, stepping down to 19% in April 2017
and 17% from April 2020 (31 March 2015: 20%).
Fair value of intermediate holding companies
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 environmental infrastructure projects investments
were as follows:
% holding at % holding at
31 March 2016 31 March 2015
-------------------- --------------------
Subordinated Subordinated
Project name Equity loan stock Equity loan stock
---------------------- ------ ------------ ------ ------------
Amber 100% 100% 100% 100%
Bilsthorpe 100% 100% 100% 100%
Branden 100% 100% 64% 64%
Burton Wold Extension 100% 100% - -
Carscreugh 100% 100% 100% 100%
Castle Pill 100% 100% 100% 100%
Dumfries and Galloway 80% 100% 80% 100%
ELWA 80% 100% 80% 100%
Ferndale 100% 100% 100% 100%
Hall Farm 100% 100% 100% 100%
Panther 100% 100% - -
Monksham (1) 100% - -
Pylle Southern 100% 100% - -
Tay 33% 33% 33% 33%
Wear Point 100% 100% 100% 100%
---------------------- ------ ------------ ------ ------------
(1) 100% of "B" shares. The "A" shareholders under the
Enterprise Investment Scheme remain invested in the project.
Including the loans, JLEN held an effective economic interest over
87% of the value of the project's cash flows (as calculated at
acquisition).
On 30 July 2015, the Group acquired the remaining 36% interest
in the Branden solar park project from John Laing and the entirety
of 'B' shares plus other economic interests in the Monksham solar
park project for a total cash consideration of GBP20.4 million,
including working capital.
Under two separate transactions on 30 October 2015 and 13
November 2015, UK HoldCo acquired a solar photovoltaic portfolio
owned under Venture Capital Trusts and Enterprise Investment
Schemes for a cash consideration of GBP28.5 million, including
working capital, fully funded by the Group's revolving credit
facility.
On 2 December 2015, the Group acquired Burton Wold Extension
wind farm located in Northamptonshire from John Laing for a cash
consideration, including working capital, of GBP21.8 million.
On 17 March 2016, the Group acquired Pylle Southern solar park
for a total consideration, including working capital, of GBP6.1
million. GBP1.3 million of the consideration was paid after the
year end under the terms of the sale and purchase agreement.
10. Trade and other receivables
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
-------------------- -------- --------
Prepayments 31 14
-------------------- -------- --------
Balance at 31 March 31 14
-------------------- -------- --------
11. Trade and other payables
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
-------------------- -------- --------
Accruals 852 770
-------------------- -------- --------
Balance at 31 March 852 770
-------------------- -------- --------
12. Loans and borrowings
The Company had no outstanding loans or borrowings at 31 March
2016 (31 March 2015: GBPnil), as shown in the Company's 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 of GBP65 million with HSBC and NIBC which expires
on 9 October 2017. The facility, signed on 9 October 2014 and
amended on 1 March 2016 to increase to GBP65 million, can be used
to make acquisitions of environmental infrastructure projects and
to cover working capital requirements. The loan bears interest of
LIBOR + 2.5% and will be repaid by the proceeds from future capital
raises.
At 31 March 2016, UK HoldCo had drawn GBP54.8 million (31 March
2015: GBP43.7 million) on the facility. This amount is included in
the "Investment at fair value through profit or loss" in the
Company's statement of financial position.
There were no other outstanding loans and borrowings in either
the Company, UK HoldCo or HWT Limited.
13. Share capital account
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
----------------------------------------- -------- --------
Opening balance/balance on incorporation 157,352 -
Shares issued in the year/period 65,000 160,000
Expenses of issue of equity shares (1,230) (2,648)
----------------------------------------- -------- --------
Balance at 31 March 221,122 157,352
----------------------------------------- -------- --------
On 15 July 2015, 64,356,435 new ordinary shares of no par value
were issued and fully paid at a price of 101.0 pence.
At 31 March 2016, the Company's share capital was comprised of
224,356,435 ordinary shares of no par value.
On 27 May 2016, the Company announced that it had raised GBP35.2
million by way of a cash placing of 36.0 million new ordinary
shares to institutional investors pursuant to its existing Placing
Programme.
All new shares issued rank pari passu and include the right to
receive all future dividends and distributions declared, made or
paid.
14. Retained earnings
31 Mar 31 Mar
2016 2015
GBP'000s GBP'000s
----------------------------------------- -------- --------
Opening balance/balance on incorporation 4,557 -
Profit for the year/period 6,199 9,357
Dividends paid (14,987) (4,800)
----------------------------------------- -------- --------
Balance at 31 March (4,231) 4,557
----------------------------------------- -------- --------
15. 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 9. 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 Limited as Investment Adviser together with the details
of investment acquisitions from John Laing, of which JLCM is a
wholly owned subsidiary.
Transactions with the Investment Adviser
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 annum of the Adjusted Portfolio Value* of the Fund**
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 income statement
for the year ended 31 March 2016 was GBP2,446,000 (period from
incorporation on 12 December 2013 to 31 March 2015: GBP1,735,000)
of which GBP659,000 remained payable as at 31 March 2016 (31 March
2015: GBP511,000).
* 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.
** 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
During the year, the Company's wholly owned subsidiary, UK
HoldCo, acquired the remaining 36% stake in the Branden solar park
project and the Burton Wold Extension wind farm from John Laing as
detailed in note 9.
During the year, the Directors of the Company, who are
considered to be key management, received fees of GBP200,000
(period ended 31 March 2015: GBP250,000) for their services. The
Directors of the Company were also paid GBP3,741 of expenses (year
ended 31 March 2015: GBP3,969). As set out in the Directors'
remuneration report in the governance section, it is proposed to
pay the Directors additional fees totalling GBP25,000 for the year
ended 31 March 2016.
During the year, the Directors subscribed for and were issued
new ordinary shares, which are detailed in the table below:
Subscribed and
issued
as part of the
issue of
64,356,435 new Other Total
ordinary subscriptions number
of
shares on 15 during shares
Jul 2015 the year held at
(number of shares) Consideration (number Consideration 31 Mar
of shares) 2016
--------------- ------------------ ------------- -------------- ------------- --------
Richard Morse 9,792 GBP9,890 23,250* GBP24,470 83,042
Richard Ramsay 8,813 GBP8,901 - - 53,813
Christopher
Legge 4,896 GBP4,945 - - 29,896
Denise Mileham 8,160 GBP8,242 - - 28,160
Peter Neville 4,896 GBP4,945 - - 29,896
--------------- ------------------ ------------- -------------- ------------- --------
* On 23 November 2015, Richard Morse subscribed for an
additional 23,250 shares for a consideration of GBP24,470.
All of the above transactions were undertaken on an arm's length
basis.
The Directors were paid dividends in the year of GBP15,157
(period ending 31 March 2015: GBP4,950).
16. Financial instruments
Financial instruments by category
The Company held the following financial instruments at fair
value at 31 March 2016. There have been no transfers of financial
instruments between levels of the fair value hierarchy. There are
no non--recurring fair value measurements.
31 March 2016
------------------------------------------------------------
Financial
assets Financial
at fair
Cash and Loans value liabilities
and through at
bank balances receivables profit amortised Total
or loss cost
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------- ------------- ----------- --------- ----------- --------
Levels 1 1 3 1
Non--current
assets
Investments at
fair value through
profit or loss
(Level 3) - - 214,400 - 214,400
Current assets
Trade and other
receivables - 31 - - 31
Cash and cash
equivalents 3,312 - - - 3,312
-------------------- ------------- ----------- --------- ----------- --------
Total financial
assets 3,312 31 214,400 - 217,743
-------------------- ------------- ----------- --------- ----------- --------
Current liabilities
Trade and other
payables - - - (852) (852)
-------------------- ------------- ----------- --------- ----------- --------
Total financial
liabilities - - - (852) (852)
-------------------- ------------- ----------- --------- ----------- --------
Net financial
instruments 3,312 31 214,400 (852) 216,891
-------------------- ------------- ----------- --------- ----------- --------
31 March 2015
------------------------------------------------------------
Financial
assets Financial
at fair
Cash and Loans value liabilities
and through at
bank balances receivables profit amortised Total
or loss cost
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------- ------------- ----------- --------- ----------- --------
Levels 1 1 3 1
Non--current
assets
Investments at
fair value through
profit or loss
(Level 3) - - 159,043 - 159,043
Current assets
Trade and other
receivables - 14 - - 14
Cash and cash
equivalents 3,622 - - - 3,622
-------------------- ------------- ----------- --------- ----------- --------
Total financial
assets 3,622 14 159,043 - 162,679
-------------------- ------------- ----------- --------- ----------- --------
Current liabilities
Trade and other
payables - - - (770) (770)
-------------------- ------------- ----------- --------- ----------- --------
Total financial
liabilities - - - (770) (770)
-------------------- ------------- ----------- --------- ----------- --------
Net financial
instruments 3,622 14 159,043 (770) 161,909
-------------------- ------------- ----------- --------- ----------- --------
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 year.
In the tables 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 and closing balances
of the investments at fair value through profit or loss is given in
note 9.
The fair value of the investments at fair value through profit
or loss includes the use of Level 3 inputs. Please refer to note 9
for details of 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:
31 March 2016
----------------------------- ---------- --------- ---------
Discount rate Minus 0.5% Base 8.2% Plus 0.5%
Change in portfolio valuation Increases GBP264.5m Decreases
GBP10.9m GBP10.3m
Change in NAV per share Increases 96.7p Decreases
4.9p 4.6p
----------------------------- ---------- --------- ---------
31 March 2015
----------------------------- ---------- --------- ---------
Discount rate Minus 0.5% Base 9.1% Plus 0.5%
Change in portfolio valuation Increases GBP197.7m Decreases
GBP8.1m GBP7.6m
Change in NAV per share Increases 101.2p Decreases
5.1p 4.8p
----------------------------- ---------- --------- ---------
The sensitivity of the portfolio to movements in long term
inflation rates is as follows:
31 March 2016
----------------------------- ---------- ---------- ---------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP264.5m Increases
GBP10.9m GBP11.5m
Change in NAV per share Decreases 96.7p Increases
4.9p 5.1p
----------------------------- ---------- ---------- ---------
31 March 2015
----------------------------- ---------- ---------- ---------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP197.7m Increases
GBP8.4m GBP8.6m
Change in NAV per share Decreases 101.2p Increases
5.3p 5.4p
----------------------------- ---------- ---------- ---------
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:
31 March 2016
----------------------------- --------- --------- ---------
Energy yield P90 (10 Base P50 P10 (10
year) year)
Change in portfolio valuation Decreases GBP264.5m Increases
GBP21.6m GBP21.7m
Change in NAV per share Decreases 96.7p Increases
9.6p 9.7p
----------------------------- --------- --------- ---------
31 March 2015
Energy yield P90 (10 Base P50 P10 (10
year) year)
Change in portfolio valuation Decreases GBP197.7m Increases
GBP19.4m GBP18.8m
Change in NAV per share Decreases 101.2p Increases
12.1p 11.8p
----------------------------- ---------- --------- ---------
The sensitivity of the portfolio to movements in electricity
prices is as follows:
31 March 2016
----------------------------- --------- --------- ---------
Electricity prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP264.5m Increases
GBP9.6m GBP9.5m
Change in NAV per share Decreases 96.7p Increases
4.3p 4.2p
----------------------------- --------- --------- ---------
31 March 2015
----------------------------- --------- --------- ---------
Electricity prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP197.7m Increases
GBP7.8m GBP7.7m
Change in NAV per share Decreases 101.2p Increases
4.9p 4.8p
----------------------------- --------- --------- ---------
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 statements 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
shareholders through the optimisation of the debt and equity
balances. The capital structure of the Group principally consists
of share capital account and retained earnings as detailed in notes
13 and 14, debt as detailed in note 12 and 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 31 March 2016, the Company had no outstanding debt.
However as set out in note 12, the Company's subsidiary UK HoldCo
raised a revolving credit facility in October 2014 (amended in
March 2016) and at 31 March 2016, there was a loan outstanding in
UK HoldCo of GBP54.8 million.
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 electricity 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 the intermediate holding companies,
financial risks are managed by the Investment Adviser which
operates within the Board approved policies. For the environmental
infrastructure 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 31 March 2016 the Company had no recourse
debt, although as set out in note 12, the Company is a guarantor
for the revolving credit facility of UK HoldCo.
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. At the balance sheet date the Group
had net debt of GBP54.8 million, being the amount drawn on the
revolving credit facility to purchase assets described in note
9.
Market risk - foreign currency exchange rate risk
As at 31 March 2016 the Company has only invested in UK projects
denominated in pounds sterling.
Where investments are made in currencies other than pounds
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 pounds sterling. However, any dividends or distributions
in respect of the ordinary shares will be made in pounds sterling
and the market prices and Net Asset Value of the ordinary shares
will be reported in pounds sterling.
Currency hedging may be carried out to seek to provide some
protection for 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
revolving 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
revolving 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 - electricity 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 renewable energy projects benefit from fixed
prices, others have revenue which is in part based on wholesale
electricity 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 - electricity 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,
local authorities 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 required to
meet its obligations. 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 asset investments from third parties is without
recourse to the Group.
17. Guarantees and other commitments
As at 31 March 2016, the Company has provided a guarantee under
the Company's wholly owned subsidiary UK HoldCo's GBP65 million
revolving credit facility due to expire on 9 October 2017.
The Company had no other commitments or guarantees.
18. 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) and Investment
Entities: Applying the Consolidation Exemption (Amendments to IFRS
10, IFRS 12 and IAS 28):
Place Ownership
of
Name Category business interest Voting
rights
------------------------- ---------------- --------- --------- -------
John Laing Environmental
Assets Group (UK) Intermediate
Limited holding UK 100% 100%
Intermediate
HWT Limited holding UK 100% 100%
Project holding
JLEAG Solar 1 Limited company UK 100% 100%
Operating
Croft Solar PV Limited subsidiary UK 100% 100%
Operating
Cross Solar PV Limited subsidiary UK 100% 100%
Operating
Domestic Solar Limited subsidiary UK 100% 100%
Operating
Ecossol Limited subsidiary UK 100% 100%
Operating
Hill Solar PV limited subsidiary UK 100% 100%
Operating
Share Solar PV Limited subsidiary UK 100% 100%
Operating
Tor Solar PV limited subsidiary UK 100% 100%
Residential PV trading Operating
Limited subsidiary UK 100% 100%
South--Western Farms Operating
Solar Limited subsidiary UK 100% 100%
Operating
Angel Solar Limited subsidiary UK 100% 100%
Project holding
Easton PV Limited company UK 100% 100%
Project holding
Pylle Solar Limited company UK 100% 100%
Operating
Second Energy Limited subsidiary UK 100% 100%
Project holding
ELWA Holdings Limited company UK 80% 80%
Operating
ELWA Limited(1) subsidiary UK 80% 81%
JLEAG Wind Holdings Project holding
Limited company UK 100% 100%
Project holding
JLEAG Wind Limited company UK 100% 100%
Amber Solar Parks Project holding
(Holdings) Limited company UK 100% 100%
Amber Solar Park Operating
Limited subsidiary UK 100% 100%
Operating
Fryingdown Solar subsidiary
Park Limited (dormant) UK 100% 100%
Operating
Five Oaks Solar Parks subsidiary
Limited (dormant) UK 100% 100%
Bilsthorpe Wind Farm Project holding
Holdings Limited company UK 100% 100%
Bilsthorpe Wind Farm Operating
Limited subsidiary UK 100% 100%
Project holding
Ferndale Wind Limited company UK 100% 100%
Castle Pill Wind Project holding
Limited company UK 100% 100%
Operating
Wind Assets LLP subsidiary UK 100% 100%
Shanks Dumfries and
Galloway Holdings Project holding
Limited company UK 80% 80%
Shanks Dumfries and Operating
Galloway Limited subsidiary UK 80% 80%
JL Hall Farm Holdings Project holding
Limited company UK 100% 100%
Hall Farm Wind Farm Operating
Limited subsidiary UK 100% 100%
Branden Solar Parks Project holding
(Holdings) Limited company UK 100% 100%
Branden Solar Parks Operating
Limited subsidiary UK 100% 100%
Operating
KS SPV 3 Limited subsidiary UK 100% 100%
Operating
KS SPV 4 Limited subsidiary UK 100% 100%
Carscreugh (Holdings) Project holding
Limited company UK 100% 100%
Carscreugh Renewable Operating
Energy Park Limited subsidiary UK 100% 100%
Wear Point Wind Holdco Project holding
Limited company UK 100% 100%
Operating
Wear Point Wind Limited subsidiary UK 100% 100%
Project holding
Monksham Power Ltd company UK (2) (2)
Operating
Frome Solar Limited subsidiary UK (2) (2)
------------------------- ---------------- --------- --------- -------
(1) ELWA Holdings Limited holds 81% of the voting rights and
100% share of the economic benefits in ELWA Limited.
(2) 100% of "B" shares plus 100% of loans to the project. The
"A" shareholders, investors under the Enterprise Investment Scheme,
remain invested in the project. Including the loans, JLEN held an
effective economic interest over 87% of the value of the project's
cash flow (as calculated at acquisition).
19. Events after balance sheet date
On 27 May 2016, the Company successfully raised gross proceeds
of GBP35.2 million through the issue of 36.0 million ordinary
shares of no par value in the Company at 97.75 pence per ordinary
share.
A dividend for the quarter ended 31 March 2016 of 1.5135 pence
per share, amounting to GBP3.4 million, was approved by the Board
on 11 May 2016 for payment on 24 June 2016.
On 9 May 2016, UK HoldCo entered into an agreement to acquire
100% of a 4MW capacity wind farm in Northwest France for a total
consideration, including working capital, of EUR2.5 million, fully
funded by the Group's revolving credit facility. This acquisition
is expected to complete in the coming weeks, subject to the
customary consents.
There are no other significant events since the year end which
would require to be disclosed.
ADDITIONAL INFORMATION
Company summary
Below are the Company key facts, advisers and other
information.
Company information John Laing Environmental Assets Group Limited is a Guernsey--registered
closed--ended investment company (registered number 57682)
with a premium listing on the London Stock Exchange
------------------------ -----------------------------------------------------------------------
Registered address Sarnia House, Le Truchot, St Peter Port, Guernsey GY1
1GR
------------------------ -----------------------------------------------------------------------
Ticker/SEDOL JLEN/BJL5FH8
------------------------ -----------------------------------------------------------------------
Company year end 31 March
------------------------ -----------------------------------------------------------------------
Dividend payments Quarterly in March, June, September and December
------------------------ -----------------------------------------------------------------------
Investment Adviser John Laing Capital Management Limited, incorporated in
England and Wales on
19 May 2004 under the Companies Act 1985 (registered
number 5132286) and
authorised and regulated in the UK by the Financial Conduct
Authority ("FCA")
------------------------ -----------------------------------------------------------------------
Company Secretary and Praxis Fund Services Limited, a company incorporated in
Administrator Guernsey on 13 April 2005
(registered number 43046)
------------------------ -----------------------------------------------------------------------
Market capitalisation GBP222.7 million at 31 March 2016
------------------------ -----------------------------------------------------------------------
Investment Adviser fees 1.0% per annum of the Adjusted Portfolio Value of the
investments up to GBP0.5 billion falling to 0.8% per annum
for investments above GBP0.5 billion. No performance or
acquisitions fees
------------------------ -----------------------------------------------------------------------
ISA, PEP and SIPP status The ordinary shares are eligible for inclusion in PEPs
and ISAs (subject to applicable subscription limits) provided
that they have been acquired in the market, and they are
permissible assets for SIPPs
------------------------ -----------------------------------------------------------------------
AIFMD status The Company is classed as a self--managed Alternative
Investment Fund under the European Union's Alternative
Investment Fund Managers Directive
------------------------ -----------------------------------------------------------------------
Non--mainstream pooled The Board conducts the Company's affairs, and intends
investment status to continue to conduct the Company's affairs, such that
the Company would qualify for approval as an investment
trust if it were resident in the United Kingdom. It is
the Board's intention that the Company will continue to
conduct its affairs in such a manner and that independent
financial advisors should therefore be able to recommend
its ordinary shares to ordinary retail investors in accordance
with the FCA's rules relating to non--mainstream investment
products
------------------------ -----------------------------------------------------------------------
FATCA The Company has registered for FATCA and has a GIIN number
2BN95W.99999.SL.831
------------------------ -----------------------------------------------------------------------
Investment policy The Company's investment policy is set out in the strategy
and investment policy section of the strategic report
and is detailed on page 60 of the Company's prospectus
dated 4 June 2015.
------------------------ -----------------------------------------------------------------------
Website www.jlen.com
------------------------ -----------------------------------------------------------------------
Directors and advisers
Directors
Richard Morse (Chairman)
Christopher Legge
Denise Mileham
Peter Neville
Richard Ramsay
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
Capita Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
UK Transfer Agent
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent B43 4TU
United Kingdom
Auditor
Deloitte LLP
Regency Court
Glategny Esplanade
St Peter Port
Guernsey GY1 3HW
Channel Islands
Investment Adviser
John Laing Capital Management Limited
1 Kingsway
London WC2B 6AN
United Kingdom
Public Relations
Redleaf Communications
First Floor
4 London Wall Buildings
Blomfield Street
London EC2M 5NT
United Kingdom
Joint Corporate Brokers
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Barclays
5 The North Colonnade
Canary Wharf
London E14 4BB
United Kingdom
Corporate Bankers
HSBC
PO Box 31
St Peter Port
Guernsey GY1 3AT
Channel Islands
Public company directorships
Richard Morse
John Laing Environmental Assets Group Limited
Christopher Legge
Ashmore Global Opportunities Limited, London - Main Market
BH Macro Limited, London - Main Market
John Laing Environmental Assets Group Limited
Sherborne Investors (Guernsey) B Limited, London - SFM
Third Point Offshore Investors Limited, London - Main Market
TwentyFour Select Monthly Income Fund Limited, London - Main
Market
Denise Mileham
John Laing Environmental Assets Group Limited
Peter Neville
John Laing Environmental Assets Group Limited
Richard Ramsay
Seneca Global Income & Growth plc, London - Main Market
This information is provided by RNS
The company news service from the London Stock Exchange
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSUNUNRNOANAAR
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June 17, 2016 02:00 ET (06:00 GMT)
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