TIDMJLEN
RNS Number : 0317C
John Laing Environmental Assets Grp
13 June 2019
13 June 2019
John Laing Environmental Assets Group Limited
Announcement of results for the year ended 31 March 2019
The Directors of John Laing Environmental Assets Group Limited
(the "Company" or "JLEN") are pleased to announce the Company's
results for the year ended 31 March 2019.
Financial Highlights
-- Portfolio valuation as at 31 March 2019 of GBP523.6 m (31 March 2018: GBP429.5m)
-- NAV per ordinary share of 104.7 pence as at 31 March 2019 (31
March 2018: 99.6 pence), increase due to value enhancements,
including successful refinancing of a portfolio of wind and solar
assets and the ongoing review of potential asset life extension
where supported by land rights, partially offset by the recognition
of Ofgem's Targeted Charging Review
-- Total dividends declared of 6.51 pence per ordinary share for
the year to 31 March 2019 (2018: 6.31 pence per ordinary share), in
line with the target set out in the 2018 Annual Report. Dividend
cover of 1.2 times for the financial year
-- Target dividend for the year to 31 March 2020 of 6.66 pence per ordinary share
-- Share price total return for the period since IPO of 45.5% (7.8% annualised)
Portfolio Highlights
-- Four anaerobic digestion plant acquisitions completed during
the year for a total consideration of GBP70.3m, increasing exposure
to this sector with attractive risk-adjusted returns and
inflation-linked revenues
-- Diversified portfolio now 43% wind, 25% solar, 21% AD, 11% waste and wastewater by value
-- Overall portfolio performance in line with expectations
-- Wind portfolio generation below budget due to unusually low
average wind speeds over the year
-- Solar and anaerobic digestion assets ahead of budget for the year
-- Waste tonnages in line with expectations. Wastewater volumes
below budget but offset by strong cost controls
Other Highlights
-- Raised GBP105m of equity capital via oversubscribed placings during the year
-- Revolving credit facility increase of GBP40m to GBP170m and a
further one year extension, now expiring in June 2022
-- JLCM team and investment advisory mandate transferring from
John Laing to Foresight with effect from 1 July 2019
-- Strong pipeline of assets for further growth both under the
First Offer Agreement (continuing with John Laing) and from third
parties
-- Refreshing of the Board following the year-end, with the
resignation of Chris Legge and the appointment of Hans Rieks,
effective 13 June 2019 (described further under 'Board matters' in
the Chairman's Statement).
Richard Morse, Chairman of JLEN, said:
"JLEN passed the milestones of GBP500 million portfolio value
and market capitalisation during the year and has consolidated its
position as an attractive, low-risk, diversified environmental
infrastructure investor, paying a consistent and growing dividend.
We have paid dividends in line with our target and increased the
target dividend for 2019/20 to 6.66p. We continue to see attractive
opportunities across environmental infrastructure sectors and we
look forward to working with Foresight Group in the year ahead as
the Company's investment advisory team transfers there from 1
July."
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
An analyst briefing call for the annual results will be held at
09:00 a.m. on 13 June. To register for the briefing, please contact
Newgate Communications on +44 (0)20 3757 6880, or by email at
JLEN@newgatecomms.com.
Presentation materials will be posted on the Company's website,
www.jlen.com, from 9.00am.
For further information, please contact:
John Laing Capital Management Limited
Chris Tanner
Chris Holmes +44(0)20 7901 3559
Winterflood Investment Trusts
Neil Langford
Chris Mills +44(0)20 3100 0000
Newgate Communications
Elisabeth Cowell
Ian Silvera +44(0) 20 3757 6880
ABOUT US
John Laing Environmental Assets Group Limited ("JLEN" or the
"Company") is an environmental infrastructure investment fund which
aims to provide shareholders with a sustainable dividend, paid
quarterly, that increases progressively in line with inflation, and
to preserve the capital value of its portfolio on a real basis over
the long term through the reinvestment of cash flows not required
for the payment of dividends.
JLEN's investment policy is to invest in a diversified portfolio
of environmental infrastructure projects that have the benefit of
long--term, predictable, wholly or partially inflation--linked cash
flows supported by long--term contracts or stable regulatory
frameworks.
At 31 March 2019, the portfolio included onshore wind, PV solar,
anaerobic digestion, waste and wastewater processing projects in
the UK and two onshore wind projects in France. The wind, solar and
anaerobic digestion projects are supported by the UK's and France's
commitment to low-carbon energy generation targets whilst the waste
and wastewater processing projects benefit from long--term
contracts backed by the UK Government.
AT A GLANCE AT 31 MARCH 2019
Highlights
-- Dividend of 6.51 pence per share declared for the year to 31
March 2019 (2018: 6.31 pence per share). Dividend cover of 1.2x
-- NAV per share 104.7 pence from 99.6 pence at 31 March 2018;
increase due to value enhancements, including a successful
refinancing of a portfolio of wind and solar assets and the ongoing
review of potential asset life extensions where supported by
existing land rights
-- Profit before tax for the year of GBP53.4 million (2018: GBP21.1 million)
-- Share price total return for the period since IPO of 45.5% (7.8% annualised).
-- Raised GBP105 million of equity capital via placings during the year
-- Positive performance from growing anaerobic digestion segment
and solar PV assets, offset by onshore wind below budget due to
poor wind conditions
-- Four acquisitions completed during the year for a total
consideration of GBP70.3 million, giving a total of 28 assets
-- GBP40 million increase of the revolving credit facility to
GBP170 million, and one-year extension, now expiring in June
2022
-- Refinancing of a 180MW combined portfolio of wind and solar assets with improved terms
-- Strong pipeline of assets for further growth, both under
First Offer Agreement with John Laing and from third parties
CHAIRMAN'S STATEMENT
JLEN passed the milestones of GBP500 million portfolio value and
market capitalisation during the year and has consolidated its
position as an attractive, low-risk, diversified environmental
infrastructure investment, paying a consistent and growing dividend
to investors.
Richard Morse
Chairman
On behalf of the Board, I am pleased to present the Annual
Report of the Company for the year ended 31 March 2019.
Results
The Company has consolidated its position as an attractive,
low-risk, diversified environmental infrastructure investment,
paying a consistent and growing dividend to investors. During the
year, the Company passed linked milestones of GBP500 million
portfolio value and GBP500 million market capitalisation, thereby
creating increasing opportunities for operating and financing
efficiencies within our diversified portfolio of operating assets,
as well as making JLEN more appealing to a wider range of investors
and triggering a step-down in the level of investment advisory fees
paid.
The Board continues to believe that the Company's diversified
mandate creates opportunities for higher return investments than
are currently available from the more established wind and solar
markets. The Company is well--placed to continue to make progress
in building a resilient portfolio, and then operating and financing
it in the most efficient way.
Acquisitions during the year were all focused in the crop--fed,
gas-to-grid anaerobic digestion ("AD") market, where the Company
successfully anticipated a pipeline of opportunity with less
competition than for wind and solar assets. Four plants were
purchased, with a combined generating capacity of 20MWth for
c.GBP70 million.
In addition, the Company has committed to the upgrade of the
Vulcan AD project, our first significant construction project, for
a further GBP8.5 million and made a follow-on investment into the
Icknield AD plant for GBP1 million. The Investment Adviser
continues to be active prospecting for opportunities and further
acquisitions are expected.
As a result, at the year end, JLEN has a diversified portfolio
of 28 operational solar, onshore wind, waste & wastewater and
anaerobic digestion projects based in the UK and France,
representing a total of 279.2MW, which are substantially backed by
long-term contracts or stable regulatory-backed subsidy
arrangements.
The Net Asset Value ("NAV") per share at 31 March 2019 was 104.7
pence, compared with 99.6 pence at 31 March 2018. One driver of NAV
growth has been the recognition of life extensions on certain wind
and solar projects. The Board has followed a prudent policy of only
recognising life extensions on projects where the Company has land
rights that permit an additional period of operations and where the
Board is not aware of any other obstacle that would prevent that
longer running. Other drivers of growth include the refinancing of
UK wind and solar assets at improved terms and recognition of
sustained out-performance at the Icknield AD plant.
The key negative factor affecting the year-end NAV has been
Ofgem's Targeted Charging Review ("TCR") that aims to change the
way in which the costs of the electricity network are shared
between consumers and different types of generators. TCR is still
the subject of consultation, but it seems prudent to assume that
distribution grid--connected wind and solar generators will lose
some "embedded benefits" revenues they currently enjoy by virtue of
their position on the network and may also incur some additional
costs. Our assumptions have reduced NAV by 1.7 pence per share. The
AD assets, the environmental processing assets and the overseas
wind assets, making up 33% of the portfolio, are unaffected.
Profit after tax for the year was GBP53.4 million (2018: GBP21.1
million) resulting in earnings per share of 12.2 pence (2018: 5.7
pence). Removing unrealised movements on investments at fair value,
the adjusted PBT is GBP25.5 million (2018: GBP24.0 million),
equivalent to 5.8 pence per share (2018: 6.5 pence).
Cash received from the portfolio assets by way of distributions,
which includes interest, loan repayments and dividends, was GBP43.6
million during the year. After operating and finance costs, cash
flow from operations of the Company of GBP35.6 million covered the
cash dividends paid during the year of 6.46 pence per share by 1.2x
and the declared interim dividends applicable to the year of 6.51
pence per share 1.2x, covered in more detail below.
Dividends
The Company has delivered consistent financial performance
during the year, with a reported dividend cover of 1.2x. This is
the same as the previous year and has been achieved while growing
the dividend in line with inflation and without the Company issuing
scrip in place of cash dividends.
During the year, the Company paid a final dividend for the
period ended 31 March 2018 of 1.5775 pence per share (GBP6.2
million). Interim dividends of 1.6275 pence per share were paid in
September 2018 (GBP6.4 million), of 1.6275 pence per share in
December 2018 (GBP8.1 million) and of 1.6275 pence per share in
March 2019 (GBP8.1 million).
The Board is pleased to confirm the quarterly dividend in
respect of the quarter to 31 March 2019 of 1.6275 pence per share,
which was approved on 30 May 2019 and will be paid on 28 June 2019,
bringing the total to the target of 6.51 pence per share for the
full year.
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 is targeting a full-year dividend
for the year ending 31 March 2020 of 6.66 pence per share(1). This
broadly reflects the increase in inflation over the year and
demonstrates the Directors' confidence in the robustness of the
financial performance associated with the underlying project
portfolio.
(1) This is a target only and not a profit forecast. There is no
assurance that this target will be met.
Portfolio performance
During the year, overall generation from the renewable energy
portfolio was 3.9% below budget including assets purchased during
the year.
Electricity generation from the wind assets (which represent 43%
of the portfolio) was 9.2% below budget, primarily due to unusually
low average wind speeds, particularly during the summer months.
Operational availability was in line with budget, with the
exception of the four wind farms in the portfolio where operations
and maintenance are carried out under contract with the wind
turbine manufacturer Senvion. These suffered some prolonged
outages, leading to a deterioration in previously good levels of
availability, which we consider likely to be connected with the
Senvion group's efforts to carry out a financial restructuring that
has included a period of self-administration under German
insolvency law. Excluding the Senvion sites from the generation
figures, negative variance from budget was 7%. The Investment
Adviser is monitoring the situation closely and continues to keep
the Board informed of developments with the Senvion assets.
The Board has recognised life extensions for a number of wind
farms where the relevant project company has sufficient land rights
to permit the additional period of operations. The Investment
Adviser continues to explore life extension options on the
remaining unextended assets. Further turbine optimisation packages
have been agreed on a number of wind farms, following the
successful implementation over the year on the Dungavel wind farm,
and the Investment Adviser is exploring a number of site--specific
value enhancement opportunities that the Board anticipates will
come through to the NAV in future periods, including private wires
and improved monitoring and automation.
Electricity generation from the solar assets (which represent
25% of the portfolio) was 1.6% above budget, driven by high solar
irradiation throughout the year and particularly over the summer
months. The majority of the solar portfolio performed
satisfactorily during the year, but the Branden asset experienced
outages associated with transformer and switchgear faults and a
small fire at an inverter station. Excluding Branden from the
generation figures, the solar portfolio would be 3.1% over budget
on generation whilst being 6.1% over forecast on irradiation, with
the discrepancy due primarily to high temperatures and distribution
network operator ("DNO") outages at the Welsh sites. We expect
insurance to cover fire damage and to mitigate the lost revenues at
Branden. The Investment Adviser is focused on understanding root
causes of sub--optimal performance within the solar portfolio using
a testing regime that includes thermography and panel sampling. As
with the wind portfolio, the Board has recognised life extensions
on some solar parks where the project company's land rights
permit.
Gas generation from the AD portfolio (which represents 21% of
the portfolio) was 3.7% above budget on a MWh basis. The Icknield
plant has performed very strongly during the year, and Vulcan has
also performed well, which is particularly pleasing given the major
upgrade works that are going on in parallel with day-to-day
operations. The newest plant to the portfolio, Biogas Meden,
experienced some unplanned downtime relating to the gas upgrader
following acquisition, but this has now been resolved and recent
performance has been promising. The other plants in the portfolio
have been broadly in line with budget.
The Vulcan upgrade to double the capacity of the plant remains
broadly on track for operational commencement late in 2019. Other
value enhancements pursued during the year include the improved
pricing for "green gas" certificates and improved terms on gas
purchase agreements also benefiting from effective winter-hedging
strategy. Retrofitting of equipment to improve the biogas yield
extraction from feedstock on a trial basis will also be rolled out
to the rest of the portfolio to gain further value enhancements.
The Investment Adviser is also considering initiatives to increase
the resilience of the portfolio to risks around feedstock,
including strategically located feedstock storage hubs to allow
greater flexibility on feedstock sourcing and storage improvements.
The Board remains encouraged by the potential in the AD
portfolio.
The results from our renewable energy assets are dependent in
part on the level of energy prices. Market prices increased
materially during the year, being at their peak in the last quarter
of 2018, before coming off the peak in the first quarter of 2019.
JLEN was able to fix prices into this market strength for the
current summer 2019 season and generally the valuation has
reflected an increase in near-term electricity price expectations
partially offset by a decline in mid to long-term forecasts.
Compared to the assumptions used in the valuation at 31 March 2018,
on a time-weighted average basis, the net increase in the
electricity price assumptions is approximately 6.7% over a 25-year
period (being a simple average decrease over 25 years of
approximately 1.9% offset by an increase in market forward prices
(gross of any discounts under PPAs) over the next two years of
17.5%). The overall change in forecasts for future electricity
prices compared to forecasts at 31 March 2018 has increased the
valuation of the portfolio by GBP2.1 million.
The PFI-backed waste & wastewater assets now represent only
11% of the portfolio. ELWA waste and Tay wastewater have both
performed well operationally, with financial distributions ahead of
budget. ELWA waste tonnages continue comfortably to exceed budget
and while the operator has reported some Brexit-related issues with
disposing of the project's residual refuse-derived fuel to European
counterparties, this remains the operator's risk. The insurance
market for waste assets is thin and this has led to some issues in
placing cover, which the Investment Adviser is following closely.
Tay has experienced another year of relatively low wastewater flows
but once again has been able to exercise control over elements of
its costs which has kept performance on track.
The Dumfries and Galloway project has now been terminated and
the Company expects to receive proceeds from the winding up of the
project company, an improvement on the position at the last year
end. The Board expects Dumfries and Galloway to be removed from the
portfolio during the course of the year ahead.
Investment performance
Over the 12-month period to 31 March 2019, shareholders have
seen a share price total return of 16.3%, whilst over the same
period the NAV total return per share was 11.6%. The listed
renewable infrastructure sector has generally been in favour with
investors during the year, resulting in all the established funds,
including JLEN, experiencing higher premiums to NAV.
Operations
The Investment Adviser's asset management team have delivered a
number of value-enhancing initiatives during the year, and work
continues on further plans that the Board expects to contribute
positively in the years ahead. The biggest initiatives were the
life extension programme and the refinancing of wind and solar
assets; together these delivered an additional GBP16.9 million of
value compared to the previous year. Also significant was the
outturn result of the wind portfolio management services
retendering in November 2018, which delivered GBP2.0 million
compared to the previous year, and the progress made in capturing
additional revenues from REGOs and green gas certificates (GBP2.7
million).
Acquisitions
During the year under review, the Company announced the
following acquisitions:
-- Egmere Energy Limited - 5MWth & 0.5MWe
-- Grange Farm Energy Limited - 5MWth & 0.5MWe
-- Merlin Renewables Limited - 5MWth & 0.5MWe
-- Biogas Meden Ltd - 5MWth & 0.4MWe
-- Icknield Farm - increased equity stake to 52.6%
These acquisitions bring the total capacity of the renewable
energy assets in the JLEN portfolio to 279.2MW. The Directors are
particularly pleased to see the continued investment into the
anaerobic digestion sector. These assets have established operating
track records and a high proportion of RPI-linked revenues,
combined with attractive risk-adjusted returns.
Debt facilities
In June 2017, the Fund signed a new replacement three--year loan
agreement with HSBC, NIBC, ING and Santander which provides for a
committed revolving credit facility ("RCF") of GBP130 million (of
which GBP16.7 million has been drawn at 31 March 2019), and for an
uncommitted "accordion" facility of up to GBP60 million. In June
2018, the facility was extended for a further year until June 2021.
In May 2019, the Fund extended the facility for a further year to
June 2022 and committed to the accordion facility for up to GBP40
million.
This gives JLEN an increased source of flexible funding outside
of equity raisings at a lower cost. The facility is periodically
paid down from the proceeds of equity issuance which then allows
JLEN to make new investments with the certainty of funding and on a
timely basis, reducing the performance drag associated with holding
excess cash.
Share capital
In October 2018, JLEN successfully raised GBP105 million via a
combined Placing, Offer for Subscription and Intermediaries Offer
utilising the Issuance Programme put in place in February 2018.
This was at a price of 102 pence per share, a 2.4% premium to NAV,
against a target of GBP50 million. The capital-raising was very
substantially over--subscribed, and part of that excess demand was
met by the John Laing Pension Trust agreeing to make GBP20 million
of shares available. The capital-raising enabled JLEN to repay in
full its drawings under its RCF at that time.
In March 2019, the John Laing Pension Trust sold its entire
remaining stake of c.22 million shares in the Company by way of a
secondary market book-build led by the Company's brokers. This
process also revealed strong interest in the market for the
Company's shares and the Board believes that the Company continues
to be an attractive proposition for income-seeking investors
wishing to be exposed to a diversified portfolio of environmental
infrastructure assets.
Valuation
The Net Asset Value at 31 March 2019 is GBP520.3 million,
comprising GBP523.6 million portfolio valuation, GBP11.4 million of
cash held by the Group, less GBP16.7 million drawn on the Company's
(immediate subsidiary's) revolving credit facility, together with
positive working capital balances of GBP2.0 million.
The Investment Adviser has prepared a fair market valuation of
the portfolio as at 31 March 2019. This valuation is based on a
discounted cash flow analysis of the future expected equity and
loan note cash flows accruing to the Group from each portfolio
investment. This valuation uses key assumptions which are
recommended by the Investment Adviser using its experience and
judgement, having 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 is provided to the Directors. The Directors
have satisfied themselves as to the methodology used and the
assumptions adopted and have approved the valuation of GBP523.6
million for the portfolio of 28 investments as at 31 March 2019.
This equates to a Net Asset Value of 104.7 pence per share.
Risks and uncertainties
While it is the Investment Adviser that 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, regularly 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 last
published Prospectus in February 2018. The Prospectus is available
on JLEN's website, and a summary of the principal risks and
uncertainties is included below in the strategic report. The
Directors do not consider that Brexit represents a significant risk
for the Fund, as more than 99% of the portfolio by value is located
in Great Britain and should not be affected directly by matters
that are currently the subject of negotiation between the UK
Government and the EU, such as customs arrangements and trade
deals.
The Board notes investors' recent appetite for the Company's
shares and interest in the listed renewables sector generally,
combined with the low level of drawings on the RCF, and believes
that the Company is very well placed to continue to execute on its
central proposition of investing in a diversified portfolio of
environmental infrastructure assets with the benefit of long-term,
predictable, wholly or partially inflation-linked cash flows.
Annual general meeting
The annual general meeting will be held on 14 August 2019 at
10:00 a.m. at the Company's registered office in Guernsey.
Investment Adviser management changes
On 5 June 2019, post the end of the year under review, the
Company announced that the Investment Adviser would be changing
from John Laing Capital Management to Foresight Group, effective
from 1 July 2019. The existing team that has been providing
investment advice since JLEN's launch in 2014 will also be
transferring to Foresight. The Board holds Foresight in high regard
as a successful and experienced fund manager with a track record of
investment in environmental infrastructure asset classes. The Board
looks forward to working with them as we continue to seek to
enhance and grow our portfolio of environmental assets in the
interests of shareholders.
On behalf of the Board, I wish to express our thanks to John
Laing for its key role in establishing JLEN and for facilitating
this change of Investment Adviser. We are also pleased that the
First Offer Agreement is to continue.
Outlook
As the project portfolio expands, the Board and the Investment
Adviser continue to monitor opportunities to optimise the
performance and financing efficiency of the operational projects
that make up the portfolio. At the same time, the Board remains
committed to finding high--quality, value-accretive acquisitions
and also, on a more modest scale, "bolt-on" construction
opportunities at existing sites.
As the Board considers the acquisition outlook for the Company,
the main impression is of competitive pressure in asset markets.
This competitive pressure is felt more acutely in market sectors
that investors are now comfortable with, such as wind and solar,
but is present now across the spectrum of environmental
infrastructure. Indeed, the Board has noted increasing competition
in sectors as diverse as energy-from-waste, biomass, flexible
generation and hydro.
This competition is also being felt in the listed sector, as
evidenced by higher premiums to NAV and new entrants coming to
market with focused geographical and technological propositions and
target dividend yields that are below those currently on offer from
the established funds such as JLEN.
Against this backdrop, the Board continues to believe that
JLEN's broad investment mandate provides investors with access to a
wider range of environmental infrastructure opportunities that
conform to the Company's investment targets. This has been the case
with anaerobic digestion projects during the past year and, looking
forward, it is anticipated that the Company will have continuing
success in targeting assets in less mainstream sectors. It is also
possible that some future deals may include features that
distinguish them from pure "project" deals according to a
traditional "project finance" model, such as more exposure to
merchant markets in feedstock or by-products, specialist staff
within the project vehicle who are important to the project's
success, or assumptions around the re-purposing of plant beyond
subsidy expiry to maximise economic life. We are seeing factors
such as these emerge in some asset processes now, and it is likely
to become a fact of life for funds such as JLEN that wish to
continue to acquire infrastructure projects without competing away
returns in "cost of capital" auctions.
The Board will approach such risks selectively, with due
consideration given to the Company's ability to manage the risks
and whether the returns on offer duly compensate for them, both in
an absolute sense and relative to other environmental
infrastructure markets. Where this is not the case, the Board will
not invest, but we have always viewed the diversified mandate as a
positive differentiator. JLEN was not launched as a fund to focus
on a single project type, and so JLEN should be exploring these new
"risk and return" profiles in the interests of investors.
The Board continues to view the UK as the main geographical
focus for capital deployment over the short to medium term. JLEN
has the mandate to invest in established environmental
infrastructure assets in OECD countries, and the Investment Adviser
has taken steps to become more knowledgeable about and known in
those overseas markets that it thinks are likely to appeal to the
Company, but investments will be on a cautious, opportunistic
basis.
The Company also does not anticipate making a concerted effort
to invest in UK "subsidy-free" wind and solar assets, but would
consider making such an investment if it assesses the risk-adjusted
returns to be acceptable, with a particular focus on the extent of
exposure to merchant power markets.
The Investment Adviser has been successful during the year in
delivering value enhancements to the portfolio, including a major
refinancing, retendering of portfolio-wide service providers and a
significant upgrade to the Vulcan AD project. The Board continues
to be pleased with the value enhancement potential of the portfolio
and expects further value to be uncovered in the future. In
recognising value enhancements, the Board will continue to act in a
prudent manner and only recognise enhancements when it has a clear
understanding of what is involved in delivering them and a
reasonable belief that the benefits will be realised.
Board matters
Chris Legge, one of our Directors and Chair of the Audit
Committee, will be standing down from the Board on 13 June 2019. He
has been on the Board since IPO and we have been fortunate to have
had his wisdom and experience available to us, and he leaves with
hearty thanks for all he has contributed. He will be succeeded as
Audit Chair by Peter Neville. On 20 May 2019, we announced that
Hans Rieks will become a Director of JLEN on 13 June 2019. Hans is
a very senior figure within the European wind industry and brings a
wealth of commercial and operational knowledge to the Board. On
appointment he will succeed Peter Neville as Chair of the Risk
Committee.
I am, as ever, grateful to all of my Board, to our Investment
Adviser and all our other advisers for their efforts over the
course of the year under review. JLEN can look forward to the next
year from a position of strength.
Richard Morse
Chairman
12 June 2019
STRATEGIC REPORT
This strategic report has been prepared to 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 the portfolio over the long term on a real
basis.
The Company aims to provide its investors with a sustainable
dividend per share, paid quarterly, that increases progressively in
line with inflation. It aims 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 for the year ended 31 March 2019 is 6.51 pence per
share. 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, strategic partners, national and local
government, and local communities.
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
VALUE ENHANCEMENT
The Investment Adviser has achieved operational and financial
enhancements to projects to improve cash flow and increase value
for shareholders.
Refinancing
In March 2019, we took advantage of favourable debt market
conditions and completed a debt refinancing for a portfolio of ten
wind projects and four solar sites, with a combined electricity
generation capacity of 180MW. The new credit facilities are in the
aggregate amount of c.GBP200 million, consisting of a single senior
term loan, a debt service reserve facility and a letter of credit
facility.
The successful completion of this refinancing transaction brings
a number of benefits to the Fund's investment portfolio,
including:
-- improved the valuation of the constituent assets by c.GBP8.5
million in total through reduction of future financing costs;
-- removed the refinancing risk associated with the previous
project financing facilities, which had a legal maturity date in
March 2021; and
-- preserved a high level of operational flexibility by
implementing a portfolio financing approach.
Renewable Energy Guarantees of Origin ("REGO")
We regularly review the power purchase agreements of the Fund's
investment projects, in seeking to optimise their revenue
potential. During the past year, we have secured a new source of
revenue for a number of the wind projects after the project
companies entered into a REGO sale and purchase agreement with an
initial period of three years. The result was achieved through a
tender process in which we received attractive rates from multiple
bidders and negotiation of a waiver with the wind projects' PPA
offtaker.
The Renewable Energy Guarantees of Origin scheme is administered
by Ofgem in the United Kingdom and aims to provide transparency to
consumers about the proportion of electricity that suppliers source
from renewable generation. All EU Member States are required to
have such a scheme.
Historically, REGOs had little monetary value attached to them
at the time when the Fund's investment projects entered into their
current power purchase agreements. Over recent years, we have seen
emergence of an increasingly active market in which REGOs are
traded and bought by corporates to promote green energy sources.
The achieved contract rate represents a multiple of our initial
estimate, adding a value of c.GBP1.1 million to the portfolio
valuation, assuming that the current rate continues. In the coming
years, we will seek to further improve the terms of future REGO
sales and extend them to a wider range of the Fund's investment
projects.
Vulcan upgrade
The Vulcan capital upgrade project consists of provision of
funding of c.GBP8.5 million to double the capacity of JLEN's first
AD acquisition, the Vulcan AD plant. Works for the expansion began
earlier this year and construction has been progressing through the
year, with minimal disruption to Vulcan's existing operations to
date. This is highlighted further by Vulcan's year-end generation
results which have exceeded budget; a remarkable achievement and
testament to the strong partnership between JLEN's Investment
Adviser and Future Biogas, its business partner in the AD sector.
Future Biogas are managing both the operational activities and
expansion on site.
The works have involved converting the existing storage tank to
a primary digester which is broadly complete, installing an
additional biomethane upgrading unit, together with associated
engineering, electrical and civil works which are well progressed.
The construction works are broadly on track to be completed in late
2019. The project now enters the final critical phase of
construction which will then be followed by commissioning of the
new larger, upgraded AD plant. During this time, overhaul
activities such as stirrer bearing replacements have also been
strategically planned to minimise plant disruption.
As the project enters this crucial phase, JLEN's Investment
Adviser is working closely with Future Biogas to ensure the project
remains on track.
General AD upgrades/improvements
The Investment Adviser regularly reviews the gas purchase
agreements ("GPAs") and green certificate offtake agreements of the
Fund's AD investment projects. In a similar way to the Fund's PPAs,
it seeks to optimise their revenue potential. As the Fund grows its
AD asset class, it has been able to achieve improved terms for a
number of these agreements by running a tender process.
Furthermore, it is working closely with green gas certificates
("GGC") offtakers and is seeing a strong increase in demand for
GGCs, reflected in market value. It has also implemented a gas
hedging strategy by forward selling wholesale gas at 2 pence/kWh
compared to current wholesale market prices of just over 1
pence/kWh. The combination of these strategies has added a value of
c.GBP1.5 million to the portfolio valuation, assuming that the
current rates continue.
The strong performance of the assets is a reflection of the
Investment Adviser's ability to identify and select best--in--class
operational service providers within the AD sector. This is
reflected through its most recent AD acquisition, Biogas Meden,
where as part of the acquisition it took the decision to replace
the incumbent operator and introduce its AD partner, Future Biogas,
who is now successfully integrated into the new asset. JLCM is also
working closely with Future Biogas and co-owners of Icknield Gas
Limited, in developing technological improvements to increase plant
output and improve operational efficiency. Some examples include
retrofitting material treatment technologies to improve gas
production, reducing propane injection and associated costs,
sourcing alternative feedstocks and enhancing feedstock and
digestate storage. Combined with strong and consistent
overperformance of budgeted output for a number of AD assets within
the portfolio, the collective result of these measures has added a
value of c.GBP1.6 million to the portfolio valuation.
Service providers retendering
The agreed terms of the Management Services Agreements ("MSA")
on eight of the wind portfolio projects expired at the end of 2018.
We were aware that service provision in this market had become more
competitive, and we were keen to explore what alternative providers
might offer. Five potential providers were invited to submit
proposals for one-year and three-year contract terms for both the
individual project company MSAs and the portfolio loan
administration MSA. All five bidders submitted proposals, each of
which would have offered savings on the existing arrangements.
We opted for three-year contracts for two bundles of wind assets
commencing 1 January 2019, but with an option to terminate this at
the end of the first year. This gives us the option to review the
performance of each service provider, and determine whether further
expected benefits of streamlining asset management across the wind
portfolio materialise.
On the ten projects, the approximate annual saving from the
previous MSA pricing is GBP550,000.
STRATEGY AND INVESTMENT POLICY
To provide investors with access to 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 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. It is intended that the equipment
and systems used by the assets in the portfolio will not rely
substantially on new technology but will use those that have a
significant track record of use in other projects. On acquisition,
the relevant equipment will also have demonstrated operational
performance at its place of installation.
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, the 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.
This is likely to include technologies that do not currently
feature in the portfolio but clearly exhibit the characteristics of
well-established technologies, such as biomass combustion and hydro
projects. It may come to include technologies that are currently in
the process of establishing themselves, such as advanced conversion
treatments for waste and flexible generation. Future investments
may also differ from traditional infrastructure projects by
including features such as greater exposure to merchant markets in
feedstock or by-products, specialist staff within the project
vehicle who are important to the project's success, or assumptions
around the re-purposing of plant beyond subsidy expiry to maximise
economic life.
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 where appropriate 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 comply 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 are acceptable and 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
previously are as follows:
-- market capitalisation;
-- dividend per share (declared);
-- share price;
-- total shareholder return for the year (share price basis);
-- Net Asset Value;
-- Net Asset Value per share;
-- Net Asset Value per share growth;
-- portfolio value;
-- number of investments;
-- largest single investment as a percentage of portfolio value; and
-- total megawatt capacity.
The key performance measures for the year ended 31 March 2019
are set out below in 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 2019 the Company owns a portfolio of 28
environmental infrastructure investments in the UK and France. The
Company has a 31 March financial year end, announces half--year
results in November and full-year results in June. The Company pays
dividends quarterly, targeting payments in June, September,
December and March each year.
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 below) whose
role is to manage the governance of the Company in the interests of
shareholders and other stakeholders.
In particular, the Board scrutinises the performance of the
Investment Adviser, 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 needs. 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, keep under review the performance of the
Investment Adviser and will manage 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 with 12
months' notice.
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 below and in note 15
to the financial statements with respect to fees.
Praxis Fund Services Limited is Company Secretary and
Administrator to the Fund. Other key service providers to the JLEN
Group include Winterflood Securities as corporate broker, Newgate
Communications as financial public relations advisers, Mourant
Ozannes as legal advisers as to Guernsey law, Hogan Lovells as
legal advisers as to English law, Link Registrars as registrars,
Deloitte LLP as auditor, and NIBC, Santander, ING and HSBC as
lenders to the Group via the GBP170 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 may
include investments that will be acquired from John Laing under the
terms of the First Offer Agreement 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
from both John Laing and 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.
Impact of change of Investment Adviser
While the First Offer Agreement will remain in place between the
Company and John Laing, John Laing will cease to be a related party
and the potential conflicts associated with purchasing assets from
John Laing should diminish substantially. The Company intends to
maintain the disciplines noted above for John Laing purchases for a
period of time following the change of Investment Adviser to ensure
no residual bias.
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.
CASE STUDIES
Egmere Energy
In July 2018, the Fund purchased its third and fourth AD sites.
Egmere is JLEN's first asset in Norfolk, in the village of Holkham.
Egmere commissioned in 2014 and is accredited under the Renewable
Heat Incentive ("RHI") and Feed-in Tariff ("FiT") schemes for its
core biogas activities and additionally benefits from RHI for heat,
received on a process to remove excess water from the digestate
fertiliser. The plant is c.5MWth and has a 0.5MW CHP engine to
produce heat and electricity on site.
Egmere processes around 42,000 tonnes per year of agricultural
feedstocks sourced from the local vicinity, including whole crop
maize, rye, sugar beet and grass silage. The biogas generated from
the decomposition of this organic mix is then cleaned and upgraded
to biomethane, which is then exported directly to the national gas
grid to displace fossil natural gas. The digestate by-product is
then redistributed to the local farming community and used as a
fertiliser and soil improver.
It is expected that Egmere will save a total of 91,968tCO over
their operational lifetime, when compared to alternative methods of
producing the same quantity of energy produced in the UK.
Merlin Renewables
Soon after the Egmere and Grange acquisitions were completed,
the Fund acquired Merlin Renewables Ltd. The Merlin AD Plant,
located in Hibaldstow, Lincolnshire, is close to Grange Farm and
Vulcan, forming a cluster. Merlin is again technically similar to
Grange, Egmere and Vulcan. Each of the sites has three main tanks,
one of which is used for storing digestate, which in the case of
Vulcan, the Fund's first AD investment in 2017, is in the process
of being converted to another fermenter to extend the plant's
generating capacity.
Currently, the plant is rated at 5MW of thermal generating
capacity with a 0.5MWe CHP engine, accredited under the Renewable
Heat Incentive ("RHI") and Feed--in Tariff ("FiT") schemes. The
plant is fed on 40,000 tonnes per year of agricultural feedstocks
including maize and rye silage. The site itself straddles a now
disused runway.
Merlin is forecast to save 97,264tCO e.
Grange Farm, Merlin Renewables and Egmere are sites which have
been operating for a number of years and have successfully
integrated into the local farming sector. The sites provide a
viable and affordable break crop to local growers, allowing them to
diversify their crop rotation.
Furthermore, as the sites are located in predominantly arable
areas, where livestock farming is less common, the introduction of
the return of liquid digestate back to arable farmland has been
welcomed by growers as it allows organic matter to be reintroduced
to soils in areas where it does not benefit from livestock manures
and slurries. Organic matter is an important part of sustainable
farming practices and improves soil health.
Grange Farm Energy
At the same time as purchasing Egmere, the Fund also purchased
Grange Farm Energy located in Spridlington, Lincolnshire.
It was commissioned in December 2014. Grange Farm AD Plant is
similar in design to Egmere, although it benefits from a slightly
larger primary fermenter - which in early 2019 was illuminated for
charity to become the nation's largest red nose.
The plant's main energy production comes in the form of
biomethane which is injected into the existing natural gas network
and is displacing the use of natural gas. The plant will save a
total of 88,441tCO e over its operational lifetime.
The combined acquisition of Egmere and Grange Farm saw JLEN
invest a total of GBP36 million.
Biogas Meden
The Fund's most recent acquisition of Biogas Meden brought the
portfolio to a total of 279.2MW and was acquired for c.GBP16
million from the German developer BayWa Renewable Energy. The AD
plant is located in the now disused and repurposed Welbeck Colliery
in Meden Vale, around 25 miles south-east of Sheffield, South
Yorkshire. It was commissioned in March 2016 and is a good example
of how clean, renewable energy is being produced in what was once
the heartland of one of the UK's main sources of electricity
production, coal.
The plant is again similar to those in the portfolio, has a
thermal capacity of c.5MWth predominantly producing biomethane to
be injected with a 0.4MWe CHP engine and is accredited under the
Renewable Heat Incentive ("RHI") and Feed--in Tariff ("FiT")
schemes.
The AD plant processes around 42,000 tonnes of a wider mix of
feedstock per year ("tpa") comprising grown maize, sugar beet,
waste vegetables and farmyard manures and residues. Through having
a pasteuriser being fully bunded and having a versatile feeding
system, the plant benefits from a more diversified feedstock as
well as relatively higher volumes of contracted feedstock, securing
supply and de-risking the site. The site has the largest footprint
of all in the JLEN AD portfolio with four major tanks.
The project has to date offset over 10,000tCO2e and is expected
to offset at least a further 78,000tCO2e over its operational life.
The site shows how the use of crops for AD can be integrated
effectively with the processing of agricultural wastes such as
manures. The manures fed into the plant would otherwise be spread
directly onto farmland for its nutrient benefits. By digesting the
manures in the AD facility, energy is extracted in the form of gas
whilst the original nutrients are still present and subsequently
applied to farmland through digestate.
OPERATIONAL AND FINANCIAL REVIEW
Financial performance of the portfolio has been satisfactory,
with above-budget performance from solar and AD, offset by
unusually low average wind speeds in the year.
Key performance measures
The key performance measures for the year ended 31 March 2019
are summarised below:
Year ended Year ended
31 Mar 31 Mar
2019 2018
------------------------------------------------------------------ ----------- -----------
Market capitalisation GBP549.2m GBP394.4m
Dividend per share (declared) 6.51p 6.31p
Share price 110.5p 101.1p
Total shareholder return for the year (share price basis) 16.3% (1.8%)
Net Asset Value GBP520.3m GBP392.4m
Net Asset Value per share 104.7p 99.6p
Net Asset Value per share growth (after adjusting for dividends) 5.1% (0.5%)
Portfolio value GBP523.6m GBP429.5m
Number of investments 28 24
Largest single investment as % of portfolio value 9.0% 10.2%
------------------------------------------------------------------ ----------- -----------
Portfolio performance
Operating performance of the environmental infrastructure
portfolio during the year ended 31 March 2019 was generally
satisfactory, with some exceptions. The renewables segment of the
portfolio produced 746GWh (2018: 514GWh) of green energy. Wind was
the biggest detractor from budget, with generation 9.2% below
budget (2018: 0% variance from budget), primarily due to unusually
low average wind speeds, particularly during the summer months.
Solar generation was 1.6% above budget (2018: 9% below budget),
driven by high solar irradiation throughout the year and
particularly over the summer months. The AD portfolio continued to
outperform, with gas generation 4% above budget (2018: 8% above
budget).
The wind assets experienced good reliability and availability
levels, with the exception of the four wind farms in the portfolio
where operations and maintenance ("O&M") are carried out under
contract with the wind turbine manufacturer Senvion. Senvion's
well-publicised financial difficulties had a knock-on effect in
respect of asset performance. Stretched O&M resource strained
to keep up with routine maintenance and respond to unplanned
outages, prolonging downtime. Three of the four wind farms were
particularly impacted by periods of extended downtime, connected to
unusually long lead times for parts and challenges with getting the
appropriate engineers on site in a timely fashion. Excluding the
Senvion sites from the generation figures, negative variance from
budget was 7%.
The underlying faults at each site have subsequently been
addressed and are not a cause for ongoing concern. However,
Senvion's performance remains a focus for the Investment Adviser
and the Board. Going forward, Senvion look to address the issue
with a recently announced restructuring plan. While it is hoped
restructuring will improve performance, the Investment Adviser
continues to monitor the situation closely and is exploring all
options within the parameters of existing obligations.
Various value enhancement opportunities were implemented across
the wind portfolio during the year. Aftermarket software and
hardware upgrades were agreed for five sites. While it is too soon
to quantify any resultant performance uplift, they are anticipated
to improve generation significantly. This is supported by the
experience at the Dungavel wind farm which has had a full upgrade
and performed impressively during the year allowing for the poor
wind resource. Similar upgrades are currently being explored for
the remaining sites. Lease extension options were agreed for four
Wind sites, affording the ability to extend the operational life of
the respective assets. Contracts for the sale of REGOs were agreed,
providing a new revenue stream for the majority of the wind
sites.
Other asset management plans are currently under review,
including ongoing contract rationalisation, an initiative to
improve the interaction with the grid in order to reduce DNO
charges and increase embedded benefits, data-driven asset
management systems, and O&M initiatives including possible
provision by parties other than the original turbine supplier.
Generation from the solar assets during the year at 79GWh was
1.6% above budget, driven by high irradiation throughout the year
and particularly over the summer months. The majority of the solar
portfolio performed satisfactorily during the year, but the Branden
asset experienced outages associated with transformer and
switchgear faults and a small fire at an inverter station.
Insurance is expected to cover the fire damage, and to mitigate
some of the lost revenues. Excluding Branden from the generation
figures, the solar portfolio would be 3.1% over budget.
Irradiation for the solar portfolio was 6.1% higher than the
long-term average forecast for the portfolio. The main reasons for
the discrepancy between irradiation and generation were high
temperatures negatively impacting the performance of key components
such as panels and inverters, and DNO outages, particularly for the
Welsh sites. The Investment Adviser is focused on understanding
root causes of sub-optimal performance within the solar portfolio
using a testing regime that includes thermography and panel
sampling.
As with the wind portfolio, lease extension options are in place
for four solar assets, enabling the Company to recognise longer
economic lives for those assets. The Investment Adviser continues
to look at the prospects for further extensions.
For the ELWA waste project and the Tay wastewater project,
financial performance has been slightly ahead of expectations.
Operational performance and compliance with contractual targets has
also been good, with no material breaches occurring. Waste tonnages
at the East London waste project have continued to be stable.
Operational performance targets were exceeded with diversion from
landfill at 93.4%, substantially ahead of the 67% contract target,
and recycling at 25%, also ahead of the 22% contract target, and
ELWA was again able to pay distributions slightly ahead of budget.
While the operator has reported some Brexit-related issues with
disposing of the project's residual refuse-derived fuel to European
counterparties, this remains the operator's risk. The insurance
market for waste assets is thin and this has led to some issues in
placing cover, which the Investment Adviser is following closely.
Tay has experienced another year of relatively low wastewater flows
but once again has been able to exercise control over elements of
its costs which has kept performance on track.
The Dumfries and Galloway project was formally terminated on 11
September 2018 in a settlement agreed between the project company,
the Council, lenders and Renewi. Compensation payments were made by
Renewi and the Council. The lenders were repaid in full. Remaining
property lease liabilities were subsequently transferred to Renewi,
and Waste Management Licences were transferred back to the Council
through SEPA. Final tax computations and returns were submitted to
HMRC at the end of Q4. The Company expects to receive around GBP2
million as the remaining proceeds from the winding up of the
project company, an improvement on the position at the last year
end.
Overall, the AD portfolio generation performance for the full
year was around 4% above budget in energy generation terms, with
strong availability of the assets throughout the year. Icknield
continued to maintain its strong performance throughout the year,
exceeding budgeted performance by 16%. Similarly, Vulcan also
maintained a strong overperformance against budget of 5%,
notwithstanding it is currently undergoing construction activity on
site to facilitate its expansion project. Grange Farm performed
marginally above budget in terms of generation.
Merlin and Egmere experienced minor negative variances against
budgeted output due to unplanned downtime or component failures.
The effects of these downtimes were greatly reduced through the
site's operator, Future Biogas, that was able to respond to these
failures and rectify them in a timely manner. Biogas Meden, which
is the newest addition to the AD portfolio, also experienced
various unplanned downtime due to minor component failures, now
resolved.
Wholesale gas price fixing has been achieved for 50% of the gas
volumes for a number of sites with price hedging from December
2018, where gas prices peaked at favourable rates (around 2
pence/kWh) versus current market wholesale prices of just over 1.1
pence/kWh. In total, around 60% of the AD portfolio volume has been
hedged for the next 12 months.
Given the agricultural nature of the feedstock for the AD
plants, availability and cost of feedstock has been an important
aspect of the financial year. With a prolonged cold period in
March-April 2018 and lower than average rainfall (and high
temperatures leading to drought) in the summer of 2018, growing
conditions for feedstocks were unfavourable. The AD plants have
managed the situation through a risk-managed strategy that has been
worked on together with the Investment Adviser and the operators
Future Biogas and at Icknield Gas. Some plants which had stock
buffers were able to use surplus stock from the previous
harvest.
Looking ahead for the year, feedstock will carry on being an
important aspect for consideration. Greater resilience to feedstock
variability is being developed as the fund is able to leverage its
larger AD portfolio by introducing strategic locations for
feedstock storage. The Investment Adviser is also assessing plant
upgrades that are able to process the material more efficiently,
and new technologies in feedstock dosing systems in AD plants,
which allow for improvements in energy production and
consistency.
Apart from the issues noted above, all other projects have
achieved good levels of technical and operational availability
during the year, with no significant operational disruption
experienced. Overall, the generation of the renewable energy assets
in the portfolio since IPO is summarised as follows:
Portfolio generation 2014/15 2015/16 2016/17 2017/18 2018/19 Total
------------------------------------------ -------- -------- -------- -------- -------- ------
Wind portfolio actual generation (GWhe) 82 184 217 399 405 1,287
Variation from budget(1) -7% +11% -15% 0% -9% -5%
Solar portfolio actual generation (GWhe) 10 30 40 64 79 223
Variation from budget(1) -1% --2% -12% -9% +2% -5%
AD portfolio actual generation (GWhth) - - - 51 262 313
Variation from budget - - - +8% +4% +5%
------------------------------------------ -------- -------- -------- -------- -------- ------
(1) Budgets adjusted to reflect operational energy yield
assessments carried out under contracted true-up mechanisms post
IPO.
The average all-in price received by the differing technology
classes in the UK for their energy volumes generated in the year
ended 31 March 2019 was GBP92 per MWh(e) for onshore wind (31 March
2018: GBP78 per MWh(e) ), GBP190 per MWh(e) for solar (31 March
2018: GBP192 per MWhe) and GBP101 per MWh(th) for AD (31 March
2018: GBP93 per MWh(th) ).
The effects of monthly variability and seasonality in production
expected in a portfolio of intermittent renewables projects are
reduced by the overall technology diversification in JLEN's
portfolio. Although agricultural AD plants have some indirect
exposure to weather patterns through the yield of harvests
(feedstock), it is very unlikely to impact on their gas volumes.
The environmental processing assets, apart from Tay, have revenues
independent of weather and all have revenues that vary little with
changes in volume of waste and wastewater processed. Anecdotally,
this was borne out by the portfolio's experience during summer
2018, when wind speeds were low but solar irradiation was very
high. Going forward, the "volumes" sensitivity illustrating the
impact of different levels of weather resource on portfolio
valuation will no longer aggregate wind and solar, as there is no
indication that these weather resources are positively
correlated.
Acquisitions
Since 31 March 2018, the Company has acquired four new projects
for a total consideration of GBP70.3 million, made an additional
investment into an existing project and committed to invest a
further GBP8.5 million into another AD plant. The aggregate
investment of c.GBP78 million was funded through cash available and
drawdowns under the Company's revolving credit facility, which were
subsequently paid down following the Company's successful equity
raise of GBP105 million in October 2018. The assets were as
follows:
Vulcan Renewables Ltd - Expansion works
In June 2018, the Company announced a further investment in the
Vulcan Renewables anaerobic digestion ("AD") plant. The investment
consists of provision of funding of c.GBP8.5 million to
significantly expand the AD plant's biomethane generating capacity.
The plant extension is being carried out by Future Biogas, JLEN's
business partner in the AD sector and current service provider at
the Vulcan site. The works involve converting an existing storage
tank to a primary digester, providing for separate digestate
storage, installing an additional biomethane upgrading unit,
together with associated engineering, electrical and civil works.
The construction works are expected to complete in late 2019.
Operations have continued throughout the year with limited plant
downtime.
Egmere Energy Ltd and Grange Farm Energy Ltd
In July 2018, the Company completed the acquisitions of Egmere
Energy Limited and Grange Farm Energy Limited, for a total
consideration of c.GBP36 million.
The Egmere Energy AD plant is located in Egmere, North Norfolk
and was commissioned in November 2014. The plant has a thermal
capacity of c.5MW and predominantly produces biomethane to be
injected to the national gas grid. In addition, the plant has a
0.5MW CHP engine and is accredited under the Renewable Heat
Incentive ("RHI") and Feed--in Tariff ("FiT") schemes.
The Grange Farm Energy AD plant is located in Spridlington,
Lincolnshire and was commissioned in December 2014. The plant has a
thermal capacity of c.5MW and predominantly produces biomethane to
be injected to the national gas grid. In addition, the plant has a
0.5MW CHP engine and is accredited under the Renewable Heat
Incentive ("RHI") and Feed-in Tariff ("FiT") schemes.
The AD plants have been acquired from venture capital funds
managed by Downing LLP, EIS funds managed by Amersham Investment
Management Ltd and minority shareholders. Future Biogas Limited
will continue to provide management, operations and maintenance
services to the AD plants after the acquisition.
Merlin Renewables Limited
In August 2018, the Company completed the acquisition of Merlin
Renewables Limited for a total consideration, including working
capital, of c.GBP18.1 million.
The Merlin AD plant is located in Hibaldstow, North Lincolnshire
and was commissioned in September 2014. The plant has a thermal
capacity of c.5MW(th) and predominantly produces biomethane to be
injected to the national gas grid. In addition, the plant has a
0.5MW(e) CHP engine and is accredited under the Renewable Heat
Incentive ("RHI") and Feed-in Tariff ("FiT") schemes.
The AD plant has been acquired from venture capital funds
managed by Downing LLP and minority shareholders. Future Biogas
Limited will continue to provide management, operations and
maintenance services to the AD plants after the acquisition.
Biogas Meden Limited
In December 2018, the Company announced the acquisition of its
sixth anaerobic digestion plant, Biogas Meden Limited, for a
consideration of GBP16.2 million.
The AD plant is located around 25 miles south-east of Sheffield,
South Yorkshire and was commissioned in March 2016. The plant has a
thermal capacity of c.5MW(th) and predominantly produces biomethane
to be injected to the national gas grid.
The plant also has a 0.4MW(e) CHP engine and is accredited under
the Renewable Heat Incentive ("RHI") and Feed-in Tariff ("FiT")
schemes. The AD plant has been acquired from a subsidiary of BayWa
r.e. Renewable Energy GmbH. Future Biogas Limited will provide
management, operations and maintenance services to the AD plant
after the acquisition.
Furthermore, during December 2018, JLEAG (UK) increased its
equity stake in Green Gas Oxon Ltd, the holding company of Icknield
Farm Ltd, to 52.6% for a consideration of GBP1 million.
Financing
In June 2017, the Fund signed a new three-year facilities
agreement with HSBC, NIBC, ING and Santander which provides for a
committed revolving credit facility of GBP130 million and for an
uncommitted accordion facility of up to GBP60 million. The facility
has been extended twice, in June 2018 and May 2019, and now will
expire in June 2022.
In May 2019, the fund also increased its borrowing capacity by
GBP40 million of the GBP60 million accordion facility available
within the facilities agreement. The committed revolving facility
now stands at GBP170 million. The facility margin is 200 to 225 bps
(depending on the loan-to-value ratio for the Fund) over LIBOR.
This facility provides JLEN an increased source of flexible
funding outside of equity raisings at a lower cost. It will be used
to make future acquisitions of environmental infrastructure
projects to add to JLEN's current portfolio of wind, solar,
anaerobic digestion, and waste & wastewater processing assets,
on a timely basis, reducing the performance drag associated with
holding excess cash. As at the year end, drawings under the RCF
were GBP16.7 million. Under its investment policy, JLEN may borrow
up to 30% of its NAV.
In addition to the revolving credit facility, several of the
projects have underlying project-level debt which is not reflected
in these financial statements. There is an additional gearing limit
in respect of such debt of 85% of the aggregate gross project value
(being the fair market value of such portfolio companies increased
by the amount of any financing held within the projects) for
PFI/PPP projects and 65% for renewable energy generation
projects.
The project-level gearing at 31 March 2019 across the portfolio
was 33.7% (31 March 2018: 39.1%) being 28.1% (31 March 2018: 32.9%)
for the renewable energy assets and 52.7% (31 March 2018: 56.4%)
for the PFI processing assets. Taking into account the amount drawn
down under the revolving credit facility of GBP16.7 million, the
overall fund gearing at 31 March 2019 was 35.7% (31 March 2018:
45.4%).
As at 31 March 2019, the Group, which comprises the Company and
the intermediate holding companies, had cash balances of GBP11.4
million (31 March 2018: GBP11.8 million).
Analysis of financial results
The financial statements of the Company for the year ended 31
March 2019 are set out below.
The Company prepared the financial statements for the year ended
31 March 2019 in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU and IFRS as issued by the
International Accounting Standard Board. In order to continue
providing useful and relevant information to its investors, the
financial statements also refer to the "Group", which comprises the
Company, its wholly owned subsidiary (John Laing Environmental
Assets Group (UK) Limited ("UK HoldCo")) and the indirectly held
wholly owned subsidiaries HWT Limited (which holds the investment
interest in the Tay project) and JLEAG Solar 1 Limited (which holds
the investment interest in the Panther solar portfolio).
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 28 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).
Results for the year ended 31 March 2019
Year ended Year ended
31 Mar 31 Mar
All amounts presented in GBPmillion (except as noted) 2019 2018
------------------------------------------------------------ ---------- ----------
Net assets(1) 520.3 392.4
Portfolio value(2) 523.6 429.5
Intermediate holding companies' net (liabilities)/assets(2) (3.6) (41.0)
Operating income 59.2 26.1
Net assets per share 104.7p 99.6p
Distributions, repayments and fees from portfolio 43.6 33.4
Profit before tax 53.4 21.1
------------------------------------------------------------ ---------- ----------
(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 GBP392.4 million at 31 March 2018 to
GBP520.3 million at 31 March 2019, primarily driven by the capital
raises used for acquisitions and value enhancements during the
year.
The net assets of GBP520.3 million comprise GBP523.6 million
portfolio value of environmental infrastructure investments and the
Company's cash balances of GBP1.9 million, partially offset by
GBP3.6 million of intermediate holding companies' net liabilities
and other net liabilities of GBP1.6 million.
The intermediate holding companies' net liabilities of GBP3.6
million comprises a GBP16.7 million credit facility loan, partially
offset by cash balances of GBP9.5 million and other net assets of
GBP3.6 million.
Analysis of the Group's net assets at 31 March 2019
At 31 Mar At 31 Mar
All amounts presented in GBPmillion (except as noted) 2019 2018
---------------------------------------------------------- ----------- -----------
Portfolio value 523.6 429.5
Intermediate holding companies' cash 9.5 6.3
Intermediate holding companies' revolving credit facility (16.7) (48.4)
Intermediate holding companies' other assets 3.6 1.1
---------------------------------------------------------- ----------- -----------
Fair value of the Company's investment in UK HoldCo 520.0 388.5
---------------------------------------------------------- ----------- -----------
Company's cash 1.9 5.5
Company's other liabilities (1.6) (1.6)
---------------------------------------------------------- ----------- -----------
Net Asset Value at 31 March 520.3 392.4
---------------------------------------------------------- ----------- -----------
Number of shares 497,018,205 394,077,029
Net Asset Value per share 104.7p 99.6p
---------------------------------------------------------- ----------- -----------
At 31 March 2019, the Group (the Company plus intermediate
holding companies) had a total cash balance of GBP11.4 million (31
March 2018: GBP11.8 million), including GBP1.9 million in the
Company's balance sheet (31 March 2018: GBP5.5 million) and GBP9.5
million in the intermediate holding companies (31 March 2018:
GBP6.3 million), which is included in the Company's balance sheet
within "investments at fair value though profit or loss".
At 31 March 2019, UK HoldCo had drawn GBP16.7 million of its
revolving credit facility (31 March 2018: GBP48.4 million) which is
included in the Company's balance sheet within "investments at fair
value through profit or loss".
The movement in the portfolio value from 31 March 2018 to 31
March 2019 is summarised as follows:
Year ended Year ended
31 Mar 31 Mar
All amounts presented in GBPmillion (except as noted) 2019 2018
--------------------------------------------------------- ---------- ----------
Portfolio value at start of the year 429.5 327.6
Acquisitions (net of post-acquisition price adjustments) 77.5 107.2
Distributions received from investments (43.6) (33.4)
Growth in value of portfolio 60.2 28.1
--------------------------------------------------------- ---------- ----------
Portfolio value at 31 March 523.6 429.5
--------------------------------------------------------- ---------- ----------
Further details on the portfolio valuation and an analysis of
movements during the year are provided in the investment portfolio
and valuation section below.
Income
The Company's profit before tax for the year ended 31 March 2019
is GBP53.4 million, generating earnings of 12.2 pence per
share.
Year ended Year ended
31 Mar 31 Mar
All amounts presented in GBPmillion (except as noted) 2019 2018
------------------------------------------------------ ---------- ----------
Interest received on UK HoldCo loan notes 24.1 18.6
Dividend received from UK HoldCo 7.3 10.4
Net gains/(losses) on investments at fair value 27.9 (2.9)
------------------------------------------------------ ---------- ----------
Operating income 59.3 26.1
------------------------------------------------------ ---------- ----------
Operating expenses (5.9) (5.0)
------------------------------------------------------ ---------- ----------
Profit before tax 53.4 21.1
------------------------------------------------------ ---------- ----------
Earnings per share 12.2p 5.7p
------------------------------------------------------ ---------- ----------
In the year to 31 March 2019, the operating income was GBP59.3
million, including the receipt of GBP24.1 million of interest on
the UK HoldCo loan notes, GBP7.3 million of dividends also received
from UK HoldCo and a net gain on investments at fair value of
GBP27.9 million.
The operating expenses included in the income statement for the
year were GBP5.9 million, in line with expectations. These comprise
GBP5.0 million Investment Adviser fees and GBP0.9 million operating
expenses. The details on how the Investment Adviser fees are
charged are as set out in note 15 to the financial statements.
Ongoing charges
The "ongoing charges" ratio is an indicator of the costs
incurred in the day--to--day management of the Fund. JLEN uses the
AIC-recommended methodology for calculating this ratio, which is an
annual figure.
The ongoing charges percentage for the year to 31 March 2019 was
1.26% (year ended 31 March 2018: 1.31%). 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.
Adjusting for the impact of the drawdown amount under the revolving
credit facility, the ongoing charges ratio would be 1.14% (31 March
2018: 1.18%). JLCM believes this to be competitive for the market
in which JLEN operates and the stage of development and size of the
Fund, demonstrating 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 2019 of GBP1.9
million (31 March 2018: GBP5.5 million). The breakdown of the
movements in cash during the year is shown below.
Cash flows of the Company for the year (GBPmillion):
Year ended Year ended
31 Mar 31 Mar
2019 2018
------------------------------------------------ ---------- ----------
Cash balance at 1 April 5.5 4.2
Net proceeds from share issues 103.1 54.7
Investment in UK HoldCo (equity and loan notes) (103.7) (54.5)
Interest on loan notes received from UK HoldCo 24.1 18.6
Dividends received from UK HoldCo 7.3 10.4
Directors' fees and expenses (0.2) (0.3)
Investment Adviser fees (4.8) (3.9)
Administrative expenses (0.6) (0.6)
Dividends paid in cash to shareholders (28.8) (23.1)
------------------------------------------------ ---------- ----------
Company cash balance at 31 March 1.9 5.5
------------------------------------------------ ---------- ----------
The Group had a total cash balance at 31 March 2019 of GBP11.4
million (31 March 2018: GBP11.8 million) and borrowings under the
revolving credit facility of GBP16.7 million (31 March 2018:
GBP48.4 million). The breakdown of the movements in cash during the
year is shown below.
Cash flows of the Group for the year (GBPmillion):
Year ended Year ended
31 Mar 31 Mar
2019 2018
------------------------------------------------------------------------- ---------- -----------
Cash distributions from environmental infrastructure investments 43.6 33.4
Administrative expenses (1.0) (0.7)
Directors' fees and expenses (0.2) (0.3)
Investment Adviser fees (4.8) (3.9)
Financing costs (net of interest income) (2.0) (1.6)
------------------------------------------------------------------------- ---------- -----------
Cash flow from operations 35.6 26.9
Net proceeds from share issues 103.1 54.7
Acquisition of investment assets (76.7) (108.5)
Reduction in acquisition price 0.2 3.7
Acquisition costs (including stamp duty) (1.2) (2.5)
Short-term projects debtors (0.5) -
Debt arrangement fee cost (0.4) (1.4)
(Repayment)/proceeds from borrowings under the revolving credit facility (31.7) 35.9
Dividends paid in cash to shareholders (28.8) (23.1)
------------------------------------------------------------------------- ---------- -----------
Cash movement in the year (0.4) (14.3)
Opening cash balance 11.8 26.1
------------------------------------------------------------------------- ---------- -----------
Group cash balance at 31 March 11.4 11.8
------------------------------------------------------------------------- ---------- -----------
During the year, the Group received cash distributions of
GBP43.6 million from its environmental infrastructure investments,
in line with the distributions expected by the Group after
adjusting for acquisitions during the year.
Cash received from investments in the year adequately 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 2019. Cash flow from operations of the Group of
GBP35.6 million covers dividends paid in the year to 31 March 2019
of GBP28.8 million by 1.2x. The dividend cover based on dividends
declared in respect of the year to 31 March 2019 was 1.2x.
The Group anticipates that future revenues from its
environmental infrastructure investments will continue to be in
line with expectations and therefore will continue to fully cover
future costs as well as planned dividends payable to its
shareholders.(1)
Dividends
During the year, the Company paid a final dividend of 1.5775
pence per share in June 2018 (GBP6.2 million) in respect of the
quarter to 31 March 2018.
Interim dividends of 1.6275 pence per share were paid in
September 2018 (GBP6.4 million) in respect of the quarter to 30
June 2018, of 1.6275 pence per share in December 2018 (GBP8.1
million) in respect of the quarter to 30 September 2018, and of
1.6275 pence per share in March 2019 (GBP8.1 million) in respect of
the quarter to 31 December 2018. On 30 May 2019, the Company
declared an interim dividend of 1.6275 pence per share in respect
of the quarter ended 31 March 2019 (GBP8.1 million), which is
payable on 28 June 2019.
The target dividend for the year to 31 March 2020 is 6.66 pence
per share, being the amount declared in respect of the year to 31
March 2019 of 6.51 pence per share, adjusted for inflation.(1)
INVESTMENT PORTFOLIO AND VALUATION
Portfolio value increased to GBP523.6 million at 31 March 2019
from GBP429.5 million at 31 March 2018.
Investment portfolio
At 31 March 2019, the Group's investment portfolio comprised of
interests in 28 project vehicles:
Commercial
operations
Asset Location Type Ownership Capacity (MWs) date
------------------- ---------- ----------------- --------- -------------- -----------
Amber UK (Eng) Solar 100% 9.8 Jul 2012
Branden UK (Eng) Solar 100% 14.7 Jun 2013
Mar 2014 &
CSGH UK (Eng) Solar 100% 33.5 15
Monksham UK (Eng) Solar 100% 10.7 Mar 2014
Panther UK (Eng) Solar 100% 6.5 2011-2014
Pylle Southern UK (Eng) Solar 100% 5.0 Dec 2015
Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Burton Wold
Extension UK (Eng) Wind 100% 14.4 Sept 2014
Carscreugh UK (Scot) Wind 100% 15.3 Jun 2014
Castle Pill UK (Wal) Wind 100% 3.2 Oct 2009
Dungavel UK (Scot) Wind 100% 26.0 Oct 2015
Ferndale UK (Wal) Wind 100% 6.4 Sep 2011
Hall Farm UK (Eng) Wind 100% 24.6 Apr 2013
Le Placis
Vert France Wind 100% 4.0 Jan 2016
Llynfi Afan UK (Wal) Wind 100% 24 Mar 2017
Moel Moelogan UK (Wal) Wind 100% 14.3 2003 & 08
New Albion UK (Eng) Wind 100% 14.4 Jan 2016
Plouguernével France Wind 100% 4.0 May 2016
Wear Point UK (Wal) Wind 100% 8.2 Jun 2014
Anaerobic
Biogas Meden UK (Eng) digestion 100% 5.0(1) Mar 2016
Anaerobic
Egmere UK (Eng) digestion 100% 5.0(2) Nov 2014
Anaerobic
Grange UK (Eng) digestion 100% 5.0(2) Sept 2034
Anaerobic
Icknield UK (Eng) digestion 53% 5.0(1) Dec 2014
Anaerobic
Merlin UK (Eng) digestion 100% 5.0(2) Dec 2013
Anaerobic
Vulcan UK (Eng) digestion 100% 5.0(2) Oct 2013
Dumfries & UK (Scot) Waste management 80% n/a 2007
Galloway
ELWA UK (Eng) Waste management 80% n/a 2006
Tay UK (Scot) Wastewater 33% n/a Nov 2001
------------------- ---------- ----------------- --------- -------------- -----------
Total 279.2
------------------------------------------------ --------- -------------- -----------
(1) MWth (thermal) and an additional 0.4MWe CHP engine for on-site power provision.
(2) MWth (thermal) and an additional 0.5MWe CHP engine for on-site power provision.
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 2019 was
GBP523.6 million, compared to GBP429.5 million at 31 March 2018.
The increase of GBP94.1 million is the net impact of new
acquisitions, cash received from investments, changes in
macroeconomic, power price and discount rate assumptions, and
underlying growth in the portfolio.
The movement in value of investments during the year ended 31
March 2019 is shown in the table below:
2019 2018
GBPm GBPm
--------------------------------------------------------------------------------------------- ------ ------
Valuation of portfolio at opening balance 429.5 327.6
Acquisitions in the year (including post-acquisition adjustments and deferred consideration) 77.5 107.2
Cash distributions from portfolio (43.6) (33.4)
--------------------------------------------------------------------------------------------- ------ ------
Rebased opening valuation of portfolio 463.4 401.4
Changes in forecast power prices 4.8 (17.4)
Changes in economic assumptions (0.9) 2.9
Changes in discount rates 11.6 7.2
Changes in exchange rates (0.1) 0.1
Balance of portfolio return 44.8 35.3
--------------------------------------------------------------------------------------------- ------ ------
Valuation of portfolio at 31 March 523.6 429.5
Fair value of intermediate holding companies (3.6) (41.0)
--------------------------------------------------------------------------------------------- ------ ------
Investments at fair value through profit or loss 520.0 388.5
--------------------------------------------------------------------------------------------- ------ ------
Allowing for investments of GBP77.5 million (including
post-acquisition adjustments and deferred consideration) and cash
receipts from investments of GBP43.6 million, the rebased valuation
is GBP463.4 million. The portfolio valuation at 31 March 2019 is
GBP523.6 million (2018: GBP429.5 million), representing an increase
over the rebased valuation of 13% over the year (2018: 7.0%).
Valuation assumptions
The investments in JLEN's portfolio are valued by discounting
the future cash flows forecast by the underlying assets' financial
models.
Each movement between the rebased valuation and the 31 March
2019 valuation is considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 31
March 2019 reflect contractual fixed price arrangements under PPAs,
where they exist, and short--term market forward prices for the
next two years where they do not. The Company maintains a programme
of rolling price fixes for its wind and solar projects, typically
having the majority of projects on fixed price arrangements for the
next six to 12 months in order to reduce the revenue risk from
price volatility.
Where generating projects in the portfolio do not have a fixed
price under their PPAs, JLEN has reflected the prices in the table
below (gross of PPA discounts):
Avg. GBP/MWh Summer Winter
------------- ------- -------
Electricity 46 (43) 55 (49)
Gas 14 (14) 18 (17)
------------- ------- -------
At 31 March 2019, 72% of the renewable energy portfolio's
electricity price exposure was subject to a fixed price for the
summer 2019 season and 42% for the winter season 2019/20.
After the initial two-year period, the project cash flows assume
future electricity and gas prices in line with a blended curve
informed by the central forecasts from two established market
consultants, adjusted by the Investment Adviser for
project-specific arrangements and price cannibalisation as
required. This is a change in valuation policy from the year ended
31 March 2018, where electricity and gas price assumptions were
based on the forecast of a single market consultant. The Directors
have adopted the new policy to bring the Company in line with the
majority of other funds within the listed renewables sector to aid
comparison and also with the intention of reducing the volatility
observed in portfolio valuations due to reflecting additional views
on medium and long-term electricity and gas prices. This policy was
introduced at the half-year valuation to 30 September 2018 and
resulted in an increase in NAV per share at the time of 2.3
pence.
JLEN has reflected an increase in near-term electricity price
expectations partially offset by a decline in mid to long-term
forecasts. Compared to the assumptions used in the valuation at 31
March 2018, on a time-weighted average basis, the net increase in
the electricity price assumptions is approximately 6.7% over a
25-year period (being a simple average decrease over 25 years of
approximately 1.9% offset by an increase in market forward prices
(gross of any discounts under PPAs) over the next two years of
17.5%).
The overall change in forecasts for future electricity and gas
prices compared to forecasts at 31 March 2018 has increased the
valuation of the portfolio by GBP4.8 million.
The Company uses slightly different curves for wind and solar
projects based on the generation profile, the Company's experience
of actual capture rates, and expectations of future price
cannibalisation resulting from increased penetration of low
marginal cost, intermittent generators on the GB network.
Economic assumptions
Macroeconomic assumptions in respect of inflation, corporation
tax and deposit interest rates have remained relatively constant
during the year and the overall movement in valuation is not
significant. RPI inflation rates assumed in the valuation at 31
March 2019 are 3.2% in 2019/20 (31 March 2018: 3.5%), 3.2% in
2020/21 (31 March 2018: 3.1%) with 2.75% for all subsequent years,
whilst CPI is assumed at a long-term rate of 2% for UK assets, and
1.5% for 2019 and all subsequent years (31 March 2018: 1.5%) for
the French assets. The long--term UK corporation tax rate assumed
is 19%, stepping down to 17% from April 2020 onwards, reflecting
the rates enacted by legislation and in line with market practice.
The equivalent rate for the French assets is 28% (31 March 2018:
28%) stepping down to 26.5% in 2021 and 25% in 2022 (31 March 2018:
step down to 26.5% in 2020 and 25% in 2021). Deposit rates assumed
in the valuation reflect a range of deposit rates in the UK from
1.75% in 2019/20 and a long--term rate of 2.5% thereafter (31 March
2018: 2.5%). For the French assets, the rate assumed is 0.5% (31
March 2018: 0.5%). The euro/sterling exchange rate used to value
the euro--denominated investments in France was EUR1.16/GBP1 at 31
March 2019 (EUR1.14/GBP1 at 31 March 2018).
Discount rates
The discount rates used in the valuation exercise represent the
Investment Adviser's and Board's assessment of the rate of return
in the market for assets with similar characteristics and risk
profile. The discount rates are reviewed on a regular basis and
updated to reflect changes in the market and in the project risk
characteristics.
During the year, there has continued to be strong demand for
income--producing infrastructure assets, including environmental
infrastructure projects as their market matures. The Investment
Adviser, based on its experience of bidding in the secondary market
and as flagged within the half-year Investment Adviser report, has
proposed a reduction in the discount rate used for valuing UK
agricultural AD projects which has been adopted by the Board. In
addition to this, the levered discount rate applied to assets
within the combined UK wind and solar portfolio refinancing has
also been reduced, reflecting the lower risk profile for these
assets. The majority of the solar assets within the portfolio are
ungeared, and the read-across from geared to ungeared discount
rates (based on a market--norm level of gearing) suggests that
these too are reducing and the Investment Adviser will continue to
monitor for future valuations.
Taking the above into account and reflecting the change in mix
of the portfolio during the year, the overall weighted average
discount rate ("WADR") of the portfolio was 7.9% at 31 March 2019
(31 March 2018: 8.1%).
Balance of portfolio return
This represents the balance of valuation movements in the year
excluding the factors noted above. The balance of the portfolio
return mostly reflects the impact on the rebased portfolio value,
all other measures remaining constant, of the effect of the
discount rate unwinding and also some additional valuation
adjustments from updates to individual project revenue assumptions.
The total represents an uplift of GBP44.8 million.
Of this, the key valuation adjustments include an uplift of
GBP8.5 million (1.7 pence per share) from the successful
refinancing of a 180MW combined portfolio of wind and solar assets,
an uplift of GBP8.4 million (1.7 pence per share) from the
recognition of life extensions on eight projects where the Company
has land rights that permit an additional period of operations, and
a reduction in value of GBP8.4 million (1.7 pence per share) from
recognition of Ofgem's Targeted Charging Review ("TCR") that aims
to change the way in which the costs of the electricity network are
shared between consumers and different types of generators.
Valuation sensitivities
The Net Asset Value of the Company is the sum of the discounted
value of the future cash flows of the underlying asset financial
models, the cash balances of the Company and UK HoldCo, and the
other assets and liabilities of the Group less Group debt.
The portfolio valuation is the largest component of the Net
Asset Value and the key sensitivities are considered to be the
discount rate applied in the valuation of future cash flows and the
principal assumptions used in respect of future revenues and
costs.
A broad range of assumptions is used in our valuation models.
These assumptions are based on long--term forecasts and are not
affected by short--term fluctuations in inputs, whether economic or
technical. The Investment Adviser exercises its judgement in
assessing both the expected future cash flows from each investment
based on the project's life and the financial models produced by
each project company and the appropriate discount rate to
apply.
The key assumptions are as follows:
Discount rate
The WADR of the portfolio at 31 March 2019 was 7.9% (31 March
2018: 8.1%). A variance of plus or minus 0.5% is considered to be a
reasonable range of alternative assumptions for discount rates.
Volumes
Base case forecasts for intermittent renewable energy projects
assume a "P50" level of electricity output based on reports by
technical consultants. The P50 output is the estimated annual
amount of electricity generation (in MWh) that has a 50%
probability of being exceeded - both in any single year and over
the long term - and a 50% probability of being underachieved. Hence
the P50 is the expected level of generation over the long term.
The P90 (90% probability of exceedance over a 10--year period)
and P10 (10% probability of exceedance over a 10--year period)
sensitivities reflect the future variability of wind and solar
irradiation and the uncertainty associated with the long--term data
source being representative of the long--term mean.
Separate P10 and P90 sensitivities are determined for each asset
and historically the results presented on the basis they are
applied in full to all wind and solar assets. This implies
individual project uncertainties are completely dependent on one
another; however, a recent Portfolio Uncertainty Benefit analysis
performed in the year by a third-party technical adviser,
identified a positive portfolio effect from investing in a
diversified asset base. That is to say that the lack of correlation
between wind and solar variability means P10 and P90 sensitivity
results should be considered independent. Therefore, whilst the
overall P90 sensitivity decreases NAV by 8.1 pence, the impact from
solar and wind separately is only 1.9 pence and 6.2 pence
respectively.
Agricultural anaerobic digestion facilities do not suffer from
similar deviations as their feedstock input volumes (and
consequently biogas production) are controlled by the site
operator.
For the waste and wastewater processing projects, forecasts are
based on projections of future flows and are informed by both the
client authorities' own business plans and forecasts and
independent studies where appropriate. Revenues in the PPP projects
are generally not very sensitive to changes in volumes due to the
nature of their payment mechanisms.
Electricity and gas prices
Electricity and gas price assumptions are based on the
following: for the first two years, cash flows for each project use
forward electricity and gas prices based on market rates unless a
contractual fixed price exists, in which case the model reflects
the fixed price followed by the forward price for the remainder of
the two--year period. For the remainder of the project life, a
long--term blend of central case forecasts from two established
market consultants and other relevant information is used, and
adjusted by the Investment Adviser for project-specific
arrangements. The sensitivity assumes a 10% increase or decrease in
power prices relative to the base case for each year of the asset
life after the first two--year period.
Feedstock prices
Feedstock accounts for over half of the operating costs of
running an AD plant. As feedstocks used for AD are predominantly
crops grown within existing farming rotation, they are exposed to
the same growing risks as any agricultural product. The sensitivity
assumes a 10% increase or decrease in feedstock prices relative to
the base case for each year of the asset life.
Inflation
Each project in the portfolio receives a revenue stream which is
either fully or partially inflation--linked. The inflation
assumptions are described in the macroeconomic section below. The
sensitivity assumes a 0.5% increase or decrease in inflation
relative to the base case for each year of the asset life.
Euro/sterling exchange rates
As the proportion of the portfolio assets with cash flows
denominated in euros represented approximately less than 1% of the
portfolio value at 31 March 2019, the Directors consider the
sensitivity to changes in euro/sterling exchange rates to be
insignificant.
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 continued political and economic uncertainty in the UK with
regard to its relationship with Europe underlines the importance of
the Company's strategy of investing in a diversified portfolio of
assets in the wider environmental infrastructure sector. We believe
the Company's portfolio can offer resilience against this unsettled
backdrop, providing consistent and achievable long-term income.
In recent months in the UK we have witnessed how important the
government's action over climate change is to the general public.
The sentiment is that inaction is not an option and the UK
Government's policy commitments for clean energy and climate change
remains of crucial importance. We believe this will translate
itself into the development of new environmental infrastructure
and, in turn, an opportunity for JLEN to grow its diversified
portfolio of assets. In the Chancellor's 2019 Spring Statement we
have seen how attention is now being given to the "greening" of our
gas network to tackle the contribution carbon intensive heating can
have on meeting emission targets. The Committee on Climate Change
set out in its recent report that Britain should cease to
contribute to global warming by 2050 and reduce greenhouse gas
emissions to "net zero". Most accept that to achieve the highly
ambitious target of zero carbon emissions by 2050 would require
multiple policy levers, such as change in social patterns, societal
improvements, energy efficiency measures, changes in the fuels we
use for heat and transport, zero carbon power production alongside
carbon capture and storage. This would require major changes to the
way we work and live. However, many of the routes to a zero-carbon
future, such as the scaling of green energy technologies including
wind, solar, waste management and biogas production, are already
taking shape today. We believe this provides a compelling
opportunity for investors such as JLEN to capitalise on the
continued growth of large-scale, commercialised environmental
infrastructure.
Short-term electricity prices have been buoyant and we have
taken advantage of this by locking-in fixed prices across a number
of our projects. However, the longer--term outlook for electricity
prices has softened, informed in part by the low prices bid into
auctions for new plants seeking subsidies throughout Europe. In the
UK, the strike prices for the next Contract for Difference ("CfD")
auction for offshore wind is at an all-time low of GBP53/MWh for
projects delivering in 2024/25, a target many within the industry
expect to be undercut during the auction process. This is against a
backdrop of the auction in 2015 delivering prices of
GBP114/MWh.
We see continued fierce competition for assets in UK markets,
with every indication that pricing not only for core renewable
sectors, but also now more niche asset classes, is rising. Despite
this backdrop, the Investment Adviser continues to see good levels
of potential transactions in the market and participates on
occasion, but remains committed to observing the Company's
investment requirements and not overpaying for assets. It continues
to explore the boundaries of the investment mandate in terms of
asset classes, business models and financial structures in order to
deliver growth and acceptable returns. This is likely to include
technologies that do not currently feature in the portfolio but
clearly exhibit the characteristics of well-established
technologies, such as biomass combustion and hydro projects. Newer
technologies that are likely to play a key part in the future
energy mix are also being considered, including batteries and other
forms of flexible generation.
Similarly, as the investment mandate covers OECD countries, it
follows that consideration should also be given to compelling
opportunities in stable, well-understood international markets that
meet our investment requirements. Whilst the UK remains the focus,
the investment adviser believes that selective acquisitions in new
geographies will help to provide attractive diversification to
JLEN's portfolio.
Although smaller in number, the Investment Adviser has been
pleased with the level of environmental infrastructure
opportunities outside of wind and solar that it has seen. During
the year, JLEN has continued to invest into the anaerobic digestion
sector through its acquisitions of Grange Farm, Egmere Energy,
Merlin Renewables and Biogas Meden. These assets are very similar
to our first two acquisitions in this asset class and we can now
start to recognise the benefits of managing a broader portfolio
where operational learnings can be applied. Anaerobic digestion
projects present a different risk/return profile to wind and solar
projects, with relatively high proportions of index-linked subsidy
revenue and exposure to different climatic conditions. The
Investment Adviser believes that the Company is an attractive
counterparty and will continue to analyse opportunities in this
space and the broader environmental sector that fit in with the
uniquely broad remit of this fund.
JLEN has the benefit of a First Offer Agreement with John Laing
over a 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 of over GBP200 million (as
estimated by John Laing) will become available for acquisition by
the Fund within the period to 31 December 2020. This includes wider
environmental infrastructure projects, including biomass.
This First Offer Agreement remains in place despite the change
of Investment Adviser from JLCM to Foresight Group that the Company
announced on 5 June 2019, post the balance sheet date.
The Investment Adviser continues to deliver on a programme of
value enhancement initiatives throughout the portfolio. These
performance improvements have come through the delivery of
operational efficiencies, technology advancements and prudent
portfolio and financial management. The Investment Adviser provides
a dedicated asset management team with specific industry experience
in our core sectors. They are currently pursuing a number of
avenues which should boost the value of the portfolio, including
plant expansion, upgrades to equipment and life extension
opportunities. We consider that these opportunities should increase
in number and value as the portfolio grows and innovation continues
in environmental infrastructure sectors where the Company
invests.
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 Company'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 Prospectus 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, comprising 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. These systems of
internal control were in place for the year under review and up to
the date of the Annual Report.
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 red, orange, amber or green
categorisation to prioritise and focus JLEN's risk management
policies and procedures:
-- red - very likely to occur or has occurred in the recent
past, with a significant potential impact on the Group's
stakeholders, reputation and/or financial standing if the risk
occurred;
-- orange - a non-negligible chance of occurring, with a material impact if it did occur;
-- amber - more likely to occur than green, with a medium impact if the risk did occur; or
-- green - unlikely to occur and with a 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 risks faced by the Group are
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 or contracts manager who reports
to their individual project board. The general and contract
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, business, processes and resourcing;
-- 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
------------------------------- -------------------------------------- ---------------------------------------
1 -- The underlying assets -- Returns from the assets
Inflation and interest in the portfolio, and therefore in the portfolio are highly
rates the returns expected from correlated with inflation
them, have some exposure due to revenues from PFI
to inflation. assets, green benefits
-- The Company has some for renewable energy assets
interest rate exposure, and most operational costs
through its own cash deposits being directly linked to
and bank funding (UK Holdco an inflation index. This
revolving credit facility) results in a "natural hedge",
and deposits and funding removing the need for the
within the projects themselves. use of derivatives to mitigate
inflation risk.
-- 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.
-- The revolving credit
facility has a floating
interest charge over LIBOR
but this is mitigated as
the facility provides short-term
finance prior to being
repaid with capital raise
proceeds.
------------------------------- -------------------------------------- ---------------------------------------
2 -- JLEN's intention is -- JLEN continually receives
Acquisitions and pipeline to grow the portfolio through and seeks opportunities
the acquisition of further from the wider secondary
environmental infrastructure market and developers,
projects. However, there both in the UK and overseas.
is a risk that a pipeline -- JLEN benefits from a
of acquisitions does not First Offer Agreement with
materialise. John Laing, giving it the
right of first offer over
a pipeline of environmental
infrastructure, projects,
valued by John Laing at
approximately GBP200 million
for the period to 31 December
2020.
------------------------------- -------------------------------------- ---------------------------------------
3 -- There is a risk that -- JLEN has a three--year
Funding of acquisitions JLEN is unable to achieve GBP130 million revolving
and future equity fundraising its stated ambition of credit facility (increased
growing the portfolio by to GBP170 million in May
acquiring new assets due 2019) providing short--term
to a lack of funding, both finance to pursue acquisitions.
from corporate debt and This is used to finance
equity capital from investors. acquisitions prior to raising
capital, mitigating the
risk of inadequate funding
affecting growth.
-- Investors have been
supportive of the infrastructure
class in general and the
environmental infrastructure/renewable
energy class in particular,
with recent capital raises
by environmental infrastructure
funds confirming the appetite
investors have for infrastructure
as an asset class. A number
of economic factors, including
interest rate increases,
could reduce the investors'
appetite in future equity
fundraising.
------------------------------- -------------------------------------- ---------------------------------------
4 -- There is a risk that -- The Investment Adviser
Refinancing of existing JLEN is unable to refinance closely monitors the liquidity
medium-term project finance any or all of its project-level in the capital markets
facilities which fall subject and, should credit not
to a full repayment demand be forthcoming, could consider
rather than following the i) raising further equity
pre-agreed amortisation capital to repay the SPV
schedule used to size the level debt or ii) consider
original debt level. an asset sale to a third
party with a differing
capital funding structure.
-- The recent wind and
solar projects refinancing
removed the financing risk
associated with the previous
wind projects facilities
which had a legal maturity
date of March 2021.
------------------------------- -------------------------------------- ---------------------------------------
5 -- JLEN, in pursuing investment -- JLEN differentiates
Competition opportunities and in seeking itself from its peer group
to raise further capital, in a number of ways, including
competes against a number its investment policy of
of other listed and private investing in a diversified
infrastructure funds. There range of environmental
is a risk that such competition infrastructure technologies
could limit growth of the and revenue streams, its
Company. aim to only raise capital
against committed investments
and through its First Offer
Agreement with John Laing.
------------------------------- -------------------------------------- ---------------------------------------
6 -- Under its investment -- Should either of these
Future of UK capital spending policy, JLEN is required risks materialise, the
to hold at least 50% of immediate impact on JLEN
its portfolio by value and the secondary PPP/renewable
in UK assets. JLEN therefore energy market would be
has a significant interest small as there is sufficient
in the future of UK infrastructure deal flow in the UK market
spending. Government financial to sustain this space in
support for new renewable the short to medium term,
energy and environmental as primary participants
processing assets has reduced seek to recycle equity
significantly in recent to reinvest in new infrastructure
years and there is a risk projects.
that spending is either -- In addition, JLEN has
reduced or stopped altogether the ability to mitigate
or that the model used the impact of a slowdown
to procure environmental in UK deal flow through
infrastructure and/or renewable overseas acquisitions in
energy projects offers order to diversify the
a risk profile that would portfolio and reduce its
not allow JLEN to invest reliance on the UK for
under its investment policy. investment opportunities.
------------------------------- -------------------------------------- ---------------------------------------
7 -- In June 2016, the UK -- At this stage it is
UK referendum on EU membership voted in favour of leaving not clear what the precise
the EU and on 29 March impact on the UK environmental
2017 formally notified infrastructure industry
the European Council of will be of an exit from
its intention to leave the EU. The UK Government
the EU under Article 50 remains committed to UK
of the Lisbon Treaty. In infrastructure development
March 2019, by agreement and there continues to
with the EU, the UK extended be evidence that investors
its Brexit deadline. As see listed infrastructure
a result of this outcome as a "safe haven" in times
there is likely to be a of market turbulence. The
prolonged period of market mitigation measures for
uncertainty as the exact the principal macroeconomic
details are negotiated risks are those described
between the UK Government above in relation to inflation
and the rest of the EU, and interest rates. Given
which could result in adverse the current level of investment
conditions for JLEN and in non-UK assets, JLEN
an increase in the risks has a non-significant exposure
noted in this section, to changes in exchange
particularly volatility rates. And whilst the UK
in macroeconomic indicators Government may not in future
such as inflation and interest be bound by EU-set renewable
rates and changes in regulations. obligations, the UK is
-- In response to the decision still bound by national
by the UK to leave the and international renewable
EU, in March 2017 the Scottish obligations including the
Parliament voted in favour 2008 Climate Change Act.
of seeking a second Scottish As such, JLEN believes
independence referendum, that a low carbon and renewable
although the UK Government energy generation agenda
has indicated such a vote will remain a key part
should not occur before of UK policy.
the UK has formally left -- Regarding a Scottish
the EU. Scottish independence referendum, JLEN will continue
might impact its renewable to monitor the situation
market and its currency as it develops and will
should it leaves its current identify potential risks
sterling currency. when the likely course
of events becomes clearer
and it is possible to assess
their nature and extent.
------------------------------- -------------------------------------- ---------------------------------------
Operational, business, processes and resourcing
----------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation
------------------------------- -------------------------------------- ---------------------------------------
8 -- By the very nature of -- For renewable energy
Volume of resource environmental infrastructure projects there is a degree
projects, their financial of protection from this
performance is dependent variability in weather
on the volume of resource resource from portfolio
available, be it solar diversification, as solar
irradiation, wind, feedstock is more productive in the
yields, waste or water. summer and wind more productive
These are factors outside in the winter, with the
the control of JLEN or absolute level of resource
the projects themselves, being uncorrelated.
with the risk of a significant -- In addition, the waste
effect on performance if and wastewater projects
the outcome is significantly benefit from "banded" volumetric
different from the assumptions payment arrangements that
made in forecasting revenue mean the projects are relatively
and costs and hence returns insensitive to falling
to JLEN. volumes. The projects also
benefit from contractual
exclusivity over the available
waste or water stream and,
in the case of the waste
projects, minimum guaranteed
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.
-- When acquiring wind
farms with limited operational
life, the aim is to seek
to include, where possible,
"energy yield true-up"
mechanisms in acquisition
agreements which apply
when a reasonable operational
period has been completed.
Under this true--up the
energy yield will be reforecast
based on all available
data and the purchase price
adjusted subject to de
minimis thresholds and
caps.
-- For anaerobic digestion
sites, it is common to
agree feedstock contracts
that adjust for the dry
matter content in the biomaterial
and relate pricing to that
energy content and volume
which is delivered. Should
a shortfall be likely,
for instance due to a poor
harvest, substitute feedstocks
are widely available.
------------------------------- -------------------------------------- ---------------------------------------
9 -- The revenues of the -- The risk of exposure
Power prices renewable energy solar, to variations in electricity
anaerobic digestion and and gas prices from assumptions
wind assets are dependent made is mitigated by JLEN
to some extent on the market in the following ways:
price of electricity, which i) short--term PPAs are
is out of the control of used to fix prices for
JLEN. There is a risk that between one and three years
the actual prices received depending on market conditions
vary significantly from and many have floor prices;
the model assumptions, ii) forward prices based
leading to a shortfall on market rates are used
in anticipated revenues for the first two years
to JLEN. where no fix is in place;
and iii) quarterly reports
from various independent
established market consultants
are used to inform the
electricity prices over
the longer term used in
the financial models.
------------------------------- -------------------------------------- ---------------------------------------
10 -- The Company is heavily -- As announced by the
Reliance on reliant on the Investment Company on 5 June 2019,
Investment Adviser Adviser to identify, acquire the Investment Adviser
and manage JLEN's investments. is changing from JLCM to
A performance deterioration Foresight Group. Foresight
by the Investment Adviser is a leading infrastructure
could have an impact on fund manager, with considerable
the Company's performance depth of resource and experience
and there is a risk that in environmental infrastructure
the Company may not be from managing over 170
able to find an appropriate assets in sectors including
replacement Investment wind, solar, bioenergy
Adviser should the engagement and flexible generation.
with the Investment Adviser The existing advisory team
be terminated. that has provided investment
advice to the Company since
launch in 2014 is also
transferring to Foresight.
Ultimately, in the event
of ongoing under-performance
by the Investment Adviser,
JLEN has the ability to
serve notice and to engage
a replacement.
------------------------------- -------------------------------------- ---------------------------------------
11 -- There exists a threat -- JLEN has no dedicated
Cyber risk of cyber-attack in which IT systems and it relies
a hacker or computer virus on those of its service
may attempt to access the providers, principally
IT systems of the Group, the Investment Adviser
the Investment Adviser, and Administrator, who
the Administrator or one have procedures in place
of the project companies to mitigate cyber-attacks
and attempt to destroy and have robust business
or use the data for malicious continuity plans in place.
purposes. While JLEN considers JLEN carries out ongoing
that it is unlikely to compliance checks and reviews
be the deliberate target on these procedures to
of a cyber-attack, there ensure the risk is mitigated.
is the possibility that
it could be targeted as
part of a random or general
act.
------------------------------- -------------------------------------- ---------------------------------------
Financial and taxation
----------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation
12 -- The discount rates used -- The discount rates are
Portfolio valuation in the valuation exercise reviewed on a regular basis
represent the Investment and updated, where appropriate,
Adviser's and the Board's to reflect changes in the
assessment of the rate market and in the project
of return in the market risk characteristics.
for assets with similar -- To provide additional
characteristics and risk assurance to both the Board
profile. Increased underlying and JLEN's shareholders
gilt rates may lead to with respect to the valuation,
increased discount rates an independent verification
being applied by the market exercise of the methodology
and a consequential decrease and assumptions applied
in the portfolio value. by JLCM is performed by
-- Asset values may not a leading accountancy firm
run in parallel to evolving and an opinion provided
forecasts for future electricity to the Directors.
and gas prices and investors
should expect some variation
in asset valuation from
period to period, as and
when a material movement
from prior expectations
is identified.
------------------------------- -------------------------------------- ---------------------------------------
13 -- JLEN values its portfolio -- JLEN works closely with
Changes to tax legislation based on current enacted expert tax advisers and
and rates corporation tax rates and adopts tax positions which
tax rules in the jurisdictions are based on industry practice
in which it operates. Changes and in line with the wider
to these rates or rules Group strategy. However,
in the future could impact other than participating
the valuation of the portfolio in industry consultation
and the level of distributions processes, there is little
received from the portfolio. within the power of the
Company that is able to
mitigate changes in corporation
tax rates and tax legislation.
-- JLEN continues to monitor
and participate in any
relevant consultation processes
with UK HMRC and to assess
the impact of any additional
changes which may result
from the introduction of
differing legislation.
------------------------------- -------------------------------------- ---------------------------------------
Compliance and legal
----------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation
------------------------------- -------------------------------------- ---------------------------------------
14 -- JLEN is required to -- Through a comprehensive
Regulatory - general comply with certain London compliance monitoring programme,
Stock Exchange, UK Listing JLEN ensures that it remains
Authority and Guernsey well informed as to the
regulatory requirements legislation, regulation
and regulations, including and guidance relevant to
those under the Alternative both the Company itself
Investment Fund Managers as well as the project
Directive ("AIFMD") and entities in which it invests.
the Foreign Account Tax The Board monitors compliance
Compliance Act ("FATCA"). information provided by
There is a risk that failure the Administrator, Company
to comply with any of the Secretary, Investment Adviser
relevant rules could result and legal counsel and monitors
in a negative reputational ongoing compliance developments
or financial impact on in the Channel Islands
the Company. and with the London Stock
Exchange and Financial
Conduct Authority.
------------------------------- -------------------------------------- ---------------------------------------
15 -- Changes in government -- The government has evolved
Regulatory - support for policy to new renewable the regulatory framework
renewables energy have resulted in for new projects being
changes to, and in some developed but has consistently
cases early closure of, stood behind the framework
the Renewables Obligation, that supports operating
the Renewable Heat Incentive projects as it understands
and Feed--in Tariff regimes. the need to ensure investors
If these were applied retrospectively can trust regulation. This
to current operating projects principle of "grandfathering"
including those in the was confirmed in the Energy
Group's portfolio, this Act 2013.
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
------------------------------- -------------------------------------- ---------------------------------------
16 -- JLEN invests in projects -- The portfolio is constantly
Operational risks where the majority of operational monitored by the Investment
risk is retained by the Adviser to address risks
public sector counterparty as they are identified.
(relevant to PFI projects) -- The use of a diverse
or passed down to sub--contractors. range of service providers
However, in all cases, supplying management, operational
some risk is retained by and maintenance services
the project, as set out ensures any failure of
above and identified in a single service provider
the Prospectus. has a minimal impact on
-- There is a risk that the portfolio as a whole.
poor performance by sub-contractors -- This risk is mitigated
or, in the event of having in part by the diversification
to replace a sub-contractor, represented by JLEN's portfolio
that a replacement may of assets.
only be found at a higher -- The portfolio has material
cost, could adversely affect damage and business interruption
project cash flows. insurance policies in place
-- In the event of a single to cover against potential
project suffering from losses.
a material issue, distributions
to the Fund could possibly
be impacted absolutely
or for a period of time
whilst the issue is resolved.
------------------------------- -------------------------------------- ---------------------------------------
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
This year marks the fifth anniversary since the launch of John
Laing Environmental Assets Group plc, during which time it has
invested over GBP500 million into a diverse portfolio of
environmental assets.
CHAIRMAN'S FOREWORD
Our commitment to environmental, social and governance ("ESG")
matters has been present since the launch of the Fund and this
five--year anniversary marks an opportune time to launch our first
report on the subject.
In this ESG report we want to demonstrate JLEN's active
commitment to managing ESG in its investments. One of the aims of
this document is to mark our current approach so that we can track
improvements over time and report on progress going forward.
At JLEN we know that appropriate management of ESG does not
sacrifice portfolio returns. We pay a quarterly, inflation-linked
dividend from the cash flows generated from our environmental
assets. Integrating consideration of ESG management into our
activities helps to manage risks and identify opportunities,
promote resilience of returns, manage reputation in the market and,
ultimately, deliver increased value to our investors over the long
term.
JLEN has consistently proven that it is possible to offer
predictable income growth, preserve capital over the long term and
to establish a diversified portfolio while upholding and managing
ESG criteria.
UK, European and global markets are increasingly focused on
finance as a way to deliver on climate change objectives. Global
risks around climate change adaptation, man-made environmental
disasters, water crises and biodiversity loss are more commonly
recognised as significant risks which could arguably be quite
devastating, especially in the long term. JLEN believes that it
makes financial sense to develop an investment portfolio that is
resilient to these risks.
Our investors are expecting to us to deliver a financially
resilient portfolio that embraces ESG objectives - particularly
assets that deliver resource-efficient, low carbon energy
generation. Funds such as JLEN are supportive of the UK
Government's drive to a low carbon economy and we have built a
279.2MW portfolio of subsidy--backed wind, solar, anaerobic
digestion, wastewater treatment and waste management assets. The
market is anticipated to scale rapidly going forward, with the
declining cost of these technologies. The UK market alone is
predicted to top 200GW by 2050, while globally, over 70% of the
electricity market is anticipated to be produced by zero carbon
sources by 2050. JLEN's broad geographical mandate and our
expertise in investing in environmental assets ensures we are well
placed to grow with this market in the coming years.
Within our portfolio, and as a long-term investor, JLEN has the
benefit of being able to work closely with our assets to deliver
positive environmental and financial benefit. As our portfolio
develops into new asset classes, we are able to bring together
learning from our different sectors and identify greater
opportunities for our investments to meet our ESG criteria and
deliver stable financial returns.
ESG criteria have always been an important part of our
day--to--day investment activities and this report represents an
evolution in our existing process to be more transparent about our
approach. Looking forward to the next five years of the Fund, we
are exploring ways of building on our current processes to maintain
continuous improvement in our activities.
Richard Morse
Chairman
12 June 2019
At a glance
Environmental performance 2018/19
746,000 MWh energy generated
415,000 tonnes of waste diverted from landfill
111,000 tonnes of waste recycled
33,000,000,000 litres of wastewater treated
160,000 tonnes of organic fertiliser produced
Social performance 2018/19
4 Apprenticeships
GBP350,000 community funding
Corporate social responsibility 2018/19
GBP36,000 raised for Children in Need
JLEN's approach to ESG
Overall responsibility for ESG resides with the Board of JLEN,
with governance of ESG criteria managed by the appropriate
Investment Directors and asset managers of the Fund's Investment
Adviser John Laing Capital Management ("JLCM").
Assess
JLEN undertakes thorough due diligence on each of its asset
acquisitions and continues to closely monitor them throughout our
ownership. This includes assessing a range of ESG criteria - as set
out in the following sections.
Each of our assets employs a third-party service provider to
monitor and manage their ongoing performance. These companies are
assessed and chosen on a range of criteria, including ESG
performance.
JLCM's asset managers are closely aligned with the investment
process. This structure allows us to ensure that lessons learned
from the management of assets currently within the portfolio are
fed back into the due diligence of potential assets acquisitions,
ensuring that their team is able to continually improve the way
that JLEN invests in environmental assets.
This learning and monitoring approach is one that we value
highly at JLEN, allowing us to manage risk and identify
opportunities in a consistent and collaborative way between our
investment and our portfolio management teams.
Monitor
Third-party service providers, sometimes with the assistance of
technical advisers, monitor and manage the ongoing performance of
each asset in the JLEN portfolio.
The performance of the service providers themselves is regularly
assessed by JLCM as Investment Adviser to JLEN, to ensure they are
delivering on their obligations in managing the asset(s)
appropriately.
Lessons learned during the management of existing assets in the
portfolio are fed back into due diligence and the investment
decision-making process for future acquisitions.
As a long-term investor, JLEN is able to build solid
partnerships with our third-party service providers, allowing us to
manage risk with a long-term perspective. It also allows us to
identify opportunities for improvement, as well as to implement
those improvements, across our portfolio.
Risk management
By their very nature, the performance of environmental
infrastructure projects is dependent on the volume of resource
available, be it solar irradiation, wind, feedstock yields, waste
or water.
On all potential asset acquisitions, JLEN employs technical
consultants to advise on performance assumptions. Additionally, we
will ensure that all appropriate measures will be taken to maximise
the technical performance of each asset once in our ownership.
Once an asset is acquired, JLEN works with third--party service
providers to ensure that each asset is as resilient as possible to
variation in resource availability. For example, anaerobic
digestion sites will ensure that they have access to substitute
feedstocks if weather conditions result in poor harvests.
At the portfolio level, JLEN manages climatic risks by ensuring
that returns are not overly dependent on one sector or asset class.
We invest in a range of environmental infrastructure technologies
to ensure that resource availability risk is managed
effectively.
Engage
JLCM regularly liaises with a range of stakeholders, in addition
to the JLEN Board. Engagement with stakeholders occurs through a
combination of formal (e.g. through contractual obligations or
industry events) and informal channels (e.g. through ongoing
meetings and discussions).
Industry bodies
Key industry bodies that JLEN engages with include:
-- Renewable Energy Association;
-- Anaerobic Digestion and Bioresources Association;
-- National Farmers' Union;
-- Solar Trade Association;
-- Energy Networks Association;
-- Association of Investment Companies; and
-- Guernsey Financial Services Commission.
Investors
JLEN engages with our investors both formally, through results
meetings at the half year and full year, and informally through
continuous liaison and business updates.
Asset managers
JLEN engages with its third-party service providers both
formally, through contractual reporting obligations, and informally
through continuous liaison and relationship development.
Going forward
ESG criteria have always been an important part of our
day--to--day investment activities. This report represents an
evolution in our existing process to be more transparent about our
approach. Looking forward, we are exploring ways of building on our
current processes to maintain our culture of continuous improvement
in our investment and portfolio management activities.
Environmental
JLEN's investment policy is to invest in a diversified portfolio
of environmental infrastructure projects. JLEN defines
"environmental infrastructure" as infrastructure projects that
utilise natural or waste resources or support more environmentally
friendly approaches to economic activity. As a result,
environmental criteria are embedded in the structure of our
investment and portfolio management activities.
We typically consider the following environmental criteria
during due diligence and ongoing monitoring of assets:
-- energy management;
-- resource and waste management;
-- pollution;
-- climate change and resilience; and
-- biodiversity.
Impact
JLEN is proud of the contribution of our assets to the low
carbon economy. JLCM, on behalf of the Fund, works with third party
technical advisors to maximise the technical performance and
operational life of each asset in our portfolio. This focus on
technical performance and longevity helps to maximise the
environmental benefit delivered by each asset through generation of
renewable electricity and heat, production of organic fertiliser
from our AD plants, treatment wastewater, waste recycled and waste
diverted from landfill. Figures for 2018--19 performance are set
out on above.
In order to quantify some of the benefits being delivered by our
portfolio, JLEN commissioned Aardvark Certification Ltd to
undertake an independent, third-party assessment of the
environmental impact of each asset currently in our portfolio.
Individual reports for each asset, as well as a portfolio summary
report, are published on our website.
JLCM, on behalf of JLEN, works with third-party service
providers to ensure that habitat management plans for each asset
are being implemented appropriately and effectively, helping to
conserve biodiversity.
Portfolio electricity and carbon performance(1)
To date, the assets in our portfolio have generated 1.5TWh
electricity. In 2018/19 our wind and solar assets generated 484GWh,
which equates to the average annual electricity usage of 140,000
households. Detailed information on portfolio energy performance is
provided above.
A summary of the greenhouse gas benefits delivered by our
portfolio is provided in the table below. Our portfolio is forecast
to result in the avoidance of 370ktCO(2) e per year, the equivalent
of taking almost 170,000 cars off the road.
Greenhouse gas emissions reduction
tCO(2) e
--------------------------------------
Emissions Average annual Lifetime
avoided to emissions Emissions
date avoided avoided
------------- ----------- -------------- ---------
Wind assets 481,550 119,400 2,946,000
Solar assets 104,200 21,650 476,800
AD assets 116,750 29,750 594,700
------------- ----------- -------------- ---------
CASE STUDIES
Soil resilience and protection
Key environmental criteria:
-- commitment to energy management;
-- climate change resilience; and
-- management of natural resources.
Liquid digestate is a by-product from the anaerobic digestion
process and can be used as an organic fertiliser in farming.
Digestate from our AD plants is sold to local farmers as an organic
fertiliser.
Our partners, Future Biogas, have been part of a trial study
investigating the effect of liquid digestate on soil quality in
Norfolk. The three-year study was undertaken between 2016 and 2018
and involved regular application of liquid digestate as a
fertiliser to trial fields. The results of the study have shown
that use of liquid digestate results in:
-- increased availability of nutrients in the soil;
-- reduced need for inorganic fertiliser;
-- increased soil health through increased micro biological soil life;
-- increased resilience to drought due to increased organic
matter, which holds water effectively; and
-- improved yields.
All of this resulted in increased financial benefit to the
farmer.
Management of resources
Key environmental criteria:
-- resource management; and
-- diversion from landfill (waste hierarchy).
The ELWA asset accepts municipal waste from four Borough
Councils: Redbridge, Havering, Newham & Barking and Dagenham.
In 2018/19 it treated household and commercial black bag waste,
street cleaning and highway waste, green and park waste, bulky
household waste, and fly tipped and other waste.
The product from the treatment process, refuse derived fuel
("RDF"), is delivered to energy from waste facilities, principally
located in the Netherlands. These facilities produce a mix of heat
- for district heating schemes, and energy - for export to the
grid.
Social
In 2018/19 our portfolio delivered
4 Apprenticeships
GBP350,000 community funding
We typically consider the following social criteria during due
diligence and ongoing monitoring of assets:
-- health and safety;
-- skilled labour;
-- employee relations;
-- community engagement; and
-- customer relations.
Impact
Health and safety
The governance of each asset requires the Directors of the
Company, often including JLCM employees, to monitor health and
safety standards. JLEN takes its responsibility in this regard
seriously and works to ensure that reporting and liaison
arrangements between the project and the Directors are appropriate.
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. Further
information on this can be found below.
We are committed to continuous improvement in this regard and
are developing an online monitoring and reporting tool which will
aggregate health and safety information across our portfolio,
allowing us to better identify trends and opportunities for
improvement.
Apprenticeships
Apprenticeships provide a valuable opportunity to ensure that
future generations have the skills we need in order to run our
environmental assets in the long term. A strong base of qualified
engineers is required in order to support increased capacity for
environmental assets, both in the UK and abroad.
As a specialist investor into environmental assets, JLEN is
committed to ensuring that those assets are managed and maintained
by skilled teams. The apprenticeships provided by our AD assets
represent part of that commitment.
Community funds
Most of JLEN's assets have a community fund associated with
them. Some of these are triggered by planning conditions, while
others have been put in place by JLEN in order to drive good
practice in community engagement. Each community fund is managed by
the local parish council, with funds allocated to projects designed
for the betterment of the local community - with a preference for
projects which promote sustainability.
To date, community projects that JLEN assets have contributed to
include:
-- heating units for residential care homes;
-- equipment and support for community organisations; and
-- refurbishment of local sports facilities and heritage buildings.
Cost reduction
Thanks to subsidies catalysing a supply chain industry, the cost
of low carbon energy has dropped drastically in the last 10 years
and is now competitive with conventional generation. As more
competitors enter this market, the prices will fall further and
JLEN, as a relatively new entrant, is contributing to that. In
addition, our approach to maximising performance efficiency ensures
that the cost of renewable electricity generated by the assets in
our portfolio remains competitive.
Case studies
Apprenticeships
Key social criteria:
-- commitment to skilled labour.
JLEN supports and encourages its assets to provide opportunities
for skills development. One way in which this can occur is through
provision of apprenticeships. Ensuring future supply of skilled
labour with experience in low carbon energy is essential to
securing the future of this industry.
Our portfolio of anaerobic digestion plants, run by Future
Biogas, provides an apprenticeship programme.
Following the successful completion of their 2014 programme,
this year Future Biogas launched their 2018 apprenticeship
programme. This will provide four applicants with the opportunity
to undergo a four-year Engineering Maintenance Apprenticeship. The
apprentices will learn valuable skills on site, working alongside
the Future Biogas maintenance team.
Apprenticeships provide a valuable opportunity to ensure that
future generations have the skills we need in order to run our
environmental assets in the long term.
Community funds
Key social criteria:
-- community engagement.
The majority of our assets have a form of community fund
associated with them. Whether prompted by planning requirements or
through JLEN's commitment to community engagement, these funds
provide local community groups with access to a source of funding
for projects which help the community either academically,
culturally, economically, environmentally, recreationally or
socially, with a preference for projects which promote
sustainability.
New Albion wind farm is located near Kettering in
Northamptonshire. Its community fund provides funding each year to
the local community for a range of projects. The fund panel is made
up of local representatives, who meet once a year to determine
applications.
Since 2016, New Albion wind farm's community fund has committed
over:
GBP60,500 to 9 projects
Including:
-- Superfast broadband
-- Pocket park maintenance
-- Refurbishment of community buildings
-- Improvement of sports facilities
Environmental and health and safety incidents
JLEN takes its environmental and health and safety
responsibilities very seriously and seeks to ensure effective
management of these issues in both its own operations and in its
investment portfolio. JLEN aims to manage risks and incidents in a
fair and transparent manner with appropriate action to reduce risk
wherever possible.
Each of JLEN's renewable energy sites has an environmental or
habitat management plan agreed with the relevant local authorities
under planning approvals, which ensures the projects mitigate
habitat damage and protect local wildlife.
This report identifies the material environmental, health and
safety incidents in the JLEN portfolio in 2018/19.
There was one reportable health and safety incident during the
year. This involved a mechanical failure at our waste asset. The
area affected is an operative free zone so there was no risk or
injury resulting from the incident. The incident was reviewed and a
plan put in place to prevent it happening again.
Reportable environmental, health and safety incidents
2018/19
------------------------ -------
H&S incidents 1
Environmental incidents 0
------------------------ -------
Health and safety recording and reporting
To date, health and safety has been managed on a sector and
asset basis, with risk registers holding asset-specific information
and aggregated reporting to the Board. This year, JLEN has worked
to move health and safety reporting to an online asset management
tool, allowing live reporting and comparisons of health and safety
performance across the portfolio.
Response to incidents
Where an incident occurs at any of our assets, this will be
dealt with in a number of ways:
Governance
Good governance is essential for JLEN's portfolio to achieve its
targeted returns.
JLEN holds Board positions for each of its assets, which are
fulfilled by JLCM on our behalf. We work to promote good governance
as part of our active engagement with projects.
We typically consider the following governance criteria during
due diligence and ongoing monitoring of assets:
-- board independence and expertise;
-- business integrity;
-- audit and tax practices; and
-- fiduciary duty.
Specialist non-executive Directors
The expertise of project company Board members is of critical
importance to JLEN to help ensure the continued technical and
financial performance of our assets. JLCM appoints specialist
non-executive Directors to assist them in their capacity as both
adviser to JLEN and as project company Board members so that
additional technical and industry expertise can be utilised.
JLCM employs these industry specialists in onshore wind and
solar. Simon Vince (Partnerships for Renewables Ltd) and Giuseppe
La Loggia (Senior Adviser to Octopus Investments) have both been
working with JLCM for the last two years.
Health and safety governance
JLCM, on behalf of JLEN, commissions a rolling programme of
health and safety audits on each of our assets in order to ensure
that policies, procedures and management arrangements are being
undertaken to good industry practice. These audits provide
recommendations for improvements which are then acted on as
appropriate. Further information on health and safety practices can
be found above.
Anti-bribery practices
We place a contractual obligation on our third-party service
providers for them to implement anti-bribery policies and practices
for each asset within our portfolio.
Modern slavery and human trafficking
As part of John Laing Group, JLCM's policy and practices in
relation to modern slavery and human trafficking are included in
the Group's Modern Slavery and Human Trafficking statement. The
Group reports annually on matters such as policy, training, due
diligence processes and the effectiveness of measures taken to
combat slavery and trafficking, to drive transparency and promote
ethical principles and practices related to the prevention of the
exploitation and abuse associated with modern slavery and human
trafficking.
Corporate social responsibility
Carbon offsetting
In addition to the emissions avoided by our portfolio, we
recognise the importance of managing our own emissions from
necessary travel as part of our business. As such, we have
purchased UK woodland tree planting carbon credits to offset the
carbon emissions from all flights between our headquarters in
Guernsey and our London offices, over the lifetime of the Fund to
date.
Community investment
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.
As part of John Laing Group, JLEN is committed to being a
responsible member of our communities - both local and national. We
help and encourage our team to volunteer and to raise money for
charity and local communities through individual and team efforts,
both internally and with partners.
This year, members of our team have raised money for The
Prince's Trust, the Group's chosen charity, by undertaking a cycle
ride and getting involved in a 10,000 Step Challenge.
Individuals within JLCM also regularly volunteer within their
communities and further afield; for example, one of our team
undertook search and rescue operations in Switzerland.
Case study
Comic Relief's largest ever red nose
On 15 March 2019, one of the domed storage tanks of the Grange
Farm biogas plant was lit up to create the biggest ever red nose
for Comic Relief. The event was organised by Future Biogas at our
Grange Farm biogas plant.
The red nose measured 38m in diameter and was 17m tall, making
it the height and width of three double decker buses. The event
raised money from the local Lincolnshire community as well as
suppliers and business partners associated with Future Biogas, who
run the plant.
Around 100 local people and staff members were invited for a
family fun afternoon, including food and refreshment, a magician,
and an event allowing the local Lincoln under-10s rugby team to
pelt senior JLCM and Future Biogas team members with digestate.
The event culminated in the switching-on of the red nose - which
was so big that the plant needed to notify air traffic control in
advance.
GOVERNANCE
The Board recognises the importance of a strong corporate
governance culture.
CHAIRMAN'S INTRODUCTION
Introduction
The Listing Rules and the Disclosure Guidance 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 and April 2016, 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 for
Guernsey domiciled member companies in July 2016. 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 and Guidance, and provides a formal expression of good
corporate practice against which shareholders, boards and the 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 is classified within the
infrastructure (renewable energy) sector. The Company currently
complies (except as set out at the end of this paragraph) with the
principles of good governance contained in the AIC Code (which
complements the Corporate Governance Code and provides a framework
of best practice for listed investment companies) and has decided
to follow the AIC's Corporate Governance Guide for Investment
Companies (the "AIC Guide"), and in accordance with the AIC Code,
the Company will be meeting its obligations in relation to the
Corporate Governance Code and associated disclosure requirements of
the Listing Rules. The Corporate Governance 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 Corporate Governance 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.
LEADERSHIP
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 33 years' experience in energy and
infrastructure, including environmental energy. He is a partner at
Opus Corporate Finance, where he leads the environmental energy
practice. His current boardroom experience includes Bazalgette
Tunnel Limited (Deputy Chairman and Chairman of the Audit
Committee), Woodard Corporation (Chairman), and Heathrow Southern
Rail Limited (non--executive director).
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 NC
Christopher Legge
Director
Chris worked for Ernst & Young in Guernsey from 1983 to 2003
and was Head of Audit and Accountancy from 1990 to 1998 where he
was responsible for the audits of a number of banking, insurance,
investment fund, property fund and other financial services
clients. He was 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 TwentyFour Select Monthly Income Fund
Limited, Sherborne Investors (Guernsey) B Limited, Sherborne
Investors (Guernsey) C Limited, Third Point Offshore Investors
Limited and NB Distressed Debt Investment Fund Limited, all of
which are UK listed and where he also chairs the Audit Committee.
He is a Fellow of the Institute of Chartered Accountants in England
and Wales.
Committee memberships NC RC
Denise Mileham
Director
Denise has over 32 years' experience in financial services,
having worked in fund administration, custody and compliance roles.
She previously sat on the board of Resolution Limited, the FTSE 100
company, now part of Aviva. She was previously an executive
director of Kleinwort Benson (Channel Islands) Fund Services,
acting as Head of Fund Administration and Deputy Head of Fund
Services (which included custody). She also worked at Close Fund
Services, as Director of New Business, running a team responsible
for marketing, sales and implementation.
Past experience
In her early career, Denise worked in the funds department of
Barclaytrust before moving to Credit Suisse where she undertook a
number of roles, including Compliance Officer in the fund
administration department. She is a Chartered Fellow of the
Securities and Investment Institute and 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 NC RC
Peter Neville
Director
Peter Neville, a resident of Guernsey, has more than 36 years'
experience in the financial services and financial services
regulatory sectors in the UK and overseas, being Director General
of the Guernsey Financial Services Commission from 2001 until
2009.
Past experience
Peter's boardroom experience has included the Chairmanship of
Kleinwort Benson (Channel Islands) Limited, the Guernsey-based
bank, and acting as a non-executive director of Mytrah Energy
Limited. 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,
mainly while working for various bodies within the HSBC group. As
the first Director of Investment Services at Malta's financial
services regulator, he established the Maltese regulatory regime
for funds and investment management firms. Peter was also involved
in establishing the Investment Management Regulatory Organisation
in the UK. Peter currently holds a number of non-executive
directorships, including as a non-executive director on the Board
of Network Rail Insurance Limited. Peter is a Fellow of the
Institute of Chartered Accountants in England and Wales.
Committee memberships AC NC RC
Richard Ramsay
Senior Independent Director
Richard is a chartered accountant with considerable experience
of the energy sector and the closed-end fund industry. He is
currently Chairman of Seneca Global Income & Growth Trust plc,
an investment trust. He is also Chairman of Northcourt Limited,
Wolsey Group Limited and a director of Castle Trust Capital plc,
all unlisted companies in the financial services sector.
Past experience
Richard's energy sector experience includes: leading the
Barclays de Zoete Wedd team that privatised the Scottish
electricity industry; a period at Ofgem as Managing Director
Finance and Regulation; and working as director of the Shareholder
Executive, principally involved with government businesses in the
nuclear sector. At Ivory & Sime, Barclays de Zoete Wedd and
latterly at Intelli Corporate Finance, he has worked as a corporate
adviser in the closed-end funds sector, completing over GBP2.5
billion of transactions. He has been a director of two investment
trusts and one venture capital trust.
Committee memberships AC
Hans Joern Rieks
Director - Appointed 13 June 2019
Hans has over 25 years of experience within the global wind
industry and has previously worked for Siemens Gamesa and Vestas
Central Europe. He is highly regarded in the energy sector and has
successfully led growth agendas and international strategies. An
engineer by background, Hans has a strong technical grounding and
excellent operational experience of how to manage the constantly
evolving renewables landscape.
Past experience
Hans formerly led the Siemens wind business in EMEA, crafting
and implementing a growth strategy which resulted in the merger
with Gamesa. Prior to this, he was President and CEO of Vestas
Central Europe and member of the Group Management of Vestas Wind
Systems A/S.
THE INVESTMENT ADVISER
JLEN is advised by John Laing Capital Management Limited
("JLCM"). JLCM is a wholly owned subsidiary of John Laing plc.
Chris Tanner
Investment Adviser
Chris is a Director of JLCM and co-lead Investment Adviser with
over 20 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.
Chris Holmes
Investment Adviser
Chris is a Director of JLCM and co-lead Investment Adviser with
over 22 years' experience in infrastructure, including PPPs,
economic infrastructure and renewables.
Chris joined the Investment Adviser in January 2018. Prior to
this, he was a Managing Director and Head of Waste & Bioenergy
team at the Green Investment Group (formerly the UK Green
Investment Bank plc) for four years. During his time at Green
Investment Group, Chris was responsible for over GBP0.5 billion of
investment across 18 assets in the waste and biomass sectors.
Before taking up his position at the Green Investment Bank plc,
Chris was Head of Capital Markets in the Infrastructure and
Renewables team at NIBC, also with responsibility for UK debt
origination and advisory within these sectors. Chris was with NIBC
for over 12 years, working on a number of waste and bioenergy
transactions.
Chris has a BA in Business Economics from the University of
Durham.
CORPORATE GOVERNANCE STATEMENT
The Board recognises the importance of a strong corporate
governance culture.
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 9 of the Prospectus, 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, there is one material update to the Article 23
Disclosures contained in Section 11 of Part 9 of the Prospectus, as
follows:
-- as detailed further in this report, the repayment date of the
Fund's revolving credit facility has been extended for an
additional year (to June 2022), with effect from 8 May 2019. This
follows the one-year extension effective from 1 June 2018 reported
in last year's Annual Report.
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 on above 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 not to 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 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.
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 separate
remuneration committee as, being comprised of five Directors, it
considers that such matters may be considered by the Board as a
whole. At the launch of the Fund, the remuneration of the Board was
fixed after consultation with independent external advisers. During
subsequent years, the Board has reviewed the remuneration levels
for the Company and received industry comparison information from
the Investment Adviser in respect of Directors' remuneration. As
noted in the Directors' remuneration report below, remuneration
levels were subject to a full independent review during 2017 and
recommendations for fee levels to apply from the financial year
commencing April 2019 will be proposed to shareholders as part of
the revised remuneration policy at the 2019 annual general
meeting.
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 on above. 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 Half-year Report and financial statements; the
system of internal controls; and the terms of appointment of the
external auditor, together with their remuneration. It is also the
forum through which the external auditor reports to the Board. The
Audit Committee also reviews the objectivity of the external
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 year are set out on below. The terms of
reference for each of the Committees are available on the Company's
website or upon request from the Company Secretary.
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 2019
is set out below.
Board meeting Audit Committee Risk Nomination Committee
Committee
------------------------ ------------- --------------- ---------- --------------------
Number of meetings held 4 4 4 5
------------------------ ------------- --------------- ---------- --------------------
Richard Morse 4 n/a n/a 5
Christopher Legge 4 4 4 n/a
Denise Mileham 4 n/a 4 5
Peter Neville 4 4 4 5
Richard Ramsay 4 3 n/a n/a
------------------------ ------------- --------------- ---------- --------------------
A total of 12 other unscheduled Board meetings were held during
the year for specific purposes which were attended by some, but not
all, of the Directors.
EFFECTIVENESS
The Board ensures it has the appropriate balance of skills,
experience, independence and knowledge to operate effectively.
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 review of the Chairman's
performance is led by the Senior Independent Director.
This year the Board carried out an internal assessment of its
effectiveness and performance. The result of this was generally
satisfactory and in line with previous reviews.
Issues raised in the assessment, which we have agreed to take
forward in the coming year, include:
-- A more formal annual plan for the management of the
portfolio, acquisitions and financing strategy. This is already
done informally but our asset portfolio is now of a size to justify
a more formal process, which will also incorporate a detailed
review of the financial model for the Fund every six months.
-- Continuing work on Board succession, which commenced with the
appointment of Hans Rieks. We regard it as important to address the
diversity of the Board within the next 12 months, and to address
the fact that four more of the original Directors are likely to be
replaced by the ninth anniversary of the Fund's listing in
2023.
-- Continuing training and education on emerging trends and
technologies in the market space accessible by JLEN. A suitable
programme will be put in place for 2019/20 and beyond.
The Board has agreed, in line with its stated policy, to
undertake an independent review of Board effectiveness next
year.
Any new Directors will receive an induction from the Investment
Adviser and the Administrator as part of their induction process.
All Directors regularly update their skills and knowledge and will
receive other relevant training as necessary, including site
visits.
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
below.
RELATIONS WITH SHAREHOLDERS
The Company welcomes engagement with shareholders and the
investment community.
Dialogue 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. The Chairman and 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 broker.
Investor publications
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.
Company website
The Company's website was refreshed in November 2018 to provide
a more user-friendly experience. The website is regularly updated
with new information and quarterly publication. The Company's
Prospectus, Key Information Document and Investor Disclosure
Document are available for download.
ACCOUNTABILITY
DIRECTORS' REMUNERATION REPORT
The Board has established separate Risk, Audit and Nomination
Committees to effectively oversee the activities of the Group.
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, provided that no
Director is involved in deciding their own remuneration.
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
fundraises).
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 and has since been
increased broadly with inflation. During the year, the Board
engaged the services of Trust Associates to undertake an external
review of the Company's current remuneration policy, and to provide
recommendations in relation to any changes which may apply to the
financial year commencing 1 April 2019. The review included
benchmarking the fees paid by the Company against the investment
funds sector generally, and with companies operating in the
infrastructure and renewable energy infrastructure sectors.
Certain recommendations arising from the Trust Associates review
were accepted by the Directors. In addition, the Directors gave due
consideration to certain specific factors of the Company which
placed additional responsibilities on the Directors, including the
active nature of the Board and the governance obligations of
operating as a self--managed AIF, and elements of the previous
remuneration policy which were deemed to be inconsistent with
market practice or commensurate with the levels of work undertaken
by the designated Chairs of the Company's formally constituted
committees. The proposed changes to the Company's remuneration
policy in relation to the financial year ending 31 March 2020 will
be proposed to shareholders at the 2019 annual general meeting, and
are set out below.
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. Shares held by
the Directors are disclosed in the report of the Directors. 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, recommended an inflationary increase
to the levels of individual remuneration paid to the Directors.
For comparative purposes, the table below sets out the
Directors' remuneration approved and actually paid for the year to
31 March 2019, as well as that proposed for the year ending 31
March 2020.
Base proposed Base paid
Director Role for 2019/2020 2018/2019
----------------- ----------------------------- -------------- ----------
Richard Morse Chairman GBP66,500 GBP65,000
Richard Ramsay Senior Independent Director GBP48,400 GBP47,300
Christopher Legge Audit Committee Chairman GBP46,100 GBP45,000
Denise Mileham Nomination Committee Chairman GBP42,000 GBP41,000
Peter Neville Risk Committee Chairman GBP42,000 GBP41,000
----------------- ----------------------------- -------------- ----------
Total GBP245,000 GBP239,300
----------------- ----------------------------- -------------- ----------
Where the Company requires Directors to work on specific
corporate actions such as further equity raisings, an additional
fee will be appropriately determined. No additional fees were paid
to the Directors for the year ended 31 March 2019.
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 2019 was GBP1,991 (31
March 2018: GBP2,059).
Approval of report
The Board will seek approval at the annual general meeting on 14
August 2019 for both the remuneration policy and the annual
Directors' fees for routine business for the year ended 31 March
2019 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
Guidance 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 on the Company's website or
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;
-- agreeing with the external auditor the audit plan and
reviewing the auditor's report related to the Half--year Report and
the Annual Report and financial statements;
-- reviewing and recommending for approval the audit,
audit-related and non-audit fees payable to the external auditor
and the terms of their engagement;
-- reviewing the long-term viability and going concern
statements, including the underlying documentation prepared by the
Investment Adviser;
-- 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; and
-- 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.
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.
Any member of the Audit Committee may request that a meeting be
convened by the Secretary of the Audit Committee. The external
auditor may request that a meeting be convened if it is deemed
necessary.
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 IFRS 9 Financial
Instruments and IFRS 13 Fair Value Measurement.
The calculation of the fair value of the investments carries
elements of risk, 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 power prices, energy generation and volumes underlying the
forecast investment cash flows;
-- the determination of appropriate sensitivities to apply to meet the required disclosures;
-- 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 tax deductibility of interest expense now that Bank
erosion and profit shifting (BEPS) legislation has been
implemented;
-- the underlying project financial models may not reflect the
underlying performance of the investment;
-- terms and costs of the future refinancing of senior debt on certain projects;
-- 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, actual results, and
prior year comparatives;
-- the electricity price, gas price, energy generation and
volume assumptions, including the comparison of these assumptions
to observable market data, actual results and prior year
comparatives; and
-- the build--up of the discount rates for consistency and
reasonableness, benchmarking against market data and peers and
project-specific items.
The Audit Committee is also satisfied that the portfolio
valuation and associated disclosures have 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 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 a sample of projects
have been performed during the period by the Investment Adviser,
who has reported findings to the Audit Committee.
External audit
Deloitte LLP has been the Company's auditor since incorporation
on 12 December 2013 and this is the fifth set of financial
statements on which it has expressed an audit opinion.
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 external auditor's 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 Code and
the AIC Code, 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. This is the fifth year of Deloitte's appointment as
the Company's auditor. The audit partner for the Company, John
Clacy, has been in place for five years. In line with the rotation
requirements, John Clacy will be stepping down as the Company's
audit partner immediately after the approval of this Annual Report
and financial statements.
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 2020. 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 Company has adopted a formal
policy in relation to the provision of non-audit services, pursuant
to which 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 2019. Matters considered at these meetings included, but
were not limited to:
-- review of the reappointment of the external auditor;
-- review of the effectiveness of the external auditor and the external audit process;
-- 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;
-- review of the Company's valuation methodology;
-- review of the independent valuation report; and
-- review of the 2019 Annual Report and financial statements and the 2018 Half--year Report.
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.
Approval
On behalf of the Audit Committee:
Christopher Legge
Chairman of the Audit Committee
12 June 2019
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 at least annually by the Risk Committee
and are then referred to the Board for approval. A copy of the
terms of reference is available on the Company's website or 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
extent to which the risk profile of the Company corresponds to the
size, structure and objectives of the Company, in addition to 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 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 must
meet 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. The Risk Committee met four times in the year.
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 on the Company's website or upon request
from the Company Secretary.
The main roles and responsibilities of the Nomination 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.
The Chairman of the Board, 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. 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 Nomination Committee met five times during the year. Matters
considered at these meetings included, but were not limited to:
-- the findings of the internal Board evaluation concerning the
size, structure and composition of the Board and the
appropriateness of the current mix of skills, knowledge and
experience for its current activities;
-- Director succession planning;
-- Director training;
-- the time requirements of Directors;
-- 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 and the
feedback received from the internal Board evaluation, the Committee
concluded that the Board would benefit from the addition of a
director with specific technical and operational experience of
environmental infrastructure projects. The Committee appointed Korn
Ferry, an independent external executive recruitment firm, to
compile a list of candidates who would provide this experience on
the Board. This list was assessed by the Nominations Committee and
the Investment Adviser, and the preferred candidates were
interviewed by members of the Board. On 20 May, the Company
announced the appointment of Hans Joern Rieks, who has considerable
experience in the wind sector across European and global markets,
having held senior positions with Vestas and Siemens/Gamesa. Korn
Ferry has no other connection with the Company or its individual
directors.
The Committee noted that the Board was satisfied with the
internal evaluations process conducted for 2019 and it is expected
that the next external evaluation would be arranged for 2020.
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
2019.
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 2018, the total number of ordinary shares of the
Company in issue was 394,077,029. In October 2018, JLEN issued
102,941,176 shares in an oversubscribed placing. At 31 March 2019,
the total number of ordinary shares of the Company in issue was
497,018,205.
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 2019, 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
above.
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 to 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
below. On 30 May 2019, the Directors declared a dividend in respect
of the period 1 January 2019 to 31 March 2019 of 1.6275 pence per
share to shareholders on the register as at the close of business
on 7 June 2019, payable on 28 June 2019.
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and prospects,
are set out in the strategic report. The financial position of the
Company, its cash flows and its liquidity position are also
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 above. 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 to 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.
JLEN benefits from a GBP170 million multi--currency revolving
credit facility with a remaining accordion facility of up to GBP20
million with HSBC, NIBC, ING and Santander, expiring in June 2022
after committing, in May 2019, to an additional GBP40 million
within the accordion facility and extending the facility by one
further year. The facility is used primarily to fund acquisitions,
and is repaid through raising equity in the market. The facility is
intended to provide short-term finance which is then repaid from
equity raises and not structural financing.
At 31 March 2019, the Company had net current assets of GBP0.3
million (31 March 2018: GBP3.9 million), including a cash balance
of GBP1.9 million (31 March 2018: GBP5.5 million). At UK HoldCo
level, the GBP130 million revolving credit facility was drawn to a
level of GBP16.7 million (31 March 2018: GBP48.4 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 June 2022, 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 June 2022.
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 and gas prices, continued government support for
renewable energy subsidy payments and the impact of a proportion of
the PPP 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 equity and debt markets to
raise new capital as and when required.
The Directors have determined that a three--year look forward to
June 2022 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 above in 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
through placings in October 2018. Further details can be found in
note 13 to the financial statements.
The Company has one class of ordinary shares which carry 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 14
August 2019. This shareholder authority was renewed at the 2018
annual general meeting.
Major interests in shares and voting rights
As at 31 March 2019, the Company had been notified, in
accordance with Chapter 5 of the Disclosure Guidance and
Transparency Rules, of the following interests in 5% or more of the
voting rights as a shareholder in the Company.
Percentage
of voting
rights Number of
and issued ordinary
Shareholder share capital shares
-------------------------------------- -------------- ---------
Newton Investment Management Limited 9.5% 47.1m
Baillie Gifford & Co Limited 6.8% 33.7m
Legal & General Investment Management 6.1% 30.1m
-------------------------------------- -------------- ---------
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 above.
Name Function
----------------- ---------------------------
Richard Morse Chairman
Christopher Legge Director
Denise Mileham Director
Peter Neville Director
Richard Ramsay Senior Independent Director
----------------- ---------------------------
Chris Legge, Director and Chair of the Audit Committee, will be
standing down from on 13 June 2019. He will be succeeded as Audit
Chair by Peter Neville. On 20 May 2019, the Company announced that
Hans Rieks will become a Director of JLEN on 13 June 2019. On
appointment, Hans Rieks will succeed Peter Neville as Chair of the
Risk Committee.
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 compliance with the provisions of the AIC
Code of Corporate Governance, all of the Directors will stand for
re-election at each annual general meeting. Having considered the
results of the internal performance evaluation for the year-ended
31 March 2019, the Directors are satisfied that the Board continues
to perform effectively, and that each Director continues to
demonstrate commitment to their roles. 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 2019 were:
Ordinary Ordinary
shares of shares of
no par value no par value
each held each held
at at
31 Mar 2019 31 Mar 2018
------------------ ------------- -------------
Richard Morse 103,535 83,042
Christopher Legge 29,896 29,896
Denise Mileham 32,340 28,160
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
------------------ ------------- -------------
There have been no changes in the Directors' interests from 31
March 2019 to the date of this report.
Annual general meeting
The Company's annual general meeting will be held at 10:00 a.m.
on 14 August 2019 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 has acted as the Investment
Adviser to the Company for the year under review. Post the balance
sheet date, the Company announced that the Investment Adviser would
change from JLCM to Foresight Group on the 1 July 2019, and the
existing advisory team would also transfer to Foresight Group on
that date. The material terms, fees and provisions of the
Investment Advisory Agreement with Foresight Group are the same as
the existing investment advisory agreement with JLCM, as set out in
Note 15 to the Financial Statements. It is the Directors' opinion
that the appointment of Foresight Group on the agreed terms is in
the best interests of the shareholders as a whole.
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 2019 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 the 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
12 June 2019
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors'
report and financial statements in accordance with applicable laws
and regulations. 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 Standard Board, and 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 year.
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 as adopted by the European Union 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; and
-- make an assessment of the Company's ability to continue as a going concern.
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 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
12 June 2019
INDEPENT AUDITOR'S REPORT
to the members of John Laing Environmental Assets Group
Limited
Opinion
In our opinion, the financial statements of John Laing
Environmental Assets Group Limited:
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2019 and of its profit for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the European
Union and IFRSs as issued by the International Accounting Standards
Board ("IASB"); and
-- have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008.
We have audited the financial statements of John Laing
Environmental Assets Group Limited (the "Company") which
comprise:
-- the income statement;
-- the statement of financial position;
-- 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 IFRSs as adopted by the European
Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council's
(the "FRC's") Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We confirm that the
non-audit services prohibited by the FRC's Ethical Standard were
not provided to the Company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
While the parent company is not a public interest entity subject
to European Regulation 537/2014, the Directors have decided that
the parent company should follow the same requirements as if that
Regulation applied to the parent company.
Summary of our audit approach
-------------------------------------------------------------------------------------
Key audit matters The key audit matter that we identified in the current
year was the assessment of the fair value of the investments
in the Fund.
---------------------- -------------------------------------------------------------
Materiality The materiality that we used for the financial statements
was GBP10.2 million which was determined on the basis
of 2% of net assets.
---------------------- -------------------------------------------------------------
Scoping As the Company is treated as an investment entity under
IFRS 10, its subsidiaries are measured at fair value
rather than consolidated on a line-by-line basis and
therefore the Company has been treated as one component.
There has been no change in approach for the current
year.
---------------------- -------------------------------------------------------------
Significant changes in There were no significant changes in our approach from
our approach the prior year.
---------------------- -------------------------------------------------------------
Conclusions relating to going concern, principal risks and viability
statement
----------------------------------------------------------------------------------------
Going concern We confirm that we have
We have reviewed the Directors' statement in note nothing material to report,
2(b) to the financial statements about whether add or draw attention to
they considered it appropriate to adopt the going in respect of these matters.
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 12 months from the date
of approval of the financial statements.
We considered as part of our risk assessment the
nature of the Company, its business model and
related risks including, where relevant, the impact
of Brexit, the requirements of the applicable
financial reporting framework and the system of
internal control. We evaluated the Directors'
assessment of the Company's ability to continue
as a going concern, including challenging the
underlying data and key assumptions used to make
the assessment, and evaluated the Directors' plans
for future actions in relation to their going
concern assessment.
We are required to state whether we have anything
material to add or draw attention to in relation
to that statement required by Listing Rule 9.8.6R(3)
and report if the statement is materially inconsistent
with our knowledge obtained in the audit.
------------------------------------------------------- -------------------------------
Conclusions relating to going concern, principal
risks and viability statement
------------------------------------------------------- -----------------------------
Principal risks and viability statement We confirm that we have
Based solely on reading the Directors' statements nothing material to report,
and considering whether they were consistent with add or draw attention
the knowledge we obtained in the course of the to in respect of these
audit, including the knowledge obtained in the matters.
evaluation of the Directors' assessment of the
Company's ability to continue as a going concern,
we are required to state whether we have anything
material to add or draw attention to in relation
to:
-- the disclosures that describe the principal
risks and explain how they are being managed or
mitigated;
-- the Directors' confirmation 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; or
-- the Directors' explanation 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 are also required to report whether the Directors'
statement relating to the prospects of the Company
required by Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the
audit.
------------------------------------------------------- -----------------------------
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Valuation of investments at fair value
----------------------------------------------------------------------------------------------------------
Key audit As described in the significant accounting policies in note
matter description 2 to the financial statements, the fair value of the Company's
investments is determined using a discounted cash flow methodology,
as there is no liquid market for these projects. These investments
are valued at GBP520.0 million (2018: GBP388.5 million). Note
9 to the financial statements provides a breakdown of the movement
in these investments in the financial year.
The complexity of the valuation methodology, as well as a number
of significant estimates, means that the fair value of the investments
will be sensitive to the assumptions made (as described in the
sensitivity disclosures in note 16 and the "Investment portfolio
and valuation" section of the Annual Report) and may not be
appropriate. The key estimates included in the valuation are:
-- discount rates - the determination of the appropriate discount
rate for each investment with regards to risk-free rates, operational
risk, and recent market transactions where applicable; there
is also potential for fraud through manipulation of this assumption;
-- macroeconomic assumptions - including forward electricity
prices, corporation tax rates, and inflation rates; and
-- operational assumptions - including expected future energy
yields, output levels, and asset extension and upgrade assumptions.
------------------- -----------------------------------------------------------------------------------
How the Our audit procedures were designed to allow us to obtain appropriate
scope of evidence to challenge the assumptions adopted in the discounted
our audit cash flow models. Our audit procedures included:
responded -- understanding and evaluating the design and implementation
to the key of internal controls in respect of updates to the valuation
audit matter model used at 31 March 2019;
-- challenging the discount rates applied by engaging our internal
valuation specialists to calculate an independent appropriate
range, and benchmarking the discount rates against comparable
market participants and recent market transactions;
-- challenging the macroeconomic assumptions by reference to
observable market data and forecasts;
-- reviewing changes to operational assumptions in the underlying
models, in particular movements from acquisition values, and
extensions and value enhancements made, through reference to
third-party support where required;
-- challenging the conclusions of the Investment Adviser's external
report;
-- reviewing the historical accuracy of the models' cash flow
forecasts against actual results;
-- reviewing the share purchase agreements for assets acquired
in the year in order to confirm that the value of assets acquired
was appropriately included in the valuation of the portfolio;
-- testing the mechanical accuracy of the valuation models including
performing model integrity tests; and
-- reviewing the appropriateness of the disclosures made in
the financial statements including the sensitivities applied.
------------------- -----------------------------------------------------------------------------------
Key observations In consideration of the fair value of the portfolio, we have
determined that as a whole the assumptions adopted are appropriate,
noting in particular that:
-- the discount rates applied are within the reasonable range
determined by our valuation specialists and industry peers;
-- the macroeconomic assumptions fall within a reasonable range
based on available observable market data;
-- the future energy yield assumptions appear appropriate based
on historic performance and our challenge of operational management;
and
-- asset-specific enhancements were appropriately reflected
in the underlying cash flows supported by third-party reports.
------------------- -----------------------------------------------------------------------------------
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.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP10.2 million (2018: GBP7.8 million)
------------ -----------------------------------------------------------------
Basis for 2% of Net Asset Value (2018: 2% of Net Asset Value)
determining
materiality
------------ -----------------------------------------------------------------
Rationale We consider Net Asset Value to be a key benchmark used by members
for the of the Company in assessing financial performance.
benchmark
applied
------------ -----------------------------------------------------------------
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of GBP510,000 (2018:
GBP390,000), 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 controls, 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.
As the Company is treated as an investment entity under IFRS 10,
its subsidiaries are measured at fair value rather than
consolidated on a line-by-line basis and therefore the Company has
been treated as one component. There has been no change in approach
for the current year.
Other information
----------------------------------------------------------------------------------------------------
The Directors are responsible for the other information. The other We have nothing
information comprises the information included in the Annual Report, to report in
other than the financial statements and our auditor's report thereon. respect of these
Our opinion on the financial statements does not cover the other information matters.
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether there is a material misstatement
in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are
required to report that fact.
In this context, matters that we are specifically required to report
to you as uncorrected material misstatements of the other information
include where we conclude that:
-- fair, balanced and understandable - the statement given by the Directors
that they consider the Annual Report and financial statements taken
as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
-- Audit Committee reporting - the section describing the work of the
Audit Committee does not appropriately address matters communicated
by us to the Audit Committee; or
-- Directors' statement of compliance with the UK Corporate Governance
Code - the parts of the Directors' statement required under the Listing
Rules relating to the Company's compliance with the UK Corporate Governance
Code containing provisions specified for review by the auditor in accordance
with Listing Rule 9.8.10R(2) do not properly disclose a departure from
a relevant provision of the UK Corporate Governance Code.
--------------------------------------------------------------------------------- -----------------
Responsibilities of Directors
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, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Details of the extent to which the audit was considered capable
of detecting irregularities, including fraud, are set out
below.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Extent to which the audit was considered capable of detecting
irregularities, including fraud
We identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, and then
design and perform audit procedures responsive to those risks,
including obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance with
laws and regulations, our procedures included the following:
-- enquiring of management, internal audit and the Audit
Committee, including obtaining and reviewing supporting
documentation, concerning the Company's policies and procedures
relating to:
o identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances of
non-compliance;
o detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged fraud;
and
o the internal controls established to mitigate risks related to
fraud or non-compliance with laws and regulations;
-- discussing among the engagement team and involving relevant
internal specialists, including tax and valuations specialists,
regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud. As part of this
discussion, we identified potential for fraud in the valuation of
investments at fair value; and
-- obtaining an understanding of the legal and regulatory
frameworks that the Company operates in, focusing on those laws and
regulations that had a direct effect on the financial statements or
that had a fundamental effect on the operations of the Company. The
key laws and regulations we considered in this context included the
Companies (Guernsey) Law, 2008, Listing Rules and tax
legislation.
Audit response to risks identified
As a result of performing the above, we identified the valuation
of investments at fair value as a key audit matter. The key audit
matters section of our report explains the matter in more detail
and also describes the specific procedures we performed in response
to that key audit matter.
In addition to the above, our procedures to respond to risks
identified included the following:
-- reviewing the financial statement disclosures and testing
supporting documentation to assess compliance with relevant laws
and regulations discussed above;
-- enquiring of management and the Audit Committee concerning
actual and potential litigation and claims;
-- performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
-- reading minutes of meetings of those charged with governance
and reviewing internal audit reports;
-- in addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members including
internal specialists, and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the
audit.
Report on other legal and regulatory requirements
Matters on which we are required to report by exception
---------------------------------------------------------------------------------
Adequacy of explanations received and accounting records We have nothing to
Under the Companies (Guernsey) Law, 2008 we are required report in respect
to report to you if, in our opinion: of these matters.
-- we have not received all the information and explanations
we require for our audit; or
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with
the accounting records.
------------------------------------------------------------- ------------------
Other matters
Auditor tenure
Following the recommendation of the Audit Committee, we were
appointed by the Board on 12 December 2013 to audit the financial
statements for the period ending 31 March 2015 and subsequent
financial periods. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is five
years, covering the years ending 31 March 2015 to 31 March
2019.
Consistency of the audit report with the additional report to
the Audit Committee
Our audit opinion is consistent with the additional report to
the Audit Committee we are required to provide in accordance with
ISAs (UK).
Use of our report
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.
John Clacy, FCA
For and on behalf of Deloitte LLP
Recognised Auditor
Guernsey, Channel Islands
12 June 2019
INCOME STATEMENT
for the year ended 31 March 2019
2019 2018
Notes GBP'000s GBP'000s
-------------------------- ----- -------- --------
Operating income 9 59,247 26,078
Operating expenses 5 (5,895) (5,018)
-------------------------- ----- -------- --------
Operating profit 53,352 21,060
-------------------------- ----- -------- --------
Profit before tax 53,352 21,060
Tax 6 - -
Profit for the year 53,352 21,060
-------------------------- ----- -------- --------
Earnings per share
Basic and diluted (pence) 8 12.2 5.7
-------------------------- ----- -------- --------
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 year, other than the profit for the year, and
therefore no separate statement of comprehensive income has been
presented.
STATEMENT OF FINANCIAL POSITION
as at 31 March 2019
2019 2018
Notes GBP'000s GBP'000s
------------------------------------------------- ----- -------- --------
Non-current assets
Investments at fair value through profit or loss 9 520,032 388,468
------------------------------------------------- ----- -------- --------
Total non--current assets 520,032 388,468
------------------------------------------------- ----- -------- --------
Current assets
Trade and other receivables 10 21 20
Cash and cash equivalents 1,849 5,509
------------------------------------------------- ----- -------- --------
Total current assets 1,870 5,529
------------------------------------------------- ----- -------- --------
Total assets 521,902 393,997
------------------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 11 (1,563) (1,610)
------------------------------------------------- ----- -------- --------
Total current liabilities (1,563) (1,610)
------------------------------------------------- ----- -------- --------
Total liabilities (1,563) (1,610)
------------------------------------------------- ----- -------- --------
Net assets 520,339 392,387
------------------------------------------------- ----- -------- --------
Equity
Share capital account 13 492,670 389,262
Retained earnings 14 27,669 3,125
------------------------------------------------- ----- -------- --------
Equity attributable to owners of the Company 520,339 392,387
Net assets per share (pence per share) 104.7 99.6
------------------------------------------------- ----- -------- --------
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 12 June 2019.
They were signed on its behalf by:
Richard Morse
Chairman
Christopher Legge
Director
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Year ended 31 Mar 2019
---------------------------------------------------
Share capital account Retained earnings Total
Notes GBP'000s GBP'000s GBP'000s
Balance at 1 April 2018 389,262 3,125 392,387
Profit for the year - 53,352 53,352
--------------------------------------------------- ----- --------------------- ----------------- ---------
Profit and total comprehensive income for the year - 53,352 53,352
Issue of share capital 13 105,000 - 105,000
Expenses of issue of equity shares 13 (1,592) - (1,592)
Dividends paid 7 - (28,808) (28,808)
--------------------------------------------------- ----- --------------------- ----------------- ---------
Balance at 31 March 2019 492,670 27,669 520,339
--------------------------------------------------- ----- --------------------- ----------------- ---------
Year ended 31 Mar 2018
-----------------------------------------------------
Share capital account Retained earnings Total
Notes GBP'000s GBP'000s GBP'000s
------------------------------------------------ ------- --------------------- ----------------- ---------
Balance at 1 April 2017 334,858 5,190 340,048
Profit for the year - 21,060 21,060
------------------------------------------------ ------- --------------------- ----------------- -----------
Profit and total comprehensive income for the
year - 21,060 21,060
Issue of share capital 13 55,522 - 55,522
Expenses of issue of equity shares 13 (1,118) - (1,118)
Dividends paid 7 - (23,125) (23,125)
------------------------------------------------ ------- --------------------- ----------------- -----------
Balance at 31 March 2018 389,262 3,125 392,387
------------------------------------------------ ------- --------------------- ----------------- -----------
The accompanying notes form an integral part of the financial
statements.
CASH FLOW STATEMENT
for the year ended 31 March 2019
2019 2018
Notes GBP'000s GBP'000s
-------------------------------------------------------------------- ----- --------- ---------
Profit from operations 53,352 21,060
Adjustments for:
Investment interest (24,063) (18,631)
Dividends received (7,300) (10,400)
Net (gain)/loss on investments at fair value through profit or loss (27,884) 2,953
-------------------------------------------------------------------- ----- --------- ---------
Operating cash flows before movements in working capital (5,895) (5,018)
(Increase)/decrease in receivables (1) 12
(Decrease)/increase in payables (47) 555
-------------------------------------------------------------------- ----- --------- ---------
Net cash outflow from operating activities (5,943) (4,451)
-------------------------------------------------------------------- ----- --------- ---------
Investing activities
Investments in subsidiaries (13,680) (17,500)
Loan to subsidiaries 12 (90,000) (37,000)
Investment interest 24,063 18,631
Dividends received 7,300 10,400
-------------------------------------------------------------------- ----- --------- ---------
Net cash used in investing activities (72,317) (25,469)
-------------------------------------------------------------------- ----- --------- ---------
Financing activities
Proceeds on issue of share capital 13 105,000 55,522
Expenses relating to issue of shares 13 (1,592) (1,118)
Dividends paid 7 (28,808) (23,125)
-------------------------------------------------------------------- ----- --------- ---------
Net cash from financing activities 74,600 31,279
-------------------------------------------------------------------- ----- --------- ---------
Net increase in cash and cash equivalents (3,660) 1,359
Cash and cash equivalents at beginning of the year 5,509 4,150
Cash and cash equivalents at end of year 1,849 5,509
-------------------------------------------------------------------- ----- --------- ---------
The accompanying notes form an integral part of the financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2019
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
2019 and have been prepared on the basis of the accounting policies
set out below. The financial statements comprise only the results
of the Company as its investment in John Laing Environmental Assets
Group (UK) Limited ("UK HoldCo") is measured at fair value as
detailed in the key accounting policies below. The Company and its
subsidiaries invest in environmental infrastructure projects that
utilise natural or waste resources or support more environmentally
friendly approaches to economic activity.
2. Significant accounting policies
(a) Basis of preparation
The financial statements were approved and authorised for issue
by the Board of Directors on 12 June 2019. 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 Standards 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 IFRS 9
Financial Instruments: Recognition and Measurement, and IFRS 13
Fair Value Measurement. The Company accounts for its investment in
its wholly owned direct subsidiary UK HoldCo at fair value. The
Company, together with its wholly owned direct subsidiary UK
HoldCo, the intermediate holding subsidiary HWT Limited and JLEAG
Solar 1 Limited, comprise the Group (the "Group") investing in
environmental infrastructure assets.
The net assets of the intermediate holding companies (comprising
UK HoldCo, HWT Limited and JLEAG Solar 1 Limited), which at 31
March 2019 principally comprise working capital balances, the
revolving credit facility 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 has a finite life. For the PPP
assets, the shareholder 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 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 17 Insurance Contracts (effective 1 January 2021);
-- IFRIC 23 Uncertainty over Income Tax Treatments (effective 1 January 2019);
-- Amendments to IFRS 9 Prepayment features with Negative
Compensation (effective 1 January 2019);
-- Amendments to IFRS 10 and IAS 28 Long-term Interest in
Associates and Joint Ventures (effective 1 January 2019);
-- Annual improvements to IFRS standards 2015-2017 cycle (effective 1 January 2019);
-- Amendments to IAS 19 Plan Amendments, Curtailment or
Settlement (effective 1 January 2019); and
-- Amendments to References to the Conceptual Framework in IFRS
standards (effective 1 January 2019).
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.
IFRS 16 Leases
IFRS 16 replaces IAS 17 Leases and requires all operating leases
in excess of one year, where the Company is the lessee, to be
included on the Company's balance sheet, and recognise a
right-of-use asset and a related lease liability representing the
obligation to make lease payments. The right-of-use asset will be
assessed for impairment annually (incorporating any onerous lease
assessments) and amortised on a straight-line basis, with the lease
liability being amortised using the effective interest method.
Lessor accounting is unchanged from previous guidance. As the
Company itself does not have any leases it is not anticipated that
the new standard will have a material impact on the Company's
reported results. The change in accounting treatment for the leases
in the subsidiaries is not expected to have a significant cash
impact over time and therefore does not impact the overall
valuation of the Company's investments.
The following standards became effective during the year and did
not have a material impact on the Company's reported results:
-- IFRS 9 Financial Instruments (effective 1 January 2018); and
-- IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018).
IFRS 9 Financial Instruments
IFRS 9 replaces the classification and measurement models for
financial instruments in IAS 39 (Financial Instruments: recognition
and measurement) with three classification categories: amortised
cost, fair value through profit or loss and fair value through
other comprehensive income. Following an assessment of the
Company's assets and liabilities, IFRS 9 has not had a material
impact on its reported results as the classification and
measurement basis are consistent with the previous standard.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a single, principles-based revenue
recognition model to be applied to all contracts with customers.
Revenue is recognised when a customer obtains control of a good or
service and thus has the ability to direct the use and obtain the
benefits from the good or service. IFRS 15 replaces IAS 18 Revenue
and IAS 11 Construction Contracts and related interpretations. New
disclosure requirements are also introduced. The majority of the
Company's revenue is derived from interest income, dividend income
and fair valuation movements on investments which are not within
the scope of IFRS 15. As a result, the new standard has not had a
material impact on the Company's reported results.
(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 GBP11.4 million (including GBP1.9 million in
the Company) as at 31 March 2019 and a revolving credit facility
(available for investment in new or existing projects and working
capital) of GBP130 million and an uncommitted accordion facility of
up to GBP60 million expiring in June 2021. After the balance sheet
date, on 8 May 2019, the facility was further extended by one year
to June 2022 and the accordion facility was exercised for up to
GBP40 million, increasing the borrowing facility to GBP170
million.
As at 31 March 2019, the Company's wholly owned subsidiary UK
HoldCo had borrowed GBP16.7 million under the 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 and interest
received from UK HoldCo. Dividends from UK HoldCo are recognised
when the Company's right to receive payment has been established.
Interest income is accrued by reference to the loan principal
outstanding, applicable interest rate, and 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 statement of financial position 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 IFRS 9
Financial Instruments and IFRS 13 Fair Value Measurement.
I) 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, investments 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, JLEAG Solar 1 Limited, HWT Limited and
the environmental infrastructure investments.
The intermediate holding companies' net assets (UK HoldCo, HWT
Limited and JLEAG Solar 1 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 has 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.
II) 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.
III) Effective interest method
The effective interest rate is the 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.
IV) 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), shareholder and inter-company
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 2019 were in the range 6.5% to 9.2%
(31 March 2018: 6.5% to 9.2%). 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.
(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
The fair value of environmental infrastructure investments 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), shareholder and inter-company loans (interest and
repayments). Estimates such as the cash flows are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about the fair value of assets not
readily available from other sources. Actual results may differ
from these estimates.
Discount rates used in the valuation 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 rate is deemed to be one of the most significant
unobservable inputs and any change could have a material impact on
the fair value of investments. Underlying assumptions and discount
rates are disclosed in note 9 and sensitivity analysis is disclosed
in note 16.
Critical accounting judgements
Equity and debt investment in UK HoldCo
In applying their judgement, 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 Year ended
31 Mar 2019 31 Mar 2018
GBP'000s GBP'000s
----------------------------- ------------ ------------
Investment advisory fees 5,006 4,147
Directors' fees and expenses 242 273
Administration fee 100 89
Other expenses 547 509
----------------------------- ------------ ------------
5,895 5,018
----------------------------- ------------ ------------
The Company had no employees during the year (31 March 2018:
nil). There was no Directors' remuneration for the year other than
Directors' fees as detailed in note 15 (31 March 2018: nil).
Included within other expenses is an amount of GBP102,000 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 2019 (year ended 31 March 2018:
GBP91,500).
The Company did not pay any non--audit services to Deloitte LLP
(year ended 31 March 2018: GBP49,000 to Deloitte LLP in respect of
non--audit services related to the Company's Prospectus issued on
23 February 2018).
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 or loss, are included in the estimate
of the fair value of these investments.
7. Dividends
Year ended Year ended
31 Mar 2019 31 Mar 2018
GBP'000s GBP'000s
------------------------------------------------------------------------------------------ ------------ ------------
Amounts recognised as distributions to equity holders during the year (pence per share):
Final dividend for the year ended 31 March 2018 of 1.5775 (31 March 2017: 1.535) 6,216 5,215
Interim dividend for the quarter ended 30 June 2018 of 1.6275 (30 June 2017: 1.5775) 6,414 5,970
Interim dividend for the quarter ended 30 September 2018 of 1.6275 (30 September 2017:
1.5775) 8,089 5,970
Interim dividend for the quarter ended 31 December 2018 of 1.6275 (31 December 2017:
1.5775) 8,089 5,970
------------------------------------------------------------------------------------------ ------------ ------------
28,808 23,125
------------------------------------------------------------------------------------------ ------------ ------------
A dividend for the quarter ended 31 March 2019 of 1.6275 pence
per share, amounting to GBP8.1 million, was approved by the Board
on 30 May 2019 and is payable on 28 June 2019. The dividend has not
been included as a liability at 31 March 2019.
8. Earnings per share
Earnings per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of ordinary shares in issue during the year:
Year ended Year ended
31 Mar 2019 31 Mar 2018
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 53,352 21,060
------------------------------------------------------------------------------------------ ------------ ------------
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings
per share 438,919,897 369,225,001
------------------------------------------------------------------------------------------ ------------ ------------
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 12.2 5.7
------------------------------------- ----- -----
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 2019 31 Mar 2018
GBP'000s GBP'000s
------------------------------------------------------- ------------ ------------
Fair value of environmental infrastructure investments 523,558 429,494
Fair value of intermediate holding companies (3,526) (41,026)
------------------------------------------------------- ------------ ------------
Total fair value of investments 520,032 388,468
------------------------------------------------------- ------------ ------------
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 2019, by incorporating the fair value of these intermediate
holding companies.
Cash, working Cash, working
capital and capital and
debt in debt in
intermediate intermediate
Portfolio value holdings Total Portfolio value holdings Total
31 Mar 2019 31 Mar 2019 31 Mar 2019 31 Mar 2018 31 Mar 2018 31 Mar 2018
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
Opening balance 429,494 (41,026) 388,468 327,647 9,274 336,921
Acquisitions
Portfolio of assets
acquired 77,666 - 77,666 110,789 - 110,789
Post-acquisition
price adjustments (163) - (163) (3,591) - (3,591)
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
77,503 - 77,503 107,198 - 107,198
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
Growth in
portfolio(1) 60,143 - 60,143 28,058 - 28,058
Yields from portfolio
to intermediate
holding companies (43,582) 43,582 - (33,409) 33,409 -
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
Yields from
intermediate holding
companies
Interest on loan
notes(1) - (24,063) (24,063) - (18,631) (18,631)
Dividend payments
from UK HoldCo to
the Company(1) - (7,300) (7,300) - (10,400) (10,400)
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
- (31,363) (31,363) - (29,031) (29,031)
Other movements
Investment in working
capital in UK HoldCo - (5,553) (5,553) - (16,798) (16,798)
Administrative
expenses borne by
intermediate holding
companies(1) - (896) (896) - (1,980) (1,980)
(Drawdown)/repayment
of UK HoldCo
revolving credit
facility borrowings - 31,730 31,730 - (35,900) (35,900)
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
Fair value of the
Company's investment
in UK HoldCo 523,558 (3,526) 520,032 429,494 (41,026) 388,468
--------------------- --------------- -------------- --------------- --------------- -------------- ------------
1. The net gain on investments at fair value through profit or
loss for the year ended 31 March 2019 is GBP27,884,000 (31 March
2018: net loss of GBP2,953,000). This, together with interest
received on loan notes of GBP24,063,000 (31 March 2018:
GBP18,631,000) and dividend income of GBP7,300,000 (31 March 2018:
GBP10,400,000) comprises operating income in the income
statement.
The balances in the table above represent the total net movement
in the fair value of the Company's investment. The "cash, working
capital and debt in intermediate holding companies" balances
reflect investment in, distributions from or movements in working
capital and are not value generating.
Fair value of portfolio of assets
The Investment Adviser has carried out fair market valuations of
the investments as at 31 March 2019. The Directors have satisfied
themselves as to the methodology used and the discount rates
applied for the valuation. Investments are all investments in
environmental infrastructure projects and are valued using a
discounted cash flow methodology, being the most relevant and most
commonly used method in the market to value similar assets to the
Company's. The Company's holding of its investment in UK HoldCo
represents its interest in both the equity and debt instruments.
The equity and debt instruments are valued as a whole using a
blended discount rate and the value attributed to the equity
instruments represents the fair value of future dividends and
equity redemptions in addition to any value enhancements arising
from the timing of loan principal and interest receipts from the
debt instruments, while the value attributed to the debt
instruments represents the principal outstanding and interest due
on the loan at the valuation date.
The valuation techniques and methodologies have been applied
consistently with the valuations performed since the launch of the
Fund in March 2014.
Discount rates applied to the portfolio of assets range from
6.5% to 9.2% (31 March 2018: 6.5% to 9.2%). The weighted average
discount rate of the portfolio at 31 March 2019 is 7.9% (31 March
2018: 8.1%).
The following economic assumptions have been used in the
discounted cash flow valuations:
31 Mar 2019 31 Mar 2018
---------------------------- ------------------------------ ------------------------------------------------------
UK - inflation rates 2.8% for 2019 3.50% for 2018 gradually decreasing to 2.75% from 2020
decreasing to 2.75% from 2021
---------------------------- ------------------------------ ------------------------------------------------------
France - inflation rates 1.5% 1.5%
---------------------------- ------------------------------ ------------------------------------------------------
UK - deposit interest rates 1.5% for 2019, gradually 1.5% for 2018, gradually
rising to 2.5% from 2020 rising to 2.5% from 2020
France - deposit rates 0.5% 0.5%
---------------------------- ------------------------------ ------------------------------------------------------
Euro/sterling exchange rate 1.16 1.14
---------------------------- ------------------------------ ------------------------------------------------------
The UK corporation tax rate assumed in the 31 March 2019
portfolio valuation is 19%, stepping down to 17% from April 2020
(31 March 2018: 19%), in line with market practice. The equivalent
rate for the French assets is 28%, stepping down to 25.0% from
2022.
Refer to note 16 for details of the sensitivity of the portfolio
to movements in the discount rate and economic assumptions.
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 project investments were
as follows:
% holding at 31 Mar % holding at 31 Mar
2019 2018
--------------------- ---------------------
Shareholder Shareholder
Project name Equity loan Equity loan
---------------------- ------- ------------ ------- ------------
Amber 100% 100% 100% 100%
Bilsthorpe 100% 100% 100% 100%
Branden 100% 100% 100% 100%
Burton Wold Extension 100% 100% 100% 100%
Carscreugh 100% 100% 100% 100%
Castle Pill 100% 100% 100% 100%
CSGH 100% 100% 100% 100%
Dumfries and Galloway 80% 80% 80% 80%
Dungavel 100% 100% 100% 100%
Egmere Energy 100% 100% - -
ELWA 80% 80% 80% 80%
Ferndale 100% 100% 100% 100%
Grange Farm 100% 100% - -
Hall Farm 100% 100% 100% 100%
Icknield 53% 100% 40% 100%
Le Placis Vert 100% 100% 100% 100%
Llynfi 100% 100% 100% 100%
Biogas Meden 100% 100% - -
Merlin Renewables 100% 100% - -
Moel Moelogan 100% 100% 100% 100%
Monksham 100% 100% 100% 100%
New Albion Wind Farm 100% 100% 100% 100%
Panther 100% 100% 100% 100%
Plouguernével 100% 100% 100% 100%
Pylle Southern 100% 100% 100% 100%
Tay 33% 33% 33% 33%
Vulcan 100% 100% 100% 100%
Wear Point 100% 100% 100% 100%
---------------------- ------- ------------ ------- ------------
Details of investments made during the year
On 22 June 2018, the Group signed a further investment in the
Vulcan Renewables anaerobic digestion plant. The investment
consists of provision of funding of c.GBP8.5 million to
significantly expand the AD plant's biomethane generating
capacity.
On 6 July 2018, the Group acquired two anaerobic digestion
assets, Egmere Energy Limited and Grange Farm Energy Limited, for a
total consideration of c.GBP36.0 million.
On 15 August 2018, the Group acquired Merlin Renewables Limited
for a consideration of c.GBP18.1 million.
On 18 December 2018, the Group acquired Biogas Meden Limited for
a consideration of c.GBP16.2 million.
On 20 December 2018, the Group completed a minority investment
in the Icknield Farm anaerobic digestion plant from private
individuals who were the project's developers for a cash
consideration of GBP1.0 million.
10. Trade and other receivables
31 Mar 2019 31 Mar 2018
GBP'000s GBP'000s
--------------------- ------------- -------------
Prepayments 21 20
--------------------- ------------- -------------
Balance at 31 March 21 20
--------------------- ------------- -------------
11. Trade and other payables
31 Mar 2019 31 Mar 2018
GBP'000s GBP'000s
-------------------- ------------ ------------
Accruals 1,563 1,610
-------------------- ------------ ------------
Balance at 31 March 1,563 1,610
-------------------- ------------ ------------
12. Loans and borrowings
The Company had no outstanding loans or borrowings at 31 March
2019 (31 March 2018: 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 with HSBC, ING, NIBC and Santander which provides
for a committed revolving credit facility of GBP130 million and an
uncommitted accordion facility of up to GBP60 million. On 1 June
2018 the facility was extend for a further year. On 8 May 2019, the
facility was further extended by one year to June 2022 and the
accordion facility was exercised for up to GBP40 million,
increasing the borrowing facility to GBP170 million. The facility
margin is 200 to 225 bps (depending on the loan-to-value ratio for
the Fund) over LIBOR. The facility will be used to finance the
acquisitions of environmental infrastructure projects and to cover
working capital requirements.
As at 31 March 2019, UK HoldCo had an outstanding balance of
GBP16.7 million under the facility (31 March 2018: GBP48.4
million). The loan bears interest of LIBOR + 200 to 225 bps and is
intended to be repaid by proceeds from future capital raises.
As at 31 March 2019, the Company held loan notes of GBP318.9
million which were issued by UK HoldCo (31 March 2018: outstanding
amount of GBP228.9 million).
There were no other outstanding loans and borrowings in either
the Company, UK HoldCo, HWT or JLEAG Solar 1 at 31 March 2019.
13. Share capital account
Number of shares 31 Mar 2019 GBP'000s 31 Mar 2018 GBP'000s
----------------------------------- ---------------- -------------------- --------------------
Opening balance 1 April 2018 394,077,029 389,262 334,858
Shares issued in the year 102,941,176 105,000 55,522
Expenses of issue of equity shares - (1,592) (1,118)
----------------------------------- ---------------- -------------------- --------------------
Balance at 31 March 2019 497,018,205 492,670 389,262
----------------------------------- ---------------- -------------------- --------------------
On 24 October 2018, the Company raised gross proceeds of
GBP105.0 million by way of issuing a total of 102,941,176 new
ordinary shares at 102 pence per new ordinary share. A total of
86,694,028 new ordinary shares were issued pursuant to a placing,
10,384,829 new ordinary shares were issued pursuant to an offer for
subscription, and 5,862,319 new ordinary shares were issued
pursuant to an intermediaries offer placing, all in accordance with
the terms set out in the Prospectus published by the Company on 23
February 2018.
Following these issues, at 31 March 2019, the Company's share
capital is comprised of 497,018,205 fully paid-up ordinary shares
of no par value.
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 2019 31 Mar 2018
GBP'000s GBP'000s
-------------------- ------------ ------------
Opening balance 3,125 5,190
Profit for the year 53,352 21,060
Dividends paid (28,808) (23,125)
-------------------- ------------ ------------
Balance at 31 March 27,669 3,125
-------------------- ------------ ------------
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
On 5 June 2019, the Company announced a change of Investment
Adviser from JLCM to Foresight Group, effective from 1 July 2019.
The material terms, fees and provisions of the Investment Advisory
Agreement with Foresight Group are the same as applied to JLCM for
the period, as summarised below.
JLCM is entitled to a base fee equal to:
a) 1.0% per annum of the Adjusted Portfolio Value(1) of the
Fund(2) up to and including GBP500 million; and
b) 0.8% per annum of the Adjusted Portfolio Value of the Fund in excess of GBP500 million.
The total Investment Adviser fee charged to the income statement
for the year ended 31 March 2019 was GBP5,006,000 (31 March 2018:
GBP4,147,000) of which GBP1,341,000 remained payable as at 31 March
2019 (31 March 2018: GBP1,103,000).
1. Adjusted Portfolio Value is defined in the Investment Advisory Agreement as:
a) the fair value of the investment portfolio; plus
b) any cash owned by or held to the order of the Fund; plus
c) the aggregate amount of payments made to shareholders by way
of dividend in the quarterly period ending on the relevant
valuation day, less
I. any other liabilities of the Fund (excluding borrowings); and
II. any uninvested cash.
2. Fund means the Company and John Laing Environmental Assets
Group (UK) Limited together with their wholly owned subsidiaries or
subsidiary undertakings (including companies or other entities
wholly owned by them together, individually or in any combination,
as appropriate) but excluding project entities.
Individual project companies make provision for the payment of
fees to Directors appointed by its shareholders. During the year,
one of the Investment Adviser's parent company's subsidiaries,
Laing Investments Management Services Limited, received Directors'
fees of GBP13,000 (31 March 2018: GBP18,000) from the portfolio for
the provision of Directors' services provided to assets within the
portfolio.
During the year, the Company's intermediate holding companies
paid fees of GBP10,000 (31 March 2018: GBP30,000) related to tax
compliance-related services provided by one of the Investment
Adviser's parent company's subsidiaries, Laing Investments
Management Services Limited.
Other transactions with related parties
During the year, the Directors of the Company, who are
considered to be key management, received fees of GBP239,000 (31
March 2018: GBP271,000) for their services. The Directors of the
Company were also paid GBP1,991 of expenses (31 March 2018:
GBP2,059).
The Directors held the following shares:
Ordinary shares of no par value Ordinary shares of no par value
each held at each held at
31 Mar 2019 31 Mar 2018
------------------ ------------------------------- -------------------------------
Richard Morse 103,535 83,042
Christopher Legge 29,896 29,896
Denise Mileham 32,340 28,160
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
------------------ ------------------------------- -------------------------------
All of the above transactions were undertaken on an arm's length
basis.
The Directors were paid dividends in the year of GBP14,924 (31
March 2018: GBP14,090).
16. Financial instruments
Financial instruments by category
The Company held the following financial instruments at fair
value at 31 March 2019. There have been no transfers of financial
instruments between levels of the fair value hierarchy. There are
no non--recurring fair value measurements.
31 Mar 2019
----------------------------------------------------------------------------------
Financial Financial
assets at fair liabilities at
Cash and bank Loans and value through amortised
balances receivables profit or loss cost Total
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) - - 520,032 - 520,032
Current assets
Trade and other receivables - 21 - - 21
Cash and cash equivalents 1,849 - - - 1,849
-------------------------------- ---------------- ----------------- ---------------- ---------------- -----------
Total financial assets 1,849 21 520,032 - 521,902
-------------------------------- ---------------- ----------------- ---------------- ---------------- -----------
Current liabilities
Trade and other payables - - - (1,563) (1,563)
-------------------------------- ---------------- ----------------- ---------------- ---------------- -----------
Total financial liabilities - - - (1,563) (1,563)
Net financial instruments 1,849 21 520,032 (1,563) 520,339
-------------------------------- ---------------- ----------------- ---------------- ---------------- -----------
31 Mar 2018
------------------------------------------------------------------------------------------------
Financial Financial
assets at fair liabilities at
value through amortised
Cash and bank Loans and profit or loss cost Total
balances GBP'000s receivables 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) - - 388,468 - 388,468
Current assets
Trade and other
receivables - 20 - - 20
Cash and cash
equivalents 5,509 - - - 5,509
-------------------- -------------------- -------------------- ------------------- -------------------- ---------
Total financial
assets 5,509 20 388,468 - 393,997
-------------------- -------------------- -------------------- ------------------- -------------------- ---------
Current liabilities
Trade and other
payables - - - (1,610) (1,610)
-------------------- -------------------- -------------------- ------------------- -------------------- ---------
Total financial
liabilities - - - (1,610) (1,610)
Net financial
instruments 5,509 20 388,468 (1,610) 392,387
-------------------- -------------------- -------------------- ------------------- -------------------- ---------
The table above provides an analysis of financial instruments
that are measured subsequent to their initial recognition at fair
value as follows:
-- Level 1: fair value measurements derived from quoted prices
(unadjusted) in active markets for identical assets or
liabilities;
-- Level 2: fair value measurements derived from inputs other
than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
-- Level 3: fair value measurements derived from valuation
techniques that include inputs to the asset or liability that are
not based on observable market data (unobservable inputs).
There were no transfers between Level 1 and 2, Level 1 and 3 or
Level 2 and 3 during the 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 2019
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 7.9% Plus 0.5%
Change in portfolio valuation Increases GBP18.6m GBP523.6m Decreases GBP17.6m
Change in NAV per share Increases 3.7p 104.7p Decreases 3.5p
----------------------------- ------------------ --------- ------------------
31 March 2018
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 8.1% Plus 0.5%
Change in portfolio valuation Increases GBP16.8m GBP429.5m Decreases GBP15.8m
Change in NAV per share Increases 3.9p 99.6p Decreases 3.7p
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in long-term
inflation rates is as follows:
31 March 2019
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP20.7m GBP523.6m Increases GBP22.0m
Change in NAV per share Decreases 4.2p 104.7p Increases 4.4p
----------------------------- ------------------ ---------- ------------------
31 March 2018
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP18.9m GBP429.5m Increases GBP20.2m
Change in NAV per share Decreases 4.4p 99.6p Increases 4.7p
----------------------------- ------------------ ---------- ------------------
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 2019
----------------------------- ------------------ --------- ------------------
Energy yield: Wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP30.8m GBP523.6m Increases GBP30.4m
Change in NAV per share Decreases 6.2p 104.7p Increases 6.1p
Energy yield: Solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP9.6m GBP523.6m Increases GBP10.2m
Change in NAV per share Decreases 1.9p 104.7p Increases 2.1p
----------------------------- ------------------ --------- ------------------
31 March 2018
----------------------------- ------------------ --------- ------------------
Energy yield (combined) P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP43.4m GBP429.5m Increases GBP42.6m
Change in NAV per share Decreases 10.1p 99.6p Increases 9.9p
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in electricity and
gas prices is as follows:
31 March 2019
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP28.9m GBP523.6m Increases GBP29.1m
Change in NAV per share Decreases 5.8p 104.7p Increases 5.9p
----------------------------- ------------------ --------- ------------------
31 March 2018
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP23.4m GBP429.5m Increases GBP23.0m
Change in NAV per share Decreases 5.4p 99.6p Increases 5.3p
----------------------------- ------------------ --------- ------------------
Waste & wastewater assets do not have significant volume and
price risks.
The sensitivity of the portfolio to movements in AD feedstock
prices is as follows:
31 March 2019
----------------------------- ----------------- --------- -----------------
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases GBP7.0m GBP523.6m Decreases GBP7.2m
Change in NAV per share Increases 1.4p 104.7p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
Comparative sensitivity results are not applicable for 31 March
2018 as this did not present a significant risk given the smaller
size of the AD portfolio at the time.
Euro/sterling exchange rate sensitivity
As the proportion of the portfolio assets with cash flows
denominated in euros represented less than 1% of the portfolio
value at 31 March 2019, the Directors consider the sensitivity to
changes in the euro/sterling exchange rate to be insignificant.
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
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 the 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 2019, the Company had no outstanding debt.
However, as set out in note 12, the Company's subsidiary UK HoldCo
has a GBP130 million revolving credit facility (increased to GBP170
million after the balance sheet date), which was drawn by GBP16.7
million at 31 March 2019.
Financial risk management
The Group's activities expose it to a variety of financial
risks: capital risk, liquidity risk, market risk (including
interest rate risk, inflation risk and power price risk) and credit
risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
For the Company and 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 its 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 2019 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 debt of GBP16.7 million, being the amount drawn on the
revolving credit facility.
Market risk - foreign currency exchange rate risk
As the proportion of the portfolio assets with cash flows
denominated in euros represented less than 1% of the portfolio
value at 31 March 2019, the Directors consider the sensitivity to
changes in the euro/sterling exchange rate to be insignificant.
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 infrastructure investment hedges their interest rate risk
at the inception of a project. This will either be done by issuing
fixed rate debt or variable rate debt which will be swapped into
fixed rate by the use of interest rate swaps.
Market risk - inflation risk
Some of the Company's investments will have part of their
revenue and some of their costs linked to a specific inflation
index at inception of the project. In most cases this creates a
natural hedge, meaning a derivative does not need to be entered
into in order to mitigate inflation risk.
Market risk - power price risk
The wholesale market price of electricity and gas is volatile
and is affected by a variety of factors, including market demand
for electricity and gas, 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 and gas 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 and gas in the market. Short--term and seasonal
fluctuations in electricity and gas demand will also impact the
price at which the investments can sell electricity and gas. The
supply of electricity and gas also impacts wholesale electricity
and gas prices. Supply of electricity and gas 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 infrastructure 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 2019, the Company has provided a guarantee under
the Company's wholly owned subsidiary UK HoldCo's GBP130 million
revolving credit facility. Following an increase in the committed
amount and a further one-year extension signed in May 2019, the RCF
has increased to GBP170 million and is now due to expire in June
2022.
The Company had no other commitments or guarantees.
18. Subsidiaries
The following subsidiaries have not been consolidated in these
financial statements as a result of applying the requirements of
"Investment Entities: Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and IAS 27)":
Name Category Place of business Registered office Ownership interest Voting rights
-------------------- --------------------- ------------------ ------------------ ------------------ -------------
John Laing
Environmental
Assets Group (UK)
Limited(1) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1
Limited Intermediate holding UK A 100% 100%
Croft Solar PV
Limited Operating subsidiary UK C 100% 100%
Cross Solar PV
Limited Operating subsidiary UK C 100% 100%
Domestic Solar
Limited Operating subsidiary UK C 100% 100%
Ecossol Limited Operating subsidiary UK C 100% 100%
Hill Solar PV
Limited Operating subsidiary UK C 100% 100%
Share Solar PV
Limited Operating subsidiary UK C 100% 100%
Tor Solar PV Limited Operating subsidiary UK C 100% 100%
Residential PV
Trading Limited Operating subsidiary UK C 100% 100%
South-Western Farms
Solar Limited Operating subsidiary UK C 100% 100%
Angel Solar Limited Operating subsidiary UK C 100% 100%
Project holding
Easton PV Limited company UK D 100% 100%
Project holding
Pylle Solar Limited company UK D 100% 100%
Second Energy
Limited Operating subsidiary UK D 100% 100%
ELWA Holdings Project holding
Limited company UK E 80% 80%
ELWA Limited(1) Operating subsidiary UK E 80% 81%(2)
JLEAG Wind Holdings Project holding
Limited company UK A 100% 100%
Project holding
JLEAG Wind Limited company UK A 100% 100%
Amber Solar Parks Project holding
(Holdings) Limited company UK F 100% 100%
Amber Solar Park
Limited Operating subsidiary UK F 100% 100%
Fryingdown Solar Operating subsidiary
Park Limited (dormant) UK F 100% 100%
Five Oaks Solar Operating subsidiary
Parks Limited (dormant) UK F 100% 100%
Bilsthorpe Wind Farm
Limited Operating subsidiary UK F 100% 100%
Ferndale Wind Project holding
Limited company UK F 100% 100%
Castle Pill Wind Project holding
Limited company UK F 100% 100%
Wind Assets LLP Operating subsidiary UK F 100% 100%
Shanks Dumfries and
Galloway Holdings Project holding
Limited company UK G 80% 80%
Shanks Dumfries and
Galloway Limited Operating subsidiary UK G 80% 80%
Hall Farm Wind Farm
Limited Operating subsidiary UK F 100% 100%
Branden Solar Parks Project holding
(Holdings) Limited company UK F 100% 100%
Branden Solar Parks
Limited Operating subsidiary UK F 100% 100%
KS SPV 3 Limited Operating subsidiary UK F 100% 100%
KS SPV 4 Limited Operating subsidiary UK F 100% 100%
Carscreugh Renewable
Energy Park Limited Operating subsidiary UK F 100% 100%
Wear Point Wind
Limited Operating subsidiary UK F 100% 100%
-------------------- --------------------- ------------------ ------------------ ------------------ -------------
1. John Laing Environmental Assets Group (UK) Limited is the
only entity directly held by the Company.
2. ELWA Holdings Limited holds 81% of the voting rights and a
100% share of the economic benefits in ELWA Limited.
Name Category Place of business Registered office Ownership interest Voting rights
-------------------- --------------------- ------------------ ------------------ ------------------ -------------
Project holding
Monksham Power Ltd company UK D 100% 100%
Frome Solar Limited Operating subsidiary UK D 100% 100%
BL Wind Limited Operating subsidiary UK F 100% 100%
Burton Wold
Extension Limited Operating subsidiary UK F 100% 100%
New Albion Wind Farm
Project holding
(Holdings) Limited company UK F 100% 100%
New Albion Wind
Limited Operating subsidiary UK F 100% 100%
Dreachmhor Wind Farm
Limited Operating subsidiary UK F 100% 100%
France Wind GP Project holding
Germany GmbH company DE K 100% 100%
France Wind Germany Project holding
GmbH & Co. KG company DE K 100% 100%
Parc Eolien Le
Placis Vert SAS Operating subsidiary FR I 100% 100%
Energie Eolienne de
Plouguernével
SAS Operating subsidiary FR J 100% 100%
Project holding
CSGH Solar Limited company UK A 100% 100%
CSGH Solar (1) Project holding
Limited company UK A 100% 100%
Catchment Tay Project holding
Holdings Limited company UK H 33.3% 33.3%
Catchment Tay
Limited Operating subsidiary UK H 33.3% 33.3%
sPower Holdco 1 (UK) Project holding
Limited company UK D 100% 100%
sPower Finco 1 (UK) Project holding
Limited company UK D 100% 100%
Higher Tregarne
Solar (UK) Limited Operating subsidiary UK D 100% 100%
Crug Mawr Solar Farm
Limited Operating subsidiary UK D 100% 100%
Golden Hill Solar Project holding
(UK) Limited company UK D 100% 100%
Golden Hill Solar
Limited Operating subsidiary UK D 100% 100%
Shoals Hook Solar
(UK) Limited Operating subsidiary UK D 100% 100%
CGT Investment Project holding
Limited company UK L 100% 100%
CWMNI GWYNT TEG CYF Operating subsidiary UK L 100% 100%
Moelogan 2
(Holdings) Project holding
Cyfyngedig company UK L 100% 100%
Moelogan 2 C.C.C. Operating subsidiary UK L 100% 100%
Vulcan Renewables
Limited Operating subsidiary UK M 100% 100%
Llynfi Afan
Renewable Energy
Park (Holdings) Project holding
Limited company UK A 100% 100%
Llynfi Afan
Renewable Energy
Park Limited Operating subsidiary UK A 100% 100%
Green Gas Oxon Project holding
Limited company UK N 52.6% 52.6%
Icknield Gas Limited Operating subsidiary UK N 52.6% 52.6%
Slapton Power Operating subsidiary
Company Limited (dissolved) UK N 52.6% 52.6%
Egmere Energy
Limited Operating subsidiary UK M 100% 100%
Grange Farm Energy
Limited Operating subsidiary UK M 100% 100%
Merlin Renewables
Limited Operating subsidiary UK M 100% 100%
Biogas Meden Limited Operating subsidiary UK M 100% 100%
-------------------- --------------------- ------------------ ------------------ ------------------ -------------
Registered offices
A. 1 Kingsway, London WC2B 6AN
B. 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ
C. Calder & Co, 16 Charles II Street, London SW1Y 4NW
D. Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF
E. Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU
F. 8 White Oak Square, London Road, Swanley, Kent BR8 7AG
G. 16 Charlotte Square, Edinburgh EH2 4DF
H. Infrastructure Managers Limited, 2nd floor, 11 Thistle Street, Edinburgh EH2 1DF
I. Parc Eolien le Placis Vert, Rue du Pre Long 35770 Vern Sur Seiche, France
J. 3 Rue Benjamin Delessert, 56104 Lorient Cedex 04, France
K. Steinweg 3-5, Frankfurt am Main, 60313, Germany
L. Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy LL28 5UN
M. 10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD
N. Friars Ford, Manor Road, Goring, Reading RG8 9EL
19. Events after balance sheet date
A dividend for the quarter ended 31 March 2019 of 1.6275 pence
per share, amounting to GBP8.1 million, was approved by the Board
on 30 May 2019 for payment on 28 June 2019.
In May 2019, the RCF was extended for a further year and the
accordion facility exercised for GBP40 million. The GBP170 million
facility is now available until June 2022.
On 5 June 2019, the Company announced a change of Investment
Adviser from JLCM to Foresight Group, effective from 1 July 2019,
and that the existing advisory team would also transfer to
Foresight Group on that date. The material terms, fees and
provisions of the Investment Advisory Agreement with Foresight
Group are the same as applied to JLCM for the year under
review.
There are no other significant events since the year end which
would require to be disclosed.
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 Praxis Fund Services Limited, a company incorporated in
and Administrator Guernsey on 13 April 2005 (registered number 43046)
--------------------- -----------------------------------------------------------------------
Market capitalisation GBP549.2 million at 31 March 2019
--------------------- -----------------------------------------------------------------------
Investment Adviser 1.0% per annum of the Adjusted Portfolio Value of the
fees 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 The ordinary shares are eligible for inclusion in PEPs
status 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 The Board conducts the Company's affairs, and intends
pooled investment to continue to conduct the Company's affairs, such that
status the Company would qualify for approval as an investment
trust if it were resident in the United Kingdom. It is
the Board's intention that the Company will continue to
conduct its affairs in such a manner and that independent
financial advisers should therefore be able to recommend
its ordinary shares to ordinary retail investors in accordance
with the FCA's rules relating to non--mainstream investment
products
--------------------- -----------------------------------------------------------------------
FATCA The Company has registered for FATCA and has a GIIN number
2BN95W.99999.SL.831
--------------------- -----------------------------------------------------------------------
Investment policy The Company's investment policy is set out on above and
is detailed on page 65 of the Company's Prospectus dated
23 February 2018
--------------------- -----------------------------------------------------------------------
Website www.jlen.com
--------------------- -----------------------------------------------------------------------
DIRECTORS AND ADVISERS
Directors
Richard Morse (Chairman)
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
Link Registrars (Guernsey) Limited (formerly Capita Asset
Services)
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
UK transfer agent
Link Asset Services (formerly 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
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE
United Kingdom
Corporate broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Corporate bankers
HSBC
PO Box 31
St Peter Port
Guernsey GY1 3AT
Channel Islands
Public company directorships
Richard Morse
John Laing Environmental Assets Group Limited
Christopher Legge
John Laing Environmental Assets Group Limited
Ashmore Global Opportunities Limited, London - Main Market
NB Distressed Debt Investment Fund Limited - SFM
Sherborne Investors (Guernsey) B Limited, London - SFM
Sherborne Investors (Guernsey) C 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
John Laing Environmental Assets Group Limited
Seneca Global Income & Growth plc, London - Main Market
GLOSSARY OF KEY TERMS
AD
Anaerobic digestion
AIFM Directive
the EU Alternative Investment Fund Managers Directive (No.
2011/61/EU)
bps
basis points
Brexit
the UK referendum on 23 June 2016 in which a majority of voters
voted to exit the EU
the Company or JLEN or the Fund
John Laing Environmental Assets Group Limited
EPC
Engineering, Procurement and Construction
EU
European Union
First Offer Agreement
the First Offer Agreement between the Company and John Laing
FiT
the Feed--in Tariff
gross project value
the fair market value of the investment interests held in a
project as increased by the amount of any financing in the relevant
project entity
Group
John Laing Environmental Assets Group Limited and its
intermediate holding companies UK HoldCo, HWT Limited and JLEAG
Solar 1 Limited
GWh
gigawatt hour
intermediate holding companies
companies within the Group which are used as pass-through
vehicles to invest in underlying environmental infrastructure
assets, namely UK HoldCo, HWT Limited and JLEAG Solar 1 Limited
Investment Adviser or JLCM
John Laing Capital Management Limited
IPO
Initial Public Offering
IRR
internal rate of return
John Laing
John Laing Group plc and its subsidiary companies
MW(e)
megawatt electric
MWh
megawatt hour
MW(th)
megawatt thermal
NAV
Net Asset Value
OECD
Organisation for Economic Co--operation and Development
portfolio
the 28 assets in which JLEN had a shareholding as at 31 March
2019
portfolio valuation
the sum of all the individual investments' net present
values
PPAs
Power Purchase Agreements
PPP/PFI
the Public Private Partnership procurement model
Price cannibalisation
the depressive influence on the wholesale power price at timings
of high output from intermittent weather driven generation such as
solar and wind
PV
photovoltaic
RHI
Renewable Heat Incentive
ROCs
Renewables Obligation Certificates
total shareholder return
total shareholder return combines the share price movement and
dividends since IPO expressed as an annualised percentage
UK HoldCo
John Laing Environmental Assets Group (UK) Limited, wholly owned
subsidiary of John Laing Environmental Assets Group Limited
WADR
the weighted average discount rate
- ENDS -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKBDNOBKDAAD
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