TIDMJLEN
RNS Number : 6033P
Jlen Environmental Assets Grp
11 June 2020
11 June 2020
JLEN Environmental Assets Group Limited
Announcement of results for the year ended 31 March 2020
The Directors of JLEN Environmental Assets Group Limited (the
"Company" or "JLEN") are pleased to announce the Company's results
for the year ended 31 March 2020.
Financial highlights
-- Portfolio valuation as at 31 March 2020 of GBP537.1m (31 March 2019: GBP523.6m)
-- NAV per ordinary share of 97.5 pence as at 31 March 2020 (31
March 2019: 104.7 pence), reduction primarily driven by the effect
of the long-term power price forecast on the portfolio value
-- Total dividends declared of 6.66 pence per ordinary share for
the year to 31 March 2020 (2019: 6.51 pence per ordinary share), in
line with the target set out in the 2019 Annual Report. Dividend
cover of 1.1 times for the financial year
-- Target dividend for the year to 31 March 2021 of 6.76 pence per ordinary share
-- Share price total return for the period since IPO of 54.6% (7.5% annualised)
Portfolio highlights
-- Three acquisitions completed this year and EUR25m commitment
to FEIP, a limited partnership investing in predominantly
greenfield European energy infrastructure assets
-- First acquisitions in the hydro, battery and food waste
sectors increasing the Company's diversification
-- Diversified portfolio now 36% wind, 25% AD, 23% Solar, 15%
waste and wastewater and 1% Hydro and battery by value
-- Overall portfolio performance slightly above expectations
-- Wind portfolio generation above budget due to particularly
good wind resource in the last quarter
-- Solar assets slightly below budget for the year due to grid
outages and repair works carried out under warranty
-- Anaerobic digestion assets continued to outperform during the year
-- Bio Collectors food waste project negatively impacted by
Covid-19 pandemic as waste volumes fall. Other projects in the
portfolio currently demonstrating resilience
Other highlights
-- JLEN will join the FTSE 250, effective 22 June 2020
-- Raised GBP57.2m of equity capital via oversubscribed placings during the year
-- Revolving credit facility of GBP170m, expiring in June 2022
-- Strong pipeline of assets for further growth
-- Appointment of Stephanie Coxon to the Board of Directors, effective 11 June 2020
Richard Morse, Chairman of JLEN, said:
"In an extraordinary year featuring falling power prices and the
onset of the Covid-19 pandemic, JLEN has provided reliable income
for investors while continuing to diversify its portfolio."
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
A webinar for the annual results will be held at 10:00 a.m. (UK
time) on 11 June, hosted by Chris Holmes and Chris Tanner, Co-lead
Investment Advisers to JLEN. To register for the webinar, please
contact Newgate Communications on +44 (0)20 3757 6880 or by email
at JLEN@newgatecomms.com.
Presentation materials will be posted on the Company's website,
www.jlen.com, from 9.00am.
For further information, please contact:
Foresight Group +44(0)20 3667 8100
Chris Tanner
Chris Holmes
Winterflood Investment Trusts +44(0)20 3100 0000
Neil Langford
Chris Mills
Newgate Communications +44(0) 20 3757 6880
Elisabeth Cowell
Ian Silvera
Megan Kovach
ABOUT US
JLEN Environmental Assets Group Limited ("JLEN" or the
"Company") is an environmental infrastructure investment fund which
aims to provide shareholders with a sustainable, progressive
dividend, paid quarterly and to preserve the capital value of its
portfolio on a real basis over the long term through the
reinvestment of cash flows not required for the payment of
dividends.
JLEN's investment policy is to invest in a diversified portfolio
of environmental infrastructure projects that have the benefit of
long--term, predictable, wholly or partially inflation--linked cash
flows supported by long--term contracts or stable regulatory
frameworks.
At 31 March 2020, the portfolio included onshore wind, PV solar,
anaerobic digestion, hydro, battery storage and waste &
wastewater processing projects in the UK and two onshore wind
projects in France. The wind, solar, hydro and anaerobic digestion
projects are supported by the UK's and France's commitment to
low-carbon energy generation targets, whilst the waste &
wastewater processing projects benefit from long--term contracts
backed by the UK Government.
OUR PURPOSE
JLEN aims to invest in a diversified portfolio of environmental
infrastructure projects that support more environmentally friendly
approaches to economic activity whilst generating a sustainable
financial return. It seeks to integrate consideration of
sustainability and environmental, social and governance ("ESG")
management into its activities, which helps to manage risks and
identify opportunities.
AT A GLANCE
Our results for the full year ending 31 March 2020.
2020 2019 Change
---------------------------- --------- --------- ------
Market capitalisation GBPm GBP606.9m GBP549.2m +10.5%
Share price p 111.0p 110.5p +0.5%
Annual dividend per share p 6.66p 6.51p +2.3%
Net Asset Value GBPm GBP533.0m GBP520.3m +2.4%
Net Asset Value per share p 97.5p 104.7p -6.9%
Portfolio value GBPm GBP537.1m GBP523.6m +2.6%
---------------------------- --------- --------- ------
-- Dividend of 6.66 pence per share declared for the year to 31
March 2020 (2019: 6.51 pence per share). Dividend cover of 1.1x
-- Three acquisitions completed during the year, giving a total of 30 assets
-- Raised GBP57.2 million of equity capital via an oversubscribed placing during the year
-- NAV per share 97.5 pence from 104.7 pence at 31 March 2019;
decrease mainly due to reduction in the long--term power price
forecast and removal of the corporation tax rate reduction from
2020
-- GBP40 million increase of the revolving credit facility to
GBP170 million, and one-year extension, now expiring in June
2022
-- Positive performance of the portfolio, which performed 2%
above budget with the two largest portfolio segments -onshore wind
and anaerobic digestion - both outperforming against budget
-- Share price total return since IPO of 54.6% (7.5% annualised)
-- Strong pipeline of assets for further growth
MARKET AND OPPORTUNITIES
Through JLEN's diversified mandate the Board believes that the
Company is positioned well to capture attractive investment
opportunities in environmental infrastructure assets.
The markets in which JLEN operates continue to evolve as the
build out of sustainable infrastructure takes on new forms,
technology and financing structures. The Company can continue
building a resilient and diversified portfolio of assets whose
performances follow different market dynamics and climatic
conditions.
Market developments Investment policy Investment outlook
---------------------------------- ----------------------------- --------------------------------
Against the backdrop The Company invests in
of international collaboration environmental infrastructure
to reduce further climate projects, being those
change, the decarbonisation that utilise natural
of the energy system or waste resources or
is an integral part in support more environmentally
developing a sustainable friendly approaches to
future. To make this economic activity.
happen, a significant
investment into new environmental
infrastructure will be
required.
---------------------------------- ----------------------------- --------------------------------
Global investment into Generation of New proposals within
renewable energy generation renewable energy the UK will extend the
will be significant to Contracts for Difference
meet climate targets. regime to onshore wind
32% of the EU's energy and solar, supporting
consumption will need further development and
to come from renewable investment opportunities
sources by 2030, requiring benefiting from a degree
some EUR400 billion of of revenue stability.
investment. Increasing Other renewable energy
electrification of end sectors present opportunities,
users will drive increased such as biogas production
power demand to be met for either heat or transport.
by renewable sources.
---------------------------------- ----------------------------- --------------------------------
Energy efficiency is Projects that promote Low-carbon investment
an integral part of addressing energy efficiency opportunities could encompass
climate change. Within combined heat and power
the UK, widespread deployment systems, batteries storage
of energy efficiency and flexible generation,
measures will be required low--carbon agriculture,
to meet the net zero co-location of battery
target now enshrined storage with existing
in law. New infrastructure assets, and electric
will be required that vehicle and low-carbon
either offers a more transport infrastructure
efficient way to generate such as biofuels.
or distribute energy
or a means to reduce
the demand of energy
users.
---------------------------------- ----------------------------- --------------------------------
Water deficits are expected Supply and treatment Following waste reduction
to become more prevalent of water and processing measures, further investment
in the UK with wetter of waste into materials recycling
winters and drier summers. will be required; new
The UK water industry legislation for food
has pledged to achieve waste collection is expected
net zero carbon emissions to generate demand for
by 2030. Diverting biodegradable new and expanded AD facilities.
waste from landfill remains Energy from waste facilities
a key policy. are being developed to
reduce residual waste
to landfill.
---------------------------------- ----------------------------- --------------------------------
The scale of the climate Geographic spread of JLEN's mandate supports
challenge has resulted investments geographic diversification,
in government policies reducing its exposure
drivers on a global scale. to the UK power market,
Technologies and commercial regulatory framework
partners can provide and weather systems.
continuity across jurisdictions The Investment Adviser
whilst more localised can take advantage of
climate conditions and in-country presence across
market dynamics present Europe and Australia
diversification opportunities. to generate investment
opportunities outside
of the UK.
---------------------------------- ----------------------------- --------------------------------
CHAIRMAN'S STATEMENT
In an extraordinary year featuring falling power prices and the
onset of the Covid-19 pandemic, JLEN has provided reliable income
for investors while continuing to diversify its portfolio.
On behalf of the Board, I am pleased to present the Annual
Report of the Company for the year ended 31 March 2020.
Results
We have had an extraordinary year. We have had good operational
performance in most sectors of the portfolio; we have undertaken
new investments that have further diversified the portfolio,
increasing the capacity to more than 300MW, shortly after year end
and broadening our contribution to the world of sustainable energy.
We concluded a successful fundraising in March 2020, leaving us
with good headroom for further acquisitions and increasing our
market capitalisation to more than GBP600 million, and received
confirmation from FTSE Russell that JLEN will join the FTSE 250,
effective 22 June 2020.
All of this has been against a backdrop of falling energy
prices. The Covid-19 crisis has accelerated that decline in energy
prices, but the crisis has not materially affected operations for
most of our assets. The net effect of this has been to reduce our
NAV, although I am pleased to say that the shareholder return is
still positive for the period under review. Many of our ultimate
investors are individuals or institutions, including charities that
need income, particularly in these challenging times.
The Company has continued to offer investors a mature, yielding
environmental infrastructure investment, and is the most
diversified by technology of its peer group. New investments in the
period increased that diversification, adding run-of-river hydro,
battery storage and food waste anaerobic digestion.
Falling wholesale electricity prices have been a feature of the
year under review, driven by benign global conditions for
production of natural gas (the predominant price--setting factor on
the UK network) and, most recently, the ongoing Covid-19 pandemic
that has impacted demand for electricity. Within its peer group,
the Company has a relatively low level of exposure to wholesale
electricity prices by virtue of its portfolio mix, but it is not
immune to the effects of lower revenues from this source. Dividend
cover is lower for this period as a result, at 1.1x on a paid
basis, and NAV per share has also fallen during the year by 7.2
pence per share, primarily as a result of expectations of lower
power prices in the future.
Our commitment to environmental, social and governance ("ESG")
matters was set out in our first ESG report last year and remains
an important consideration. To underline this, we have articulated
a set of ESG objectives, which are set out in this report and which
have been integrated into the Fund's objectives.
We are approaching the anniversary of the transfer of the
investment advisory team to Foresight Group, and the Board has been
pleased with the way in which the transfer has gone. The greater
origination network of Foresight has led to more opportunities
being considered, and while the Company will remain prudent in
deciding which ones to pursue, we continue 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.
During the period, the Company purchased two run--of--river
hydro facilities for GBP4.3 million in July, which are subsidised
under the Feed-in Tariff regime. One of these facilities also
includes a co-located battery storage system. In August, another
crop--fed, gas-to-grid anaerobic digestion ("AD") facility was
acquired for GBP14.8 million, close to some of our existing assets
in Norfolk, bringing the total number of these plants in the
portfolio to seven at the year end. A further such plant was
acquired just after the year end. In December, the Company made its
first acquisition in the food waste sector, buying a 70% stake in
the London-based Bio Collectors business that processes food waste
in its AD facility and is subsidised under the Renewable Heat
Incentive.
The Company also made a EUR25 million commitment to Foresight
Energy Infrastructure Partners ("FEIP"), a limited partnership
managed by Foresight Group focused mainly on greenfield wind and
solar opportunities in Europe. No additional fees are paid on this
commitment, and the Board considered it an effective means of
diversifying the Company further into European markets without
being overly concentrated in single assets. FEIP made its first
investment post year end into the 231MW Skaftasen wind project in
Sweden.
As a result, at the year end, JLEN has a diversified portfolio
of 30 operational solar, onshore wind, waste & wastewater,
hydro, battery and anaerobic digestion projects based in the UK and
France, representing a total of 297.9MW, which are substantially
backed by long-term contracts or stable regulatory-backed subsidy
arrangements.
The Net Asset Value ("NAV") per share at 31 March 2020 was 97.5
pence, compared with 104.7 pence at 31 March 2019. The main driver
for the NAV per share reduction has been the impact of the update
of power price forecasts.
The loss after tax for the year was GBP10.7 million (2019:
profit after tax GBP53.4 million) resulting in a loss per share of
2.1 pence (2019: earnings per share of 12.2 pence). Removing
unrealised movements on investments at fair value, the adjusted
profit before tax is GBP32.8 million (2019: GBP25.5 million),
equivalent to 6.5 pence per share (2019: 5.8 pence).
Cash received from the portfolio assets by way of distributions,
which includes interest, loan repayments and dividends, was GBP45.0
million during the year. After operating and finance costs, cash
flow from operations of the Company of GBP36.2 million covered the
cash dividends paid during the year of 6.62 pence per share by 1.1x
and the declared interim dividends applicable to the year of 6.66
pence per share 1.1x, covered in more detail below.
Dividends
The Company has delivered a covered dividend for the year of
1.1x (2019:1.2x), despite project revenues received from the sale
of wholesale electricity and gas declining over the year.
During the year, the Company paid a final dividend for the
period ended 31 March 2019 of 1.6275 pence per share (GBP8.1
million). Interim dividends of 1.665 pence per share were paid in
September 2019 (GBP8.3 million), of 1.665 pence per share in
December 2019 (GBP8.3 million) and of 1.665 pence per share in
March 2020 (GBP8.3 million).
The Board is pleased to confirm the quarterly dividend in
respect of the quarter to 31 March 2020 of 1.665 pence per share,
which was approved on 27 May 2020 and will be paid on 26 June 2020,
bringing the total to the target of 6.66 pence per share for the
full year.
It has been 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 has never missed a
dividend target during its six-year life and has grown the dividend
consistently at a time when investors have found dependable income
hard to come by, despite falling power price projections. After
careful consideration, and in light of a weak outlook for a
recovery in power prices exacerbated further by the Covid--19
pandemic, the Board has decided that it is prudent now to change
the dividend policy to break the explicit link with inflation. The
Board also decided to increase the Company's dividend target to
6.76 pence per share for the year to 31 March 2021. Thereafter, the
Company will follow a progressive dividend policy. The Board
recognises the importance to investors of maintaining a sustainable
and growing dividend and will aim to deliver that in the coming
years.
Portfolio performance
During the year, overall generation from the renewable energy
portfolio was 904GWh, 3.0% over budget, excluding the Bio
Collectors asset which has been owned for just one quarter.
Electricity generation from the wind assets (51% by GWh energy
generated) was 3.9% above budget, helped by good wind speeds and
strong performance in the final quarter of the year. Operational
availability was in line with budget, despite increased
unavailability at four wind farms in the portfolio where operations
and maintenance services were provided by the wind turbine
manufacturer Senvion. Senvion filed for insolvency during the year,
and its European service business was acquired by Siemens Gamesa.
This coincided with an improvement in performance for these assets
in the second half of the year.
Electricity generation from the solar assets (8% by GWh energy
generated) was 3.3% below budget, impacted by planned grid outages
and some significant repair works to inverter stations carried out
under warranty at the CSGH portfolio in South Wales. Excluding
these events, generation would have been on budget. The period was
a frustrating one for the solar portfolio, with several unplanned
outages and component issues also affecting performance. Insurance
is likely to cover some of the associated downtime, and components
have been improved in a number of locations, such as the
replacement of all dry-cast transformers at the Branden sites. The
Investment Adviser has also reviewed the energy yield assessments
for those sites with persistent issues and reduced them for the
year ahead where considered appropriate.
Gas generation from the agricultural AD portfolio (39% by GWh
energy generated) was 3.6% above budget on a MWh basis. Several
plants performed strongly during the year in terms of gas
production, and the Vulcan plant also completed its major upgrade
to finish the year regularly producing more than twice the level in
its original investment case. However, the period also had its
challenges, with the legacy of the dry summer of 2018 being low
feedstock buffers and the very wet winter making it difficult to
spread digestate onto already waterlogged fields. The Investment
Adviser is looking at several initiatives to increase resilience in
the portfolio given the likelihood of more extreme weather patterns
in the future, as well as further projects to increase production
capacity.
The results from our renewable energy assets are dependent in
part on the level of energy prices. Market prices decreased
materially during the year, with average wholesale prices captured
for the summer season of
GBP34/MWh being 26% lower than the previous year, and for the
winter season of GBP43/MWh being 22% lower. A similar pictured
emerged for gas sales.
The wind and solar projects carried a number of favourable fixed
price arrangements into the first half of the period, covering 72%
of the renewable energy portfolio's electricity price exposure;
this reduced for the winter 2019 season, lowering wholesale
electricity revenues and contributing to the lower dividend cover
compared to the previous year.
As well as lower short--term prices, forecasts of future
electricity prices also fell significantly, driven initially by
increased expectations of renewables deployment and the benign
global environment for natural gas that is the main driver of UK
electricity prices. More latterly, the Covid-19 pandemic has caused
a deep reduction in electricity demand, with considerable
uncertainty as to the pace and pattern of any "rebound" for the
economy and this has exacerbated the already negative outlook for
electricity prices. The wind and solar assets have fixes and floor
arrangements in place for 53% and 48% of generation for the
upcoming summer and winter seasons respectively, but the long-term
impact of expected lower wholesale electricity revenues have
weighed on the portfolio valuation, decreasing it by GBP56.9
million or 10.4 pence per share.
The waste & wastewater assets represent 15% of the portfolio
by value, having been added to with the acquisition of a majority
share in the Bio Collectors food waste business. The PFI-backed
ELWA waste and Tay wastewater projects have both performed well
operationally in the period, meeting or exceeding their key
contractual targets. A key objective for the ELWA project in the
year ahead is to enhance the fire defences of the major facilities
in order to meet the expectations of the insurance market and the
Investment Adviser is paying close attention to progress on this
front. Both projects have coped well with the challenges of the
Covid-19 pandemic, being essential infrastructure and benefiting
from large, experienced operators even as changes to work practices
have been required.
The project vehicle of the Dumfries and Galloway PFI project,
which was formally terminated on 11 September 2018, has now
distributed the large majority of the cash it held to the Company
and is expected to be wound up shortly. It has been removed from
the portfolio.
Bio Collectors, a London-based food waste anaerobic digestion
operation with an associated collections business, joined the
portfolio in December and has been significantly impacted by the
Covid-19 pandemic. Specifically, the dramatic enforced change in
the lifestyle patterns of the population has led to a collapse in
the volumes of food waste that Bio Collectors attracted from the
commercial sector, although municipal volumes have held up.
Management are using the lower level of activity as an opportunity
to bring forward maintenance activity such as de-gritting, but it
is inevitable that lower volumes and therefore lower production
will carry forward into the upcoming period. The business has no
external leverage and so is well placed to weather the current
situation and the Directors continue to believe in the long-term
investment case for strategically located food waste projects given
likely drivers for increased resource reuse in this area.
Investment performance
Over the 12-month period to 31 March 2020, shareholders have
seen a share price total return of 6.3%, whilst over the same
period the NAV total return per share was (1.1)%. 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 identified a
number of value-enhancing initiatives during the year that have
contributed GBP12.6 million to the portfolio valuation, and work
continues on further plans that the Board expects to contribute
positively in the years ahead. The biggest initiatives were work on
optimising the Group's use of tax losses (GBP4.4 million) and
enhancements to the AD portfolio such as the successful delivery of
the Vulcan AD upgrade (GBP3.7 million). Two further life extensions
were achieved in the period and ongoing progress made in capturing
additional revenues from REGOs and green gas certificates.
Acquisitions
During the year under review, the Company announced the
following acquisitions:
-- Yorkshire Hydropower Limited, which comprises two low head
run-of-river hydro projects and a battery storage facility:
-- Kirkthorpe hydro, a 500kW single turbine hydro project
located on the River Calder, which was commissioned on 21 November
2016; and
-- Thrybergh hydro, a twin screw 260kW hydro project located on
the River Don, commissioned on 26 October 2015; and a 1.2MW battery
co-located at Thrybergh, commissioned in January 2018.
-- Warren Power Limited agricultural AD facility - 5MWth and 0.5MWe;
-- 70% equity stake in Bio Collectors Holdings Ltd food waste AD
facility and collections business - 10MWth and 1.7MWe;
-- EUR25 million commitment to Foresight a Luxembourg limited
partnership investment vehicle of which GBP1.4 million has been
paid as at 31 March 2020.
These acquisitions bring the total capacity of the renewable
energy assets in the JLEN portfolio to 297.9MW at the period end.
The Directors are pleased to see the investment into new
environmental infrastructure sectors. These acquired assets have
established operating track records and a high proportion of
RPI-linked revenues, combined with attractive risk-adjusted
returns.
Debt facilities
In May 2019, the Fund extended its revolving credit facility
("RCF") for a further year to June 2022 and committed to GBP40
million of the GBP60 million pre-agreed accordion facility. This
increases the total committed funds available to JLEN under the RCF
to GBP170 million, of which GBP29.3 million was drawn at 31 March
2020. The RCF is provided by HSBC, NIBC, ING and Santander.
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 February 2020, the Company successfully raised GBP57 million
via an institutional Placing, making full use of its tap issuance
facility of 10% of issued share capital. This was at a price of 115
pence per share, a 13% premium to NAV, achieved via a book-building
process co-ordinated by the Company's brokers, Winterflood. The
Placing was substantially oversubscribed. Funds raised were used to
repay drawings under the RCF.
The Directors anticipate refreshing the Company's tap issuance
authority at the annual general meeting in September 2020,
following which the Company would be able to issue up to 54.6
million shares at a price not dilutive to existing shareholders
without further approval.
Valuation
The Net Asset Value at 31 March 2020 is GBP533.0 million,
comprising GBP537.1 million portfolio valuation, GBP22.0 million of
cash held by the Group, less GBP29.3 million drawn on the Company's
(immediate subsidiary's) revolving credit facility, together with
positive working capital balances of GBP3.2 million.
The Investment Adviser has prepared a fair market valuation of
the portfolio as at 31 March 2020. This valuation is based on a
discounted cash flow analysis of the future expected equity and
loan note cash flows accruing to the Group from each portfolio
investment. This valuation uses key assumptions which are
recommended by the Investment Adviser using its experience and
judgement, having 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 Foresight is performed by a leading
accountancy firm and an opinion is provided to the Directors. The
Directors have satisfied themselves as to the methodology used and
the assumptions adopted and have approved the valuation of GBP537.1
million for the portfolio of 30 investments as at 31 March 2020.
This equates to a Net Asset Value of 97.5 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.
Clearly at the present time the dominant risk facing the world
at large is Covid-19 and the many far-reaching implications for the
way we live, travel and work. The Company is not immune from this
risk, although it is pleasing to see that the Company's portfolio
of environmental infrastructure assets have thus far proved to be
more resilient than many sectors of the economy. A case study of
the actions taken by the Company, the Investment Adviser and other
service providers is set out below
Overall, there have been few material operational issues caused
by Covid-19. The wind and solar assets have continued to perform
well. Essential maintenance has been carried out with little
disruption, although routine maintenance that can be deferred is
being shifted to later in the year by operators in order to limit
personnel movements. The agricultural AD assets have also continued
to perform well. As a process technology, AD sites tend to have
greater labour activity, with operators adapting to the need to
maintain proper social distancing in their working practices.
The waste assets have been affected by changes to the pattern of
waste arising, particularly from the commercial and industrial
sectors. At the ELWA waste projects, tonnages have also been
affected by the temporary closure of public-facing household waste
recycling sectors. The project has a robust payment mechanism that
offers protection from changes in waste volumes and the financial
performance is not expected to be materially affected as a result
of Covid-19. The Bio Collectors food waste asset is a "merchant"
facility in that it is dependent upon the waste that it can bring
though its gates, and this has been negatively affected by a
reduction in tonnages. Management, in conjunction with the
Investment Adviser, have taken steps to minimise the financial
impact on the business, and tonnages are expected to recover as the
economy emerges from lockdown.
There have been no material issues resulting from Covid-19 to
note in respect of the Tay wastewater project and the hydro
facilities.
Beyond Covid-19, 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 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 the relative resilience of the renewables sector in
terms of valuations and the ability to maintain dividends compared
to other investment sectors. The consequences of the Covid-19
pandemic will take time to crystallise, but the Board is confident
that the themes of sustainability, cash generation and resilience
are solid and that environmental infrastructure is one of the
sectors that will prosper in the 21st Century, giving the Company
an optimistic long-term outlook.
Annual general meeting
The annual general meeting will be held on 3 September 2020 at
10.00am at the Company's registered office in Guernsey. The Board
recognises the ongoing public health risk arising from public
gatherings and notes the restrictions in place over non-essential
travel due to the Covid-19 pandemic. Whilst it remains the Board's
intention that the annual general meeting will take place as
scheduled on 3 September 2020, the Board strongly advises all
shareholders against attending the meeting in person and encourages
all shareholders to submit their votes by proxy in advance of the
meeting. Shareholders are encouraged to submit any questions they
may have to the Company Secretary in advance of the meeting and
answers will be posted on the Company website.
Investment Adviser management changes
On 1 July 2019, the Company changed Investment Adviser from John
Laing Capital Management ("JLCM") to Foresight Group. The existing
team that had been providing investment advice since JLEN's launch
in 2014 transferred to Foresight and continue working with the
Company, and I am pleased to note that all the individuals are
still working with the Company. At the same time, the Company has
benefited from the wider fund management resources of Foresight
Group, and the Directors look forward to building upon the positive
relationship that has been established with Foresight Group since
the transfer.
Outlook
The Board and the Investment Adviser consider that the wider
market environment is favourable for the Company's investment
policy. While the Covid-19 pandemic has introduced a significant
level of uncertainty into the global economy, established
environmental infrastructure assets such as those favoured by the
Company have generally performed resiliently and continued to
generate cash even as other asset classes and market sectors have
struggled. Investors have noted this, and the listed renewables
sector is expected to continue to see investor support.
In the UK, there were also positive signs that the government
was becoming increasingly committed to tackling climate change. The
UK became the first major economy to make a legally binding
commitment to reaching "net zero" carbon emissions (compared to
1990 levels) during the period, and there have also been positive
signals regarding the inclusion of onshore wind and solar in future
government subsidy rounds. While detailed plans addressing how "net
zero" is to be achieved are still forthcoming, particularly for
sectors previously considered hard to de-carbonise such as heat, it
is very likely that the paths to "net zero" will require increased
investment into environmental infrastructure.
Some of this investment will be into established technologies
such as wind and solar that have already become core holdings for
investors. As in recent years, the Board continues to see fierce
competitive pressure in these markets, even as power price
forecasts have reduced. It remains to be seen whether the Covid-19
pandemic leads to a re-evaluation of returns available, but the
early signs do not suggest this. The Board does not anticipate
material capital deployment here in the short to medium term,
except through JLEN's EUR25 million commitment to FEIP, which will
be presented on a look-through basis to the assets.
Bioenergy assets remain attractive to the Company. The
agri-anaerobic digestion sector has been a fruitful one for JLEN in
recent years, and further opportunities are available. The Board
aims to maintain a broadly diversified portfolio with a spread of
risks, and so future investments in this sector are likely to be
limited to those that feature links to the existing portfolio such
that they offer a strategic benefit in addition to being good
investments in their own right. Well-positioned food waste AD
assets, such as the Bio Collectors investment, continue to be of
interest in the light of legislative changes covering food waste
collection, although the impact of the Covid-19 pandemic will need
to be factored into any investment case. Biomass and
energy-from-waste plants are also of interest, although large UK
transactions attract significant investor interest and
competition.
Beyond these sectors, 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. Flexible generation projects
remain of interest, as such assets should complement intermittent
generators such as wind and solar and facilitate the further
roll-out of renewables by helping to balance the grid. The Board is
open to exploring the opportunities presented by the "energy
efficiency" aspect of the investment policy, particularly where
this can be combined with sustainability, as may be the case for
low-carbon farming and forms of controlled environment
agriculture.
Some future deals will 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. An example of this in the period has been the Bio
Collectors investment. As JLEN seeks to set its horizons further
afield as the sustainability agenda takes hold, 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.
While the Board continues to view the UK as the Company's main
geographical focus for capital deployment, the Investment Adviser
has continued to present opportunities from European countries.
This has undoubtedly been aided by the transfer of the team to
Foresight Group and the origination network that is now available
for the benefit of the Company. Where the risks and returns of such
investments compare favourably to UK alternatives and there is a
credible asset management strategy, then the Board will consider
them positively.
Board matters
As announced on 28 February 2020, my fellow Directors and I are
delighted to be welcoming Stephanie Coxon to the Board from 11 June
2020. Stephanie is a Guernsey resident who brings considerable
financial experience, particularly from a 15-year career spent with
PwC, specialising in the reporting accountant and audit services of
investment funds and REITs listed on the London Stock Exchange.
Stephanie is a fellow of the Institute of Chartered Accountants of
England and Wales. We are confident that her skills, background and
experience in corporate finance and capital markets will complement
the skillsets of the existing Directors and bring greater diversity
to the Board.
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. While the year ahead remains
subject to significant uncertainties as a result of the Covid-19
pandemic, the Company is in a stable position with great
opportunity ahead as questions of environment, sustainability and
resilience are addressed in the post--Covid-19 world.
Richard Morse
Chairman
10 June 2020
STRATEGIC REPORT
INVESTMENT OBJECTIVES
To provide investors with a sustainable, progressive dividend
per share, paid quarterly 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,
progressive dividend per share, paid quarterly. 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 2020 is 6.66 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.
Our key objectives
--------------------------------------------------- ----------------------------------------------------------
Financial objectives ESG objectives
--------------------------------------------------- ----------------------------------------------------------
* Predictable income growth for shareholders * Promote the efficient use of resources
* Preservation of capital over the longer term * Develop positive relationships with the communities
in which JLEN works
* Investment, growth and diversification
* Ensure effective, ethical governance across the
portfolio
--------------------------------------------------- ----------------------------------------------------------
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
FUND OBJECTIVES
The Fund's key objectives and the measures against which they
are assessed are summarised below:
Financial
----------------- --------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
Objectives KPIs Principal risks Outlook for
2021
----------------- --------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Predictable 6.66p
income dividend declared * Volume of resource * Weak outlook for UK power prices weighs on revenues
growth for for the year, in line
shareholders with target
Provide investors * Power prices * Progressive dividend policy going forward
with a dividend * Target dividend for the next financial year 6.76
of pence(1) , up 1.5% from 2019
6.66 pence per * Inflation
share
for the year to
31 * Changes in the legislative and regulatory framework
March 2020. that affect renewables and PPP projects
* Operational risks in the portfolio
----------------- --------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Preservation of GBP533.0m
capital Net Asset Value * Valuation risks (volume/energy * Speed of recovery in demand for electricity uncertain
over the longer 97.5p prices/inflation/feedstock costs/operational given Covid-19
term Net Asset Value per performance)
To preserve the share
capital * Assets demonstrating resilience in the face of
value of the * NAV GBP533.0 million, up 2.4% from GBP520.3 million * Lack of future pipeline and/or funding Covid-19 disruption likely to be at a premium
portfolio at 31 March 2019
over the long
term * Increased competition
on a real basis * Net Asset Value per share 97.5 pence down 7.2 pence
through against 104.7 pence at 31 March 2019
active management * Changes in the legislative and regulatory framework
of the portfolio that affect renewables and PPP projects
and
the reinvestment
of
cash flows not
required
for the payment
of
dividends.
----------------- --------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Investment, 30
growth project investments * Lack of future pipeline and/or funding * Increased demand for renewable energy to meet global
and GBP537.1m green targets
diversification portfolio value
To invest in 297.9MW * Increased competition
operational total diversified
environmental capacity
infrastructure * Changes in the legislative and regulatory framework
projects in OECD * Portfolio value GBP537.1 million, up 2.6% from that affect renewables and PPP projects
countries GBP523.6 million at 31 March 2019
with established
technologies,
operational track * Predominantly UK portfolio balanced by sector: 36%
records and that wind, 25% AD, 23% solar, 15% waste & wastewater and
have 1% hydro
the benefit of
long--term,
predictable,
wholly
or partially
inflation--linked
cash flows
supported
by long--term
contracts
or stable
regulatory
frameworks.
----------------- --------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Environmental, social and governance
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Promote the Develop positive relationships Ensure effective,
efficient with the communities ethical governance * Over the next full year 2020/21 a series of KPIs will
use of resources in which JLEN works across the portfolio be developed to help the Fund track the portfolio's
To invest into To encourage positive To manage portfolio performance against each of the three ESG objectives
projects relationship-building assets in a way that set out here.
that manage the between portfolio promotes ethical,
availability assets and the communities effective governance
of natural in which they sit
resources,
whether through
utilisation
of renewable
resources,
increasing
resource
or energy
efficiency,
or reusing or
recovering
waste
----------------- --------------------------------------------------------- --------------------------------------------------------- -----------------------------------------------------------
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
BUSINESS MODEL
JLEN invests in a diversified portfolio of environmental
infrastructure projects that support environmentally friendly
approaches to economic activity whilst generating a sustainable
financial return.
Objective
The Company seeks to acquire infrastructure assets with
attractive characteristics through the extensive origination
network of its Investment Adviser.
The Company seeks to enhance returns, where possible, through
active management that identifies opportunities to increase
revenues and decrease costs.
The Company seeks to maintain the assets to a high standard over
their lifetime to support the long-term investment outlook of the
Company and its investors.
The Company's approach to raising new equity capital is
consistent with JLEN's business model objectives. New equity is
raised periodically to repay drawings under JLEN's RCF used to
acquire assets. The Company does not seek to raise more cash than
drawings under the RCF and so will not face pressure to deploy
capital or suffer a reduction in returns. This assists the Company
in maintaining discipline and targeting attractive assets.
Competitive advantage
Investment Adviser - Foresight has a strong track record of
managing assets in the sector and has access to an extensive
pipeline of new projects.
Broad investment mandate/policy - allows for investment across a
diversified range of technology sub-sectors and geographies,
helping to reduce risks within the portfolio and providing a
broader base of assets to consider at the acquisition stage.
Existing portfolio - well established portfolio of assets which
have the benefit of strong operational track records and
predictable, wholly or partially inflation-linked cash flows
supported by long-term contracts.
Sustainability - investment mandate is limited to investment in
projects and assets which support a more environmentally friendly
approach to economic activity and JLEN invests in assets with long
project lives of up to 35 years.
Operating model
1 Acquire
The Investment Adviser uses its network of relationships to
originate environmental infrastructure opportunities. These are
screened for suitability and attractive opportunities are subject
to a full due diligence process to assess risks, valuation
assumptions and ESG considerations. Investment approval is
multi-level and culminates in a decision of the Company's
Investment Committee.
ESG considerations
ESG criteria are an integral element of the investment
assessment at the acquisition stage. The Investment Adviser
undertakes a thorough rating analysis against a pre-determined
minimum threshold for that asset class.
2 Maintain
Active asset management is employed by the Investment Adviser to
maintain consistent performance and asset condition across the
portfolio, identifying and, where possible, mitigating risks.
Strong communications between the JLEN Board, the Investment
Adviser and external asset managers and other operational and
corporate counterparties aid in the management of the assets.
ESG considerations
Third-party service providers, sometimes with the assistance of
technical advisers, monitor and manage the ongoing performance of
each asset in the JLEN portfolio and these third parties are
regularly assessed by Foresight.
3 Enhance
All assets are included in a programme of enhancement
initiatives to increase operational and financial performance and
to better meet ESG objectives. Where appropriate, the Investment
Adviser identifies where value can be realised to enhance the
valuation of the portfolio to the benefit of all stakeholders.
ESG considerations
The Investment Adviser continually seeks to improve all areas of
ESG across the portfolio and new assets are assessed to see where
improvements to ESG matters can be improved over the tenure of
ownership.
Who benefits?
Shareholders
Institutional and retail
Local communities and public authorities
Local residents, local authorities and institutions, trade
bodies
Company's operational counterparties
O&Ms, other suppliers
Underpinned by
Risk management
Strong governance
Financial management
Portfolio sectors
Wind
Anaerobic digestion
Solar
Waste & wastewater
Hydro
FUND STRUCTURE
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 JLEN 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 2020 the Company owns a portfolio of 30 environmental
infrastructure investments in the UK, France and Sweden. 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.
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 remain unchanged, and the key roles
remain as below:
-- monitoring financial performance against Group targets and forecasts;
-- advising the Board on investment strategy and portfolio
composition to achieve the desired target returns within the agreed
risk appetite;
-- sourcing, evaluating and implementing the pipeline of new investments for the portfolio;
-- monitoring the operational management of, and managing the
investment cash flows from, the Group's investments;
-- minimising cash drag (having uninvested cash on the balance
sheet) and improving cash efficiency generally;
-- managing the process and analysis for semi--annual valuations
of the Group's portfolio submitted to the Board for approval;
-- ensuring good financial management of the Group, having
regard to accounting, tax and debt covenants;
-- hedging non--sterling investments; and
-- managing the Company's investor reporting and investor relations activities.
Further details on the Investment Adviser are set out on below
and in note 15 to the financial statements with respect to
fees.
The Board takes advice from the Investment Adviser, Foresight
Group LLP ("Foresight") 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
Foresight Group LLP which can be terminated with 12 months'
notice.
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 formally reviews the performance of all key service
providers on an annual basis.
Acquisitions
The Fund will seek to acquire further investments going forward
sourced via the Investment Adviser's extensive deal-sourcing
capabilities across the geographies in which the Fund is permitted
to invest. 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 Foresight.
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.
STAKEHOLDER ENGAGEMENT
The Board is committed to promoting the long-term success of the
Company whilst conducting business in a fair, ethical and
transparent manner.
Whilst directly applicable to companies incorporated in the UK,
the Board recognises the intention of the AIC Code that matters set
out in section 172 of the Companies Act, 2006 are reported. The
Board strives to understand the views of the Company's key
stakeholders and to take these into consideration as part of its
discussions and decision--making process.
As an investment company, the Company does not have any
employees and conducts its core activities through third-party
service providers. Each provider has an established track record
and through regulatory oversight is required to have in place
suitable policies and procedures to ensure they maintain high
standards of business conduct, treat shareholders fairly, and
employ corporate governance best practice.
The Company strongly believes that fostering healthy and
constructive relationships with its broad range of stakeholders
should result in increased shareholder value over the long
term.
The following table sets out how the Company has communicated
and engaged with its key stakeholder groups over the last year,
highlighting key strategic decisions taken which have had direct
impact on these groups.
Key strategic decisions
Stakeholder How has JLEN communicated impacting stakeholder
group Key stakeholders and engaged? group during period
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
Shareholders
* Institutional shareholders * Annual general meeting Regular market announcements * Raised an additional GBP57.2 million of equity,
Investor communications including quarterly increasing the size, liquidity and attractiveness of
factsheets Dedicated JLEN website Investor roadshows the Company to investors. Shareholders were consulted
* Retail shareholders Annual and interim reports Market events and throughout the fundraising process
conferences Views and feedback sought from
institutional shareholders via corporate broker
* Proxy voting organisations * Paid an increased dividend target of 6.66 pence in
line with investment objective, continuing to
position JLEN as an attractive proposition for
investors seeking income
* Made a number of portfolio acquisitions which further
diversified the portfolio and should prove accretive
to NAV in the long term
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
Investment
Adviser * Foresight Group * Regular Board meetings in Guernsey during the period * Changed Investment Adviser from JLCM to Foresight
attended by key investment personnel Meetings to Group
discuss and approve investment recommendations Annual
service provider questionnaire
* Core investment advisory team retained and
supplemented with additional Foresight resource
* Investment Management Agreement subsequently novated
to Foresight Group UK LLP from Foresight Group CI Ltd
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
Commercial
service * Administration agent * Regular scheduled update calls as well as specific * Key service providers retained, providing continuity
providers interactions on corporate actions and new portfolio of service and familiarity with the objectives of the
acquisitions Collaboration with multiple service Company
* Corporate broker providers in publication of annual and interim
reports Annual service provider questionnaire
* Legal advisers
* Public relations agency Auditor and tax advisers
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
Asset-level
counterparties * Operations & Maintenance ("O&M") contractors * Regular update calls with O&M and MSA providers to * Termination of some O&Ms and MSA providers to
ensure adequate oversight of portfolio operations consolidate services across portfolio with preferred
Focused engagement on value enhancement opportunities, partners
* External management services ("MSA") providers including rationalisation of service provision for
cost savings and/or improved services Increased
scrutiny of, and resource allocation to, emerging * Acquired a number of new assets during the period,
* Supply chain counterparties risks identified increasing ongoing servicing requirements from O&M
counterparties
* Landowners
* Entered a number of new technology types over the
period, including hydro and food waste to energy
* Successful upgrade of capacity at Vulcan AD site
resulted in increased revenue for partners
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
Local
communities * Local authorities and agencies * Frequent engagement with local authorities to ensure * JLEN donated over GBP350k to local community funds
safe and compliant operation of our assets Actively over the period, helping to address local needs and
engage with local authorities on construction promote long-term sustainable and prosperous
* Community funds planning and obtaining necessary planning permissions communities
Regular interaction between the owners of land on
which our assets operate and the Investment Adviser's
* Landowners asset management team Conduct educational site visits
for local community schools and colleges
* Local environment
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
Debt providers
* Banks * Regular updates provided on covenant compliance and * Debt remained a key component of funding strategy
current positioning during the period and the portfolio has utilised debt
facilities throughout
* Extension of existing debt facilities during the
period
-------------- ------------------------------------------------------ ------------------------------------------------------------ -----------------------------------------------------------
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 (available on the Company website) details 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 neither possible nor commercially viable. 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. In the case of unusual
and significant risks such as Covid-19, assessment occurs outside
of the quarterly cycle. These systems of internal control were in
place for the year under review and continue to be in
operation.
The Audit Committee has worked closely with Foresight to
implement a regime which addresses the changes in the internal
control environment as a result of the change of Investment Adviser
from John Laing to Foresight. This regime strengthens the oversight
of internal controls and provides the necessary comfort that the
internal control systems at the Investment Adviser, the
Administrator and the operating companies are effective.
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.
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.
Climate risk
As a long-term investor, JLEN is able to manage risk with a
long-term perspective. This means it can take long-term views on
climate risk in its portfolio. With altering weather patterns
brought on by climate change, resource availability and security of
the assets is a key area of focus for the Fund. Climate resilience
is assessed as standard during the investment process as part of
the sustainability evaluation criteria and is considered as part of
the asset management approach. In addition to the work it currently
undertakes, this year the Fund will be working to integrate climate
risk into its standard risk management processes, integrating it
into the Fund's risk matrix.
Emerging risks
A new provision in the AIC Code 2019 calls for specific
disclosure about emerging risks within the Annual Report. Emerging
risks are characterised by a degree of uncertainty and the
Investment Adviser and the Board consider new and emerging risks at
the Risk Committee which takes place quarterly; the risk register
(found overleaf) is then updated to include these considerations.
Furthermore, the Company is advised by various advisers within the
listed infrastructure space and the Investment Adviser, Foresight,
considers emerging risks over a wider market arena.
Covid-19
In recent months, the emergence of the Covid-19 pandemic has
prompted the Directors and the Investment Adviser to reassess these
risks to the Company and the portfolio. The Directors consider the
risks identified are still the material ones, but it is clear that
Covid-19 has changed the way in which some of these risks may be
experienced in the future. The actions the Company and the
Investment Adviser have taken in responding to the Covid-19
pandemic, and assessing the resilience of the portfolio to
Covid-19, are set out below.
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 Change in
year
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
1 Increased
Inflation and * The underlying assets in the portfolio, and therefore * Returns from the assets in the portfolio are highly
interest rates the returns expected from them, have some exposure to correlated with inflation due to revenues from PFI
Link to Fund inflation. assets, green benefits for renewable energy assets
objectives and most operational costs being directly linked to
Predictable an inflation index. This results in a "natural hedge"
income * The Company has some interest rate exposure, through ,
growth for its own cash deposits and bank funding (UK HoldCo removing the need for the use of derivatives to
shareholders revolving credit facility) and deposits and funding mitigate inflation risk.
within the projects themselves.
* Through the use of interest rate swaps and fixed rate
* The Covid-19 pandemic has impacted demand for goods loans, finance costs are fixed at the time of the
and services in the economy and this will translate contract being signed, substantially reducing
into lower inflation in the short term, which will interest rate risk.
lead to lower revenues from the portfolio.
* 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 Decreased
Acquisitions * JLEN's intention is to grow the portfolio through the * JLEN continually receives and seeks opportunities
and pipeline acquisition of further environmental infrastructure from the wider secondary market and developers, both
Link to Fund projects. However, there is a risk that a pipeline of in the UK and overseas. JLEN benefits from
objectives acquisitions does not materialise. Foresight's well established pipeline of renewable
Investment, infrastructure assets and presence within the market.
growth
and
diversification * JLEN's broad environmental infrastructure mandate
captures a wider range of potential investments.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
3 No change
Funding of * There is a risk that JLEN is unable to achieve its * JLEN has a three--year GBP130 million revolving
acquisitions stated ambition of growing the portfolio by acquiring credit facility (increased to GBP170 million in May
and future new assets due to a lack of funding, both from 2019) providing short--term finance to pursue
equity corporate debt and equity capital from investors. acquisitions. This is used to finance acquisitions
fundraising prior to raising capital, mitigating the risk of
Link to Fund inadequate funding affecting growth.
objectives
Investment,
growth * Investors have been supportive of the infrastructure
and class in general and the environmental
diversification 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 weak power
prices and the consequences of the Covid-19 pandemic,
could reduce the investors' appetite in future equity
fundraising, although environmental infrastructure
has been relatively stable compared to other asset
classes, so far.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
4 Increased
Competition * JLEN, in pursuing investment opportunities and in * JLEN differentiates itself from its peer group in a
Link to Fund seeking to raise further capital, competes against a number of ways, including its investment policy of
objectives number of other listed and private infrastructure investing in a diversified range of environmental
Investment, funds. There is a risk that such competition could infrastructure technologies and revenue streams and
growth limit growth of the Company. its aim to only raise capital against committed
and investments.
diversification
* Competition is strong for infrastructure assets that
have demonstrated resilience to the Covid-19 pandemic,
such as wind and solar assets with high levels of
contracted or subsidised revenues.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
5 Decreased
Future of UK * Under its investment policy, JLEN is required to hold * The UK Government's adoption of a legally binding
capital at least 50% of its portfolio by value in UK assets. commitment to "net zero" carbon emissions by 2050
spending JLEN therefore has a significant interest in the underpins its support for environmental
Link to Fund future of UK infrastructure spending. Government infrastructure. The recovery from the Covid-19
objectives financial support for new renewable energy and pandemic and the sectors that government will
Investment, environmental processing assets has reduced prioritise is currently uncertain, but prospects for
growth significantly in recent years and there is a risk environmental infrastructure appear positive.
and that spending is either reduced or stopped altogether
diversification or that the model used to procure environmental
infrastructure and/or renewable energy projects * The UK Government has indicated that future auctions
offers a risk profile that would not allow JLEN to for allocation of "Contract for Difference" subsidies
invest under its investment policy. will be open to established technologies such as
onshore wind and solar PV that were previously
excluded.
* In addition, JLEN has the ability to mitigate the
impact of a slowdown in UK deal flow through overseas
acquisitions in order to diversify the portfolio and
reduce its reliance on the UK for investment
opportunities.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
6 No change
UK referendum * On 31 January 2020, the UK ceased to be a member of * At this stage it is not clear what the precise impact
on EU the European Union, entering a limited transition on the UK environmental infrastructure industry will
membership period until 31 December 2020, during which the be once the UK ceases to be subject to EU regulation
Link to Fund majority of rights and obligations of membership, and to have market access. The UK Government remains
objectives including market access, remain. The precise model committed to UK infrastructure development and there
Investment, that the relationship between the UK and the EU will continues to be evidence that investors see listed
growth follow post 31 December 2020 is not certain. infrastructure as a "safe haven" in times of market
and turbulence. The mitigation measures for the principal
diversification macroeconomic risks are those described above in
* As a result of this outcome, there is likely to be a relation to inflation and interest rates. Given the
prolonged period of market uncertainty as the exact current level of investment in non-UK assets, JLEN
details are negotiated between the UK Government and has a non-significant exposure to changes in exchange
the rest of the EU, which could result in adverse rates. And whilst the UK Government may not in future
conditions for JLEN and an increase in the risks be bound by EU-set renewable obligations, the UK is
noted in this section, particularly volatility in still bound by national and international renewable
macroeconomic indicators such as inflation and obligations, including the commitment to "net zero"
interest rates and changes in regulations. carbon emissions by 2050. As such, JLEN believes that
a low carbon and renewable energy generation agenda
will remain a key part of UK policy.
* In response to the decision by the UK to leave the EU,
in March 2017 the Scottish Parliament voted in favour
of seeking a second Scottish independence referendum, * Regarding a Scottish referendum, JLEN will continue
although the UK Government has indicated such a vote to monitor the situation as it develops and will
should not occur before the UK has formally left the identify potential risks when the likely course of
EU. Scottish independence might impact its renewable events becomes clearer and it is possible to assess
market and its currency, should it leave its current their nature and extent.
sterling currency.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
Operational, business, processes and resourcing
-----------------------------------------------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation Change in
year
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
7 No change
Volume of * By the very nature of environmental infrastructure * For renewable energy projects there is a degree of
resource projects, their financial performance is dependent on protection from this variability in weather resource
Link to Fund the volume of resource available, be it solar from portfolio diversification, as solar is more
objectives irradiation, wind, feedstock yields, waste or water. productive in the summer and wind more productive in
Predictable These are factors outside the control of JLEN or the the winter, with the absolute level of resource being
income projects themselves, with the risk of a significant weakly negatively correlated.
growth for effect on performance if the outcome is significantly
shareholders different from the assumptions made in forecasting
Preservation revenue and costs and hence returns to JLEN. * In addition, the waste & wastewater projects benefit
of capital over from "banded" volumetric payment arrangements that
the longer term mean the projects are relatively insensitive to
falling 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.
* 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.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
8 Increased
Power prices * The revenues of the renewable energy solar, anaerobic * The risk of exposure to variations in electricity and
Link to Fund digestion and wind assets are dependent to some gas prices from assumptions made is mitigated by JLEN
objectives extent on the market price of electricity and natural in the following ways: i) short--term PPAs are used
Predictable gas, which is out of the control of JLEN. There is a to fix electricity and gas prices for between one and
income risk that the actual prices received vary three years depending on market conditions and many
growth for significantly from the model assumptions, leading to have floor prices; ii) forward prices based on market
shareholders a shortfall in anticipated revenues to JLEN. rates are used for the first two years where no fix
Preservation is in place; and iii) quarterly reports from various
of capital over independent established market consultants are used
the longer term to inform the electricity prices over the longer term
used in the financial models.
* The Covid-19 pandemic and the associated reduction in
economic activity related to counter-measures have
had a significant effect on power prices due to the
reduction in demand for electricity and gas. It is
not certain that prices will recover to previously
forecast levels.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
9 Decreased
Reliance on * The Company is heavily reliant on the Investment * The Company changed Investment Adviser to Foresight
Investment Adviser to identify, acquire and manage JLEN's Group on 1 July 2019, with the incumbent advisory
Adviser investments. A performance deterioration by the team also transferring to Foresight. Foresight is a
Link to Fund Investment Adviser could have an impact on the leading infrastructure fund manager, with
objectives Company's performance and there is a risk that the considerable depth of resource and experience in
Investment, Company may not be able to find an appropriate environmental infrastructure from managing over 200
growth replacement Investment Adviser should the engagement assets in sectors including wind, solar, bioenergy
and with the Investment Adviser be terminated. and flexible generation. Ultimately, in the event of
diversification ongoing under-performance by the Investment Adviser,
Preservation JLEN has the ability to serve notice and to engage a
of capital over replacement.
the longer term
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
10 No change
Cyber risk * There exists a threat of cyber--attack in which a * JLEN has no dedicated IT systems and it relies on
Link to Fund hacker or computer virus may attempt to access the IT those of its service providers, principally the
objectives systems of the Group, the Investment Adviser, the Investment Adviser and Administrator, who have
Predictable Administrator or one of the project companies and procedures in place to mitigate cyber-attacks and
income attempt to destroy or use the data for malicious have robust business continuity plans in place. JLEN
growth for purposes. While JLEN considers that it is unlikely to carries out ongoing compliance checks and reviews on
shareholders be the deliberate target of a cyber-attack, there is these procedures to ensure the risk is mitigated.
the possibility that it could be targeted as part of
a random or general act.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
Financial and taxation
-----------------------------------------------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation Change in
year
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
11 No change
Portfolio * The discount rates used in the valuation exercise * The discount rates are reviewed on a regular basis
valuation represent the Investment Adviser's and the Board's and updated, where appropriate, to reflect changes in
Link to Fund assessment of the rate of return in the market for the market and in the project risk characteristics.
objectives assets with similar characteristics and risk profile. However, the Covid-19 pandemic has introduced
Preservation Increased underlying gilt rates may lead to increased additional uncertainty into the market and the
of capital over discount rates being applied by the market and a outlook for power prices.
the longer term consequential decrease in the portfolio value.
* To provide additional assurance to both the Board and
* Asset values may not run in parallel to evolving JLEN's shareholders with respect to the valuation, an
forecasts for future electricity and gas prices and independent verification exercise of the methodology
investors should expect some variation in asset and assumptions applied by Foresight is performed by
valuation from period to period, as and when a a leading accountancy firm and an opinion provided to
material movement from prior expectations is the Directors on a semi-annual basis.
identified.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
12 Increased
Changes to tax * JLEN values its portfolio based on current enacted * JLEN continues to monitor and participate in any
legislation and corporation tax rates and tax rules in the relevant consultation processes with UK HMRC and to
rates jurisdictions in which it operates. Changes to these assess the impact of any additional changes which may
Link to Fund rates or rules in the future could impact the result from the introduction of differing
objectives valuation of the portfolio and the level of legislation.
Predictable distributions received from the portfolio.
income
growth for
shareholders * JLEN works closely with expert tax advisers and
Preservation adopts tax positions which are based on industry
of capital over practice and in line with the wider Group strategy.
the longer term However, other than participating in industry
consultation processes, there is little within the
power of the Company that is able to mitigate changes
in corporation tax rates and tax legislation. The
Covid-19 pandemic and the resultant pressure on
government finances has increased the risk of future
tax rises.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
Compliance and legal
-----------------------------------------------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation Change in
year
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
13 No change
Regulatory - * JLEN is required to comply with certain London Stock * Through a comprehensive compliance monitoring
general Exchange, UK Listing Authority and Guernsey programme, JLEN ensures that it remains well informed
Link to Fund regulatory requirements and regulations, including as to the legislation, regulation and guidance
objectives those under the Alternative Investment Fund Managers relevant to both the Company itself as well as the
Investment, Directive ("AIFMD") and the Foreign Account Tax project entities in which it invests. The Board
growth Compliance Act ("FATCA"). There is a risk that monitors compliance information provided by the
and failure to comply with any of the relevant rules Administrator, Company Secretary, Investment Adviser
diversification could result in a negative reputational or financial and legal counsel and monitors ongoing compliance
Preservation impact on the Company. developments in the Channel Islands and with the
of capital over London Stock Exchange and Financial Conduct
the longer term Authority.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
14 Decreased
Regulatory - * Changes to government policy for new renewable energy * The Government has evolved the regulatory framework
support for have resulted in changes to, and in some cases early for new projects being developed but has consistently
renewables closure of, the Renewables Obligation, the Renewable stood behind the framework that supports operating
Link to Fund Heat Incentive and Feed--in Tariff regimes. If these projects as it understands the need to ensure
objectives were applied retrospectively to current operating investors can trust regulation. This principle of
Predictable projects including those in the Group's portfolio, "grandfathering" was confirmed in the Energy Act
income this could adversely impact the market price for 2013.
growth for renewable energy or the value of the green benefits
shareholders earned from generating renewable energy.
Preservation * The Company aims to hold a diversified portfolio of
of capital over environmental infrastructure projects so that it is
the longer term * The UK electricity system is also changing as unlikely that all assets will be affected equally by
renewables make up an increasing proportion of the a change in regulation. In the case of changes to the
energy mix as old fossil fuel generators are shut network, the Investment Adviser remains in close
down. Changes such as the Targeted Charging Review contact with specialist advisers and trade bodies to
have reduced ancillary revenues earned by many advise and lobby on proposals.
renewable generators, including wind and solar assets
in the JLEN portfolio. Future changes may negatively
impact the portfolio. * Public sentiment has moved firmly towards action to
alleviate the climate-19 pandemic. Recent government
announcements, such as the extension of the CfD
regime to onshore wind and solar, show support
increasing rather than decreasing.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
Asset specific
-----------------------------------------------------------------------------------------------------------------------------------------------------
Risk Potential impact Mitigation Change in
year
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
15 Increased
Operational * JLEN invests in projects where the majority of * The portfolio is constantly monitored by the
risks operational risk is retained by the public sector Investment Adviser to address risks as they are
Link to Fund counterparty (relevant to PFI projects) or passed identified.
objectives down to sub--contractors. However, in all cases, some
Predictable risk is retained by the project, as set out above and
income identified in the Prospectus. * The use of a diverse range of service providers
growth for supplying management, operational and maintenance
shareholders services ensures any failure of a single service
Preservation * There is a risk that poor performance by provider has a minimal impact on the portfolio as a
of capital over sub-contractors or, in the event of having to replace whole.
the longer term a sub-contractor, that a replacement may only be
found at a higher cost, could adversely affect
project cash flows. * This risk is mitigated in part by the diversification
represented by JLEN's portfolio of assets.
* In the event of a single project suffering from a
material issue, distributions to the Fund could * The portfolio has material damage and business
possibly be impacted absolutely or for a period of interruption insurance policies in place to cover
time whilst the issue is resolved. against potential losses.
* The Covid-19 pandemic has exposed assets and key * The Board has in place a regime, overseen by the
counterparties to unexpected risks. While the Audit Committee, which provides the necessary comfort
portfolio has demonstrated its resilience so far, the that the internal control systems at the Investment
risk is to the downside while the full impact is Adviser, the Administrator and the operating
still unfolding. companies are effective. This has included addressing
the challenges presented by the Covid-19 pandemic.
--------------- ------------------------------------------------------------ ----------------------------------------------------------- ---------
INVESTMENT POLICY
To provide investors with access to a diversified portfolio of
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.
The Company's investment interests in environmental
infrastructure
projects may include partnership equity, partnership loans,
membership interests, share capital, trust units, shareholder loans
and/or debt interests in or to project entities or any other
entities or undertakings in which the Company invests or may
invest.
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 Company will also ensure that its
investment portfolio comprises a minimum of five environmental
infrastructure projects at any given time, save that this
requirement shall not apply when the Company is being wound up or
dissolved.
As technologies and the markets in which they contract into
develop and become established, future investments may differ from
those currently within the portfolio. These assets may incorporate
new technologies that have a demonstrable track record or
traditional infrastructure projects with features such as greater
exposure to merchant markets in feedstock or by-products. Assets
may include the employment of specialist staff within the project
vehicle who are important to the project's success, or incorporate
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;
Borrowing and gearing
-- The Company intends to make use of short--term debt financing
to facilitate the acquisition of investments (either itself or by
one of its subsidiaries). 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.
-- 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 or
repayments of any outstanding indebtedness, 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.
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. 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.
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 the Investment Adviser.
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 Financial Conduct
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; and
-- total megawatt capacity.
The key performance measures for the year ended 31 March 2020
are set out below in the of the strategic report.
INVESTMENT PORTFOLIO AND VALUATION
Portfolio value increased to GBP537.1 million at 31 March 2020
from GBP523.6 million at 31 March 2019.
Investment portfolio
At 31 March 2020, the Group's investment portfolio comprised of
interests in 30 project vehicles:
Commercial
Capacity operations
Asset Location Type Ownership (MW) date
---------------------- ---------- --------------------------------- --------- -------- -----------
Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Burton Wold Extension UK (Eng) Wind 100% 14.4 Sept 2014
Carscreugh UK (Scot) Wind 100% 15.3 Jun 2014
Castle Pill UK (Wal) Wind 100% 3.2 Oct 2009
Dungavel UK (Scot) Wind 100% 26.0 Oct 2015
Ferndale UK (Wal) Wind 100% 6.4 Sep 2011
Hall Farm UK (Eng) Wind 100% 24.6 Apr 2013
Le Placis Vert France Wind 100% 4.0 Jan 2016
Llynfi Afan UK (Wal) Wind 100% 24.0 Mar 2017
Moel Moelogan UK (Wal) Wind 100% 14.3 2003 & 08
New Albion UK (Eng) Wind 100% 14.4 Jan 2016
Plouguernével France Wind 100% 4.0 May 2016
Wear Point UK (Wal) Wind 100% 8.2 Jun 2014
---------------------- ---------- --------------------------------- --------- -------- -----------
Biogas Meden UK (Eng) Anaerobic digestion 100% 5.0(1) Mar 2016
Egmere UK (Eng) Anaerobic digestion 100% 5.0(2) Nov 2014
Grange UK (Eng) Anaerobic digestion 100% 5.0(2) Sept 2034
Icknield UK (Eng) Anaerobic digestion 53% 5.0(1) Dec 2014
Merlin UK (Eng) Anaerobic digestion 100% 5.0(2) Dec 2013
Vulcan UK (Eng) Anaerobic digestion 100% 5.0(2) Oct 2013
Warren Energy UK (Eng) Anaerobic digestion 100% 5.0(2) Dec 2015
---------------------- ---------- --------------------------------- --------- -------- -----------
Amber UK (Eng) Solar 100% 9.8 Jul 2012
Branden UK (Eng) Solar 100% 14.7 Jun 2013
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
ELWA UK (Eng) Waste management 80% n/a 2006
Tay UK (Scot) Wastewater 33% n/a Nov 2001
Bio Collectors UK (Eng) Waste management 70% 11.7 Dec 2013
---------------------- ---------- --------------------------------- --------- -------- -----------
Yorkshire Hydropower UK (Eng) Hydro plants and battery storage 100% 2.0
---------------------- ---------- --------------------------------- --------- -------- -----------
Total 297.9
------------------------------------------------------------------- --------- -------- -----------
(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.
The JLEN portfolio comprises a diversified range of assets
across different geographies, sectors, technologies and revenue
types, as illustrated in the analysis below as at 31 March 2020 (by
portfolio value and distributions from projects):
Portfolio value split by sector
Wind 36%
Anaerobic digestion 25%
Solar 23%
Waste & wastewater 15%
Hydro 1%
Portfolio value split by geography
UK 99%
Rest of Europe 1%
Portfolio value split by remaining asset life
Up to 10 years 10%
11 to 20 years 49%
More than 20 years 41%
Portfolio distributions split by inflation linkage(1)
Inflation linked 71%
Non-inflation linked 29%
Portfolio distributions split by revenue type(1)
Merchant power 29%
Green benefits 56%
PFI 15%
Portfolio operator exposure
Future Biogas 23%
Siemens Gamesa 23%
ROC Energy 11%
Renewi 7%
Vestas 7%
Other 29%
(1) Based on project revenues from volumes/generation during the
year and assumes project cash flow distributions reflect revenue
split at each project.
Portfolio valuation
The Investment Adviser is responsible for carrying out the fair
market valuation of the Company's investments, which is presented
to the Directors for their approval and adoption. The valuation is
carried out on a quarterly basis as at 30 June, 30 September, 31
December and 31 March each year.
The Directors' valuation of the portfolio at 31 March 2020 was
GBP537.1 million, compared to GBP523.6 million at 31 March 2019.
The increase of GBP13.5 million is the net impact of new
acquisitions, cash received from investments, changes in
macroeconomic, power price and discount rate assumptions, and
underlying growth in the portfolio. A reconciliation of the factors
contributing to the growth in the portfolio during the year is
shown in the chart below.
The movement in value of investments during the year ended 31
March 2020 is shown in the table below:
2020 2019
GBPm GBPm
--------------------------------------------------------------------------------------------- ------ ------
Valuation of portfolio at opening balance 523.6 429.5
Acquisitions in the year (including post-acquisition adjustments and deferred consideration) 57.9 77.5
Cash distributions from portfolio (45.0) (43.6)
--------------------------------------------------------------------------------------------- ------ ------
Rebased opening valuation of portfolio 536.5 463.4
Changes in forecast power prices (56.9) 4.8
Changes in economic assumptions (13.1) (0.9)
Changes in discount rates 19.6 11.6
Changes in exchange rates 0.1 (0.1)
Balance of portfolio return 50.9 44.8
--------------------------------------------------------------------------------------------- ------ ------
Valuation of portfolio at 31 March 537.1 523.6
Fair value of intermediate holding companies (4.2) (3.6)
--------------------------------------------------------------------------------------------- ------ ------
Investments at fair value through profit or loss 532.9 520.0
--------------------------------------------------------------------------------------------- ------ ------
Allowing for investments of GBP57.9 million (including
post-acquisition adjustments and deferred consideration) and cash
receipts from investments of GBP45.0 million, the rebased valuation
is GBP536.5 million. The portfolio valuation at 31 March 2020 is
GBP537.1 million (2019: GBP523.6 million), representing an increase
over the rebased valuation of 3% over the year (2019: 13%).
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
2020 valuation is considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 31
March 2020 reflect contractual fixed price arrangements under PPAs,
where they exist, and short--term market forward prices for the
next two years where they do not. The Company maintains a programme
of rolling price fixes for its wind and solar projects, typically
having the majority of projects on fixed price arrangements for the
next six to 12 months in order to reduce the revenue risk from
price volatility.
Where generating projects in the portfolio do not have a fixed
price under their PPAs, JLEN has reflected the prices in the table
below (gross of PPA discounts):
Summer Winter
Avg. GBP/MWh 2020 2020/21
------------- ------- -------
Electricity 34 (46) 43 (55)
Gas 9 (14) 13 (18)
------------- ------- -------
At 31 March 2020, 53% of the renewable energy portfolio's
electricity price exposure was subject to a fixed price or a floor
arrangement for the summer 2020 season and 48% for the winter
season 2020/21.
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.
Compared to the assumptions used in the valuation at 31 March
2019, on a time-weighted average basis, the net decrease in the
electricity price assumptions is approximately 17% over the period
to 2050 (including a 26% average reduction over the next three
years and a 14% average reduction thereafter).
In the event of sudden shocks, the curves provided by
consultants can lag the observed effects on wider power markets by
a quarter. In the case of the Covid-19 pandemic, the curves used in
the valuation are informed by the consultants' views on the
implications of the economic slowdown and the severe reduction in
electricity and gas demand, although it is likely that the
consultants will continue to refine their thinking in quarters to
come as more data become available about the impacts of
Covid-19.
The overall change in forecasts for future electricity and gas
prices compared to forecasts at 31 March 2019 has decreased the
valuation of the portfolio by GBP56.9 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 and intermittent generators on the GB network. The
graph at the top of the page 44 of the annual report represents the
blended curve used by the Company for wind and solar projects,
weighted according to generation.
Illustrative blended power price curve
The annual real rate of price growth on a constant basis from 1
April 2020 is 1.9%, which is up from 0.6% at 31 March 2019 due to
the severe reduction in near-term prices from which there is a
forecasted recovery over time.
Revenue analysis
The graph at the bottom of the page 44 of the annual report
shows the way in which the revenue mix of the renewables portfolio
changes over time, given the assumptions made regarding future
power prices set out above. As one would expect, merchant power
revenues increase in later years as the subsidies that projects
currently enjoy expire.
On an NPV basis (using the discount rate applicable to each
project), the relative significance of each revenue category
(including PFI) is as follows:
Contribution
to
Portfolio
Revenue Type Value
--------------------------------- ------------
PPA/FiT with floor arrangement 27%
ROC buyout 18%
ROC recycle 1%
Ancillary revenue 1%
PPA market revenue (electricity) 17%
PPA market revenue (gas) 5%
PFI 10%
Short Term Fixed Price under PPA 1%
RHI 20%
--------------------------------- ------------
According to this analysis, the proportion of Fund revenues that
come from the sale of wholesale electricity and gas is 17% and 5%
respectively. This is a low proportion of merchant power revenue
relative to peers and reflects the broader diversification of
JLEN's portfolio.
Economic assumptions
The 31 March 2020 valuation reflects an overall reduction in
near-term inflation assumptions based on recent independent
economic forecasts. RPI inflation rates assumed in the valuation at
31 March 2020 are 2.17% in 2020 (31 March 2019: 3.2%), stepping to
2.75% from 2025 onwards, whilst CPI inflation rates assumed in the
valuation at 31 March 2020 are 1.41% in 2020 (31 March 2019: 2.0%),
stepping to 2.0% from 2025 onwards and 1.5% for 2020 and all
subsequent years (31 March 2019: 1.5%) for the French assets.
The long--term UK corporation tax rate assumed is 19%,
reflecting the rates enacted by legislation and in line with market
practice following the recent decision by the UK Government to
reverse the proposed step-down to 17%. The equivalent rate for the
French assets is 28% (31 March 2019: 28%) stepping down to 26.5% in
2021 and 25% from 2022 (31 March 2019: step-down to 26.5% in 2021
and 25% in 2022).
Deposit rates assumed in the valuation reflect a range of
deposit rates in the UK from 1.75% in 2020 and a long--term rate of
2.5% thereafter (31 March 2019: 2.5%). For the French assets, the
rate assumed is 0.5% (31 March 2019: 0.5%).
The euro/sterling exchange rate used to value the
euro--denominated investments in France was EUR1.12/GBP1 at 31
March 2020 (EUR1.16/GBP1 at 31 March 2019).
The overall reduction in value resulting from changes to
economic assumptions in the year is GBP13.1 million.
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 discount rate applied to solar assets
qualifying under the Feed-in Tariff and the levered discount rate
applied to assets within the combined UK wind and solar portfolio
refinancing have 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 7.4% at 31 March 2020
(31 March 2019: 7.9%).
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 GBP50.9 million.
Of this, the key valuation adjustments include an uplift of
GBP3.4 million (0.6 pence per share) from the recognition of life
extensions on projects where the Company has land rights that
permit an additional period of operations, an uplift of GBP1.9
million (0.3 pence per share) from the ongoing transition through
construction to operations for a significant upgrade package at the
Vulcan AD project, an uplift of GBP4.5 million (0.8 pence per
share) from the ongoing implementation of various upgrade projects
across the portfolio and an uplift of GBP5.0 million (0.9 pence per
share) from recognition of cost savings across the portfolio driven
by various tendering processes being conducted in the period.
Valuation sensitivities
The Net Asset Value of the Company is the sum of the discounted
value of the future cash flows of the underlying asset financial
models, the cash balances of the Company and UK HoldCo, and the
other assets and liabilities of the Group less Group debt.
The portfolio valuation is the largest component of the Net
Asset Value and the key sensitivities are considered to be the
discount rate applied in the valuation of future cash flows and the
principal assumptions used in respect of future revenues and
costs.
A broad range of assumptions is used in our valuation models.
These assumptions are based on long--term forecasts and are not
affected by short--term fluctuations in inputs, whether economic or
technical. The Investment Adviser exercises its judgement in
assessing both the expected future cash flows from each investment
based on the project's life and the financial models produced by
each project company and the appropriate discount rate to
apply.
The key assumptions are as follows:
Discount rate
The WADR of the portfolio at 31 March 2020 was 7.4% (31 March
2019: 7.9%). A variance of plus or minus 0.5% is considered to be a
reasonable range of alternative assumptions for discount rates.
Volumes
Base case forecasts for intermittent renewable energy projects
assume a "P50" level of electricity output based on reports by
technical consultants. The P50 output is the estimated annual
amount of electricity generation (in MWh) that has a 50%
probability of being exceeded - both in any single year and over
the long term - and a 50% probability of being underachieved. Hence
the P50 is the expected level of generation over the long term.
The P90 (90% probability of exceedance over a 10--year period)
and P10 (10% probability of exceedance over a 10--year period)
sensitivities reflect the future variability of wind and solar
irradiation and the uncertainty associated with the long--term data
source being representative of the long--term mean.
Separate P10 and P90 sensitivities are determined for each asset
and historically the results presented on the basis they are
applied in full to all wind and solar assets. This implies
individual project uncertainties are completely dependent on one
another; however, a recent Portfolio Uncertainty Benefit analysis
performed 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 6.7 pence, the impact from solar and
wind separately is only 1.5 pence and 5.2 pence respectively, as
shown in the chart overleaf.
Agricultural anaerobic digestion facilities do not suffer from
similar deviations as their feedstock input volumes (and
consequently biogas production) are controlled by the site
operator.
For the waste & 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. While power markets can
experience movements in excess of +/-10% on a short-term basis, the
sensitivity is intended to provide insight into the effect on the
NAV of persistently higher or lower power prices over the whole
life of the portfolio. The Directors feel that +/-10% remains a
realistic range of outcomes over this very long time horizon,
notwithstanding that shocks will occur from time to time.
Feedstock prices
Feedstock accounts for over half of the operating costs of
running an AD plant. As feedstocks used for AD are predominantly
crops grown within existing farming rotation, they are exposed to
the same growing risks as any agricultural product. The sensitivity
assumes a 10% increase or decrease in feedstock prices relative to
the base case for each year of the asset life.
Inflation
Each project in the portfolio receives a revenue stream which is
either fully or partially inflation--linked. The inflation
assumptions are described in the macroeconomic section 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 2020, the Directors consider the
sensitivity to changes in euro/sterling exchange rates to be
insignificant.
Corporation tax
The UK corporation tax assumptions applied in the portfolio
valuation are outlined in the notes to the accounts below. The
sensitivity below assumes a 2% increase or decrease in the rate of
UK corporation tax relative to the base case for each year of the
asset life.
OPERATIONAL REVIEW
Overall performance of the portfolio has been in line with
expectations, with good performance from the wind and AD assets
offsetting weaker performance from the solar portfolio, which has
made progress during the year in improving asset condition.
Key performance measures
The key performance measures for the year ended 31 March 2020
are summarised below:
Year ended Year ended
31 Mar 2020 31 Mar 2019
----------------------------------------------------------------- ----------- -----------
Market capitalisation GBP606.9m GBP549.2m
Dividend per share (declared) 6.66p 6.51p
Share price 111.0p 110.5p
Total shareholder return for the year (share price basis) 6.3% 16.3%
Net Asset Value GBP533.0m GBP520.3m
Net Asset Value per share 97.5p 104.7p
Net Asset Value per share growth (after adjusting for dividends) (1.1)% 11.0%
Portfolio value GBP537.1m GBP523.6m
Number of investments 30 28
Largest single investment as % of portfolio value 7.9% 9.0%
----------------------------------------------------------------- ----------- -----------
Portfolio performance
Operating performance of the environmental infrastructure
portfolio during the year ended 31 March 2020 was generally good
and the portfolio performed 2.4% above budget over the year. The
renewables segment of the portfolio produced 904GWh (2019: 746GWh)
of green energy. Solar was the biggest detractor from budget, with
generation 3.3% below budget (2019: 1.6% variance from budget),
primarily due to grid outages and significant repair works carried
out under warranty. Wind generation was 3.9% above budget (2019:
9.2% below budget), with particularly good wind resource in the
last quarter boosting generation. The AD portfolio continued to
outperform, with gas generation 3.6% above budget (2019: 3.9% above
budget).
The wind portfolio generated 458.4GWh over the 12 months ended
31 March 2020, 3.9% above budget. Exceptional wind speeds over the
last quarter buoyed what was otherwise a period of generally poor
wind resource. Meanwhile, availability levels improved with a
marked difference in the performance of the wind farms serviced by
Senvion, following Senvion filing for self-administration and
subsequently selling the European operations business that services
JLEN's wind farms to SGRE. Reliability of the Senvion machines
remains inconsistent, but faster response times and improved spares
availability have helped reduce downtime. The Investment Adviser
continues to monitor the situation closely but is cautiously
optimistic that SGRE's acquisition represents a positive long-term
solution to servicing needs following Senvion's insolvency.
Various value enhancement opportunities were implemented across
the wind portfolio during the year. Aftermarket software and
hardware upgrades for two sites were agreed with OEMs and installed
during the period. While additional data must be collected before
the impact can be quantified definitively, initial data analysis
makes clear that production has improved. A systematic cost
rationalisation campaign resulted in improved terms across a
selection of key contractual arrangements, including financial
administration, turbine operations and maintenance provision and
power purchase arrangements. A sustained campaign with the O&M
to address historical availability issues at Carscreugh has
resulted in sustained improvement and recognition of higher energy
yield going forward.
The Investment Adviser continues to explore additional value
enhancement opportunities including co-locating battery storage
systems with other renewable technologies, private wire
opportunities, power price hedging and operational life
extensions.
The hydro assets have performed 16.8% below budget since
acquisition. The negative variance is primarily attributable to
extreme river levels over the period. Record floods in November
caused peripheral damage to both sites, materially impacting
generation for a sustained period. Following successful repair
works, subsequent widespread flooding caused by a series of
powerful storms systematically kept hydrostatic pressure low and
resulting generation suppressed.
The battery asset co-located with one of the hydro installations
continued to focus exclusively on delivering frequency response
services throughout the period. Following expiry of the original
two-year Fast Frequency Response agreement, the asset has
consistently successfully bid into month-ahead frequency response
auctions, providing a more predictable revenue stream.
Generation from the solar assets (which represent 8% of the
portfolio energy generation for the year) at 75.5GWh was 3.3% below
budget.
Irradiation for the solar portfolio was 4.2% higher than the
long-term average forecast for the portfolio. The discrepancy
between the irradiation and generation was due to a combination of
technical issues, network outages, warranty works and grid
constraints scheduled over the summer months.
Distribution Network Operator (DNO) outages in Amber Fryingdown
and CSGH Shoals Hook related to major long-term maintenance plans
on DNO HV equipment retrofit and 132kV overhead lines. This
resulted in an overall 2.2% negative impact on generation from the
solar portfolio.
Warranty works on the CSGH projects were in relation to
corrosion issues and involved off-site repainting of all
transformers and replacement of most of inverter substation
enclosures at the manufacturer's cost, resolving concerns on
long-term reliability of the equipment. This resulted in an overall
1.3% portfolio impact as the Investment Adviser was able to plan
with the component manufacturer to schedule works away from the
peak summer months.
The Branden asset experienced outages at the beginning of the
year due to a small fire at an inverter station. This impacted
portfolio performance by 0.5% but the loss will be covered by
insurance and the transformers have since been upgraded.
CSGH Higher Tregarne experienced an event of HV equipment
failure impacting portfolio performance by 0.7% and which loss will
also be covered by insurance.
Higher than usual temperatures also had a negative impact on the
performance of key components at some sites, although a testing
regime has been undertaken to understand the root cause of these
issues and various options are being considered to enhance the
performance of the sites.
Lease extension options are now in place for five of the solar
assets, with one new extension recognised in the portfolio
valuation at the year end. The Company's policy is to recognise
longer economic lives for assets only when there is no technical
indication that the asset is not capable of operating for longer
and where suitable land rights for that longer period of operations
are secured. 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 in line with expectations.
Operational performance and compliance with contractual targets has
also been good, with no material breaches reported. Waste tonnages
at the East London waste project have continued to be stable for
the year as a whole, with the Covid-19 pandemic only occurring at
the very end of the period with no material impact on volumes.
Operational performance targets were with diversion from landfill
at 99.8%, substantially ahead of the 67% contract target, and
recycling at 26.4%, also ahead of the 22% contract target, and ELWA
was again able to pay distributions in line with budget. The
project has faced Brexit-related issues with disposing of the
project's residual refuse-derived fuel to European counterparties
and with placing insurance in a challenging market for waste
facilities during the year. The project company benefits from
contractual protections that place these risks with counterparties;
the Investment Adviser continues to follow developments in these
areas closely.
After two relatively dry years, rainfall, and therefore
wastewater, flows picked up in the last part of the year at Tay,
leading to revenues on budget. When combined with the project's
strong cost control that has been in evidence over recent years,
Tay was able to distribute slightly ahead of budget.
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. The
project company has now substantially completed the steps necessary
for winding up and has distributed remaining cash of GBP2 million
to the Company. It has been removed from the portfolio.
The Bio Collectors waste collection and processing business
collects and treats food waste from around London. The business
processes commercial and residential food waste. As a result of
Covid-19, the business has seen a material reduction in commercial
food waste collections, whilst residential food waste collection
has remained stable. Commercial food waste forms up to half of the
anticipated tonnages for the plant and therefore it is possible
that the plant will see a material impact on performance going into
the new financial year. Management of Bio Collectors have been
proactive during this period with advancing planned lifecycle
maintenance works and sourcing alternative feedstocks.
The AD portfolio maintained its good operational performance
this year; overall energy generation was 3.6% above budget due to
high plant availability and further process optimisation (2019
variance was 3.7% favourable). The operational results are
particularly impressive given the challenges from the low-yielding
feedstock harvest in 2018, followed by the wet harvest experienced
in 2019. Both Icknield Gas and Grange Farm Energy have been amongst
the top-performing sites and have exceeded their energy generation
budgets by >10% and >5% respectively.
The expansion of Vulcan Renewables was completed in late 2019
and the plant is successfully operating at over double its original
output. Although the build and commissioning did see some minor
delays, the plant has shown a strong performance for the final
quarter and exceeded its generation budget by 4% for the year.
Biogas Meden, which was acquired in December 2018, completed its
first full financial year under JLEN ownership and its new
replacement operator, Future Biogas, and concluded the year with a
negative performance variance of 1.5%. This was due to a number of
unplanned outages and a low level of buffer of feedstock prior to
the 2019 harvest. The Investment Adviser continues to work with the
Future Biogas team at Biogas Meden to increase plant availability
and optimise the feedstock mix. This facility is being considered
for a number of value enhancement projects in the coming year,
potentially including the processing of further alternative
feedstocks.
As highlighted, the above-average rainfall experienced during
this year's winter period (October to February) has resulted in
some issues in terms of feedstock harvesting, feedstock
establishment in some areas and digestate management. Coupled with
the prior year's drought and lower than expected feedstock yields,
the AD portfolio has been presented with various challenges which
have been managed as effectively as possible through its asset
managers across the UK.
More recently, the impact of Covid-19 on the Agri-AD plants
during Q4 has been noticed, but remains minimal due to the security
of the feedstock and dynamic continuity plans put in place by the
various asset managers.
Wholesale gas price fixing has been achieved for 45% of the gas
volumes across the AD portfolio for summer and winter 2020. Given
the volatility of the wholesale gas market and the more recent
negative gas pricing, the hedging volumes and prices are partially
mitigating this volatility.
Going forward, the Investment Adviser will be assessing and
implementing various plant upgrades, securing and improving
feedstock supply contracts and developing greater operational
consistency amongst the existing assets.
Total since
Portfolio generation 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 IPO
----------------------------------------------- ------- ------- ------- ------- ------- ------- -----------
Wind portfolio actual generation (GWhe) 82 184 217 399 406 458 1,746
Variation from budget(1) +7% +11% -15% 0% -9% +4% -2.8%
----------------------------------------------- ------- ------- ------- ------- ------- ------- -----------
AD portfolio actual generation (GWhth) - - - 51 262 352 665
Variation from budget - - - +8% +4% +4% +4.1%
----------------------------------------------- ------- ------- ------- ------- ------- ------- -----------
Solar portfolio actual generation (GWhe) 10 30 40 64 79 75 298
Variation from budget(1) -1% --2% -12% -9% +2% -3% -4.4%
----------------------------------------------- ------- ------- ------- ------- ------- ------- -----------
Waste and wastewater actual generation (GWhth) - - - - - 16 16
Variation from budget - - - - - n/a n/a
----------------------------------------------- ------- ------- ------- ------- ------- ------- -----------
Hydro portfolio actual generation (GWhth) - - - - - 3 3
Variation from budget - - - - - -17% -17%
----------------------------------------------- ------- ------- ------- ------- ------- ------- -----------
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 2020 was GBP87.63 per MWhe for onshore wind (31
March 2019: GBP92 per MWhe), GBP186.0 per MWhe for solar(2) (31
March 2019: GBP190 per MWhe) and GBP96 per MWhth for AD (31 March
2019: GBP101 per MWhth).
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. The Company
now separates the sensitivities illustrating the effect of
different levels of wind and solar resource on the portfolio
valuation as there is no indication that these weather resources
are positively correlated.
(1) Budgets adjusted to reflect operational energy yield
assessments carried out under contracted true-up mechanisms post
IPO.
(2) Does not include the Panther rooftop portfolio.
Acquisitions
Since 31 March 2019, the Company has acquired three new
projects, and provided initial funding against its EUR25 million
commitment as a limited partner in the FEIP fund. The total
consideration was GBP58.6 million. The aggregate investment amount
was funded through cash available and drawdowns under the Company's
revolving credit facility, which were subsequently partially paid
down following the Company's successful equity raise of GBP57.2
million in February 2020. The assets were as follows:
Yorkshire Hydropower Holdings Limited
In July 2019, the Company completed the acquisition of Yorkshire
Hydropower Holdings Limited ("YHHL"), for a total consideration of
c.GBP4.3 million.
YHHL owns 100% of the equity in Yorkshire Hydropower Limited
("YHL"), which in turn holds the rights to two operational hydro
projects and an operational battery storage system.
This represents JLEN's first investment in two new sectors -
run-of-river hydro and battery storage - diversifying the Fund's
portfolio of environmental infrastructure projects.
The Yorkshire-based projects acquired are:
-- Kirkthorpe hydro, a 500kW single turbine hydro project
located on the River Calder, which was commissioned on 21 November
2016; and
-- Thrybergh hydro, a twin screw 260kW hydro project located on
the River Don, commissioned on 26 October 2015, and a 1.2MW battery
co-located at Thrybergh, commissioned in January 2018.
Warren Energy Limited
In August 2019, the Company completed the acquisition of Warren
Power Limited ("WPL") for an initial consideration, including
working capital, of GBP14.8 million subject to additional deferred
payments up to GBP0.8 million. WPL owns 100% of the equity in
Warren Energy Limited ("WEL"), which holds the rights and
operational assets that make up the anaerobic digestion plant.
The Warren AD plant is located in Methwold, Norfolk and was
commissioned in December 2015 and became operational in March 2016.
The plant has a thermal capacity of c.5MWth and predominantly
produces biomethane to be injected to the national gas grid. In
addition, the plant also has a 0.5MWe CHP engine and is accredited
under the Renewable Heat Incentive and Feed-in Tariff schemes.
The Warren AD plant has been acquired from EIS funds managed by
Amersham Investment Management Ltd and minority shareholders,
Future Biogas Ltd ("FBL"). FBL will continue to provide management,
operations and maintenance services to the AD plant after the
acquisition.
Bio Collectors Holdings Limited
In December 2019, the Company announced the acquisition of a 70%
equity stake in Bio Collectors Holdings Limited ("BCH"). BCH,
through its subsidiary companies, holds the rights and operational
assets that make up the waste-fuelled anaerobic digestion plant and
the Bio Collectors waste collections business.
The group of companies is based in Merton, London. The AD plant
was commissioned in December 2013 and has subsequently been
expanded through several phases. The plant has a current thermal
capacity of c.10MWth, a waste processing capacity of up to
100,000tpa and predominantly produces biomethane to be injected to
the national gas grid. In addition, the plant has 1.7MWe of
capacity through two CHP engines and is accredited under the
Renewable Heat Incentive ("RHI") and Feed--in--Tariff ("FiT")
schemes. The Bio Collectors waste collections business collects
source-separated and packaged food waste for the AD plant from a
variety of commercial, industrial and local authorities located in
and around Greater London, utilising an increasing biogas--powered
fleet.
The 70% stake in BCH has been acquired from private individuals,
with the residual 30% retained by the existing owner who will
remain active in the business going forward.
The acquisition was funded by a drawdown on JLEN's revolving
credit facility.
FEIP
In January 2020, JLEN announced a commitment of EUR25 million to
Foresight Energy Infrastructure Partners SCSp ("FEIP"), a
Luxembourg limited partnership investment vehicle. At the balance
sheet date GBP1.4 million had been invested into FEIP.
FEIP aims to generate returns from investing in a portfolio of
diversified infrastructure assets that contribute to the
decarbonisation of electricity networks. The majority of
investments will be in construction-stage European renewable energy
generation infrastructure such as wind farms and solar parks, and
FEIP also has an allocation to renewable--enabling infrastructure
such as energy storage, and transmission and distribution assets
that complement intermittent generation assets. FEIP has identified
an initial portfolio that includes European construction-stage wind
and solar assets and operational battery storage assets. Its first
investment into the Skaftasen wind farm, a 231MW greenfield project
in Sweden, was announced post year end.
The investment in FEIP will allow JLEN to further diversify its
geographic and technology exposure, while also gaining an
allocation to construction-stage assets which is expected to
enhance returns. Given construction-stage assets can only represent
a small part of the Company's portfolio, the FEIP investment allows
a greater level of diversification than would be possible with
direct investments, providing for a more attractive risk-adjusted
return profile. JLEN's commitment to FEIP will also open the
possibility of future co-investment opportunities on a selective
basis. JLEN will be excused from any FEIP investment that is not
consistent with JLEN's investment policy. Any management fees
payable by FEIP in connection with JLEN's commitment will be
rebated to JLEN. A carried interest is due to the manager, subject
to a hurdle rate.
Financing
The Group benefits from a three-year facilities agreement with
HSBC, NIBC, ING and Santander. The facility has been extended
twice, in June 2018 and May 2019, and will expire in June 2022. The
facility currently provides for a committed revolving credit
facility of GBP170 million and for a remaining uncommitted
accordion facility of up to GBP20 million. The facility margin is
200 to 225 bps (depending on the loan-to-value ratio for the Fund)
over LIBOR.
This facility provides JLEN an increased source of flexible
funding outside of equity raisings at a lower cost. It will be used
to make future acquisitions of environmental infrastructure
projects to add to JLEN's current portfolio of wind, solar,
anaerobic 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 GBP29.3 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 2020 across the portfolio
was 31.9% (31 March 2019: 33.7%) being 26.7% (31 March 2019: 28.1%)
for the renewable energy assets and 52.4% (31 March 2019: 52.7%)
for the PFI processing assets. Taking into account the amount drawn
down under the revolving credit facility of GBP29.3 million, the
overall fund gearing at 31 March 2020 was 35.3% (31 March 2019:
35.7%).
As at 31 March 2020, the Group, which comprises the Company and
the intermediate holding companies, had cash balances of GBP22.0
million (31 March 2019: GBP11.4 million).
COVID-19 RESPONSE
The Covid-19 pandemic is an unprecedented crisis in our time,
one which could not be predicted and the changes to our business
practices have been rapid and unplanned. However, the combination
of JLEN's risk-averse investment strategy and management practices
have, so far, allowed the Company to continue operation with
minimal interruptions.
While some disruption is inevitable, the Company is taking steps
to identify and mitigate, where possible, the effect of Covid-19 on
the business and to ensure that health and safety best practices
are adhered to. Communication between the Company and its
stakeholders and counterparties is particularly important in these
circumstances and the way in which events unfolded has meant that
business continuity throughout the business has been tested and, in
places, improved.
Foresight response
The wellbeing of the Foresight staff is their priority and most
staff transitioned to working from home in the weeks leading up to
the government lockdown.
Foresight has a well-established Business Continuity Plan
("BCP") which was tested in early March as the prospect of a
serious disruption to everyday operations became apparent and IT
infrastructure was refined so that staff could efficiently work
from home. In addition to this, lines of regular communication were
put in place between line managers and their teams to both ensure
efficient working practices and to allow regular check-ins on the
health and wellbeing of staff.
Foresight, in its capacity as asset manager, quickly began to
build and implement a "Covid-19 Response Plan" which identified the
main risks to the portfolio and set in place a risk management
matrix for mitigating and dealing with these risks.
Macroeconomic risks have been assessed in-house by the Foresight
valuation team, particularly the effect of the pandemic on power
prices over the long and short term. In the short term, power
prices which had already declined in late 2019 are forecast to
decline further as businesses and industries are not operating at
full capacity.
Due to the diversification of the JLEN portfolio, it has one of
the lowest exposures to wholesale power prices within its peer
group; however, it is not immune to the changes in power prices and
JLEN uses power price fixes and floors to reduce its exposure to
short-term fluctuations in power prices. The majority of projects
are on fixed price arrangements for the next six to 12 months in
order to reduce the revenue risk from price volatility.
Example risk management matrix
General issue Cause Impact Likelihood(1) Impact(2) Mitigation
------------------- -------------- ------------------- ------------- --------- ----------------------------------
Staff absence Illness Delay on 1 3 Contacted all major O&M providers
repairs resulting to request BCPs to understand what
in long downtime measures they are taking
to mitigate the impact of the
pandemic on their staff.
------------------- -------------- ------------------- ------------- --------- ----------------------------------
Travel restrictions Quarantine Delays in 1 3 Delegated authority shared amongst
approvals a range of people
for work
to proceed
-------------- ------------------- ------------- --------- ----------------------------------
Exclusion Fault response 1 3 Remote control of plant to reset
zones/ travel delayed faults where possible.
restrictions
------------------- ------------- --------- ----------------------------------
Emergency 2 1 Remote control of plant to isolate
response plant to protect people and
impossible/delayed equipment.
------------------- -------------- ------------------- ------------- --------- ----------------------------------
(1) 1-high, 2-med, 3-low.
(2) 1-safety, 2-major financial, 3-minor financial, 4-other.
Communications with operational counterparties
Foresight asset managers are in regular contact with the
operations and management providers of the JLEN assets. These
communications were increased in response to the crisis and
counterparties were asked to provide Business Continuity Plans.
Depending on the requirements, in some cases communications were
held on a weekly basis or even daily basis. JLEN's counterparties
were quick to respond and practical measures were put in place to
keep operations running as smoothly as possible while also ensuring
that government guidelines were adhered to and the health and
safety of staff was prioritised.
Plans were discussed to address disruption to:
-- scheduled maintenance planning - where necessary adjusting
timing of planned maintenance work;
-- response to unplanned technical incidents - ensuring the
correct resources are in place to manage unplanned incidents across
the portfolio;
-- supply chain of spare parts - working with counterparties to
either acquire in advance, bulk purchase or find alternative
suppliers of spare parts;
-- feedstock supply and offtake of digestate - diversifying
feedstock mixes, securing alternative feedstocks;
-- insurance - close liaison with insurance providers during this period;
-- response in case of emergency - e.g. fire;
-- where applicable, adopting Government financial support (tax holiday, furlough); and
-- regulatory authorities - working with Ofgem and the
Environment Agency to ensure minimum disruption to operations.
On the whole, plans to decrease the effects of these disruptions
have been successful, with problems being addressed as they
arise.
Communications with other stakeholders
At the beginning of the crisis, JLEN set up regular calls with
its broker and PR agency to keep informed about changes in the
market which could affect the business and to take decisions on
external communications in the market. A Regulatory News Service
announcement was released with the London Stock Exchange to give
the market an operational update.
Lessons learned
While the impact of Covid-19 is not yet fully known and may have
long-reaching consequences, for JLEN which invests in assets over
the longer term, a pandemic and associated economic downturn may be
one of many risks that the Company faces over its lifetime.
However, when risks do emerge, they can provide an opportunity to
learn and further increase the resilience of the portfolio.
Lessons learned from this most recent crisis have led to greater
oversight of emergency procedures in business continuity planning
and more technical lessons in the management of the supply chain
and resources.
VALUE ENHANCEMENT
The Investment Adviser has achieved operational and financial
enhancements to projects to improve cash flow and increase value
for shareholders.
Vulcan upgrade and land acquisition
The Vulcan capital upgrade project involved doubling the
capacity of JLEN's first AD acquisition through converting an
existing storage tank into an additional digester, plus associated
works to process the increased gas flow. This was completed in Q3
following some minor delays during the construction phase. The
plant has successfully ramped up and is now achieving energy yields
in excess of the investment model.
Land adjacent to the facility was acquired at the end of the
period, enabling the opportunity for potential cost savings and
increased feedstock security going forward. Vulcan is being
considered for a number of other value enhancement projects in the
coming year which will further increase its profitability.
Restructuring of rooftop solar portfolio
Potential opportunities for improvement of operational
efficiency on the portfolio projects are continuously explored.
During the past year, a restructuriong of the Panther rooftop solar
portfolio was completed. The restructuring was aimed at
consolidating the rooftop portfolio's ownership structure from 10
special purpose entities at acquisition into one project company
and entering into a new operations and maintenance agreement with
Freetricity Operations Limited, a specialist service provider in
the rooftop solar sector. It is expected that this initiative will
achieve savings of Company management costs and improve system
performance by benefiting from Freetricity's experience of managing
similar portfolios for various investors and with over the thousand
rooftop solar installations throughout the UK. The costs savings
are estimated to be c.GBP25k per annum.
Service providers retendering
Following a cost and performance review of Financial Management
Service Agreements, five wind assets exercised options to terminate
existing arrangements and awarded new contracts to an existing
provider. The new arrangements further streamline asset management
across the wind portfolio and represent a saving of c.GBP20,000 per
annum.
General AD upgrades/improvements
The Investment Adviser successfully secured a number of improved
green gas certificate ("GGC") purchase agreements in 2019/20,
further increasing the revenues received in this area. A range of
innovative upgrade projects have been implemented across the
portfolio in 2019/20 and will continue to be installed going into
2020/21. These include retrofitting mechanical treatment units
across applicable plants within the portfolio that allows increased
digestion efficiency, the initial results of which are promising.
Other enhancements include investing in "online" dry matter
sampling equipment with a view to use this to optimise plant
performance. Additionally, given the importance of feedstock
security, the Fund has also invested in additional feedstock
storage at its Warren AD plant.
Alternative feedstocks have been trialled with a view to
optimise operating performance of certain assets but also increase
feedstock security during the year. The Investment Adviser intends
to continue its activity in incorporating value-enhancing
technologies in the coming year.
Notwithstanding the challenges experienced by the UK AD sector
in both feedstock production and digestate management in 2019/20,
the JLEN AD portfolio has maintained its overperformance to budget
across the portfolio, whilst also achieving increased value through
a number of value-enhancement measures.
CASE STUDY - BIO COLLECTORS
In December 2019, JLEN acquired a 70% stake in Bio Collectors
Holdings Limited ("BCH"). BCH, through its subsidiary companies,
holds the rights and operational assets that make up an anaerobic
digestion ("AD") plant and the Bio Collectors waste collections
business.
Background
The AD plant was commissioned in December 2013 and has
subsequently been expanded through several phases. The plant has a
current thermal capacity of c.10MWth, a waste processing capacity
of up to 100,000tpa and predominantly produces biomethane to be
injected to the national gas grid. In addition, the plant has
1.7MWe of capacity through two CHP engines and is accredited under
the Renewable Heat Incentive ("RHI") and Feed--in--Tariff ("FiT")
schemes.
The Bio Collectors waste collections business collects
source-separated and packaged food waste for the AD plant from a
variety of commercial, industrial and local authorities located in
and around Greater London utilising an increasing biogas-powered
fleet.
The award-winning collection business consists of a fleet of
over 20 vehicles, seven of which are fuelled with CNG at the AD
plant's refuelling station. Bio Collectors are the only company in
England collecting food waste in vehicles powered by gas from food
waste and all the food waste from the West London Waste Contract is
collected by CNG powered vehicles.
The Bio Collectors plant to date has offset 60,950tCO e and is
expected to save a further 182,859tCO e over its remaining
operational life by generating renewable electricity and gas. In
addition to this, the addition of the six CNG fuelled collection
vehicles will offset a further 242tCO e per annum.
11.7
Megawatt capacity
100,000 tpa
Waste processing capacity
Food waste in the UK
The transaction represents a strategic move by JLEN following
the commitment by Defra to introduce mandatory weekly food waste
collections in England from 2023. This was set out in its Resource
and Waste Strategy launched in December 2018.
In 2015, the UK was estimated to generate around 10.2 million
tonnes of food waste, approximately 70% of this is believed to come
from private households (WRAP, 2018). Only a proportion of the UK
food waste is currently going to AD plants for disposal; this is
likely to increase should segregated collections be rolled out in
2023.
This potential increase in available food waste tonnages
represents an opportunity for Bio Collectors to further increase
the amount of renewable energy it generates in the future.
The UK AD sector's food waste treatment capacity is currently
estimated to be c.3.84 million tonnes and based on current planning
permissions could rise to 6.3 million tonnes (REA based on NNFCC
data, 2019). It is, however, anticipated that under the current
incentive regime only a proportion of the new plants will be
deployed; this will result in an opportunity for existing plants
such as Bio Collectors to potentially expand in the future as
demand for capacity increases.
SUSTAINABILITY AND ESG
CHAIRMAN'S FOREWORD
Last year we launched our first report, articulating our
commitment to ESG matters. This year, we have developed a set of
ESG objectives and over the next year we intend to test and refine
a range of KPIs to inform these objectives.
Last year we launched our first report articulating our
commitment to environmental, social and governance ("ESG") matters.
June 2019 marked the move of JLEN to Foresight, joining our team
with one that has broad experience and geographical reach across a
wide range of environmental sectors. The use of Foresight's ESG
assessment and monitoring tools has helped to further cement JLEN's
ESG principles and allowed us to build on our ESG foundations over
the course of the past year.
This year, for the first time, we have articulated a set of ESG
objectives, which are set out in this report and which have been
integrated into the Fund's objectives. Over the course of the next
year we will be developing and testing a range of key performance
indicators ("KPIs") to inform these objectives. These KPIs will
provide a consistent framework against which we can track the ESG
performance of our portfolio over time. We anticipate that our 2021
ESG report will provide an update on the KPIs under
development.
We remain conscious of the risks of Covid-19 and have taken all
necessary steps to ensure the safety of all staff and stakeholders,
however we do not currently forecast any material long-term impact
on our ability to meet our investment and ESG objectives. We
operate a portfolio that is highly diversified across wind, solar,
waste & wastewater, anaerobic digestion and hydro technology.
Our solar and wind assets have proven very robust during this time,
experiencing minor to no disruption from the crisis. These
technologies are less exposed to the personnel challenges a
pandemic situation can cause, given that they generate their energy
from the weather rather than from efforts made by staff on site.
Despite the current challenges, the global need to reduce carbon
emissions remains an important goal not to lose sight of.
Indeed, the World Economic Forum recently stated that investment
in sustainable infrastructure will aid the post-Covid-19 recovery
on an environmental, societal and economic level.
Events over the first quarter of the 2020 calendar year have
demonstrated the value of ESG criteria in understanding the
resilience of investments to significant risks. In addition to
this, JLEN sees the implementation of robust ESG criteria as being
crucial to addressing the recommendations of the Task Force on
Climate-related Financial Disclosures. ESG KPIs can help in
understanding the resilience of our portfolio to climate change as
well as in identifying options and opportunities for mitigation and
adaptation. While climate resilience is already a consideration in
our approach to investment appraisal, going forward we will be
working to integrate climate risk into our standard risk management
processes by embedding it into the Fund's risk matrix. As a
long-term investor, JLEN is well placed to take this approach to
ensure we maintain portfolio performance over the lifetime of our
investments.
We are proud to have built a reputation as a thought leader in
this space, which has been recognised over the past year as JLEN
was awarded the new Green Economy Mark by the London Stock Exchange
as well as Best ESG Investment Fund: Private Capital at the 2020
ESG Investment Awards.
Richard Morse
Chairman
10 June 2020
AT A GLANCE
Environmental performance 2019/20
>900,000 MWh energy generated
>445,000 waste diverted from landfill (tonnes)
>115,000 waste recycled (tonnes)
39 billion wastewater treated (litres)
245,000 organic fertiliser produced (tonnes)
Social performance 2019/20
GBP350,000 community funding
Governance performance 2019/20
27 health and safety audits
JLEN'S APPROACH TO ESG
JLEN's approach to ESG is based on three core principles:
Assess, Monitor and Engage. The Fund's approach to these is set out
below.
Sustainability considerations are embedded throughout the JLEN
investment process and asset management procedures, from initial
investment screening through due diligence and into ongoing
monitoring and reporting. Overall responsibility for ESG resides
with the Board of JLEN, with analysis and reporting of ESG criteria
advised on by the Fund's Investment Adviser, Foresight.
ESG objectives
-- Promote the efficient use of resources.
-- Develop positive relationships with the communities in which JLEN works.
-- Ensure effective, ethical governance across the portfolio.
This year the Investment Adviser has developed ESG objectives on
behalf of the Fund. These objectives are set out above. Over the
next year a series of KPIs will be developed to help the Fund track
the portfolio's performance against each of the three ESG
objectives.
Assess
JLEN undertakes thorough due diligence on each of its asset
acquisitions and continues to closely monitor them throughout its
ownership. This includes assessing a range of ESG criteria - as set
out in the following sections.
Each of the 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. Foresight's asset managers, who monitor the assets of
JLEN, are closely aligned with the process of assessing potential
acquisitions. This structure allows the Fund's Investment Adviser
to ensure that lessons learned from the management of assets
currently within the portfolio are fed back into the due diligence
process, ensuring that the team is able to continually improve the
way that JLEN invests in environmental assets.
This learning and monitoring approach is one that JLEN values
highly, allowing the Fund to manage risk and identify opportunities
in a consistent and collaborative way between its investment and
portfolio management teams.
Each asset is assessed against a range of "sustainability
evaluation criteria" covering aspects such as contribution to
sustainable development, environmental footprint, social
engagement, governance and third-party interactions. Assets are
scored against a range of factors within these criteria, providing
an overall picture of ESG performance. Foresight has minimum
thresholds for ESG performance - ensuring that, where necessary,
post investment improvement plans are implemented.
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. Site visits are undertaken to
ensure that the asset's day-to-day running and ESG performance is
as expected and simultaneously help to prepare the asset, and asset
managers, for a regular series of third-party environmental,
governance and health and safety ("H&S") audits that Foresight
contracts. The audits produce recommendations, which are
subsequently assigned to designated responsible individuals from
the asset manager and Investment Adviser, who are held accountable
for ensuring the recommendation is actioned. All operational and
financial KPIs as well as live tracking of "incidents", including
H&S, operational performance, ESG, insurance and contractual
management, are monitored using a specialist software package
utilised across Foresight.
The performance of the service providers themselves is regularly
assessed by Foresight as Investment Adviser to JLEN, to ensure they
are delivering on their obligations in managing the asset(s)
appropriately.
Engage
Stakeholder engagement is an important part of JLEN's approach.
Engagement with stakeholders occurs through a combination of formal
(e.g. contractual obligations or industry events) and informal
channels (e.g. ongoing meetings and discussions).
Risk management - environment and climate
As an environmental infrastructure fund, JLEN's mandate is
aligned with the transition to a low-carbon economy. This approach
brings with it sector-specific risks that must be managed
throughout the investment and asset management processes.
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, the
Investment Adviser ensures that all appropriate measures are taken
to maximise the technical performance of each asset once it has
been acquired.
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. JLEN also
works to maximise resource efficiency in its assets through
installing enhancements to boost performance, for example on its
wind assets.
At the portfolio level, JLEN manages climatic risks by ensuring
that returns are not overly dependent on one sector or asset class.
The Fund invests in a range of environmental infrastructure
technologies to ensure that resource availability risk is managed
effectively.
Task Force on Climate-related Financial Disclosures
The Financial Stability Board's Task Force on Climate-related
Financial Disclosures ("TCFD") was set up by the Bank of England
Governor and Chair of the Financial Stability Board ("FSB"), Mark
Carney, and chaired by Michael Bloomberg. It was established to
develop recommendations for more effective climate-related
financial disclosures that:
-- could promote more informed investment, credit and insurance underwriting decisions; and
-- would enable stakeholders to understand better the
concentrations of carbon-related assets in the financial sector and
the financial system's exposures to climate-related risks.
TCFD provides JLEN with a framework under which to consolidate
its existing climate-related activities, as well as to identify
opportunities for improvement and gaps in its current approach.
Going forward
With the Investment Adviser being part of the Foresight Group,
JLEN's commitment to achieving positive environmental impact
through its investments is aligned with, and strengthened by
Foresight's Sustainability Principles and associated Sustainability
and ESG policy. This policy, as well as Foresight's commitment to
the United Nations Principles for Responsible Investment and other
globally recognised responsible investing standards, provides JLEN
with a robust framework through which to direct its commitment to
continuous improvement.
This year JLEN has articulated its ESG objectives for the first
time. Over the coming year, Foresight will be developing, on behalf
of the Fund, a set of measurable KPIs for each of those objectives,
in addition to its financial KPIs. This will allow the Fund to
consistently monitor and communicate ESG performance.
Finally, the recommendations of the TCFD provides a toolkit for
diving deeper into sector-specific climate risk in the portfolio.
Over the coming year any material long-term climate risks to the
portfolio sectors will be identified, and a path mapped out to
mitigating and managing those risks as appropriate.
CASE STUDIES
AD feedstock management
Key environmental criteria:
-- climate resilience.
The efficiency of AD assets is heavily influenced by feedstock
supply. As such, resilience of feedstock supply is an important
focus for JLEN. JLEN's Investment Adviser and asset managers work
together to improve the resilience of feedstock supply through a
combination of monitoring of stocks, forecasting consumption and
contingency strategies.
Climate change has driven abnormal weather patterns at multiple
points in recent years, most recently drought in 2018 and prolonged
rainfall during the latter part of 2019. This highlights the
importance of having the correct measures in place to increase
feedstock supply resilience. By closely monitoring stock levels and
working on forecasting consumption levels, JLEN has been able to
work effectively with its asset managers to:
-- diversify feedstock types, avoiding reliance on a single type of feedstock; and
-- operate with a "buffer" feedstock capacity, preventing supply
challenges during periods of lower feedstock availability.
This approach reduces the risk of feedstock being unavailable at
a critical point and allows JLEN to be confident in the ongoing
operations of its AD assets.
Engaging on ESG
ESG is important to JLEN in having a comprehensive understanding
of the risks and opportunities associated with the portfolio. It is
also important when engaging with stakeholders. In-depth
understanding of the ESG performance of the portfolio helps to
engage with a broader range of stakeholders across a multitude of
topics. That insight and comprehensive knowledge of portfolio
performance beyond financial returns is one that JLEN values
highly.
JLEN's Investment Adviser is a recognised thought leader in this
space and this year has seen significant recognition of their
approach. In 2019 JLEN was awarded the new Green Economy Mark by
the London Stock Exchange, which identifies London-listed companies
and funds that generate between 50% and 100% of total annual
revenues from products and services that contribute to a global
green economy. Also this year, JLEN was awarded Best ESG Investment
Fund: Private Capital at the 2020 ESG Investment Awards
ENVIRONMENTAL
Environmental criteria are embedded in the structure of JLEN's
investment and portfolio management activities. As part of its move
to Foresight, the Fund's approach has been further formalised
through assessment of assets against sustainability evaluation
criteria described below.
With its Investment Adviser, Foresight, JLEN considers the
following key environmental criteria during due diligence of a
potential acquisition and thereafter the ongoing monitoring of its
assets:
-- resource management;
-- life on land/below water; and
-- climate change and resilience.
Impact
JLEN is proud of the contribution of its assets to the low
carbon economy. Foresight, as Investment Adviser to the Fund, works
with third--party technical advisers to maximise the technical
performance and operational life of each asset in its portfolio.
This focus on technical performance and longevity helps to maximise
resource efficiency which, in turn, maximises the environmental
benefit delivered by each asset through generation of renewable
electricity and heat, production of organic fertiliser from the
Fund's AD plants, treatment of wastewater, waste recycled and waste
diverted from landfill. Figures for 2019/20 performance are set out
above.
In order to quantify some of the benefits being delivered by its
portfolio, JLEN works with Aardvark Certification Ltd to undertake
an independent, third-party assessment of the environmental impact
of its assets. Individual reports for each asset, as well as a
portfolio summary report, are published on the Fund's website.
Foresight, acting as Investment Adviser to JLEN, works with
third-party service providers to ensure that habitat management
plans for each asset are being implemented appropriately and
effectively, helping to protect life on land and below water.
Portfolio electricity and carbon performance(1)
In 2019/20, the wind, solar and hydro assets generated over
535GWhe, which equates to the average annual electricity usage of
143,500 households. Detailed information on portfolio energy
performance is provided above.
A summary of the greenhouse gas benefits delivered by the
portfolio is provided in the table below. JLEN's portfolio is
forecast to result in the avoidance of over 387 ktCO2e per year,
the equivalent of taking almost 178,000 cars off the road.
(1) Greenhouse gas emissions calculations, household and car
equivalents are aggregated from the Aardvark reports, accessed on
JLEN's website.
Greenhouse gas emissions reduction
(tCO(2) e)
--------------------------------------
Average annual Lifetime
Emissions emissions emissions
avoided to
Asset portfolio by sector date avoided avoided
-------------------------- ----------- -------------- ---------
Wind assets 600,960 119,390 2,946,000
Solar assets 125,850 21,630 476,820
AD assets 275,040 46,740 934,850
-------------------------- ----------- -------------- ---------
JLEN's portfolio is forecast to deliver, per year 535 GWh
electricity
Equivalent to >143,500 households' annual electricity
And avoid emissions of 387 ktCO(2) e
Equivalent to 177,500 cars off the road
CASE STUDIES
Bio Collectors
Key environmental criteria:
-- resource management: waste.
Food waste is a global issue, and governments, the third sector
and the private sector are working hard to reduce food waste
throughout supply chains. While that work is ongoing, the UK is
faced with a challenge in how to effectively manage food waste and
avoid it going to landfill.
One of the most effective ways food waste is managed can be seen
at Bio Collectors. Bio Collectors collects food waste from around
London and also has a multi-year partnership with West London Waste
Authority for collection of residential food waste.
The business converts the food waste primarily into renewable
gas, injected into the gas network, which is then used locally to
heat homes and businesses.
Bio Collectors also uses the food waste it collects to run its
own operations by:
-- converting some of the gas produced into electricity to power
its own business and provide additional renewable electricity to
the grid; and
-- powering their fleet of food waste collection vehicles with
biomethane produced on site, eliminating the need for a diesel
fleet.
Finally, nutrients from processing the food waste are recovered
and returned to farmland as organic fertiliser, reducing the use of
artificial fertilisers. This circular approach to operating the
business allows Bio Collectors to effectively manage waste as a
resource.
Asset optimisation
Key criteria:
-- resource management: efficiency.
One method of managing resources is to ensure JLEN's portfolio
is making the most of naturally available resources such as wind
power. By maximising the power produced by each turbine, JLEN
ensures that its assets are operating as efficiently as they can. A
number of the Fund's wind assets have recently been optimised
following acquisition to increase the efficiency of power
production. This includes:
-- hardware changes, where the turbine blades might be changed
to improve aerodynamics or power capture, or additional sensors
installed to improve reliability of information driving the
turbine's control system; and/or
-- software changes designed to improve the responsiveness of
the turbines to a range of wind conditions including speed and
direction.
Initial analysis of power production indicates that there has
been a clear improvement of performance, and the asset managers
continue to analyse power production against past data to
understand to what degree performance has been optimised. Lessons
learned from this exercise will be used to inform future investment
appraisals and optimisation exercises.
SOCIAL
The following social criteria are typically considered during
due diligence and ongoing monitoring of assets:
-- health and wellbeing;
-- local economic impact - job creation;
-- local social impact; and
-- community engagement and benefit.
Impact
Health and safety
JLEN takes its responsibility to health and safety seriously and
works to ensure that reporting and liaison arrangements between the
asset managers and the Investment Adviser are appropriate. JLEN
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.
Foresight's investment and asset management teams work closely
with all third-party asset managers to ensure the sites are being
operated to the highest possible standard, with health and safety
("H&S"), environmental performance and regulatory adherence all
being of paramount importance. As part of this, Foresight
undertakes regular site visits to help identify opportunities for
improvement, and ensures that the third-party asset managers
implement:
-- a robust set of enforceable site rules, tailored to the
individual asset, which clearly stipulate the working practices and
procedures that are to be adhered to at all times by employees and
visitors alike;
-- a site-specific induction and training programme, conducted
for all new employees/operators, which highlights the importance of
ESG performance; and
-- developmental training to further improve the knowledge and practices of the workforce.
Following JLEN's move to Foresight, health and safety
considerations are now integrated into Foresight's monitoring and
reporting software, which aggregates health and safety information
across the portfolio, allowing the Fund to better identify trends
and opportunities for improvement.
Skilled labour
Many of JLEN's assets are situated in rural areas, providing
vital skilled roles in smaller rural communities. A strong base of
qualified engineers is required in order to run the Fund's
environmental assets in the long term and 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.
JLEN's portfolio relies on skilled labour to ensure its assets
operate as efficiently as possible. In addition to apprenticeships
in the AD portfolio, third-party asset managers also provide a
range of support to staff to enhance their skillsets, as well as
job progression opportunities.
Community benefit
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.
Recent community projects that JLEN assets have contributed to
include:
-- regeneration and equipment for children's play areas;
-- support for sports groups such as sponsoring players,
purchasing equipment and improving facilities; and
-- support for arts groups, including purchase of equipment.
CASE STUDIES
Skilled labour
JLEN's third-party asset managers work to promote skilled labour
across a range of experience levels.
Entry level
JLEN's 2019 ESG report highlighted the apprenticeship programme
run by Future Biogas. Over the past year, the apprentices have been
working on a range of different sites in order to provide them with
a working knowledge of multiple assets. Their training includes
time working on maintenance activities, as well as getting involved
in planned shutdowns. Additionally, Bio Collectors provides four
apprenticeship schemes with associated support for GNVQs. This
helps to ensure that skilled staff continue to be trained to fill
skilled roles in the sector.
Supporting continued development
ROC Energy, one of JLEN's third-party contractors on its solar
assets, maintains a skilled labour base as all their experienced
electricians have been trained to High Voltage Authorised Personnel
("AP HV") level. They are currently training members within their
operations team to become qualified electricians and, when suitably
experienced, they will progress to complete AP HV level training.
This helps to enhance skillsets and retain staff due to the career
progression opportunities available.
Knowledge sharing
Bio Collectors welcomes a variety of public sector authorities
to the site to further the external knowledge of operational biogas
facilities. A number of training/demonstration days have been
conducted with BEIS, HSE and the Fire Service. This helps to
advance knowledge of the sector.
Lynfi Afan Renewable Energy Park
Key criteria:
-- community engagement and benefit.
The Llynfi Afan Renewable Energy Park is located on Mynydd y
Gelli near Abergwynfi in Neath Port Talbot and Blaengarw in
Bridgend, South Wales, and has been operational since 2017. It
consists of 12 turbines with a total capacity of 24MW and produces
enough electricity to power the equivalent of over 14,000 homes.
Throughout the life of the wind farm, approximately GBP96,000 per
year is being made available to the local community to support
projects that provide academic, cultural, economic, environmental,
recreational or social benefit locally.
In the 2018/19 year, the Llynfi Afan Community Fund Steering
Group approved applications for almost GBP100,000 of funding from
projects including:
-- support for local schools, including purchase of equipment
and renovation of outdoor spaces to include agility trails;
-- training and equipment to help boost skills for local young people;
-- funding of community events, clubs and facilities;
-- purchase and installation of equipment, including a
defibrillator and disabled access, for local sports and fitness
clubs; and
-- funding a part-time library support officer position.
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 and health and
safety incidents in the JLEN portfolio in 2019/20.
Reportable environmental and health and safety incidents
2019/20
------------------------ -------
H&S incidents 3
Environmental incidents 0
------------------------ -------
Health and safety recording and reporting
Third-party asset managers are responsible for the day--to--day
management of H&S issues and are required to report incidents
to Foresight, which are recorded through their portfolio management
software. Depending on the requirement, the software can deliver
either a high degree of granularity on individual assets or an
aggregated snapshot of the portfolio's performance as a whole. This
allows the Investment Adviser to monitor, and report, individual
asset performance as well as sector and portfolio-level performance
to a range of internal stakeholders.
Foresight periodically contracts third parties to conduct
comprehensive audits of each site. This serves both to encourage
best possible working practices and acts as a means of highlighting
areas for development. Foresight staff also perform spot auditing
and reporting functions on selected assets on an ongoing basis. Any
recommendations from the audit are allocated to the Investment
Adviser's asset management team, which then becomes responsible for
ensuring the recommendation is actioned as necessary. These tasks
are tracked through Foresight's portfolio management software and
monitored to ensure they have been resolved in a timely manner. All
audit results, shortfalls and recommendations are included on the
agenda of the asset's board meetings, with H&S constituting one
of the first items for discussion in all cases.
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 Foresight on its behalf. The Board members work to
promote good governance as part of the Fund's active engagement
with projects.
JLEN typically considers the following governance criteria
during due diligence and ongoing monitoring of assets:
-- anti-bribery and corruption;
-- modern slavery;
-- audit and tax practices; and
-- Board composition.
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 its assets. Foresight 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.
Foresight 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
advising on the JLEN portfolio for the last three years.
The appointment of specialists and Foresight representatives to
the boards of project companies provides direct insight into the
operational aspects of the portfolio, the performance of key
counterparties, and ensuring a continued alignment of interest.
Health and safety governance
Foresight, as Investment Adviser to JLEN, commissions a rolling
programme of health and safety audits on each of the Fund's 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.
Anti-bribery practices
JLEN places a contractual obligation on its third-party service
providers for them to implement anti-bribery policies and practices
for each asset within its portfolio.
Modern slavery and human trafficking
As part of Foresight Group, JLEN's policy and practices in
relation to modern slavery and human trafficking are included in
the Group's Modern Slavery Act statement. The statement sets out
Foresight's approach to matters such as services and supply chain
due diligence and training of employees, recruitment and
welfare.
Post investment improvement plans
When identifying the suitability of an investment opportunity
for the JLEN Fund, it is assessed against a number of ESG criteria.
If an investment does not meet the standard of governance required
by JLEN prior to acquisition, but improvements can be swiftly
achieved, the Investment Manager will identify these areas and work
with the relevant stakeholders to ensure the required governance
levels are met. This is often done through creating a "100-day
plan" which sets out the steps required to ensure the investment
reaches the standards expected by JLEN.
The investment has a series of deadlines to meet in delivering
the steps in the 100-day plan. These deadlines are monitored
closely by the Investment Adviser, who provides support and
guidance to the investment during the process when needed. Where
implemented, these plans are a topic of discussion at the quarterly
board meetings held by the SPVs and attended by the Investment
Adviser, to ensure that the 100 day plan is progressing.
CORPORATE SOCIAL RESPONSIBILITY
As Investment Adviser to JLEN, Foresight believes an engaged and
empowered workforce supports the Company's purpose. Foresight seeks
to co-ordinate and manage its corporate practices to maximise
positive social and economic contributions and minimise the
environmental impact of its business operations. Engagement with
key clients, employees, community, environmental stakeholders,
regulators, business partners and suppliers is central to
Foresight's approach.
Foresight's approach to corporate social responsibility ("CSR")
is integrated into its Sustainability and ESG Policy, ensuring that
it is considered under the same remit as ESG in its
investments.
Foresight divides its commitment to CSR into four segments:
-- marketplace - how they work with their customers and counterparties;
-- workplace - where they work, how they recruit and how they work with their staff;
-- environment - how they reduce their environmental impact; and
-- community - how they engage with the community.
As part of this commitment, Foresight supports employee
volunteering opportunities and encourages and supports employees in
their own community activities. In addition, Foresight uses its
position in the marketplace to raise awareness of sustainability,
ESG and CSR with clients and the market and helps facilitate change
to minimise impact on the natural environment and communities in
which they operate.
Key party CSR commitments
Corporate social responsibility is also important to those that
Foresight works with. PraxisIFM Group, JLEN's Company Secretary and
Administrator, provides support to the local communities in which
it operates by supporting learning, training and development and
healthy lifestyle initiatives. This includes supporting a number of
local initiatives near to PraxisIFM's registered offices in
Guernsey.
Carbon offsetting
In addition to the emissions avoided by the portfolio, JLEN
recognises the importance of managing its own emissions from
necessary travel as part of its business. JLEN offsets flights
taken by Directors for travel related to Board meetings and other
JLEN activities. This year JLEN purchased 4tCO2e carbon offsets
from native broadleaved tree planting in UK schools and
biodiversity sites.
Goodwood sustainability partnership
In January 2020, Foresight embarked on a partnership with the
Goodwood Estate as their Sustainability Partner. The five-year
partnership is working to accelerate the delivery of the Estate's
sustainability goals, which cover:
-- organic farming;
-- driving change;
-- fostering innovation; and
-- rewilding.
In particular, Foresight's work with the Estate will focus on
clean energy generation, waste management and energy-efficient
solutions, helping to play a constructive part in their transition
towards a carbon-positive business. The Estate is already actively
exploring green initiatives such as transitioning its power supply
to 100% renewable energy, the electrification of the Estate's
entire vehicle fleet and developing its visitor carbon offset
programme. Foresight's collective expertise in these areas can
contribute to their efforts to preserve what is one of Britain's
most prestigious, family-run estates.
At the beginning of 2020, key staff from Foresight, including
JLEN's Investment Advisers Chris Holmes and Chris Tanner, visited
Goodwood Estate to take part in a workshop in order to identify
opportunities for accelerating the Estate's transition. Further
information can be found at
https://www.foresightgroup.eu/responsible-investing/sustainability-partnerships/
FINANCIAL REVIEW
Analysis of financial results
The financial statements of the Company for the year ended 31
March 2020 are set out below.
The Company prepared the financial statements for the year ended
31 March 2020 in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU and IFRS as issued by the
International Accounting Standards Board. In order to continue
providing useful and relevant information to its investors, the
financial statements also refer to the "Group", which comprises the
Company, its wholly owned subsidiary (JLEN Environmental Assets
Group (UK) Limited ("UK HoldCo")) and the indirectly held wholly
owned subsidiary HWT Limited (which holds the investment interest
in the Tay project). Following a restructuring of the Panther Solar
Portfolio, JLEAG Solar 1 Limited has been reclassified as a project
company and is included in the portfolio valuation.
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 JLEN 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 30 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 2020
Year ended Year ended
31 Mar 31 Mar
All amounts presented in GBPmillion (except as noted) 2020 2019
----------------------------------------------------------------- ---------- ----------
Net assets(1) 533.0 520.3
Portfolio value(2) 537.1 523.6
Operating income and gains/(losses) on fair value of investments (4.2) 59.2
Net assets per share 97.5p 104.7p
Distributions, repayments and fees from portfolio 45.0 43.6
(Loss)/profit before tax (10.7) 53.4
----------------------------------------------------------------- ---------- ----------
(1) Also referred to as Net Asset Value or "NAV".
(2) Classified as investments at fair value through profit or
loss on the statement of financial position.
Net assets
Net assets increased from GBP520.3 million at 31 March 2019 to
GBP533.0 million at 31 March 2020, primarily driven by the equity
raise during the year, offset by the effect of the long--term power
price forecast on the portfolio value.
The net assets of GBP533.0 million comprise GBP537.1 million
portfolio value of environmental infrastructure investments and the
Company's cash balances of GBP1.8 million, partially offset by
GBP4.2 million of intermediate holding companies' net liabilities
and other net liabilities of GBP1.7 million.
The intermediate holding companies' net liabilities of GBP4.2
million comprises a GBP29.3 million credit facility loan, partially
offset by cash balances of GBP20.2 million and other net assets of
GBP4.9 million.
Analysis of the Group's net assets at 31 March 2020
At 31 Mar At 31 Mar
All amounts presented in GBPmillion (except as noted) 2020 2019
---------------------------------------------------------- ----------- -----------
Portfolio value 537.1 523.6
Intermediate holding companies' cash 20.2 9.5
Intermediate holding companies' revolving credit facility (29.3) (16.7)
Intermediate holding companies' other assets 4.9 3.6
---------------------------------------------------------- ----------- -----------
Fair value of the Company's investment in UK HoldCo 532.9 520.0
---------------------------------------------------------- ----------- -----------
Company's cash 1.8 1.9
Company's other liabilities (1.7) (1.6)
---------------------------------------------------------- ----------- -----------
Net Asset Value at 31 March 533.0 520.3
---------------------------------------------------------- ----------- -----------
Number of shares 546,720,025 497,018,205
Net Asset Value per share 97.5 104.7p
---------------------------------------------------------- ----------- -----------
At 31 March 2020, the Group (the Company plus intermediate
holding companies) had a total cash balance of GBP22.0 million (31
March 2019: GBP11.4 million), including GBP1.8 million in the
Company's balance sheet (31 March 2019: GBP1.9 million) and GBP20.2
million in the intermediate holding companies (31 March 2019:
GBP9.5 million), which is included in the Company's balance sheet
within "investments at fair value though profit or loss".
At 31 March 2020, UK HoldCo had drawn GBP29.3 million of its
revolving credit facility (31 March 2019: GBP16.7 million) which is
included in the Company's balance sheet within "investments at fair
value through profit or loss".
The movement in the portfolio value from 31 March 2019 to 31
March 2020 is summarised as follows:
Year ended Year ended
31 Mar 31 Mar
All amounts presented in GBPmillion (except as noted) 2020 2019
-------------------------------------------------------------------------------- ---------- ----------
Portfolio value at start of the year 523.6 429.5
Acquisitions and further investment (net of post-acquisition price adjustments) 57.9 77.5
Distributions received from investments (45.0) (43.6)
Growth in value of portfolio 0.6 60.2
-------------------------------------------------------------------------------- ---------- ----------
Portfolio value at 31 March 537.1 523.6
-------------------------------------------------------------------------------- ---------- ----------
Further details on the portfolio valuation and an analysis of
movements during the year are provided in the investment portfolio
and valuation section above.
Income
The Company's loss before tax for the year ended 31 March 2020
is GBP10.7 million, generating earnings of (2.1) pence per
share.
Year ended Year ended
31 Mar 31 Mar
All amounts presented in GBPmillion (except as noted) 2020 2019
----------------------------------------------------------------- ---------- ----------
Interest received on UK HoldCo loan notes 28.7 24.1
Dividend received from UK HoldCo 10.6 7.3
Net (losses)/gains on investments at fair value (43.5) 27.9
----------------------------------------------------------------- ---------- ----------
Operating income and gains/(losses) on fair value of investments (4.2) 59.3
----------------------------------------------------------------- ---------- ----------
Operating expenses (6.5) (5.9)
----------------------------------------------------------------- ---------- ----------
(Loss)/profit before tax (10.7) 53.4
----------------------------------------------------------------- ---------- ----------
(Loss)/earnings per share (2.1)p 12.2p
----------------------------------------------------------------- ---------- ----------
In the year to 31 March 2020, the operating income and
gains/(losses) on fair value of investments was GBP(4.2) million,
including the receipt of GBP28.7 million of interest on the UK
HoldCo loan notes, GBP10.6 million of dividends also received from
UK HoldCo and net losses on investments at fair value of GBP43.5
million.
The operating expenses included in the income statement for the
year were GBP6.5 million, in line with expectations. These comprise
GBP5.5 million Investment Adviser fees and GBP1.0 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 2020 was
1.22% (year ended 31 March 2019: 1.26%). 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
2019: 1.14%). Foresight 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 2020 of GBP1.8
million (31 March 2019: GBP1.9 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
2020 2019
------------------------------------------------ ---------- ----------
Cash balance at 1 April 1.9 5.5
Net proceeds from share issues 56.4 103.1
Investment in UK HoldCo (equity and loan notes) (56.4) (103.7)
Interest on loan notes received from UK HoldCo 28.7 24.1
Dividends received from UK HoldCo 10.6 7.3
Directors' fees and expenses (0.3) (0.2)
Investment Adviser fees (5.5) (4.8)
Administrative expenses (0.7) (0.6)
Dividends paid in cash to shareholders (32.9) (28.8)
------------------------------------------------ ---------- ----------
Company cash balance at 31 March 1.8 1.9
------------------------------------------------ ---------- ----------
The Group had a total cash balance at 31 March 2020 of GBP22.0
million (31 March 2019: GBP11.4 million) and borrowings under the
revolving credit facility of GBP29.3 million (31 March 2019:
GBP16.7 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
2020 2019
------------------------------------------------------------------------- ---------- ----------
Cash distributions from environmental infrastructure investments 45.0 43.6
Administrative expenses (1.0) (1.0)
Directors' fees and expenses (0.3) (0.2)
Investment Adviser fees (5.5) (4.8)
Financing costs (net of interest income) (2.0) (2.0)
------------------------------------------------------------------------- ---------- ----------
Cash flow from operations 36.2 35.6
Net proceeds from share issues 56.4 103.1
Acquisition of investment assets and further investment (61.0) (76.7)
Post-acquisition price adjustment 2.4 0.2
Acquisition costs (including stamp duty) (2.4) (1.2)
Short-term projects debtors - (0.5)
Debt arrangement fee cost (0.8) (0.4)
Proceeds/(repayment) from borrowings under the revolving credit facility 12.7 (31.7)
Dividends paid in cash to shareholders (32.9) (28.8)
------------------------------------------------------------------------- ---------- ----------
Cash movement in the year 10.6 (0.4)
Opening cash balance 11.4 11.8
------------------------------------------------------------------------- ---------- ----------
Group cash balance at 31 March 22.0 11.4
------------------------------------------------------------------------- ---------- ----------
During the year, the Group received cash distributions of
GBP45.0 million from its environmental infrastructure investments,
an increase of 3.2% compared to 2019.
Cash received from investments in the year 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 2020. Cash flow from operations of the Group of GBP36.2
million covers dividends paid in the year to 31 March 2020 of
GBP32.9 million by 1.1x. The dividend cover based on dividends
declared in respect of the year to 31 March 2020 was 1.1x.
The Group anticipates that future revenues from its
environmental infrastructure investments will continue to be in
line with expectations and therefore will continue to 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 1.6275
pence per share in June 2019 (GBP8.1 million) in respect of the
quarter to 31 March 2019.
Interim dividends of 1.665 pence per share were paid in
September 2019 (GBP8.3 million) in respect of the quarter to 30
June 2019, of 1.665 pence per share in December 2019 (GBP8.3
million) in respect of the quarter to 30 September 2019, and of
1.665 pence per share in March 2020 (GBP8.3 million) in respect of
the quarter to 31 December 2019. On 27 May 2020, the Company
declared an interim dividend of 1.665 pence per share in respect of
the quarter ended 31 March 2020 (GBP9.1 million), which is payable
on 26 June 2020.
The target dividend for the year to 31 March 2021 is 6.76 pence
per share, a 1.5% increase from the dividend declared in respect of
the year to 31 March 2020.(1)
(1) These are targets only and not profit forecasts. There can
be no assurance that these targets will be met.
GOVERNANCE
CHAIRMAN'S INTRODUCTION
The Board recognises the importance of a strong corporate
governance culture and has put in place a framework for corporate
governance which it believes is appropriate for the Company.
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 July 2018, 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") provides
specific corporate governance guidelines to investment companies.
The AIC issued their revised code for member companies in February
2019 and this applies to accounting periods beginning on or after 1
January 2019. The FRC has confirmed that AIC member companies who
report against the AIC Code 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
renewable energy infrastructure sector. The Company currently
complies (except as set out at the end of this paragraph) with the
principles and provisions of good governance contained in the AIC
Code (which complements the UK Code and provides a framework of
best practice for listed investment companies) and in accordance
with the AIC Code, the Company will be meeting its obligations in
relation to the UK Code and associated disclosure requirements of
the Listing Rules.
The UK Code includes provisions relating to the role of the
Chief Executive, executive Directors' remuneration and the need for
an internal audit function. The Board considers these provisions
are not relevant to the position of the Company, as all of the
Company's day-to-day management and administrative functions are
outsourced to third parties and it has no executive Directors,
employees or internal operations. Therefore, no further reporting
has been provided in respect of these provisions.
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
AC NC
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, and the Guernsey NED Forum.
Committee memberships
NC RC
Peter Neville
Director
Peter 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 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. 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, and is also Chairman of Northcourt Limited, a
private company providing insurance services to the global nuclear
sector.
Past experience
Richard's previous 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 also previously been a director of
two investment trusts and one venture capital trust.
Committee memberships
AC
Hans Joern Rieks
Director
Hans has over 25 years' 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, as well as being directly
involved 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.
Committee memberships
RC
Stephanie Coxon
Director
Stephanie has 15 years' experience within audit and advisory
with PwC in the asset management sector, specialising in listed
investment funds in a multitude of asset classes. She has a wealth
of knowledge, having advised numerous investment managers
throughout the UK, US and Europe on initial public offerings and
secondary offerings. Stephanie is a fellow of the Institute of
Chartered Accountants of England and Wales.
Past experience
Prior to joining the JLEN Board and over the past nine years,
Stephanie led the PwC capital markets team responsible for advising
on the listing process for UK, Guernsey and Jersey investment
funds.
THE INVESTMENT ADVISER
JLEN is advised by Foresight Group LLP. Foresight Group is a
leading infrastructure and private equity investment manager with
c.GBP4.6 billion of assets under management and employing over 230
people worldwide.
The Group has offices in London, Manchester, Edinburgh,
Nottingham, Leicester, Milton Keynes, Guernsey, Rome, Madrid, Seoul
and Sydney. As Investment Adviser to JLEN Environmental Assets
Group, Foresight Group LLP has a highly experienced global
infrastructure team with 88 people. This includes an experienced
team of investment professionals supported by a leading
multi-disciplined in-house asset management team.
Chris Tanner
Co-lead Investment Adviser
Chris joined Foresight in 2019 as a Partner and currently works
in the London office. He has over 20 years' experience as an
infrastructure fund manager, an equity principal, a project
director and an adviser. Before joining Foresight, Chris was a
Director of JLCM and was co-lead Investment Adviser to the JLEN
fund.
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
Co-lead Investment Adviser
Chris joined Foresight in 2019 as a Partner in the London office
and has over 20 years' experience in infrastructure, including
PPPs, economic infrastructure and renewables.
Prior to joining Foresight, Chris worked at JLCM as a Director,
where he co-led the investment advisory services for JLEN. Before
joining JLCM, Chris was a Managing Director and Head of the 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.
In addition, 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.
BOARD LEADERSHIP AND COMPANY PURPOSE
The Board places a high degree of importance on ensuring that
high standards of corporate governance are maintained throughout
the Group.
Duties and responsibilities
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 Board has overall responsibility for the management of the
Company's affairs. 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, entering into any material
contracts by the Company and overseeing the Company's
sustainability strategy.
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 approval by the Board of Directors. In
contributing to the delivery of the Company's strategy, the Board
maintains a high level of engagement with the Investment Adviser
and seeks to work in a collegiate and co-operative manner, whilst
encouraging open discussion, challenge and debate of all
significant matters relevant to the Investment Adviser's delegated
authority. In addition to the Board's cycle of scheduled meetings,
members of the Board regularly attend operational update meetings
hosted by the investment advisory team.
The Directors are expected to devote such time as is necessary
to enable them to discharge their duties. 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.
Board operation
The overall management of the Company is the responsibility of
the Board, who exercise all the powers of the Company subject to
the relevant statutes, the Company's Articles of Incorporation, and
any directions given by resolutions passed by shareholders. The
Articles empower the Board to allot, grant options, warrants or
other rights over or otherwise dispose of the Company's shares as
the Board determines. The law permits the Company to make market
purchases of its own shares if the purchase has first been
authorised by a resolution of the Company.
Shareholders authorised the renewal of the Board's authority to
allot ordinary shares at the 2019 AGM and, subject to certain terms
and conditions, to repurchase ordinary shares on behalf of the
Company. Similar authorities are being sought at the forthcoming
AGM and details are set out in the notice of AGM.
The Board's annual cycle includes quarterly meetings where the
Directors follow a formal agenda which is fixed in advance and
standing agenda items at each quarterly meeting cover each area
where the Board has reserved decision-making power, in addition to
receiving reports from key service providers on portfolio
performance, asset valuations and enhancements, operational
matters, business development and capital allocation, ESG matters,
risk management, peer group information, regulatory and industry
developments. The Board actively monitors the regulatory
environment in which the Company operates to ensure any
developments which may affect the Company are considered. Strategy
sessions are held at least annually and are co-ordinated by the
Investment Adviser, which include site visits and technical
briefings. The Board's annual cycle also includes a dividend policy
review session and setting the target for the next financial
year.
In order to discharge their duties and to operate effectively as
a Board, the Directors have full and timely access to all relevant
information concerning the Company.
The principal matters considered by the Board during the year
(including attending to matters formally reserved for its decision
making) included:
-- the strategic direction of the Company and the effect of emerging technologies;
-- composition of the Board and succession planning;
-- the Annual Report and audited financial statements and the half-yearly report;
-- the dividend policy;
-- periodic reports from committees of the Board;
-- assessing the feasibility of entering new overseas markets; and
-- the risk management framework and the principal risks facing the Company.
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
advisers in respect of Directors' remuneration. The Company's
remuneration policy was last subject to a full independent review
during 2017. As noted in the Directors' remuneration report above,
remuneration levels were reviewed internally by the Directors
during the year and recommendations for fee levels to apply from
the financial year commencing April 2020, unchanged from the year
ending 31 March 2020, will be proposed to shareholders as part of
the remuneration policy at the 2020 annual general meeting.
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 reviews and makes
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. In the case
of each service provider, the review seeks to ensure that:
-- the terms of engagement remain fair and reasonable in the
context of the Company and the market;
-- their objectives remain aligned with those of the Company;
-- they have not been subject to any adverse event which may
present additional risk to the Company;
-- they remain appropriately incentivised to perform their duties to a high standard; and
-- that their continued engagement remains in the best interests of the Company as a whole.
The Board notes the supporting guidance provided under provision
17 of the 2019 edition of the AIC Code on means by which investment
companies may assess the relationship with the adviser. During
2019, the Board reviewed the Company's position against each of the
suggested considerations and concluded that the relationship was
operating effectively, and that the continued retention of the
Investment Adviser's services remained in the best interests of the
Company.
Audit Committee
The Company has established an Audit Committee, chaired by Peter
Neville, which operates within clearly defined terms of reference
and comprises three non--executive Directors: Peter Neville,
Richard Morse and Richard Ramsay, whose qualifications and
experience are noted above. All members of the Audit Committee are
independent Directors and have no connections with the external
auditor. The Audit Committee meets at least three times a year, at
times appropriate to the financial reporting calendar.
Following the resignation of Chris Legge during 2019, the Board
determined that it would be appropriate for the Chairman of the
Company to be a member of the Audit Committee as the breadth of his
financial experience and his knowledge of the Company provided
value and continuity to the work of the Committee in the discharge
of its responsibilities.
Further details of the membership and activities of the Audit
Committee are described below.
Risk Committee
The Company has also established a Risk Committee, which is
chaired by Hans Rieks and comprises three non--executive Directors:
Hans Rieks, Peter Neville 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.
Nomination Committee
The Nomination Committee, chaired by Denise Mileham, 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 below. The terms of
reference for each of the Committees are available on the Company's
website or upon request from the Company Secretary.
Directors' attendance
The attendance record of Directors for the year to 31 March 2020
is set out below.
Board Audit Risk Nomination
meeting Committee Committee Committee
------------------------------------------ ------- --------- --------- ----------
Number of meetings held 4 4 4 2
------------------------------------------ ------- --------- --------- ----------
Richard Morse 4 3(1) 4 2
Christopher Legge (resigned 13 June 2019) 1 1 1 n/a
Denise Mileham 3 n/a 4 2
Peter Neville 4 4 4 2
Richard Ramsay 3 4 n/a n/a
Hans Joern Rieks 3 n/a 3 n/a
------------------------------------------ ------- --------- --------- ----------
(1) Member of the Audit Committee from 13 June 2019.
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.
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 Chairman or the Senior Independent Director are willing to
meet with major shareholders to discuss any particular items of
concern or to understand their views on governance and the
performance of the Company, and 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 publications. The Company's
Prospectus, Key Information Document and Investor Disclosure
Document are all available for download.
Stakeholders, business relationships and socially responsible
investment
Section 172 Statement
Whilst directly applicable to companies incorporated in the UK,
the Board recognises the intention of the AIC Code that matters set
out in section 172 of the Companies Act, 2006 are reported. The
Board strives to understand the views of the Company's key
stakeholders and to take these into consideration as part of its
discussions and decision-making process. Additionally, the Board
promotes the success of the Company for the benefit of our members
as a whole as well as a broad range of stakeholders that we
recognise are material to the long-term success of the business. We
set out below the detailed of how the Board has complied with its
duty under section 172.
As an investment company, the Company does not have any
employees and conducts its core activities through third-party
service providers. Each provider has an established track record
and through regulatory oversight is required to have in place
suitable policies and procedures to ensure they maintain high
standards of business conduct, treat shareholders fairly and employ
corporate governance best practice.
The Board's commitment to maintaining high standards of
corporate governance, combined with the Directors' duties enshrined
in company law, the constitutive documents, the Disclosure Guidance
and Transparency Rules, and the Market Abuse Regulation, provides
shareholders with regular and detailed announcements concerning the
Company and its activities. A significant amount of time is
dedicated at each scheduled meeting to risk management and how
effectively the Company can preserve value for shareholders over
the long term through mitigating downside risk. Regular dialogue
with the Investment Adviser and the corporate broker ensures the
Board is aware of the investment strategy and the views of major
shareholders and for these to be taken into consideration as part
of the Board's decision-making process.
Representatives of the Investment Adviser are involved in the
governance framework of each project. This provides information on
the activities of the Company's significant counterparty exposures
involved in operating each project to be considered at each
scheduled meeting of the Directors, and to ensure their interests
remain aligned with the objectives of the Company.
Further information on how the Company engages with stakeholders
can be found above.
DIVISION OF RESPONSIBILITIES
The Board has overall responsibility for the management of the
Company's affairs
Chairman
As Chairman, Richard Morse is responsible for leading the Board
and for ensuring its effectiveness in all aspects of its role.
Specific duties of the Chairman include demonstrating ethical
leadership, objective judgement, promoting the highest standards of
integrity, probity and a culture of openness and debate. The
Chairman sets the Board's agenda and ensures the Board has a clear
understanding of the views of those who provide the Company's
capital and that effective decision-making processes are in place,
supported by high quality information, that take into consideration
the interests of all the Company's key stakeholders.
The Chairman leads the annual performance evaluation of the
Board, with support from the Senior Independent Director, and acts
as appropriate on the results. One--on--one meetings are held
between the Chairman and the Directors each year, which provides an
additional forum through which any potential training needs or
other relevant Board matters are addressed.
Senior Independent Director
Richard Ramsay is the Senior Independent Director and provides
support to the Chairman on matters of Board effectiveness,
governance, and acting as an intermediary for the Directors,
shareholders and other key stakeholders. The Senior Independent
Director also provides an additional channel of communication
through which stakeholders may voice concerns, works annually with
the other Directors on reviewing the performance of the Chairman,
and will be responsible for leading the succession planning
arrangements for the Chairman.
Non-executive Directors
Including the Chairman and the Senior Independent Director, the
Company currently has five independent non-executive Directors.
The Company Secretary
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. The Company Secretary is also
responsible for the timely delivery of information to the Board and
ensuring that statutory obligations are met.
Market Abuse Regulation
The Board has formally adopted procedures in relation to the
Company's obligations under the EU Market Abuse Regulation ("MAR"),
including procedures for the identification, management and
disclosure of price sensitive information, share dealing by persons
discharging managerial responsibility and their persons closely
associated. The Board is responsible for overseeing the Company's
compliance with MAR, and ensuring compliance with MAR by the
Directors.
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.
Non-mainstream pooled investments
The Board notes the rules of the UK FCA on the promotion of
non-mainstream pooled investments.
The Board confirms that it conducts the Company's affairs, and
intends to continue to do so, in order that the Company's shares
will be excluded securities under the FCA's rules. This is on the
basis that the Company, which is resident outside the EEA, would
qualify for approval as an investment trust by the Commissioners
for HM Revenue and Customs under Sections 1158 and 1159 of the
Corporation Tax Act 2010 if resident and listed in the United
Kingdom. Therefore, the Company's shares will not amount to
non--mainstream pooled investments. Accordingly, promotion of the
Company's shares will not be subject to the FCA's restriction on
the promotion of non-mainstream pooled investments.
Significant voting rights
Details of shareholders with notifiable interests in the voting
rights of the Company can be found below.
Share repurchase
Subject to the provisions of the law and the Company's Articles
of Incorporation, the Company may purchase all or any of its shares
of any class, including any redeemable shares, and may hold such
shares as treasury shares or cancel them. During the year no shares
were acquired by the Company.
Amendment to the Company's Articles of Incorporation
Subject to the provisions of the law and the Company's Articles
of Incorporation, the Company's Articles can be amended by special
resolution.
COMPOSITION, SUCCESSION AND EVALUATION
The Board ensures it has the appropriate balance of skills,
experience, independence and knowledge to operate effectively.
Board independence and composition
The Board consists of five Directors, all of whom are
non--executive and independent of the Company's Investment Adviser
and other key service providers. Board independence is formally
reviewed annually against the factors suggested in the AIC Code as
likely to impair, or could appear to impair, independence, in
addition to any other relevant considerations. The Board considers
all of the Directors, including the Chairman, to be independent.
The Directors' details are contained 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 believes that the Directors provide the appropriate
balance of skills, knowledge and diversity necessary to manage the
affairs of the Company. Biographical details of the Directors are
provided above. The composition of the Board is formally reviewed
annually by the Nomination Committee with the objective of ensuring
that it meets the current and expected future leadership needs of
the Company. The Board's formal performance evaluation also
provides feedback from the Directors on aspect of the Board's
operation where greater effectiveness may be achieved.
The Board is pleased to welcome Stephanie Coxon who joins in
June 2020. Stephanie's appointment comes after an extensive search
process led by the Nomination Committee. No external firm was
engaged in the recruitment process.
Tenure, succession planning and induction
The tenure of all Directors, including the Chairman, is expected
not to exceed nine years unless exceptional circumstances warrant,
such as to allow for phased Board appointments and retirements and
to ensure that the Board remains well balanced and that the skills,
knowledge and experience of the Board is refreshed at appropriate
intervals.
The Company launched in 2014 and to avoid undue disruption in
future from multiple Board changes within the same year and to
ensure a smooth transfer of knowledge, in 2019 the Board began a
staged process of rotating the Directors first appointed at the
Company's launch. In accordance with corporate governance best
practice as set out in the AIC Code, each Director will be subject
to annual re--election by shareholders at the annual general
meeting.
On appointment to the Board, new Directors will be provided with
an induction pack by the Company Secretary containing all relevant
information regarding the Company, its history, operations, key
relationships, and their duties and responsibilities as Directors.
New appointees meet with each of the Directors and with
representatives of the Investment Adviser. The Chairman is
responsible for agreeing the programme of induction training with
new appointees, and that any training needs of the existing
Directors are addressed.
The Nomination Committee is responsible for ensuring that a
diverse pipeline for succession is maintained, relevant to the
future leadership needs of the Company.
Board diversity
The Board supports the recommendations of the Davies Report and
notes the recommendations of the Parker review into ethnic
diversity and the Hampton-Alexander review on gender balance in
FTSE leadership. 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. Acting on the
findings from the Nomination Committee's recent review of the size,
structure and composition of the Board, the Board is actively
seeking to address the balance of gender diversity as part of its
succession planning arrangements to achieve the target of not less
than one-third female representation on the Board.
No Director has a service contract with the Company and the
terms and conditions of appointment for each of the Directors are
set out in writing between each individual and the Company. Copies
of the relevant appointment letters are available for inspection at
the Company's registered office.
Conflicts of interest
The Directors have undertaken to notify the Company Secretary as
soon as they become aware of any actual or potential new conflict
of interest. Only Directors who have no material interest in the
matter being considered will be able to participate in the Board
approval process. Other business relationships, including those
that conflict or may potentially conflict with the interests of the
Company, are taken into account when appointing Board members and
are monitored on a regular basis. The terms of each Director's
appointment letter with the Company requires that they seek prior
approval from the Board before taking up any additional external
appointments.
The Board recognises the holdings of ordinary shares in the
Company held by each of Richard Morse, Richard Ramsay, Peter
Neville and Denise Mileham, details of which are set out below. The
Board considers these interests at each scheduled meeting and
remains satisfied that they do not affect the ability of the
Directors to exercise independent judgement or their
objectivity.
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 engaged Aspida Advisory Services Limited
("Aspida") to undertake an externally facilitated assessment of its
effectiveness and performance. Aspida (formerly Optimus Group)
undertook the Company's first external Board effectiveness review
in 2017. Save for this, Aspida has no other connection to the
Company.
The findings from the external performance review were generally
satisfactory and no material deficiencies or issues were
raised.
The external effectiveness review process included meetings held
between Aspida with each of the Directors individually, the
Investment Adviser and with the Company Secretary. Questionnaires
were completed by each of the Directors and Aspida observed the
Board's proceedings at a scheduled quarterly meeting before
providing their findings to the Board during February 2020.
Certain issues raised in the assessment, which we have agreed to
take forward in the coming year, include:
-- enhancements to the Board's Director induction programme to
include a greater focus on boardroom dynamics and the operation of
the Board; and
-- continuing work on Board succession and implementing the
Board's diversity plans, particularly seeking to address the
balance of gender diversity represented on the Board during 2020
and 2021.
The Board has agreed, in line with its stated policy, to
undertake an internal review of Board effectiveness next year.
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 and the risks at the
operating companies. 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
above.
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 to:
-- regularly review the structure, size and composition of the
Board and make recommendations to the Board with regard to any
changes, based on merit and objective criteria (including skills,
knowledge and experience, and promoting diversity of gender, social
and ethnic backgrounds);
-- give full consideration to succession planning for Directors,
ensuring effective plans are in place for orderly succession to the
Board and to oversee the development of a diverse pipeline for
succession, taking into account the challenges and opportunities
facing the Company; and
-- lead the process for appointments 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. The initial
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 two times during the year. Matters
considered at these meetings included, but were not limited to:
-- the findings of the 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;
-- the Company's policy on diversity, ensuring this remained
aligned with the Company's strategy and objectives;
-- Director succession planning;
-- Director training;
-- the time requirements and independence of Directors;
-- governance of subsidiaries; and
-- consideration and agreement of the terms of reference of the
Nomination Committee for approval by the Board.
The Nomination Committee is pleased with the progress made to
date in implementing the Board's succession plans, noting the
appointment of Hans Rieks in 2019, who succeeded one of the
original five Directors appointed at the Company's launch. Hans'
extensive experience in the wind sectors across European and global
markets has provided great value to the Board since his
appointment.
During 2019, the Nomination Committee reviewed in detail the
Board's succession planning arrangements and the feedback from the
Board performance evaluation, recognising the continued growth of
the Company in terms of portfolio diversity and assets under
management, the skills represented on the Board, and the intention
to further increase the diversity of the Board. This led to a
search process conducted through existing relationships which
identified several potential candidates suitable for appointment to
the Board based on their broad and relevant skillsets, personal
strengths, and supporting the Board's diversity objectives.
Resulting from this, the Nomination Committee is pleased to welcome
the appointment of Stephanie Coxon, who has considerable financial
services experience from a 15-year career spent with PwC in the UK,
Australia and Guernsey.
The Nomination Committee continues to maintain and develop the
Board's succession planning arrangements to ensure the arrangements
remain effective, and that a diverse pipeline for succession is
maintained which remains aligned with the Company's strategy and
future leadership needs. The Board is committed to maintaining not
less than one-third female representation.
AUDIT, RISK AND INTERNAL CONTROL
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 Peter Neville, 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 by the Audit Committee at each
meeting and any changes 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
position, 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;
-- maintaining the Company's policy on the provision of
non-audit services by the external auditor;
-- 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, recognising that responsibilities for whistleblowing arrangements reside with the Board as a whole;
-- 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:
-- Peter Neville (Chairman);
-- Richard Morse; 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
during the year and 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 be
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 Base
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 may
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 including in the context of the effects and
implications of the Covid-19 pandemic; 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 and its subsidiaries, provide sufficient assurance that
a sound system of internal control, which safeguards the Company's
assets, is maintained.
External audit
Deloitte LLP has been the Company's auditor since incorporation
on 12 December 2013 and this is the sixth 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 principal 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 sixth year of Deloitte's appointment as
the Company's auditor. The audit partner for the Company, David
Becker, joined the audit team during the year after John Clacy
stepped down as the Company's audit partner after five years, in
line with the rotation requirements.
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 reappointed as external auditor for the
year ending 31 March 2021. 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 and in relation
to the half-year interim review. The Company paid GBP27,400 during
the year for non-audit services to Deloitte LLP, all in relation to
the half-year interim review.
Activities of the Audit Committee
The Audit Committee met on four occasions during the year ended
31 March 2020. Matters considered at these meetings included, but
were not limited to:
-- review of the reappointment of the external auditor;
-- review of the proposed change of lead audit partner;
-- 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 2020 Annual Report and financial statements and the 2019 Half--year Report.
Following the sale of JLCM's investment advisory business to
Foresight, during the year the Audit Committee worked with the
Investment Adviser to review the Foresight internal control
environment to ensure the necessary internal control systems at the
Investment Adviser and the operating companies remain robust and
effective.
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:
Peter Neville
Chairman of the Audit Committee
10 June 2020
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 Hans Rieks, 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
to:
-- 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:
-- Hans Rieks (Chairman);
-- Denise Mileham; and
-- Peter Neville.
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.
REMUNERATION
DIRECTORS' REMUNERATION REPORT
Introduction
The Board has established separate Risk, Audit and Nomination
Committees to effectively oversee the activities of the Group.
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). No Director is involved in determining his or her own
remuneration.
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 2018 the Board engaged the services of Trust Associates
to undertake an external review of the Company's 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 from the independent review were
accepted; 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. These
aspects were approved by shareholders at the 2019 annual general
meeting and incorporated into the Company's remuneration policy for
the current financial year.
For the current year, the Directors undertook an internal review
of the Company's remuneration policy and benchmarked the policy
against comparable information on listed investment companies,
particularly those operating in similar or adjacent market sectors,
in addition to giving due regard to the individual circumstances of
the Company which may warrant a departure from industry norms. It
was concluded that the policy remained appropriate in its current
form and that this would be proposed to shareholders at the 2020
annual general meeting.
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 no change 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 2020, as well as that proposed for the year ending 31
March 2021.
Base
proposed
for Paid
Director Role 2020/2021 2019/2020
----------------------------------------- ----------------------------- ---------- ----------
Richard Morse Chairman GBP66,500 GBP66,500
Richard Ramsay Senior Independent Director GBP48,400 GBP48,400
Christopher Legge (resigned 13 June 2019) n/a GBP9,220
Peter Neville Audit Committee Chairman GBP46,100 GBP45,122
Denise Mileham Nomination Committee Chairman GBP42,000 GBP42,000
Hans Rieks (appointed 13 June 2019) Risk Committee Chairman GBP42,000 GBP33,456
Stephanie Coxon GBP42,000 n/a
----------------------------------------- ----------------------------- ---------- ----------
Total GBP287,000 GBP244,698
----------------------------------------- ----------------------------- ---------- ----------
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 2020.
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 2020 was GBP7,844 (31
March 2019: GBP1,991).
Approval of report
The Board will seek approval at the annual general meeting on 3
September 2020 for both the remuneration policy and the annual
Directors' fees for routine business for the year ended 31 March
2021, as set out above.
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
2020.
Principal activities
JLEN 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 registered number 57682.
At 31 March 2020, the total number of ordinary shares of the
Company in issue was 546,720,025, including 49,701,820 shares
issued in March 2020 in an oversubscribed placing.
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 2020, 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 27 May 2020, the Directors declared a dividend in respect
of the period 1 January 2020 to 31 March 2020 of 1.665 pence per
share to shareholders on the register as at the close of business
on 5 June 2020, payable on 26 June 2020.
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, including the impact of Covid-19 on
electricity and gas prices, 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 Directors have also reviewed
the results of reverse stress test and downside case as part of the
going concern assessment. 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. This revolving credit
facility is expected to expire 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.
At 31 March 2020, the Company had net current assets of GBP0.1
million (31 March 2019: GBP0.3 million), including a cash balance
of GBP1.8 million (31 March 2019: GBP1.9 million). At UK HoldCo
level, the GBP170 million revolving credit facility was drawn to a
level of GBP29.3 million (31 March 2019: GBP16.7 million), with the
balance available for future acquisitions and working capital. JLEN
has sufficient cash balances to meet other current obligations as
they fall due, while all key financial covenants are forecast to
continue to be complied with.
The Directors have reviewed Company forecasts and projections
which cover a period of not less than 12 months from the date of
the Annual Report, taking into account reasonably likely changes in
investment and trading performance, which show that the Company has
sufficient financial resources.
On the basis of this review, and after making due enquiries, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.
Long-term viability statement
The Directors have assessed the viability of the Group over the
three--year period to June 2023, taking account of the Group's
current position and the potential impact of the principal risks
documented in the strategic report. 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 2023.
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,
including a stressed scenario due to Covid-19, 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, or a reduction of dividends paid to
shareholders.
The Directors have determined that a three--year look forward to
June 2023 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, or mitigating actions taken, such as a
reduction of dividends paid to shareholders.
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 March 2020. 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 3
September 2020. This shareholder authority was renewed at the 2019
annual general meeting.
Major interests in shares and voting rights
As at 31 March 2020, 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 9.28% 50.8m
Gravis Capital Management 7.53% 41.2m
Legal & General Investment Management 5.79% 31.6m
-------------------------------------- ------------- ---------
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 (resigned 13 June 2019) Director
Denise Mileham Director
Peter Neville Director
Richard Ramsay Senior Independent Director
Hans Rieks (appointed 13 June 2019) Director
Stephanie Coxon (joining on 11 June 2020) Director
----------------------------------------- ---------------------------
Chris Legge, Director and former Chair of the Audit Committee,
stood down from the Board on 13 June 2019. He was succeeded as
Audit Chair by Peter Neville. On 13 June 2019, Hans Rieks was
appointed as a Director and succeeded Peter Neville as Chair of the
Risk Committee. Stephanie Coxon will join the Board on 11 June
2020.
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 2020, 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 2020 were:
Ordinary Ordinary
shares of shares of
no par value no par value
each held each held
at at
31 Mar 2020 31 Mar 2019
------------------ ------------ ------------
Richard Morse 103,535 103,535
Christopher Legge n/a 29,896
Denise Mileham 32,340 32,340
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
Hans Rieks - -
------------------ ------------ ------------
There have been no changes in the Directors' interests from 31
March 2020 to the date of this report.
Annual general meeting
The Company's annual general meeting will be held at 10.00am on
3 September 2020 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. As explained
in the Chairman's statement, due to the Covid-19 pandemic the Board
advises shareholders against attending the meeting in person and
instead voting by proxy.
Appointment of the Investment Adviser
On 1 July 2019, the Company changed Investment Adviser from JLCM
to Foresight Group. The existing team that had been providing
investment advice since JLEN's launch in 2014 transferred to
Foresight to continue working with the Company. The material terms,
fees and provisions of the Investment Advisory Agreement with
Foresight Group are the same as the previous 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 2020 annual general meeting to reappoint Deloitte LLP.
So far as the Directors are aware, there is no relevant audit
information of which the Company's 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
10 June 2020
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 Standards 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 position,
performance, business model and strategy.
By order of the Board
Richard Morse
Chairman
10 June 2020
INDEPENT AUDITOR'S REPORT
to the members of JLEN Environmental Assets Group Limited
Report on the audit of the financial statements
1. Opinion
In our opinion, the financial statements of JLEN Environmental
Assets Group Limited (the "Company"):
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2020 and of its loss 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 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.
2. 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.
3. Summary of our audit approach
-----------------------------------------------------------------------------
Key audit matters The key audit matter that we identified in the current
year is the valuation of investments at fair value.
Materiality The materiality that we used in the current year was
GBP10.7 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 There were no significant changes in our approach
in our approach from the prior year, other than to incorporate the
impact of Covid-19 in our work relating to investment
valuation as discussed in the key audit matters section
below.
------------------- --------------------------------------------------------
4. Conclusions relating to going
concern, principal risks and viability
statement
---------------------------------------------------------------- -----------------------------------------
4.1. Going concern
We have reviewed the Directors' Going concern is the basis of preparation
statement in note 2(b) to the financial of the financial statements that
statements about whether they considered assumes an entity will remain in
it appropriate to adopt the going operation for a period of at least
concern basis of accounting in 12 months from the date of approval
preparing them and their identification of the financial statements.
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 We confirm that we have nothing
assessment the nature of the Company, material to report, add or draw
its business model and related attention to in respect of these
risks including, where relevant, matters.
the impact of the Covid-19 pandemic
and 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.
---------------------------------------------------------------- -----------------------------------------
4.2. Principal risks and viability
statement
---------------------------------------------------------------- -----------------------------------------
Based solely on reading the Directors' Viability means the ability of the
statements and considering whether Company to continue over the time
they were consistent with the knowledge horizon considered appropriate by
we obtained in the course of the the Directors. We confirm that we
audit, including the knowledge have nothing material to report,
obtained in the evaluation of the add or draw attention to in respect
Directors' assessment of the Company's of these matters.
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 above that describe the principal
risks, procedures to identify emerging risks, and an
explanation of how these are being managed or
mitigated;
* the Directors' confirmation above that they have
carried out a robust assessment of the principal and
emerging risks facing the company, including those
that would threaten its business model, future
performance, solvency or liquidity; or
* the Directors' explanation above 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.
---------------------------------------------------------------- -----------------------------------------
5. 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 matter description The Company's principal activity is to act as an investor for environmental
infrastructure
assets, and has direct and indirect interests in wind farms, solar farms, anaerobic
digestion
and waste and wastewater projects. As described in the significant accounting policies
in
note 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 GBP532.9 million (2019: GBP520.0 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. There is also judgment as to
how
the impact of the Covid-19 pandemic has been reflected in the valuation and how this has
been
incorporated into the key assumptions.
The key assumptions 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 and gas prices (including the impact of
the Covid-19 pandemic), corporation tax rates and
inflation rates; and
* operational assumptions - including expected future
energy yields, output levels and asset extension
assumptions.
---------------------------- ----------------------------------------------------------------------------------------
How the scope of our Our audit procedures were designed to allow us to obtain appropriate evidence to challenge
audit responded to the assumptions adopted in the discounted cash flow models. Our audit procedures included:
the key audit matter
---------------------
* obtaining an understanding of the relevant controls
in respect of updates to the valuation model used at
31 March 2020;
---------------------
* challenging the discount rates applied by working
with our internal valuation specialists to calculate
an independent appropriate range, and benchmarking
the discount rates against those used by comparable
market participants and those indicated by recent
market transactions;
* challenging the macroeconomic assumptions by
reference to observable market data and forecasts;
* reviewing the adjustments made to the projected cash
flows and economic assumptions as a result of the
Covid-19 pandemic, which included lower short-term
power and gas price assumptions, and lower anaerobic
digestion yields on certain projects;
* 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 rate, macroeconomic assumptions
(including electricity and gas price), future energy
yield, output level, and asset enhancement
assumptions are considered reasonable, and reflect
the latest available observable market data;
* the discount rates applied to certain anaerobic
digestion assets are at the optimistic end of our
acceptable range, however are supported by recent
market transactions.
---------------- -------------------------------------------------------------------------------------------
6. Our application of materiality
6.1. 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:
* GBP10.7 million (2019: GBP10.2 million)
Materiality
--------------------- ------------------------------------------------------------
Basis for determining * 2% of net assets
materiality
--------------------- ------------------------------------------------------------
* We consider Net Asset Value to be a key benchmark
Rationale for the used by members of the Company in assessing financial
benchmark applied performance.
--------------------- ------------------------------------------------------------
6.2. Performance materiality
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial
statements as a whole. Performance materiality was set at 70% of
materiality for the 2020 audit (2019: 70%). In determining
performance materiality, we considered the number of assumptions,
estimations and judgements used in the investment valuation which
is noted as a key audit matter.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of GBP535,000 (2019:
GBP510,000), 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.
7. An overview of the scope of our audit
7.1. Scoping
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.
8. Other information
The Directors are responsible for the other information. The
other information comprises the information included in the Annual
Report, other than the financial statements and our auditor's
report thereon.
Our opinion on the financial statements does not cover the other
information 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, 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.
We have nothing to report in respect of these matters.
9. 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.
10. 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 and non-compliance
with laws and regulations, 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.
11. 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.
11.1. 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, we considered the following:
-- the nature of the industry and sector, control environment
and business performance including the design of the Company's
remuneration policies, key drivers for Directors' remuneration,
bonus levels and performance targets;
-- results of our enquiries of management and the Audit
Committee about their own identification and assessment of the
risks of irregularities;
-- any matters we identified having obtained and reviewed the
Company's documentation of their policies and procedures relating
to:
-- identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances of
non-compliance;
-- detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged fraud;
and
-- the internal controls established to mitigate risks of fraud
or non-compliance with laws and regulations; and
-- the matters discussed among the audit 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 a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following area:
valuation of investments at fair value. In common with all audits
under ISAs (UK), we are also required to perform specific
procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory
frameworks that the Company operates in, focusing on provisions of
those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this
context included the Companies (Guernsey) Law 2008, Listing Rules
and tax legislation.
In addition, we considered provisions of other laws and
regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the
group's ability to operate or to avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified valuation of
investments at fair value as a key audit matter related to the
potential risk of fraud. 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 statements disclosures and testing to
supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect
on the financial statements;
-- 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; and
-- 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
12. Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records.
We have nothing to report in respect of these matters.
13. Other matters
13.1. 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 year ending 31 March 2015 and subsequent
financial periods. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is six
years, covering the years ending 2015 to 2020.
13.2. 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).
14. 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.
David Becker
For and on behalf of Deloitte LLP
Statutory Auditor
Guernsey, Channel Islands
10 June 2020
INCOME STATEMENT
for the year ended 31 March 2020
2020 2019
Notes GBP'000s GBP'000s
----------------------------------------------------------------- ----- -------- --------
Operating income and gains/(losses) on fair value of investments 9 (4,190) 59,247
Operating expenses 5 (6,493) (5,895)
----------------------------------------------------------------- ----- -------- --------
Operating (loss)/profit (10,683) 53,352
----------------------------------------------------------------- ----- -------- --------
(Loss)/profit before tax (10,683) 53,352
Tax 6 - -
(Loss)/profit for the year (10,683) 53,352
----------------------------------------------------------------- ----- -------- --------
(Loss)/earnings per share
Basic and diluted (pence) 8 (2.1) 12.2
----------------------------------------------------------------- ----- -------- --------
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 (loss)/profit for the
year, and therefore no separate statement of comprehensive income
has been presented.
2020 2019
Notes GBP'000s GBP'000s
------------------------------------------------- ----- -------- --------
Non-current assets
Investments at fair value through profit or loss 9 532,941 520,032
------------------------------------------------- ----- -------- --------
Total non --current assets 532,941 520,032
------------------------------------------------- ----- -------- --------
Current assets
Trade and other receivables 10 31 21
Cash and cash equivalents 1,762 1,849
------------------------------------------------- ----- -------- --------
Total current assets 1,793 1,870
------------------------------------------------- ----- -------- --------
Total assets 534,734 521,902
------------------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 11 (1,720) (1,563)
------------------------------------------------- ----- -------- --------
Total current liabilities (1,720) (1,563)
------------------------------------------------- ----- -------- --------
Total liabilities (1,720) (1,563)
------------------------------------------------- ----- -------- --------
Net assets 533,014 520,339
------------------------------------------------- ----- -------- --------
Equity
Share capital account 13 548,943 492,670
Retained earnings 14 (15,929) 27,669
------------------------------------------------- ----- -------- --------
Equity attributable to owners of the Company 533,014 520,339
------------------------------------------------- ----- -------- --------
Net assets per share (pence per share) 97.5 104.7
------------------------------------------------- ----- -------- --------
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 10 June 2020.
They were signed on its behalf by:
Richard Morse Peter Neville
Chairman Director
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2020
Year ended 31 Mar 2020
---------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
--------------------------------------------------- ----- ------------- -------- --------
Balance at 1 April 2019 492,670 27,669 520,339
Loss for the year - (10,683) (10,683)
--------------------------------------------------- ----- ------------- -------- --------
Loss and total comprehensive income for the year - (10,683) (10,638)
Issue of share capital 13 57,157 - 57,157
Expenses of issue of equity shares 13 (884) - (884)
Dividends paid 7 - (32,915) (32,915)
--------------------------------------------------- ----- ------------- -------- --------
Balance at 31 March 2020 548,943 (15,929) 533,014
--------------------------------------------------- ----- ------------- -------- --------
Year ended 31 Mar 2019
---------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
--------------------------------------------------- ----- ------------- -------- --------
Balance at 1 April 2018 389,262 3,125 392,387
Profit 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
--------------------------------------------------- ----- ------------- -------- --------
The accompanying notes form an integral part of the financial
statements.
CASH FLOW STATEMENT
for the year ended 31 March 2020
2020 2019
Notes GBP'000s GBP'000s
-------------------------------------------------------------------- ----- -------- --------
(Loss)/profit from operations (10,683) 53,352
Adjustments for:
Investment interest (28,701) (24,063)
Dividends received (10,600) (7,300)
Net loss/(gain) on investments at fair value through profit or loss 43,491 (27,884)
-------------------------------------------------------------------- ----- -------- --------
Operating cash flows before movements in working capital (6,493) (5,895)
Increase in receivables (10) (1)
Increase/(decrease) in payables 157 (47)
-------------------------------------------------------------------- ----- -------- --------
Net cash outflow from operating activities (6,346) (5,943)
-------------------------------------------------------------------- ----- -------- --------
Investing activities
Investments in subsidiaries (56,400) (13,680)
Loan to subsidiaries 12 - (90,000)
Investment interest 28,701 24,063
Dividends received 10,600 7,300
-------------------------------------------------------------------- ----- -------- --------
Net cash used in investing activities (17,099) (72,317)
-------------------------------------------------------------------- ----- -------- --------
Financing activities
Proceeds on issue of share capital 13 57,157 105,000
Expenses relating to issue of shares 13 (884) (1,592)
Dividends paid 7 (32,915) (28,808)
-------------------------------------------------------------------- ----- -------- --------
Net cash from financing activities 23,358 74,600
-------------------------------------------------------------------- ----- -------- --------
Net decrease in cash and cash equivalents (87) (3,660)
Cash and cash equivalents at beginning of the year 1,849 5,509
-------------------------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of the year 1,762 1,849
-------------------------------------------------------------------- ----- -------- --------
The accompanying notes form an integral part of the financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2020
1. General information
JLEN Environmental Assets Group Limited (the "Company" or
"JLEN") is a closed--ended investment company domiciled and
incorporated in Guernsey, Channel Islands, under Section 20 of the
Companies (Guernsey) Law, 2008. The shares are publicly traded on
the London Stock Exchange under a premium listing. The audited
financial statements of the Company are for the year ended 31 March
2020 and have been prepared on the basis of the accounting policies
set out below. The financial statements comprise only the results
of the Company, as its investment in JLEN Environmental Assets
Group (UK) Limited ("UK HoldCo") is measured at fair value as
detailed in the 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 10 June 2020. 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
and the intermediate holding subsidiary HWT Limited, comprise the
Group (the "Group") investing in environmental infrastructure
assets.
The net assets of the intermediate holding companies (comprising
UK HoldCo and HWT Limited), which at 31 March 2020 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. Foresight Group, 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:
-- amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-Current (applicable
for annual periods beginning on or after 1 January 2022, but not
yet endorsed in the EU);
-- amendments to IAS 1 and IAS 8 Definition of Material
(applicable for annual periods beginning on or after 1 January
2020);
-- amendments to IFRS 3 Business Combinations (applicable for
annual periods beginning on or after 1 January 2020, but not yet
endorsed in the EU);
-- amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate
Benchmark Reform (applicable for annual periods beginning on or
after 1 January 2020);
-- amendments to references to the Conceptual Framework in IFRS
standards (applicable for annual periods beginning on or after 1
January 2020);
-- IFRS 17 Insurance Contracts (applicable for annual periods
beginning on or after 1 January 2021, but not yet endorsed in the
EU); and
-- IFRS 10 and IAS 28 (amendments) Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture.
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.
The following standards became effective during the year and did
not have a material impact on the Company's reported results:
-- IFRS 16 Leases;
-- IFRIC 23 Uncertainty over Income Tax Treatments;
-- amendments to IAS 19 Plan Amendment, Curtailment or Settlement;
-- amendments to IAS 28 Long-term Interests in Associates and Joint Ventures;
-- amendments to IFRS 9 Prepayment Features with Negative Compensation; and
-- annual improvements to IFRS Standards 2015-2017 Cycle.
(b) Going concern
The Directors, in their consideration of going concern, have
reviewed comprehensive cash flow forecasts prepared by the
Company's Investment Adviser, which are based on prudent market
data, and believe, based on those forecasts, the assessment of the
Company's subsidiary's banking facilities and the assessment of the
principal risks described in this report, including those related
to Covid-19, 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 GBP22.0 million (including GBP1.8 million in
the Company) as at 31 March 2020 and a revolving credit facility
("RCF") (available for investment in new or existing projects and
working capital) of GBP130 million and an accordion facility of
GBP60 million, of which GBP40 million has been committed, expiring
in June 2022. On 8 May 2019, the accordion facility was exercised
for up to GBP40 million, increasing the borrowing facility to
GBP170 million.
As at 31 March 2020, the Company's wholly owned subsidiary UK
HoldCo had borrowed GBP29.3 million under the facility. Since the
balance sheet date, UK HoldCo borrowed an additional GBP3 million
for a further investment in the Vulcan Renewables anaerobic
digestion plant (refer to note 9 for further detail). At the date
of signing this Annual Report and financial statements, the Group
had an additional borrowing capacity under the RCF of GBP137.7
million.
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.
Refer to the Report of the Directors for further
information.
(c) Revenue recognition - Operating income and gains/(losses) on
fair value of investments
Operating income and gains/(losses) on fair value of investments
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
investments at fair value through profit or loss or financial
assets at amortised cost. 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 and HWT Limited and the environmental
infrastructure investments.
The intermediate holding companies' net assets (UK HoldCo and
HWT Limited) are mainly composed of cash, working capital balances
and borrowings under the Company's wholly owned direct subsidiary's
revolving credit facility, and are recognised at fair value, which
is equivalent to their net assets.
The Company's investment in UK HoldCo comprises both equity and
loan notes. Both elements are exposed to the same primary risk,
being performance risk. This performance risk is taken into
consideration when determining the discount rate applied to the
forecast cash flows. In determining fair value, the Board
considered observable market transactions and 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) Financial assets at amortised cost
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, which 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 2020 were in the range 6.0% to 9.2%
(31 March 2019: 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 2020 31 Mar 2019
GBP'000s GBP'000s
----------------------------- ------------ ------------
Investment advisory fees 5,500 5,006
Directors' fees and expenses 253 242
Administration fee 122 100
Other expenses 618 547
----------------------------- ------------ ------------
6,493 5,895
----------------------------- ------------ ------------
The Company had no employees during the year (31 March 2019:
nil). There was no Directors' remuneration for the year other than
Directors' fees as detailed in note 15 (31 March 2019: nil).
Included within other expenses is an amount of GBP84,600 to
Deloitte LLP for the audit of the Company for the year ended 31
March 2020 (year ended 31 March 2019: GBP77,000).
The Company paid GBP27,400 during the year for non--audit
services to Deloitte LLP, all in relation to the half-year interim
review (year ended 31 March 2019: GBP25,000 to Deloitte LLP).
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. JLEN is charged an annual exemption fee of GBP1,200.
The income from its investments is therefore not subject to any
further tax in Guernsey, although the investments provide for and
pay taxation at the appropriate rates in the 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 2020 31 Mar 2019
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 2019 of 1.6275 (31 March 2018: 1.5775) 8,090 6,216
Interim dividend for the quarter ended 30 June 2019 of 1.6650 (30 June 2018: 1.6275) 8,275 6,414
Interim dividend for the quarter ended 30 September 2019 of 1.6650 (30 September 2018:
1.6275) 8,275 8,089
Interim dividend for the quarter ended 31 December 2019 of 1.6650 (31 December 2018:
1.6275) 8,275 8,089
------------------------------------------------------------------------------------------ ------------ ------------
32,915 28,808
------------------------------------------------------------------------------------------ ------------ ------------
A dividend for the quarter ended 31 March 2020 of 1.6650 pence
per share, amounting to GBP9.1 million, was approved by the Board
on 27 May 2020 and is payable on 26 June 2020. The dividend has not
been included as a liability at 31 March 2020.
8. (Loss)/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 2020 31 Mar 2019
GBP'000s GBP'000s
------------------------------------------------------------------------------------------ ------------ ------------
(Loss)/earnings
(Loss)/earnings for the purposes of basic and diluted earnings per share,
being net (loss)/profit attributable to owners of the Company (10,683) 53,352
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings
per share 500,820,530 438,919,897
------------------------------------------------------------------------------------------ ------------ ------------
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 (loss)/earnings per share (2.1) 12.2
------------------------------------------------------------------------------------------ ------------ ------------
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 2020 31 Mar 2019
GBP'000s GBP'000s
------------------------------------------------------- ------------ ------------
Fair value of environmental infrastructure investments 537,094 523,558
Fair value of intermediate holding companies (4,153) (3,526)
Total fair value of investments 532,941 520,032
------------------------------------------------------- ------------ ------------
Reconciliation of movement in fair value of portfolio of
assets
The table below shows the movement in the fair value of the
Company's portfolio of environmental infrastructure assets. These
assets are held through other intermediate holding companies. The
table also presents a reconciliation of the fair value of the asset
portfolio to the Company's statement of financial position as at 31
March 2020, by incorporating the fair value of these intermediate
holding companies.
Cash, working Cash, working
capital and capital and
Portfolio debt in intermediate Portfolio debt in intermediate
value holdings Total value holdings Total
31 Mar 2020 31 Mar 2020 31 Mar 2020 31 Mar 2019 31 Mar 2019 31 Mar 2019
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------- ----------- -------------------- ----------- ----------- --------------------- -----------
Opening balance 523,558 (3,526) 520,032 429,494 (41,026) 388,468
Acquisitions
Portfolio of assets
acquired 60,276 - 60,276 77,666 - 77,666
Post-acquisition
price adjustments (2,407) - (2,407) (163) - (163)
--------------------- ----------- -------------------- ----------- ----------- --------------------- -----------
57,869 - 57,869 77,503 - 77,503
Growth in
portfolio(1) 629 - 629 60,143 - 60,143
Yields from portfolio
to intermediate
holding companies (44,962) 44,962 - (43,582) 43,582 -
--------------------- ----------- -------------------- ----------- ----------- --------------------- -----------
Yields from
intermediate
holding companies
Interest on loan
notes(1) - (28,701) (28,701) - (24,063) (24,063)
Dividend payments
from UK HoldCo to
the Company(1) - (10,600) (10,600) - (7,300) (7,300)
--------------------- ----------- -------------------- ----------- ----------- --------------------- -----------
- (39,301) (39,301) - (31,363) (31,363)
Other movements
Investment in working
capital in UK HoldCo - 11,189 11,189 - (5,553) (5,553)
Expenses borne by
intermediate holding
companies(1) - (4,819) (4,819) - (896) (896)
(Drawdown)/repayment
of UK HoldCo
revolving credit
facility borrowings - (12,658) (12,658) - 31,730 31,730
--------------------- ----------- -------------------- ----------- ----------- --------------------- -----------
Fair value of the
Company's investment
in UK HoldCo 537,094 (4,153) 532,941 523,558 (3,526) 520,032
--------------------- ----------- -------------------- ----------- ----------- --------------------- -----------
(1) The net loss on investments at fair value through profit or
loss for the year ended 31 March 2020 is GBP43,491,000 (31 March
2019: net gain of GBP27,884,000). This, together with interest
received on loan notes of GBP28,701,000 (31 March 2019:
GBP24,063,000) and dividend income of GBP10,600,000 (31 March 2019:
GBP7,300,000) comprises operating income and gains/(losses) on fair
value of investments 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 2020. The Directors have satisfied
themselves as to the methodology used and the discount rates
applied for the valuation. Investments are all investments in
environmental infrastructure projects and are valued using a
discounted cash flow methodology, being the most relevant and most
commonly used method in the market to value similar assets to the
Company's. The Company's holding of its investment in UK HoldCo
represents its interest in both the equity and debt instruments.
The equity and debt instruments are valued as a whole using a
blended discount rate and the value attributed to the equity
instruments represents the fair value of future dividends and
equity redemptions in addition to any value enhancements arising
from the timing of loan principal and interest receipts from the
debt instruments, while the value attributed to the debt
instruments represents the principal outstanding and interest due
on the loan at the valuation date.
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
6.0% to 9.2% (31 March 2019: 6.5% to 9.2%). The weighted average
discount rate of the portfolio at 31 March 2020 is 7.4% (31 March
2019: 7.9%).
The following economic assumptions have been used in the
discounted cash flow valuations:
31 Mar 2020 31 Mar 2019
---------------------------- ------------------------- -------------------------
UK - inflation rates 2.17% for 2020, gradually
increasing to 2.75% 2.8% for 2019, decreasing
from 2025 to 2.75% from 2021
France - inflation rates 1.5% 1.5%
UK - deposit interest rates 1.75% for 2020, gradually 1.5% for 2019, gradually
rising to 2.5% from rising to 2.5% from
2021 2020
France - deposit rates 0.5% 0.5%
Euro/sterling exchange rate 1.12 1.16
---------------------------- ------------------------- -------------------------
The UK corporation tax rate assumed in the 31 March 2020
portfolio valuation is 19% (31 March 2019: 19%), in line with
market practice. The equivalent rate for the French assets is 28%,
stepping down to 25% 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
2020 2019
--------------------- ---------------------
Shareholder Shareholder
Project name Equity loan Equity loan
---------------------- ------- ------------ ------- ------------
Amber 100% 100% 100% 100%
Bilsthorpe 100% 100% 100% 100%
Bio Collectors 70% 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%
Dungavel 100% 100% 100% 100%
Egmere Energy 100% 100% 100% 100%
ELWA 80% 80% 80% 80%
Ferndale 100% 100% 100% 100%
Grange Farm 100% 100% 100% 100%
Hall Farm 100% 100% 100% 100%
Icknield 53% 100% 53% 100%
Le Placis Vert 100% 100% 100% 100%
Llynfi 100% 100% 100% 100%
Biogas Meden 100% 100% 100% 100%
Merlin Renewables 100% 100% 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%
Warren 100% 100% - -
Wear Point 100% 100% 100% 100%
Yorkshire Hydro 100% n/a - -
---------------------- ------- ------------ ------- ------------
Details of investments made during the year
On 12 July 2019, the Group acquired two operational hydro
projects and an operational battery storage system, Yorkshire
Hydropower Limited, for a total consideration of GBP4.3
million.
On 28 August 2019, the Group acquired an anaerobic digestion
asset, Warren Power Limited, for a total consideration of GBP14.8
million.
On 13 December 2019, the Group acquired a 70% equity stake in an
anaerobic digestion ("AD") plant and a waste collection business,
Bio Collectors Holdings Limited.
On 31 March 2020, the Group signed a further investment in the
Vulcan Renewables anaerobic digestion plant. The investment
consists of a provision of funding of c.GBP3.1 million to acquire
two freehold plots of land.
During the year, the Group also invested GBP1.4 million towards
its commitment to FEIP.
10. Trade and other receivables
31 Mar 2020 31 Mar 2019
GBP'000s GBP'000s
-------------------- ------------ ------------
Prepayments 31 21
-------------------- ------------ ------------
Balance at 31 March 31 21
-------------------- ------------ ------------
11. Trade and other payables
31 Mar 2020 31 Mar 2019
GBP'000s GBP'000s
-------------------- ------------ ------------
Accruals 1,720 1,563
-------------------- ------------ ------------
Balance at 31 March 1,720 1,563
-------------------- ------------ ------------
12. Loans and borrowings
The Company had no outstanding loans or borrowings at 31 March
2020 (31 March 2019: 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
accordion facility of up to GBP60 million. 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 2020, UK HoldCo had an outstanding balance of
GBP29.3 million under the facility (31 March 2019: GBP16.7
million). The loan bears interest of LIBOR + 200 to 225 bps and is
intended to be repaid by proceeds from future capital raises.
As at 31 March 2020, the Company held loan notes of GBP318.9
million which were issued by UK HoldCo (31 March 2019: outstanding
amount of GBP318.9 million).
There were no other outstanding loans and borrowings in either
the Company, UK HoldCo or HWT at 31 March 2020.
13. Share capital account
Number of 31 Mar 2020 31 Mar 2019
shares GBP'000s GBP'000s
----------------------------------- ----------- ----------- -----------
Opening balance at 1 April 2019 497,018,205 492,670 389,262
Shares issued in the year 49,701,820 57,157 105,000
Expenses of issue of equity shares - (884) (1,592)
----------------------------------- ----------- ----------- -----------
Balance at 31 March 2020 546,720,025 548,943 492,670
----------------------------------- ----------- ----------- -----------
On 27 February 2020, the Company raised gross proceeds of
GBP57.2 million by way of issuing a total of 49,701,820 new
ordinary shares at 115 pence per new ordinary share.
Following this issue, at 31 March 2020, the Company's share
capital is comprised of 546,720,025 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 2020 31 Mar 2019
GBP'000s GBP'000s
--------------------------- ------------ ------------
Opening balance 27,669 3,125
(Loss)/profit for the year (10,683) 53,352
Dividends paid (32,915) (28,808)
--------------------------- ------------ ------------
Balance at 31 March (15,929) 27,669
--------------------------- ------------ ------------
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 JLCM (for the period
from 1 April to 30 June 2019) and Foresight Group (from 1 July 2019
to 31 March 2020) as respective Investment Adviser following the
change announced on 5 June and effective 1 July 2019.
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 overleaf.
Foresight Group is entitled to a base fee equal to:
a) 1.0% per annum of the Adjusted Portfolio Value(1) of the
Fund(2) up to and including GBP500 million; and
b) 0.8% per annum of the Adjusted Portfolio Value of the Fund in excess of GBP500 million.
The total Investment Adviser fee charged to the income statement
for the year ended 31 March 2020 was GBP5,499,712 (31 March 2019:
GBP5,006,000), of which GBP1,367,079 remained payable as at 31
March 2020 (31 March 2019: GBP1,341,000).
(1) Adjusted Portfolio Value is defined in the Investment Advisory Agreement as:
a) the fair value of the investment portfolio; plus
b) any cash owned by or held to the order of the Fund; plus
c) the aggregate amount of payments made to shareholders by way
of dividend in the quarterly period ending on the relevant
valuation day, less
i) any other liabilities of the Fund (excluding borrowings);
and
ii) any uninvested cash.
(2) Fund means the Company and JLEN Environmental Assets Group
(UK) Limited together with their wholly owned subsidiaries or
subsidiary undertakings (including companies or other entities
wholly owned by them together, individually or in any combination,
as appropriate) but excluding project entities.
Other transactions with related parties
During the year, the Directors of the Company, who are
considered to be key management, received fees of GBP244,698 (31
March 2019: GBP239,000) for their services. The Directors of the
Company were also paid GBP7,844 of expenses (31 March 2019:
GBP1,991).
The Directors held the following shares:
Ordinary Ordinary
shares shares
of no par of no par
value each value each
held at held at
31 Mar 2020 31 Mar 2019
------------------ ----------- -----------
Richard Morse 103,535 103,535
Christopher Legge - 29,896
Denise Mileham 32,340 32,340
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
Hans Joern Rieks - -
------------------ ----------- -----------
All of the above transactions were undertaken on an arm's length
basis.
The Directors were paid dividends in the year of GBP16,522 (31
March 2019: GBP14,924).
16. Financial instruments
Financial instruments by category
The Company held the following financial instruments at fair
value at 31 March 2020. 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 2020
----------------------------------------------------------------
Financial Financial Financial
assets held assets at liabilities
at fair at
Cash and amortised value through amortised
profit or
bank balances cost loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Level 1 1 3 1
Non --current assets
Investments at fair value through profit or loss
(Level 3) - - 532,941 - 532,941
Current assets
Trade and other receivables - 31 - - 31
Cash and cash equivalents 1,762 - - - 1,762
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Total financial assets 1,762 31 532,941 - 534,734
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Current liabilities
Trade and other payables - - - (1,720) (1,720)
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Total financial liabilities - - - (1,720) (1,720)
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Net financial instruments 1,762 31 532,941 (1,720) 533,014
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
31 Mar 2019
----------------------------------------------------------------
Financial Financial
assets at liabilities
Financial fair at
assets held
Cash and at value through amortised
amortised profit or
bank balances cost loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Level 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
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
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 opposite, 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 2020
------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 7.4% Plus 0.5%
Change in portfolio
valuation Increases GBP19.6m GBP537.1m Decreases GBP18.5m
Change in NAV per
share Increases 3.6p 97.5p Decreases 3.4p
------------------- ------------------ --------- ------------------
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
------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in long-term
inflation rates is as follows:
31 March 2020
------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio
valuation Decreases GBP21.4m GBP537.1m Increases GBP22.3m
Change in NAV per
share Decreases 3.9p 97.5p Increases 4.1p
------------------- ------------------ ---------- ------------------
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
------------------- ------------------ ---------- ------------------
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 2020
----------------------------- ------------------ --------- ------------------
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP28.7m GBP537.1m Increases GBP29.0m
Change in NAV per share Decreases 5.2p 97.5p Increases 5.3p
----------------------------- ------------------ --------- ------------------
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP8.0m GBP537.1m Increases GBP8.3m
Change in NAV per share Decreases 1.5p 97.5p Increases 1.5p
----------------------------- ------------------ --------- ------------------
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
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in electricity and
gas prices is as follows:
31 March 2020
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP26.8m GBP537.1m Increases GBP26.7m
Change in NAV per share Decreases 4.9p 97.5p Increases 4.9p
----------------------------- ------------------ --------- ------------------
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
----------------------------- ------------------ --------- ------------------
Waste & wastewater assets do not have significant volume and
price risks.
The sensitivity of the portfolio to movements in corporation tax
rate is as follows:
31 March 2020
----------------------------- ----------------- --------- -----------------
Corporation tax Minus 2% Base 19% Plus 2%
Change in portfolio valuation Increases GBP7.4m GBP537.1m Decreases GBP7.6m
Change in NAV per share Increases 1.4p 97.5p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
Comparative sensitivity results are not applicable for 31 March
2019 as the Company did not present such sensitivity at the
time.
The sensitivity of the portfolio to movements in AD feedstock
prices is as follows:
31 March 2020
----------------------------- ----------------- --------- -----------------
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases GBP6.8m GBP537.1m Decreases GBP7.6m
Change in NAV per share Increases 1.2p 97.5p Decreases 1.4p
----------------------------- ----------------- --------- -----------------
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
----------------------------- ----------------- --------- -----------------
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 2020, the Directors consider the sensitivity to
changes in the euro/sterling exchange rate to be insignificant.
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
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 2020, the Company had no outstanding debt.
However, as set out in note 12, the Company's subsidiary UK HoldCo
has a GBP170 million revolving credit facility, which was drawn by
GBP29.3 million at 31 March 2020.
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 2020 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 GBP29.3 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 2020, 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 UK HoldCo 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.
Financial risk management - Company and non --consolidated
subsidiaries continued
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 2020, the Company has provided a guarantee under
the Company's wholly owned subsidiary UK HoldCo's GBP170 million
revolving credit facility ("RCF"). Following a further one-year
extension signed in May 2019, the RCF is now due to expire in June
2022.
On 28 January 2020, the Group committed EUR25 million to
Foresight Energy Infrastructure Partners SCSp ("FEIP"), a
Luxembourg limited partnership investment vehicle, of which GBP1.4
million has been invested at the balance sheet date.
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)":
Place of Registered Ownership Voting
Name Category business office interest rights
------------------------------------------------- ------------------------ --------- ----------- --------- ------
JLEN Environmental Assets Group (UK) Limited(1) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Operating subsidiary UK C 100% 100%
Operating subsidiary
Croft Solar PV Limited (dormant) UK C 100% 100%
Operating subsidiary
Cross Solar PV Limited (dormant) UK C 100% 100%
Operating subsidiary
Domestic Solar Limited (dormant) UK C 100% 100%
Operating subsidiary
Ecossol Limited (dormant) UK C 100% 100%
Operating subsidiary
Hill Solar PV Limited (dormant) UK C 100% 100%
Operating subsidiary
Share Solar PV Limited (dormant) UK C 100% 100%
Operating subsidiary
Tor Solar PV Limited (dormant) UK C 100% 100%
Operating subsidiary
Residential PV Trading Limited (dormant) UK C 100% 100%
Operating subsidiary
South-Western Farms Solar Limited (dormant) UK C 100% 100%
Operating subsidiary
Angel Solar Limited (dormant) UK C 100% 100%
Easton PV Limited Project holding company UK D 100% 100%
Pylle Solar Limited Project holding company UK D 100% 100%
Second Energy Limited Operating subsidiary UK D 100% 100%
ELWA Holdings Limited Project holding company UK E 80% 80%
ELWA Limited(2) Operating subsidiary UK E 80% 81%(2)
JLEAG Wind Holdings Limited Project holding company UK A 100% 100%
JLEAG Wind Limited Project holding company UK A 100% 100%
Amber Solar Parks (Holdings) Limited Project holding company UK F 100% 100%
Amber Solar Park Limited Operating subsidiary UK F 100% 100%
Operating subsidiary
Fryingdown Solar Park Limited (dormant) UK F 100% 100%
Operating subsidiary
Five Oaks Solar Parks Limited (dormant) UK F 100% 100%
Bilsthorpe Wind Farm Limited Operating subsidiary UK F 100% 100%
Ferndale Wind Limited Project holding company UK F 100% 100%
Castle Pill Wind Limited Project holding company UK F 100% 100%
Wind Assets LLP Operating subsidiary UK F 100% 100%
Active proposal to
Shanks Dumfries and Galloway Holdings Limited strike off UK G 80% 80%
Shanks Dumfries and Galloway Limited In liquidation UK G 80% 80%
Hall Farm Wind Farm Limited Operating subsidiary UK F 100% 100%
Branden Solar Parks (Holdings) Limited Project holding company UK F 100% 100%
Branden Solar Parks Limited Operating subsidiary UK F 100% 100%
KS SPV 3 Limited Operating subsidiary UK F 100% 100%
KS SPV 4 Limited Operating subsidiary UK F 100% 100%
Carscreugh Renewable Energy Park Limited Operating subsidiary UK F 100% 100%
Wear Point Wind Limited Operating subsidiary UK F 100% 100%
Monksham Power Ltd Project holding company UK D 100% 100%
Frome Solar Limited Operating subsidiary UK D 100% 100%
BL Wind Limited Operating subsidiary UK F 100% 100%
Burton Wold Extension Limited Operating subsidiary UK F 100% 100%
New Albion Wind Farm (Holdings) Limited Project holding company UK F 100% 100%
New Albion Wind Limited Operating subsidiary UK F 100% 100%
Dreachmhor Wind Farm Limited Operating subsidiary UK F 100% 100%
France Wind GP Germany GmbH Project holding company DE K 100% 100%
France Wind Germany GmbH & Co. KG Project holding company DE K 100% 100%
Parc Eolien Le Placis Vert SAS Operating subsidiary FR I 100% 100%
Energie Eolienne de Plouguernével SAS Operating subsidiary FR J 100% 100%
CSGH Solar Limited Project holding company UK A 100% 100%
CSGH Solar(1) Limited Project holding company UK A 100% 100%
Catchment Tay Holdings Limited Project holding company UK H 33.3% 33.3%
Catchment Tay Limited Operating subsidiary UK H 33.3% 33.3%
sPower Holdco 1 (UK) Limited Project holding company UK D 100% 100%
sPower Finco 1 (UK) Limited Project holding company UK D 100% 100%
Higher Tregarne Solar (UK) Limited Operating subsidiary UK D 100% 100%
Crug Mawr Solar Farm Limited Operating subsidiary UK D 100% 100%
Golden Hill Solar (UK) Limited Project holding company UK D 100% 100%
Golden Hill Solar Limited Operating subsidiary UK D 100% 100%
Shoals Hook Solar (UK) Limited Operating subsidiary UK D 100% 100%
CGT Investment Limited Project holding company UK L 100% 100%
CWMNI GWYNT TEG CYF Operating subsidiary UK L 100% 100%
Moelogan 2 (Holdings) Cyfyngedig Project holding company UK L 100% 100%
Moelogan 2 C.C.C. Operating subsidiary UK L 100% 100%
Vulcan Renewables Limited Operating subsidiary UK M 100% 100%
Llynfi Afan Renewable Energy Park (Holdings)
Limited Project holding company UK A 100% 100%
Llynfi Afan Renewable Energy Park Limited Operating subsidiary UK A 100% 100%
Green Gas Oxon Limited Project holding company UK N 52.6% 52.6%
Icknield Gas Limited Operating subsidiary UK N 52.6% 52.6%
Operating subsidiary
Slapton Power 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%
Yorkshire Hydropower Holdings Limited Project holding company UK F 100% 100%
Yorkshire Hydropower Limited Operating subsidiary UK F 100% 100%
Warren Power Limited Project holding company UK M 100% 100%
Warren Energy Limited Operating subsidiary UK M 100% 100%
Bio Collectors Holdings Limited Project holding company UK O 70% 70%
Bio Collectors Limited Operating subsidiary UK O 70% 70%
Riverside Bio Limited Operating subsidiary UK O 70% 70%
Riverside AD Limited Operating subsidiary UK O 70% 70%
------------------------------------------------- ------------------------ --------- ----------- --------- ------
(1) JLEN Environmental Assets Group (UK) Limited is the only
entity directly held by the Company.
(2) ELWA Holdings Limited holds 81% of the voting rights and a
100% share of the economic benefits in ELWA Limited.
Registered offices
A. The Shard, 32 London Bridge Street, London SE1 9SG
B. 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ
C. 1 Filament Walk, Suite 203, Wandsworth, London, SW18
D. Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF
E. Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU
F. C/O Res White Limited, Beaufort Court, Egg Farm Lane, Kings Langley, Hertfordshire WD4 8LR
G. 16 Charlotte Square, Edinburgh EH2 4DF
H. Infrastructure Managers Limited, 2nd Floor, 11 Thistle Street, Edinburgh EH2 1DF
I. Parc Eolien le Placis Vert, Rue du Pre Long 35770 Vern Sur Seiche, France
J. 3 Rue Benjamin Delessert, 56104 Lorient Cedex 04, France
K. Steinweg 3-5, Frankfurt am Main, 60313, Germany
L. Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy LL28 5UN
M. 10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD
N. Friars Ford, Manor Road, Goring, Reading RG8 9EL
O. 10 Osier Way, Mitcham, Surrey CR4 4NF
19. Events after balance sheet date
After the balance sheet date, the Group acquired a 70% stake in
Peacehill Farm AD plant for an aggregate amount of c.GBP10.7
million. The plant is located in Wormit, Fife, Scotland and has a
thermal capacity of c.5MW and predominantly produces biomethane
which is exported to the national gas grid.
A dividend for the quarter ended 31 March 2020 of 1.6550 pence
per share, amounting to GBP9.1 million, was approved by the Board
on 27 May 2020 for payment on 26 June 2020.
COMPANY SUMMARY
Below are the Company key facts, advisers and other
information.
Company information JLEN Environmental Assets Group Limited is a Guernsey--registered closed--ended investment
company (registered number 57682) with a premium listing on the London Stock Exchange
Registered address Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR
Ticker/SEDOL JLEN/BJL5FH8
Company year end 31 March
Dividend payments Quarterly in March, June, September and December
Investment Adviser Foresight Group LLP, No OC300878, registered in England and Wales and authorised and regulated
by the Financial Conduct Authority
Company Secretary Praxis Fund Services Limited, a company incorporated in Guernsey on 13 April 2005 (registered
and Administrator number 43046)
Market capitalisation GBP606.9 million at 31 March 2020
Investment Adviser 1.0% per annum of the Adjusted Portfolio Value of the investments up to GBP0.5 billion, falling
fees 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 and ISAs (subject to applicable
status subscription
limits) provided that they have been acquired in the market, and they are permissible assets
for SIPPs
AIFMD status The Company is classed as a self--managed Alternative Investment Fund under the European
Union's
Alternative Investment Fund Managers Directive
Non-mainstream pooled The Board conducts the Company's affairs, and intends to continue to conduct the Company's
investment status affairs, such that the Company would qualify for approval as an investment trust if it were
resident in the United Kingdom. It is the Board's intention that the Company will continue
to conduct its affairs in such a manner and that independent financial advisers should
therefore
be able to recommend its ordinary shares to ordinary retail investors in accordance with the
FCA's rules relating to non--mainstream investment products
FATCA The Company has registered for FATCA and has a GIIN number
2BN95W.99999.SL.831
Investment policy The Company's investment policy is set out 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)
Denise Mileham
Peter Neville
Richard Ramsay
Hans Joern Rieks
Administrator to the Company, Company Secretary and registered
office
Praxis Fund Services Limited
Sarnia House
Le Truchot
St Peter Port
Guernsey GY1 1GR
Channel Islands
Registrar
Link Registrars (Guernsey) Limited (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
Foresight Group LLP
The Shard
32 London Bridge Street
London SE1 9SG
United Kingdom
Public relations
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE
United Kingdom
Corporate broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Corporate bankers
HSBC
PO Box 31
St Peter Port
Guernsey GY1 3AT
Channel Islands
Public company directorships
Richard Morse
JLEN Environmental Assets Group Limited
Denise Mileham
JLEN Environmental Assets Group Limited
Peter Neville
JLEN Environmental Assets Group Limited
Richard Ramsay
JLEN Environmental Assets Group Limited
Seneca Global Income & Growth plc, London - Main Market
Hans Joern Rieks
JLEN Environmental Assets Group Limited
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
CFD
Contracts for Difference
the Company or JLEN or the Fund
JLEN Environmental Assets Group Limited
EU
European Union
FiT
the Feed--in Tariff
gross project value
the fair market value of the investment interests held in a
project as increased by the amount of any financing in the relevant
project entity
Group
JLEN Environmental Assets Group Limited and its intermediate
holding companies UK HoldCo and HWT Limited
GWh
gigawatt hour
intermediate holding companies
companies within the Group which are used as pass-through
vehicles to invest in underlying environmental infrastructure
assets, namely UK HoldCo, HWT Limited and JLEAG Solar 1 Limited
Investment Adviser or Foresight
Foresight Group LLP
IPO
Initial Public Offering
IRR
internal rate of return
John Laing
John Laing Group plc and its subsidiary companies
MWe
megawatt electric
MWh
megawatt hour
MWth
megawatt thermal
NAV
Net Asset Value
OECD
Organisation for Economic Co--operation and Development
portfolio
the 30 assets in which JLEN had a shareholding as at 31 March
2020
portfolio valuation
the sum of all the individual investments' net present
values
PPAs
Power Purchase Agreements
PPP/PFI
the Public Private Partnership procurement model
price cannibalisation
the depressive influence on the wholesale power price at timings
of high output from intermittent weather-driven generation such as
solar and wind
PV
photovoltaic
RHI
Renewable Heat Incentive
ROCs
Renewables Obligation Certificates
total shareholder return
total shareholder return combines the share price movement and
dividends since IPO expressed as an annualised percentage
UK HoldCo
JLEN Environmental Assets Group (UK) Limited, wholly owned
subsidiary of JLEN Environmental Assets Group Limited
WADR
the weighted average discount rate
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 DZGMVMGGGGZZ
(END) Dow Jones Newswires
June 11, 2020 02:00 ET (06:00 GMT)
Jlen Environmental Assets (LSE:JLEN)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Jlen Environmental Assets (LSE:JLEN)
Historical Stock Chart
Von Jul 2023 bis Jul 2024