TIDMJLEN
RNS Number : 1212I
John Laing Environmental Assets Grp
22 November 2018
22 November 2018
John Laing Environmental Assets Group Limited
Announcement of half-year results for the period to 30 September
2018
The Directors of John Laing Environmental Assets Group Limited
(the "Company" or "JLEN") are pleased to announce the Company's
half-year results to 30 September 2018.
Financial Highlights
-- NAV per ordinary share of 100.4 pence as at 30 September 2018
(31 March 2018: 99.6 pence), up 0.8%
-- Portfolio valuation as at 30 September 2018 of GBP488.9m (31 March 2018: GBP429.5m)
-- Further interim dividend of 1.6275 pence per share declared
making total dividends declared for the six months to 30 September
2018 of 3.255 pence per share, in line with target set out in the
2018 Annual Report
-- Dividend cover of 1.3x on dividends paid during the period
-- Share price total return for the period to 30 September 2018
of 5.3% (31.8% since IPO in March 2014)
Portfolio Highlights
-- Three acquisitions in the six month period, totaling
GBP54.1m, bringing the number of investments to 27 and the capacity
of the renewable energy assets in the JLEN portfolio to 274.2MW
-- Generation for the solar portfolio was 2% ahead of budget and
generation across the anaerobic digestion ("AD") portfolio was 4%
above budget. Generation for the wind portfolio was 12% below
budget due to very low wind speeds during the period. Performance
at the environmental processing plants was in line with
expectations
-- Vulcan AD upgrade project underway expected to result in a doubling of capacity
-- Strong pipeline of assets for further growth, both under the
First Offer Agreement with the John Laing Group and from third
parties
Financing Activity
-- In June 2018, the fund exercised the option to extend its
GBP130m revolving credit facility for a further year, now expiring
June 2021. The facility was drawn GBP103.6 million at 30 September
2018
-- In October 2018, post the period end, JLEN successfully
raised GBP105m at an issue price of 102 pence per share. The
proceeds were used to fully repay the outstanding balance on the
facility
Dividend Timetable
Ex-dividend date 29 November 2018
Record date 30 November 2018
Payment date 21 December 2018
Half-year report
A copy of the half-year report has been submitted to the
National Storage Mechanism and will shortly be available at
www.morningstar.co.uk/uk/NSM. The half-year report can also be
found on the Company's website at www.jlen.com where further
information on JLEN can be found.
Details of the conference call for analysts and investors
There will be a call at 9.30am today for analysts and investors.
To register for the call please contact Newgate Communications on
+44 (0)20 7357 6880, or by email on JLEN@newgatecomms.com.
Presentation materials will be posted on the Company's website,
www.jlen.com, from 9.00am.
For further information, please contact:
John Laing Capital Management Limited
Chris Tanner
Chris Holmes +44(0)20 7901 3559
Winterflood Investment Trusts
Neil Langford
Chris Mills +44(0)20 3100 0000
Newgate Communications
Elisabeth Cowell
Ian Silvera +44(0)20 7357 6880
-------------------------------------- ------------------
CHAIRMAN'S STATEMENT
The Company has successfully grown its portfolio, made progress
in its operations, and remains on target to pay dividends of 6.51
pence per share for the year.
On behalf of the Board, I am pleased to present the half--year
report of John Laing Environmental Assets Group Limited for the six
months ended 30 September 2018.
Results
During the period under review, the Company has successfully
grown its portfolio by continuing to diversify into the anaerobic
digestion ("AD") sector and has made progress in its operations and
asset management. Recent acquisitions have continued to reduce
exposure to volatile electricity and gas prices and cash generation
and dividend cover remain resilient despite poor wind speeds during
the period. The Company remains on target to pay dividends of 6.51
pence per share relating to the year ending 31 March 2019 (6.31
pence per share 31 March 2018).
The Company's profit before tax for the six-month period to 30
September 2018 was GBP16.1 million (six months to 30 September
2017: GBP6.3 million) and earnings per share for the period was 4.1
pence (six months to 30 September 2017: 1.8 pence). The Board
continues to believe that the portfolio is well positioned to
deliver the target returns to shareholders.
The Net Asset Value ("NAV") per share at 30 September 2018 was
100.4 pence, up from 99.6 pence at 31 March 2018.
Cash received from the portfolio by way of distributions, which
includes interest, loan repayments and dividends, was GBP20.7
million (six months to 30 September 2017: GBP15.4 million). Net
cash inflows from the investment portfolio (after operating and
finance costs) of GBP16.7 million (six months to 30 September 2017:
GBP12.1 million) cover the interim dividends paid in the half-year
period of GBP12.6 million by approximately 1.3 times (six months to
30 September 2017: GBP11.2 million; 1.1 times). On a
dividend-declared basis for the half year, dividend cover was 1.2
times.
Dividend policy
For the year to 31 March 2018, the Company achieved its target
dividend of 6.31 pence per share by the payment of four interim
dividends.
In line with the total inflation adjusted target for the year
ending 31 March 2019 of 6.51 pence per share set out in our 2018
Annual Report, a quarterly dividend of 1.6275 pence per share was
paid in September 2018 for the quarter to 30 June 2018. I am
pleased to announce that the Board has declared an interim dividend
of 1.6275 pence per share for the quarter to 30 September 2018,
payable on 21 December 2018 to shareholders on the register as at
30 November 2018. The ex-dividend date will be 29 November
2018.
Portfolio performance
Total generation for the period from the renewables portfolio
was 334GWh, 4.2% below budget. Above budget performance from the
solar and AD assets was more than offset by low wind speeds
affecting the wind portfolio.
For the solar assets, the majority of plants performed
satisfactorily given the high levels of solar irradiance
experienced over the period, an improvement on previous periods and
evidence that the focus placed on solar asset management is making
a difference. Generation was 1.5% above budget, which includes a
period of unavailability at Branden for a transformer and
switchgear failure at the end of May. Excluding these outages,
generation was 2.8% above budget, on irradiation that was 3.7%
higher than the long-term expectation.
For the AD assets, Vulcan Renewables and Icknield Farm were held
throughout the period, with Egmere Energy and Grange Farm Energy
acquired in July and Merlin Renewables shortly afterwards in August
(see below). Allowing for JLEN's period of ownership, performance
across the AD portfolio has been very encouraging, with gas
generation 4.3% above budget, a trend that has been seen
consistently since our first acquisition in the sector in August
2017. Phased work has been progressing on the Vulcan capital
upgrade project that is expected to result in a doubling of
capacity at the plant, with no material impact on existing
operations.
For the wind assets, the period was notable for very low wind
speeds, with May, June, July and August all materially below
budget. Overall, generation was 12.0% below budget including agreed
curtailment at Carscreugh where the foregone generation was
compensated for at attractive rates. Wind generation is expected to
be seasonally lower during the summer and so variances to budget
look greater on a relative basis. For the six months to 30 June
2018, the variance to budget was -4.2%.
Allowing for the lower wind speed, the performance of the wind
portfolio was in line with expectations, notwithstanding some minor
instances of unavailability at individual wind farms.
The ELWA waste management project has continued to perform in
line with expectations, with key contractual targets being met and
the amount of waste delivered comfortably above the level that the
project needs to meet budget. The Tay wastewater project has
continued to experience unusually dry conditions and so revenues
based on flows will be reduced, although cost controls are expected
to mitigate the financial impact.
Investment Adviser
I am pleased to announce that the Investment Adviser has
continued to expand its resources in the period, most notably on
the asset management side in respect of wind and AD. The Board is
delighted with these appointments and is confident that with the
advice provided by JLCM, JLEN remains well placed for the next
phase of growth.
Acquisitions
During the period under review, the Company announced the
following acquisitions:
Egmere Energy and Grange Farm Energy
On 9 July, 2018 JLEN completed two further acquisitions of AD
assets, Egmere Energy Limited and Grange Farm Energy Limited, for a
total consideration of c. GBP36 million. The Egmere Energy AD plant
is located in Egmere, North Norfolk and was commissioned in
November 2014. The plant has a thermal capacity of c. 5MW and
predominantly produces biomethane to be injected to the national
gas grid. In addition, the plant also has a 0.5MW CHP engine and is
accredited under the Renewable Heat Incentive ("RHI") and Feed-in
Tariff ("FiT") schemes.
The Grange Farm Energy AD plant is located in Spridlington,
Lincolnshire and was commissioned in December 2014. The plant has a
thermal capacity of c. 5MW and predominantly produces biomethane to
be injected to the national gas grid. In addition, the plant also
has a 0.5MW CHP engine and is accredited under the RHI and FiT
schemes.
Merlin Renewables
On 16 August 2018, JLEN completed the acquisition of an AD
asset, Merlin Renewables Limited for a total consideration,
including working capital of c. GBP18.1 million.
The Merlin Renewables AD plant is located in Hibaldstow, North
Lincolnshire and was commissioned in September 2014. The plant has
a thermal capacity of c.5MW(th) and predominantly produces
biomethane to be injected to the national gas grid. In addition,
the plant also has a 0.5MW(e) CHP engine and is accredited under
the RHI and FiT schemes.
The Company also announced a major capital upgrade to an
existing asset:
Vulcan Renewables, further investment
In June 2018, JLEN committed to invest a further c. GBP8.5
million into the Vulcan Renewables AD plant of which GBP4.3 million
had been funded at 30 September 2018. The investment consists of
provision of funding to double the plant's biomethane and
generating capacity.
Financing
JLEN benefits from a revolving credit facility with HSBC, NIBC,
ING and Santander of GBP130 million (of which GBP103.6 million has
been drawn at 30 September 2018) and an uncommitted "accordion"
facility of up to GBP60 million. In June 2018, the Fund exercised
the option to extend the facility a further year, now expiring in
June 2021.
Post the end of the period, all the outstanding facility was
repaid from the proceeds of an equity issuance that closed in
October 2018. At the date of issuing this report, the full
committed facility of GBP130m is available for acquisitions.
Share capital
As mentioned above, in October 2018, JLEN successfully issued a
further 103 million shares at 102 pence per share raising gross
proceeds of GBP105 million through the issuance programme
originally announced in February for up to 200 million new ordinary
shares and take the market capitalisation over GBP500 million. The
proceeds of the capital raise were used to repay the revolving
credit facility.
Valuation
The Net Asset Value at 30 September 2018 is GBP395.7 million,
comprising GBP488.9 million portfolio valuation, GBP10.0 million of
cash held by the Group, together with outstanding revolving credit
debt of GBP103.6 million and a positive working capital balance of
GBP0.4 million.
The Investment Adviser has prepared a fair market valuation of
the portfolio as at 30 September 2018. 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. The Directors have satisfied themselves as to the
methodology used and the assumptions adopted and have approved the
valuation of GBP488.9 million for the portfolio of 27 investments
as at 30 September 2018.
The Directors have made a change to the valuation policy in
respect of medium and long-term future power price assumptions,
switching to the use of a blended curve informed by the forecast
reports of two market consultants as is the norm within the listed
renewables sector. Changes to forecast future electricity and gas
prices, which incorporate this policy change, have increased the
portfolio valuation by 0.7 pence per share compared to the forecast
used at the last year end. The valuation policy remains unchanged
in respect of short-term power price assumptions, where the
season-ahead forward market is adopted for summer (Apr-Sep) and
winter (Oct-Mar) periods for the next two years from the valuation
date where fixed price arrangements are not already in place.
Outlook
The outlook for the Company is positive. In the period under
review, the Company has made use of its broad "environmental
infrastructure" mandate to continue to diversify into the AD
sector, where assets with established operating track records can
be acquired for attractive risk-adjusted returns. Following the
recent over-subscribed fundraising that closed after the period
end, the Company is now in an excellent position to capitalise on
the reputation it has in that sector as a knowledgeable investor
prepared to act in a collaborative manner with co-shareholders and
operators.
The Investment Adviser has an identified pipeline of
opportunities and the Company intends to make further investments
that add to the strong performance of the existing AD
portfolio.
The Company is also pursuing opportunities in wider bioenergy
sectors such as energy-from-waste and biomass. These opportunities
tend to be larger and so the recent fundraising and subsequent
repayment of the Company's credit facility has also put the Company
in a good position as a credible bidder. Like the AD sector, deals
tend to feature a relatively high proportion of revenues not
connected to sale of wholesale electricity, consistent with the
Company's strategy of limiting exposure to wholesale power markets
that can be volatile. The Board will continue to consider wind and
solar investments where risk-adjusted returns in those sectors
compare favourably with alternative environmental infrastructure
sectors that the Company can invest in, and that is not currently
the case for competitive bidding processes.
The Board continues to work closely with the Investment Adviser
in assessing the risks and opportunities in the environmental
infrastructure market. The Board considers that the principal risks
and uncertainties for JLEN have not materially altered from those
set out in the Supplementary Prospectus issued on 22 June 2018. The
full Supplementary Prospectus is available on JLEN's website, and a
summary of the principal risks and uncertainties is included on
pages 46 to 51 of the strategic report in the Annual Report for the
year ended 31 March 2018.
Richard Morse
Chairman
21 November 2018
VULCAN RENEWABLES BIOMETHANE PLANT
CO(2) analysis report
Asset introduction
The Vulcan Renewables Biomethane Plant is fed on a menu of
42,000 tonnes per annum of agricultural feedstocks including whole
crop maize, rye, sugar beet and grass silage. The biogas plant has
a designed export capacity of 450m3/hr biomethane with all
biomethane produced exported directly to the national gas grid. A
500kW CHP provides heat and power to meet the energy requirements
of the plant with surplus electricity exported to the grid. The
plant was commissioned in October 2013 and to date has exported
14,000MWh of renewable electricity and a further 186,000MWh of
biomethane.
CO(2) savings from biomethane
Biomethane offsets significant CO emissions compared with fossil
fuel derived gas and electricity. Conversion factors for fossil
fuel derived electricity, natural gas and biomethane are shown
below:
-- UK generated electricity: 0.28037 kg CO e per kWh;
-- natural gas: 0.18396 kg CO e per kWh (gross CV); and
-- biomethane: 0.00037703 kg CO e per kWh (gross CV).
The calculated CO savings shown within this report are based on
the actual savings achieved by the site.
What do these savings mean?
The Vulcan Renewables Biomethane Plant has to date offset
19,091tCO e since commissioning and is expected to offset at least
95,456tCO e over its operational lifetime. This equates to:
-- Equivalent emissions produced by a mid-sized diesel car
driving around Earth's equator 13,276 times over the plant's
lifetime
-- Average UK homes provided with gas for heating and cooking over the plant's lifetime 3,100
-- Mid-sized diesel cars removed from UK roads every year over the plant's lifetime
-- Average UK homes powered with renewable electricity over the plant's lifetime 1,000
Other environmental/social benefits
The Vulcan Renewables Biomethane Plant delivers several other
environmental and local community benefits. These have included to
date:
-- GBP5,000 paid to a local community benefit fund in the last
financial year which has been used for:
- new playground equipment for a local primary school;
- payment of Brownie and Girl Guide subscriptions;
- purchase of a trailer for the local Scout group;
- a new boiler for the local Methodist Church; and
- payment of rent for the local gardening society.
-- the resultant digestate from the plant is used on local
farmland as a valuable biofertilizer. The liquid fraction has been
particularly useful for establishment of cover crop, oilseed rape
and grass; and
-- use of the digestate as a direct replacement for traditional
fertilisers offsets an estimated 472tCO e per annum.
Source: AARDVARK Certification Limited
INVESTMENT ADVISER'S REPORT
JLEN's Net Asset Value as at 30 September 2018 increased to
GBP395.7 million from GBP392.4 million at 31 March 2018,
predominantly driven by increased forecast electricity prices. On a
per share basis it increased to 100.4 pence from 99.6 pence.
About the Investment Adviser
JLEN is advised by John Laing Capital Management Limited
("JLCM"), a wholly owned subsidiary of John Laing Group plc. JLCM
was incorporated in England and Wales on 19 May 2004 under the
Companies Act 1985 (registered number 5132286) and has been
authorised and regulated in the UK by the FCA (previously FSA)
since December 2004.
The portfolio
At 30 September 2018, the Group's investment portfolio comprised
of interests in 27 projects, 25 located in the UK and two in
France:
Commercial
Capacity operations
Asset Location Type Ownership (MWs) date
---------------------- ---------- -------------------- --------- -------- ----------
Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Burton Wold Extension UK (Eng) Wind 100% 14.4 Sep 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
---------------------- ---------- -------------------- --------- -------- ----------
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
Pylle Southern UK (Eng) Solar 100% 5.0 Dec 2015
Panther UK (Eng) Solar 100% 6.5 2011-2014
---------------------- ---------- -------------------- --------- -------- ----------
Icknield Farm UK (Eng) Anaerobic digestion 40% 5.0(1) Dec 2014
Vulcan Renewables UK (Eng) Anaerobic digestion 100% 5.0(2) Oct 2013
Egmere Energy UK (Eng) Anaerobic digestion 100% 5.0(2) Nov 2014
Grange Farm Energy UK (Eng) Anaerobic digestion 100% 5.0(2) Dec 2014
Merlin Renewables UK (Eng) Anaerobic digestion 100% 5.0(2) Sep 2014
---------------------- ---------- -------------------- --------- -------- ----------
Dumfries & Galloway UK (Scot) Waste management 80% n/a 2007
ELWA UK (Eng) Waste management 80% n/a 2006
Tay UK (Scot) Wastewater 33% n/a Nov 2001
---------------------- ---------- -------------------- --------- -------- ----------
(1) MW(th) (thermal) and an additional 0.4MW(e) CHP engine for on-site power provision.
(2) MW(th) (thermal) and an additional 0.5MW(e) CHP engine for on-site power provision.
Investment performance
The change in total NAV reflects the updates for recent
operational performance, changes in assumptions for future
electricity and gas prices and value enhancements. The Directors
have considered the current status of the electricity and gas
markets as well as discount rates seen in the secondary markets for
environmental infrastructure assets in arriving at the forecasts
used in the valuation.
The NAV per share at 30 September 2018 was 100.4 pence, up from
99.6 pence at 31 March 2018.
JLEN has announced an interim dividend of 1.6275 pence per share
for the quarter ended 30 September 2018, payable on 21 December
2018, in line with the full--year target of 6.51 pence per share
for the year ending 31 March 2019 as set out in the 2018 Annual
Report.
Portfolio performance
Total generation for the period from the renewables portfolio
was 208 GWh of electrical generation and 125GWhth of thermal
production, 9% below the electrical budget but 5% above the thermal
generation budget. Above budget performance from the solar assets
was more than offset by low wind speeds affecting the wind
portfolio but the growing AD segment displayed encouraging
results.
For the solar assets, the majority of plants performed
satisfactorily given the high levels of solar irradiance
experienced over the period, an improvement on previous periods and
evidence that the focus placed on solar asset management is making
a difference. Generation was 1.6% above budget, including a
transformer and switchgear failure in Branden in the end of May.
The switchgear was repaired and the transformer replaced. Excluding
these outages, generation was 2.8% above budget, on irradiation
that was 3.7% higher than the long-term expectation. Temperatures
were measured 1 to 2 degrees higher on average than long-term
expectations, contributing to lower generation than would otherwise
be expected given irradiance over the period.
For the AD assets, Vulcan Renewables and Icknield Farm were held
throughout the period, with Egmere Energy and Grange Farm Energy
acquired in July and Merlin Renewables shortly afterwards in
August. Allowing for JLEN's period of ownership, performance across
the AD portfolio has been very encouraging, with gas generation 5%
above budget, a trend that has been seen consistently since our
first acquisition in the sector in August 2017. Work has been
progressing on the Vulcan capital upgrade project that is expected
to result in a doubling of capacity at the plant, with no material
impact on existing operations.
For the wind assets, the period was notable for very low wind
speeds, with May, June, July and August all materially below
budget. Overall, generation was 12.0% below budget for the Funds'
reporting period, although this includes agreed curtailment at
Carscreugh where the project is paid an attractive rate to switch
off when requested by the network operator. Wind generation is
expected to be seasonally lower during the summer and so variances
to budget look greater on a relative basis. For example, for the
six months to 30 June 2018, the variance to budget was -4.2%. New
Albion experienced unavailability due to replacement work for
generator bearings on three turbines; recovery is expected under
the availability warranty. Notwithstanding the low level of wind
resource, the performance of the other assets was satisfactory,
with no material outages or performance issues to report. The
Investment Adviser has also concluded a portfolio wide tender for
management services, which has resulted in materially lower prices,
which in turn has increased the NAV and should lead to clearer
operational responsibility.
The continued growth of the AD portfolio also saw a good
performance across the asset base with an average of 5% favourable
variance against budgeted production. The assets displayed good
availability over this reporting period with minimal unplanned
downtime. Vulcan Renewables is undergoing its upgrade phase through
its EPC contractor with expected completion for the latter part of
2019, thereafter doubling the asset's output. Further value
enhancements are being considered by the Investment Adviser which
would be applicable across the AD portfolio focusing on enhancing
revenue further whilst managing operating costs.
Portfolio generation 2014-15 2015-16 2016-17 2017-18 2018-19 H1 Total
-------------------------------------------- ------- ------- ------- ------- ---------- -----
Wind portfolio actual generation (GWh(e) ) 82 184 217 399 151(2) 1033
Variation from budget(1) -7% +11% -15% 0% -12% -4%
Solar portfolio actual generation (GWh(e) ) 10 30 40 64 57 201
Variation from budget(1) -1% -2% -12% -9% +2% -5%
AD portfolio actual generation (GWh(th) ) - - - 51 125 176
Variation from budget - - - +8% +4% +6%
-------------------------------------------- ------- ------- ------- ------- ---------- -----
(1) Budgets adjusted to reflect operational energy yield
assessments carried out under contracted true-up mechanisms post
IPO.
(2) Actual generation voluntarily curtailed by 0.8GWh at Carscreugh and would have otherwise been commensurately higher.
The ELWA waste management project has continued to perform in
line with expectations, with key contractual targets being met and
the amount of waste delivered comfortably above the level that the
project needs to meet budget. The Tay wastewater project has
continued to experience unusually dry conditions and so revenues
based on flows will be reduced, although cost controls are expected
to mitigate the financial impact. The D&G waste concession
agreement was terminated during the period, with the Council taking
services in house and no further liability for JLEN as the majority
shareholder of the project company. Once outstanding project
company assets and liabilities have been settled, the project
company will be wound up and any residual net cash distributed to
JLEN as the subordinated creditor.
Environmental and social governance
JLEN takes its approach to environmental and social governance
("ESG") matters seriously and is of the opinion that the portfolio
provides a wide range of positive environmental benefits. It is the
intention of the Fund to provide an independent assessment of the
environmental impact of each of its investments such that there is
a clear and measurable set of metrics by which environmental
benefit can be assessed. As at this half-year reporting date, five
assets have been assessed and these reports are available on the
JLEN website. JLEN engages in a variety of community activities
where possible with their assets. An example of this is the
establishment of a community fund by one of the AD projects whereby
anyone living within the local area can apply for funding. Recent
examples of this include the provision of heating units to
residential care homes, equipment to Scouts and the contribution to
an extension at the village hall and refurbishment of local sports
facilities. More recently, our AD partner, Future Biogas, announced
their intention to hire three apprentices who will be assigned to
JLEN's AD plants for the duration of their four-year training
scheme. The long-term operations agreements in place between JLEN
and Future Biogas has ensured that this investment is made in the
future of these three young individuals. It is rewarding to see the
positive impact a JLEN investment is able to make in the
communities it invests in.
Acquisitions
Since 31 March 2018, the Company has acquired three further AD
assets and committed to a further investment in an existing
portfolio asset for a total capital deployment of GBP62.6 million.
The acquisitions and further investments were funded through a
drawdown under the Company's GBP130 million revolving credit
facility. The assets were as follows:
Vulcan Renewables, further investment
In June 2018, JLEN committed to invest a further c. GBP8.5
million into the Vulcan Renewables AD plant of which GBP4.3 million
had been funded at 30 September 2018. The investment consists of
the provision of funding to double the AD plant's biomethane and
generating capacity.
Egmere Energy and Grange Farm Energy
On 9 July 2018, JLEN completed two further acquisitions of AD
assets, Egmere Energy Limited and Grange Farm Energy Limited, for a
total consideration of c. GBP36 million. The Egmere Energy AD plant
is located in Egmere, North Norfolk and was commissioned in
November 2014. The plant has a thermal capacity of c. 5MW and
predominantly produces biomethane to be injected to the national
gas grid. In addition, the plant also has a 0.5MW CHP engine and is
accredited under the RHI and FiT schemes.
The Grange Farm Energy AD plant is located in Spridlington,
Lincolnshire and was commissioned in December 2014. The plant has a
thermal capacity of c. 5MW and predominantly produces biomethane to
be injected to the national gas grid. In addition, the plant also
has a 0.5MW CHP engine and is accredited under the RHI and FiT
schemes.
Merlin Renewables
On 16 August 2018, JLEN completed the acquisition of Merlin
Renewables Limited for a total consideration, including working
capital of c. GBP18.1 million.
The Merlin Renewables AD plant is located in Hibaldstow, North
Lincolnshire and was commissioned in September 2014. The plant has
a thermal capacity of c.5MW(th) and predominantly produces
biomethane to be injected to the national gas grid. In addition,
the plant also has a 0.5MW(e) CHP engine and is accredited under
the RHI and FiT schemes.
Future Biogas Limited will continue to provide management,
operations and maintenance services to the AD plants after the
acquisition.
Portfolio valuation
The Investment Adviser is responsible for carrying out the fair
market valuation of the Company's investments which is presented to
the Directors for their approval and adoption. The valuation is
carried out on a quarterly basis as at 30 June, 30 September, 31
December and 31 March each year.
The Directors' valuation of the portfolio at 30 September 2018
was GBP488.9 million, compared to GBP429.5 million at 31 March
2018. The increase of GBP59.4 million is the net impact of
acquisitions, cash received from investments, changes in
macroeconomic and power price assumptions, and underlying growth in
the portfolio.
The total movement of investments during the period ended 30
September 2018 is shown in the table below:
Six months ended
30 Sep 2018
(unaudited)
GBPm
-------------------------------------------------- ----------------
Valuation of portfolio at beginning of the period 429.5
Acquisitions and further investment in the period 59.8
Cash distributions from portfolio (20.7)
-------------------------------------------------- ----------------
Rebased opening valuation of portfolio 468.6
Changes in forecast power prices 2.9
Changes in economic assumptions 1.7
Changes in discount rates -
Balance of portfolio return 15.7
-------------------------------------------------- ----------------
Valuation of portfolio at end of the period 488.9
Fair value of Intermediate Holding Companies (91.8)
Investments at fair value through profit or loss 397.1
-------------------------------------------------- ----------------
Valuation assumptions
The investments in JLEN's portfolio are valued by discounting
the future cash flows forecast by the underlying asset financial
models.
Each movement between the rebased valuation and the 30 September
2018 valuation is considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 30
September 2018 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 6-12 months in order to reduce the revenue risk from price
volatility.
Where generating projects in the portfolio do not have a fixed
price under their PPAs, JLEN has reflected the prices in the table
below (gross of PPA discounts):
Avg GBP/Mwh Summer Winter
----------- ------------------- -------------------
Electricity 57 (March 2018: 43) 69 (March 2018: 49)
Gas 20 (March 2018: 14) 25 (March 2018: 17)
----------- ------------------- -------------------
At 30 September 2018, 78% of the renewable energy portfolios'
electricity price exposure was subject to a fixed price for the
winter 2018 season and 43% for the summer 2019 season. Further
fixes for the summer 2019 season were made post the period end.
After the initial two-year period, the project cash flows assume
future electricity and gas prices in line with a blended curve
informed by the central forecasts from two established market
consultants, adjusted by the Investment Adviser for
project-specific arrangements and price cannibalisation as
required. This is a change in valuation policy from the year ended
31 March 2018, where electricity and gas price assumptions were
based on the forecast of a single market consultant. The Directors
have adopted the new policy to bring the Company in line with the
majority of other funds within the listed renewables sector to aid
comparison and also with the intention of reducing the volatility
observed in portfolio valuations due to reflecting additional views
on medium and long-term electricity and gas prices. Changes to
forecast power prices have added 0.7 pence per share to the NAV
compared to the previous forecasts. If the Directors had maintained
the previous policy in updating power price forecasts, NAV per
share would have been 2.3 pence lower.
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 the low
marginal cost, intermittent generators on the GB network.
The real rate of price growth on a constant basis from the
period end is 0.4%. Current electricity prices are generally
considered to be high and the Directors note that there is a
short-term reduction expected which means that the actual real rate
of growth may increase.
Economic assumptions
Macroeconomic assumptions in respect of inflation, corporation
tax and deposit interest rates have remained relatively constant
during the period, RPI inflation rates assumed in the valuation at
30 September 2018 are 3.4% in 2018 (3.5% at 31 March 2018), 3.1% in
2019 (3.0% at 31 March 2018), 3.0% in 2020 (2.75% at 31 March 2018)
and 2.75% for all subsequent years for UK assets, and 1.5% in 2018
(1.5% at 31 March 2018) and for all subsequent years for the French
assets. The long--term UK corporation tax rate assumed is 19%,
stepping down to 17% from April 2020 onwards, reflecting the rates
enacted by legislation, which is in line with market practice. The
equivalent rates for the French assets remain unchanged from those
applied at 31 March 2018 at 28% in 2018, stepping down to 26.5% in
2021 and 25% from 2022. Deposit rates assumed in the valuation
reflect a range of deposit rates in the UK from 1.5% in 2018 with a
gradual increase to a long--term rate of 2.5% with effect from 2020
onwards. For the French assets the rate assumed is 0.5%. The
euro/sterling exchange rate used to value the euro-denominated
investments in France was EUR1.12/GBP1 (EUR1.14/GBP1 at 31 March
2018).
Discount rates
The discount rates used in the valuation exercise represent the
Investment Adviser's and the Board's assessment of the rate of
return in the market for assets with similar characteristics and
risk profile. The discount rates are reviewed on a regular basis
and updated, where appropriate, to reflect changes in the market
and in the project risk characteristics.
During the period since 31 March 2018, there has continued to be
strong demand for income--producing infrastructure assets,
including environmental infrastructure projects as the market
matures. Discount rates for the portfolio remain unchanged from
those used at 31 March 2018, although the Investment Adviser notes
discount rate benchmarks for UK agricultural AD projects are
reducing and will continue to monitor this for future
valuations.
Taking the above into account, and the change in mix of the
portfolio during the period due to new acquisitions, the overall
Weighted Average Discount Rate ("WADR") of the portfolio was 8.2%
at 30 September 2018 (8.1% at 31 March 2018).
Balance of portfolio return
This represents the balance of valuation movements in the period
excluding the factors noted above. The balance of the portfolio
return mostly reflects the impact on the rebased portfolio value,
all other measures remaining constant, of the effect of the
discount rate unwinding and also some additional valuation
adjustments from updates to individual project revenue assumptions.
The total represents an uplift of GBP15.7 million.
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 the Intermediate
Holding Companies, 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 cash inflows and
outflows.
A broad range of assumptions are used in our valuation models.
These assumptions are based on long-term forecasts and are not
affected by short-term fluctuations in inputs, be it economic or
technical. The Investment Adviser exercises its judgement in
assessing both the expected future cash flows from each investment
based on the project's life and the financial models produced by
each project company and the appropriate discount rate to
apply.
The key assumptions are as follows:
Volumes
Base case forecasts for renewable energy projects assume a "P50"
level of 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.
Agricultural AD facilities do not suffer from similar deviations
as their feedstock input volumes (and consequently biogas
production) are controlled by the site operator.
For the waste and wastewater processing projects, forecasts are
based on projections of future flows and are informed by both the
client authorities' own business plans and forecasts and
independent studies where appropriate.
Revenues in the PPP projects are generally not very sensitive to
changes in volumes due to the nature of their payment
mechanisms.
Power prices
Power price assumptions are based on the following: for the
first two years' cash flows for each project use forward
electricity and/or 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
long--term blended central case forecasts are taken from
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
electricity and gas prices relative to the base case for each year
of the asset life after the first two--year period.
Inflation
The inflation assumptions used in the valuation as at 30
September 2018 are 3.4% in 2018, 3.1% in 2019, 3.0% in 2020 with
2.75% for all subsequent years for UK assets, and 1.5% in 2018 and
for all subsequent years for the French assets. Each project in the
portfolio receives a revenue stream which is either fully or
partially inflation linked. The sensitivity assumes a 0.5% increase
or decrease in inflation relative to the base case.
Euro/sterling exchange rates
As the proportion of the portfolio assets with cash flows
denominated in euros represented less than 1% of the portfolio
value at 30 September 2018, JLCM considers the sensitivity to
changes in euro/sterling exchange rates to be insignificant.
Financing
JLEN benefits from a revolving credit facility with HSBC, NIBC,
ING and Santander of GBP130 million (of which GBP103.6 million has
been drawn at 30 September 2018) and an uncommitted "accordion"
facility of up to GBP60 million. In June 2018, the Fund exercised
the option to extend the facility a further year, now expiring in
June 2021. The facility margin is 200 to 225 bps (depending on the
loan-to-value ratio for the Fund) over LIBOR.
The facility gives 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, AD and waste and
wastewater processing assets, on a timely basis, reducing the
performance drag associated with holding excess cash. As at the
period end, drawings under the revolving credit facility were
GBP103.6 million. Under its investment policy, JLEN may borrow up
to 30% of its NAV.
Post the end of the period, all the outstanding facility was
repaid from the proceeds of an equity issuance that closed in
October 2018. At the date of issuing this report, the full
committed facility of GBP130m is available for acquisitions.
In addition to the revolving credit facility, several of the
projects have underlying project level debt which is not reflected
in these financial statements. There is an additional gearing limit
in respect of such debt of 85% of the aggregate gross project value
(being the fair market value of such portfolio companies increased
by the amount of any financing held within the projects) for
PFI/PPP projects and 65% for renewable energy generation
projects.
The project-level gearing at 30 September 2018 across the
portfolio was 35.5% (31 March 2018: 39.1%) being 29.4% (31 March
2018: 32.9%) for the renewable energy assets and 54.5% (31 March
2018: 56.4%) for the PFI processing assets. The decrease in the
gearing for the renewable energy assets during the period reflects
the acquisition of the AD plants in the period. Taking into account
the amount drawn down under the revolving credit facility, the
overall fund gearing at 30 September 2018 was 48.2% (31 March 2018:
45.4%). As discussed further below, the revolving credit facility
was fully repaid in October 2018.
As at 30 September 2018, the Group, which comprises the Company
and the Intermediate Holding Companies, had cash balances of
GBP10.0 million (31 March 2018: GBP11.8 million).
Share capital
In October 2018, post the period end JLEN raised GBP105 million
through the issue of 102.9 million new ordinary shares at a price
of 102 pence per share, an estimated 1.6% premium to NAV at 30
September 2018 and accretive to existing shareholders. The issue
was significantly over-subscribed and applications had to be scaled
back in accordance with the terms of the placing. The proceeds of
the share issue were used to repay the outstanding balance on the
revolving credit facility, which had been drawn to finance the
acquisition of the Llynfi wind farm and the new AD plant
investments completed in the period.
Profit before tax
Profit before tax for the period was GBP16.1 million (30
September 2017: GBP6.3 million), generating earnings per share for
the period of 4.1 pence (30 September 2017: 1.8 pence). The
increase over the period to 30 September 2017 reflects the increase
in forecast power prices and value enhancements included in the
valuation of the portfolio.
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
All amounts presented in GBPmillion (except as noted) GBPm GBPm
------------------------------------------------------ ----------- -----------
Interest received on UK HoldCo loan notes 10.3 8.9
Dividends received from UK HoldCo - 5.5
Net gains/(loss) on investments at fair value 8.6 (5.7)
------------------------------------------------------ ----------- -----------
Operating income 18.9 8.7
------------------------------------------------------ ----------- -----------
Operating cost (2.8) (2.4)
------------------------------------------------------ ----------- -----------
Profit before tax 16.1 6.3
------------------------------------------------------ ----------- -----------
Earnings per share 4.1p 1.8p
------------------------------------------------------ ----------- -----------
Ongoing charges
The "ongoing charges" ratio is an indicator of the costs
incurred in the day--to--day management of the Fund. JLEN uses the
Association of Investment Companies ("AIC") recommended methodology
for calculating this ratio, which is an annual figure. For the year
ended 31 March 2018 the ratio was 1.31% and it is anticipated that
the full year ratio for the year ended March 2019 will be in line
with this. The ongoing charges percentage is calculated on a
consolidated basis and therefore takes into consideration the
expenses of UK HoldCo as well as the Company's.
Net assets
Net assets increased from GBP392.4 million at 31 March 2018 to
GBP395.7 million at 30 September 2018, primarily driven by the
increase in forecast power prices assumed in the valuation of the
portfolio.
Analysis of the Group's net assets
30 Sep 2018 31 Mar 2018
All amounts presented in GBPmillion (except as noted) (unaudited) (audited)
--------------------------------------------------------- ----------- -----------
Portfolio value 488.9 429.5
Intermediate Holding Companies cash 9.8 6.3
Intermediate Holding Companies revolving credit facility (103.6) (48.4)
Intermediate Holding Companies other assets 2.0 1.1
--------------------------------------------------------- ----------- -----------
Fair value of the Company's investment in UK HoldCo 397.1 388.5
--------------------------------------------------------- ----------- -----------
Company's cash 0.2 5.5
Company's other net liabilities (1.6) (1.6)
--------------------------------------------------------- ----------- -----------
Net Asset Value 395.7 392.4
--------------------------------------------------------- ----------- -----------
Number of shares 394,077,029 394,077,029
Net Asset Value per share 100.4p 99.6p
--------------------------------------------------------- ----------- -----------
The movement in the portfolio value of environmental
infrastructure assets during the period is summarised as
follows:
GBPm
------------------------------------------------- ------
Value at 31 March 2018 (audited) 429.5
Acquisitions and further investment 59.8
Growth in value of portfolio 20.3
Distributions received from investments (20.7)
------------------------------------------------- ------
Portfolio value at 30 September 2018 (unaudited) 488.9
------------------------------------------------- ------
Cash flow
At 30 September 2018, the Group (Company plus Intermediate
Holding Companies) had a total cash balance of GBP10.0 million (31
March 2018: GBP11.8 million), including GBP0.2 million (31 March
2018: GBP5.5 million) in the Company's balance sheet and GBP9.8
million (31 March 2018: GBP6.3 million) in the Intermediate Holding
Companies, which is included in the Company's balance sheet within
"investments at fair value through profit or loss".
At 30 September 2018, UK HoldCo had GBP103.6 million drawn down
(31 March 2018: GBP48.4 million) under its revolving credit
facility.
Cash flows of the Group for the period are summarised as
follows:
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------------------------ ----------- -----------
Cash received from environmental infrastructure investments 20.7 15.4
Administrative expenses (0.4) (0.6)
Directors' fees and expenses (0.1) (0.1)
Investment advisory fees (2.2) (1.8)
Financing costs (net of interest income) (1.3) (0.8)
------------------------------------------------------------ ----------- -----------
Cash flow from operations 16.7 12.1
------------------------------------------------------------ ----------- -----------
(Expenses)/net proceeds from share issues (0.3) 39.5
Drawdown under the revolving credit facility 55.2 3.3
Arrangement fee for revolving credit facility (0.4) (1.2)
Acquisition of investment assets and further investment (58.7)(1) (52.8)
Acquisition costs (including stamp duty) (1.7) (1.4)
Dividends paid in cash to shareholders (12.6) (11.2)
------------------------------------------------------------ ----------- -----------
Cash movement in the period (1.8) (11.7)
------------------------------------------------------------ ----------- -----------
Opening cash balance 11.8 26.1
------------------------------------------------------------ ----------- -----------
Group cash balance at 30 September 10.0 14.4
------------------------------------------------------------ ----------- -----------
(1) Excludes acquisition costs recovered from the sellers.
During the period, the Group received cash distributions of
GBP20.7 million from its environmental infrastructure investments,
in line with distributions expected by the Group.
The Company has declared an interim dividend of 1.6275 pence per
share for the quarter to 30 September 2018 (estimated based on the
shares in issue at the date of this Half-year Report to have a cash
cost of GBP8.1 million), which is payable on 21 December 2018.
Outlook
In the period under review, the Company has benefited from
having its broad environmental infrastructure investment mandate.
Acquisition opportunities in AD and wider bioenergy have compared
favourably with alternatives in wind and solar, with the outcome
that the Company has added only AD projects in the period. These
projects have attractive revenue characteristics, with high levels
of RPI-linked subsidy support and correspondingly low exposure to
wholesale gas and electricity markets. The Company sees further
opportunities in the AD sector and is in discussions with a number
of asset owners about future transactions.
The Company also sees opportunities in the biomass and
energy-from-waste sectors. Each of these sectors is represented in
the pipeline of assets covered by the First Offer Agreement that
the Company has with John Laing Group plc. In addition, the Company
is aware of third-party bioenergy assets that are available for
sale and is continuing to position itself for those transactions
that fit with the Company's strategic objectives.
The Company views the typically low level of revenue exposure of
bioenergy projects to wholesale gas and electricity markets as a
positive. In the period under review, short-term prices have
increased significantly, from GBP49/MWh for winter contracts at 31
March 2018 to GBP69/MWh at this period end. Post the period end,
electricity prices have started to fall back, demonstrating the
inherent variability in these revenues. The Company's strategy
remains to target assets with low exposure to wholesale power
markets in their revenue mix where possible to minimise this risk.
The Company will also continue to maintain a series of rolling
price fixes such that the portfolio has a very low exposure to
movements in wholesale markets the closer to generating power it
gets.
The shape of a Brexit deal, or indeed no deal, remains very
uncertain. As far as is possible, the Directors have considered the
consequences for the Company of different Brexit outcomes and have
not identified any first-order implications for the Company's
operations or its very substantially mainland Britain-based
portfolio. Even for the two French wind farms (<1% of the
portfolio value), there are no potential obstacles apparent for the
Company as an owner. The pipeline of asset opportunities available
to the Company is very heavily focused on UK assets in the short
term and so the Directors do not consider Brexit to be a
significant risk at the present time.
Progress has also been made on the operations of the existing
portfolio. The Investment Adviser has continued to strengthen its
core team in this area, with an experienced Head of AD asset
management joining in the period, and a new Head of Wind asset
management starting post the period end.
For the solar projects, the majority of sites are performing
well, as demonstrated by the positive generation variance over the
period, reflecting high solar irradiance. Initiatives are underway
to improve pre-emptive repairs and to optimise spares retention.
For the wind portfolio, notwithstanding low wind speeds during the
period, availability performance has been good, with the focus now
on achieving a number of site-specific enhancement opportunities
and continuing to implement turbine upgrades to deliver increased
generation. Across both the wind and solar portfolios, discussions
continue with landowners to extend leases where feasible in order
to benefit from extended operational asset life and increase the
NAV.
For the AD portfolio, feedstock supplies for 2019 have mostly
been secured and harvested to the sites. Feedstock crop yields have
been lower than expected in 2018 due to a cold spring and low
rainfall during the summer period. However due to the prolonged
elevated temperatures, feedstock quality (a measure of the gas
potential) is better than expected. In turn these factors may
result to in a potential marginal increase in cost of sales, whilst
being mitigated by requiring less feedstock due to improved
quality. The AD plants continue to offer interesting value
enhancement opportunities due to the ability to optimise different
stages of the AD process and also due to the increasing scale of
the JLEN AD portfolio.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
-- the condensed set of unaudited financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting and
in accordance with the accounting policies set out in the audited
Annual Report to 31 March 2018; and
-- the Chairman's statement and Investment Adviser's report meet
the requirements of an interim management report and include a fair
review of the information required by:
a) DTR 4.2.7R, being an indication of important events during
the first six months of the financial year and a description of
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.
This responsibility statement was approved by the Board of
Directors on 21 November 2018 and is signed on its behalf by:
Richard Morse
Chairman
21 November 2018
INDEPENT REVIEW REPORT
to John Laing Environmental Assets Group Limited
We have been engaged by the Company to review the condensed set
of financial statements in the half--yearly financial report for
the six months ended 30 September 2018 which comprises the
condensed income statement, the condensed statement of financial
position, the condensed statement of changes in equity, the
condensed cash flow statement and related notes 1 to 18. We have
read the other information contained in the half--yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half--yearly financial report is the responsibility of, and
has been approved by the Directors. The Directors are responsible
for preparing the half--yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of financial statements included
in this half--yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half--yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half--yearly financial report for the six months ended 30
September 2018 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor,
Guernsey, Channel Islands
21 November 2018
CONDENSED UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2018
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
Notes GBP'000s GBP'000s
-------------------------- ----- ----------- -----------
Operating income 8 18,951 8,756
Operating expenses 4 (2,853) (2,412)
-------------------------- ----- ----------- -----------
Operating profit 16,098 6,344
-------------------------- ----- ----------- -----------
Profit before tax 16,098 6,344
Tax 5 - -
-------------------------- ----- ----------- -----------
Profit for the period 16,098 6,344
-------------------------- ----- ----------- -----------
Earnings per share
Basic and diluted (pence) 7 4.1 1.8
-------------------------- ----- ----------- -----------
The accompanying notes form an integral part of the condensed
set of financial statements.
All results are derived from continuing operations.
There are no items of other comprehensive income in either the
current or preceding period, other than the profit for the period
and therefore no separate statement of comprehensive income has
been presented.
CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION
as at 30 September 2018
30 Sep 2018 31 Mar 2018
(unaudited) (audited)
Notes GBP'000s GBP'000s
------------------------------------------------- ----- ----------- -----------
Non-current assets
Investments at fair value through profit or loss 8 397,090 388,468
------------------------------------------------- ----- ----------- -----------
Total non-current assets 397,090 388,468
------------------------------------------------- ----- ----------- -----------
Current assets
Trade and other receivables 9 23 20
Cash and cash equivalents 170 5,509
------------------------------------------------- ----- ----------- -----------
Total current assets 193 5,529
------------------------------------------------- ----- ----------- -----------
Total assets 397,283 393,997
------------------------------------------------- ----- ----------- -----------
Current liabilities
Trade and other payables 10 (1,552) (1,610)
------------------------------------------------- ----- ----------- -----------
Total current liabilities (1,552) (1,610)
------------------------------------------------- ----- ----------- -----------
Total liabilities (1,552) (1,610)
------------------------------------------------- ----- ----------- -----------
Net assets 395,731 392,387
------------------------------------------------- ----- ----------- -----------
Equity
Share capital account 12 389,138 389,262
Retained earnings 13 6,593 3,125
------------------------------------------------- ----- ----------- -----------
Equity attributable to owners of the Company 395,731 392,387
------------------------------------------------- ----- ----------- -----------
Net assets per share (pence per share) 100.4 99.6
------------------------------------------------- ----- ----------- -----------
The accompanying notes form an integral part of the condensed
set of financial statements.
The condensed set of unaudited financial statements were
approved by the Board of Directors and authorised for issue on 21
November 2018.
They were signed on its behalf by:
Richard Morse
Chairman
Christopher Legge
Director
CONDENSED UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2018
Six months ended 30 Sep 2018
(unaudited)
---------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
----------------------------------------------------- ----- ------------- -------- --------
Balance at 1 April 2018 389,262 3,125 392,387
----------------------------------------------------- ----- ------------- -------- --------
Profit and total comprehensive income for the period - 16,098 16,098
Issue of share capital 12 - - -
Expenses of issue of equity shares 12 (124) - (124)
Dividends paid 6, 13 - (12,630) (12,630)
----------------------------------------------------- ----- ------------- -------- --------
Balance at 30 September 2018 389,138 6,593 395,731
----------------------------------------------------- ----- ------------- -------- --------
Six months ended 30 Sep 2017
(unaudited)
---------------------------------
Share capital Retained
account earnings Total
Notes GBP'000s GBP'000s GBP'000s
----------------------------------------------------- ----- ------------- -------- --------
Balance at 1 April 2017 334,858 5,190 340,048
----------------------------------------------------- ----- ------------- -------- --------
Profit and total comprehensive income for the period - 6,344 6,344
Issue of share capital 12 40,000 - 40,000
Expenses of issue of equity shares 12 (551) - (551)
Dividends paid 6, 13 - (11,184) (11,184)
----------------------------------------------------- ----- ------------- -------- --------
Balance at 30 September 2017 374,307 350 374,657
----------------------------------------------------- ----- ------------- -------- --------
The accompanying notes form an integral part of the condensed
set of financial statements.
CONDENSED UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2018
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
Notes GBP'000s GBP'000s
-------------------------------------------------------------------- ----- ----------- -----------
Profit from operations 16,098 6,344
Adjustments for:
Interest received (10,329) (8,969)
Dividends received - (5,500)
Net (gain)/loss on investments at fair value through profit or loss (8,622) 5,713
-------------------------------------------------------------------- ----- ----------- -----------
Operating cash flows before movements in working capital (2,853) (2,412)
(Increase)/decrease in receivables (3) 8
(Decrease)/increase in payables (58) 145
-------------------------------------------------------------------- ----- ----------- -----------
Net cash flow from operating activities (2,914) (2,259)
-------------------------------------------------------------------- ----- ----------- -----------
Investing activities
Investment in subsidiaries - (17,500)
Loans to subsidiaries 11 - (22,000)
Interest received 10,329 8,969
Dividends received - 5,500
-------------------------------------------------------------------- ----- ----------- -----------
Net cash flow from investing activities 10,329 (25,031)
-------------------------------------------------------------------- ----- ----------- -----------
Financing activities
Gross proceeds on issue of share capital 12 - 40,000
Expenses relating to issue of shares 12 (124) (551)
Dividends paid 6 (12,630) (11,184)
-------------------------------------------------------------------- ----- ----------- -----------
Net cash flow from financing activities (12,754) 28,265
-------------------------------------------------------------------- ----- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (5,339) 975
Cash and cash equivalents at beginning of period 5,509 4,150
-------------------------------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of period 170 5,125
-------------------------------------------------------------------- ----- ----------- -----------
The accompanying notes form an integral part of the condensed
set of financial statements.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
for the six months ended 30 September 2018
1. General information
John Laing Environmental Assets Group Limited (the "Company" or
"JLEN") is a closed-ended investment company domiciled and
incorporated in Guernsey, Channel Islands, under Section 20 of the
Companies (Guernsey) Law. The shares are publicly traded on the
London Stock Exchange under a Premium Listing. The condensed set of
financial statements of the Company are for the six-month period
ended 30 September 2018 and have been prepared on the basis of the
accounting policies set out in the Company's latest annual audited
financial statements. The condensed set of financial statements
comprise the Company and its investment in John Laing Environmental
Assets Group (UK) Limited ("UK HoldCo"). The Company and its
subsidiaries invest in environmental infrastructure projects that
utilise natural or waste resources or support more environmentally
friendly approaches to economic activity.
2. Significant accounting policies
(a) Basis of preparation
The condensed set of financial statements were approved and
authorised for issue by the Board of Directors on 21 November 2018.
The condensed set of financial statements included in this
Half-year Report have been prepared in accordance with IAS 34
Interim Financial Reporting. The accounting policies are consistent
with those used in the latest audited financial statements to 31
March 2018 and should be read in conjunction with the Company's
annual audited financial statements for the year ended 31 March
2018.
As a result of adopting the amendments to IFRS 10, IFRS 12 and
IAS 28 first adopted in the Company's Annual Report to 31 March
2015, the Company is required to hold its subsidiaries that provide
investment services at fair value, in accordance with IAS 39
Financial Instruments: Recognition and Measurement, and IFRS 13
Fair Value Measurement.
The Investment Adviser has performed a detailed analysis of the
potential impact of IFRS 9 and IFRS 15 on the Company, intermediate
holding companies and underlying portfolio companies. The Directors
have concluded that IFRS 9 and IFRS 15 do not have a material
impact on the condensed financial statements.
The Company accounts for its investment in its wholly owned
direct subsidiary UK HoldCo at fair value. The Company, together
with its wholly owned direct subsidiary UK HoldCo, the intermediate
holding subsidiary HWT Limited and JLEAG Solar 1 Limited, comprise
the Group (the "Group") investing in environmental infrastructure
assets.
The net assets of the intermediate holding companies (comprising
UK HoldCo, HWT Limited and JLEAG Solar 1 Limited), which at 30
September 2018 principally comprise working capital balances, the
bank loan and investments in projects, are required to be included
at fair value in the carrying value of investments.
(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 consider, based on those forecasts and an assessment of
the Company's subsidiary's banking facilities, that it is
appropriate to prepare the condensed 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 GBP10.0
million as at 30 September 2018 and a banking facility available
for investment in new or existing projects and for working capital
of GBP130.0 million. GBP103.6 million of this facility was drawn at
the period end and the facility is repayable in June 2021. The
facility was fully repaid in October 2018 with proceeds from the
recent capital raise of GBP105 million.
All key financial covenants are forecast to continue to be
complied with at least 12 months from the date of signing these
condensed financial statements.
The Directors are satisfied that the Company has sufficient
resources to continue to operate for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing these condensed financial statements.
(c) Segmental reporting
The Board is of the opinion that the Company is engaged in a
single segment of business, being investment in environmental
infrastructure to generate investment returns while preserving
capital. The financial information used by the Board to allocate
resources and manage the Company presents the business as a single
segment comprising a homogeneous portfolio.
(d) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey)
Law, 1987 the Company is a Registered Closed--Ended Investment
Scheme. As a registered scheme, the Company is subject to certain
ongoing obligations to the Guernsey Financial Services Commission
and is governed by the Companies (Guernsey) Law, 2008 as
amended.
3. Seasonality
Neither operating income nor profit are impacted significantly
by seasonality. While meteorological conditions resulting in the
fluctuation in the levels of wind and sunlight can affect revenues
of the Company's environmental infrastructure projects, due to the
diversified mix of projects, these fluctuations do not materially
affect the Company's operating income or profit.
4. Operating expenses
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
GBP'000s GBP'000s
----------------------------- ----------- -----------
Investment advisory fees 2,383 1,977
Directors' fees and expenses 121 137
Administration fee 49 44
Other expenses 300 254
----------------------------- ----------- -----------
2,853 2,412
----------------------------- ----------- -----------
5. Tax
Income tax expense
The Company has obtained exempt status from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989.
The income from its investments is therefore not subject to any
further tax in Guernsey, although the investments provide for and
pay taxation at the appropriate rates in the jurisdictions in which
they operate. The underlying tax within the subsidiaries and
environmental infrastructure assets, which are held as investments
at fair value through profit or loss, are included in the estimate
of the fair value of these investments.
6. Dividends
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
GBP'000s GBP'000s
------------------------------------------------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity holders during the period (pence per share):
Final dividend for the year ended 31 March 2018 of 1.5775 (31 March 2017: 1.535) 6,216 5,214
Interim dividend for the quarter ended 30 June 2018 of 1.6275 (30 June 2017: 1.5775) 6,414 5,970
------------------------------------------------------------------------------------------- ----------- -----------
12,630 11,184
------------------------------------------------------------------------------------------- ----------- -----------
A dividend for the quarter to 30 September 2018 of 1.6275 pence
per share was approved by the Board on 21 November 2018 and is
payable on 21 December 2018. The dividend has not been included as
a liability at 30 September 2018.
7. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
GBP'000s GBP'000s
-------------------------------------------------------------------------------------------- ----------- -----------
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit
attributable
to owners of the Company 16,098 6,344
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings
per share 394,077,029 357,892,383
-------------------------------------------------------------------------------------------- ----------- -----------
The denominator for the purposes of calculating both basic and
diluted earnings per share is the same as the Company had not
issued any share options or other instruments that would cause
dilution.
Six months Six months
ended ended
30 Sep 2018 30 Sep 2017
(unaudited) (unaudited)
--------------------------------------------- ----------- -----------
Basic and diluted earnings per share (pence) 4.1 1.8
--------------------------------------------- ----------- -----------
8. Investments at fair value through profit or loss
As set out in note 1, the Company accounts for its interest in
its 100% wholly 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 in the Company's statement of financial
position:
30 Sep 2018 31 Mar 2018
(unaudited) (audited)
GBP'000s GBP'000s
------------------------------------------------------- ----------- -----------
Fair value of environmental infrastructure investments 488,887 429,494
Fair value of Intermediate Holding Companies (91,797) (41,026)
------------------------------------------------------- ----------- -----------
Total fair value of investments 397,090 388,468
------------------------------------------------------- ----------- -----------
Reconciliation of movement in fair value of portfolio of
assets
The table below shows the movement in the fair value of the
Company's portfolio of environmental infrastructure assets. These
assets are held through other Intermediate Holding Companies. The
table below also presents a reconciliation of the fair value of the
asset portfolio to the Company's condensed unaudited statement of
financial position as at 30 September 2018, by incorporating the
fair value of these Intermediate Holding Companies.
Six months to 30 Sep 2018 (unaudited) Year to 31 Mar 2018 (audited)
----------------------------------------- ----------------------------------------
Cash, working Cash, working
capital and debt capital and debt
in Intermediate in Intermediate
Portfolio Holding Portfolio Holding
value Companies Total value Companies Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------- ---------- ---------------- ----------- --------- ---------------- -----------
Opening balance 429,494 (41,026) 388,468 327,647 9,274 336,921
Acquisitions
Portfolio of assets acquired/
further investment 59,751 59,751 110,789 - 110,789
Post-acquisition price
adjustments - - - (3,591) - (3,591)
--------------------------------- ---------- ---------------- ----------- --------- ---------------- -----------
59,751 59,751 107,198 - 107,198
Growth in portfolio(1) 20,342 - 20,342(1) 28,058 - 28,058(1)
Cash yields from portfolio to
Intermediate Holding Companies (20,700) 20,700 - (33,409) 33,409 -
Yields from Intermediate Holding
Companies
Interest on loan notes(1) - (10,329) (10,329)(1) - (18,631) (18,631)(1)
Dividends from UK HoldCo to the
Company(1) - - -(1) - (10,400) (10,400)(1)
--------------------------------- ---------- ---------------- ----------- --------- ---------------- -----------
- (10,329) (10,329) - (29,031) (29,031)
Other movements
Investment in working capital in
UK HoldCo - (4,601) (4,601) - (16,798) (16,798)
Administrative expenses borne by
Intermediate Holding
Companies(1) - (1,391) (1,391)(1) - (1,980) (1,980)(1)
Drawdown of UK HoldCo credit
facility borrowings - (55,150) (55,150) - (35,900) (35,900)
--------------------------------- ---------- ---------------- ----------- --------- ---------------- -----------
Fair value of the Company's
investment in UK HoldCo 488,887 (91,797) 397,090 429,494 (41,026) 388,468
--------------------------------- ---------- ---------------- ----------- --------- ---------------- -----------
(1) The net gain on investments at fair value through profit or
loss for the period ended 30 September 2018 is GBP8,622,000 (year
ended 31 March 2018: loss of GBP2,953,000, six-month period ended
30 September 2017: loss of GBP5,713,000). This, together with
interest received on loan notes of GBP10,329,000 (year ended 31
March 2018: GBP18,631,000, six-month period ended 30 September
2017: GBP8,969,000) and dividend income of GBPnil (year ended 31
March 2018: GBP10,400,000, six-month period ended 30 September
2017: GBP5,500,000) comprises operating income in the condensed
income statement.
The balances in the above table 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 movement in working
capital and are not value generating.
Fair value of portfolio of assets
The Investment Adviser has carried out fair market valuations of
the investments as at 30 September 2018. The Directors have
satisfied themselves as to the methodology used and the discount
rates applied for the valuation. Investments are all investments in
environmental infrastructure9 projects and are valued using a
discounted cash flow methodology, being the most relevant and most
commonly used method in the market to value similar assets to the
Company's. The Company's holding of its investment in UK HoldCo
represents its interest in both the equity and debt instruments.
The equity and debt instruments are valued as a whole using a
blended discount rate and the value attributed to the equity
instruments represents the fair value of future dividends and
equity redemptions in addition to any value enhancements arising
from the timing of loan principal and interest receipts from the
debt instruments, while the value attributed to the debt
instruments represents the principal outstanding and interest due
on the loan at the valuation date.
The valuation techniques and methodologies have been applied
consistently with the valuation performed since the launch of the
Fund in March 2014.
Discount rates applied to the portfolio of assets range from
6.5% to 9.8% (weighted average 8.2%) (at 31 March 2018: from 6.5%
to 9.2% - weighted average 8.1%).
The following economic assumptions were used in the discounted
cash flow valuations:
30 Sep 2018 31 Mar 2018
---------------------------- ------------------------------------------ ------------------------------------------
UK - inflation rates 3.4% for 2018 gradually reducing to 2.75% 3.5% for 2018 decreasing to 2.75% from
from 2021 2020
France - inflation rates 1.5% 1.5%
UK - deposit interest rates 1.5% for 2018 gradually rising 1.5% for 2018, gradually rising
to 2.5% from 2020 to 2.5% from 2020
France - deposit rates 0.5% 0.5%
Euro/sterling exchange rate 1.12 1.14
---------------------------- ------------------------------------------ ------------------------------------------
The long--term UK corporation tax rate assumed in the 30
September 2018 portfolio valuation is 19%, stepping down to 17% in
April 2020 (in line with market practice). The equivalent rate for
the French assets is 28% in 2018, stepping down to 26.5% in 2021
and 25% from 2022.
Fair value of Intermediate Holding Companies
The assets in the Intermediate Holding Companies substantially
comprise working capital, cash balances and the outstanding
revolving credit facility debt, therefore the Directors consider
the fair value to be equal to the book values.
Details of investments made during the period
On 22 June 2018, the Group completed a further investment of
GBP4.3 million into the Vulcan Renewables AD plant to double the
plant's biomethane generating capacity.
On 9 July 2018, the Group acquired the two AD plants, Egmere
Energy and Grange Farm Energy for a total consideration of GBP36.9
million.
On 16 August 2018, the Group acquired the Merlin AD plant for a
total consideration, including working capital of GBP18.5
million.
9. Trade and other receivables
30 Sep 2018 31 Mar 2018
(unaudited) (audited)
GBP'000s GBP'000s
---------------- ----------- -----------
Prepayments 23 20
---------------- ----------- -----------
Closing balance 23 20
---------------- ----------- -----------
10. Trade and other payables
30 Sep 2018 31 Mar 2018
(unaudited) (audited)
GBP'000s GBP'000s
---------------- ----------- -----------
Accruals 1,552 1,610
---------------- ----------- -----------
Closing balance 1,552 1,610
---------------- ----------- -----------
11. Loans and borrowings
The Company had no outstanding loans or borrowings at 30
September 2018 (31 March 2018: none), as shown in the Company's
condensed statement of financial position.
The Company's immediate subsidiary, UK HoldCo, as Borrower, and
the Company, as Guarantor, benefit from a three--year revolving
credit facility with HSBC, ING, NIBC and Santander. On 14 June
2017, the Fund signed a new three-year facilities agreement which
provides for a committed revolving credit facility of GBP130
million and an uncommitted accordion facility of up to GBP60
million. Furthermore, the facility incorporates an uncommitted
option to extend for a further year which was exercised on 1 June
2018. The facility margin is 200 to 225 bps (depending on the
loan-to-value ratio for the Fund) over LIBOR. The facility will be
used to finance the acquisitions of environmental infrastructure
projects and to cover working capital requirements.
As at 30 September 2018, UK HoldCo had an outstanding balance of
GBP103.6 million under the facility (31 March 2018: GBP48.4
million). The loan bears interest of LIBOR +200 to 225 bps and was
subsequently repaid after the period end from the proceeds of the
capital raise.
As at 30 September 2018, the Company held loan notes of GBP228.9
million which were issued by UK HoldCo (31 March 2018: outstanding
amount of GBP228.9 million).
There were no other outstanding loans and borrowings in either
the Company, UK HoldCo, HWT or JLEAG Solar 1 at 30 September
2018.
12. Share capital account
30 Sep 2018 (unaudited) 31 Mar 2018 (audited)
------------------------- -----------------------
Number of Number of
shares GBP'000s shares GBP'000s
----------------------------------- -------------- --------- ------------- --------
Opening balance 394,077,029 389,262 339,642,078 334,858
Shares issued in the period - - 54,434,951 55,522
Expenses of issue of equity shares - (124) - (1,118)
----------------------------------- -------------- --------- ------------- --------
Closing balance 394,077,029 389,138 394,077,029 389,262
----------------------------------- -------------- --------- ------------- --------
All shares issued rank pari passu and include the right to
receive all future dividends and distributions declared or
paid.
13. Retained earnings
30 Sep 2018 31 Mar 2018
(unaudited) (audited)
GBP'000s GBP'000s
--------------------------- ----------- -----------
Opening balance 3,125 5,190
Profit for the period/year 16,098 21,060
Dividends paid (12,630) (23,125)
--------------------------- ----------- -----------
Closing balance 6,593 3,125
--------------------------- ----------- -----------
14. Transactions with Investment Adviser and other related
parties
Transactions between the Company and its subsidiaries, which are
related parties of the Company, are transacted at arm's length and
are disclosed within this note. Details of transactions between the
Company and other related parties are disclosed below. This note
also details the terms of the Company's engagement with John Laing
Capital Management Limited as Investment Adviser, together with the
details of investment acquisitions from John Laing Group plc, of
which JLCM is a wholly owned subsidiary.
Transaction with the Investment Adviser
JLCM is the Company's Investment Adviser. JLCM's appointment as
Investment Adviser is governed by an Investment Advisory Agreement
which may be terminated after an initial four--year term, starting
31 March 2014, by either party giving one year's written
notice.
JLCM is entitled to a base fee equal to a) 1.0% per annum of the
Adjusted Portfolio Value(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 six months ended 30 September 2018 was GBP2,383,000
(six-month period ended 30 September 2017: GBP1,977,000) of which
GBP1,295,000 remained payable as at 30 September 2018 (31 March
2018: GBP1,103,000).
(1) Adjusted Portfolio Value is defined in the Investment Advisory Agreement as:
a) the fair value of the investment portfolio; plus
b) any cash owned by or held to the order of the Fund; plus
c) the aggregate amount of payments made to shareholders by way
of dividend in the quarterly period ending on the relevant
valuation day, less
i. any other liabilities of the Fund (excluding borrowings); and
ii. any uninvested cash.
(2) Fund means the Company and John Laing Environmental Assets
Group (UK) Limited together with their wholly owned subsidiaries or
subsidiary undertakings (including companies or other entities
wholly owned by them together, individually or in any combination,
as appropriate) but excluding project entities.
Other transactions with related parties
The Directors of the Company, who are considered to be key
management, received fees for their services for the six-month
period of GBP119,650 (six-month period ended 30 September 2017:
GBP135,500. The Directors were paid expenses of GBP1,009 in the
six-month period (six-month-period ended 30 September 2017:
GBP1,055).
The Directors held the following shares:
Total number Total number
of shares held of shares held
at 30 Sep 2018 at 31 Mar 2018
------------------ -------------- --------------
Richard Morse 83,042 83,042
Christopher Legge 29,896 29,896
Denise Mileham 28,160 28,160
Peter Neville 29,896 29,896
Richard Ramsay 53,813 53,813
------------------ -------------- --------------
All of the above transactions were undertaken on an arm's length
basis.
The Directors were paid dividends in the period of GBP7,205
(six-month period ended 30 September 2017: GBP6,962).
15. Financial instruments
Financial instruments by category
The Company held the following financial instruments at fair
value at 30 September 2018. There have been no transfers of
financial instruments between levels of the fair value hierarchy.
There are no non-recurring fair value measurements.
30 Sep 2018 (unaudited)
--------------------------------------------------------------------
Financial Financial
assets at fair liabilities at
Cash and Loans and value through amortised
bank balances receivables profit or loss cost Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Levels 1 1 3 1
Non-current assets
Investments at fair value through profit or loss
(Level 3) - - 397,090 - 397,090
Current assets
Trade and other receivables - 23 - - 23
Cash and cash equivalents 170 - - - 170
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Total financial assets 170 23 397,090 - 397,283
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Current liabilities
Trade and other payables - - - (1,552) (1,552)
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Total financial liabilities - - - (1,552) (1,552)
------------------------------------------------ ------------- ----------- -------------- -------------- --------
Net financial instruments 170 23 397,090 (1,552) 395,731
------------------------------------------------ ------------- ----------- -------------- -------------- --------
31 Mar 2018 (audited)
----------------------------------------------------------------
Financial Financial
assets at liabilities
fair at
Cash and Loans and value through amortised
bank balances receivables profit or cost Total
loss
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Levels 1 1 3 1
Non-current assets
Investments at fair value through profit or loss
(Level 3) - - 388,468 - 388,468
Current assets
Trade and other receivables - 20 - - 20
Cash and cash equivalents 5,509 - - - 5,509
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Total financial assets 5,509 20 388,468 - 393,997
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Current liabilities
Trade and other payables - - - (1,610) (1,610)
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Total financial liabilities - - - (1,610) (1,610)
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
Net financial instruments 5,509 20 388,468 (1,610) 392,387
---------------------------------------------------- ------------- ----------- ------------- ----------- --------
The tables above provide an analysis of financial instruments
that are measured subsequent to their initial recognition at fair
value as follows:
-- Level 1: fair value measurements are those derived from
quoted prices (unadjusted) in active markets for identical assets
or liabilities;
-- Level 2: fair value measurements are those derived from
inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3: fair value measurements are those derived from
valuation techniques that include inputs to the asset or liability
that are not based on observable market data (unobservable
inputs).
There were no transfers between Level 1 and 2, Level 1 and 3, or
Level 2 and 3 during the period.
In the above tables, financial instruments are held at carrying
value as an approximation to fair value unless stated
otherwise.
Reconciliation of Level 3 fair value measurement of financial
assets and liabilities
An analysis of the movement between opening to closing balances
of the investments at fair value through profit or loss is given in
note 8.
The fair value of the investments at fair value through profit
or loss includes the use of Level 3 inputs. Please refer to note 8
for details on the valuation methodology.
Sensitivity analysis of the portfolio
The discount rate is considered the most significant
unobservable input through which an increase or decrease would have
a material impact on the fair value of the investments at fair
value through profit or loss.
The sensitivity of the portfolio to movements in the discount
rate is as follows:
30 Sep 2018 (unaudited)
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 8.2% Plus 0.5%
Change in portfolio valuation Increases GBP18.1m GBP488.9m Decreases GBP17.1m
Change in NAV per share Increases 4.6p 100.4p Decreases 4.3p
----------------------------- ------------------ --------- ------------------
31 Mar 2018 (audited)
----------------------------- ------------------ --------- ------------------
Discount rate Minus 0.5% Base 8.1% Plus 0.5%
Change in portfolio valuation Increases GBP16.8m GBP429.5m Decreases GBP15.8m
Change in NAV per share Increases 3.9p 99.6p Decreases 3.7p
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in long--term
inflation rates is as follows:
30 Sep 2018 (unaudited)
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP19.5m GBP488.9m Increases GBP20.3m
Change in NAV per share Decreases 4.9p 100.4p Increases 5.2p
----------------------------- ------------------ ---------- ------------------
31 Mar 2018 (audited)
----------------------------- ------------------ ---------- ------------------
Inflation rates Minus 0.5% Base 2.75% Plus 0.5%
Change in portfolio valuation Decreases GBP18.9m GBP429.5m Increases GBP20.2m
Change in NAV per share Decreases 4.4p 99.6p Increases 4.7p
----------------------------- ------------------ ---------- ------------------
Wind and solar assets are subject to electricity price and
electricity generation risks. The sensitivities of the investments
to movements in the level of electricity output and electricity
price are as follows:
The fair value of the investments is based on a "P50" level of
electricity output 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 output (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 output (i.e. a level of
generation that is above the "P50", with a 10% probability of being
achieved) is as follows:
30 Sep 2018 (unaudited)
----------------------------- ------------------ --------- ------------------
Energy yield P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP41.3m GBP488.9m Increases GBP38.9m
Change in NAV per share Decreases 10.5p 100.4p Increases 9.9p
----------------------------- ------------------ --------- ------------------
31 Mar 2018 (audited)
----------------------------- ------------------ --------- ------------------
Energy yield P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases GBP43.4m GBP429.5m Increases GBP42.6m
Change in NAV per share Decreases 10.1p 99.6p Increases 9.9p
----------------------------- ------------------ --------- ------------------
The sensitivity of the portfolio to movements in energy prices
is as follows:
30 Sep 2018 (unaudited)
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP23.2m GBP488.9m Increases GBP22.6m
Change in NAV per share Decreases 5.9p 100.4p Increases 5.7p
----------------------------- ------------------ --------- ------------------
31 Mar 2018 (audited)
----------------------------- ------------------ --------- ------------------
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases GBP23.4m GBP429.5m Increases GBP23.0m
Change in NAV per share Decreases 5.4p 99.6p Increases 5.3p
----------------------------- ------------------ --------- ------------------
Waste and wastewater assets do not have significant volume and
price risks.
Euro/sterling exchange rates sensitivity
As the proportion of the portfolio assets with cash flows
denominated in euros represented less than 1% of the portfolio
value at 30 September 2018, the Directors consider the sensitivity
to changes in the euro/sterling exchange rate to be
insignificant.
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
16. Guarantees and other commitments
As at 30 September 2018, the Company has provided a guarantee
under the Company's wholly owned subsidiary UK HoldCo's GBP130
million revolving credit facility. Following a one-year extension
signed in June 2018, the revolving credit facility is now due to
expire in June 2021.
The Company had no other commitments or guarantees.
17. Subsidiaries
The following subsidiaries have not been consolidated in these
financial statements as a result of applying the requirements of
"Investment Entities: Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and IAS 27)":
Place of Registered Ownership Voting
Name Category business office interest rights
------------------------------------------ ------------------------------- --------- ----------- --------- ------
John Laing Environmental Assets Group (UK)
Limited Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Intermediate holding UK A 100% 100%
Croft Solar PV Limited Operating subsidiary UK C 100% 100%
Cross Solar PV Limited Operating subsidiary UK C 100% 100%
Domestic Solar Limited Operating subsidiary UK C 100% 100%
Ecossol Limited Operating subsidiary UK C 100% 100%
Hill Solar PV limited Operating subsidiary UK C 100% 100%
Share Solar PV Limited Operating subsidiary UK C 100% 100%
Tor Solar PV limited Operating subsidiary UK C 100% 100%
Residential PV trading Limited Operating subsidiary UK C 100% 100%
South-Western Farms Solar Limited Operating subsidiary UK C 100% 100%
Angel Solar Limited Operating subsidiary UK C 100% 100%
Easton PV Limited Project holding company UK D 100% 100%
Pylle Solar Limited Project holding company UK D 100% 100%
Second Energy Limited Operating subsidiary UK D 100% 100%
ELWA Holdings Limited Project holding company UK E 80% 80%
ELWA Limited(1) Operating subsidiary UK E 80% 81%
JLEAG Wind Holdings Limited Project holding company UK A 100% 100%
JLEAG Wind Limited Project holding company UK A 100% 100%
Amber Solar Parks (Holdings) Limited Project holding company UK F 100% 100%
Amber Solar Park Limited Operating subsidiary UK F 100% 100%
Fryingdown Solar Park Limited Operating subsidiary (dormant) UK F 100% 100%
Five Oaks Solar Parks Limited Operating subsidiary (dormant) UK F 100% 100%
Bilsthorpe Wind Farm Holdings Limited Project holding company UK F 100% 100%
Bilsthorpe Wind Farm Limited Operating subsidiary UK F 100% 100%
Ferndale Wind Limited Project holding company UK F 100% 100%
Castle Pill Wind Limited Project holding company UK F 100% 100%
Wind Assets LLP Operating subsidiary UK F 100% 100%
Shanks Dumfries and Galloway
Holdings Limited Project holding company UK G 80% 80%
Shanks Dumfries and Galloway Limited Operating subsidiary UK G 80% 80%
JL Hall Farm Holdings Limited Project holding company UK F 100% 100%
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 (Holdings) Limited Project holding company UK F 100% 100%
Carscreugh Renewable Energy Park Limited Operating subsidiary UK F 100% 100%
Wear Point Wind Holdco Limited Project holding company 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 (Holdings) Limited Project holding company UK F 100% 100%
BL Wind Limited Operating subsidiary UK F 100% 100%
Burton Word 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 (Holdings) Limited Project holding company 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 Operating subsidiary UK D 100% 100%
sPower Finco 1 (UK) Limited Operating subsidiary UK D 100% 100%
Higher Tregarne Solar (UK) Limited Operating subsidiary UK D 100% 100%
Crug Mawr Solar (UK) Limited Operating subsidiary UK D 100% 100%
Golden Hill Solar (UK) 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%
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 40% 40%
Icknield Gas Limited Operating subsidiary UK N 40% 40%
Slapton Power Company Limited Operating subsidiary UK N 40% 40%
Vulcan Renewables Limited Operating subsidiary UK M 100% 100%
Egmere Energy Limited Operating subsidiary UK A 100% 100%
Grange Farm Energy Limited Operating subsidiary UK A 100% 100%
Merlin Renewables Limited Operating subsidiary UK A 100% 100%
------------------------------------------ ------------------------------- --------- ----------- --------- ------
(1) ELWA Holdings Limited holds 81% of the voting rights and
100% share of the economic benefits in ELWA Limited.
Registered office
(A) 1 Kingsway, London WC2B 6AN
(B) 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3
9WJ
(C) Calder & Co, 16 Charles II Street, London SW1Y 4NW
(D) Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3
4QF
(E) Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1
1BU
(F) 8 White Oak Square, London Road, Swanley, Kent BR8 7AG
(G) 16 Charlotte Square, Edinburgh EH2 4DF
(H) Infrastructure Managers Limited, 2nd floor, 11 Thistle
Street, Edinburgh EH2 1DF
(I) Parc Eolien le Placis Vert, Rue du Pre Long 35770 Vern Sur Seiche, France
(J) 3 Rue Benjamin Delessert, 56104 Lorient Cedex 04, France
(K) Steinweg 3-5, Frankfurt am Main, 60313, Germany
(L) Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy
LL28 5UN
(M) 10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD
(N) Friars Ford, Manor Road, Goring, Reading RG8 9EL
18. Events after the reporting period
A dividend for the quarter ended 30 September 2018 of 1.6275
pence per share was approved by the Board on 21 November 2018.
Please refer to note 6 for further details.
In October 2018, the Company issued a further 103 million shares
at 102 pence per share raising gross proceeds of GBP105 million
through the issuance programme originally announced in February
2018 for up to 200 million new ordinary shares. The proceeds of the
capital raise were used to repay all of the outstanding revolving
credit facility.
There are no other significant events since the period end which
would require to be disclosed.
DIRECTORS AND ADVISERS
Directors
Richard Morse (Chairman)
Christopher Legge
Denise Mileham
Peter Neville
Richard Ramsay
Administrator to the Company, Company Secretary and Registered
Office
Praxis Fund Services Limited
Sarnia House
Le Truchot
St Peter Port
Guernsey GY1 1GR
Channel Islands
Registrar
Link Registrars (Guernsey) Limited (formerly Capita Asset
Services)
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
UK Transfer Agent
Link Asset Services (formerly Capita Asset Services)
65 Gresham Street
London EC2V 7NQ
United Kingdom
Auditor
Deloitte LLP
Regency Court
Glategny Esplanade
St Peter Port
Guernsey GY1 3HW
Channel Islands
Investment Adviser
John Laing Capital Management Limited
1 Kingsway
London WC2B 6AN
United Kingdom
Public Relations
Redleaf Communications
First Floor
4 London Wall Buildings
Blomfield Street
London EC2M 5NT
United Kingdom
Corporate Brokers
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Corporate Bankers
HSBC
PO Box 31
St Peter Port
Guernsey GY1 3AT
Channel Islands
GLOSSARY
AD
Anaerobic digestion
bps
basis points
the Company or JLEN or the Fund
John Laing Environmental Assets Group Limited
EPC
Engineering, Procurement and Construction
First Offer Agreement
the First Offer Agreement between the Company and John Laing
FiT
the Feed-in Tariff
gross project value
the fair market value of the investment interests held in a
project as increased by the amount of any financing in the relevant
project entity
Group
John Laing Environmental Assets Group Limited and its
Intermediate Holding Companies UK HoldCo, HWT and JLEAG Solar 1
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 and JLEAG Solar 1
Investment Adviser or JLCM
John Laing Capital Management Limited
IPO
Initial Public Offering
IRR
internal rate of return
John Laing
John Laing Group plc and its subsidiary companies
MW(e)
megawatt electric
MWh
megawatt hour
MW(th)
megawatt thermal
NAV
Net Asset Value
OECD
Organisation for Economic Co--operation and Development
portfolio
the 27 investments in which JLEN had a shareholding as at 30
September 2018
portfolio valuation
the sum of all the individual investments' net present
values
PPAs
Power Purchase Agreements
PPP/PFI
the Public Private Partnership procurement model
Price cannibalisation
The depressive influence on the wholesale power price at timings
of high output from intermittent weather driven generation such as
solar and wind
PV
Photovoltaic
RHI
Renewable Heat Incentive
ROCs
Renewables Obligation Certificates
total shareholder return
total shareholder return combines the share price movement and
dividends since IPO expressed as an annualised percentage
UK HoldCo
John Laing Environmental Assets Group (UK) Limited,
wholly--owned subsidiary of John Laing Environmental Assets Group
Limited
WADR
the weighted average discount rate
LEI: 213800JWJN54TFBMBI68
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END
IR EAKFFAEDPFFF
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November 22, 2018 02:00 ET (07:00 GMT)
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