REG - JLEN Environmental - JLEN results for the year ended 31 March 2024
21/06/2024 07:00
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RNS Number : 3117T JLEN Environmental Assets Group Ltd 21 June 2024
21 June 2024
JLEN Environmental Assets Group Limited
JLEN reports results for the year ended 31 March 2024
JLEN Environmental Assets Group Limited ("JLEN" or the "Company"), the listed
environmental infrastructure fund, is pleased to announce the Company's
results for the year ended 31 March 2024.
Highlights
Resilient earnings and Net Asset Value ("NAV"):
· NAV per share of 113.6 pence following payment of dividends to
shareholders in line with targets
· Strong annualised NAV total return of 8.0% since IPO
· On course to deliver dividend of 7.57 pence in line with annual
target, representing a yield of 8.1% on the closing share price at 31 March
2024
Summary of changes in NAV:
NAV per share
NAV at 31 March 2023 123.1p
Dividends paid in the year -7.5p
Power prices forecast -5.4p
Battery revenue outlook -2.2p
Guarantee of origin certificates +1.7p
Inflation +0.9p
Discount rate changes -4.9p
Revaluation of cost asset(s) +0.7p
Other movements (including discount rate unwind and actual performance) +7.2p
NAV at 31 March 2024 113.6p
Record cash generation from underlying assets:
· Consecutive year of record distributions received from
investments
· 1.30x dividend cover - second highest since IPO
· Prudent balance sheet management maintaining low levels of
gearing
Clear and effective capital allocation strategy:
· Continued progress on development and construction assets -
unlocking potential for capital growth
· Progress made on several credible selective asset disposal
opportunities
· Sales proceeds will provide flexibility to pay down debt and
consider share buybacks where accretive to NAV
· Existing commitments to development and construction-stage assets
prioritised, with any new investment activity highly selective
Key investment metrics
All amounts presented in £million (except as noted) Year ended Year ended
31 March 2024 31 March 2023
Net assets((1)) 751.2 814.6
Portfolio value((2)) 891.9 898.5
Operating income and (losses)/gains on fair value of investments (3.8) 108.4
Net Asset Value per share((3)) 113.6p 123.1p
Distributions, repayments and fees from portfolio 87.0 83.6
(Loss)/profit before tax (13.9) 98.3
Gross asset value((3)) 1,091.8 1,119.8
Share price((3)) 93.7p 119.6p
(1) Also referred to as "NAV".
(2) Classified as investments at fair value through profit or loss on the
statement of financial position.
(3) Net Asset Value per share, share price and gross asset value are
alternative performance measures ("APMs").
Ed Warner, Chair of JLEN, said:
"As we celebrate JLEN's 10th anniversary as a listed company, this year's
performance is another demonstration of our resilience, despite it being a
challenging year for the listed renewable investment company sector, including
JLEN. We have delivered consecutive years of record distributions received
from investments, resulting in a dividend cover of 1.30 times - the second
highest since IPO.
"In the current difficult operating environment, we have maintained our
disciplined approach to investment activity during the year. Future cash flows
remain robust, with comfort provided from near-term fixes, such that the Board
has set a dividend target of 7.80 pence per share for the current year, an
increase of 3%. We have also taken steps to strengthen our balance sheet,
completing a successful refinancing of our RCF post period end.
"We are progressing several asset sales processes. We hope to complete the
first transaction in the coming months.
"The Board has agreed a new fee structure with our Investment Manager which we
believe will deliver excellent value for shareholders. We are proud of JLEN's
performance over the past 10 years, including the Company's record of
delivering consecutive dividend growth since its launch in 2014, and believes
strongly in the Company's purpose and prospects."
Annual report
A copy of the annual report has been submitted to the National Storage
Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The annual report will
also be available on the Company's website at http://www.jlen.com
(http://www.jlen.com) where further information on JLEN can be found.
Details of the conference call for analysts and investors
A webinar and in-person event for the annual results will be held at 10:00 am
(UK time) today, 21 June 2024, hosted by Chris Tanner and Edward Mountney,
Investment Managers to JLEN. To register for the webinar, please contact SEC
Newgate by email at JLEN@secnewgate.co.uk.
Retail Investor Webinar
On 25 June 2024, Chris Tanner and Edward Mountney will also provide a live
presentation relating to its full year results via Investor Meet Company at
12:30 pm BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9:00 am the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet JLEN
Environmental Assets Group Limited via:
https://www.investormeetcompany.com/jlen-environmental-assets-group-limited/register-investor
Investors who already follow JLEN Environmental Assets Group Limited on the
Investor Meet Company platform will automatically be invited.
For further information and enquiries, please contact:
Foresight Group +44(0)20 3667 8100
Chris Tanner institutionalir@foresightgroup.eu
Edward Mountney
Wilna de Villiers
(-----)----
Winterflood Securities Limited +44(0)20 3100 0000
Neil Langford
SEC Newgate +44 (0)20 3757 6882
Elisabeth Cowell Jlen@secnewgate.co.uk
Alice Cho
Harry Handyside
Apex Fund and Corporate Services (Guernsey) Limited +44(0)20 3530 3600
Matt Lihou
Matt Falla
About JLEN
JLEN's investment policy is to invest in a diversified portfolio of
Environmental Infrastructure. Environmental Infrastructure is defined by the
Company as infrastructure assets, projects and asset-backed businesses that
utilise natural or waste resources or support more environmentally friendly
approaches to economic activity, support the transition to a low carbon
economy or which mitigate the effects of climate change. Such investments will
typically feature one or more of the following characteristics:
· long-term, predictable cash flows, which may be wholly
or partially inflation-linked cash flows;
· long-term contracts or stable and well-proven
regulatory and legal frameworks; or
· well-established technologies, and demonstrable
operational performance
JLEN's aim is to provide investors with a sustainable, progressive dividend
per share, paid quarterly and to preserve the capital value of the portfolio
over the long term on a real basis. The target dividend for the year to 31
March 2025 is 7.80 pence per share¹. The dividend is payable quarterly.
JLEN is an Article 9 fund under the EU Sustainable Finance Disclosure
Regulation and has a transparent and award winning approach to ESG.
Further details of the Company can be found on its website www.jlen.com
(http://www.jlen.com)
LEI: 213800JWJN54TFBMBI68
(1) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met or that the Company will make any
distributions at all.
-ENDS-
JLEN Environmental Assets Group Limited
Annual Report 2024
About jlen
JLEN Environmental Assets Group Limited ("JLEN" or the "Company") is an
environmental infrastructure investment fund, investing in a diversified
portfolio of assets that support the drive towards decarbonisation, resource
efficiency and environmental sustainability. The Company's portfolio
comprises 42 assets located across the UK and mainland Europe.
JLEN is Guernsey-incorporated with a premium listing on the London Stock
Exchange and is a constituent of the FTSE 250 Index. The Company has an
award‑winning approach to environmental, social and governance ("ESG").
PERFORMANCE HIGHLIGHTS
Our results summary for the full year ended 31 March 2024.
Net Asset Value ("NAV") NAV per share((1)) Annualised NAV total return((1))
£751.2m 113.6p 8.0%
2023: £814.6m 2023: 123.1p 2023: 9.3%
Portfolio value Gearing Market capitalisation((1))
£891.9m 31.2% £619.9m
2023: £898.5m 2023: 27.3% 2023: £791.2m
2024 dividend declared 2025 dividend target((2)) Dividend cover((1,3))
7.57p (+6% increase) 7.80p (+3% increase) 1.30x
2023: 7.14p 2024: 7.57p 2023: 1.51x
Diversified portfolio Renewable energy generated GHG emissions avoided
42 assets 1,358GWh 212,917 tCO(2)e
2023: 42 assets 2023: 1,325GWh 2023: 212,263 tCO(2)e
Tonnes of waste diverted from landfill Contributed to community funds FTE jobs supported
680,825 £655,076 467
2023: 684,181 2023: £432,756 2023: 347
(1) The market capitalisation, NAV total return, Net Asset Value per share
and dividend cover are alternative performance measures ("APMs"). The APMs
within the Annual Report.
(2) This is a target only, there can be no guarantee this target will be
met.
(3) On a paid basis.
Resilient earnings and NAV:
· NAV per share of 113.6 pence following payment of dividends to
shareholders in line with targets
· Strong annualised NAV total return of 8.0% since IPO
· On course to deliver dividend of 7.57 pence in line with annual
target, representing a yield of 8.1% on the closing share price at 31 March
2024
Record cash generation from underlying assets:
· Consecutive year of record distributions received from investments
· 1.30x dividend cover - second highest since IPO
· Prudent balance sheet management maintaining low levels of gearing
Clear and effective capital allocation strategy:
· Continued progress on development and construction assets -
unlocking potential for capital growth
· Progress made on several credible selective asset disposal
opportunities
· Sales proceeds will provide flexibility to pay down debt and
consider share buybacks where accretive to NAV
· Existing commitments to development and construction-stage assets
prioritised, with any new investment activity highly selective
Our Portfolio at a glance
JLEN's portfolio comprises a diversified mix of environmental infrastructure
assets.
Total assets (split by sector)
42 assets
11 Wind
6 Waste & bioenergy
9 Anaerobic digestion
6 Solar
6 Low carbon & sustainable solutions
2 Controlled environment
2 Hydro
Portfolio value (split by operational status)
91% Operational
7% Construction
2% Development
Portfolio value (split by geography)
90% UK
10% Rest of Europe
Assets by location:
Norway | 1 asset
United Kingdom | 39 assets
Germany | 1 asset
Italy | 1 asset
Does not include investment into FEIP.
See more online: https://jlen.com
Chair's Statement
"The Board is proud of JLEN's performance over the past 10 years and believes
strongly in the Company's purpose and prospects."
On behalf of the Board, I am pleased to present the audited Annual Report and
financial statements for the Company for the year ended 31 March 2024.
We celebrate JLEN's 10th anniversary as a listed company and this year's
performance is another demonstration of our resilience, despite it being a
challenging year for the listed renewable investment company sector, including
JLEN. While short-term interest rates are expected to fall, and with them bond
yields, the first official reduction will be later than originally expected by
markets and the eventual pace of decline likely to be slower. At the same
time, subsiding inflation has reduced the index‑linked cash flows from
energy generating assets. Add in the uncertainty created by continued
geopolitical crises and the net effect has been that shares in all
infrastructure companies traded at wide discounts to Net Asset Value ("NAV")
throughout the year.
We recognise that the recent returns have been frustrating for investors and
we believe that the capital allocation decisions that we are taking, together
with the anticipated change in the future rate environment, will see a
re-rating of the Company's shares in due course. We also recognise the
imperative for our Investment Manager to focus on stewardship of JLEN's
existing portfolio, rather than targeting new investments, to ensure that it
remains very well placed to deliver strong cash flows and value accretion in
the coming years.
Over the 12 months to 31 March 2024, JLEN's NAV per share declined by 7.7% to
113.6 pence. After taking account of the dividend, the NAV total return for
the year was marginally negative at -1.6%.
The operational review provides detail on the performance of the individual
assets within the portfolio, overall this has been satisfactory. The Company
has delivered consecutive years of record distributions received from
investments, resulting in a dividend cover of 1.30 times - the second highest
since IPO. We are particularly pleased with the progress made on construction
assets which are already providing capital growth - most recently West Gourdie
BESS and the glasshouse became operational. Conversely, overall electricity
generation across JLEN's assets was marginally short of budget, 4.1% behind on
a MWh basis.
We are pleased to have met our stated target dividend of 7.57 pence per share
for the year, up 6% compared to the prior year and still well covered by net
cash flows from the Company's diversified portfolio. Despite the difficult
operating environment, future cash flows remain robust with comfort provided
from near-term fixes, such that the Board has set a dividend target of 7.80
pence per share for the current year, an increase of 3%. This will be paid in
quarterly instalments as usual.
Investment activity has remained highly disciplined, with priority given to
existing commitments to construction-stage assets and opportunities directly
linked to the Company's current portfolio. We have purchased the remaining 30%
shareholding in the Bio Collectors anaerobic digestion ("AD") and waste
collections business and continued to build JLEN's exposure to German green
hydrogen developer, HH2E, where the Investment Manager is excited by the
combination of technology and market opportunity. During the year, the Company
deployed £69.2 million overall into the portfolio.
Balance sheet strength is especially important at present. To that end, I am
pleased that JLEN has successfully refinanced its revolving credit facility
("RCF"), with an enhanced £200 million three‑year multi-currency facility
and a further uncommitted accordion facility of up to £30 million with an
option to extend for another year.
This facility provides the Company with more than sufficient headroom to meet
our outstanding commitments and pursue future investment opportunities on a
highly selective basis, including planned follow-on investments.
At the same time, the Board and the Investment Manager have been actively
reviewing JLEN's portfolio with a view to undertaking targeted asset sales to
generate capital to meet the Company's objectives while also ensuring that we
have an optimal mix of technologies, cash flows, asset maturities and growth
opportunities.
In that regard, we are currently engaged in several asset sale processes
across different sub-sectors of the portfolio. The asset sales processes are
at various stages of progression and we expect to complete the first
transaction in the coming months.
During the year, the Board set out its asset allocation priorities, making it
clear that share buybacks are under constant consideration as a means of
deploying any surplus cash within an overall imperative of prudent balance
sheet management. We anticipate that any buybacks will be funded from the
proceeds of asset sales after ensuring the Company maintains a robust balance
sheet and can meet its commitments.
One consequence of the persistent discount that JLEN's shares have traded at
is that shareholders will be presented with a discontinuation vote at our
Annual General Meeting ("AGM") in September. The trigger for this vote is a
discount that has averaged more than 10% in the financial year under review.
The Board very much hopes that JLEN's excellent record of delivering
consecutive dividend growth since the Company's launch in 2014, combined with
the exciting prospects for the broad range of technologies and assets that it
invests in, will encourage all shareholders to vote "against" the
discontinuation resolution put forward at the AGM. This will ensure that the
Company continues into the future, pursuing opportunities that help create a
sustainable world for coming generations.
The Board, conscious of the continuous requirement to ensure that JLEN is as
attractive as possible to current and potential shareholders, has identified
two initiatives that are intended to achieve this objective. The first is a
reduction in the fee paid to our
Investment Manager, Foresight Group LLP, as follows:
· A change in the basis of calculating the fee from Adjusted
Portfolio Value to NAV;
· A change in the first tier of fee (up to and including £500
million) from 1.0% to 0.95% of net assets;
· The second tier fee of 0.8% now only applies from net assets of
£500 million to £1 billion; and
· A third tier fee of 0.75% is introduced for net assets in excess
of £1 billion.
The Board believes that this will deliver excellent value for JLEN's
shareholders, while continuing to provide a fair reward and incentive for the
Investment Manager.
The second, included as a proposed resolution at the AGM, is to change the
name of the Company to Foresight Environmental Infrastructure. It is five
years now since Foresight acquired the investment management team of John
Laing that managed JLEN and which effectively gave the Company its name. The
Board has assessed the benefits available through a closer association with
the Investment Manager - including the scale afforded by its broader marketing
initiatives and strong market reputation - and believes that there are clear
commercial benefits to renaming the Company. The Board encourages shareholders
to approve the proposed change of name.
We continue to evolve and progress our sustainability initiatives across the
portfolio. This year, we set a decarbonisation target, aiming to achieve net
zero greenhouse gas emissions by 2050. This goal will be supported by a
Transition Plan, which is under development. At the asset level, biodiversity
improvement works have been undertaken in a number of locations to increase
the variety of habitats and support birds and mammals across our sites. In
addition, we have restructured our ESG and Task Force on Climate-related
Financial Disclosures ("TCFD") reports to bring them together with the goal of
aligning more closely with emerging standards and regulations.
Further details on our efforts to promote resource efficiency, foster positive
community relationships and ensure effective and ethical governance are set
out in the consolidated ESG report.
During the year, the Board has continued to engage actively with all of JLEN's
stakeholders. This engagement has taken the form of meetings with major
shareholders, dialogue with senior executives at Foresight Group, as well as
site visits to the newly constructed glasshouse and adjacent anaerobic
digestion plant.
Our longest-serving Director, Hans Joern Rieks, is not seeking re-election at
this year's AGM. Hans has been a fantastic contributor to the work of the
Board over the past five years, supportive and challenging in equal measure,
and on behalf of all shareholders and my colleagues I would like to thank him
for his service and wish him well for the future.
Finally, I would like to thank all of JLEN's shareholders for the support you
have shown us over the past year. It is greatly appreciated. The Board is
proud of JLEN's performance over the past 10 years, believes strongly in the
Company's purpose and prospects and hopes that you will continue to share with
us in its success in the years to come.
Ed Warner
Chair
20 June 2024
KEY PERFORMANCE INDICATORS
NAV total return (annualised)
8.0%
2024 8.0%
2023 9.3%
2022 8.7%
2021 5.5%
2020 6.1%
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
KPI performance
· Annualised NAV total return since IPO of 8.0%, against the backdrop
of a depressed market for listed infrastructure
Objectives for 2025
· Invest selectively in opportunities that are accretive to the
Company on a risk-adjusted basis
· Consider returns of new investments against portfolio WADR of 9.4%
and target returns of 7.5-8.5%, net of fees and expenses
Principal risks
· See risk and risk management section in the 2024 Annual Report.
Refer to risks: 2, 3, 5, 6, 7, 9, 10 and 11.
NAV per share
113.6p
2024 113.6p
2023 123.1p
2022 115.3p
2021 92.2p
2020 97.5p
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
KPI performance
· NAV £751.2 million, down from £814.6 million at 31 March 2023
· NAV per share 113.6 pence, down 7.7% compared to 31 March 2023
· -1.6% NAV total return for the 12 months ended 31 March 2024
Objectives for 2025
· Prioritise progress in development and construction-stage assets to
drive NAV growth
· Continue to progress value enhancement initiatives
· Share buybacks considered as NAV accretive option as part of
overall capital allocation strategy
Principal risks
· See risk and risk management in the 2024 Annual Report. Refer to
risks: 2, 3, 5, 6, 7, 9, 10 and 11.
Dividend cover
1.30x
2024 1.30x
2023 1.51x
2022 1.10x
2021 1.07x
2020 1.10x
Link to Fund objectives:
Predictable income growth for shareholders
KPI performance
· 1.30x dividend cover for the year
Objectives for 2025
· Manage cover in light of lower power prices compared to recent
years
Principal risks
· See risk and risk management in the 2024 Annual Report. Refer to
risks: 2, 3, 5, 6, 7, 9 and 11
Dividend
7.57p
2025 target 7.80p((1))
2024 7.57p
2023 7.14p
2022 6.80p
2021 6.76p
Link to Fund objectives:
Predictable income growth for shareholders
KPI performance
· 7.57 pence dividend declared for the year, in line with target
Objectives for 2025
· Target dividend for the next financial year of 7.80 pence, up 3.0%
from 2024
Principal risks
· See risk and risk management in the 2024 Annual Report. Refer to
risks: 2, 3, 5, 6, 7, 9 and 11.
Asset concentration (proportion of portfolio value from top 10 assets)
46.0%
2024 46.0%
2023 49.9%
2022 54.0%
2021 53.6%
2020 56.3%
Link to Fund objectives:
Preservation of shareholder value
Investment, growth and diversification
KPI performance
· The top 10 largest assets now provide 46.0% of the total portfolio
value, down from 49.9% at 31 March 2023
· Follow-on investments in the year, combined with ongoing buildout
of construction‑stage investments, continue to further diversify the
portfolio
Objectives for 2025
· Continue to focus on the buildout of the Company's development and
construction-stage investments to increase the value of these assets in the
portfolio
· Manage new investment activity carefully in line with capital
allocation policy
Principal risks
· See risk and risk management on in the 2024 Annual Report. Refer to
risks: 1, 4, 10 and 11.
Renewable energy generated
1,358GWh
2023: 1,325GWh
GHG emissions avoided
212,917 tCO(2)e
2023: 212,263 tCO(2)e
Tonnes of waste diverted from landfill
680,825 tonnes
2023: 684,181 tonnes
Contributed to community funds
£655,076
2023: £432,756
FTE jobs supported
467
2023: 347
Number of SDGs((2)) the portfolio aligns to
8
2023: 8
(1) This is a target only, there can be no guarantee this target will be
met.
(2) Sustainable Development Goals.
The investment manager's report
JLEN is managed by Foresight Group LLP ("Foresight" or "Foresight Group") as
its external alternative investment fund manager ("AIFM") with discretionary
investment management authority for the Company.
Chris Tanner
Investment Manager
Chris has been an Investment Manager((1)) to JLEN since IPO in 2014. He joined
Foresight in 2019 as a Partner. He has over 24 years of industry experience.
Chris is a Member of the Institute of Chartered Accountants in England and
Wales and has an MA in Politics, Philosophy and Economics from Oxford
University. Chris also serves as Chair of the Finance Forum for The
Association of Renewable Energy and Clean Technology ("REA").
Edward Mountney
Investment Manager
Edward has been involved with JLEN since 2016, joining the management team in
2022. Prior to that, Edward was Head of Valuations for Foresight Group and
John Laing Capital Management before then. He has over 14 years' experience in
infrastructure and renewables, is a Member of the Institute of Chartered
Accountants in England and Wales and holds a BA (Hons) in Business and
Management from Oxford Brookes University.
About Foresight Group
Foresight is the Investment Manager for the Company. Founded in 1984,
Foresight is a leading investment manager in real assets and providing capital
for growth, operating across Europe and Australia.
Foresight's Infrastructure division
The division manages over 435 infrastructure assets with a focus on renewable
energy generation (in particular wind and solar power, but also bioenergy,
hydropower and geothermal energy), energy storage, grid infrastructure, as
well as energy efficiency management solutions, social and transport
infrastructure projects and sustainable forestry assets.
Breadth of expertise
The Foresight infrastructure team comprises 175 investment, commercial and
technical professionals across offices in the UK, Italy, Spain, Luxembourg and
Australia, bringing extensive investment origination and execution
capabilities to JLEN. The team considers close to 900 opportunities a year
across all strategies, selecting only those for JLEN which meet its risk
appetite and where JLEN has a realistic chance of successfully completing a
transaction for further investigation. The breadth of experience within the
team suits JLEN's broad environmental infrastructure mandate and this
experience has been critical in determining which projects to pursue as JLEN
has diversified beyond core renewable energy projects.
£11.9bn((2))
Assets under management
900((4))
Investment opportunities reviewed
8((3))
Countries with operations
435((3))
Infrastructure assets
175((5))
Infrastructure professionals
4.7GW((5))
Renewable energy generation
(1) Prior to January 2022, JLEN engaged Foresight in an investment
advisory capacity rather than as the Investment Manager.
(2) Based on Foresight Group Trading Update for financial year ending 31
March 2024 on the LSE.
(3) Foresight Group information as at 31 March 2024.
(4) For the period 1 April 2023 - 31 March 2024.
(5) Foresight Group information as at 30 September 2023.
The infrastructure investment team utilise established international networks
to access market opportunities as they arise. The team is able to deploy and
manage capital across a wide range of infrastructure sectors at various stages
of an asset's life, through development, construction and operational stages.
Foresight's construction management capabilities are valuable to JLEN as
bringing development and construction-stage assets through to operations
provides potential for capital appreciation. The team is also experienced in
managing exits, having carried out several such transactions in the last
12 months.
Active asset management with a strong sustainability focus
JLEN benefits from a team of portfolio management experts who are focused on
operational performance, asset optimisation and commercial management, as well
as assessing enhancement opportunities for the Company's portfolio.
Sustainability and ESG is fully integrated into JLEN's business model and the
portfolio team is supported by a dedicated team of sustainability experts
providing a data-driven approach to monitoring, reporting and improving
sustainability and ESG performance across JLEN's portfolio.
Co-investment
Given JLEN's broad mandate, its investment activities can overlap with other
Foresight‑managed funds. Foresight maintains a clear allocation policy that
sets out the way in which common interest in an investment across funds shall
be managed.
In keeping with this policy, JLEN is currently co-invested in seven projects
with other Foresight funds, enabling JLEN to achieve greater diversification
with the same level of funds and amplifying Foresight‑managed funds'
influence on these assets. All co‑investments have market-standard
shareholder protections and are ultimately subject to the approval of JLEN's
Board, which will take independent advice as appropriate.
Diversification
Foresight considers that the benefits of diversification for JLEN are as
follows:
· spreading of risks such that no one set of risks associated with a
particular technology or set of climactic conditions predominates;
· wider opportunity set provides scope to assess risk‑adjusted
returns across the range of environmental infrastructure opportunities,
avoiding highly competitive markets; and
· ability to construct a portfolio that combines higher returning
investments with lower risk investments to provide an attractive mix of
sustainable income and capital growth.
Foresight does not advocate diversification for its own sake for JLEN. New
investment sectors must comply with the investment policy and present a
risk/return profile that compares favourably with investments that are already
present within the JLEN portfolio. See the "market and opportunities" section
for an assessment of the relative attractiveness of different sectors.
Performance summary
NAV per ordinary share at 31 March 2024 was 113.6 pence (31 March 2023: 123.1
pence per share). The details on NAV movements over the annual period are set
out in the Annual Report. The Company's portfolio valuation was £891.9
million (31 March 2023: £898.5 million). Losses per share for the year were
2.1 pence, (31 March 2023: earnings per share 14.9 pence) driven by the loss
on fair value of investments as a result of power price forecast contraction
and increase in discount rate during the financial year.
We continued to manage the portfolio prudently with the aim of generating
consistent and predictable cash flows with a high degree of inflation linkage.
Cash received from the portfolio by way of distributions, which includes
interest, loan repayments and dividends, was £87.0 million (31 March 2023:
£83.6 million). Net cash inflows from the investment portfolio (after
operating and finance costs) cover the cash dividends of £49.4 million paid
to shareholders in the 12-month period by 1.30x (31 March 2023: 1.51x).
Despite operating in a challenging macroeconomic and geopolitical environment,
our performance benefited from:
· the Company's diversification strategy which ensures the portfolio
benefits from a significant proportion of contracted revenues and revenues
earned by non‑energy generating assets;
· having a substantial portion of generation for both electricity and
gas on fixed price arrangements, partially insulating the portfolio from price
fluctuations;
· good progress made on development and construction-stage assets -
unlocking potential for capital growth as they become operational;
· active asset management of the portfolio identifying value
enhancement opportunities to optimise performance across the portfolio; and
· prudent balance sheet management maintaining low levels of gearing
relative to sector norms.
Market and opportunities
2024 has been billed as "the year of elections", with national elections
(including elections for the European Union) covering a combined population of
about 49% of the people of the world((1)). For many of the people voting in
the UK and Europe, key markets for JLEN, climate change will be a significant
issue((2)). The choice in the US appears to be stark, with Donald Trump
signalling intent to unwind key components of President Biden's signature
Inflation Reduction Act((3)), that aims to incentivise investment in green
technology in the US. There appears to be more consensus between the main
political parties in the UK and the European Union, but even here there are
differences in emphasis and in speed of action. So while the case for
environmental infrastructure remains as clear as ever, with the International
Energy Agency ("IEA") estimating that full year investments in the energy
sector will account for US$2.8 trillion in 2023((4)), of which more than 60%
will be invested in clean energy technology such as renewables, low-carbon
fuels, nuclear, grids and battery storage, there is some uncertainty in the
near term due to the political situation, particularly in the European
Union((5)).
The Company continues to be presented with a substantial opportunity set by
virtue of its broad investment policy. However, the Board and the Investment
Manager are very aware of the current state of the market for listed renewable
infrastructure; the model that applied for most of JLEN's first 10 years,
where acquisitions supported by frequent equity raises were the norm, is over.
Further additions into the portfolio will require capital to be recycled from
existing assets and any acquisitions will need to compare favourably to
returns from the existing portfolio and also the implied returns to
shareholders from buying back shares at a discount.
As a result, the Investment Manager expects new investment activity in the
upcoming year to be limited. The Company will continue to deploy capital to
meet its existing commitments to construction assets and will consider
opportunities to support value enhancements and follow‑on investments within
the portfolio on their merits. Beyond this, new investments will be selective,
making full use of the investment mandate and the Investment Manager's ability
to originate in the UK and Europe to pursue only those opportunities that
clearly benefit shareholder returns. This is likely to favour operational
assets that make a clear contribution to dividend cover, but may also include
short-duration development and construction opportunities where outlay is
modest and funds are only deployed for a relatively short period of time
before earning a return.
(1) Time Magazine https://time.com/6550920/world-elections-2024/.
(2)
https://www.euronews.com/green/2024/03/25/over-half-of-european-voters-think-climate-action-is-a-priority-exclusive-euronews-poll-re;
https://www.kcl.ac.uk/.news/britons-more-likely-to-prefer-party-that-takes-strong-action-on-climate-change.
(3)
https://www.technologyreview.com/2024/02/26/1088921/trump-wants-to-unravel-bidens-landmark-climate-law-here-is-whats-most-at-risk/.
(4) International Energy Agency ("IEA"), "Clean energy investment is
extending its lead over fossil fuels, boosted by energy security strengths,"
25 May, 2023.
(5) https://www.climateforesight.eu/articles/eu-elections-climate-policy/.
Wind
Market developments:
Wind remains the predominant renewable generation technology in the UK,
particularly in the offshore sector with the UK Government targeting
deployment of 50GW of capacity by 2030. The onshore wind market continues to
face certain challenges from a planning perspective, though steps have been
taken to address this via amendments in late 2023 which should have a positive
effect on development rates in the medium‑to‑long term. The UK Government
continues to offer support for onshore and offshore wind projects through the
Contracts for Difference ("CfD") subsidy mechanism, which has come under
scrutiny over the last 12 months due to strike prices that have proven too low
to support the buildout of new sites. However, the UK Government has taken
positive steps to address this in the latest rounds, and so the regulatory
environment remains demonstrably supportive, also via other measures such as
the Energy Act 2023.
Wind markets in other European geographies have come under those same cost
pressures, which has led to a slowdown in capacity buildout. However, in part
driven by energy security concerns, EU targets for onshore and offshore
capacity have increased over the last year or so and whilst subsidies in their
previous form are no longer available, many countries still provide revenue
support via auctions or tender processes. Therefore, whilst the industry has
come under pressure over the last 12 months, wind energy remains critical to
wider decarbonisation targets and so we expect the slowdown in buildout to be
short term only.
JLEN investment outlook:
JLEN has historically invested in operational onshore wind farms, although has
not made new investments in this area since 2017. It remains unlikely that
JLEN will make new investments into operational onshore wind in the
short-to-medium term due to high competition and resultant return levels, but
given the impact of interest rates on both target returns and market-wide
funding capacity, opportunistic acquisitions of attractively priced assets is
a possibility. The Investment Manager estimates that discount rates for UK and
European onshore wind are typically in the range of 7-9%, ultimately dependent
on project revenue structures, market and the nature of the sale or
origination process. A benefit for JLEN is its wide geographic remit and the
ability to target markets that might offer better risk-adjusted returns
compared to the UK or over-reliance on a single jurisdiction.
The Investment Manager has previous experience in both construction-stage and
development-stage wind investments. Therefore, JLEN may consider construction
and development-stage wind investments if risk‑adjusted returns are
considered attractive. JLEN may particularly consider late-stage development
investment where the wind developer is credible and has demonstrable pipeline,
and where the investment is structured via secured positions with controlled
expenditure, to enable JLEN to benefit from development gains and/or secure
future wind deployment at favourable rates of return.
Solar
Market developments:
Similar to wind, the UK Government has ambitious targets for solar capacity,
targeting a five-fold increase of current capacity to achieve 70GW by 2035,
supported in part by the CfD programme which saw c.2GW securing tariffs in
2023. Given increasing cost pressures, strike prices have been increased in
the latest round as an indication of the continued regulatory support. A key
challenge for solar is securing viable grid connections, with some quoted
connection dates as late as 2036. However, National Grid has been tasked with
the better management of connection queues to free up capacity for projects
that are ready to start operations.
Across Europe, solar capacity targets remain ambitious via legislation such as
the REPowerEU plan. Whilst there are similar macro challenges as per the UK
across different European solar markets, for example cost pressures and grid
availability, there continues to be a high degree of regulatory support across
large and mature markets such as Germany, Spain, Netherlands and France.
JLEN investment outlook:
JLEN has historically invested in operational grid-scale solar parks, although
has not made new investments in this sector since 2017. It remains unlikely
that JLEN will make new investments into operational solar in the
short-to-medium term as competition for assets continues to make returns less
attractive than other sectors, albeit within a mature and well understood
asset class. The Investment Manager estimates that discount rates for UK
ground-mounted solar are in the range 6-8%, often with optimistic cash flow
assumptions.
As per wind, and given the Investment Manager's experience, in addition to
construction-stage opportunities JLEN may consider late-stage development
investment where the developer is credible and has demonstrable pipeline, and
where the investment is structured via secured positions with controlled
expenditure, to enable JLEN to benefit from development gains and/or secure
future solar deployment at favourable rates of return.
Anaerobic digestion
Market developments:
The UK Government published its "Biomass Strategy" during the year under
review. This contained a section on "greening the gas grid", which recognised
that biomethane can directly replace natural gas across a range of end uses
and has a part to play in increasing energy security. The Strategy indicates
that 30-40 TWh of biomethane production would be beneficial in helping the UK
to reach net zero in a cost-effective manner, but also notes that this level
of production is not supported by current government subsidy regimes and that
it is considering future options.
The UK Government's Simpler Recycling consultation stated that the
government's "preference is for food waste to be collected for treatment by
AD, which presents the best environmental outcome for the treatment of
unavoidable food waste". The government intends for all local authorities to
implement food waste collections for households by the end of March 2026, with
an earlier date of 2025 for firms to make arrangements for food waste
collection. This should benefit operators of AD facilities capable of
processing food waste, such as the Company's Codford and Bio Collectors
assets.
There was also an extension to the deadline for applications for the Green Gas
Support Scheme, the main government support scheme for new AD facilities. New
AD sites now have until March 2028 (previously November 2025) to qualify for
support, which can be seen as working in tandem with the increase in food
waste feedstock expected from Simpler Recycling.
The European Union ("EU") has continued to make progress towards its ambition
of producing 35bcm of biomethane by 2030 under the REPowerEU plan, setting a
record for biomethane production according to the latest figures available to
the European Biogas Association((1)). However, while there have been positive
signs, investment and support needs to increase further if the target of 35bcm
by 2030 is to be met from the most up-to-date assessment of c.4bcm.
(1)
https://www.europeanbiogas.eu/strongnew-record-for-biomethane-production-in-europebrshows-eba-gie-biomethane-map-2022-2023-strong/.
JLEN investment outlook:
JLEN has invested in a portfolio of operational gas-to-grid and
gas-to-electric AD plants using a range of agricultural and waste feedstocks
and remains active in the market. Further investments in UK and European
plants are possible across the spectrum of development-stage, ready-to-build
and operational assets based on risk-adjusted returns available.
The Investment Manager also notes increased belief in the market of use cases
for AD assets beyond the life of their primary subsidy (e.g. the Renewable
Heat Incentive). While there is not a clear and defined path to follow, there
are a range of options that may be feasible, such as monetisation of captured
carbon and corporate gas purchase agreements with companies interested in
decarbonising their heat usage. Further investment in existing plants may be
attractive to make them more resilient and prepare them for a life beyond
subsidy. No value is currently recognised for life extensions of AD assets.
Biomass and energy-from-waste
Market developments:
The UK Biomass Strategy stressed the significant role that biomass can play in
decarbonising major sectors of the economy, including heat, transport and
electricity. It also emphasised the government's interest in bioenergy with
carbon-capture and storage ("BECCS") which can produce negative emissions as
well as a source of baseload power, making it a useful tool in reaching net
zero. Alongside these benefits, the Strategy recognises the need to build upon
the existing arrangements within subsidy arrangements regarding sustainability
of feedstocks and states a desire to deal with inconsistencies between them in
order to develop an overarching framework including areas such as
implementation of a common greenhouse gas ("GHG") emission calculation
methodology and accounting for soil carbon changes.
The UK Government also published consultations regarding the expansion of the
UK Emissions Trading Scheme ("UK ETS") to the energy-from-waste ("EfW")
incineration sector and how to integrate Greenhouse Gas Removals ("GGR")
schemes into the UK ETS, including engineering-based solutions like BECCS and
nature-based solutions like afforestation.
EU countries are also focused on the sustainability of biomass, with the
European Environment Agency publishing a report on the need to prioritise
between the various uses of biomass foreseen within the policy ambitions of
the European Green Deal given the potential shortage of sustainable biomass in
the future given possible impacts of a changing climate.
JLEN investment outlook:
JLEN remains open to new investments in this sector, providing the
sustainability credentials of an asset are satisfactory in the light of new,
more stringent expectations being flagged by UK and European governments.
However, biomass and EfW assets can be large and in the current
capital-constrained environment may not be the first priority. The Investment
Manager will continue to look for assets in special circumstances, such as the
Cramlington biomass facility that was bought out of administration, as these
may represent an opportunity for enhanced returns. The Investment Manager will
also consider value enhancements and measures to improve resilience for
existing bioenergy assets within its portfolio as these can have attractive
investment cases and typically involve a lower outlay of capital than purchase
of a new asset.
Controlled environment ("CE")
Market developments:
Prices for salmonids have increased since the time of JLEN's investment into
controlled environment aquaculture, driven by demand as supply from
traditional farming methods faces headwinds. Norway introduced a resource rent
tax on sea-based aquaculture of 25% during the year in addition to general
corporate taxation. This does not apply to fully land-based facilities such as
the Company's Rjukan facility and so presents a cost advantage for land-based
controlled environment projects. Other factors such as licence costs and
maturing technology also favour land-based solutions over traditional
sea-based pens.
JLEN investment outlook:
The current focus is on bringing JLEN's existing CE Rjukan and CE Glasshouse
projects to steady state production in order to validate the investment case.
While the projects have made good progress to date, there is no intention to
increase portfolio allocation to controlled environment projects until a full
cycle has been observed, including an exit.
Low-carbon transport
Market developments:
Transport remains a key sector for decarbonisation as the second largest
emitter of GHG emissions after the power sector((1)) and a key plank for
driving decarbonisation is the switch from fossil fuel-powered internal
combustion engines to electric for smaller vehicles. In the UK, the Zero
Emission Vehicle mandate became law during the year, requiring 80% of new cars
and 70% of new vans sold to be zero emission by 2030, increasing to 100% by
2035. With this commitment, a substantial expansion of charging infrastructure
and other incentives is required, potentially opening up investment
opportunities. A similar requirement is in place for EU Member States.
The UK Government also put in place new targets for jet fuel, requiring 10% of
all jet fuel for flights taking off from the UK to come from sustainable
sources by 2030. The Investment Manager has seen several development-stage
opportunities for projects producing sustainable aviation fuel and other
biofuels for transport.
JLEN investment outlook:
JLEN continues to see good potential in the sector, as evidenced by the annual
growth of 39% in fuel dispensed seen in its investment into CNG refuelling
("CNG"). In keeping with JLEN's wider investment approach in the near term,
any further investments in low-carbon transport will be highly selective,
focusing on risk profile and quality of cash flows.
(1)
https://www.statista.com/statistics/1129656/global-share-of-co2-emissions-from-fossil-fuel-and-cement/.
Battery storage
Market developments:
2023 was a challenging year for the battery storage market in the UK. The
industry as a whole suffered from weakened revenues driven by factors such as
lower power price volatility and the saturation of ancillary services as a
result of the rapid buildout of BESS capacity, in stark contrast to the high
profits in FY23. The reduction in actual and forecast revenues has impacted
JLEN's NAV, but independent market analysis and recent actual revenues suggest
that 2023 could be the bottom of the cycle, with sound long-term market
fundamentals driven by the continued electrification of heating and transport
and greater renewables penetration. The general trend towards long-duration
batteries, and other forms of long-duration energy storage ("LDES"), is likely
to continue given the finite opportunity of grid services provision. The
Investment Manager has experience in other forms of LDES, such as pump-hydro,
and so JLEN will continue to monitor developments across other storage
technologies.
The Investment Manager has seen an increasing pipeline of grid-scale battery
projects in other European markets, notably Germany, Netherlands and the
Nordics, and is assessing those markets and their underlying characteristics
including power price volatility, arbitrage opportunities and ancillary
services.
JLEN investment outlook:
JLEN has four grid-scale battery projects within the portfolio at various
stages of development. West Gourdie completed construction during the year and
is now fully operational. Sandridge is in construction and expected to connect
during FY24/25. The two other investments are still at ready-to-build stage
with strategic decisions to be taken shortly on either starting construction
during the year or pursuing exits at an opportune time in the future.
Whilst the Investment Manager believes that the long-term outlook for the UK
BESS market is positive, JLEN is likely to pause further investment into the
sector until there's been further validation of the revenue model and greater
clarity around storage capacity and utilisation rates following a period of
rapid growth. It will continue to monitor other European markets in order to
stay ahead of developments and will consider opportunities where underpinned
by supportive frameworks, for example in the form of capacity-based revenue
streams.
Hydrogen
Market developments:
Market analysts believe that the global decarbonisation agenda sets a
favourable market context for the rise of the low-carbon hydrogen industry.
Hydrogen infrastructure represents a significant portion of total investment
requirement to reach net zero targets especially where electrification is not
a viable solution, research estimates a minimum of €4.6 trillion investments
required in the clean hydrogen supply chain to achieve that goal. In that
context, researchers have identified an immediate funding gap of €268
billion through 2030 as €295 billion direct investments have been announced
in low-carbon hydrogen projects globally through 2030((1)), but only €27
billion have passed FID or is in more advanced stages.
JLEN investment outlook:
Green hydrogen production and its derivatives is an area of focus for
Foresight Group. The investment management team has access to the wider
Foresight efforts in this area and can evaluate pipeline opportunities as they
arise. JLEN has an existing position in a development-stage opportunity in
Germany through its investment in the developer HH2E and the expectation is
that this position will fulfil JLEN's allocation to hydrogen projects for the
short-to-medium term.
Germany has a favourable outlook for green hydrogen, with the National
Hydrogen Strategy aiming for 10GW of electrolyser capacity by 2030 and
legislative and regulatory initiatives in train that should support the
investment case for greenfield plants, such as a green gas quota. HH2E has
several projects in development and JLEN can increase its investment as
projects move into construction should it so wish, depending on funding
capacity and risk-adjusted returns available.
(1) Hydrogen Insights 2023, Hydrogen Council.
Our portfolio
Wind
"JLEN's wind portfolio contains mature assets with established counterparties.
As intermittent generators, we seek to fix a higher proportion of merchant
power revenues than for baseload and Renewable Energy Certificates ("ROCs")
earned by the wind farms also provide an attractive RPI-linked revenue stream
for investors."
11
assets
Share of portfolio value
27%
Joe Hardy
Portfolio Manager
Assets include operating onshore wind farms in the UK.
Investment attractions:
· Government-backed incentives (ROC)
· Index-linked incentives
· Low technology risk
· Readily available input resource
Profile:
· Intermittent energy generation profile
First investment:
· IPO in 2014
Potential risks:
· Merchant electricity prices
· Wind resource risk
· Operational issues
Waste & bioenergy
"JLEN's waste and bioenergy assets include baseload generating plants and
waste processing concessions. They generate a range of different revenue
streams, many of which are fixed price and index‑linked. Common to all of
them is a need to consider the feedstocks that are going into the plants and
to maintain the assets with a long-term mindset."
6
assets
Share of portfolio value
24%
Stefania Trivellato
Portfolio Manager
Assets include municipal waste management, wastewater treatment and biomass
projects across the UK and an energy-from-waste project in Southern Italy.
Investment attractions:
· Combination of ROCs, Feed-in Tariffs ("FiT") and Renewable Heat
Incentives ("RHI") accreditation or long‑term government‑backed contracts
Profile:
· Baseload energy generation profile((1))
· Range of revenue streams - FiT, RHI, ROC, private wire,
concession-based, merchant
First investment:
· IPO in 2014
Potential risks:
· Risks around cost and supply of feedstock
· Operational issues
· Handback risk (ELWA, Tay)
(1) Excludes waste management and wastewater treatment which are
non-energy generating.
Solar
"JLEN's solar portfolio includes older vintage assets with high value subsidy
tariffs. These assets provide a high proportion of RPI-linked income and our
focus now is on managing the assets as they age to maintain, and where
possible enhance, performance."
6
assets
Share of portfolio value
14%
Moritz Ilg
Portfolio Manager
Assets include operational ground-mounted and rooftop solar plants across the
UK.
Investment attractions:
· Government-backed incentives (ROC and FiT)
· Index-linked incentives
· Low technology risk
· Readily available input resource
Profile:
· Intermittent energy generation profile
First investment:
· IPO in 2014
Potential risks:
· Merchant electricity prices
· Solar resource risk
· Lifecycle maintenance and component replacements
Anaerobic digestion
"JLEN's AD assets use energy crops and agricultural waste to generate
biomethane that replaces fossil gas in the GB gas network. Not only do the
assets contribute to the decarbonising of the heat sector, they offer farmers
a means to diversify their revenue sources and to use digestate,
the by‑product from the process, as an alternative to chemical
fertilisers."
9
assets
Share of portfolio value
18%
Sam Matthews
Portfolio Manager
The assets consist of operational agricultural anaerobic digestion plants
across the UK.
Investment attractions:
· Government-backed incentives (FiT and RHI accreditation)
· Index-linked incentives
· Low technology risk
· Higher returns than solar and wind
Profile:
· Baseload energy generation profile
First investment:
· 2017
Potential risks:
· Risks around cost and supply of feedstock
· Merchant gas and electricity prices
· Operational issues
Low carbon & sustainable solutions
"Battery assets and other forms of storage are necessary for the energy
transition if we are to harness increasing levels of intermittent renewable
generation on the system. JLEN's assets are in construction or newly
commissioned and so we are focused on bringing them into operations
as effectively as possible."
6
assets
Share of portfolio value
9%
Saadat Ullah
Portfolio Manager
Assets provide sustainable approaches to economic activity, and currently
include Battery Energy Storage System ("BESS"), low‑carbon CNG refuelling
stations and green hydrogen development platforms.
Investment attractions:
· Strong cash yield expected from sites once established
· Mainly merchant revenues, although some contracts exist
Profile:
· Non‑energy generating environmental infrastructure
First investment:
· 2020
Potential risks:
· Construction risk
· Merchant nature of trading revenue streams
· Evolving market and increased competition
· Shorter track record of operations than for other technologies
Controlled environment
"Construction activities at JLEN's controlled environment projects are
progressing well. We aim to build good relationships with our project
counterparties to promote a collaborative approach to construction management
that should then carry over into the projects' operations."
2
assets
Share of portfolio value
7%
Amit Thakrar
Portfolio Manager
Sustainable solutions to food production and agriculture. Key environmental
infrastructure needed to enable populations to live sustainably.
Investment attractions:
· Established technologies with deep revenue markets
· Potential for capital growth
Profile:
· Non-energy generating environmental infrastructure
First investment:
· 2022
Potential risks:
· Merchant revenues
· New markets for the Investment Manager
· Construction risk
Hydro
"Hydropower plays a key role in the transition to clean energy, not only
through the low-carbon electricity it produces, but also because of its strong
capabilities for providing flexibility and storage."
2
assets
Share of portfolio value
1%
Joe Hardy
Portfolio Manager
Operational UK run-of-river hydro assets with two co‑located batteries.
Investment attractions:
· FiT accredited
Profile:
· Intermittent energy generation profile
First investment:
· 2019
Potential risks:
· Resource risk - rainfall
· Merchant electricity revenues
· Operational issues
Investment portfolio and valuation
Investment portfolio
Diversification continues to play a key role for the Company, reducing
dependency on a single market, technology type or set of climatic conditions,
whilst allowing exposure to a wide opportunity set, as illustrated in the
analysis below at 31 March 2024, according to share of portfolio value:
Sector split
27% Wind
24% Waste & bioenergy
18% Anaerobic digestion
14% Solar
9% Low carbon & sustainable solutions
7% Controlled environment
1% Hydro
Geography
90% UK
10% Rest of Europe
Remaining asset life((1))
13% Up to 10 years
60% 11 to 20 years
27% More than 20 years
Weighted average remaining asset life((1)) of the portfolio is 16.3 years.
(1) Based on project revenues from volumes/ generation during the period
and assumes project cash flow distributions reflect revenue split at each
project.
Operational status
91% Operational
7% Construction
2% Development
Operator exposure
16% SGRE
16% Future Biogas
9% BWSC
7% Brighter Green Engineering
5% Vestas
47% Other
Asset concentration
9% Largest asset
5% 2nd largest asset
5% 3rd largest asset
5% 4th largest asset
5% 5th largest asset
17% Top 6-10
54% Other
Valuation method
89% Discounted cash flow
11% Cost
Portfolio valuation
The Investment Manager 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 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
operational portfolio investment. Assets under construction are valued at cost
until such time as the risks associated with construction have substantially
passed. For some technologies with more complex construction activities, this
will be when the asset reaches the start of commercial operations, while for
others this may be during late-stage construction.
This valuation uses key assumptions which are recommended by Foresight using
its experience and judgement, having considered available comparable market
transactions and financial market data in order to arrive at a fair market
value. An independent verification exercise of the methodology and assumptions
applied by Foresight is performed by a leading accountancy firm and an opinion
is provided to the Directors. The Directors have satisfied themselves as to
the methodology used and the assumptions adopted and have approved the
valuation.
The Directors' valuation of the portfolio at 31 March 2024 was £891.9
million, compared to £898.5 million at 31 March 2023. The decrease of £6.6
million is the net impact of new acquisitions, cash received from investments,
changes in macroeconomic, power price and discount rate assumptions and
underlying growth in the portfolio. A reconciliation of the factors
contributing to the change in the portfolio during the period is shown in the
chart below.
The movement in value of investments during the year ended 31 March 2024 is
shown in the table below:
2024 2023
£m £m
Valuation of portfolio at opening balance 898.5 795.4
Acquisitions in the year (including deferred consideration) 69.2 72.1
Cash distributions from portfolio (87.0) (83.6)
Rebased opening valuation of portfolio 880.7 783.9
Changes in forecast power prices (36.0) 57.7
Changes in economic assumptions 8.6 67.7
Changes in discount rates (29.0) (39.1)
Changes in exchange rates (0.5) 1.0
Balance of portfolio return 68.1 27.3
Valuation of portfolio at 31 March 891.9 898.5
Fair value of intermediate holding companies (138.3) (81.7)
Investments at fair value through profit or loss 753.6 816.8
Allowing for investments of £69.2 million (including deferred consideration)
and cash receipts from investments of £87.0 million, the rebased valuation is
£880.7 million. The portfolio valuation at 31 March 2024 is £891.9 million
(31 March 2023: £898.5 million), representing an increase over the rebased
valuation of 1.3% during the year.
Valuation assumptions
Each movement between the rebased valuation and the 31 March 2024 valuation is
considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 31 March 2024
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.
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 three established market consultants, adjusted by the
Investment Manager for project-specific arrangements and price
cannibalisation.
For the Italian investment, project cash flows assume future electricity
prices informed by a leading independent market consultant's long‑term
projections.
The overall change in forecasts for future electricity and gas prices compared
to forecasts at 31 March 2023, net of the EGL, has decreased the valuation of
the portfolio by £36.0 million.
The graph in the 2024 Annual Report represents the blended weighted power
curve used by the Company, reflecting the forecast of three leading market
consultants, adjusted by the Investment Manager to reflect its judgement of
capture discounts and a normalised view across the portfolio of expectations
of future price cannibalisation resulting from increased penetration of low
marginal cost, intermittent generators on the GB network. The solid line
represents the weighted average realised price forecast - including short term
price fixes under PPAs, and whereas the dotted line shows the equivalent
merchant price for unhedged generation.
Guarantees of origin certificates
As the portfolio includes a number of renewable energy generation projects, it
is able to generate revenue from the sale of Renewable Energy Certificates in
addition to income from the sale of gas and electricity. A certificate is
issued by Ofgem for each unit of renewable electricity or gas generated, and
can be sold as part of, or independently of, the offtake contracts in place
for the wholesale electricity and/or gas. The certificates received for UK
projects are Renewable Energy Guarantee of Origin ("REGO") and Renewable Gas
Guarantee of Origin ("RGGO") for electricity and gas, respectively. Being
traded on the open market, the price is variable and subject to typical demand
and supply dynamics.
As with forecast power prices, valuations reflect contractual fixed price
arrangements where they exist, or the following assumptions informed by
forecasts provided from a range of independent market consultants where they
do not:
Year 2024 2025 2026-28 2029+
REGO £5/MWh £5/MWh £5/MWh £2/MWh
RGGO £8.5/MWh £7.5/MWh £7/MWh £7/MWh
Revenue analysis
The graph in the 2024 Annual Report shows the way in which the revenue mix of
the portfolio changes over time for future financial years, given the
assumptions made regarding future power prices set out in the 2024 Annual
Report. As expected, the proportion of merchant revenues increases in later
years as the subsidies that projects currently benefit from expire.
On a net present value ("NPV") basis (using the discount rate applicable to
each project), the relative significance of each revenue category illustrated
above is as follows:
Revenue NPV
47% Subsidy
29% Merchant power
12% Long-term contracts
2% Flexible generation
10% Other merchant revenues
Energy generating portfolio
JLEN's energy generating portfolio includes wind, solar, anaerobic digestion,
biomass, EfW and hydropower investments. Revenues in these projects typically
consist of a combination of government-backed inflation-linked subsidies,
short-term price fixes contracted under a PPA, merchant revenue or other
revenues such as those earned from private wire contracts.
Merchant prices have reduced materially from the elevated levels experienced
recently. The Company seeks to minimise the impact of power price volatility
by maintaining a programme of rolling price fixes for its energy generating
projects, typically having the majority of projects on fixed price
arrangements in the near term.
At 31 March 2024, 61% of the renewable energy portfolio's electricity and gas
price exposure was subject to fixed prices for the summer 2024 season and 58%
for the winter 2024/25 season. See the power price hedging section in the
Operational Review for more detail about the latest price fixes in place
across the portfolio.
Taking the proportion of merchant revenues hedged under fixed price short term
PPAs, along with subsidy revenues and revenues from long term contracts
outside of the energy generating assets, 81% of total revenues are subject to
a fixed price for the financial year to 31 March 2025. Showing that merchant
revenue remains a low proportion and reflects the broader diversification of
JLEN's portfolio.
Development‑stage investments are not included within the revenue and other
analysis in this section due to the nature of their early stage investment
lifecycle.
Waste and wastewater treatment concessions
This category consists of availability-based assets structured under the
Private Finance Initiative ("PFI")/Public Private Partnership ("PPP")
procurement models, whereby revenue is derived from long-term contracts with
local authorities.
Other non-energy generating portfolio
The desire to mitigate the effects of climate change stimulate not only
opportunities connected to the energy transition, but also in wider
environmental infrastructure that has improved sustainability credentials over
traditional infrastructure approaches in sectors like transport and food
production.
This is reflected in JLEN's diversified portfolio, which includes both
grid-scale batteries and non-energy generating assets such as low-carbon
transport (CNG Foresight) and controlled environment projects, CE Glasshouse
(sustainable agriculture) and CE Rjukan (sustainable aquaculture).
Low-carbon transport
In the case of JLEN's investment into CNG Foresight, a portfolio of CNG
refuelling stations for heavy goods vehicles located across the UK, the asset
generates revenue through a specified margin on CNG dispensed.
Per the terms of the fuel supply contracts, the asset reserves the right to
revise pricing to reflect changes in the wholesale price of natural gas and
fuel duty, and will annually adjust prices (upwards only) in line with CPI
inflation.
Batteries
JLEN's portfolio includes one operational and three c.50MW Battery Energy
Storage Systems ("BESS") at varying stages of construction at 31 March 2024.
Whilst the portfolio only has one operational asset, lower revenue projections
have impacted pricing and valuations in the market for assets at all stages of
their lifecycle. Moving into April and the new financial year, revenues have
started to rise, and independent market analysis suggests this trend to
continue through 2024 and 2025 as well as continued strong fundamentals for
the long-term outlook of the sector.
Revenues for BESS assets can be generated in a variety of ways with
third-party consultants continuing to indicate the importance of prioritising
the capture of trading margins over the finite opportunity from revenues
generated by the provision of grid services. Therefore, merchant revenues are
likely to make up the largest part of the revenue model for these assets. As
such, these investments do not currently have long-term contractual inflation
linkage, although revenues are driven by a margin over costs which is expected
to be sustained regardless of inflation.
Controlled environment
Controlled environment projects typically face a greater level of market risk
than environmental infrastructure projects with subsidy support or with
long-term contracts. Therefore, the Company has only invested in projects that
enjoy a privileged market position over competitors, for example due to
physical location, technology or product differentiation.
In the case of JLEN's glasshouse, the investment is primarily built around the
debt service on its senior secured shareholder loan, with some equity
participation over time from growth of the underlying horticultural products.
The glasshouse is co-located with an existing JLEN anaerobic digestion
facility, which itself will receive an additional source of revenue via a
private wire supplying low-carbon heat and power to the glasshouse. Wastage
from the glasshouse produce may also be returned to the AD digester, creating
a circular ecosystem.
In the case of CE Rjukan, revenues will primarily be generated from the
production of approximately 8,000 tonnes of trout annually, once the site is
fully ramped up in 2025. This will be sold to European and international
salmonid markets via an offtake agreement with an established Norwegian
seafood distribution company with global reach.
The Rjukan investment case is built on the premise of achieving average
historic prices evidenced by the Fish Pool Index; however, our experienced
operational partner is targeting sales at levels between c.5% and 50% higher
than this; underpinned by the higher quality of fish production at Rjukan
versus the typical fish sold in commodity-based markets.
Whilst these investments do not currently have long-term contractual inflation
linkage, the projects retain pricing power and are able to increase prices to
maintain margins as the underlying cost base inflates.
The Company's diversification strategy ensures the portfolio benefits from a
significant proportion of contracted revenues and revenues earned by
non-energy generating assets. Under current forecasts, dividend cover is
expected to be healthily covered for the years ahead.
Useful economic lives
Useful economic lives ("UELs") of assets are based on the Investment Manager's
estimates of the period over which the assets will generate revenue and are
periodically reviewed for continued appropriateness. The assumption used for
the useful life of investments is the lower of lease duration and 35 years for
solar assets, 30 years for wind farms and 20 years for anaerobic digestion
facilities - being the life of the RHI subsidy, after which point the
Investment Manager conservatively assumes that facilities will cease to
operate.
In light of growing evidence to suggest AD facilities may be able to
successfully operate for longer durations, the Investment Manager has provided
a sensitivity in the Annual Report to illustrate the potential impact on
extending the maximum UEL for AD by five years to 25 years.
Economic assumptions
The valuation reflects an update in inflation assumptions based on a
combination of actual historic inflation and recent independent economic
forecasts.
Valuation assumptions for operational assets are set out below:
Economic assumptions used in the portfolio valuation (31 March 2023 figures
shown in brackets)
2024 2025-2030 2031+
UK
RPI 3.5% 3.0% 2.25%
(3.0%) (3.0%) (2.25%)
CPI 2.50% 2.25% 2.25%
(2.25%) (2.25%) (2.25%)
Deposit rates 2.0% 2.0% 2.0%
(1.5%) (1.5%) (1.5%)
Corporation tax 25.0% 25.0% 25.0%
(25.0%) (25.0%) (25.0%)
Italy
Inflation 2.0% 2.0% 2.0%
(2.9%) (1.8%-2.2%)((1)) (2.0%)
Deposit rates -% -% -%
(-%) (-%) (-%)
Corporation tax (IRES) 24.0% 24.0% 24.0%
(24.0%) (24.0%) (24.0%)
Regional tax (IRAP) 4.8% 4.8% 4.8%
(4.8%) (4.8%) (4.8%)
(1) 2025 to 2027 Italian inflation assumptions at 31 March 2023 ranged
between 1.8% to 2.2%, before reverting to a long term assumption of 2.0%.
The euro/sterling exchange rate used to value euro-denominated investments was
€1.17/£1 at 31 March 2024 (€1.14/£1 at 31 March 2023).
The overall uplift in value resulting from changes to economic assumptions in
the year is £8.6 million.
Discount rates
The discount rates used in the valuation exercise represent the Investment
Manager'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 to reflect changes in the market and
in the project risk characteristics.
Reflecting the sustained increase in UK gilt yields since the start of the
year, discount rates have been increased by an average of 0.75% since 31 March
2023 - of which 0.50% was applied at the 30 June 2023 valuation and a further
0.25% at the 30 September 2023 valuation date. No changes to discount rates
were made in December 2023 or March 2024 in relation to the macroeconomic
backdrop.
In addition to gilt-driven changes, the weighted average discount rate has
also increased as a result of continued investment into JLEN's ongoing
development and construction projects, with discount rates in excess of the
portfolio weighted average.
Mitigating these movements is a reduction in the discount rate applied to
JLEN's controlled environment glasshouse investment, reflecting successful
delivery of key construction milestones as the project nears full operational
status. The impact of the change is an uplift in value of £4.8 million (0.7
pence per share). Additionally, an uplift of £1.8 million (0.3 pence per
share) has been recognised for further project-specific adjustments to
discount rates across three assets, Warren Energy, Bio Collectors and West
Gourdie. These relate to operational performance, transactional data and wider
sector benchmarking, respectively.
As in previous valuations, the discount rate used for energy generating asset
cash flows which have received lease extensions beyond the initial investment
period of 25 years retains a premium of 1% for subsequent years, reflecting
the merchant risk of the expected cash flows beyond the initial 25-year
period.
Taking the above into account and including an increase in the value of assets
in construction, the overall weighted average discount rate ("WADR") of the
portfolio is 9.4% at 31 March 2024 (31 March 2023: 8.4%).
The WADR applied to each of the principal operational sectors within the
portfolio is displayed in the table below, noting this represents a blend of
levered and unlevered investments and therefore the relevant gearing of each
sector is also shown.
Sector WADRs Gearing
Wind 8.7% 36%
Waste & bioenergy 9.8% 10%
Anaerobic digestion 8.6% -
Solar 7.6% 10%
Batteries 10.0% -
Hydropower 8.0% 40%
Weighted average 9.4% 16.9%
Sectors in which the Investment Manager retains proprietary information, such
as controlled environment and low-carbon transport, are not disclosed in the
table above, although discount rates used in these sectors feed into the
portfolio WADR of 9.4%.
The overall decrease in value resulting from changes to discount rates in the
year is £29.0 million.
Balance of portfolio return
This represents the balance of valuation movements in the year, excluding the
factors noted above. The balance of the portfolio return mostly reflects the
impact on the rebased portfolio value, all other measures remaining constant,
of the effect of the discount rate unwinding and also some additional
valuation adjustments from updates to individual project assumptions. The
total represents an uplift of £68.1 million.
Of this, the key valuation adjustments include an uplift of £11.5 million
(1.7 pence per share) arising from a review of green certificate price
forecasts on the renewables portfolio (REGOs and RGGOs), offset by an £18.7
million (2.8 pence per share) reduction in value attributable to the Company's
investments in Battery Energy Storage Systems ("BESS"), reflecting the lower
revenue outlook for operational projects and a review of the ready-to-build
projects (Lunanhead and Clayfords).
In addition to this, the Company has recognised a number of other lower-value
cost adjustments and other commercial assumptions following the normal course
of ongoing reassessment throughout the period.
Valuation sensitivities
The Net Asset Value ("NAV") of the Company is the sum of the discounted value
of the future cash flows of the underlying asset financial models,
construction and development spend, the cash balances of the Company and UK
HoldCo, and the other assets and liabilities of the Group less Group debt.
The portfolio valuation is the largest component of the NAV and the key
sensitivities are considered to be the discount rate applied in the valuation
of future cash flows and the principal assumptions used in respect of future
revenues and costs.
A broad range of assumptions is used in our valuation models. These
assumptions are based on long‑term forecasts and are not affected by
short‑term fluctuations in inputs, whether economic or technical. The
Investment Manager 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 sensitivities in the 2024 Annual Report include the impact of the EGL.
The key assumptions are as follows:
Discount rate
The WADR of the portfolio at 31 March 2024 was 9.4% (31 March 2023: 8.4%). A
variance of plus or minus 0.5% is considered to be a reasonable range of
alternative assumptions for discount rates.
An increase in the discount rate of 0.5% would result in a downward movement
in the portfolio valuation of £19.8 million (3.0 pence per share) compared to
an uplift in value of £20.7 million (3.1 pence per share) if discount rates
were reduced by the same amount.
Volumes
Base case forecasts for intermittent renewable energy projects assume a "P50"
level of electricity output based on reports by technical consultants. The P50
output is the estimated annual amount of electricity generation (in MWh) that
has a 50% probability of being exceeded - both in any single year and over the
long term - and a 50% probability of being underachieved. Hence the P50 is the
expected level of generation over the long term.
The P90 (90% probability of exceedance over a 10‑year period) and P10 (10%
probability of exceedance over a 10‑year period) sensitivities reflect the
future variability of wind, hydropower and solar irradiation and the
uncertainty associated with the long‑term data source being representative
of the long‑term mean.
Separate P10 and P90 sensitivities are determined for each asset and
historically the results are presented on the basis that they are applied in
full to all wind, hydro and solar assets. This implies individual project
uncertainties are completely dependent on one another; however, a portfolio
uncertainty benefit analysis performed by a third-party technical adviser
identified a positive portfolio effect from investing in a diversified asset
base.
That is to say that the lack of correlation between wind, hydro and solar
variability means P10 and P90 sensitivity results should be considered
independent. Therefore, whilst the overall P90 sensitivity decreases NAV by
5.9 pence, the impact from wind, hydro and solar separately is only 4.3 pence
per share, 1.4 pence per share and 0.2 pence per share respectively, as shown
in the chart in the Annual Report.
Agricultural anaerobic digestion facilities do not suffer from similar
deviations as their feedstock input volumes (and consequently biogas
production) are controlled by the site operator.
For the waste & bioenergy projects, forecasts are based on projections of
future input volumes and are informed by both forecasts and independent
studies where appropriate. Revenues in the PPP projects are generally not very
sensitive to changes in volumes due to the nature of their payment mechanisms.
Electricity and gas prices
Electricity and gas price assumptions are based on the following: for the
first two years, cash flows for each project use forward electricity and gas
prices based on market rates unless a contractual fixed price exists, in which
case the model reflects the fixed price followed by the forward price for the
remainder of the two‑year period. For the remainder of the project life, a
long‑term blend of central case forecasts from three established market
consultants and other relevant information is used, and adjusted by the
Investment Manager for project‑specific arrangements and price
cannibalisation.
The sensitivity assumes a 10% increase or decrease in power prices relative to
the base case for each year of the asset life after the first two‑year
period. While power markets can experience movements in excess of +/-10% on a
short‑term basis, as has been the case recently, the sensitivity is intended
to provide insight into the effect on the NAV of persistently higher or lower
power prices over the whole life of the portfolio. The Directors feel that
+/-10% remains a realistic range of outcomes over this very long time horizon,
notwithstanding that significant movements will occur from time to time.
An increase in electricity and gas prices of 10% would result in an uplift in
the portfolio valuation of £37.0 million (5.6 pence per share) compared to a
downward movement in value of £37.4 million (5.7 pence per share) if prices
were reduced by the same amount.
Should electricity prices fall to £50/MWh, and gas prices also fall by a
corresponding amount, the Company would maintain a resilient dividend cover
for the next three financial years. Alternatively, should prices fall to
£40/MWh, the Company would still expect to cover the dividend, albeit with
reduced headroom by year three.
Useful economic lives
In line with JLEN's original investment case for anaerobic digestion, the
Company continues to apply the conservative valuation assumption that
facilities will simply cease to operate beyond the life of their RHI tariff.
In recent months, the Investment Manager has seen a growing case of evidence,
including several transactional datapoints, pointing towards a positive change
in market sentiment for valuing these assets - including the potential to run
anaerobic digestion facilities on an unsubsidised basis.
In light of this change, the Investment Manager has once again provided a
sensitivity extending the useful economic lives of its AD portfolio by up to
five years - capped at the duration of land rights already in place. Such an
extension would result in an uplift in the portfolio valuation of £21.9
million (3.3 pence per share).
Uncontracted revenues on non-energy generating portfolio
Non-energy generating assets, such as batteries and controlled environment
agriculture and aquaculture, make up a growing proportion of the portfolio.
These assets are not materially affected by either scarcity of natural
resource nor power price markets. Therefore, the Investment Manager has
presented a sensitivity illustrating an assumed 10% increase or decrease on
all uncontracted revenues for each year of the asset lives.
An increase in uncontracted revenues of 10% would result in an upward movement
in the portfolio valuation of £17.9 million (2.7 pence per share) compared to
a decrease in value of £20.2 million (3.0 pence per share) if those revenues
were reduced by the same amount.
Feedstock prices
Feedstock accounts for over half of the operating costs of running an AD
plant. As feedstocks used for AD are predominantly crops grown within existing
farming rotation, they are exposed to the same growing risks as any
agricultural product. The sensitivity assumes a 10% increase or decrease in
feedstock prices relative to the base case for each year of the asset life.
An increase in the feedstock prices of 10% would result in a downward movement
in the portfolio valuation of £8.9 million (1.3 pence per share) compared to
an uplift in value of £8.7 million (1.3 pence per share) if prices were
reduced by the same amount.
No such sensitivity is applicable to JLEN's biomass investment, where fuel
costs are tied under long-term contracts.
Inflation
Most projects in the portfolio receive a revenue stream which is either fully
or partially inflation‑linked. The inflation assumptions are described in
the macroeconomic section In the Annual Report. The sensitivity assumes a 0.5%
increase or decrease in inflation relative to the base case for each year of
the asset life.
An increase in the inflation rates of 0.5% would result in an uplift in the
portfolio valuation of £19.3 million (2.9 pence per share) compared to a
decrease in value of £18.9 million (2.9 pence per share) if rates were
reduced by the same amount.
Euro/sterling exchange rates
As the proportion of the portfolio assets with cash flows denominated in euros
represents a small proportion of the portfolio value at 31 March 2024, the
Directors consider the sensitivity to changes in euro/sterling exchange rates
to be insignificant.
Corporation tax
The UK corporation tax assumptions applied in the portfolio valuation are
outlined in the notes to the accounts.The sensitivity below assumes a 2%
increase or decrease in the rate of UK corporation tax relative to the base
case for each year of the asset life.
An increase in the UK corporation tax rate of 2% would result in a downward
movement in the portfolio valuation of £13.9 million (2.1 pence per share)
compared to an uplift in value of £13.6 million (2.1 pence per share) if
rates were reduced by the same amount.
Sensitivities - impact on NAV at 31 March 2024
The chart contained in the 2024 Annual Report shows the impact of the key
sensitivities on NAV per share, with the £ labels indicating the impact of
the sensitivities on portfolio value.
Investment portfolio
At 31 March 2024, the Group's investment portfolio comprised interests in 42
projects and investments into several European opportunities through its
investment in FEIP.
Type Asset Location Ownership Capacity Commercial
(MW) operations date
Wind Bilsthorpe England 100% 10.2 Mar 2013
Burton Wold Extension England 100% 14.4 Sep 2014
Carscreugh Scotland 100% 15.3 Jun 2014
Castle Pill Wales 100% 3.2 Oct 2009
Dungavel Scotland 100% 26.0 Oct 2015
Ferndale Wales 100% 6.4 Sep 2011
Hall Farm England 100% 24.6 Apr 2013
Llynfi Afan Wales 100% 24.0 Mar 2017
Moel Moelogan Wales 100% 14.3 Jan 2003 & Sep 2008
New Albion England 100% 14.4 Jan 2016
Wear Point Wales 100% 8.2 Jun 2014
Total 161.0
Waste & bioenergy Bio Collectors waste management England 70% 11.7((1)) Dec 2013
Codford Biogas waste management England 100% 3.8((2)) 2014
ELWA waste management England 80% n/a 2006
Cramlington biomass combined heat and power England 100% 32.0((3)) 2018
Energie Tecnologie Ambiente ("ETA") energy‑from-waste Italy 45%((4)) 16.8 2012
Tay wastewater treatment Scotland 33% n/a Nov 2001
Total 64.3
Anaerobic digestion Biogas Meden England 100% 5.0((5)) Mar 2016
Egmere Energy England 100% 5.0((6)) Nov 2014
Grange Farm England 100% 5.0((6)) Sep 2014
Icknield Farm England 53% 5.0((5)) Dec 2014
Merlin Renewables England 100% 5.0((6)) Dec 2013
Peacehill Farm Scotland 49% 5.0((7)) Dec 2015
Rainworth Energy England 100% 2.2((2)) Sep 2016
Vulcan Renewables England 100% 13.0((6)) Oct 2013
Warren Energy England 100% 5.0((6)) Dec 2015
Total 50.2
Solar Amber England 100% 9.8 Jul 2012
Branden England 100% 14.7 Jul 2013
CSGH England 100% 33.5 Mar 2014 & Mar 2015
Monksham England 100% 10.7 Mar 2014
Panther England 100% 6.5 2011-2014
Pylle Southern England 100% 5.0 Dec 2015
Total 80.2
Low carbon & sustainable solutions West Gourdie battery storage Scotland 100% n/a May 2023
Clayfords battery storage Scotland 50% n/a Ready to build
Lunanhead battery storage Scotland 50% n/a Ready to build
Sandridge battery storage England 50% n/a Under construction
CNG Foresight low-carbon transport England 25%((8)) n/a Various
HH2E green hydrogen Germany n/a n/a Development phase
Total n/a
Controlled environment Glasshouse England Minority stake n/a Partially operating
Rjukan aquaculture system Norway Minority stake n/a Under construction
Total n/a
Hydro Northern Hydropower England 100% 2.0((9)) Oct 2011 & Oct 2017
Yorkshire Hydropower England 100% 1.8((9)) Oct 2015 & Nov 2016
Total 3.8
FEIP((10)) Avalon solar and green hydrogen Spain n/a n/a Development
JLEN has committed €25 million to FEIP
Carna pumped storage hydro and co-located wind Scotland n/a n/a Under construction
Inca pumped storage hydro Ireland n/a n/a Development
Kölvallen wind Sweden n/a n/a Under construction
MaresConnect interconnector Republic of Ireland n/a n/a Development and under construction
Puskakorpi wind Finland n/a n/a Dec 2022
Quartz battery storage England n/a n/a Development
Skaftåsen Vindkraft AB wind Sweden n/a n/a June 2023
Torozos wind Spain n/a n/a Dec 2019
85 Degrees geothermal heat Netherlands n/a n/a Operational /under construction
Beleolico Italy n/a n/a July 2022
Blue Jay Scotland n/a n/a Development and under construction
Total n/a
Total portfolio Total 359.5
(1) 10MWth and an additional 1.7MWe capacity through two CHP engines.
(2) Electrical exporting plant measured as MWe.
(3) 26MWe (electrical) and 6MWth (thermal).
(4) Not including FEIP's 45% ownership.
(5) MWth (thermal) and an additional 0.4MWe CHP engine for on-site power
provision.
(6) MWth (thermal) and an additional 0.5MWe CHP engine for on-site power
provision.
(7) MWth (thermal) and an additional 0.25MWe CHP engine for on-site power
provision.
(8) JLEN holds 25% of the "A" shares. "A" shares have a different economic
entitlement than "B" shares, including a priority return.
(9) Includes a 1.2MW battery storage.
(10) Foresight Energy Infrastructure Partners ("FEIP").
Operational review
Investment performance
The NAV per share at 31 March 2024 was 113.6 pence, down from 123.1 pence last
year.
JLEN has announced an interim dividend of 1.89 pence per share for the quarter
ended 31 March 2024, meeting its full‑year target of 7.57 pence per share.
Despite ending the year below budget, the Fund has delivered consecutive years
of record distributions received from investments, resulting in a dividend
cover of 1.30x.
Financial performance
The financial performance chart to the right shows the budgeted proportion of
cash distributions forecast to be received from underlying investments at the
start of the financial year, versus the relative over or under-performance
during the year under review.
The main differences from budget relate to the waste & bioenergy portfolio
(9.4%) - although a large part of this is due to timing of payments and will
be recovered next year, and the wind portfolio (3.6%), which experienced
lower-than-expected wind speeds.
Operational performance
The operational performance chart to the right shows the forecast generation
target expected to be achieved at the start of the financial year, versus the
relative sector-level over or under-performance against this target during the
year.
Overall operating performance of the environmental infrastructure portfolio
was satisfactory. The renewables segment of the portfolio produced 1,358GWh
(2023: 1,325GWh) of green energy, an uplift of 3% over the previous year but
4.1% below budget. The main factors causing the negative deviation were low
wind speeds during Q1 and Q3. along with a prolonged outage at Cramlington for
planned maintenance works, although the agri- and food waste AD portfolio, the
largest part of the portfolio by generation, performed 1.2% above budget.
The concession-based projects, hydros, controlled environment and low carbon
and sustainable solutions portfolios performed in line with their respective
targets.
The average all-in price received by the differing technology classes in the
UK for their energy volumes generated in the year ended 31 March 2024 is shown
in the table below:
Average all‑in energy price Year ended Year ended
31 Mar 2024 31 Mar 2023
Wind £148 per MWhe £383 per MWhe
AD electric £317 per MWhe £198 per MWhe
AD gas-to-grid £148 per MWhth £129 per MWhth
Biomass £205 per MWhe £307 per MWhe
Energy-from-waste €109 per MWhe €129 per MWhe
Solar £217 per MWhe £242 per MWhe
Hydro £308 per MWhe £286 per MWhe
Power price hedging
JLEN's exposure to wholesale power prices is mitigated by the practice of
having a substantial proportion of generation for both electricity and gas on
fixed price arrangements for durations ranging from six months out to two
years. The extent of generation subject to fixes at 31 March 2024 is as
follows:
Summer 2024 Winter 2024 Summer 2025 Winter 2025
Wind 81% 74% 38% 6%
Solar 100% 80% - -
Biomass - - - -
Energy-from-waste 70% 41% - -
AD - electric 100% 100% 32% 32%
AD - gas 71% 74% 53% 50%
Weighted average 61% 58% 32% 20%
The Investment Manager continues to monitor the market beyond March 2025 for
opportunities to fix prices to mitigate risk across the portfolio.
Renewable energy-generating assets
Anaerobic digestion
The AD portfolio is the largest producer of energy on a GWh basis and
generated 37% ofthe energy produced by the JLEN portfolio. Gas generation
(measured in GWh thermal generated) was 496GWh, 3.6% ahead of its sector
target (2023 variance was 1.5% favourable).
Eight of the nine plants outperformed or reached their generation targets,
notably strong performances came from Icknield and Peacehill, which both
performed >15% above their generation targets. Biogas Meden struggled in
the latter half of the year (5% below generation target) as a result of issues
with its chiller units, the operator has invested in a duty-standby system to
ensure the problem does not continue.
The poor maize harvest in 2022 resulted in widespread feedstock shortages and
increased competition for tonnages across the UK agri-AD sector, this in
combination with the residual impacts of the Ukraine war meant feedstock costs
were inflated in the financial year ended 31 March 2024.
Conversely, the maize harvest in 2023 produced good yields, leaving the
portfolio in a more stable position.
The high rainfall experienced during the winter months prevented digestate
application for prolonged periods, resulting in increased storage costs.
Though investment in greater digestate storage capacity has been carried out,
the extreme weather conditions still had a negative impact on the portfolio.
Further investment in projects like clamp extensions and digestate storage
tanks will take place to promote greater climate change resilience.
Wholesale gas and power prices stabilised during the first six months of the
financial year, while a further drop was observed in the latter half due to
the mild winter and resulting high gas storage volumes across Europe. The
Investment Manager has taken the opportunity to hedge 70%+ of the gas grid
capacity for summer and winter 2024, while 50%+ is hedged for summer and
winter 2025.
Renewable energy-generating assets
Wind
The wind portfolio generated 390GWh (31 March 2023: 383GWh), representing 29%
of the total energy generated by the portfolio. This was 8% below the sector
target. The negative variance in production was primarily the result of low
wind resource.
Although a majority of the assets performed as expected, there were five
downtime events across the wind portfolio which resulted in the overall
availability being 0.4% below anticipated levels (1.5% below target for year
ended 31 March 2023).
Three of the events will be compensated for via the O&M performance
mechanism at the conclusion of their respective contractual years.
The remaining two have been raised with the asset's insurers and discussions
with loss adjusters are ongoing.
The average power price realised for the wind assets was 49% above the average
variable price through FY24 due to the high level of fixes in place across the
portfolio. 70%+ of the wind generational capacity is now hedged until March
2025.
Value enhancements were ongoing over the year and the Investment Manager
undertook a market tender process to renew its O&M contract at one of the
sites under management. The renegotiated contract has resulted in a
significant cost saving which will be realised over the remaining life of the
asset. This tender process also served to validate the Investment Manager's
pricing assumptions for O&M services beyond existing contracts.
Another value enhancement realised this financial year is attributed to a
business rates appeal for 10 of the wind assets, the resulting revision has
generated material cost savings and increased the asset value.
Waste & bioenergy
The renewable energy-generating segment of the waste & bioenergy portfolio
is the second largest producer of energy on a GWh basis and generated 29% of
the energy produced by the portfolio. The waste & bioenergy portfolio
generated 394GWh
(31 March 2023: 334GWh), representing a 9% uplift over the prior year, though
this was 8% below the sector target.
For three quarters of the financial year, Cramlington exceeded its
generational target, unfortunately following the discovery of corrosion within
the flue gas treatment system, the operator was forced to conduct a six-week
outage from mid-February to late March 2024. The asset finished the year 10.9%
below the target, the downtime is expected to be compensated for via the
O&M agreement's performance mechanism.
Though the performance at Bio Collectors showed a marked improvement for the
first half of the financial year, digestate storage issues in December 2023,
along with a critical failure of the biogas upgrading unit in February 2024,
resulted in the asset finishing the year 15% below the generation target. The
Investment Manager is working alongside the site operations team to improve
digestate offtake provisions and review site maintenance contracts.
The private wire and heat network linking Codford Biogas with an adjacent
glasshouse has now been installed and is providing renewable power and heat to
the sustainable farming operation at a rate that benefits both businesses.
Renewable energy-generating assets
Solar
The solar portfolio generated 73GWh (31 March 2023: 76GWh), which was 3% below
the sector target; this represents 5.4% of the total energy generated by the
portfolio. Irradiation levels across the financial year were 0.6% below
expectation. The generation from most of the sites was at or above the target
during the year, the Amber and Branden sites experienced some lost generation
due to distribution network operators ("DNO") works and technical issues at
the inverters. Unfortunately, the lost revenue is not recoverable under the
O&M contract; the sites have however invested in a number of spare parts
and additional training for the O&M contractor to ensure the technical
issues experienced are addressed more effectively going forward.
Value enhancements were ongoing throughout the year, one of which involved a
tender for the solar portfolio asset management services. Following the review
and analysis of a number of proposals, a new contractor was appointed on four
of the solar sites in April 2024, with a further four solar sites
transitioning to the new contractor in July 2024.
The agreement with the new contractor includes an improvement plan for each of
the sites and the change is expected to enhance the overall profitability and
performance of the portfolio.
In late 2023 repowering works were carried out at Monksham, see the case study
in the Annual Report for more information on this value enhancement.
PPA prices at most of the solar sites are now fixed until March 2025.
Hydro
The hydro portfolio generated 5GWh, which was 10% below target (31 March 2023:
4GWh). This is a very small part of JLEN's portfolio and represents less than
1% of the total energy generation for the year. Though rainfall levels were in
line with expectation, mechanical issues at two of the sites brought overall
generation below the target for the year. An insurance claim for one of the
mechanical downtime events is ongoing and is expected to ensure the plant is
compensated for the loss of revenue.
Assets which support the transition to a lower-carbon economy
Waste & bioenergy concessions
The ELWA waste project continues to deliver operational and financial
performance which is in line with expectations. Operational performance
targets were again exceeded with diversion from landfill at 99.98%,
substantially ahead of the 67% contract target, and recycling at 30.75%, also
ahead of the 22% contract target. Waste tonnages delivered remained stable
throughout the year and were in line with expectations.
Preparations for the handback of this project to the authority in 2027 have
been initiated, in addition the Investment Manager continues to monitor the
operator in light of a proposed change in ownership between Renewi and Biffa
that was announced post the year end.
The Tay wastewater project had another stable year operationally, with cash
flows substantially in line with expectation and as a result, distributions
from the project were in line with expected budgets.
Low carbon & sustainable solutions
Low-carbon transport
The CNG refuelling stations achieved a 39% increase in fuel dispensed
year-on-year as customers brought new vehicles into service and new stations
became established. Truck deliveries have significantly improved over FY24,
and reported sales going into FY25 are strong.
During this financial year, three construction assets were commissioned at
Newton Aycliffe, Corby and Bangor, additionally, one existing operational
asset, Newark, was acquired. There are currently two assets under construction
located at Doncaster and Aylesford.
JLEN invested £8.4 million into CNG during the year. As at 31 March 2024, the
portfolio held 14 natural gas refuelling stations, including the sites in
construction phase. JLEN invested a total of £25.3 million as at the balance
sheet date.
Battery storage assets
Operational assets
West Gourdie is JLEN's recently constructed 50MW battery asset located in
Dundee, Scotland. In May 2023, the Take Over certificate was issued to the EPC
contractor and the site went into the operational phase. The asset has been
participating in various services such as: Dynamic Containment (DC),
Moderation (DM), Regulation (DR), day‑ahead (DA), intraday, and capacity
market. The open balancing platform launched by the National Grid in December
2023 allowed the site to start earning revenues in the balancing mechanism
market.
The availability across the year was 93%, which was 5% below the O&M
contractual target, the downtime events contributing to this are expected to
be compensated for via the performance mechanism in the O&M contract.
The route-to-market provider for the batteries co-located at the Company's
hydro assets continues to pursue hardware changes, allowing participation in
new grid services.
Construction and development-stage projects
Battery storage assets
JLEN owns three construction-stage 50MW battery storage assets in the UK. The
Sandridge project has progressed well with on-site works largely complete in
anticipation of the distribution network operators ("DNO") energisation in
FY25. Take over is expected soon after. The Investment Manager has not started
construction at Lunanhead and Clayfords due to volatility in the level of
expected revenues for battery assets and lower forecast returns. The
Investment Manager is considering options for these assets.
Controlled environment
Glasshouse project
Construction of the Glasshouse was achieved in September 2023, with the first
plants being delivered soon after. The operation will continue to ramp-up in
FY25 as offtake contracts are negotiated and finalised.
Rjukan project
The CE Rjukan project reached a significant milestone at the beginning of 2024
with the successful introduction of its first fish into the facility and
continues to achieve its section handover milestones. Progressing according to
schedule, the project is expected to be fully completed in FY26.
Green hydrogen
HH2E development platform
JLEN's first investment into the green hydrogen sector is expected to reach
the Final Investment Decision in the coming months.
Other investments
FEIP
JLEN has committed to investing €25 million to Foresight Energy
Infrastructure Partners SCSp ("FEIP"), a Luxembourg limited partnership
investment vehicle. At 31 March 2024, the Fund has invested in nine projects
and is no longer seeking to make new investments. The investment in FEIP
allows JLEN to further diversify its geographic and technology exposure, while
also gaining an allocation to construction-stage assets which is expected to
enhance returns.
Given construction-stage assets can only represent a small part of the
Company's portfolio, the FEIP investment allows a greater level of
diversification than would be possible with direct investments, providing for
a more attractive risk-adjusted return profile. JLEN is excused from any FEIP
investment that is not consistent with JLEN's investment policy. No management
fees are payable on the amounts invested by JLEN. FEIP also owns a 45% stake
in ETA, the Italian EfW plant, in which JLEN is also an investor. As at 31
March 2024, €16.9 million has been invested in the vehicle.
Acquisitions
Lubmin green hydrogen investment
In July 2023, the Company announced its second green hydrogen development
opportunity alongside a consortium including other Foresight-managed funds and
its development partner HH2E, a specialist in developing green hydrogen
projects to decarbonise the industry. The production site is located in
Lubmin, Germany. The consortium of investors has approved the Preliminary
Investment Decision and the initial investment of up to €9.2 million is
being utilised for detailed engineering designs and the procurement of long
lead items. The Final Investment Decision is expected in the coming months.
Bio Collectors Holdings Limited
In December 2023, the Company acquired the remaining 30% shareholding in Bio
Collectors Holdings Limited ("BCH"). BCH, through its subsidiary companies,
holds the rights and operational assets that make up an anaerobic digestion
("AD") plant and the Bio Collectors waste collections business. JLEN acquired
a 70% interest in BCH in December 2019, at which time, a mechanism was agreed
for the acquisition of the remaining 30% following the expiry of an initial
holding period.
The acquisition increases JLEN's exposure to an investment that is expected to
deliver attractive returns for shareholders and of which it has direct
operational knowledge and expertise. It also allows JLEN to consolidate its
control of BCH, creating the potential for JLEN to deliver operational
synergies across its portfolio of food waste AD plants.
Financing
On 13 June 2024, JLEN completed the refinancing of its fund-level debt
facility - securing a committed multi-currency RCF of £200 million, with an
uncommitted accordion facility of up to £30 million and an uncommitted
option to extend for a further year.
The RCF provides an increased source of flexible funding outside equity
raisings, with both sterling and euro drawdowns available on attractive terms.
The facility will principally be used to make future acquisitions of
environmental infrastructure to add to the current portfolio, as well as
covering any working capital requirements.
The interest charged in respect of the renewed RCF continues to be linked to
the Company's ESG performance, with JLEN incurring a 5 bps premium or discount
to its margin based on performance against defined targets. Those targets
include:
· environmental: increase coverage of independent biodiversity
assessments and implement initiatives to enhance biodiversity net gain across
the portfolio;
· social: increased volume of contributions to local communities; and
· governance: maintaining a low number of work-related accidents, as
defined under the Reporting of Injuries, Diseases and Dangerous Occurrences
("RIDDORS") by the Health and Safety Executive.
Performance against these targets will be measured annually, with the cost of
the RCF being amended in the following financial year. Lenders to the facility
include HSBC, ING, Clydesdale Bank, National Australia Bank and Royal Bank of
Scotland International. The margin can vary between 205 bps and 215 bps over
SONIA (Sterling Overnight Index Average) for sterling drawings and Euribor
(Euro Interbank Offered Rate) for euro drawings, depending on performance
against the ESG targets.
In addition to the RCF, several of the projects have underlying project-level
debt. 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.
As at 31 March 2024, drawings under the RCF were £159.3 million. Under its
investment policy, JLEN may borrow up to 30% of its NAV.
The project-level gearing at 31 March 2024 across the portfolio was 16.9%
(31 March 2023: 18.3%). Taking into account the amount drawn down under the
RCF of £159.3 million, the overall fund gearing at 31 March 2024 was 31.2%
(31 March 2023: 27.3%).
As at 31 March 2024, the Group, which comprises the Company and the
intermediate holding companies, had cash balances of £18.1 million (31 March
2023: £18.0 million).
Risks and risk management
JLEN has a comprehensive risk management framework overseen by the Risk
Committee, comprising independent non‑executive Directors.
Risk is the potential for events to occur that may result in damage, liability
or loss. Such occurrences could adversely impact the Company's business model,
reputation or financial standing. Alternatively, under a well‑formed risk
management framework, potential risks can be identified in advance and can
either be mitigated or possibly even converted into opportunities.
The risk and risk management section details the principal risks that the
Directors consider are material which potentially could impact the Company or
occur in an environmental infrastructure project such as those invested in by
the Company.
In assessing these risks for the purposes of this report, the Directors
typically considers the next 12-18 months as being the critical window for
risks to materialise. Environmental infrastructure assets are long-term assets
and risks can crystallise throughout an asset's life; nevertheless, this
report is intended to give the reader an understanding of the current risk
outlook for the Company and the risks that the Board and the Investment
Manager feel have the most significance at the present time. This outlook is
updated regularly in the publications that the Company puts into the market
and so readers can get a sense of how the Board and the Investment Manager's
view of risks changes over time.
Given that the Company delegates certain activities to the Investment Manager
and Administrator, reliance is also placed on the controls of the Group's
service providers.
In the normal course of business, each project will have developed a rigorous
risk management framework, including a comprehensive risk register, that is
reviewed and updated regularly and approved by its board. The purpose of
JLEN's risk management policies and procedures is not to eliminate risk
completely, as this is neither possible nor commercially viable. Rather, it is
to reduce the consequence of occurrence and to ensure that JLEN is adequately
prepared to deal with risks so as to minimise their effect should they
materialise.
Risk identification and monitoring
JLEN has a separate Risk Committee, comprising six non‑executive Directors,
which is responsible for overseeing and advising the Board on the current and
potential risk exposures of the Company, with particular focus on the Group's
principal risks, being those with the greatest potential to influence
shareholders' economic decisions, and the controls in place to mitigate those
risks.
The identification, assessment and management of risk are integral aspects of
the Investment Manager's and Administrator's work in both managing the
existing portfolio on a day‑to‑day basis and pursuing new investment
opportunities (though the Board has ultimate responsibility for the risk
management activities of the Group).
The Investment Manager and Administrator have established internal controls to
manage these risks and they review and consider the Group's key risks with the
Risk Committee on a quarterly basis, including new risks arising and/or
changes in the likelihood of, or impact from, any particular risk occurring.
In the case of new and emerging risks, assessment occurs outside of the
quarterly cycle. These systems of internal control were in place for the year
under review and continue to be in operation.
The Board reviews the performance of the Investment Manager and Administrator,
as well as other key service providers, annually.
JLEN has a comprehensive risk management framework and risk register that
assesses: a) the probability of each identified risk materialising; and b) the
impact it may have on JLEN.
Mitigations and, where applicable, controls have been developed with respect
to each risk so as first to reduce the likelihood of such risk occurring and
secondly to minimise the severity of its impact in the case that it does
occur.
The risk register is a "live" document that is reviewed and updated regularly
by the Risk Committee as new risks emerge and existing risks change. The
principal risks faced by the Group are formally reviewed by the Risk Committee
at each quarterly meeting and the Committee reports to the Board in respect of
changes to the general risk environment and material developments in already
identified risks. Each of the underlying projects is overseen by an
experienced portfolio manager who reports to their individual project board.
The portfolio managers maintain strong relationships between counterparties,
contractors, third-party asset managers and other stakeholders. This ensures
effective management of potential risks.
Emerging risks and risks relevant to the year under review
Power prices
Exposure to market power prices continues to be assessed as the most impactful
risk faced by the Company. While the Company is less exposed to this risk than
some peers in the renewable infrastructure sector due to its diversified
portfolio which has a relatively high proportion of fixed revenues and many
assets whose revenues are not exposed to wholesale energy prices at all, the
year under review demonstrates that this risk can still impact the portfolio
valuation.
Changes to power price assumptions used in valuing the portfolio has reduced
the portfolio valuation by £36.0 million/5.4 pence during the year. Even
though the last months of the previous year had already seen electricity
prices fall precipitously from the highs seen during the energy crisis in
2022, electricity prices have continued to fall further and faster than
anticipated. In the year under review, power prices have reduced by a further
£40/MWh - equivalent to approximately 40%.
The Investment Manager monitors prices regularly and seeks to enter into fixed
price arrangements in order to limit short-term exposure, although there is no
certainty that the Company will maintain a similar level of price fixes as
currently in place as this depends on pricing available in the market.
Risks associated with development or construction-stage assets
In recent years, the Company has increased its exposure to assets in the
development or construction stages, on the basis that such assets can offer
higher returns than similar ones acquired at the operational stage. There is
also potential for capital growth as these assets achieve milestones that
denote the reduction of development and construction-related risks and are
re‑rated, typically through the reduction of the discount rate used for
valuation.
At the year end, the Company had 9% of the portfolio across 42 assets, either
in construction or development stages; an decrease of 1% from 2023. This
decrease is due to the JLEN's glasshouse investment commencing partial
operations during the year, offset by further deployment into other ongoing
construction and development‑stage assets during the year in the normal
course. In light of the continued allocation to construction or development
assets, the Directors have raised risks associated with such projects,
including cost overruns or failure to achieve key milestones, as principal
risks faced by the Company.
Risks associated with interest rates and changes to tax legislation and rates
In the 2023 Annual Report, risks associated with interest rates and changes to
tax legislation and rates were included as being among the Company's principal
risks. These are not assessed as being principal risks at the current time.
While infrastructure assets such as those in the Company's portfolio are
long-term assets, and they are very likely to experience further periods of
higher perceived risk due to interest rates and tax, the Directors consider
that these risks have receded when looking over the 12-18-month horizon for
this report. Interest rates are expected to decrease modestly over the period,
which should be positive for the valuation of the Company's portfolio.
Following the introduction of the Energy Generator Levy, the Directors are not
aware of any further changes to taxes that are proposed, either by the current
government or by an incoming Labour government, that would negatively impact
the portfolio materially.
Discontinuation vote
In common with several peers, the Company faces a discontinuation vote at the
upcoming AGM in September 2024 as a result of the share price trading at a
discount to NAV of greater than 10% on average for the year under review.
While the Directors are confident in their view that the Company offers
investors an attractive dividend and access to otherwise hard-to-access
opportunities in environmental infrastructure and that shareholders should
reject the discontinuation motion as not being in their best interests, the
vote creates a risk that the Company will be required to change strategy and
seek to sell assets at a sub-optimal time, such as construction and
development‑stage assets.
JLEN's risk register covers six main areas of risk:
Strategic, economic and political
Operational, business, processes and resourcing
Financial and taxation
Compliance and legal
Asset specific
ESG
See more on climate-related risks in our Sustainability and ESG report.
This year we are only detailing the most pertinent principal risks affecting
the Company. We have identified 11 risks within two of the above-mentioned
categories. These risks are summarised below, followed by a detailed
discussion of the mitigating factors.
Strategic, economic and political
1 Funding commitments
Change in year: increased
Potential impact:
· Unable to meet commitments as they fall due, leading to the loss of
value in unfunded portfolio assets and loss of investor confidence.
Mitigation and controls:
· The Investment Manager carries out detailed forecasting of Fund
cash position and RCF headroom.
· The Investment Manager is progressed in several asset sales
processes, the final approval relating to asset sales sits with the JLEN
Board.
· Where necessary, the Investment Manager will renegotiate
contractual commitments and timeframes to reschedule the injection of cash.
· New investment will be highly selective until the Company is able
to raise new capital or recycle capital from existing assets.
Link to Fund objectives:
Investment, growth and diversification
Residual risk:
Medium
2 Adverse movement in inflation
Change in year: decreased
Potential impact:
· The underlying assets in the portfolio, and therefore the returns
expected from them, have some exposure to inflation. This ranges from direct
exposure, such as subsidies and service contracts that increase in line with
RPI annually, to other revenue and cost items where the link to inflation is
not contractual and its effect must be estimated.
· In the current inflation environment, there is greater uncertainty
than previously about the path that inflation will follow. If inflation is
materially lower than the assumptions used in valuations, then there is a risk
that the portfolio value will fall. JLEN has adopted an assumption of 3.5% RPI
inflation for the current year, dropping to 3% until 2030.
· Nominal discount rates are used in the discounted cash flow ("DCF")
valuation methodology used to value portfolio assets. There is a risk that
discount rates increase in a high inflation environment, impacting valuations.
Mitigation and controls:
· Monitoring of market forecasts for inflation and input from the
Company's independent valuations specialist regarding inflation assumptions
seen in the market. Returns from the assets in the portfolio are highly
correlated with inflation due to revenues from PFI assets, green benefits for
renewable energy assets and most operational costs being directly linked to an
inflation index. This results in a "natural hedge", removing the need for the
use of derivatives to mitigate inflation risk.
· The adoption of a "progressive" dividend policy rather than an
explicitly "inflation-linked" one gives the Company additional flexibility to
set dividend targets at a sustainable level. Higher inflation rates may
mitigate the impact of higher interest rates.
· The Foresight Valuation Committee will approve assumptions used in
the valuation and the JLEN Board has ultimate authority over the portfolio
valuation.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Residual risk:
Medium
3 Changes in regulation and government support
Change in year: increased
Potential impact:
· Risk that regulatory, legal or contractual change in general
structure of electricity network charging regime or basis of use leads to
increased costs for JLEN's renewable energy projects or lower revenues than
forecast, negatively impacting cash flow and portfolio valuation.
· JLEN is required to comply with certain regulations, being a
Guernsey company listed on the London Stock Exchange ("LSE"), including those
under the Alternative Investment Fund Managers Directive ("AIFMD") and the
Foreign Account Tax Compliance Act ("FATCA"). There is a risk that failure to
comply with any of the relevant rules could result in a negative reputational
or financial impact on the Company.
· The newly emerging area of climate-related disclosures is changing
rapidly as understanding of what constitutes best practice evolves. There is a
risk that JLEN fails to disclose properly against the new requirements or that
investors consider disclosures to be insufficient.
Mitigation and controls:
· Cultivate links with trade bodies and relevant government
departments in order to keep abreast of proposed regulatory changes and lobby
for the Fund's interests.
· Maintaining a diversified portfolio so no one set of regulatory
risks related to a single technology predominates.
· The Investment Manager engages with specialist consultants to
assist with developing forecasts reflecting changing network regulations.
· Through a comprehensive compliance monitoring programme, JLEN
ensures that it remains well informed as to the legislation, regulation and
guidance relevant to both the Company itself as well as the project entities
in which it invests. The Board monitors compliance information provided by the
Administrator, Company Secretary, Investment Manager and legal counsel and
monitors ongoing compliance developments relevant to a Guernsey company listed
on the LSE.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
Residual risk:
Medium
4 Reputational
Change in year: Unchanged
Potential impact:
· Risk that something occurs that is perceived by investors or other
market participants to damage JLEN's reputation, such that they do not wish to
do business with JLEN.
· JLEN's activities span a range of environmental infrastructure
sectors with multiple touchpoints with local stakeholders, regulators,
contractual counterparties, local communities and other parties who are active
in the areas in which JLEN operates. As JLEN grows and its operations become
more complex, the risk that JLEN is considered to have acted improperly
increases, leading to reputational damage and investors avoiding the Company's
shares.
· JLEN aims to conduct its business in accordance with ESG principles
and is public in this aim. The ESG landscape is changing rapidly and there is
increased scrutiny of businesses' claims in this area. JLEN could suffer
reputational damage if it is considered to be "greenwashing", leading to
investors avoiding the Company's shares.
· Risk that JLEN falls short of ESG standards, whether those that it
sets itself, those set by regulation or those that are expected by wider
society or influential groups within society. The consequences could include
loss of reputation, direct action by interested groups or investors
determining that JLEN does not fit their own ESG criteria
Mitigation and controls:
· Primary mitigation is that risks to reputation are controlled and
monitored through the Risk Committee. JLEN engages its own PR advisers, who
would be able to assist in the event of risk to reputation. It will also need
to consider the possibility of reputational events occurring that effect the
Foresight brand.
· The JLEN Investment Committee also has responsibility for approving
investments where risk to reputation is a possibility.
· On sustainability matters, the Company is advised by the Investment
Manager and where appropriate it is advised by external consultants with
specific expertise.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
Residual risk:
Medium
Operational, business, processes and resourcing
5 Asset exposure to weather resource
Change in year: Increased
Potential impact:
· By the very nature of wind, solar and water-related environmental
infrastructure projects, their financial performance is dependent on the
volume of weather resource available over time, whether measured through wind
speeds, irradiance or millimetres of rainfall. These are factors outside the
control of JLEN or the projects themselves, with the risk of a significant
effect on performance if the outcome is significantly different from the
assumptions made in forecasting revenue and costs and hence returns to JLEN.
Mitigation and controls:
· For renewable energy projects there is a degree of protection from
this variability in weather resource from portfolio diversification, as solar
is more productive in the summer and wind more productive in the winter, with
the absolute level of resource being weakly negatively correlated.
· On all projects, technical consultants are employed to advise on
the assumptions which should be made regarding volume and its impact on
performance for each individual asset. Risks in this area diminish over time
as operational track record provides a stronger base for forecasts than
consultants' estimates.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
Residual risk:
Medium
6 Climate change - physical risk
Change in year: Unchanged
Potential impact:
· Climate-related physical risks are related to the potential
physical impacts of both acute (extreme) weather events and chronic changes to
climate patterns.
· This risk has the potential to impact JLEN's assets which could
impact portfolio returns.
Mitigation and controls:
· Climate-related risks are monitored by the Investment Manager and
reported to the ESG Committee and Risk Committee.
· The risk is mitigated in part by owning a portfolio that is
diversified by location, technology, resource use and revenue make-up.
· The portfolio has been subject to independent scenario analysis
this year, helping to inform the strategy going forward.
· Further information on mitigants is provided in the Sustainability
and ESG report.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
Residual risk:
Medium
7 Volume and cost of feedstock resource
Change in year: Decreased
Potential impact:
· For environmental infrastructure assets that need to source
feedstock or analogous resources, there are risks associated with the volume
of feedstock available and the costs or revenues associated with it. If
sufficient feedstock is not available for an asset to operate at its optimum
level, or feedstock is only available at a cost that is more expensive than
the investment case, then JLEN's returns can be materially affected.
Mitigation and controls:
· The feedstock assumptions used for valuations are based on recent
experience and the views of dedicated staff who are active in those markets.
· The assets in JLEN's portfolio that rely on supplies of feedstock
benefit from dedicated staff (whether employed by service providers or
directly by the asset) who work to source suitable feedstock at the best price
available.
· For agri-anaerobic digestion sites, it is common to agree feedstock
contracts that adjust for the dry matter content in the biomaterial and relate
pricing to that energy content and volume which is delivered. Should a
shortfall of a particular feedstock be likely, for instance due to a poor
harvest, substitute feedstocks are widely available.
· The Foresight Valuation Committee will approve assumptions used in
the valuation and the JLEN Board has ultimate authority over the portfolio
valuation.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Residual risk:
Medium
8 Cyber risk
Change in year: Unchanged
Potential impact:
· There exists a threat of cyber attack in which a hacker or computer
virus may attempt to access the IT systems of the Group, the Investment
Manager, the Administrator or one of the project companies and attempt to
destroy or use the data for malicious purposes. While JLEN considers that it
is unlikely to be the deliberate target of a cyber attack, there is the
possibility that it could be targeted as part of a random or general act.
Mitigation and controls:
· JLEN has no dedicated IT systems and it relies on those of its
service providers, principally the Investment Manager and Administrator, which
have procedures in place to mitigate cyber attacks and have robust business
continuity plans in place.
· Renewables assets are also susceptible to cyber attack, for example
if the control systems of wind turbines are targeted, and the Investment
Manager is working to understand weaknesses in this area better in order to
continue to improve controls to increase security.
· JLEN and the project SPVs information technology providers have
procedures in place to mitigate cyber attacks, they also have in place
business continuity plans and data is separately stored on multiple servers
which is backed up regularly.
· A service provider has been engaged to provide enhanced cyber
security for the wind portfolio including monitoring of all internet traffic
into the wind sites. This is now being rolled out to the rest of the
portfolio.
· See the "Improving cyber resilience across the portfolio" case
study in the Annual Report.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Residual risk:
Low
9 Exposure to market power prices
Change in year: Decreased
Potential impact:
· The revenues of the renewable energy-generating assets are
dependent to some extent on the market price of electricity and natural gas,
which is out of the control of JLEN. There is a risk that the actual prices
received vary significantly from the model assumptions, leading to a shortfall
in anticipated revenues to JLEN.
· The Company has introduced battery storage assets into the
portfolio, the first of which has become operational post year end. These
assets also earn revenues that are determined by electricity markets, although
the business model is more complex than for generators such as wind and solar
assets.
Mitigation and controls:
· The risk of exposure to variations in electricity and gas prices
from assumptions made is mitigated by JLEN in the following ways: i)
short‑term PPAs are used to fix electricity and gas prices for between one
and three years ahead depending on market conditions and many have floor
prices; ii) forward prices based on market rates are used for the first two
years where no fix is in place; and iii) quarterly reports from independent
established market consultants are used to inform the electricity prices over
the longer term used in the financial models. JLEN blends forecasts from three
consultants to reduce volatility in assumed prices from period to period.
· JLEN invests in a diversified portfolio of environmental
infrastructure assets that earn revenues that do not depend on merchant power
sales. At the year end, 71% of the portfolio's underlying lifetime revenues,
on an NPV basis, were not related to sales of merchant power.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
Residual risk:
Very high
10 Construction and development issues
Change in year: Increased
Potential impact:
· Projects in the pre-construction or construction stages are subject
to risks associated with the underestimation of the time or costs involved in
bringing the project to operations. Projects may also not operate as well in
practice as was assumed in the investment case.
· Projects in the development stage face additional risks associated
with bringing the project to ready‑to‑build, including permit risk and
risk of failure to secure key contracts on acceptable terms.
Mitigation and controls:
· The Investment Manager conducts due diligence by suitable external
consultants on material aspects of the project, including, but not limited to,
market, regulatory environment, land and permits and construction programme.
· The Foresight Investment Committee and the JLEN Investment
Committee assess the opportunity, including the findings from and the adequacy
of the due diligence programme, prior to committing funds.
· Ongoing monitoring of the project by the Investment Manager,
including potential delays and cost overruns.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Residual risk:
Very high
11 Operational risks
Potential impact:
· There is a risk that a health and safety event at a JLEN-owned site
could lead to increased costs to prevent further occurrences and loss in
revenue. JLEN's reputation could be adversely affected by publicity generated
by a health and safety event.
· There is a risk that poor performance by sub‑contractors, or in
the event of having to replace a sub‑contractor, that a replacement may only
be found at a higher cost, could adversely affect project cash flows.
· In the event of a single project suffering from a material issue,
distributions to the Fund could possibly be impacted absolutely or for a
period of time whilst the issue is resolved. This includes grid outages and
constraints resulting in a project being unable to export power and earn
associated revenues.
Mitigation and controls:
· Assets are monitored by the Investment Manager to address risks as
they are identified.
· The use of a diverse range of service providers supplying
management, operational and maintenance services ensures any failure of a
single service provider has a minimal impact. This risk is mitigated in part
by the diversification represented by JLEN's portfolio of assets.
· The portfolio has material damage and business interruption
insurance policies in place to cover against potential losses, although these
do not typically cover grid outages. Asset managers mitigate the impact of
this by maintaining a dialogue with network operators and influencing when
such outages occur.
· The Board has in place a regime, overseen by the Audit Committee,
which provides the necessary comfort that the internal control systems at the
Investment Manager, the Administrator and the operating companies are
effective.
· Each of the project assets has health and safety policies that are
adopted and monitored by the project board of directors. Health and safety is
a standing item on board agendas, and Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations ("RIDDORs") is received at every board
meeting. Regular health and safety audits on the projects are carried out by
independent specialists.
Link to Fund objectives:
Predictable income growth for shareholders
Preservation of shareholder value
Investment, growth and diversification
Residual risk:
Low
INVESTMENT POLICY
The Company seeks to achieve its objectives by investing in a diversified
portfolio of environmental infrastructure.
JLEN defines environmental infrastructure as infrastructure assets, projects
and asset-backed businesses that utilise natural or waste resources or support
more environmentally friendly approaches to economic activity, support the
transition to a low-carbon economy or which mitigate the effects of climate
change.
Environmental infrastructure that the Company invests in typically has one or
more of the following characteristics:
· they have the benefit of long-term, predictable cash flows, which
may be wholly or partially inflation-linked; and/or
· they are supported by long-term contracts or stable and
well‑proven regulatory and legal frameworks; and/or
· they feature well-established technologies and demonstrable
operational performance.
The Company will invest in environmental infrastructure either directly or
through holding or other structures that give the Company an investment
exposure to environmental infrastructure. The Company's investment interests
in environmental infrastructure may include partnership equity, partnership
loans, membership interests, share capital, trust units, shareholder loans
and/or debt interests in or to project entities or any other entities or
undertakings in which the Company invests or may invest.
Whilst there are no restrictions on the amount of the Company's assets that
may be invested in any individual type of environmental infrastructure, the
Company will, over the long term, seek to invest in a diversified spread of
investments both geographically (although the UK will always represent a
minimum of 50% of the portfolio by value) and across different types of
environmental infrastructure in order to achieve a broad spread of risk in the
Company's portfolio.
Whilst the Company invests predominantly in operational assets, it may also
invest in environmental infrastructure which is in its construction or
development phase, which includes investment in developers of environmental
infrastructure or development funding structures relating to environmental
infrastructure.
The Company will also ensure that its investment portfolio comprises a minimum
of five investments at any given time, save that this requirement shall not
apply when the Company is being wound up or dissolved.
As technologies and the markets in which they contract into develop and become
established, future investments may differ from those currently within the
portfolio. These assets may incorporate new technologies that have a
demonstrable track record or traditional infrastructure projects with features
such as greater exposure to merchant markets in feedstock or by‑products.
Investment restrictions
With the objective of achieving a spread of risk, the following investment
restrictions will apply to the acquisition of investment interests in the
portfolio:
· the substantial majority of investments in the portfolio by value
and number will be operational. The Company will not acquire investment
interests in any investment if, as a result of such investment: (i) 5% or more
of the NAV is attributable to environmental infrastructure in the development
phase (including in developers or development funding structures);
· or (ii) 25% or more of the NAV is attributable to projects that are
either in the development phase (including in developers or development
funding structures) or are in construction and are not yet fully operational;
· at least 50% of the portfolio (by value) will be based in the UK
and the Company will only invest in environmental infrastructure located in
the UK, member states of the European Union or OECD countries and,
accordingly, the Company will not make any investment if, as a result of such
investment, more than 50% of the NAV immediately post‑acquisition would be
attributable to investments that are not based in the UK; and
· it is intended that interests in any single investment acquired
will not have an acquisition price (aggregated with the value of any existing
investment in the relevant project, asset or business if relevant) greater
than 25% of the NAV immediately post‑acquisition. In no circumstances will a
new acquisition exceed a maximum limit of 30% of the NAV immediately
post‑acquisition.
Borrowing and gearing
The Company intends to make use of short‑term debt financing to facilitate
the acquisition of investments (either by itself or by one of its
subsidiaries). Borrowing may be secured against the assets comprising the
portfolio. It is intended that such debt will be repaid periodically by the
raising of new equity finance by the Company. The level of such debt is
limited to 30% of the Company's Net Asset Value immediately after the
acquisition of any further investment. Such debt will not include (and will be
subordinate to) any project-level gearing or borrowings by assets or
businesses in which the Company may invest which shall be in addition to any
borrowing at Company level.
The Company may acquire investment interests in respect of projects that have
non-recourse project finance in place at the project entity level. The Company
will target aggregate non-recourse financing attributable to renewable energy
generation projects not exceeding 65% of the aggregate gross project value of
such projects. The Company will target aggregate non‑recourse financing
attributable to projects structured as PFI/PPP projects not exceeding 85% of
the aggregate gross project value of such projects. The Company will not
invest in any project that would cause the Company to be in breach of the
targeted limits set out in this paragraph if the Directors do not reasonably
believe that the relevant target leverage limit can be achieved within six
months of the date of investment in that project.
It is therefore possible that the Company may exceed the targeted gearing
limits set out in this paragraph, but only in circumstances where the
Directors reasonably believe that such breach can be cured (by achieving the
relevant target leverage limit) within six months of the date of investment in
the relevant project.
Hedging
Where investments are made in currencies other than pounds sterling, the
Company will consider whether to hedge currency risk in accordance with the
Company's currency and hedging policy as determined from time to time by the
Directors. Interest rate hedging may be carried out to provide protection
against increasing costs of servicing debt drawn down by the Company to
finance investments.
This may involve the use of interest rate derivatives and similar derivative
instruments. Hedging against inflation may also be carried out where
appropriate and this may involve the use of RPI swaps and similar derivative
instruments. The currency, interest rate and any inflationary hedging policies
will be reviewed by the Directors on a regular basis to ensure that the risks
associated with movements in foreign exchange rates, interest rates and
inflation are being appropriately managed.
Any hedging transactions (if carried out) will only be undertaken for the
purpose of efficient portfolio management to enhance returns from the
portfolio and will not be carried out for speculative purposes. The execution
of hedging transactions is at the discretion of the Investment Manager,
subject to the policies set by, and the overall supervision, of the Directors.
Cash balances
Pending reinvestment or distribution of cash receipts or repayments of any
outstanding indebtedness, cash received by the Company will be invested in
cash, cash equivalents, near-cash instruments, money market instruments and
money market funds and cash funds. The Company may also hold derivative or
other financial instruments designed for efficient portfolio management or to
hedge interest, inflation or currency rate risks. The Company and any other
member of the Group may also lend cash which it holds as part of its cash
management policy.
Origination of further investments
Each of the investments comprising the portfolio comply with the Company's
investment policy and further investments will only be acquired if they comply
with the Company's investment policy.
Subject to due diligence and agreement on price, the Company will seek to
acquire those investments that fit the investment objectives and investment
policy of the Company. If, in the opinion of the Investment Manager, the risk
characteristics, valuation and price of the prospective investment are
acceptable and consistent with the Company's investment objective and
investment policy, then (subject to the Company having sufficient sources of
capital and, in respect of certain transactions, the approval of Directors) an
offer will be made (without seeking the prior approval of shareholders) and,
if successful, the investment will be acquired by the Company.
The Investment Manager will be subject to the overall supervision of the
Board, all of whom are independent of the Investment Manager.
Potential disposal of investments
Whilst the Investment Manager may elect to retain investment interests in the
portfolio of investments that the Company acquires, and any other further
investments made by the Company over the long term, the Investment Manager
will regularly monitor the valuations of such investments and any secondary
market opportunities to dispose of investments. The Investment Manager only
intends to dispose of investments where it considers that appropriate value
can be realised for the Company or where it otherwise believes that it is
appropriate to do so. Proceeds from the disposal of investments may be
reinvested or distributed at the discretion of the Directors.
Amendments to and compliance with the investment policy
Material changes to the investment policy of the Company may only be made in
accordance with the approval of the shareholders by way of ordinary resolution
and (for so long as the ordinary shares are listed on the official list
maintained by the Financial Conduct Authority) in accordance with the Listing
Rules. Minor changes to the investment policy must be approved
by the Directors.
The investment restrictions detailed above apply at the time of the
acquisition of investment interests and the values of existing investment
interests shall be as at the date of the most recently published NAV of the
Fund, unless the Directors believe that such valuation materially
misrepresents the value of the Company's investment interests at the time of
the relevant acquisition. The Fund will not be required to dispose of
investment interests and to rebalance its portfolio as a result of a change in
the respective valuations of investment interests.
Financial Review
Analysis of financial results
The financial statements of the Company for the year ended 31 March 2024 are
set out on pages 145 to 174 of the 2024 Annual Report.
The Company prepared the financial statements for the year ended 31 March 2024
in accordance with UK-adopted international accounting standards as applicable
to companies reporting under those standards. In order to continue providing
useful and relevant information to its investors, the financial statements
also refer to the "Group", which comprises the Company, its wholly owned
subsidiary (JLEN Environmental Assets Group (UK) Limited ("UK HoldCo")) and
the indirectly held wholly owned subsidiary HWT Limited (which holds the
investment interest in the Tay project).
Basis of accounting
The Company applies IFRS 10 and Investment Entities: Amendments to IFRS 10,
IFRS 12 and IAS 28, which states that investment entities should measure all
their subsidiaries that are themselves investment entities at fair value. The
Company accounts for its interest in its wholly owned direct subsidiary JLEN
Environmental Assets Group (UK) Limited as an investment at fair value through
profit or loss.
The primary impact of this application, in comparison to consolidating
subsidiaries, is that the cash balances, the working capital balances and
borrowings in the intermediate holding companies are presented as part of the
Company's fair value of investments.
The Company's intermediate holding companies provide services that relate to
the Company's investment activities on behalf of the parent which are
incidental to the management of the portfolio. These companies are recognised
in the financial statements at their fair value, which is equivalent to their
net assets.
The Group holds investments in the 42 portfolio assets which make
distributions comprising returns on investments (interest on loans and
dividends on equity) together with repayments of investments (loan repayments
and equity redemptions).
Key investment metrics
All amounts presented in £million (except as noted) Year ended Year ended
31 Mar 2024 31 Mar 2023
Net assets((1)) 751.2 814.6
Portfolio value((2)) 891.9 898.5
Operating income and (losses)/gains on fair value of investments (3.8) 108.4
Net Asset Value per share((3)) 113.6p 123.1p
Distributions, repayments and fees from portfolio 87.0 83.6
(Loss)/profit before tax (13.9) 98.3
Gross asset value((3)) 1,091.8 1,119.8
Market capitalisation((3)) 619.9 791.2
Share price((3)) 93.7p 119.6p
Total shareholder return((3)) 68.4% 99.0%
Annualised total shareholder return((3)) 5.4% 7.9%
(1) Also referred to as "NAV".
(2) Classified as investments at fair value through profit or loss in the
statement of financial position.
(3) Net Asset Value per share, share price, market capitalisation, gross
asset value, total shareholder return and annualised total shareholder return
are alternative performance measures ("APMs"). The APMs within the accounts
are defined on pages 175 and 176 of the 2024 Annual Report.
Net assets
Net assets decreased from £814.6 million at 31 March 2023 to £751.2 million
at 31 March 2024. This decrease was principally due to the reduction in
power price forecasts and the increase in discount rates during the financial
year.
The net assets of £751.2 million comprise £891.9 million portfolio value of
environmental infrastructure investments and the Company's cash balances of
£0.3 million, partially offset by £138.4 million of intermediate holding
companies' net liabilities and other net liabilities of £2.6 million.
The intermediate holding companies' net liabilities of £138.4 million
comprises a £159.3 million credit facility loan, partially offset by cash
balances of £17.8 million and other net assets of £3.1 million.
Analysis of the Group's net assets at 31 March 2024
All amounts presented in £million (except as noted) At 31 Mar 2024 At 31 Mar 2023
Portfolio value 891.9 898.5
Intermediate holding companies' cash 17.8 17.9
Intermediate holding companies' revolving credit facility (159.3) (103.5)
Intermediate holding companies' other assets 3.1 3.9
Fair value of the Company's investment in UK HoldCo 753.5 816.8
Company's cash 0.3 0.1
Company's other liabilities (2.6) (2.3)
Net Asset Value at 31 March 751.2 814.6
Number of shares 661,531,229 661,531,229
Net Asset Value per share((1)) 113.6p 123.1p
(1) Net Asset Value per share is an alternative performance measure
("APM"). The APMs within the accounts are defined on pages 175 and 176 of the
2024 Annual Report.
At 31 March 2024, the Group (the Company plus intermediate holding companies)
had a total cash balance of £18.1 million (31 March 2023: £18.0 million),
including £0.3 million in the Company's balance sheet (31 March 2023: £0.1
million) and £17.8 million in the intermediate holding companies (31 March
2023: £17.9 million), which is included in the Company's balance sheet within
"investments at fair value through profit or loss".
At 31 March 2024, UK HoldCo had drawn £159.3 million of its RCF (31 March
2023: £103.5 million), which is included in the Company's balance sheet
within "investments at fair value through profit or loss".
The movement in the portfolio value from 31 March 2023 to 31 March 2024 is
summarised as follows:
All amounts presented in £million (except as noted) Year ended Year ended
31 Mar 2024 31 Mar 2023
Portfolio value at start of the year 898.5 795.4
Acquisitions and further investment 69.2 72.0
Distributions received from investments (87.0) (83.6)
Growth in value of portfolio 11.2 114.7
Portfolio value at 31 March 891.9 898.5
Further details on the portfolio valuation and an analysis of movements during
the year are provided in the investment portfolio and valuation section on
pages 32 to 43 of the 2024 Annual Report.
Income
The Company's loss before tax for the year ended 31 March 2024 is £13.9
million, a loss of 2.1 pence per share (year ended 31 March 2023: earnings
14.9 pence per share), driven by the loss on fair value of investments as a
result of power price forecast contraction and increase in discount rate
during the financial year.
All amounts presented in £million (except as noted) Year ended Year ended
31 Mar 2024 31 Mar 2023
Interest received on UK HoldCo loan notes 31.4 31.4
Dividend received from UK HoldCo 28.0 23.1
Net (losses)/gains on investments at fair value (63.2) 53.9
Operating income and (losses)/gains on fair value of investments (3.8) 108.4
Operating expenses (10.1) (10.1)
(Loss)/profit before tax (13.9) 98.3
(Losses)/earnings per share (2.1)p 14.9p
In the year to 31 March 2024, the operating loss on fair value of investments
was £3.8 million, including the receipt of £31.4 million of interest on the
UK HoldCo loan notes, £28.0 million of dividends also received from UK HoldCo
and net losses on investments at fair value of £63.2 million.
The operating expenses included in the income statement for the year were
£10.1 million, in line with expectations. These comprise £8.5 million
Investment Manager fees and £1.6 million operating expenses. The details on
how the Investment Manager fees are charged are set out in note 15 to the
financial statements.
Ongoing charges
The "ongoing charges" ratio((1)) is an indicator of the costs incurred in the
day‑to‑day management of the Fund. JLEN uses the AIC-recommended
methodology for calculating this ratio, which is an annual figure.
The ongoing charges percentage for the year to 31 March 2024 was 1.24% (year
ended 31 March 2023: 1.18%). The ongoing charges have been calculated, in
accordance with AIC guidance, as annualised ongoing charges (i.e. excluding
acquisition costs and other non‑recurring items) divided by the average
published undiluted Net Asset Value in the period. The ongoing charges
percentage has been calculated on the consolidated basis and therefore takes
into consideration the expenses of UK HoldCo as well as the Company. Adjusting
for the impact of the drawn down amount under the RCF, the ongoing charges
ratio would have been 1.06% (31 March 2023: 1.08%). Foresight believes this to
be competitive for the market in which JLEN operates and the stage of
development and size of the Fund, demonstrating that management of the Fund is
efficient with minimal expenses incurred in its ordinary operation.
Cash flow
The Company had a total cash balance at 31 March 2024 of £0.3 million (31
March 2023: £0.1 million).
The breakdown of the movements in cash during the year is shown below.
Cash flows of the Company for the year (£million):
Year ended Year ended
31 Mar 2024 31 Mar 2023
Cash balance at 1 April 0.1 2.0
Net proceeds from share issue/(expenses from previous issues) - (0.2)
Interest on loan notes received from UK HoldCo 31.4 31.4
Dividends received from UK HoldCo 28.0 23.1
Directors' fees and expenses (0.3) (0.3)
Investment Manager fees (8.4) (8.1)
Administrative expenses (1.1) (1.2)
Dividends paid in cash to shareholders (49.4) (46.6)
Company cash balance at 31 March 0.3 0.1
(1) The ongoing charges ratio is an alternative performance measure
("APM"). The APMs within the accounts are defined on pages 175 and 176 of the
2024 Annual Report.
The Group had a total cash balance at 31 March 2024 of £18.1 million (31
March 2023: £18.0 million) and borrowings under the revolving credit
facility of £159.3 million (31 March 2023: £103.5 million).
The breakdown of the movements in cash during the year is shown below.
Cash flows of the Group for the year (£million):
Year ended Year ended
31 Mar 2024 31 Mar 2023
Cash distributions from environmental infrastructure investments 87.0 83.6
Administrative expenses (1.3) (1.3)
Directors' fees and expenses (0.3) (0.3)
Investment Manager fees (8.4) (8.1)
Financing costs (net of interest income) (7.3) (3.4)
Energy Generator Levy (5.5) -
Cash flow from operations((1)) 64.2 70.5
Expenses from share issues - (0.2)
Debt arrangement fee cost (1.0) (0.1)
Acquisition of investment assets and further investment (69.2) (72.5)
Disposal of assets - 1.6
Acquisition costs (including stamp duty) (0.4) (1.9)
Short-term project debtors (0.9) -
Drawdown under the revolving credit facility 56.8 48.9
Dividends paid in cash to shareholders (49.4) (46.6)
Cash movement in the year 0.1 (0.3)
Opening cash balance 18.0 18.0
Exchange gains on cash - 0.3
Group cash balance at 31 March 18.1 18.0
During the year, the Group received cash distributions of £87.0 million from
its environmental infrastructure investments, an increase of 4.1% compared to
2023.
Cash received from investments in the year covers the operating and
administrative expenses and financing costs, as well as the dividends declared
to shareholders in respect of the year ended 31 March 2024. Cash flow from
operations of the Group of £64.2 million covers dividends paid in the year to
31 March 2024 of £49.4 million by 1.30x.
The Group anticipates that future revenues from its environmental
infrastructure investments will continue to be in line with expectations and
therefore will continue to cover fully future costs as well as planned
dividends payable to its shareholders((2)).
Dividends
During the year, the Company paid a final dividend of 1.79 pence per share in
June 2023 (£11.8 million) in respect of the quarter to 31 March 2023.
Interim dividends of 1.89 pence per share were paid in September 2023 (£12.5
million) in respect of the quarter to 30 June 2023, of 1.89 pence per share in
December 2023 (£12.5 million) in respect of the quarter to 30 September
2023, and of 1.90 pence per share in March 2024 (£12.6 million) in respect of
the quarter to 31 December 2023. On 29 May 2024, the Company declared a final
dividend of 1.89 pence per share in respect of the quarter ended 31 March 2024
(£12.5 million), which is payable on 28 June 2024.
The target dividend for the year to 31 March 2025 is 7.80 pence per share, a
3.0% increase from the dividend declared in respect of the year to 31 March
2024((2)).
(1) Cash flow from operations is an alternative performance measure
("APM"). The APMs within the accounts are defined on pages 175 and 176 of the
2024 Annual Report.
(2) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met.
INDEPENDENT AUDITOR'S REPORT
to the members of JLEN Environmental Assets Group Limited
Our opinion is unmodified
We have audited the financial statements of JLEN Environmental Assets Group
Limited (the "Company"), which comprise the statement of financial position as
at 31 March 2024, the income statement, statement of changes in equity and
cash flow statement for the year then ended, and notes, comprising material
accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
· give a true and fair view of the financial position of the Company
as at 31 March 2024, and of the Company's financial performance and cash flows
for the year then ended;
· are prepared in accordance with UK-adopted international accounting
standards; and
· comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) ("ISAs (UK)") and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities under, and are
independent of the Company in accordance with, UK ethical requirements
including the FRC Ethical Standard as required by the Crown Dependencies'
Audit Rules and Guidance. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were
of most significance in the audit of the financial statements and include the
most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these
matters. In arriving at our audit opinion above, the key audit matter was as
follows:
The risk Our response
Investments at fair value through profit or loss: Basis: Our audit procedures included:
The Company's investment in its immediate subsidiary (the "UK HoldCo") is
carried at fair value through profit or loss and represents a significant
£753,572,000 proportion of the Company's net assets. The UK HoldCo in turn owns investments Internal controls:
in intermediate holding companies and environmental infrastructure projects.
We have obtained an understanding of the valuation process and tested the
design and implementation of the valuation process control.
Refer to Audit Committee report (page 125 of 2024 Annual Report), note 2(f)
accounting policy and note 9 disclosures The fair value of the investment in the UK HoldCo, which is reflective of its
Net Asset Value, predominantly comprises of the fair value of underlying
environmental infrastructure projects. We performed the procedures below rather than seeking to rely on the control
as the nature of the balance is such that we would expect to obtain audit
evidence primarily through the detailed procedures described.
The fair value of the underlying environmental infrastructure projects has
been primarily determined using the income approach discounting the future
cash flows to be received from the underlying projects (the "Valuations"), for Managements independent valuation specialist valuation report:
which there is no active market. The Valuations incorporate certain
assumptions including generation output assumptions, discount rates, power
price forecasts, inflation rates and other macroeconomic assumptions.
· we assessed the objectivity, capabilities and competence of
management's independent valuation specialist;
Management engages an independent valuation specialist to review the · we assessed the scope of management's independent valuation
Valuations and form an opinion on the appropriateness of the Valuations. specialist review of the Valuations and read their valuation report and the
investment valuation memoranda produced by the Investment Manager; and
· we held discussions with management's independent valuation
specialist to understand the nature of the procedures performed by them in
arriving at their opinion on the appropriateness of the Valuations.
Challenging managements' assumptions and inputs, including use of KPMG
valuation specialist:
With the support of a KPMG valuation specialist, we challenged the
appropriateness of the Company's valuation methodology and key assumptions
such as discount rates, power price forecasts, inflation rates and other
macroeconomic assumptions applied, by:
i) assessing the appropriateness of the valuation methodology applied;
ii) benchmarking the discount rates applied against independent market
data and relevant peer group companies;
iii) assessing the reasonableness of the power price forecasts used by
reference to power price curves supplied to management by external
consultants;
iv) challenging inflation rates and other macroeconomic assumptions used, by
reference to observable market data and market forecasts;
v) agreeing significant additions of operational and non-operational
environmental infrastructure projects to supporting documentation;
vi) comparing, where appropriate, the valuation of the underlying
environmental infrastructure projects to indicative non-binding offers
received by management; and
vii) using our KPMG valuation specialist's experience in valuing similar
investments.
Risk: For a risk-based sample of the cash flow valuation models:
The Valuations represent both a risk of fraud and error associated with
estimating the timing and amounts of long-term forecasted cash flows alongside
the selection, and application, of appropriate assumptions. Changes to · we tested their mathematical accuracy including, but not limited
long-term forecasted cash flows and/or the selection and application of to, material formulae errors;
different assumptions may result in a materially different valuation of
investments held at fair value through profit or loss. · we challenged the generation output assumptions, by reference to
due diligence reports prepared by third-party engineers or historical
performance, where available;
We therefore have determined that the Valuations have a high degree of · we agreed other key inputs, such as contracted revenue to
estimation uncertainty, giving rise to a potential range of reasonable supporting documentation;
outcomes greater than our materiality for the financial statements as a whole.
· we assessed the appropriateness of changes to operational
assumptions and cash flows in the underlying models, through reference to
third-party support and historical experience where required; and
· in order to assess the reliability of management's forecasts, we
assessed the historical accuracy of the cash flow forecasts against actual
results.
Assessing disclosures:
We considered the appropriateness and adequacy of the disclosures made in the
financial statements (see notes 2(f), 9 and 16) in relation to the use of
estimates and judgements regarding the fair value of investments, the
valuation estimation techniques inherent therein and fair value disclosures
for compliance with UK-adopted international accounting policies.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £15.8 million,
determined with reference to a benchmark of net assets of £751.2 million, of
which it represents approximately 2%.
In line with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance materiality for
the Company was set at 65% of materiality for the financial statements as a
whole, which equates to £10.2 million. We applied this percentage in our
determination of performance materiality because we did not identify any
factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £0.79 million, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas, as
detailed above.
Going concern
The Directors have prepared the financial statements on the going concern
basis as they do not intend to liquidate the Company or to cease its
operations, and as they have concluded that the Company's financial position
means that this is realistic. They have also concluded that there are no
material uncertainties that could have cast significant doubt over its ability
to continue as a going concern for at least a year from the date of approval
of the financial statements (the "going concern period").
In our evaluation of the Directors' conclusions, we considered the inherent
risks to the Company's business model and analysed how those risks might
affect the Company's financial resources or ability to continue operations
over the going concern period. The risks that we considered most likely to
affect the Company's financial resources or ability to continue operations
over this period were:
· availability of capital to meet operating costs and other financial
commitments;
· the outcome of the upcoming discontinuation vote.
We considered whether these risks could plausibly affect the liquidity in the
going concern period by comparing severe, but plausible downside scenarios
that could arise from these risks individually and collectively against the
level of available financial resources indicated by the Company's financial
forecasts.
We also considered the risk that the outcome of the discontinuation vote could
affect the Company over the going concern period, by inspecting summaries of
discussions held with the broker, and considering key financial metrics
including the discount of the Company's share price against its reported Net
Asset Value per share, over the last 12 months.
We considered whether the going concern disclosure in note 2(b) to the
financial statements gives a full and accurate description of the Directors'
assessment of going concern.
Our conclusions based on this work:
· we consider that the Directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
· we have not identified, and concur with the Directors' assessment
that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the
Company's ability to continue as a going concern for the going concern period;
and
· we have nothing material to add or draw attention to in relation to
the Directors' statement in the notes to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that
may cast significant doubt over the Company's use of that basis for the going
concern period, and that statement is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or conditions, and as
subsequent events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the above conclusions are not
a guarantee that the Company will continue in operation.
Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks"), we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
· enquiring of management as to the Company's policies and procedures
to prevent and detect fraud as well as enquiring whether management have
knowledge of any actual, suspected or alleged fraud;
· reading minutes of meetings of those charged with governance; and
· using analytical procedures to identify any unusual or unexpected
relationships.
As required by auditing standards, and taking into account possible incentives
or pressures to misstate performance and our overall knowledge of the control
environment, we perform procedures to address the risk of management override
of controls, in particular the risk that management may be in a position to
make inappropriate accounting entries, and the risk of bias in accounting
estimates such as valuation of unquoted investments. On this audit we do not
believe there is a fraud risk related to revenue recognition because the
Company's revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources or
agreements with little or no requirement for estimation from management. We
did not identify any additional fraud risks.
We performed procedures including:
· identifying journal entries and other adjustments to test based on
risk criteria and comparing any identified entries to supporting
documentation;
· incorporating an element of unpredictability in our audit
procedures; and
· assessing significant accounting estimates for bias.
Further detail in respect of valuation of unquoted investments is set out in
the key audit matter section of this report.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected
to have a material effect on the financial statements from our sector
experience and through discussion with management (as required by auditing
standards), and from inspection of the Company's regulatory and legal
correspondence, if any, and discussed with management the policies and
procedures regarding compliance with laws and regulations. As the Company is
regulated, our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying with
regulatory requirements.
The Company is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation and taxation
legislation and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement
items.
The Company is subject to other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of fines or
litigation or impacts on the Company's ability to operate. We identified
financial services regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Company's activities and its
legal form. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of management and
inspection of regulatory and legal correspondence, if any. Therefore, if a
breach of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection
of fraud, as this may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The Directors are responsible for the other information. The other information
comprises the information included in the Annual Report but does not include
the financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material
inconsistency between the Directors' disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements and
our audit knowledge. We have nothing material to add or draw attention to in
relation to:
· the Directors' confirmation within the long-term viability
statement (pages 133 and 134 of the 2024 Annual Report) that they have carried
out a robust assessment of the emerging and principal risks facing the
Company, including those that would threaten its business model, future
performance, solvency or liquidity;
· the emerging and principal risks disclosures describing these risks
and explaining how they are being managed or mitigated; and
· the Directors' explanation in the long-term viability statement
(pages 133 and 134 of the 2024 Annual Report) as to how they have assessed the
prospects of the Company, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We are also required to review the long-term viability statement, set out on
pages 133 and 134 of the 2024 Annual Report under the Listing Rules. Based on
the above procedures, we have concluded that the above disclosures are
materially consistent with the financial statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material
inconsistency between the Directors' corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit knowledge:
· the Directors' statement that they consider that the Annual Report
and financial statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy;
· the section of the Annual Report describing the work of the Audit
Committee, including the significant issues that the Audit Committee
considered in relation to the financial statements, and how these issues were
addressed; and
· the section of the Annual Report that describes the review of the
effectiveness of the Company's risk management and internal control systems.
We are required to review the part of the corporate governance statement
relating to the Company's compliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our review. We have nothing
to report in this respect.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008, requires us to report to you if, in our
opinion:
· the Company has not kept proper accounting records; or
· the financial statements are not in agreement with the accounting
records; or
· we have not received all the information and explanations, which to
the best of our knowledge and belief are necessary for the purpose of our
audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 136 of the 2024
Annual Report, the Directors are responsible for: the preparation of the
financial statements, including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error; assessing the Company's ability to continue as
a going concern, disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue our opinion in an auditor's report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons other than
the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members, as
a body, for our audit work, for this report, or for the opinions we have
formed.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
20 June 2024
INCOME STATEMENT
for the year ended 31 March 2024
2024 2023
Notes £'000s £'000s
Operating income and (loss)/gains on fair value of investments 9 (3,827) 108,445
Operating expenses 5 (10,110) (10,145)
Operating (loss)/profit (13,937) 98,300
(Loss)/profit before tax (13,937) 98,300
Tax 6 - -
(Loss)/profit for the year (13,937) 98,300
(Loss)/earnings per share
Basic and diluted (pence) 8 (2.1) 14.9
The accompanying notes form an integral part of the financial statements.
All results are derived from continuing operations.
There is no other comprehensive income in either the current year or the
preceding year, other than the loss for the year, and therefore no separate
statement of comprehensive income has been presented.
STATEMENT OF FINANCIAL POSITION
as at 31 March 2024
2024 2023
Notes £'000s £'000s
Non-current assets
Investments at fair value through profit or loss 9 753,572 816,800
Total non‑current assets 753,572 816,800
Current assets
Trade and other receivables 10 25 143
Cash and cash equivalents 271 143
Total current assets 296 286
Total assets 753,868 817,086
Current liabilities
Trade and other payables 11 (2,654) (2,518)
Total current liabilities (2,654) (2,518)
Total liabilities (2,654) (2,518)
Net assets 751,214 814,568
Equity
Share capital account 13 664,401 664,401
Retained earnings 14 86,813 150,167
Equity attributable to owners of the Company 751,214 814,568
Net assets per share (pence per share) 113.6 123.1
The accompanying notes form an integral part of the financial statements.
The financial statements were approved by the Board of Directors and
authorised for issue on 20 June 2024.
They were signed on its behalf by:
Ed Warner
Chair
Stephanie Coxon
Director
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2024
Year ended 31 March 2024
Share capital Retained
account earnings Total
Notes £'000s £'000s £'000s
Balance at 1 April 2023 664,401 150,167 814,568
Loss for the year - (13,937) (13,937)
Loss and total comprehensive income/(expense) for the year - (13,937) (13,937)
Dividends paid 7 - (49,417) (49,417)
Balance at 31 March 2024 664,401 86,813 751,214
Year ended 31 March 2023
Share capital Retained
account earnings Total
Notes £'000s £'000s £'000s
Balance at 1 April 2022 664,401 98,504 762,905
Profit for the year - 98,300 98,300
Profit and total comprehensive income for the year - 98,300 98,300
Dividends paid 7 - (46,637) (46,637)
Balance at 31 March 2023 664,401 150,167 814,568
The accompanying notes form an integral part of the financial statements.
CASH FLOW STATEMENT
for the year ended 31 March 2024
2024 2023
Notes £'000s £'000s
Cash flows from operating activities
(Loss)/profit from operations (13,937) 98,300
Adjustments for:
Investment interest (31,401) (31,401)
Dividends received (28,000) (23,100)
Net loss/(gain) on investments at fair value through profit or loss 63,228 (53,944)
Operating cash flows before movements in working capital (10,110) (10,145)
Decrease in receivables 118 76
Increase in payables 136 476
Net cash outflow used in operating activities (9,856) (9,593)
Investing activities
Investment interest 31,401 31,401
Dividends received 28,000 23,100
Net cash from investing activities 59,401 54,501
Financing activities
Expenses relating to issue of shares - (150)
Dividends paid 7 (49,417) (46,637)
Net cash used in financing activities (49,417) (46,787)
Net increase/(decrease) in cash and cash equivalents 128 (1,879)
Cash and cash equivalents at beginning of the year 143 2,022
Cash and cash equivalents at end of the year 271 143
The accompanying notes form an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2024
1. General information
JLEN Environmental Assets Group Limited (the "Company" or "JLEN") is a
closed‑ended investment company domiciled and incorporated in Guernsey,
Channel Islands, under Section 20 of the Companies (Guernsey) Law, 2008. The
shares are publicly traded on the London Stock Exchange under a premium
listing. The audited financial statements of the Company are for the year
ended 31 March 2024 and have been prepared on the basis of the accounting
policies set out below. The financial statements comprise only the results of
the Company, as its investment in JLEN Environmental Assets Group (UK) Limited
("UK HoldCo") is measured at fair value as detailed in the key accounting
policies below. The Company and its subsidiaries invest in environmental
infrastructure that utilise natural or waste resources or support more
environmentally friendly approaches to economic activity.
2. Accounting policies
(a) Basis of preparation
The financial statements, which give a true and fair view, were approved and
authorised for issue by the Board of Directors on 20 June 2024. The set of
financial statements included in this financial report has been prepared in
accordance with UK-adopted international accounting standards as applicable to
companies reporting under those standards and complies with the Companies
(Guernsey) Law, 2008.
As a result of adopting the amendments to IFRS 10, IFRS 12 and IAS 28 first
adopted in the Company's Annual Report to 31 March 2015, the Company is
required to hold its subsidiaries that provide investment services at fair
value, in accordance with IFRS 9 Financial Instruments Recognition and
Measurement, and IFRS 13 Fair Value Measurement. The Company accounts for its
investment in its wholly owned direct subsidiary UK HoldCo at fair value. The
Company, together with its wholly owned direct subsidiary UK HoldCo and the
intermediate holding subsidiary HWT Limited, comprise the Group (the "Group")
investing in environmental infrastructure assets.
The net assets of the intermediate holding companies (comprising UK HoldCo and
HWT Limited), which at 31 March 2024 principally comprise working capital
balances, the revolving credit facility ("RCF") and investments in projects,
are required to be included at fair value in the carrying value of
investments.
Consequently, the Company does not consolidate its subsidiaries or apply IFRS
3 Business Combinations when it obtains control of another entity as it is
considered to be an investment entity under UK-adopted international
accounting standards. Instead, the Company measures its investment in its
subsidiary at fair value through profit or loss.
The financial statements incorporate the financial statements of the Company
only.
UK HoldCo is itself an investment entity. Consequently, the Company need not
have an exit strategy for its investment in UK HoldCo.
Each investment indirectly held has a finite life. For the PPP assets, the
shareholder debt will mature towards the end of the concession, and at the end
of the concession the investment will be dissolved. In the case of renewable
energy assets, the life of the project is based on the expected asset life and
the land lease term, after which the investment will also be dissolved. The
exit strategy is that investments will normally be held to the end of the
concession, unless the Company sees an opportunity in the market to dispose of
investments. Foresight Group, the Company's Investment Manager, and the
Company's Board regularly consider whether any disposals should be made.
The Directors continue to consider that the Company demonstrates the
characteristics and meets the requirements to be considered as an investment
entity.
The following relevant standards which have not been applied in these
financial statements were in issue but not yet effective:
· Classification of Liabilities as Current or Non-current -
Amendments to IAS 1 (applicable for annual periods beginning on or after 1
January 2024);
· Non-current Liabilities with Covenants (Amendments to IAS 1)
(applicable for annual periods beginning on or after 1 January 2024);
· International tax reform - Pillar Two Model Rules - Amendments to
IAS 12 (applicable for annual periods beginning on or after 23 May 2023; and
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
(applicable for annual periods beginning on or after 1 January 2024).
The Directors do not expect that the adoption of the standards listed above
will have a material impact on the financial statements of the Company in
future periods.
The following relevant standards became effective during the year and did not
have a material impact on the Company's reported results:
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2 (applicable for annual periods beginning on or after 1
January 2023); and
· Definition of Accounting Estimates - Amendments to IAS 8
(applicable for annual periods beginning on or after 1 January 2023).
(b) Going concern
The Directors, in their consideration of going concern, have reviewed
comprehensive cash flow forecasts prepared by the Company's Investment
Manager, Foresight Group, which are based on prudent market data and a
reasonable worst case scenario and believe, based on those forecasts and an
assessment of the Company's subsidiary's banking facilities, that it is
appropriate to prepare the financial statements of the Company on the going
concern basis.
In arriving at their conclusion, the Directors assessed the risks of the
volatility of energy prices, the potential impact of the principal risks
(documented in the strategic report) and the triggering of the discontinuation
vote.
In addition to the risks outlined above, the Directors have also considered
the sustainability‑related risks covering environmental, social and
governance factors, including climate change (in line with the recommendations
of the Task Force on Climate-related Financial Disclosures ("TCFD"), which is
integrated throughout the Sustainability and ESG report found in the 2024
Annual Report). The Investment Manager has reviewed the portfolio's exposure
to these risks in the period under review and has concluded that it is
currently not material to the Fund, although it continues to monitor the
market attentively.
The Board considers the going concern assessment period of 18 months to
30 September 2025 to be appropriate. A longer period than the typical
requirement of 12 months has been adopted to factor in the full payment of
the March 2025 dividend.
The Directors also considered that the Company has adequate financial
resources, and were mindful that the Group had unrestricted cash of £18.1
million (including £0.3 million in the Company) as at 31 March 2024 and a
revolving credit and accordion facility (available for investment in new or
existing projects and working capital) of £200 million. As at
31 March 2024, the Company's wholly owned subsidiary, UK HoldCo, had
borrowed £159.3 million under the facility, leaving £40.7 million undrawn.
All key financial covenants under this facility are forecast to continue to be
complied for the duration of the going concern assessment period.
On 13 June 2024, the Fund successfully refinanced its revolving credit
facility with a three‑year agreement with ING, HSBC, RBSI, NAB and
Clydesdale Bank, which provides for a committed facility of £200 million (of
which £159.3 million was drawn at the balance sheet date), with an
uncommitted accordion facility of up to £30 million and an uncommitted option
to extend for a further year.
The RCF provides the flexibility for the Fund to continue meeting existing
funding commitments to portfolio assets. The Company also has sufficient
headroom in its revolving credit facility to finance its hard commitments
relating to construction assets held within the portfolio.
The revolving credit facility covenants have been tested on downside risk
scenarios, with the assumption of 10% lower power price projections compared
to the base case, reduced generation levels assuming a P90, a proportion of
the portfolio not yielding and a combination of these scenarios. In all
scenarios run, including the combined downside case, the Company remained
compliant with its key covenants.
The shareholders will be presented with a discontinuation vote at the AGM in
September. The trigger for this vote is the share price has traded, on
average, at a discount in excess of 10% to the Net Asset Value per share in
the financial year under review.
The Directors have made the following considerations surrounding the
discontinuation vote:
· recent interactions with shareholders, whilst assessing their
indications of intent; and
· macroeconomic factors prevalent in the entire renewables sector.
Notwithstanding the average share price discount to NAV, which has triggered
the discontinuation vote, the presence of discounts is a market-wide event and
the tighter rating for JLEN reflects the relative strong demand for its
shares. The Investment Manager and the Directors are confident that JLEN's
discount to NAV and associated triggering of the discontinuation vote is not
due to the individual performance of JLEN, its Investment Manager or its Board
of Directors.
Based on the considerations outlined in the 2024 Annual Report, the Investment
Manager and the Directors have no reason to believe that the special
resolution (75% of the total voting members) will be passed by the
shareholders.
Based on the above, 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 preparation of these
financial statements.
(c) Revenue recognition - Operating income and gains/(losses) on fair value of
investments
Operating income and gains/(losses) on fair value of investments in the income
statement represents gains or losses that arise from the movement in the fair
value of the Company's investment in UK HoldCo, dividend income and interest
received from UK HoldCo. Dividends from UK HoldCo are recognised when the
Company's right to receive payment has been established. Interest income is
accrued by reference to the loan principal outstanding, applicable interest
rate and in accordance with the loan note agreement. Refer to note 9 for
details.
(d) Taxation
Under the current system of taxation in Guernsey, the Company itself is exempt
from paying taxes on income, profits or capital gains. Dividend income and
interest income received by the Company may be subject to withholding tax
imposed in the country of origin of such income. The underlying intermediate
holding companies and project companies in which the Company invests provide
for and pay taxation at the appropriate rates in the countries in which they
operate. This is taken into account when assessing the fair value of the
Company's investments.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held on call with
banks and other short‑term highly liquid deposits with original maturities
of three months or less. Bank overdrafts that are repayable on demand are
included as a component of cash and cash equivalents for the purpose of the
cash flow statements. Deposits held with original maturities of greater than
three months are included in other financial assets.
(f) Financial instruments
Financial assets and financial liabilities are recognised on the Company's
statement of financial position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash flows from the instrument expire or
the asset is transferred and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments.
I) Financial assets
The Company classifies its financial assets as either investments at fair
value through profit or loss or financial assets at amortised cost. The
classification depends on the results of the "solely payments of principal and
interest" and the business model test. The Company determines the business
model at a level that reflects how groups of financial assets are managed
together to achieve a particular business objective. This assessment includes
judgement reflecting all relevant evidence including how the performance of
the assets is evaluated and their performance measured, the risks that affect
the performance of the assets and how these are managed and how management are
compensated. Monitoring is part of the Company's continuous assessment of
whether the business model, for which the remaining financial assets are held,
continues to be appropriate and, if it is not appropriate, whether there has
been a change in business model and so a prospective change to the
classification of those assets.
i) Investments at fair value through profit or loss
Investments at fair value through profit or loss are recognised upon initial
recognition as financial assets at fair value through profit or loss in
accordance with IFRS 10. In these financial statements, investments at fair
value through profit or loss is the fair value of the Company's subsidiary, UK
HoldCo, which comprises the fair value of UK HoldCo and HWT Limited and the
environmental infrastructure investments.
The intermediate holding companies' net assets (UK HoldCo and HWT Limited) are
mainly composed of cash, working capital balances and borrowings under the
Company's wholly owned direct subsidiary's RCF, and are recognised at fair
value, which is equivalent to their net assets. Although the working capital
and the RCF outstanding balance are measured at amortised cost, their fair
values do not materially differ from their amortised costs.
The Company's investment in UK HoldCo comprises both equity and loan notes.
Both elements are exposed to the same primary risk, being performance risk.
This performance risk is taken into consideration when determining the
discount rate applied to the forecast cash flows. In determining fair value,
the Board considered observable market transactions and has measured fair
value using assumptions that market participants would use when pricing the
asset, including assumptions regarding risk. The loan notes and equity are
considered to have the same risk characteristics. As such, the debt and equity
form a single class of financial instrument for the purposes of disclosure.
The Company measures its investment as a single class of financial asset at
fair value in accordance with IFRS 13 Fair Value Measurement.
ii) Financial assets at amortised cost
Trade receivables, loans and other receivables that are non‑derivative
financial assets and that have fixed or determinable payments that are not
quoted in an active market are classified as "loans and other receivables".
Loans and other receivables are measured at amortised cost using the effective
interest method, less any impairment. They are included in current assets,
except where maturities are greater than 12 months after the reporting date,
in which case they are classified as non‑current assets. The Company's loans
and receivables comprise "trade and other receivables" and "cash and cash
equivalents" in the statement of financial position.
The loan notes issued by the Company's wholly owned subsidiary UK HoldCo are
held at fair value, which is included in the balance of the investments at
fair value through profit or loss in the statement of financial position.
II) Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
i) Equity instruments
Ordinary shares are classified as equity. Costs directly attributable to the
issue of new shares that would otherwise have been avoided are written off
against the balance of the share capital account as permitted by Companies
(Guernsey) Law, 2008.
ii) Financial liabilities
Financial liabilities are classified as other financial liabilities,
comprising:
· loans and borrowings which are recognised initially at the fair
value of the consideration received, less transaction costs. Subsequent to
initial recognition, loans and borrowings are stated at amortised cost, with
any difference between cost and redemption value being recognised in the
income statement over the period of the borrowings on an effective interest
basis; and
· other non‑derivative financial instruments, including trade and
other payables, which are measured at amortised cost using the effective
interest method less any impairment losses.
In accordance with IFRS 9, financial guarantee contracts are recognised as a
financial liability. The liability is measured at fair value and subsequently
in accordance with the expected credit loss model under IFRS 9. The fair value
of financial guarantees is determined based on the present value of the
difference in cash flows between contracted payments required under the debt
instrument and the payments that would be required without the guarantee, or
the estimated amount that would be payable to a third party for assuming the
obligations.
III) Effective interest method
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instrument to the relevant asset's carrying amount.
IV) Fair value estimation for investments at fair value
The Company's investments at fair value are not traded in active markets.
Fair value is calculated by discounting at an appropriate discount rate future
cash flows expected to be received by the Company's intermediate holdings,
from investments in both equity (dividends and equity redemptions),
shareholder and inter-company loans (interest and repayments). The discount
rates used in the valuation exercise represent the Investment Manager's and
the Board's assessment of the rate of return in the market for assets with
similar characteristics and risk profile. The discount rates are reviewed on a
regular basis and updated, where appropriate, to reflect changes in the market
and in the project risk characteristics. The discount rates that have been
applied to the financial assets at 31 March 2024 were in the range of 7.0%
to 17.7% (31 March 2023: 5.75% to 10.30%). Refer to note 9 for details of
the areas of estimation in the calculation of the fair value.
For subsidiaries which provide management/investment‑related services, the
fair value is estimated to be the net assets of the relevant companies, which
principally comprise cash, loans and working capital balances.
(g) Segmental reporting
The Board is of the opinion that the Company is engaged in a single segment of
business, being investment in environmental infrastructure to generate
investment returns while preserving capital. The financial information used by
the Board to allocate resources and manage the Company presents the business
as a single segment comprising a homogeneous portfolio.
(h) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 2020, the
Company is a registered closed‑ended investment scheme. As a registered
scheme, the Company is subject to certain ongoing obligations to the Guernsey
Financial Services Commission, and is governed by the Companies (Guernsey)
Law, 2008, as amended.
3. Critical accounting judgements, estimates and assumptions
In the application of the Company's accounting policies, which are described
in note 2, the Directors are required to make judgements, estimates and
assumptions about the fair value of assets and liabilities that affect
reported amounts. Actual results may differ from these estimates.
Key sources of estimation uncertainty
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Investments at fair value through profit or loss
The fair value of environmental infrastructure investments is calculated by
discounting at an appropriate discount rate future cash flows expected to be
received by the Company's intermediate holdings, from investments in both
equity (dividends and equity redemptions), shareholder and inter-company loans
(interest and repayments). Estimates such as the cash flows are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgements about the fair value of assets not readily available from
other sources. Actual results may differ from these estimates.
The project cash flows used in the portfolio valuation at 31 March 2024
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.
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 three established market consultants, adjusted by the
Investment Manager for project-specific arrangements and price
cannibalisation.
For the Italian investment, project cash flows assume future electricity
prices informed by a leading independent market consultant's long‑term
projections.
The power price assumptions, including the discount to the near-term power
price assumptions, are a key source of estimation and uncertainty. Information
on the sensitivity of the portfolio to movement in power price is disclosed in
note 16.
Discount rates used in the valuation represent the Investment Manager's and
the Board's assessment of the rate of return in the market for assets with
similar characteristics and risk profile. The discount rate is deemed to be
one of the most significant unobservable inputs and any change could have a
material impact on the fair value of investments. Underlying assumptions and
discount rates are disclosed in note 9 and sensitivity analysis is disclosed
in note 16.
Due to the current economic environment, the Investment Manager and the Board
believe that the rate of inflation should also be a considered a key source of
estimation uncertainty. Information on the sensitivity of the portfolio
valuation to movements in inflation rate is disclosed in note 16.
Critical accounting judgements
Equity and debt investment in UK HoldCo
In applying their judgement, the Directors have satisfied themselves that the
equity and debt investments in UK HoldCo share the same investment
characteristics and, as such, constitute a single asset class for IFRS 7
disclosure purposes. Please refer to the accounting policies in note 2 for
further detail.
Investment entities
The Directors consider that the Company demonstrates the characteristics and
meets the requirements to be considered as an investment entity. Please refer
to the accounting policies in note 2 for further detail.
4. Seasonality
Neither operating income nor profit are impacted significantly by seasonality.
While meteorological conditions resulting in fluctuation in the levels of wind
and sunlight can affect revenues of the Company's environmental infrastructure
projects, due to the diversified mix of projects, these fluctuations do not
materially affect the Company's operating income or profit.
5. Operating expenses
Year ended Year ended
31 Mar 2024 31 Mar 2023
£'000s £'000s
Investment management fee 8,468 8,448
Directors' fees and expenses 343 332
Administration fee 104 111
Other expenses 1,195 1,254
10,110 10,145
The Company had no employees during the year (31 March 2023: nil). There was
no Directors' remuneration for the year other than Directors' fees as detailed
in note 15 (31 March 2023: £nil).
Included within other expenses is an amount of £170,775 to KPMG Channel
Islands Limited for the audit of the Company for the year ended 31 March 2024
(year ended 31 March 2023: £225,000 paid to Deloitte LLP).
The Company paid £54,532 during the year for non‑audit services to KPMG
Channel Islands Limited, all in relation to the half-year interim review (year
ended 31 March 2023: £57,720 paid to Deloitte LLP).
6. Tax
Income tax expense
The Company has obtained exempt status from income tax in Guernsey under the
Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. JLEN is charged an
annual exemption fee of £1,600 (year ended March 2023: £1,200).
The income from its investments is therefore not subject to any further tax in
Guernsey, although the investments provide for and pay taxation at the
appropriate rates in the countries in which they operate. The underlying tax
within the subsidiaries and environmental infrastructure assets, which are
held as investments at fair value through profit or loss, are included in the
estimate of the fair value of these investments.
7. Dividends
Year ended Year ended
31 Mar 2024 31 Mar 2023
£'000s £'000s
Amounts recognised as distributions to equity holders during the year (pence
per share):
Final dividend for the year ended 31 March 2023 of 1.79 (31 March 2022: 1.70) 11,841 11,246
Interim dividend for the quarter ended 30 June 2023 of 1.89 (30 June 2022: 12,503 11,775
1.78)
Interim dividend for the quarter ended 30 September 2023 of 1.89 (30 September 12,503 11,841
2022: 1.79)
Interim dividend for the quarter ended 31 December 2023 of 1.90 (31 December 12,569 11,775
2022: 1.78)
49,417((1)) 46,637((1))
(1) Total may not cast due to rounding.
A dividend for the quarter ended 31 March 2024 of 1.89 pence per share was
approved by the Board on 28 May 2024 and is payable on 28 June 2024.
8. Earnings/(loss) per share
Earnings per share is calculated by dividing the profit attributable to equity
shareholders of the Company by the time weighted average number of ordinary
shares in issue during the year:
Year ended Year ended
31 Mar 2024 31 Mar 2023
£'000s £'000s
(Loss)/earnings
(Loss)/earnings for the purposes of basic and diluted earnings per share, (13,937) 98,300
being net profit attributable to owners of the Company
Number of shares
Time weighted average number of ordinary shares for the purposes of basic and 661,531,229 661,531,229
diluted earnings per share
The denominator for the purposes of calculating both basic and diluted
earnings per share is the same, as the Company has not issued any share
options or other instruments that would cause dilution.
Pence Pence
Basic and diluted (loss)/earnings per share (2.1) 14.9
9. Investments at fair value through profit or loss
As set out in note 2, the Company accounts for its interest in its 100% owned
subsidiary UK HoldCo as an investment at fair value through profit or loss. UK
HoldCo in turn owns investments in intermediate holding companies and
environmental infrastructure projects.
The table below shows the movement in the Company's investment in UK HoldCo as
recorded on the Company's statement of financial position:
31 Mar 2024 31 Mar 2023
£'000s £'000s
Fair value of environmental infrastructure investments 891,927 898,539
Fair value of intermediate holding companies (138,355) (81,739)
Total fair value of investments 753,572 816,800
Reconciliation of movement in fair value of portfolio of assets
The table below shows the movement in the fair value of the Company's
portfolio of environmental infrastructure assets. These assets are held
through other intermediate holding companies. The table also presents a
reconciliation of the fair value of the asset portfolio to the Company's
statement of financial position as at 31 March 2024, by incorporating the fair
value of these intermediate holding companies.
Cash, working Cash, working
capital and capital and
debt in debt in
Portfolio intermediate Portfolio intermediate
value holdings Total value holdings Total
31 Mar 2024 31 Mar 2024 31 Mar 2024 31 Mar 2023 31 Mar 2023 31 Mar 2023
£'000s £'000s £'000s £'000s £'000s £'000s
Opening balance 898,539 (81,739) 816,800 795,408 (32,553) 762,855
Acquisitions
Portfolio of assets acquired 69,221 - 69,221 72,050 - 72,050
69,221 - 69,221 72,050 - 72,050
Growth in portfolio((1)) 11,181 - 11,181 114,690 - 114,690
Yields from portfolio to intermediate holding companies (87,014) 87,014 - (83,609) 83,609 -
Yields from intermediate holding companies
Interest on loan notes((1)) - (31,401) (31,401) - (31,401) (31,401)
Dividend payments from UK HoldCo to the Company((1)) - (28,000) (28,000) - (23,100) (23,100)
- (59,401) (59,401) - (54,501) (54,501)
Other movements
Movement in working capital in UK HoldCo - (13,425) (13,425) - (22,145) (22,145)
Expenses borne by intermediate holding companies((1)) - (15,008) (15,008) - (6,245) (6,245)
Drawdown of UK HoldCo revolving credit facility borrowings - (55,796) (55,796) - (49,904) (49,904)
Fair value of the Company's investment in UK HoldCo 891,927 (138,355) 753,572 898,539 (81,739) 816,800
(1) The net loss on investments at fair value through profit or loss for
the year ended 31 March 2024 is £63,228,000 (31 March 2023: net gain of
£53,944,000). This, together with interest received on loan notes of
£31,401,000 (31 March 2023: £31,401,000) and dividend income of
£28,000,000 (31 March 2023: £23,100,000) comprises operating income and
gains/(losses) on fair value of investments in the income statement.
The balances in the table above represent the total net movement in the fair
value of the Company's investment. The "cash, working capital and debt in
intermediate holdings" balances reflect investment in, distributions from or
movements in working capital and are not value generating.
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of the
investments as at 31 March 2024. The Directors have satisfied themselves as
to the methodology used and the discount rates applied for the valuation.
Investments are all investments in environmental infrastructure projects and
are valued using a discounted cash flow methodology, being the most relevant
and most commonly used method in the market to value similar assets to the
Company's. The Company's holding of its investment in UK HoldCo represents its
interest in both the equity and debt instruments. The equity and debt
instruments are valued as a whole using a blended discount rate and the value
attributed to the equity instruments represents the fair value of future
dividends and equity redemptions in addition to any value enhancements arising
from the timing of loan principal and interest receipts from the debt
instruments, while the value attributed to the debt instruments represents the
principal outstanding and interest due on the loan at the valuation date.
The valuation techniques and methodologies have been applied consistently with
the valuations performed since the launch of the Fund in March 2014.
Discount rates applied to the portfolio of assets range from 7.0% to 17.7% (31
March 2023: 5.75% to 10.30%). The weighted average discount rate of the
portfolio at 31 March 2024 is 9.4% (31 March 2023: 8.4%).
The following economic assumptions have been used in the discounted cash flow
valuations:
31 Mar 2024 31 Mar 2023
UK - inflation rates 3.5% for 2024, decreasing to 3% until 2030, decreasing to 2.25% from 2031 6.5% for 2023, decreasing to 3% until 2030, decreasing to 2.25% from 2031
Italy - inflation rates 2.0% from 2024 onwards 5.3% for 2023, stepping to 2.9% for 2024, decreasing to 2.2% for 2025,
decreasing to 1.9% for 2026, decreasing to 1.8% for 2027, increasing to 2.0%
from 2028
UK - deposit interest rates 2.0% from 2024 onwards 2.0% for 2023, decreasing to 1.5% from 2024
Italy - deposit rates 0% 0%
UK - corporation tax rates 25% from April 2024 onwards 25% from April 2023 onwards
Italy - corporation tax rates National rate of 24%, plus applicable regional premiums National rate of 24%, plus applicable regional premiums
Euro/sterling exchange rate 1.17 1.14
Refer to note 16 for details of the sensitivity of the portfolio to movements
in the discount rate and economic assumptions.
The assets in the intermediate holding companies substantially comprise
working capital, cash balances and the outstanding RCF debt; therefore, the
Directors consider the fair value to be equal to the amortised cost.
Details of environmental infrastructure project investments are as follows:
% holding at 31 Mar 2024 % holding at 31 Mar 2023
Shareholder Shareholder
Project name Equity loan Equity loan
Amber 100% 100% 100% 100%
Bilsthorpe 100% 100% 100% 100%
Bio Collectors 100% 100% 70% 100%
Biogas Meden 100% 100% 100% 100%
Branden 100% 100% 100% 100%
Burton Wold Extension 100% 100% 100% 100%
Carscreugh 100% 100% 100% 100%
Castle Pill 100% 100% 100% 100%
Clayfords 50% 50% 50% 50%
CNG Foresight 25% 25% 25% 25%
Codford 100% 100% 100% 100%
Cramlington 100% 100% 100% 100%
CSGH 100% 100% 100% 100%
Dungavel 100% 100% 100% 100%
Egmere Energy 100% 100% 100% 100%
ELWA 80% 80% 80% 80%
ETA Manfredonia 45% 45% 45% 45%
Ferndale 100% 100% 100% 100%
Glasshouse 10% 100% 10% 100%
Grange Farm 100% 100% 100% 100%
Hall Farm 100% 100% 100% 100%
Icknield 53% 100% 53% 100%
Llynfi 100% 100% 100% 100%
Lunanhead 50% 50% 50% 50%
Merlin Renewables 100% 100% 100% 100%
Moel Moelogan 100% 100% 100% 100%
Monksham 100% 100% 100% 100%
New Albion Wind Farm 100% 100% 100% 100%
Northern Hydro 100% n/a 100% n/a
Panther 100% 100% 100% 100%
Peacehill 49% 100% 49% 100%
Pylle Southern 100% 100% 100% 100%
Rainworth 100% 100% 100% 100%
Rjukan 25% 33% 25% 33%
Sandridge 50% 50% 50% 50%
Tay 33% 33% 33% 33%
Thierbach 36% 25% 25% 25%
Lubmin 30% 5% - -
Vulcan 100% 100% 100% 100%
Warren 100% 100% 100% 100%
Wear Point 100% 100% 100% 100%
West Gourdie 100% 100% 100% 100%
Yorkshire Hydro 100% n/a 100% n/a
Additionally, the fair value of the portfolio of assets includes the Fund's
investment into FEIP, details of which can be found on page 51 of the 2024
Annual Report.
Details of investments made during the year
In July 2023, the Company announced its second green hydrogen development
opportunity alongside a consortium including other Foresight-managed funds and
its development partner HH2E, a specialist in developing green hydrogen
projects to decarbonise industry. The production site is located in Lubmin,
Germany. As at 31 March 2024, the amount invested was €16.9 million.
In December 2023, the Company announced the acquisition of the remaining 30%
shareholding in Bio Collectors Holding Limited, for a total consideration of
£8.0 million, taking its ownership in the business to 100%.
During the year, £8.4 million was injected into CNG Foresight Limited. As at
31 March 2024, the portfolio held 14 natural gas refuelling stations,
including the sites in construction phase.
The Group invested €3.3 million into Foresight Energy Infrastructure
Partners SCSp ("FEIP") during the year.
The Group invested a total of £9.3 million into battery energy storage
projects during the year, including £6.4 million into Sandridge battery
storage, £2.0 million into FS West Gourdie, £0.5 million into Lunanhead
battery storage and £0.4 million into Clayfords battery storage.
The Group also invested £14.3 million into Rjukan Holdings Limited, €2.6
million into Thierbach, £4.7 million into the Glasshouse project, £2.6
million into Vulcan Renewables Limited and £2.4 million to various other
projects.
10. Trade and other receivables
31 Mar 2024 31 Mar 2023
£'000s £'000s
Prepayments 25 143
Balance at 31 March 25 143
11. Trade and other payables
31 Mar 2024 31 Mar 2023
£'000s £'000s
Accruals 2,654 2,518
Balance at 31 March 2,654 2,518
12. Loans and borrowings
The Company had no outstanding loans or borrowings at 31 March 2024 (31 March
2023: £nil), as shown in the Company's statement of financial position.
As at 31 March 2024, the Company held loan notes of £348.9 million which were
issued by UK HoldCo (31 March 2023: outstanding amount of £348.9 million).
As at 31 March 2024, UK HoldCo had an outstanding balance of £159.3 million
under a revolving credit facility (31 March 2023: £103.5 million). The loan
bears interest of SONIA + 195 to 205 bps.
There were no other outstanding loans and borrowings in either the Company, UK
HoldCo or HWT at 31 March 2024.
13. Share capital account
Number of 31 Mar 2024 31 Mar 2023
shares £'000s £'000s
Opening balance at 1 April 2023 661,531,229 664,401 664,401
Balance at 31 March 2024 661,531,229 664,401 664,401
At 31 March 2024, the Company's share capital is comprised of 661,531,229
fully paid-up ordinary shares of no par value.
14. Retained earnings
31 Mar 2024 31 Mar 2023
£'000s £'000s
Opening balance 150,167 98,504
(Loss)/profit for the year (13,937) 98,300
Dividends paid (49,417) (46,637)
Balance at 31 March 86,813 150,167
15. Transactions with Investment Manager and related parties
Transactions between the Company and its subsidiaries, which are related
parties of the Company, are fair valued and are disclosed within note 9.
Details of transactions between the Company and related parties are disclosed
below. This note also details the terms of the Company's engagement with
Foresight Group as Investment Manager.
Transactions with the Investment Manager
Foresight Group ("Foresight") is the Company's Investment Manager. Foresight's
appointment as Investment Manager is governed by an Investment Management
Agreement.
Foresight 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 £500 million; and
b) 0.8% per annum of the Adjusted Portfolio Value of the Fund in
excess of £500 million.
The total Investment Manager fee charged to the income statement for the year
ended 31 March 2024 was £8,468,000 (31 March 2023: £8,448,000), of which
£2,147,000 remained payable as at 31 March 2024 (31 March 2023: £2,057,000).
(1) "Adjusted Portfolio Value" is defined in the Investment Management
Agreement as:
a) the fair value of the investment portfolio; plus
b) any cash owned by or held to the order of the Fund; plus
c) the aggregate amount of payments made to shareholders by way of
dividend in the quarterly period ending on the relevant valuation day, less:
i. any other liabilities of the Fund (excluding borrowings); and
ii. any uninvested cash.
(2) "Fund" means the Company and JLEN Environmental Assets Group (UK)
Limited together with their wholly owned subsidiaries or subsidiary
undertakings (including companies or other entities wholly owned by them
together, individually or in any combination, as appropriate) but excluding
project entities.
Transactions with related parties
During the year, the Directors of the Company, who are considered to be key
management, received fees of £334,500 (31 March 2023: £322,480) for their
services. The Directors of the Company were also paid £8,495 of expenses (31
March 2023: £9,953).
The Directors held the following shares:
Ordinary Ordinary
shares shares
of no par of no par
value each value each
held at held at
31 Mar 2024 31 Mar 2023
Ed Warner 60,000 60,000
Alan Bates 12,500 12,500
Stephanie Coxon 15,000 15,000
Jo Harrison 8,066 8,066
Hans Joern Rieks 95,000 95,000
Nadia Sood - -
All of the above transactions were undertaken on an arm's length basis.
The Directors were paid dividends in the year of £14,235 (31 March 2023:
£16,885).
16. Financial instruments
Financial instruments by category
The Company held the following financial instruments at 31 March 2024. There
have been no transfers of financial instruments between levels of the fair
value hierarchy. There are no non‑recurring fair value measurements.
31 Mar 2024
Financial Financial
assets assets Financial
held at at fair value liabilities
Cash and amortised through profit at amortised
bank balances cost or loss cost Total
£'000s £'000s £'000s £'000s £'000s
Non‑current assets
Investments at fair value through profit or loss (Level 3) - - 753,572 - 753,572
Current assets
Trade and other receivables - 25 - - 25
Cash and cash equivalents 271 - - - 271
Total financial assets 271 25 753,572 - 753,868
Current liabilities
Trade and other payables - - - (2,654) (2,654)
Total financial liabilities - - - (2,654) (2,654)
Net financial instruments 271 25 753,572 (2,654) 751,214
31 Mar 2023
Financial Financial
assets assets Financial
held at at fair value liabilities
Cash and amortised through profit at amortised
bank balances cost or loss cost Total
£'000s £'000s £'000s £'000s £'000s
Non‑current assets
Investments at fair value through profit or loss (Level 3) - - 816,800 - 816,800
Current assets
Trade and other receivables - 143 - - 143
Cash and cash equivalents 143 - - - 143
Total financial assets 143 143 816,800 - 817,086
Current liabilities
Trade and other payables - - - (2,518) (2,518)
Total financial liabilities - - - (2,518) (2,518)
Net financial instruments 143 143 816,800 (2,518) 814,568
The Company's investments at fair value through profit or loss are classified
at Level 3 within the IFRS fair value hierarchy.
The Level 3 fair value measurements derive from valuation techniques that
include inputs to the asset or liability that are not based on observable
market data (unobservable inputs).
In the tables above, financial instruments are held at carrying value as an
approximation to fair value unless stated otherwise.
Reconciliation of Level 3 fair value measurement of financial assets and
liabilities
An analysis of the movement between opening and closing balances of the
investments at fair value through profit or loss is given in note 9.
The fair value of the investments at fair value through profit or loss
includes the use of Level 3 inputs. Please refer to note 9 for details of the
valuation methodology.
Sensitivity analysis of the portfolio
The sensitivities below include the impact of the EGL.
The sensitivity of the portfolio to movements in the discount rate is as
follows:
31 March 2024
Discount rate Minus 0.5% Base 9.4% Plus 0.5%
Change in portfolio valuation Increases £20.7m £891.9m Decreases £19.8m
Change in NAV per share Increases 3.1p 113.6p Decreases 3.0p
31 March 2023
Discount rate Minus 0.5% Base 8.4% Plus 0.5%
Change in portfolio valuation Increases £21.7m £898.5m Decreases £20.7m
Change in NAV per share Increases 3.3p 123.1p Decreases 3.1p
The sensitivity of the portfolio to movements in long‑term inflation rates
is as follows:
31 March 2024
Inflation rates Minus 0.5% Base 3.5% (2024), then 3% to 2030, then 2.25% Plus 0.5%
Change in portfolio valuation Decreases £18.9m £891.9m Increases £19.3m
Change in NAV per share Decreases 2.9p 113.6p Increases 2.9p
31 March 2023
Inflation rates Minus 0.5% Base 6.5% (2023), then 3% to 2030, then 2.25% Plus 0.5%
Change in portfolio valuation Decreases £21.1m £898.5m Increases £21.4m
Change in NAV per share Decreases 3.2p 123.1p Increases 3.2p
The fair value of the investments is based on a "P50" level of electricity
generation for the renewable energy assets, being the expected level of
generation over the long term.
Wind, solar and hydro assets are subject to electricity generation risks.
The sensitivity of the portfolio to movements in energy yields based on an
assumed "P90" level of electricity generation (i.e. a level of generation that
is below the "P50", with a 90% probability of being exceeded) and an assumed
"P10" level of electricity generation (i.e. a level of generation that is
above the "P50", with a 10% probability of being achieved) is as follows:
31 March 2024
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £28.3m £891.9m Increases £27.0m
Change in NAV per share Decreases 4.3p 113.6p Increases 4.1p
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £9.3m £891.9m Increases £9.5m
Change in NAV per share Decreases 1.4p 113.6p Increases 1.4p
Energy yield: hydro P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £1.3m £891.9m Increases £1.4m
Change in NAV per share Decreases 0.2p 113.6p Increases 0.2p
31 March 2023
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £27.3m £898.5m Increases £26.2m
Change in NAV per share Decreases 4.1p 123.1p Increases 4.0p
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £10.7m £898.5m Increases £10.5m
Change in NAV per share Decreases 1.6p 123.1p Increases 1.6p
Energy yield: hydro P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £1.4m £898.5m Increases £1.7m
Change in NAV per share Decreases 0.2p 123.1p Increases 0.3p
Agricultural anaerobic digestion facilities do not suffer from similar
deviations as their feedstock input volumes (and consequently biogas
production) are controlled by the site operator.
For the waste & bioenergy projects, forecasts are based on projections of
future input volumes and are informed by both forecasts and independent
studies where appropriate. Revenues in the PPP projects are generally not very
sensitive to changes in volumes due to the nature of their payment mechanisms.
Electricity and gas price assumptions are based on the following: for the
first two years, cash flows for each project use forward electricity and gas
prices based on market rates unless a contractual fixed price exists, in which
case the model reflects the fixed price followed by the forward price for the
remainder of the two‑year period. For the remainder of the project life, a
long‑term blend of central case forecasts from three established market
consultants and other relevant information is used, and adjusted by the
Investment Manager for project-specific arrangements and price
cannibalisation.
The sensitivity assumes a 10% increase or decrease in power prices relative to
the base case for each year of the asset life after the first two‑year
period. While power markets can experience movements in excess of +/-10% on a
short‑term basis, as has been the case recently, the sensitivity is intended
to provide insight into the effect on the NAV of persistently higher or lower
power prices over the whole life of the portfolio. The Directors feel that
+/-10% remains a realistic range of outcomes over this very long time horizon,
notwithstanding that significant movements will occur from time to time.
The sensitivity of the portfolio to movements in electricity and gas prices is
as follows:
31 March 2024
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases £37.4m £891.9m Increases £37.0m
Change in NAV per share Decreases 5.7p 113.6p Increases 5.6p
31 March 2023
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases £40.9m £898.5m Increases £40.4m
Change in NAV per share Decreases 6.2p 123.1p Increases 6.1p
Should electricity prices fall to £50/MWh, and gas prices also fall by a
corresponding amount, the Company would maintain a resilient dividend cover
for the next three financial years. Alternatively, should prices fall to
£40/MWh, the Company would still expect to cover the dividend, albeit with
reduced headroom by year three.
Waste & bioenergy assets (excluding Bio Collectors) do not have
significant volume and price risks and therefore are not included in the above
volume and price sensitivities.
In line with JLEN's original investment case for anaerobic digestion, the
Company continues to apply the conservative valuation assumption that
facilities will simply cease to operate beyond the life of their RHI tariff.
In recent months, the Investment Manager has seen a growing case of evidence,
including several transactional datapoints, pointing towards a positive change
in market sentiment for valuing these assets - including the potential to run
anaerobic digestion facilities on an unsubsidised basis.
In light of this change, the Investment Manager has once again provided a
sensitivity extending the useful economic lives of its AD portfolio by up to
five years - capped at the duration of land rights already in place. Such an
extension would result in an uplift in the portfolio valuation of £21.9
million (3.3 pence per share).
The sensitivity of the portfolio to movements in AD feedstock prices is as
follows:
31 March 2024
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases £8.7m £891.9m Decreases £8.9m
Change in NAV per share Increases 1.3p 113.6p Decreases 1.3p
31 March 2023
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases £7.3m £898.5m Decreases £7.8m
Change in NAV per share Increases 1.1p 123.1p Decreases 1.2p
No such sensitivity is applicable to JLEN's biomass investment, where fuel
costs are tied under long-term contract.
The sensitivity of the portfolio to movements in corporation tax rate is as
follows:
31 March 2024
Corporation tax Minus 2% Base 25% Plus 2%
Change in portfolio valuation Increases £13.6m £891.9m Decreases £13.9m
Change in NAV per share Increases 2.1p 113.6p Decreases 2.1p
31 March 2023
Corporation tax Minus 2% Base 25% Plus 2%
Change in portfolio valuation Increases £15.0m £898.5m Decreases £15.3m
Change in NAV per share Increases 2.3p 123.1p Decreases 2.3p
Euro/sterling exchange rate sensitivity
As the proportion of the portfolio assets with cash flows denominated in euros
represents a small proportion of the portfolio value at 31 March 2024, the
Directors consider the sensitivity to changes in euro/sterling exchange rates
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.
Uncontracted revenues on non-energy generating portfolio sensitivity
Non-energy generating assets, such as batteries and controlled environment
agriculture and aquaculture, make up a growing proportion of the portfolio.
These assets are not materially affected by either scarcity of natural
resource nor power price markets. Therefore the Investment Manager has
presented a sensitivity illustrating an assumed 10% increase or decrease on
all uncontracted revenues for each year of the asset lives.
An increase in uncontracted revenues of 10% would result in an upward movement
in the portfolio valuation of £17.9 million (2.7 pence per share) compared
to a decrease in value of £20.2 million (3.0 pence per share) if those
revenues were reduced by the same amount.
Capital risk management
Capital management
The Group, which comprises the Company and its non‑consolidated
subsidiaries, manages its capital to ensure that it will be able to continue
as a going concern while maximising the return to shareholders through the
optimisation of the debt and equity balances. The capital structure of the
Group principally consists of the share capital account and retained earnings
as detailed in notes 13 and 14, and debt as detailed in note 12. The Group
aims to deliver its objective by investing available cash and using leverage
whilst maintaining sufficient liquidity to meet ongoing expenses and dividend
payments.
Gearing ratio
The Company's Investment Manager reviews the capital structure of the Company
and the Group on a semi‑annual basis. The Company and its subsidiaries
intend to make prudent use of leverage for financing acquisitions of
investments and working capital purposes. Under the Company's Articles, and in
accordance with the Company's investment policy, the Company's outstanding
borrowings, excluding the debts of underlying assets, will be limited to 30%
of the Company's Net Asset Value ("NAV").
As at 31 March 2024, the Company had no outstanding debt. However, as set out
in note 12, as at 31 March 2024, the Company's subsidiary UK HoldCo had an
outstanding balance of £159.3 million under a revolving credit facility (31
March 2023: £103.5 million).
Financial risk management
The Group's activities expose it to a variety of financial risks: capital
risk, liquidity risk, market risk (including interest rate risk, inflation
risk and power price risk) and credit risk. The Group's overall risk
management programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's financial
performance.
For the Company and the intermediate holding companies, financial risks are
managed by the Investment Manager, which operates within the Board-approved
policies. For the environmental infrastructure investments, due to the nature
of the investments, certain financial risks (typically interest rate and
inflation risks) are hedged at the inception of a project. All risks continue
to be managed by the Investment Manager. The various types of financial risk
are managed as follows:
Financial risk management - Company only
The Company accounts for its investments in its subsidiaries at fair value.
Accordingly, to the extent there are changes as a result of the risks set out
below, these may impact the fair value of the Company's investments.
Capital risk
The Company has implemented an efficient financing structure that enables it
to manage its capital effectively. The Company's capital structure comprises
equity only (refer to the statement of changes in equity). As at 31 March
2024, the Company had no recourse debt, although as set out in note 17, the
Company is a guarantor for the RCF of UK HoldCo.
Liquidity risk
The Directors monitor the Company's liquidity requirements to ensure there is
sufficient cash to meet the Company's operating needs.
The Company's liquidity management policy involves projecting cash flows and
forecasting the level of liquid assets necessary to meet these. Due to the
nature of its investments, the timing of cash outflows is reasonably
predictable and, therefore, is not a major risk to the Company.
The Company was in a net cash position and had no outstanding debt at the
balance sheet date. At the balance sheet date, the Group had debt of £159.3
million, being the amount drawn on the RCF.
Market risk - foreign currency exchange rate risk
As the proportion of the portfolio assets with cash flows denominated in euros
represents a small proportion of the portfolio value at 31 March 2024, the
Directors consider the sensitivity to changes in the euro/sterling exchange
rate to be insignificant.
Where investments are made in currencies other than pounds sterling, the
Company will consider whether to hedge currency risk in accordance with the
Company's currency and hedging policy as determined from time to time by the
Directors. A portion of the Company's underlying investments may be
denominated in currencies other than pounds sterling. However, any dividends
or distributions in respect of the ordinary shares will be made in pounds
sterling and the market prices and NAV of the ordinary shares will be reported
in pounds sterling.
Currency hedging may be carried out to seek to provide some protection for the
level of pounds sterling dividends and other distributions that the Company
aims to pay on the ordinary shares, and in order to reduce the risk of
currency fluctuations and the volatility of returns that may result from such
currency exposure. Such currency hedging may include the use of foreign
currency borrowings to finance foreign currency assets and forward foreign
exchange contracts.
Financial risk management - Company and non‑consolidated subsidiaries
The following risks impact the Company's subsidiaries and in turn may impact
the fair value of investments held by the Company.
Market risk - interest rate risk
Interest rate risk arises in the Company's subsidiaries on the RCF borrowings
and floating rate deposits. Borrowings issued at variable rates expose those
entities to variability of interest payment cash flows. Interest rate hedging
may be carried out to seek to provide protection against increasing costs of
servicing debt drawn down by UK HoldCo as part of its RCF. This may involve
the use of interest rate derivatives and similar derivative instruments.
Each infrastructure investment hedges their interest rate risk at the
inception of a project. This will either be done by issuing fixed rate debt or
variable rate debt which will be swapped into fixed rate by the use of
interest rate swaps.
Market risk - inflation risk
Some of the Company's investments will have part of their revenue and some of
their costs linked to a specific inflation index at inception of the project.
In most cases this creates a natural hedge, meaning a derivative does not need
to be entered into in order to mitigate inflation risk.
Market risk - power price risk
The wholesale market price of electricity and gas is volatile and is affected
by a variety of factors, including market demand for electricity and gas, the
generation mix of power plants, government support for various forms of power
generation, as well as fluctuations in the market prices of commodities and
foreign exchange. Whilst some of the Company's renewable energy projects
benefit from fixed prices, others have revenue which is in part based on
wholesale electricity and gas prices.
A decrease and/or prolonged deterioration in economic activity in the UK, for
any reason, could result in a decrease in demand for electricity and gas in
the market. Short‑term and seasonal fluctuations in electricity and gas
demand will also impact the price at which the investments can sell
electricity and gas. The supply of electricity and gas also impacts wholesale
electricity and gas prices. Supply of electricity and gas can be affected by
new entrants to the wholesale power market, the generation mix of power plants
in the UK, government support for various generation technologies, as well as
the market price for fuel commodities.
Volume risk - electricity generation risk
Meteorological conditions poorer than forecast can result in generation of
lower electricity volumes and lower revenues than anticipated.
Credit risk
Credit risk is the risk that a counterparty of the Company or its subsidiaries
will default on its contractual obligations it entered into with the Company
or its subsidiaries. Credit risk arises from cash and cash equivalents,
derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers. The Company and its
subsidiaries mitigate their risk on cash investments and derivative
transactions by only transacting with major international financial
institutions with high credit ratings assigned by international credit rating
agencies.
The Company's infrastructure investments receive regular, long‑term, partly
or wholly index‑linked revenue from government departments, local
authorities or clients under the Renewables Obligation Certificates and
Feed‑in Tariff regimes. The Directors believe that the Group is not
significantly exposed to the risk that the customers of its investments do not
fulfil their regular payment obligations because of the Company's policy to
invest in jurisdictions with satisfactory credit ratings.
Given the above factors, the Board does not consider it appropriate to present
a detailed analysis of credit risk.
The Company's maximum exposure to credit risk is the £348.9 million owed by
HoldCo, detailed in note 12.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group adopts a prudent approach to
liquidity management by ensuring it maintains adequate reserves and banking
facilities by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
The Directors monitor the Company's liquidity requirements to ensure there is
sufficient cash to meet the Company's operating needs.
The Company's liquidity management policy involves projecting cash flows and
forecasting the level of liquid assets required to meet its obligations. Due
to the nature of its investments, the timing of cash outflows is reasonably
predictable and, therefore, is not a major risk to the Group.
Debt raised by asset investments from third parties is without recourse to the
Group.
17. Guarantees and other commitments
As at 31 March 2024, the Company provided a guarantee over the Company's
wholly owned subsidiary UK HoldCo's obligations under the £200 million RCF,
which was subsequently refinanced post balance sheet date.
As at 31 March 2024, the Group has the following future investment obligations
over a 12-month horizon: €3.6 million (equivalent to £3.0 million) to FEIP,
£1.4 million to the CNG Foresight project, 158.4 million NOK (equivalent to
£11.6 million) to the CE Rjukan project, £0.9 million to the CE Glasshouse
project, £4.2 million to Sandridge battery storage, €0.6 million
(equivalent to £0.5 million) to HH2E Werk Thierbach GmbH, £0.1 million to
the private wire, £3.5 million to Vulcan gas shipping, £0.1 million into
Clayfords, £0.2 million into Lunanhead, CE Glasshouse project deferred
consideration of £0.4 million, £0.6 million into Vulcan D2 feeder value
enhancements and £0.1 million into Vulcan off gas value enhancements.
The Company had no other commitments or guarantees.
18. Subsidiaries
The following subsidiaries have not been consolidated in these financial
statements as a result of applying the requirements of "Investment Entities:
Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
27)":
Place of Registered Ownership
Name Category business office interest Voting rights
JLEN Environmental Assets Group (UK) Limited((1)) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Operating subsidiary UK C 100% 100%
Cross Solar PV Limited Operating subsidiary (dormant) UK C 100% 100%
Domestic Solar Limited Operating subsidiary (dormant) UK C 100% 100%
Residential PV Trading Limited Operating subsidiary (dormant) UK C 100% 100%
Easton PV Limited Project holding company UK D* 100% 100%
Pylle Solar Limited Project holding company UK D* 100% 100%
Second Energy Limited Operating subsidiary UK D* 100% 100%
ELWA Holdings Limited Project holding company UK N 80% 80%
ELWA Limited((2)) Operating subsidiary UK N 80% 81%((2))
JLEAG Wind Holdings Limited Project holding company UK A 100% 100%
JLEAG Wind Limited Project holding company UK A 100% 100%
Amber Solar Parks (Holdings) Limited Project holding company UK D 100% 100%
Amber Solar Park Limited Operating subsidiary UK D 100% 100%
Fryingdown Solar Park Limited Operating subsidiary (dormant) UK D 100% 100%
Five Oaks Solar Parks Limited Operating subsidiary (dormant) UK D 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%
Hall Farm Wind Farm Limited Operating subsidiary UK F 100% 100%
Branden Solar Parks (Holdings) Limited Project holding company UK D 100% 100%
Branden Solar Parks Limited Operating subsidiary UK D 100% 100%
KS SPV 3 Limited Operating subsidiary UK D 100% 100%
KS SPV 4 Limited Operating subsidiary UK D 100% 100%
Carscreugh Renewable Energy Park Limited Operating subsidiary UK F 100% 100%
Wear Point Wind Limited Operating subsidiary UK F 100% 100%
Monksham Power Ltd Project holding company UK D 100% 100%
Frome Solar Limited Operating subsidiary UK D* 100% 100%
BL Wind Limited Operating subsidiary UK F 100% 100%
Burton Wold Extension Limited Operating subsidiary UK F 100% 100%
New Albion Wind Limited Operating subsidiary UK F 100% 100%
Dreachmhor Wind Farm Limited Operating subsidiary UK F 100% 100%
France Wind GP Germany GmbH((3)) Project holding company DE G 100% 100%
France Wind Germany GmbH & Co. KG((3)) Project holding company DE G 100% 100%
CSGH Solar Limited Project holding company UK A 100% 100%
CSGH Solar (1) Limited Project holding company UK A 100% 100%
sPower Holdco 1 (UK) Limited Project holding company UK D 100% 100%
sPower Finco 1 (UK) Limited Project holding company UK D 100% 100%
Higher Tregarne Solar (UK) Limited Operating subsidiary UK D 100% 100%
Crug Mawr Solar Farm Limited Operating subsidiary UK D 100% 100%
Golden Hill Solar (UK) Limited Project holding company UK D 100% 100%
Golden Hill Solar Limited Operating subsidiary UK D 100% 100%
Shoals Hook Solar (UK) Limited Operating subsidiary UK D 100% 100%
CGT Investment Limited Project holding company UK H 100% 100%
CWMNI GWYNT TEG CYF Operating subsidiary UK H 100% 100%
Moelogan 2 (Holdings) Cyfyngedig Project holding company UK H 100% 100%
Moelogan 2 C.C.C. Operating subsidiary UK H 100% 100%
Vulcan Renewables Limited Operating subsidiary UK I 100% 100%
Llynfi Afan Renewable Energy Park (Holdings) Limited Project holding company UK F 100% 100%
Llynfi Afan Renewable Energy Park Limited Operating subsidiary UK F 100% 100%
Green Gas Oxon Limited Project holding company UK J 52.6% 52.6%
Icknield Gas Limited Operating subsidiary UK J 52.6% 52.6%
Egmere Energy Limited Operating subsidiary UK I 100% 100%
Grange Farm Energy Limited Operating subsidiary UK I 100% 100%
Merlin Renewables Limited Operating subsidiary UK I 100% 100%
Biogas Meden Limited Operating subsidiary UK I 100% 100%
Yorkshire Hydropower Holdings Limited Project holding company UK F 100% 100%
Yorkshire Hydropower Limited Operating subsidiary UK F 100% 100%
Warren Power Limited Project holding company (dormant) UK I 100% 100%
Warren Energy Limited Operating subsidiary UK I 100% 100%
Northern Hydropower Holdings Limited Project holding company UK F 100% 100%
Northern Hydropower Limited Operating subsidiary UK F 100% 100%
Codford Biogas Limited Operating subsidiary UK K 100% 100%
FS West Gourdie Limited Operating subsidiary UK D 100% 100%
Rainworth Energy Limited Operating subsidiary UK L 100% 100%
Bio Collectors Holdings Limited Project holding company UK M 100% 100%
Bio Collectors Limited Operating subsidiary UK M 100% 100%
Riverside Bio Limited Operating subsidiary UK M 100% 100%
Riverside AD Limited Operating subsidiary UK M 100% 100%
Spruce Bioenergy Limited Project holding company UK A 100% 100%
Cramlington Renewable Energy Developments Limited Operating subsidiary UK N 100% 100%
(1) JLEN Environmental Assets Group (UK) Limited is the only entity
directly held by the Company.
(2) ELWA Holdings Limited holds 81% of the voting rights and a 100% share
of the economic benefits in ELWA Limited.
(3) Underlying French wind assets were disposed of in January 2022.
Registered offices
A. C/O Foresight Group LLP, The Shard, 32 London Bridge Street, London SE1
9SG
B. 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ
C. C/O Freetricity, 1 Filament Walk, Suite 203, Wandsworth, London SW18
4GQ
D. Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF
E. Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU
F. C/O Res White Limited, Beaufort Court, Egg Farm Lane, Kings Langley,
Hertfordshire WD4 8LR
G. Steinweg 3-5, Frankfurt am Main, 60313, Germany
H. Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy LL28 5UN
I. 10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD
J. Friars Ford, Manor Road, Goring, Reading RG8 9EL
K. C/O External Services Limited 20 Central Avenue, St Andrews Business
Park, Norwich NR7 0HR
L. C/O Material Change, The Watering Farm, Creeting St. Mary, Ipswich,
Suffolk IP6 8ND
M. 10 Osier Way, Mitcham, Surrey CR4 4NF
N. 8 White Oak Square, London Road, Swanley BR8 7AG
D* Post balance sheet registered office address changed from Long Barn,
Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF to C/O Foresight Group
LLP, The Shard, 32 London Bridge Street, London SE1 9SG.
19. Events after balance sheet date
A dividend for the quarter ended 31 March 2024 of 1.89 pence per share,
amounting to £12.5 million, was approved by the Board on 28 May 2024 for
payment on 28 June 2024.
On 13 June 2024, the Fund successfully refinanced its revolving credit
facility with a three-year agreement with ING, HSBC, RBSI, NAB and Clydesdale
Bank, which provides for a committed facility of £200 million (of which
£159.3 million was drawn at the balance sheet date), with an uncommitted
accordion facility of up to £30 million and an uncommitted option to extend
for a further year. The margin can vary between 205 bps and 215 bps over SONIA
(Sterling Overnight Index Average) for sterling drawings and Euribor (Euro
Interbank Offered Rate) for euro drawings, depending on the Company's
performance against predefined ESG targets.
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
APM Purpose Calculation APM value Reconciliation to IFRS
Total shareholder return (since IPO and annualised) Measure of financial performance, indicating the amount an investor reaps from Since IPO: closing share price as at 31 March 2024 plus all dividends since 68.4% Calculation for total shareholder return since IPO: closing share price as at
investing since IPO and expressed as a percentage (annualised or total since IPO assumed reinvested, divided by the share price at IPO, expressed as a 31 March 2024, as per key investments metrics on page 103 of the 2024 Annual
IPO of the Fund) percentage Report plus all dividends since IPO assumed reinvested, divided by the share
price at IPO, expressed as a percentage
Annualised: closing share price as at 31 March 2024 plus all dividends since 5.4% annualised Calculation for annualised total shareholder return: closing share price as at
IPO assumed reinvested, divided by the share price at IPO, to the power of one 31 March 2024 as per key investment metrics on page 103 of the 2024 Annual
over the number of years since IPO, expressed as a percentage Report plus all dividends since IPO assumed reinvested, divided by the share
price at IPO, to the power of one over the number of years since IPO,
expressed as a percentage
Net Asset Value per share Allows investors to gauge whether shares are trading at a premium or a The net assets divided by the number of ordinary shares in issuance 113.6 pence The calculation divides the net assets as per the statement of financial
discount by comparing the Net Asset Value per share with the share price position on page 146 of the 2024 Annual Report by the closing number of
ordinary shares in issue as per note 13 on page 159 of the 2024 Annual Report.
Market capitalisation Provides an indication of the size of the Company Closing share price as at 31 March 2024 multiplied by closing number of £619.9 million The calculation uses the closing share price as at 31 March 2024 as per the
ordinary shares in issuance key investment metric table on page 103 of the 2024 Annual Report and closing
number of ordinary shares as per note 13 of the financial statements on page
159 of the 2024 Annual Report.
Gross Asset Value ("GAV") A measure of the value of the Company's total assets The sum of total assets of the Company as shown on the statement of financial £1,091.8 million This is the total debt (RCF drawn: £159.3 million plus project-level debt:
position and the total debt of the Group and underlying investments £181.3 million) plus the Net Asset Value as per the statement of financial
position on page 146 of the 2024 Annual Report.
Gross Asset Value on investment basis including debt held at SPV level
Gearing Ascertain financial risk in the Group's balance sheet Total debt of the Group and underlying investments as a percentage of GAV 31.2% The calculation uses the total debt (RCF drawn: £159.3 million plus
project-level debt: £181.3 million) and shows this as a percentage of the GAV
Distributions, repayments and fees from portfolio A measure of performance from the underlying portfolio Total cash received from investments in the period £87.0 million As per "Cash flows of the Group for the year", also titled "Cash distributions
from environmental infrastructure investments" on page 106 of the 2024 Annual
Report.
Cash flow from operations of the Group Gauge operating revenues and expenses of the Group As per the "Cash flows of the Group for the year" table on page 106 of the £64.2 million Detailed breakdown as per page 106 of the 2024 Annual Report in the "Cash
2024 Annual Report, the calculation takes the cash distributions from flows of the Group for the year"
environmental infrastructure investments and subtracts the following:
administrative expenses, Directors' fees and expenses, Investment Manager's
fees, financing costs (net of interest income)
Cash dividend cover Investors can gauge the ability of the Group to generate cash surplus after Cash flow from operations of the Group divided by dividend paid within the 1.30x The calculation uses the cash flows from operations as per "Cash flows of the
payment of dividend reporting period Group for the year" on page 106 of the 2024 Annual Report and the dividends
paid in cash to shareholders as per the cash flow statement on page 148 of the
2024 Annual Report
Ongoing charges ratio A measure of the annual reduction in shareholder returns due to operational The ongoing charges have been calculated, in accordance with AIC guidance, as 1.24% Annualised ongoing charges for the year ended 31 March 2024 have been
expenses, based on historical data annualised ongoing charges (i.e. excluding acquisition costs and other calculated as £9.7 million. The ongoing charges ratio divides this by the
non‑recurring items) divided by the average published undiluted Net Asset published average Net Asset Value over the last four quarters (including 31
Value in the period. Total annualised ongoing charges include Investment March 2024)
Manager fees, legal and professional fees, administration fees, Directors'
fees
Annualised NAV total return since IPO Measure of financial performance (annualised), which indicates the movement of Closing NAV per ordinary share as at 31 March 2024 plus all dividends since 8.0% Calculated using the closing NAV per ordinary share as per the statement of
the value of the Company since IPO IPO assumed reinvested, divided by the NAV at IPO, to the power of one, over financial position on page 146 of the 2024 Annual Report.
the number of years since IPO
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. END FR SEDSSFELSEFMRecent news on JLEN Environmental Assets
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