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
31 March 2024
|
Year ended
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
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
Chris Tanner
Edward Mountney
Wilna de Villiers
---------
|
+44(0)20 3667 8100
institutionalir@foresightgroup.eu
|
Winterflood Securities Limited
Neil Langford
|
+44(0)20 3100
0000
|
SEC
Newgate
Elisabeth Cowell
Alice Cho
Harry Handyside
|
+44 (0)20 3757 6882
Jlen@secnewgate.co.uk
|
Apex Fund and Corporate Services (Guernsey)
Limited
Matt Lihou
Matt Falla
|
+44(0)20 3530 3600
|
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
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")
£751.2m
2023: £814.6m
|
NAV per
share(1)
113.6p
2023: 123.1p
|
Annualised NAV total
return(1)
8.0%
2023: 9.3%
|
Portfolio
value
£891.9m
2023: £898.5m
|
Gearing
31.2%
2023: 27.3%
|
Market
capitalisation(1)
£619.9m
2023: £791.2m
|
2024 dividend
declared
7.57p (+6%
increase)
2023: 7.14p
|
2025 dividend
target(2)
7.80p (+3%
increase)
2024: 7.57p
|
Dividend
cover(1,3)
1.30x
2023: 1.51x
|
Diversified
portfolio
42 assets
2023: 42 assets
|
Renewable energy
generated
1,358GWh
2023: 1,325GWh
|
GHG emissions
avoided
212,917
tCO2e
2023: 212,263 tCO2e
|
Tonnes of waste
diverted from landfill
680,825
2023: 684,181
|
Contributed to
community funds
£655,076
2023: £432,756
|
FTE jobs
supported
467
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
tCO2e
2023: 212,263 tCO2e
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
(MW)
|
Commercial
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)
JLEN has committed €25 million to FEIP
|
Avalon solar and green hydrogen
|
Spain
|
n/a
|
n/a
|
Development
|
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
31 Mar 2024
|
Year ended
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
31 Mar 2024
|
Year ended
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
31 Mar 2024
|
Year ended
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
31 Mar 2024
|
Year ended
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
31 Mar 2024
|
Year ended
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
31 Mar 2024
|
Year ended
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:
£753,572,000
Refer to Audit Committee report (page 125 of 2024
Annual Report), note 2(f) accounting policy and note 9
disclosures
|
Basis:
The Company's investment in its immediate subsidiary
(the "UK HoldCo") is carried at fair value through profit or loss
and represents a significant proportion of the Company's net
assets. The UK HoldCo in turn owns investments in intermediate
holding companies and environmental infrastructure projects.
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.
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 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.
Management engages an independent valuation specialist
to review the Valuations and form an opinion on the appropriateness
of the Valuations.
|
Our audit
procedures included:
Internal
controls:
We have obtained an understanding of the valuation
process and tested the design and implementation of the valuation
process control.
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.
Managements
independent valuation specialist valuation report:
· we
assessed the objectivity, capabilities and competence of
management's independent valuation specialist;
· we
assessed the scope of management's independent valuation 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:
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 long-term
forecasted cash flows and/or the selection and application of
different assumptions may result in a materially different
valuation of investments held at fair value through profit or
loss.
We therefore have determined that the Valuations have
a high degree of estimation uncertainty, giving rise to a potential
range of reasonable outcomes greater than our materiality for the
financial statements as a whole.
|
For a risk-based sample of the cash flow valuation
models:
· we
tested their mathematical accuracy including, but not limited to,
material formulae errors;
· we
challenged the generation output assumptions, by reference to due
diligence reports prepared by third-party engineers or historical
performance, where available;
· we
agreed other key inputs, such as contracted revenue to supporting
documentation;
· 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: 1.78)
|
12,503
|
11,775
|
Interim dividend for the quarter ended 30 September
2023 of 1.89 (30 September 2022: 1.79)
|
12,503
|
11,841
|
Interim dividend for the quarter ended 31 December
2023 of 1.90 (31 December 2022: 1.78)
|
12,569
|
11,775
|
|
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, being net profit attributable to owners of the
Company
|
(13,937)
|
98,300
|
Number of
shares
|
|
|
Time weighted average number of ordinary shares for
the purposes of basic and diluted earnings per share
|
661,531,229
|
661,531,229
|
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 investing since IPO and expressed as
a percentage (annualised or total since IPO of the Fund)
|
Since IPO: closing share price as at 31 March 2024
plus all dividends since IPO assumed reinvested, divided by the
share price at IPO, expressed as a percentage
|
68.4%
|
Calculation for total shareholder return since IPO:
closing share price as at 31 March 2024, as per key
investments metrics on page 103 of the 2024 Annual 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 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
|
5.4% annualised
|
Calculation for annualised total shareholder return:
closing share price as at 31 March 2024 as per key investment
metrics on page 103 of the 2024 Annual 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 discount by comparing the Net Asset Value per
share with the share price
|
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 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 ordinary shares in issuance
|
£619.9 million
|
The calculation uses the closing share price as at 31
March 2024 as per the 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
Gross Asset Value on investment basis including debt
held at SPV level
|
The sum of total assets of the Company as shown on the
statement of financial position and the total debt of the Group and
underlying investments
|
£1,091.8 million
|
This is the total debt (RCF drawn: £159.3 million plus
project-level debt: £181.3 million) plus the Net Asset Value as per
the statement of financial position on page 146 of the 2024 Annual
Report.
|
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 2024 Annual Report, the calculation takes
the cash distributions from environmental infrastructure
investments and subtracts the following: administrative expenses,
Directors' fees and expenses, Investment Manager's fees, financing
costs (net of interest income)
|
£64.2 million
|
Detailed breakdown as per page 106 of the 2024 Annual
Report in the "Cash flows of the Group for the year"
|
Cash dividend
cover
|
Investors can gauge the ability of the Group to
generate cash surplus after payment of dividend
|
Cash flow from operations of the Group divided by
dividend paid within the reporting period
|
1.30x
|
The calculation uses the cash flows from operations as
per "Cash flows of the 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 expenses, based on historical data
|
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. Total annualised ongoing
charges include Investment Manager fees, legal and professional
fees, administration fees, Directors' fees
|
1.24%
|
Annualised ongoing charges for the year ended 31 March
2024 have been calculated as £9.7 million. The ongoing charges
ratio divides this by the published average Net Asset Value over
the last four quarters (including 31 March 2024)
|
Annualised NAV total
return since IPO
|
Measure of financial performance (annualised), which
indicates the movement of the value of the Company since IPO
|
Closing NAV per ordinary share as at 31 March 2024
plus all dividends since IPO assumed reinvested, divided by the NAV
at IPO, to the power of one, over the number of years since IPO
|
8.0%
|
Calculated using the closing NAV per ordinary share as
per the statement of financial position on page 146 of the 2024
Annual Report.
|