Jlen Environmental: Annual Financial Report
16/06/2022 07:00
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RNS Number : 0673P JLEN Environmental Assets Group Ltd 16 June 2022
16 June 2022
JLEN Environmental Assets Group Limited
Announcement of results for the year ended 31 March 2022
The Directors of JLEN Environmental Assets Group Limited (the "Company" or
"JLEN") are pleased to announce the Company's results for the year ended 31
March 2022.
Financial highlights
· Portfolio valuation as at 31 March 2022 of £795.4 million (31
March 2021: £571.4 million)
· NAV per ordinary share of 115.3 pence as at 31 March 2022 (31
March 2021: 92.2 pence), primarily due to an upward revision to electricity
and gas price forecasts, including for assets acquired during the period
previously held at cost
· Total dividends declared of 6.80 pence per ordinary share for the
year to 31 March 2022 (2021: 6.76 pence per ordinary share), in line with the
target set out in the 2021 Annual Report
· Dividend cover of 1.10 times, on a paid basis for the financial
year
· Target dividend for the year to 31 March 2023 of 7.14 pence per
ordinary share(1), a 5% increase from the dividend declared in respect of the
year to 31 March 2022
· Total shareholder return for the period since IPO of 77.4% (7.4%
annualised)
Portfolio highlights
· Three acquisitions completed this year creating a portfolio
consisting of 37 assets
· First acquisitions in the biomass CHP and energy-from-waste
sectors, increasing portfolio diversification. Acquisitions include
Cramlington biomass, acquired out of administration at an attractive price
· Company made its first divestment with the disposal of two French
wind farms at a 25% uplift to the value prior to commencing the sales process
· Diversified portfolio now 29% wind, 28% waste and bioenergy, 22%
AD, 17% solar, 3% low carbon & energy efficiency and 1% hydro by value
· Overall, renewable energy generation portfolio 6% below
generation target, mainly due to low wind speeds in the period. Continued good
performance from the Agri AD assets, and solar assets also above budget
Other highlights
· Strong pipeline of diversified assets for further growth
· The Company raised £118 million in two oversubscribed
fundraisings
· JLEN entered into a new ESG-linked £170 million revolving credit
facility expiring in May 2024
· Appointment of Alan Bates and Jo Harrison to the Board of
Directors, effective 10 June 2021
· Set up of a dedicated ESG Committee at the Board level to sit
alongside and complement the work already done in this area by the Risk and
Audit Committees
Richard Morse, Chairman of JLEN, said:
"JLEN has had an outstanding year, with NAV appreciation per share of 25%,
£118 million raised through two oversubscribed equity issues, investments
into new sectors including biomass CHP and energy-from‑waste, as well as a
value-accretive divestment of our French wind assets. The Company has also
announced an increase in the target dividend for the upcoming financial year
of 5% to 7.14 pence per share(1) for the financial year to 31 March 2023.
"This year, JLEN has continued to support the decarbonisation agenda through
its investments in a diversified portfolio of 37 operational solar, onshore
wind, waste and wastewater, hydro, battery, anaerobic digestion, bioenergy and
low carbon transport projects based in the UK and Europe, representing a total
of 359.5MW. The green energy producing part of the portfolio generated over
one million MWh of energy, enough to power more than 255,000 UK homes with
electricity . The waste assets have avoided more than 695,000 tonnes of waste
going to landfill and the JLEN portfolio, particularly through its investment
in CNG, has also contributed to the decarbonisation of the UK road network."
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 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
a.m. (UK time) on 16 June, hosted by Chris Holmes and Chris Tanner, Co-lead
Investment Managers to JLEN. To register for the webinar, please contact SEC
Newgate by email at JLEN@secnewgate.co.uk.
Presentation materials will be posted on the Company's website, www.jlen.com,
from 9.00am.
For further information, please contact:
Foresight Group +44(0)20 3667 8100
Chris Tanner
Chris Holmes
Winterflood Investment Trusts +44(0)20 3100 0000
Neil Langford
Chris Mills
SEC Newgate +44(0) 20 3757 6880
Elisabeth Cowell
Axaule Shukanayeva
Max Richardson
(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.
OUR PURPOSE
JLEN aims to invest in a diversified portfolio of environmental infrastructure
that support more environmentally friendly approaches to economic activity
whilst generating a sustainable financial return. It seeks to integrate
consideration of sustainability and environmental, social and
governance ("ESG") management into its activities, which help to manage
risks and identify opportunities.
· diversified portfolio
· sustainable financial return
· environmental, social and governance
ABOUT JLEN
JLEN launched in March 2014 with a portfolio of eight seed assets, raising
£160 million at IPO. The Company now has a portfolio value of £795.4
million.
2014
IPO
3 technology sectors - wind, solar and waste & bioenergy
8 assets
2017
1st investment into AD
4 technology sectors
24 assets (as at 31.03.2018)
2019
1st investment into hydro & co-located battery storage
5 technology sectors
30 assets (as at 31.03.2020)
2020
1st investment into low carbon transport
6 technology sectors
35 assets (as at 03.03.2021)
2021
JLEN shareholders approve updated investment policy
1st investment into standalone battery storage and bioenergy
Investment Manager
Foresight Group is a leading infrastructure and private equity investment
manager with a highly experienced global infrastructure team supported by an
in-house asset management team.
Investment attractions
· Investment in renewable energy projects is supported by a global
commitment to the transition to a low carbon economy
· The markets in which JLEN operates continue to evolve as the
buildout of sustainable infrastructure takes on new forms. JLEN's broad
investment policy allows it to continue building a resilient and diversified
portfolio of assets that have a range of operating models that are not
dependent on a single market or set of climatic conditions
· Potential upside to asset value comes from active management of the
existing projects
Diversified portfolio
Environmental infrastructure is 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.
The current portfolio includes 37 onshore wind, PV solar, waste, wastewater
processing, hydro, anaerobic digestion, bioenergy, battery storage and low
carbon refuelling projects in the UK and Europe.
Environmental, social and governance
JLEN has a strong commitment to ESG and sustainable investing with
transparent monitoring and reporting processes.
AT A GLANCE
Our results for the full year ended 31 March 2022.
2022 2021 Change
Market capitalisation((1)) £746.2m £612.3m +22%
Share price 112.8p 112.0p +1%
Annual dividend declared per share 6.80p 6.76p +1%
Net Asset Value £762.9m £504.2m +51%
Net Asset Value per share ((1)) 115.3p 92.2p +25%
Portfolio value £795.4m £571.4m +39%
Dividend cover((2)) 1.10x 1.07x
Total shareholder return since IPO((1)) 77.4% 65.3%
(7.42% annualised)
Renewable energy generated 1,314GWh 977GWh
(6% below target)
GHG emissions avoided >905,500 tCO(2)e((3)) >445,000 tCO(2)e((3))
Tonnes of waste diverted from landfill >695,000 >500,000
Acquisitions in the period 3 6
Contributed to community funds £418,000 >£380,000
FTE jobs supported >370 jobs
Portfolio generating capacity 359.5MW 310.7MW
Diversified portfolio 37 assets 36 assets
(1) The market capitalisation, total shareholder return, Net Asset Value
per share and dividend cover are alternative performance measures ("APMs").
The APMs within the accounts are defined on page 193 of the Annual Report
2022.
(2) On a paid basis.
(3) Methodology for calculating GHG emissions avoided has been refreshed
for 2022, please see page 106 of the Annual Report 2022 for further details.
Highlights
Investments in the period
Over 2021/22 JLEN invested in three new assets, two of which were in new
sub-sectors - biomass CHP and energy-from-waste. The Company also allocated
£13.3 million in follow on investments.
French wind divestment
In January 2022, JLEN announced the value-accretive divestment of its two
operational French wind farms - Parc Éolien Le Placis Vert and Energie
Eolienne de Plouguernével.
Oversubscribed fundraises
Over the year under review, JLEN raised £118 million across two
oversubscribed fundraisings. In JLEN's most recent fundraise in January
2022, the retail Offer for Subscription portion of the fundraise was also
significantly oversubscribed.
Sustainable financial return
JLEN aims to provide investors with a sustainable, progressive dividend, paid
quarterly, and to preserve the capital value of its portfolio over the long
term on a real basis.
PORTFOLIO AT A GLANCE
At 31 March 2022, the portfolio included onshore wind, PV solar, anaerobic
digestion, hydro, battery storage and waste and bioenergy processing projects,
and low carbon transport.
Acquisitions in the period
1 Cramlington Renewable Energy Developments ("CRED")
CRED owns a biomass combined heat and power plant ("CHP Plant") and its
underlying contracts and is located in Cramlington, UK. The plant has a 26MW
electrical capacity and 6MW of heat capacity.
Ownership interest: 100%
2 Energie Tecnologie Ambiente ("ETA")
ETA is a 16.8MW energy-from-waste ("EfW") power plant which processes refuse
derived fuel, located in the municipality of Manfredonia in the Apulia region
of southern Italy.
Ownership interest: 45%((1))
3 Sandridge Battery Storage Limited ("SBSL")
SBSL holds the development rights to construct the Sandridge Battery Storage
project, a 50MW lithium-ion battery energy storage plant based in
Melksham in Wiltshire, UK.
Ownership interest: 50%
Total assets
37((2))
MW capacity
359.5((2))
11 Wind 161
9 Anaerobic digestion 50.2
6 Solar 80.2
6 Waste & bioenergy 64.3
2 Hydro 3.8
3 Low carbon & energy efficiency n/a
(1) Does not include indirect minority ownership via investment into
Foresight Energy Infrastructure Partners SCSp ("FEIP").
(2) Does not include investment into FEIP.
Wind
Bilsthorpe 10.2MW 1.0 ROC wind farm. Five MM82 Senvion turbines.
Ownership interest 100%
Burton Wold Extension 14.4MW 0.9 ROC wind farm. Nine General Electric
1.6MW-100 turbines.
Ownership interest 100%
Carscreugh 15.3MW 0.9 ROC wind farm. 18 Gamesa G52 turbines.
Ownership interest 100%
Castle Pill 3.2MW 1.0 ROC wind farm. Three 900kW EWT and one 0.5MW Nordtank
turbines.
Ownership interest 100%
Dungavel 26MW 0.9 ROC wind farm. 13 Vestas 2MW V80 turbines.
Ownership interest 100%
Ferndale 6.4MW 1.0 ROC wind farm. Eight 800kW Enercon turbines.
Ownership interest 100%
Hall Farm 24.6MW 1.0 ROC wind farm. 18 MM82 Senvion turbines.
Ownership interest 100%
Llynfi Afan 24MW 0.9 ROC wind farm. 12 Gamesa 2MW G80 turbines.
Ownership interest 100%
Moel Moelogan 14.3MW wind farm. Nine Siemens SWT-62-1.3MW and two Bonus-1.3MW
turbines. 1.0 ROC on both turbine types.
Ownership interest 100%
New Albion 14.4MW 0.9 ROC wind farm. Seven MM92 Senvion turbines.
Ownership interest 100%
Wear Point 8.2MW 0.9 ROC wind farm. Four Senvion MM82 turbines.
Ownership interest 100%
Waste & bioenergy
Bio Collectors The Bio Collectors food waste anaerobic digestion plant
processes around 100,000 tonnes of food waste each year. The Bio Collectors
waste collection business collects food waste from in and around Greater
London.
Ownership interest 70%
Codford Biogas Codford Biogas is a 100,000 tonnes per annum food waste
permitted anaerobic digestion plant based in Wiltshire, UK.
Ownership interest 100%
Cramlington Renewable Developments The asset comprises of a biomass combined
heat and power plant and its underlying contracts. The plant has a 26MW
electrical capacity and 6MW heat capacity.
Ownership interest 100%
Energie Tecnologie Ambiente 16.8MW energy-from-waste power plant which
processes refuse derived fuel.
Ownership interest 45%((1))
ELWA The ELWA project processes around 440,000 tonnes of household waste each
year from four London boroughs.
Ownership interest 80%
Tay The Tay wastewater treatment project services the equivalent of around
250,000 people from the Dundee and Arbroath areas.
Ownership interest 33%
Anaerobic digestion
Biogas Meden Biogas-to-grid anaerobic digestion plant. Accredited under both
the Renewable Heat Incentive ("RHI") and Feed-in Tariff ("FiT"), c.5MWth and
0.4MWe.
Ownership interest 100%
Egmere Energy Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.5MWth and 0.5MWe.
Ownership interest 100%
Grange Farm Agricultural biogas-to-grid anaerobic digestion plant. Accredited
under both the RHI and FiT, c.5MWth and 0.5MWe.
Ownership interest 100%
Icknield Farm((2)) Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.5MWth and 0.4MWe.
Ownership interest 53%
Merlin Renewables Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.5MWth and 0.5MWe.
Ownership interest 100%
Peacehill Farm Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.5MWth and 0.25MWe.
Ownership interest 49%
Rainworth Energy Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.2.2MWe.
Ownership interest 100%
Vulcan Renewables Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.5MWth and 0.5MWe.
Ownership interest 100%
Warren Energy Agricultural biogas-to-grid anaerobic digestion plant.
Accredited under both the RHI and FiT, c.5MWth and 0.5MWe.
Ownership interest 100%
Solar
Amber 9.8MW comprising two separate sites: Five Oaks (4.8MW) and Fryingdown
(5MW). Both accredited under the pre-August 2011 UK FiT regime.
Ownership interest 100%
Branden 14.7MW comprising two separate sites: Luxulyan & Tredinnick
(8.9MW) and Victoria (5.8MW), both accredited for two ROCs.
Ownership interest 100%
CSGH 33.5MW combined capacity comprising four sites: Higher Tregarne (4.9MW)
accredited for 1.6 ROCs, Crug Mawr (7.5MW), Golden Hill (6.3MW) and Shoals
Hook (14.8MW) accredited for 1.4 ROCs.
Ownership interest 100%
Monksham Total generating capacity of 10.7MW. Accredited for 1.6 ROCs.
Ownership interest 100%
Panther - small-scale solar portfolio 6.5MW portfolio of 1,099 systems of
domestic rooftop, commercial rooftop and ground mount solar installations,
distributed across England, Scotland and Wales. Accredited under the UK
FiT regime.
Ownership interest 100%
Pylle Southern Total generating capacity of 5MW. Accredited under the UK FiT
regime.
Ownership interest 100%
Low carbon & energy efficiency
CNG Foresight Portfolio of CNG refuelling stations located in the UK.
Ownership interest 25%((3))
Sandridge Battery Storage Construction stage battery storage asset with a 50MW
storage capacity.
Ownership interest 50%
West Gourdie Construction stage battery storage asset with a 50MW storage
capacity.
Ownership interest 100%
Hydro
Northern Hydropower Two run-of-river hydro plants and an operational battery
storage system. Both hydro plants accredited under FiT; combined capacity
between both hydro plants and the battery storage system is 1.8MW.
Ownership interest 100%
Yorkshire Hydropower Two run-of-river hydro plants and an operational
battery storage system. Both hydro plants accredited under FiT; combined
capacity between both hydro plants and the battery storage system is 2MW.
Ownership interest 100%
FEIP((4))
FEIP Skaftåsen Vindkraft AB 35-turbine wind farm under construction.
FEIP Torozos 94MW wind farm, which comprises 27 SGRE 132m, 3.5MW wind turbines
spread across two sites.
FEIP Puskakorpi Construction stage 88MW wind farm.
FEIP 85 Degrees Portfolio of operational and construction stage geothermal
heating and district heating plants with a 45MW capacity.
FEIP MaresConnect Development and construction stage project that will
comprise two high voltage direct current interconnector cables under the Irish
Sea.
FEIP Carna Construction stage co-located pumped storage hydro and two
co-located wind turbines with a combined capacity of 243.6MW.
In January 2020, JLEN made a commitment to Foresight Energy Infrastructure
Partners SCSp ("FEIP"), a Luxembourg limited partnership investment vehicle.
Through this investment JLEN has exposure to a portfolio of European assets.
(1) Not including FEIP's ownership.
(2) JLEN also provides a senior secured loan facility to the project.
(3) JLEN holds 25% of the "A" shares. "A" shares have a different economic
entitlement than "B" shares, including a priority return.
(4) Not including FEIP's 45% ownership of ETA.
MARKET AND OPPORTUNITIES
Recent global events have placed energy supply security and the desire to
decarbonise these sources at the forefront of European energy policy.
The European Commission's REPowerEU plan calls for joint European action to
provide more affordable, secure and sustainable energy.
Reducing dependence on natural gas requires growth and development in several
environmental infrastructure sectors from solar and wind through to biogas and
hydrogen, including the networks that seek to harness these new or enlarged
energy sources.
Furthermore, as populations grow and demand for affordable food and clean
water increases, an emphasis on how countries can meet these requirements in
a sustainable and cost-efficient way has become an important consideration.
The use of controlled environments, such as glasshouses, vertical farms
and aquaculture, present sustainable, energy efficient and low carbon
solutions.
As environmental infrastructure assets that draw on knowledge of renewable
electricity, renewable heat and water treatment, we feel it is a market
sector that is well suited to JLEN's portfolio.
As a diversified environmental infrastructure fund, JLEN expects
these trends to create an attractive backdrop for further investment into
these markets, in the UK and Europe.
Investment policy Market developments Investment outlook
The Company invests in environmental infrastructure such as infrastructure Factors including increasing global population, rising living standards, The Institutional Investors Group on Climate Change ("IIGCC") estimate the
assets, projects and asset-backed businesses that utilise natural or waste increasing urbanisation and greater scientific, public and political focus on scale up in capital required in Europe to meet the goals of the Paris
resources or support more environmentally friendly approaches to economic the effects of climate change have all served to increase the importance and Agreement within electricity generation alone would be $2.0 trillion during
activity, support the transition to a low carbon economy or which scale of the environmental infrastructure market globally. the 2020s.
mitigate the effects of climate change.
Generation of renewable energy Global investment in the energy infrastructure market has been significant, The UK Energy Strategy published in April 2022 sets out an acceleration of
with Bloomberg calculating investment into energy transition in 2021 totalling plans to secure clean energy, including producing more electricity from
$755 billion (up 27% on the prior year). Zero or low carbon emission energy offshore wind in 2030 (40GW) than it produced from gas in any year in
generation capacity has been and continues to be central to European carbon history. The UK government is supporting onshore wind development through its
targets and is a key requirement of the global decarbonisation agenda. inclusion in Contracts for Difference ("CfD") auctions and undertaking
Renewable energy is clean by nature and due to a combination of reductions in a review of planning systems. Other forms of renewable energy generation
capital costs and close-to-zero marginal operating costs, is now increasingly present investment opportunities including the rapidly maturing sector of
able to outcompete other sources of new build generation. hydrogen production.
Low carbon & energy efficiency Building an efficient energy system that can harness the benefits brought by Greater levels of flexibility in the form of battery storage, electric
high penetration of renewable generation will be key to delivering a low vehicles, pumped hydropower and hydrogen all play an important role alongside
carbon environment. improved system coordination and low carbon transport infrastructure such as
biofuels.
Supply and treatment of water and processing of waste COP26 called for a reduction in methane emissions, one contributor to this Across Europe, new and established energy-from-waste facilities can provide
being landfilling of biodegradable waste. Infrastructure that promotes investment opportunities. These assets can be in the form of combustion plants
recycling and where there are no alternatives to landfilling using creating power and heat, or anaerobic digestion plants creating a valuable
energy-from-waste facilities will aid this transition. Value-enhancing carbon biogas. In the UK, expected legislation on food waste collections will create
capture and storage ("CCS") installations on these waste facilities can aid in investment activity for new plants and owners of existing ones with expansion
reducing emissions. potential.
Geographic spread of investments The challenge of addressing climate change is a truly global one, evidenced by JLEN's mandate supports geographic diversification, reducing its exposure to
COP26 last year. The commitment to invest into environmental infrastructure as the UK power market, regulatory framework and weather systems. The
a means to decarbonising economies is demonstrable by those countries Investment Manager can take advantage of in-country presence across Europe
providing sustained and additional regulatory and financial support to this and Australia to generate investment opportunities outside of the UK.
sector.
YEAR AT A GLANCE
The Company has had another good year, with two oversubscribed
placings in the period and the announcement of its first asset
divestments.
March 2021
· Paid a dividend of 1.69 pence per share (relating to the
three-month period ended 31 December 2020)
May 2021
· Acquisition of a 50% stake in Sandridge Battery Storage Limited,
a construction stage 50MW battery storage project located in Wiltshire, UK
· Acquisition of a 45% stake in Energie Tecnologie Ambiente, a 16.8MW
energy-from-waste power plant located in Manfredonia, Italy
· Announced a new ESG-linked £170 million revolving credit facility
expiring in May 2024
· Raised £56.9 million in an oversubscribed placing
June 2021
· Paid a dividend of 1.69 pence per share (relating to the
three-month period ended 31 March 2021)
· Announced the appointment of Alan Bates and Jo Harrison as
non-executive Directors
· Acquisition of a 100% stake in Cramlington Renewable Energy
Developments Ltd, a biomass combined heat and power plant located in
Cramlington, UK
September 2021
· JLEN annual general meeting
· Announced the resignation of Peter Neville as non-executive
Director
· Paid a dividend of 1.70 pence per share (relating to the
three-month period ended 30 June 2021)
December 2021
· Paid a dividend of 1.70 pence per share (relating to the
three-month period ended 30 September 2021)
January 2022
· The Fund raised £60.7 million in an oversubscribed placing and
offer for subscription
· Announced the divestment of two French wind assets - Le Placis
Vert and Plouguernével
March 2022
· Paid a dividend of 1.70 pence per share (relating to the
three-month period ended 31 December 2021)
May 2022
· The Company rejoined the FTSE 250
CHAIRMAN'S STATEMENT
The Company has had an outstanding year, with NAV per share appreciation of
25%, £118 million raised through two oversubscribed equity issues,
investments into new sectors including biomass CHP and energy-from-waste, as
well as a value-accretive divestment of our French wind assets. The Company
has also announced an increase in the target dividend for the upcoming
financial year of 5% to 7.14 pence per share((1)) for the financial year
to 31 March 2023.
(1) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met.
On behalf of the Board, I am pleased to present the Annual Report of the
Company for the year ended 31 March 2022.
Results
Last year I started my Chairman's statement with an acknowledgement of the
difficult and, for some, tragic challenges of the Covid-19 pandemic. This
year, I have to start with the sombre backdrop of Russia's war in Ukraine and
the sharp increase in the cost of living that is severely affecting many
families and households. In such uncertain times, our thoughts are with those
less fortunate than ourselves, even as we remain focused on navigating this
uncertainty for the benefit of the Company, its investors and all its
stakeholders.
The Net Asset Value ("NAV") per share at 31 March 2022 was 115.3 pence, up
from 92.2 pence at 31 March 2021. This uplift is primarily due to a very
substantial increase in current and short-term power prices and inflation
expectations in addition to gains from moving the Cramlington biomass and ETA
energy-from-waste assets from the acquisition cost paid during the year to
a discounted cash flow ("DCF") valuation basis at the end of the year, in
accordance with JLEN's established valuation policy.
Current geopolitical events, most notably the war in Ukraine and its resulting
impact on energy markets have placed energy security of supply and the desire
to decarbonise energy sources at the forefront of the political agenda.
Climate change prevention and mitigation strategies remain some of the most
pressing issues of our time. In November 2021, COP26 focused on how pledges
and targets to reach net zero can be met.
This year, JLEN has continued to support the decarbonisation agenda through
its investments in a diversified portfolio of 37 operational solar, onshore
wind, waste and wastewater, hydro, battery, anaerobic digestion, bioenergy and
low carbon transport projects based in the UK and Europe, representing a total
capacity of 359.5MW. The green energy producing part of the portfolio
generated over one million MWh of energy, enough to power more than 255,000
homes with electricity. The waste assets have avoided more than 695,000 tonnes
of waste going to landfill and the JLEN portfolio, particularly through its
investment in CNG, has also contributed to the decarbonisation of the UK road
network.
JLEN's profit after tax for the year was £185.0 million (2021: £8.1
million) resulting in earnings per share of 30.6 pence (2021: earnings per
share of 1.5 pence). Removing unrealised movements on investments at fair
value, the adjusted profit before tax is £42.2 million (2021: £37.0
million), equivalent to 7.0 pence per share (2021: 6.8 pence).
Cash received from the portfolio assets by way of distributions, which
includes interest, loan repayments and dividends, was £56.5 million during
the year (2021: £48.2 million). After operating and finance costs, cash flow
from operations of the Group was £46.2 million, covering the cash dividends
paid during the year of 6.79 pence per share by 1.10x on a paid basis.
In January 2022, the Board appointed Foresight Group LLP ("Foresight") as its
alternative investment fund manager ("AIFM"). This had been prompted by the
increasing size and complexity of the portfolio and the need for more
effective and efficient ways of working. Given the Company's scale, it was no
longer appropriate for the Company to remain as a self-managed alternative
investment fund (with Foresight as the Investment Adviser) and the revised
management structure is widely adopted across the market. The fees payable by
the Company to Foresight under the new Investment Management Agreement ("IMA")
remain unchanged.
As AIFM, Foresight will have discretionary management authority, however, it
will remain subject to the Company's published investment policy and the
supervision of the Board. The Board also retains overall responsibility for
the Company's activities, including reviewing its investment activity,
performance, business conduct and policy. In addition, in accordance with the
terms of the IMA, certain investment decisions are reserved to the Board,
including in respect of very large investments, those which would involve
taking the Company near to the limits of its available borrowing facilities,
those involving the Company investing in new geographies or technologies and
those which may cause reputational risk to the Company.
Dividends and returns
The Company has delivered a dividend for the year covered 1.10x (2021: 1.07x),
in line with our progressive dividend policy. Including profit from the sale
of the French wind assets, the dividend cover is 1.12x.
During the year, the Company paid a final dividend for the period ended 31
March 2021 of 1.69 pence per share (£10.2 million). Dividends of 1.70 pence
per share for the period ended 30 June 2021 were paid in September 2021
(£10.2 million). Interim dividends of 1.70 pence per share were paid in
December 2021 (£10.2 million) and 1.70 pence per share paid in March 2022
(£11.2 million).
The Board is pleased to confirm the dividend in respect of the quarter to 31
March 2022 of 1.70 pence per share which was approved on 16 May 2022 and will
be paid on 24 June 2022, bringing the total to the target of 6.80 pence per
share for the full year.
The Board has decided to increase the Company's dividend target to 7.14 pence
per share for the year to 31 March 2023, in line with the Company's
progressive dividend policy. The outlook for cash generation from the
portfolio is very positive in the short term due to higher power prices and
the levels of price fixes that we have been able to achieve in the market for
merchant revenue streams. As a result, we are confident of the Company's
ability to meet this target.
Over the 12-month period to 31 March 2022, shareholders saw a share price
total return of 7.4%.
Following on from the success this year, the raised dividend target for next
year is projected to be strongly covered in excess of 1.5x. The additional
headroom from the current year is largely driven by:
· first full year's contribution from assets acquired part way
through the year to 31 March 2022;
· continuation of high power price and inflationary market
environment;
· yield forecasts from construction assets reaching operational
status; and
· continued roll out of asset enhancement opportunities.
The portfolio currently has price fixes secured over 77% for Summer 2022 and
74% for Winter 2022 seasons, reducing exposure to price volatility.
Illustrating this, if merchant prices were to fall by 50%, dividend cover is
projected to move by less than 20 basis points - therefore still maintaining
significant headroom in the cover ratio.
Acquisitions and divestments
During the year under review, the Company announced investments in three new
projects:
· a 50% stake in Sandridge Battery Storage Limited, a 50MW
construction stage battery storage project located in the UK;
· a 45% stake in Energie Tecnologie Ambiente S.r.l., a 16.8MW
energy-from-waste plant located in Southern Italy; and
· a 100% stake in Cramlington Renewable Energy Developments, a
biomass combined heat and power plant located in Cramlington, UK. The plant
has a 26MW electrical capacity and 6MW heat capacity.
The new acquisitions bring the total MW capacity of the portfolio to 359.5MW
and bring further diversification to the portfolio both by technology type and
geography.
The Company also made its first divestments, selling its two French onshore
wind farms, Parc Éolien Le Placis Vert and Energie Eolienne de Plouguernével
for a total consideration of €5.9 million. These divestments were
at a significant uplift to the pre-sales process valuation. Competition for
the types of assets in the Company's portfolio remains strong, reinforcing the
valuations that underpin our Net Asset Value.
Portfolio performance and value enhancement activities
During the year, overall generation from the renewable energy portfolio was
1,314GWh, 6% below generation targets.
Low wind resource was the primary driver, as areas of the UK during the
summer saw their lowest wind speeds for 20 years. Wind resource improved
towards the end of the year but the wind portfolio ended the year 16% below
its generation target. Excluding the wind portfolio, generation from the rest
of the portfolio was 2% below budget, with Agri AD exceeding its generation
target for the fourth consecutive year and solar also meeting its generation
target.
The waste & bioenergy sub-sector, now the second largest contributor to
generation in the portfolio, was below target as the Investment Manager made
progress on legacy issues on the two newly acquired assets and worked on
installing upgrades and enhancements.
Both concession-based waste and wastewater projects have continued to perform
in line with expectations and both projects continue to perform well
financially.
The portfolio of CNG refuelling stations performed extremely well over the
financial year and 16% more CNG was dispensed than was targeted for the year.
Also during the period, two further refuelling stations were successfully
completed, giving a total of eight stations.
The construction stage battery assets have fallen behind their completion
schedule due to supply chain issues and completion of the two projects is now
expected to occur in 2023. The batteries are currently held at cost and the
financial consequences of delay are expected to be offset by changes in
market assumptions when the valuation method changes to DCF.
Index power prices increased to unprecedented levels in the last half of the
year due to a combination of low renewables contribution to the grid, a
natural gas shortage and rising carbon prices. The Investment Manager took
this opportunity to fix future seasons' outputs at prices above previous
assumptions across the portfolio.
Debt facilities
In May 2021, the Fund renewed its revolving credit facility ("RCF") that had
been due to reach maturity in June 2022. The new facility remains at a
committed level of £170 million for three years, expiring in May 2024.
National Australia Bank and Royal Bank of Scotland International have joined
incumbent lenders ING, HSBC and NIBC, broadening JLEN's banking
relationships. The headline margin is 200 bps over SONIA, with an adjustment
of +/- 5 bps depending on performance against ESG metrics including quantity
of renewable energy produced and contributions to community funds.
The RCF gives JLEN a committed source of flexible funding outside of equity
raisings at a low cost. The facility is periodically paid down from the
proceeds of equity issuance which then enables JLEN to make new investments
with the certainty of funding and on a timely basis, reducing the performance
drag associated with holding excess cash.
Share capital
In May 2021, the Company raised £56.9 million via an institutional placing,
making full use of its tap issuance facility of 10% of issued share capital.
This was at a price of 104 pence per share, a 12.8% premium to NAV, achieved
via a book-building process.
A further placing and offer for subscription in January 2022 raised £60.7
million at a price of 101 pence per share at a 2.6% premium to NAV. Both
placings and the offer for subscription were significantly oversubscribed.
The proceeds have been used to pay down amounts outstanding under the
revolving credit facility and fund new environmental infrastructure
opportunities.
Sustainability and ESG
The investment world has now widely embraced ESG, a concept which JLEN has
adopted and actively promoted for many years. JLEN has produced an ESG report
since 2019 and has continued to progress in this area, recently setting up a
dedicated ESG committee of the Board to oversee the work done in this area.
The investment community is still developing its preferred approach to ESG
impact metrics and measurement. The Board believes that helping stakeholders
to be informed on JLEN's ESG performance in a manner which is consistent and
that tracks performance over time is an important part of its stakeholder
communication.
JLEN has been proactively tracking metrics such as carbon emissions avoided,
renewable energy generated and waste recycled for several years, and
continually seeks ways to improve its reporting and transparency
for investors. Last year, this was expanded by developing a suite of more
than 15 ESG metrics that were felt relevant to the Fund and that we have
reported against for the first time this year. Details of these KPIs can be
can be found on pages 99 to 112 of the Annual Report 2022.
Furthermore, last year our ESG performance was voluntarily linked to a
revolving credit facility, which incurs a higher or lower interest rate
depending on the Fund's ESG performance against select ESG metrics. Further
information can be found on page 90 of the Annual Report 2022.
This year we have also included our first Task Force on Climate-related
Financial Disclosures ("TCFD") recommended disclosure and this can be found on
pages 49 to 67 of the Annual Report 2022.
Post the period end in May 2021, the Company's efforts to communicate its
approach to ESG matters have been recognised by the Association of Investment
Companies ("AIC"), winning the Best Communication of ESG award in their annual
Communication Awards.
Valuation
The Net Asset Value at 31 March 2022 was £762.9 million, comprising £795.4
million portfolio valuation, £18.0 million of cash held by the Group, less
£53.6 million drawn on the Company's (immediate subsidiary's) revolving
credit facility, together with positive working capital balances of £3.1
million.
The Investment Manager has prepared a fair market valuation of the portfolio
as at 31 March 2022. This valuation is based on a discounted cash flow
analysis of the future expected equity and loan note cash flows accruing to
the Group from each portfolio investment. This valuation uses key assumptions
which are recommended by the Investment Manager using its experience and
judgement, having taken into account available comparable market transactions
and financial market data in order to arrive at a fair market value.
To provide assurance to the Board with respect to the valuation, an
independent verification exercise of the methodology and assumptions applied
by Foresight is performed by a leading accountancy firm and an opinion is
provided to the Directors. The Directors have satisfied themselves as to the
methodology used and the assumptions adopted and have approved the valuation
of £795.4 million for the portfolio as at 31 March 2022 and a Net Asset
Value per share of 115.3 pence.
Risks and uncertainties
The Board notes investors' recent appetite for the Company's shares and the
relative resilience of the renewables sector in terms of valuations and the
ability to maintain dividends compared to other investment sectors in the face
of extreme shocks such as the Covid-19 pandemic and geopolitical upheaval.
The greatest risk the Company faces is to changes in short and medium-term gas
and electricity prices where the risk is that the actual prices received vary
significantly from the model assumptions, leading (in adverse circumstances)
to a shortfall in anticipated revenues to JLEN. The opposite is also true and
is the case in the year under review. To minimise any short-term uncertainty,
the Company's policy is to fix prices on a high proportion of generation for
future seasons to insulate the Fund from short-term power price changes.
A summary of the principal risks and uncertainties facing the Company is
included on pages 42 to 48 of the Annual Report 2022.
Outlook
As countries seek to move on from the damaging impact that coronavirus has had
on economies and livelihoods, governments are reinforcing foundations for
growth across green technologies. By focusing on support to industry, job
creation and innovation it is anticipated that countries can address the lack
of economic growth over recent years in conjunction with addressing
climate change and commitments to achieving net zero. This mantra has been
clearly set out in the UK where the government's "Ten Point Plan for a Green
Industrial Revolution" demonstrates their commitment to tackling climate
change whilst delivering jobs and growth across the country.
This is an exciting time for an environmental infrastructure fund as it looks
to the future with a rapid increase in renewable energy generation, low carbon
transport and the charging/fuelling network needed to support this, carbon
capture, hydrogen and sustainable alternatives such as controlled environments
and opportunities in hard-to-abate sectors like agriculture and construction.
JLEN is well placed to capture investment opportunities in these evolving
asset classes with its broad investment mandate and the expertise of its
Investment Manager, Foresight.
Indeed, over the last year JLEN has further diversified its portfolio through
investments into a biomass to heat and power plant and an energy recovery from
municipal waste facility. Both these projects contribute positively to the
environment through the creation of renewable energy and the reduction of
waste to landfill, respectively. From a financial viewpoint, they both benefit
from government-backed revenues providing a source of stable, inflation-linked
dividends to JLEN, underpinning our own progressive dividend policy for our
shareholders.
Annual general meeting
The annual general meeting will be held on 1 September 2022 at 10.00am at
the Company's registered office in Guernsey. Shareholders are encouraged to
submit their votes by proxy in advance of the meeting and may provide details
of any questions they may have to the Company Secretary in advance of the
meeting. Responses to any queries will be made available on the Company's
website following the meeting.
Board matters
Peter Neville, who successively chaired our Risk Committee and Audit
Committee, stood down in September 2021 - he was a hugely valued member
of the Board and we wish him well in his retirement. Jo Harrison, who
chairs the ESG sub-committee, and Alan Bates have joined during the year,
further strengthening the breadth of experience of the Board. I am immensely
grateful to all our Directors for their dedication, hard work
and collegiality.
Finally, this is my last Chairman's statement before stepping down, having
been with JLEN since its IPO in 2014. I have had the privilege of helping to
oversee the Company's modest beginnings as a late entrant to the newly
emerging sector of "renewable infrastructure", to its present status as a
veteran of the sector with a market capitalisation of £746.2 million and a
diversified mandate for environmental infrastructure that differentiates it
from its peers. Our recruitment process is well advanced and I am confident
that JLEN is in good hands and I wish the Company every success for the
future.
Richard Morse
Chairman
15 June 2022
STRATEGIC REPORT
INVESTMENT OBJECTIVES
Our key objectives are set out further below this report.
The Company aims to provide its investors with a sustainable, progressive
dividend per share, paid quarterly. It aims to preserve, and where possible
enhance, the capital value of its portfolio on a real basis through the
reinvestment of cash flows not required for the payment of dividends.
The dividend for the year ended 31 March 2022 is 6.80 pence per share on a
declared basis. Over the longer term, the Company targets an IRR of 7.5% to
8.5% (net of fees and expenses) on the IPO issue price of 100 pence per share,
through investment in a diversified portfolio of environmental
infrastructure.((1))
The Company seeks to maintain strong relationships with all its stakeholders
and those of its investments, including investors, funders, key contractors,
strategic partners, national and local government and local communities.
Investment policy
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; and/or
· long-term contracts or stable and well-proven regulatory and legal
frameworks; and/or
· well-established technologies, and demonstrable operational
performance.
(1) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met.
FUND OBJECTIVES
The Fund's key objectives and the measures against which they are assessed are
summarised below:
Financial objectives Principal risks KPIs as at 31 March 2022 Outlook for 2023
Predictable income growth for shareholders · Volume of resource available 6.80p · High near-term power prices provides support for dividend target,
as do inflationary increases in contracted revenues
Provide investors with a dividend of 7.14 pence per share for the year to · Power prices dividend declared for the year, in line with target
31 March 2023.
· Latest fixed price arrangements in place covering 77% of the
· Inflation portfolio by generation for Summer 2022 and 74% of the portfolio for Winter
2022 also restricts volatility
· Changes in the legislative and regulatory framework that affect · Target dividend for the next financial year 7.14 pence((1)), up 5%
environmental infrastructure from 2022
· Operational risks in the portfolio
Preservation of capital over the longer term · Valuation risks (volume/energy prices/inflation/feedstock £762.9m · Construction stage assets have potential for capital growth as they
costs/operational performance)
become operational
To preserve the capital value of the portfolio over the long term on a real
Net Asset Value
basis through active management of the portfolio and the reinvestment of cash · Lack of future pipeline and/or funding
· Higher out-turn inflation beneficial to portfolio valuation
flows not required for the payment of dividends.
· Increased competition
115.3p
· Changes in the legislative and regulatory framework that the
environmental infrastructure market Net Asset Value per share
· NAV £762.9 million, up from £504.2 million at 31 March 2021
· Net Asset Value per share 115.3 pence, up 23.1 pence against
92.2 pence at 31 March 2021
Investment, growth and diversification · Lack of future pipeline and/or funding 37 · Potential for further opportunities to co-invest with other
investors in larger deals
To invest in infrastructure assets, projects and asset-backed businesses that · Increased competition asset investments
utilise natural or waste resources or support more environmentally friendly
· Likely continued emphasis on less competitive and evolving areas of
approaches to economic activity, support the transition to a low carbon · Changes in the legislative and regulatory framework that affect the environmental infrastructure
economy or which mitigate the effects of climate change. environmental infrastructure market
£795.4m · Further scope to invest in European jurisdictions
portfolio value
359.5MW
total diversified capacity
· Portfolio value £795.4 million, up 39% from £571.4 million
at 31 March 2021
· Predominantly UK portfolio balanced by sector: 29% wind, 22% AD,
17% solar, 28% waste & bioenergy, 3% low carbon & energy efficiency
and 1% hydro
(1) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met.
JLEN has developed ESG KPIs to measure its performance over time against its
stated ESG objectives.
Environmental, social and governance objectives ESG KPIs
Promote the efficient use of resources · Renewable energy generated
To invest into projects that manage the availability of natural resources, · GHG emissions avoided
whether through utilisation of renewable resources, increasing resource or
energy efficiency, or reusing or recovering waste. · Volume of waste treatment
· Volume of water treatment
· Environmental incidents
· Purchased energy originating from renewable sources
· Management of biodiversity
· Assessment of major contractors against ESG criteria
Develop positive relationships with the communities in which JLEN works · Community funding
To encourage positive relationship-building between portfolio assets and the · Health and safety incidents
communities in which they sit.
· Community engagement procedures
· FTE jobs supported
· Accessibility of community fund documents
· Assessment of major contractors against ESG criteria
Ensure effective, ethical governance across the portfolio · Portfolio audits of health and safety practices
To manage portfolio assets in a way that · Diversity of SPV directors
promotes ethical, effective governance. · Portfolio audits of tax and financial practices
· Inclusion of ESG in SPV board agendas
· Assessment of major contractors against ESG criteria
Over 2021/22 JLEN has focused on advancing its approach to ESG by collecting
baseline data against the ESG KPIs that were first agreed in 2020/21. JLEN's
KPIs are set out in the Sustainability and ESG section of the report.
BUSINESS MODEL
JLEN invests in a diversified portfolio of environmental infrastructure that
support more environmentally friendly approaches to economic activity whilst
generating a sustainable financial return.
Competitive advantage
Investment Manager - Foresight has a strong track record of managing assets
in the sector and has access to an extensive pipeline of new projects.
Broad investment mandate/policy - allows for investment across a diversified
range of technology sub-sectors and geographies, helping to reduce risks
within the portfolio and providing a broader base of assets to consider at the
acquisition stage.
Existing portfolio - well-established portfolio of assets which have the
benefit of strong operational track records and predictable, wholly or
partially inflation-linked cash flows supported by long-term contracts.
Sustainability - investment mandate is limited to investment in projects and
assets which support a more environmentally friendly approach to economic
activity and JLEN invests in assets with long project lives of up to 35 years.
Operating model
Acquire
The Investment Manager uses its network of relationships to originate
environmental infrastructure opportunities. These are screened for suitability
and attractive opportunities are subject to a full due diligence process to
assess risks, valuation assumptions and ESG considerations. Investment
approval is multi-level and culminates in a decision of the Company's
Investment Committee.
ESG considerations
Read more about ESG in the Sustainability and ESG section of the report
ESG criteria are an integral element of the investment assessment at the
acquisition stage. The Investment Manager undertakes a thorough rating
analysis against a pre-determined minimum threshold for that asset class.
Maintain
Active asset management is employed by the Investment Manager to maintain
consistent performance and asset condition across the portfolio, identifying
and, where possible, mitigating risks. Strong communications between the JLEN
Board, the Investment Manager and external asset managers and other
operational and corporate counterparties aid in the management of the assets.
ESG considerations
Read more about ESG in the Sustainability and ESG section of the report
Third-party service providers, sometimes with the assistance of technical
advisers, monitor and manage the ongoing performance of each asset in the JLEN
portfolio and these third parties are regularly assessed by Foresight.
Enhance
All assets are included in a programme of enhancement initiatives to increase
operational and financial performance and to better meet ESG objectives. Where
appropriate, the Investment Manager identifies where value can be realised to
enhance the valuation of the portfolio to the benefit of all stakeholders.
ESG considerations
Read more about ESG in the Sustainability and ESG section of the report
The Investment Manager continually seeks to improve all areas of ESG across
the portfolio and new assets are assessed to see where improvements to ESG
matters can be made over the tenure of ownership. ESG KPIs help to monitor
progress in this area.
Hold/exit
JLEN's strategy is to hold its assets over the long term in order to receive
ongoing cash yield to support JLEN's dividend targets. However, it will
consider opportunities to generate value for shareholders through the
divestment of certain assets as they arise. These opportunities will be
evaluated against the Company's strategy of diversification and the ability of
the asset to generate stable financial returns.
ESG considerations
Read more about ESG in the Sustainability and ESG section of the report
Typically, the proceeds from divestments will be used to repay amounts
outstanding under the Company's RCF and provide further headroom to invest in
new assets that provide an attractive risk-adjusted return for investors and
that are consistent with JLEN's ESG objectives.
Our business activities result in
Income for shareholders
6.80p
Dividends of 6.80p declared for the year to 31 March 2022
Environmental benefits
1,314GWh
of green energy produced during the period
Enough electricity to power more than 255,000 UK homes
Social benefits
Over £418,000
provided to local communities in the year under review
Supporting government net zero carbon emissions targets with a portfolio of 37
assets that support environmentally friendly approaches to economic activity
Read more in the Sustainability and ESG section of the Annual Report 2022
Underpinned by
Risk management
Strong governance
Financial management
Portfolio sectors
Wind
Anaerobic digestion
Solar
Waste & wastewater
Hydro
Low carbon & energy efficiency
FUND STRUCTURE
Guernsey-registered investment company with a premium listing on the London
Stock Exchange.
Introduction
The Company is a Guernsey-registered investment company with a premium listing
on the London Stock Exchange. The Company makes its investments via a Group
structure involving JLEN Environmental Assets Group (UK) Limited ("UK
HoldCo"), an English limited company and wholly owned subsidiary of the
Company, and additional intermediate holding companies for certain projects
(the Company and UK HoldCo, together with their wholly owned intermediate
holding companies, the "Group"). Through the Group structure, at 31 March 2022
the Company owns a portfolio of 37 environmental infrastructure investments
in the UK, Spain, Finland, Holland, Italy, Ireland and Sweden. The Company has
a 31 March financial year end, announces half-year results in November and
full-year results in June. The Company pays dividends quarterly, targeting
payments in June, September, December and March each year.
The Company is an externally managed Alternative Investment Fund under the
European Union's Alternative Investment Fund Managers Directive.
In January 2022, Foresight Group was appointed Alternative Investment Fund
Manager ("AIFM"), pursuant to an investment management and AIFM agreement
(the "Investment Management Agreement") in substitution for, and on
materially the same commercial terms as, the previous Investment Advisory
Agreement between the Company and Foresight Group, which has now
been terminated.
As Investment Manager, Foresight Group LLP takes investment management
decisions on behalf of the Company, subject to the terms of the Investment
Management Agreement. Foresight Group is subject to the Company's published
investment policy and the supervision of the Company's Board of Directors.
In connection with Foresight Group's appointment as AIFM, the Company
appointed NatWest Trustee and Depositary Services Limited ("NatWest") as its
depositary. NatWest performs the functions required of a depositary of an
alternative investment fund that is incorporated outside the European Economic
Area, such as the Company, which has an EEA entity, such as Foresight, as its
AIFM.
The Company has a Board of six independent non-executive Directors (details of
whom can be found later in the report) whose role is to manage
the governance of the Company in the interests of shareholders and other
stakeholders.
The Board retains overall responsibility for the Company's activities,
including reviewing its investment activity, performance, business conduct and
policy. In addition, in accordance with the terms of the Investment
Management Agreement, certain investment decisions are reserved to the Board,
including in respect of very large investments, those which would involve
taking the Company near to the limits of its available borrowing facilities,
those involving the Company investing in new geographies or technologies and
those which may cause reputational risk to the Company. The Board also
scrutinises the performance of the Investment Manager, approves and monitors
adherence to the investment policy, determines the risk appetite of the Group,
and sets Group policies.
The Board meets a minimum of four times per year for regular Board meetings
and there are several ad hoc meetings dependent upon business needs. In
addition, the Board has four committees covering Audit, Risk, ESG and
Nomination. Investment decisions are delegated to an Investment Committee
comprising all members of the Board. The Board fulfils the responsibilities
typically undertaken by a remuneration committee.
The Board as a whole also fulfils the functions of an investment management
engagement committee. The Board will review and make recommendations
on any proposed amendment to the Investment Management Agreement, keep under
review the performance of the Investment Manager and will manage the risks of
the delegation of certain activities to the Investment Manager. The Board also
performs a review of the performance of the other key service providers to
the Fund and meets to conduct these reviews at least once a year.
The key tasks of Foresight Group under the Investment Management Agreement are
as follows:
· monitoring financial performance against Group targets and
forecasts;
· advising the Board on investment strategy and portfolio composition
to achieve the desired target returns within the agreed risk appetite;
· sourcing, evaluating and implementing the pipeline of new
investments for the portfolio;
· monitoring the operational management of, and managing the
investment cash flows from, the Group's investments;
· minimising cash drag (having uninvested cash on the balance sheet)
and improving cash efficiency generally;
· managing the process and analysis for quarterly NAV updates and
semi-annual valuations of the Group's portfolio submitted to the Board for
approval;
· ensuring good financial management of the Group, having regard to
accounting, tax and debt covenants;
· if required, hedging non-sterling investments; and
· managing the Company's investor reporting and investor relations
activities.
Further details on the Investment Manager are set out later in the report and
in note 15 to the financial statements with respect to fees.
Sanne Fund Services Limited is Company Secretary and Administrator to the
Fund. Other key service providers to the JLEN Group include Winterflood
Securities as corporate broker, SEC Newgate as financial public relations
advisers, Mourant Ozannes as legal advisers as to Guernsey law, Hogan
Lovells as legal advisers as to English law, Link Registrars as registrars,
Deloitte LLP as auditor, and NIBC, NAB, ING, RBSI and HSBC as lenders to the
Group via the new £170 million revolving credit facility.
The Board formally reviews the performance of all key service providers on an
annual basis.
Acquisitions
The Fund will seek to acquire further investments going forward sourced via
the Investment Manager's extensive deal-sourcing capabilities across the
geographies in which the Fund is permitted to invest. In selecting the
projects to acquire, the Investment Manager and the Directors will be obliged
to ensure that these projects meet the Company's investment policy.
The Investment Manager will be subject to the overall supervision of the
Board, following appointment of Foresight Group as AIFM some investment
decisions have been delegated to Foresight Group. Approvals for large
investments or investments into sectors new to JLEN are reserved for the
Board, all of whom are independent of the Investment Manager.
Potential disposal of investments
Whilst the Directors may elect to retain investment interests in the portfolio
of investments that the Fund acquires and any other further investments made
by the Fund over the long term, the Investment Manager will regularly monitor
the valuations of such investments and any secondary market opportunities to
dispose of investment interests and report to the Directors accordingly. The
Directors only intend to dispose of investments where they consider that
appropriate value can be realised for the Fund or where they otherwise believe
that it is appropriate to do so. Proceeds from the disposal of investment
interests may be reinvested or distributed at the discretion of the
Directors.
STAKEHOLDER ENGAGEMENT
The Board is committed to promoting the long-term sustainable success of the
Company whilst conducting business in a fair, ethical and transparent
manner.
Whilst directly applicable to companies incorporated in the UK, the Board
recognises the intention of the AIC Code that matters set out in Section 172
of the Companies Act 2006 are reported upon. The Board strives to understand
the views of the Company's key stakeholders and to take these into
consideration as part of its discussions and decision-making process.
As an investment company, the Company does not have any direct employees and
conducts its core activities through third-party service providers. Each
provider has an established track record and through regulatory oversight is
required to have in place suitable policies and procedures to ensure they
maintain high standards of business conduct, and employ corporate governance
best practice.
The Board strongly believes that fostering healthy and constructive
relationships with its broad range of stakeholders and taking into
consideration their respective interests as part of its decision-making
process should result in increased shareholder value over the long term.
JLEN's principal stakeholders comprise of shareholders, the Investment
Manager, commercial service providers, asset-level counterparties, local
communities and debt providers. Pages 35 to 37 of the Annual Report 2022
explains why and how the Company engages with these stakeholders and the
actions taken by it to ensure their interests are understood and considered in
the Board's strategic decision making. These relationships are considered
fundamental to the Company's sustainability and are monitored carefully by the
Board.
JLEN recognises that community engagement at our sites is an ongoing process
and that at times problems can arise before we can address them; however, it
is our stated objective to develop positive relationships with
the communities in which we work.
Improving our communications, complaints handling processes and access to
relevant information for local residents is an ongoing process, and these
goals have formed part of our ESG KPIs. More information can be found on pages
108 to 110 of the Annual Report 2022.
Appointment of Foresight as Alternative Investment Fund Manager
In January 2022, the Company announced the appointment of Foresight as its
external alternative investment fund manager, or AIFM, with discretionary
investment management authority for the Company.
Since launch, the Company had been a self-managed alternative investment fund
which took its own investment management decisions on the basis of advice from
its Investment Adviser. The decision to amend Foresight's mandate was taken in
response to the enlarged scale of the Company's portfolio, the volume
of environmental infrastructure propositions under consideration by Foresight
and consequently the frequency of routine decisions which required
Board approval.
To streamline the decision-making process for routine and less significant
investment transactions and to provide a framework better suited for the
ongoing growth of the investment portfolio, the Board consulted extensively
with Foresight and with external advisers to define matters where Board
decision-making would be reserved from those where authority would be
delegated to Foresight, and agreeing other relevant circumstances where a
matter would require escalation to the Board.
Circumstances where an investment transaction would require Board approval
include those where:
· the price represents more than 5% of the Net Asset Value of the
Company immediately post-acquisition;
· would result in the Company's outstanding borrowings being equal to
more than 75% of the amount which the Company is able to borrow at the
relevant time;
· if completed, would reasonably be expected to be detrimental to the
Company's dividend coverage and
· would result in the Company being invested in environmental
infrastructure that is either reliant on nascent technologies, based in a
country or market where the Company was not yet invested, is any way risking
being inconsistent with the investment policy, or could be expected to result
in adverse publicity for, or otherwise prejudice the reputation of the
Company.
The Directors are pleased with Foresight's implementation of the AIFM
arrangements to date and believe the revised structure has achieved the
desired operational efficiencies, whilst retaining control and oversight
over the activities of the Investment Manager.
Implementation of ESG-linked revolving credit facility
In May 2021 the Company agreed terms for a new three-year facilities
agreement which provides for a committed multi-currency credit facility of
£170 million and an uncommitted accordion facility of up to £30 million.
The facility provides a clear linkage between JLEN's key sustainability
metrics and its ESG KPIs and provides for JLEN to incur a premium or benefit
from a discount to its margin and commitment fee based on performance against
defined ESG targets, including:
· Environmental: increase in the volume of clean energy produced
· Social: the value of contributions to community funds
· Governance: maintaining a low number of work-related accidents, as
defined under the Reporting of Injuries, Diseases and Dangerous Occurrences
("RIDDOR") by the Health and Safety Executive
Performance against the targets will be measured annually, beginning in the
year ended 31 March 2022, with the cost of the RCF being amended in
the following financial year. If successful in achieving these KPIs, the
benefits provided throughout the year to a wide audience of stakeholders will
in turn benefit the Company and its shareholders with a reduced cost
of funding. For more information on the KPI targets in 2021/22 please see
page 90 of the Annual Report 2022.
Retail share issue
The Board recognises the high level of demand for the Company's shares,
evidenced in past issues of new shares, and particularly the growing attention
from the retail segment in investment opportunities such as the Company.
In May 2021 the Board announced that the Company had raised £59.6 million
pursuant to an oversubscribed placing of new ordinary shares. The May 2021
placing was undertaken largely as an institutional offer and, acting in
consultation with the Company's advisers and in response to market feedback,
the Board decided as part of the subsequent issue in January 2022 to include
an offer for subscription option through which retail investors could
subscribe directly for new shares.
The January 2022 issue was significantly oversubscribed, including the offer
for subscription which received an exceptionally high level of demand from
retail investors. The Board was pleased with the results of the January 2022
issue, particularly through satisfying the apparent demand in the retail
investor market, and from such participation by retail investors diversifying
the investor base across a broader investor demographic and creating
additional liquidity for existing shareholders.
Section 172
The considerations and activities undertaken by the Directors in complying
with section 172(1), (1) to (6), below, the stakeholder groups concerned, and
how the Directors have formed their opinion are set out below.
The Board's annual cycle includes four scheduled meetings between the Board
and the Investment Manager where the agenda includes updates on matters
relevant to items (1)-(6). The reports provided support the decisions taken to
meet the objectives for each of the foregoing sections. Supplementing the
quarterly meeting schedule are bi-weekly operational meetings between the
Board, the Investment Manager and relevant portfolio managers.
The Risk Committee receives a quarterly report on the Company's key
counterparty exposures, and relationships with the Company's suppliers,
customers and others forms part of the quarterly operational review provided
to the Board. A separate agenda item is dedicated each quarter to matters
concerning shareholder engagement and sentiment, corporate broking activity,
investor profile and media engagement.
The investment vetting process adopted by the Investment Manager in
conjunction with the Risk Committee's oversight of the risk management
framework ensures consideration is given to items relevant to the Section 172
statement.
Certain key stakeholder groups interface with the Company primarily through
the Investment Manager who is responsible for communicating stakeholder
concerns and receiving Board input on the actions proposed to achieve a
positive outcome through effective engagement.
Annually, the Board meets with the Investment Manager and other key advisers
to review the strategic position of the Company, to consider the longer-term
factors relevant to the Board's decision making and how such factors may
affect the communities and the local environments in which the Company
operates.
Section 172 Commentary
Long-term decisions The Board considers the likely long-term consequences on all stakeholders as a
routine part of its decision-making process. In addition, learning gained over
the life of the Company provides evidence on which the effectiveness of past
decisions can be assessed and is considered as part of the annual strategy
day.
Please see pages 21 to 25 - investment objectives, and 26 and 27 -
business model in the Annual Report 2022.
Interests of employees As an investment company, at a corporate level, the Company does not have any
direct employees. However, certain underlying projects of the Company do have
employees and their interests are managed at board level by the respective
project company and by third-party asset-level counterparties.
Please see pages 112 and 113 - governance KPIs, and page 115 corporate
social responsibility in the Annual Report 2022.
Fostering relationships with suppliers, customers and others The Board believes that building effective business relationships with
suppliers, customers and other key counterparties is crucial to preserving
long-term shareholder value.
Excluding the Investment Manager, at the corporate level, these stakeholders
include the Administrator and Company Secretary, Corporate Broker, Legal
Counsel, public relations agency and the Auditor and tax advisers. At the
operational level, this includes asset-level counterparties, local communities
and debt providers.
Please see pages 36 and 37 - stakeholder engagement of the Annual Report 2022.
Acting fairly between Company members Each decision taken by the Board considers the interests of shareholders as a
whole and safeguards are in place to avoid conflicts of interest.
Please see pages 32 and 35 - stakeholder engagement, and pages 130 and 131 -
relations with shareholders of the Annual Report 2022.
Impact on the community and environment This topic is extensively covered in the Company's Sustainability and ESG
Report.
Please see pages 34 to 37 - stakeholder engagement and pages 97 to 115 -
sustainability and ESG of the Annual Report 2022
Maintaining high standards of business conduct The Board strives to meet or exceed the standards expected of a public company
owning and investing in renewable infrastructure assets. Examples include the
development of the Company's ESG KPIs, implementing an ESG-linked revolving
credit facility and adopting and reporting against the TCFD requirements.
Please see pages 49 to 67 - TCFD Report, and pages 97 to 115 Sustainability
and ESG of the Annual Report 2022.
Stakeholder engagement on the topics of sustainability and climate change
During the year under review, efforts have been made to engage more
proactively with key stakeholders on topics relating to sustainability and
climate change.
The Investment Manager engaged with its key counterparties - external asset
managers and operations and maintenance providers - on a wide range
of sustainability topics, including biodiversity initiatives, scope 2
emissions, health and safety initiatives and community engagement procedures.
This resulted in increased uptake of biodiversity initiatives across the solar
portfolio and websites being developed for some of the assets that did not
have them in the wind and solar portfolios, to help drive community
engagement. Conversations around switching to renewable energy providers were
also undertaken and scope 2 emissions data was collected for the first time as
part of the Company's TCFD disclosure.
Further engagement was undertaken by the Investment Manager internally, with
several best practice sessions on the collection of ESG KPIs held for the
asset managers. Individual sessions on climate-related risks to the Company's
assets were held between each portfolio asset manager and members of the
sustainability team to identify climate-related risks and mitigation
strategies. The outcome of this engagement can be found in the Strategy and
Risk section of the TCFD disclosure.
Key counterparties · Biodiversity initiatives
· "Green" energy suppliers
· Scope 2 emissions
· Community engagement procedures
Investment Manager · Climate risks and management
· JLEN's suite of ESG KPIs
JLEN Board · TCFD training, training on AD sustainability credentials, health
and safety training, strategy day with ESG and climate change topics covered
Stakeholder engagement metrics
During the period under review, the Company recorded the following stakeholder
engagement metrics:
39
meetings attended with institutional shareholders
1
AGM held
produced four factsheets, one Annual Report, one Half-year Report, one ESG
Report
2
analyst briefings held
3
training sessions attended by the Board and 1 strategy day
50
site visits attended by the Investment Manager
Shareholders
Rationale Key stakeholders How has JLEN communicated and engaged? Key strategic decisions impacting stakeholder group during period
Providers of equity finance and recipients of income distributions. · Retail investors · Annual general meeting · Declared an increased dividend target of 6.80 pence in line with
investment objective, continuing to position JLEN as an attractive proposition
· Institutional investors · Regular market announcements for investors seeking income
· Private client and wealth managers · Investor communications including quarterly factsheets · Made three portfolio acquisitions which further diversified the
portfolio and should prove accretive to NAV in the long term
· Investor platforms · Dedicated JLEN website
· Successful completion of the first asset divestment since launch,
· Pensions and insurance providers · Investor roadshows hosted via video conference achieving a marked uplift to the last internal valuation
· Proxy voting organisations · Views and feedback sought from institutional shareholders via · Formation of a dedicated ESG Committee to develop and monitor the
corporate broker Company's sustainability and ESG strategies
· Investor research notes produced by QuotedData and frequent
articles across traditional print and social media
Investment Manager
Rationale Key stakeholders How has JLEN communicated and engaged? Key strategic decisions impacting stakeholder group during period
Key counterparty responsible for delivering the Board's strategy. · Foresight Group Regular Board meetings in Guernsey and via video conference during · Determination that the Investment Manager maintains a robust
the period attended by key investment personnel internal control environment, and that the continued appointment of the
· Foresight Group employees
Investment Manager is in the best interests of shareholders as a whole
Comprehensive assessment of the contractual relationship with the Investment
Manager and their performance · Agreed the framework for Foresight's discretionary investment
mandate and the relevant criteria for escalation, creating an efficient
Consulting on proposals and the parameters for delegated authority to take decision-making framework better suited to the continued growth of
investment decisions the portfolio and the ongoing relationship with Foresight
Monitoring and assessing JLEN's strategic position within the growing
environmental infrastructure market and the expected future development of the
market
Fortnightly calls with the Investment Manager to discuss operational matters
and investment opportunities under consideration
Commercial service providers
Rationale Key stakeholders How has JLEN communicated and engaged? Key strategic decisions impacting stakeholder group during period
Providers of essential business support services. · Administrator & Company Secretary · Regular scheduled update calls as well as specific interactions on · Key service providers retained, providing continuity of service
corporate actions and new portfolio acquisitions and familiarity with the objectives of the Company
· Corporate broker
· Collaboration with multiple service providers in publication of
· Legal advisers annual and interim reports
· Public relations agency · Annual service provider performance review
· Auditor and tax advisers · Consulting on regulatory, governance, accounting and taxation
matters
· Independent valuation specialists
Asset-level counterparties
Rationale Key stakeholders How has JLEN communicated and engaged? Key strategic decisions impacting stakeholder group during period
Asset-level technical and operational management service providers. · Operations & Maintenance ("O&M") contractors · Regular update calls with O&M and MSA providers to ensure · Consolidation of insurance services at SPV level across parts of
adequate oversight of portfolio operations the portfolio
· External management services ("MSA") providers
· Focused engagement on value enhancement opportunities, including · Acquired three new assets during the period, increasing ongoing
· Supply chain counterparties Landowners rationalisation of service provision for cost savings and/or improved services servicing requirements from O&M counterparties
· Increased scrutiny of, and resource allocation to, emerging risks · Entered a number of new technology types over the period, including
identified standalone battery storage and low carbon transport
· Increased emphasis on the internal control framework, to ensure · Successful further upgrade of capacity at Vulcan AD site resulted
that controls are both robust and effective. in increased revenue
Local communities
Rationale Key stakeholders How has JLEN communicated and engaged? Key strategic decisions impacting stakeholder group during period
Members of society living in proximity to an asset of the Company, where the · Local authorities and agencies · Frequent engagement with local authorities and other regulators to · JLEN donated over £418k to local community funds over the period,
operations of that asset may have an impact, whether positive or negative.
ensure safe and compliant operation of our assets helping to address local needs and promote long-term sustainable and
· Community funds
prosperous communities
· Actively engage with local authorities on construction planning and
· Landowners obtaining necessary planning permissions · Implemented a programme of engagement with a local community, in
response to concerns raised by local residents near to one of our sites
· Local environment · Regular interaction between the owners of land on which our assets
operate and the Investment Manager's asset management team
· Local residents
· Conduct educational site visits for local community schools and
colleges
Debt providers
Rationale Key stakeholders How has JLEN communicated and engaged? Key strategic decisions impacting stakeholder group during period
Providers of long-term debt to finance assets within the portfolio. Providers · Banks · Regular updates provided on covenant compliance and current · Debt remained a key component of funding strategy during the period
of short to medium-term debt facilities ("RCF") to finance the acquisition of
positioning and the portfolio has utilised revolving debt facilities throughout
investment opportunities. · Lenders
· Consulted on the incorporation of ESG metrics into the interest · New debt facilities were arranged that included an element of
· RCF agent margin and commitment fee payable on the revolving credit facility sustainability and ESG linkage; more information on page 90 of the Annual
Report 2022
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.
Pages 41 to 48 of the Annual Report 2022 detail the principal risks that the
Directors consider are material which potentially could occur in an
environmental infrastructure project such as those invested in by the Company.
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 likelihood of occurrence and to ensure that JLEN is adequately
prepared to deal with risks so as to minimise their impact should they
materialise.
Risk identification and monitoring
JLEN has a separate Risk Committee, comprising four non-executive Directors,
which is responsible for overseeing and advising the Board on the current and
potential risk exposures of the Fund, with particular focus on the Group's
principal risks, being those with the greatest potential to influence
shareholders' economic decisions, and the controls in place to mitigate
those risks.
The identification, assessment and management of risk are integral aspects of
the Investment 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 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.
Mitigation actions have been developed with respect to each risk so as first
to reduce the likelihood of such risk occurring and secondly to minimise the
severity of its impact in the case that it does occur.
The risk register is a "live" document that is reviewed and updated regularly
by the Risk Committee as new risks emerge and existing risks change. The
principal risks faced by the Group are formally reviewed by the Risk
Committee at each quarterly meeting and a report from the Committee is
presented to the Board for consideration and approval. Each of the underlying
projects is overseen by an experienced general or contracts manager who
reports to their individual project board. The general and contract managers
maintain strong relationships between clients, sub-contractors and other
stakeholders. This ensures effective management of potential risks.
Emerging risks and risks relevant to the year under review
Covid-19
Since the start of the first lockdown in March 2020, the Company has
experience of how the assets have performed considering the challenges
presented by the Covid-19 pandemic. Operationally, the portfolio has proven
to be resilient, with only the Bio Collectors food waste plant experiencing
first-order consequences from lockdown measures through a reduction in food
waste volumes from hospitality and commercial customers. This risk is now
understood and factored into the valuation. Now, as Covid-19 restrictions are
no longer enforced, risks lie more with supply chains that have been disrupted
during Covid-19 and are taking time to become re-established. This is further
exacerbated by the Russian invasion of Ukraine, which impacts flows of some
goods and commodities that are important in the global economy.
Power prices
With the ending of the strict Covid-19 lockdowns and the associated reduction
in economic activity that drove down power prices, wholesale electricity and
gas prices have rebounded extremely strongly. Existing high prices at the
start of 2022 were then pushed even higher by Russia's invasion of Ukraine and
the sanctions on Russian fossil fuels that followed.
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 three
years. This provides protection in the event that power prices retreat from
their current levels, but it also means that portfolio generation assets may
not always be free to capture the very highest prices that are available from
time to time. JLEN currently has fixes in place for more than 53% of the
portfolio to the end of March 2024.
The energy price situation has also raised the risk of energy suppliers that
provide PPAs to renewable generators becoming insolvent. During the period,
some portfolio companies had an exposure to Bulb Energy, a supplier that was
put into Special Administration in November 2021. These exposures have been
resolved and resulted in an improvement in JLEN's financial position due to
securing improved terms with replacement PPA providers. The Investment Manager
continues to monitor the market carefully as it contemplates new PPAs and
undertakes to assess the counterparty risk on existing energy suppliers.
Brexit - legal and regulatory risk
On 31 January 2020, the UK ceased to be a member of the European Union,
entering a limited transition period until 31 December 2020. 95% of JLEN's
portfolio is located in the UK and none of JLEN's existing assets has
experienced legal or regulatory issues stemming from Brexit. The Investment
Manager expects the European component of the portfolio to increase in the
medium term. Due diligence is conducted on all new acquisitions, including an
assessment of legal and regulatory risks whether impacted by Brexit or not,
and so the Investment Manager does not expect this aspect of Brexit to be a
material risk for the portfolio in the future. Brexit is creating some
second-order issues for portfolio companies due to supply chain disruption and
this is included as one of the Company's principal risks (see below).
Change of AIFM
In January 2022, JLEN appointed its Investment Manager, Foresight Group, as
its external alternative investment fund manager ("AIFM"). Prior to this,
the Company was a self-managed Alternative Investment Fund ("AIF")
and Foresight Group was the Investment Adviser. The contract terms remain
materially unchanged; however, the AIFM takes more of the day-to-day
responsibility for the Fund and it could be considered that there is an
increased risk of reliance on the Investment Manager. The risk is mitigated by
the relationship that has already been formed with the Investment Manager,
including periodic performance assessments and by the Investment Manager's
experience in the markets in which JLEN operates.
Cost of living and risk of a windfall tax
With rising electricity and gas prices, there is a risk that governments take
action against parties, like the Company, that benefit from these higher
prices in order to mitigate the impact on ordinary families. In the UK, the
government has recently announced an 'Energy Profits Levy' that imposes a
temporary higher rate of tax on UK oil and gas producers. While this Levy does
not apply to the electricity generation sector at this time, the government
has said that it is aware that the sector has made elevated profits and that
it plans to evaluate what steps to take. The emergence of this specific risk
has been factored into our current assessment of the principal risk around
'changes to tax legislation and rates'.
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
Each of these areas, together with the principal risks within that category,
are summarised in the table below, followed by a detailed discussion of the
mitigating factors.
Strategic, economic and political
Risk Potential impact Mitigation
1 Inflation · The underlying assets in the portfolio, and therefore the returns · Returns from the assets in the portfolio are highly correlated with
expected from them, have some exposure to inflation. This ranges from direct inflation due to revenues from PFI assets, green benefits for renewable energy
exposure such as subsidies and service contracts that increase in line with assets and most operational costs being directly linked to an inflation index.
RPI annually to other revenue and cost items where the link to inflation is This results in a "natural hedge", removing the need for the
Link to Fund objectives not contractual and its effect must be estimated. use of derivatives to mitigate inflation risk.
Predictable income growth for shareholders · Nominal discount rates are used in the DCF valuation methodology · The change of dividend policy from "inflation-linked" to
used to value portfolio assets. There is a risk that discount rates increase "progressive" gives the Company additional flexibility to set dividend targets
in a high inflation environment, impacting valuations. at a sustainable level.
Change in year · In the current high inflation environment, there is greater
uncertainty than previously about how long future high inflation will last.
Increased JLEN has adopted an assumption of 5% RPI inflation for the current year,
dropping to 3% until 2030.
· Continue to monitor and seek advice from the Company's independent
Residual risk valuation specialist.
Major
2 Interest rates · The Company has some relatively limited interest rate exposure, · Through the use of interest rate swaps and fixed rate loans,
through its own cash deposits and bank funding (UK HoldCo revolving credit finance costs are fixed at the time of the contract being signed,
facility) and deposits and funding within the projects themselves. substantially reducing interest rate risk.
Link to Fund objectives · Interest rates have risen during the year under review and are · The revolving credit facility has a floating interest charge over
forecast to rise further to combat inflation. SONIA but this is mitigated as the facility provides short-term finance prior
Predictable income growth for shareholders to being repaid with capital raise proceeds.
Change in year
Increased
Residual risk
Moderate
3 Acquisitions and pipeline · JLEN's intention is to grow the portfolio through the acquisition · The Investment Manager continually receives and seeks
of further environmental infrastructure. However, there is a risk that a opportunities from the wider secondary market and developers, both in the UK
pipeline of acquisitions does not materialise or that JLEN is uncompetitive and overseas, assessing over 500 deals in a typical year for suitability. It
and fails to acquire the desired assets. has a well-established presence within the market.
Link to Fund objectives
· There is a risk that due diligence carried out on acquisition · JLEN's broad environmental infrastructure mandate captures a wider
Investment, growth and diversification targets is insufficient and does not reveal all the facts that are relevant to range of potential investments that reaches beyond renewable energy to include
the acquisition, leading to JLEN overpaying. assets that support the transition to a low carbon economy or which mitigate
the effects of climate change. Recent examples include low carbon transport
and storage assets.
Change in year
· The Investment Manager commissions a suite of due diligence from
Decreased suitable consultants that are experts in their fields for every acquisition.
The Investment Manager has significant experience of environmental
infrastructure assets and the risk areas to address through due diligence. In
the event that a consultant fails to identify a risk item within their scope,
Residual risk JLEN can seek to recover any loss it has suffered up to the consultant's
liability cap.
Moderate
Links to TCFD
4 Funding of acquisitions and future equity fundraising · There is a risk that JLEN is unable to achieve its stated ambition · JLEN raised capital in January 2022, in an oversubscribed equity
of growing the portfolio by acquiring new assets due to a lack of funding, issue. Since then, the renewable infrastructure sector has performed very
both from corporate debt and equity capital from investors. well, emphasising its non-correlated nature with mainstream markets that have
been negatively impacted by increasing market uncertainties and Russia's
Link to Fund objectives invasion of Ukraine.
Investment, growth and diversification · JLEN has two years remaining on its three-year £170 million
revolving credit facility and can request a further £30 million uncommitted
accordion. This provides flexible short-term finance to pursue acquisitions
prior to raising capital, mitigating the risk of inadequate funding affecting
Change in year growth.
Decreased
Residual risk
Moderate
5 Future of UK capital spending and other target geographies · Under its investment policy, JLEN is required to hold at least 50% · The UK government's adoption of a legally binding commitment to
of its portfolio by value in UK assets. JLEN therefore has a significant "net zero" carbon emissions by 2050 underpins its support for environmental
interest in the future of UK infrastructure spending. There is a risk that infrastructure.
spending is either reduced or stopped altogether or that the model used to
Link to Fund objectives procure environmental infrastructure and/or renewable energy projects carries · In addition, JLEN has the ability to mitigate the impact of a
a risk profile that would not allow JLEN to invest under its slowdown in UK deal flow through overseas acquisitions in order to diversify
Investment, growth and diversification investment policy. the portfolio and reduce its reliance on the UK for investment opportunities.
· Russia's invasion of Ukraine has forced all Western governments to
consider the dependence of their energy systems on Russian oil and gas and is
Change in year leading to accelerated plans for decarbonisation together with increased focus
on alternative energy sources like biomethane and hydrogen that would fall
Decreased within JLEN's investment policy.
Residual risk
Minor
6 Reputational · JLEN's activities span a range of environmental infrastructure · The Company and the Investment Manager endeavour to keep abreast of
sectors with multiple touch-points with local stakeholders, regulators, best practice in this area and emerging issues from the portfolio with the
contractual counterparties and other parties who are active in the areas in capacity to damage the Company's reputation are elevated to the Board.
which JLEN operates. As JLEN grows and its operations become more complex, the The Board has set up an ESG Committee chaired by Jo Harrison to focus on
Link to Fund objectives risk that JLEN is considered to have acted improperly increases, leading to this.
reputational damage and investors avoiding the Company's shares.
Predictable income growth for shareholders
· The Investment Manager has incorporated ESG assessments into its
· JLEN aims to conduct its business in accordance with ESG principles investment processes that are intended to highlight potential weaknesses in
Investment, growth and diversification and is public in this aim. The ESG landscape is changing rapidly and there is target assets' ESG credentials before JLEN invests.
increased scrutiny of businesses' claims in this area. JLEN could suffer
Preservation of capital over the longer term reputational damage if it is considered to be "greenwashing", leading to · JLEN has stated its ESG objectives publicly and has reported on a
investors avoiding the Company's shares. richer set of ESG metrics to try to measure objective performance towards
these objectives.
Change in year
Increased
Residual risk
Moderate
Operational, business, processes and resourcing
7 Volume of wind, solar and rainfall resource · By the very nature of wind, solar and water-related environmental · For renewable energy projects there is a degree of protection from
infrastructure projects, their financial performance is dependent on the this variability in weather resource from portfolio diversification, as solar
volume of weather resource available over time, whether measured through wind is more productive in the summer and wind more productive in the winter, with
speeds, irradiance or millimetres of rainfall. These are factors outside the the absolute level of resource being weakly negatively correlated.
Link to Fund objectives control of JLEN or the projects themselves, with the risk of a significant
effect on performance if the outcome is significantly different from the · On all projects, technical consultants are employed to advise on
Predictable income growth for shareholders assumptions made in forecasting revenue and costs and hence returns to JLEN. the assumptions which should be made regarding volume and its impact on
performance for each individual asset. Risks in this area diminish over time
Preservation of capital over the longer term as operational track record provides a stronger base for forecasts than
consultants' estimates.
Change in year
No change
Residual risk
Moderate
Links to TCFD
8 Volume and cost of feedstock resource · For environmental infrastructure assets that need to source · The assets in JLEN's portfolio that rely on supplies of feedstock
feedstock or analogous resources, there are risks associated with the volume benefit from dedicated staff (whether employed by service providers or
of feedstock available and the costs or revenues associated with it. If directly by the asset) who work to source suitable feedstock at the best price
sufficient feedstock is not available for an asset to operate at its optimum available.
Link to Fund objectives 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. · For agri-anaerobic digestion sites, it is common to agree feedstock
Predictable income growth for shareholders 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
Preservation of capital over the longer term shortfall be likely, for instance due to a poor harvest, substitute feedstocks
are widely available.
Change in year
Increased
Residual risk
Major
Links to TCFD
9 Power prices · The revenues of the renewable energy generating assets are · The risk of exposure to variations in electricity and gas prices
dependent to some extent on the market price of electricity and natural gas, from assumptions made is mitigated by JLEN in the following ways:
which is out of the control of JLEN. There is a risk that the actual prices i) short-term PPAs are used to fix electricity and gas prices for between
received vary significantly from the model assumptions, leading to a shortfall one and three years ahead depending on market conditions and many have floor
Link to Fund objectives in anticipated revenues to JLEN. 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
Predictable income growth for shareholders established market consultants are used to inform the electricity prices over
the longer term used in the financial models. JLEN blends forecasts from three
Preservation of capital over the longer term 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
Change in year sales. At the year end, 71% of the portfolio's underlying revenues were not
related to merchant sales.
Increased
Residual risk
Major
Links to TCFD
10 Cyber risk · There exists a threat of cyber-attack in which a hacker or computer · JLEN has no dedicated IT systems and it relies on those of its
virus may attempt to access the IT systems of the Group, the Investment service providers, principally the Investment Manager and Administrator, which
Manager, the Administrator or one of the project companies and attempt to have procedures in place to mitigate cyber-attacks and have robust business
destroy or use the data for malicious purposes. While JLEN considers that it continuity plans in place. Renewables assets are also susceptible to cyber
Link to Fund objectives is unlikely to be the deliberate target of a cyber-attack, there is the attack, for example if the control systems of wind turbines are targeted, and
possibility that it could be targeted as part of a random or general act. the Investment Manager is working to understand weaknesses in this area better
Predictable income growth for shareholders in order to continue to improve controls to increase security.
Change in year
Increased
Residual risk
Moderate
Financial and taxation
11 Portfolio valuation · The discount rates used in the valuation exercise represent the · The discount rates are reviewed on a regular basis and updated,
Investment Manager's and the Board's assessment of the rate of return in the where appropriate, to reflect changes in the market and in the project risk
market for assets with similar characteristics and risk profile. Increased characteristics.
underlying interest rates or expectations of prolonged high inflation may lead
Link to Fund objectives to increased discount rates being applied by the market and a consequential · The gas and electricity generating assets have entered into
decrease in the portfolio value. short-term fixed price arrangements to remove some of the risk associated with
Preservation of capital over the longer term
changes in power prices. Latest power prices are fixed for 77% of generation
· Asset values may not run in parallel to evolving forecasts for for the current summer season and 74% for the upcoming winter 2022 season. A
future electricity and gas prices and investors should expect some variation premium has been added to the discount rate for the Cramlington biomass asset
in asset valuation from period to period, as and when a material movement from as it presents the most material risk to the portfolio valuation from changing
Change in year prior expectations is identified. This risk is elevated during the current merchant power prices.
period of volatility in power markets.
Increased · Recent market transactions have supported the view that attractive
infrastructure assets remain in high demand with institutional investors.
· To provide additional assurance to both the Board and JLEN's
Residual risk shareholders with respect to the valuation, an independent verification
exercise of the methodology and assumptions applied by Foresight is performed
Moderate by a leading accountancy firm and an opinion provided to the Directors on a
semi-annual basis.
Compliance and legal
12 Changes to tax legislation and rates · JLEN values its portfolio based on current enacted corporation tax · JLEN continues to monitor and participate in any relevant
rates and tax rules in the jurisdictions in which it operates. Changes to consultation processes with UK HMRC and to assess the impact of any additional
these rates or rules in the future could impact the valuation of the portfolio changes which may result from the introduction of differing legislation.
and the level of distributions received from the portfolio.
Link to Fund objectives
· The increase in the UK corporation tax rate from 19% to 25% from
· JLEN works closely with expert tax advisers and adopts tax 2023, assumed to remain at that level for the remaining portfolio life, is
Predictable income growth for shareholders positions which are based on industry practice and in line with the wider factored into the valuation. While this risk has now crystallised, there are
Group strategy. However, other than participating in industry consultation other possible avenues for government to increase revenues, and so the
Preservation of capital over the longer term processes, there is little within the power of the Company that is able to general risk remains elevated while government deficits remain large.
mitigate changes in corporation tax rates and tax legislation.
· The Investment Manager maintains membership of various trade bodies
· The UK government has imposed a "windfall tax" on North Sea oil and and participates in lobbying efforts and calls for evidence to support the
Change in year gas producers in light of the high cost of energy and the extraordinary interests of the renewable energy sector.
profits such producers are making. The government has also put the electricity
Increased generation sector on notice that it is considering whether such a tax should
be extended to include them. If this occurs, it is likely to capture JLEN's
renewable electricity generation assets such as wind and solar projects,
although it is not possible to quantify the impact of such a move without
Residual risk seeing the detail of how the tax will be levied.
Moderate
13 Changes in regulation and government support · JLEN is required to comply with certain regulations, being a · Through a comprehensive compliance monitoring programme, JLEN
Guernsey company listed on the London Stock Exchange, including those under ensures that it remains well informed as to the legislation, regulation and
the Alternative Investment Fund Managers Directive ("AIFMD") and the Foreign guidance relevant to both the Company itself as well as the project entities
Account Tax Compliance Act ("FATCA"). There is a risk that failure to comply in which it invests. The Board monitors compliance information provided by the
Link to Fund objectives with any of the relevant rules could result in a negative reputational or Administrator, Company Secretary, Investment Manager and legal counsel and
financial impact on the Company. monitors ongoing compliance developments relevant to a Guernsey company listed
Preservation of capital over the longer term
on the London Stock Exchange.
· The newly emerging area of climate-related disclosures is changing
Investment, growth and diversification rapidly as understanding of what constitutes best practice evolves. There is a · JLEN has voluntarily addressed the requirements of the Task Force
risk that JLEN fails to disclose properly against the new requirements or that on Climate-related Finance Disclosures ("TCFD") in a separate section of
investors consider disclosures to be insufficient. this Annual Report.
Change in year
No change
Residual risk
Moderate
Links to TCFD
Asset specific
14 Operational risks · There is a risk that a health and safety event at a JLEN owned site · The portfolio is constantly monitored by the Investment Manager to
could lead to increased costs at the site to prevent further occurrences. address risks as they are identified.
JLEN's reputation could be adversely affected by publicity generated by a
health and safety event. · The use of a diverse range of service providers supplying
Link to Fund objectives
management, operational and maintenance services ensures any failure of a
· There is a risk that poor performance by sub-contractors, or in the single service provider has a minimal impact on the portfolio as a whole.
Predictable income growth for shareholders 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. · This risk is mitigated in part by the diversification represented
Preservation of capital over the longer term
by JLEN's portfolio of assets.
· In the event of a single project suffering from a material issue,
distributions to the Fund could possibly be impacted absolutely or for a · The portfolio has material damage and business interruption
period of time whilst the issue is resolved. This includes grid outages and insurance policies in place to cover against potential losses, although these
Change in year constraints resulting in a project being unable to export power and do not typically cover grid outages. Asset managers mitigate the impact of
earn associated revenues. this by maintaining a dialogue with network operators and influencing when
No change 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
Residual risk Investment Manager, the Administrator and the operating companies are
effective.
Moderate
· Each of the project assets have 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 on accidents and RIDDORs is
received at every board meeting. Regular health and safety audits on the
projects are carried out by independent specialists.
ESG
15 Climate change · Climate change risk has been assessed as part of JLEN's TCFD · Climate change risk has been assessed as part of JLEN's TCFD
report. For more information, see pages 64 to 65 of the Annual Report 2022 report. For more information, see pages 49 to 67 of the Annual Report 2022 for
mitigations.
Link to Fund objectives
Predictable income growth for shareholders
Preservation of capital over the longer term
Investment, growth and diversification
Change in year
No change
Residual risk
Moderate
TCFD REPORT
Introduction
The Task Force on Climate-related Financial Disclosures ("TCFD") was developed
in 2015 by the Financial Stability Board to help public companies and other
organisations more effectively and consistently report on climate-related
risks and opportunities.
This year, it has become mandatory for commercial companies with a premium
listing on the London Stock Exchange to report against the TCFD
recommendations on a comply or explain basis((1)). It is expected that from
1 January 2022 all companies with a standard listing will also be required to
include a TCFD disclosure on a comply or explain basis.
JLEN as an investment company, is not required under the Listing Rules to
include a full TCFD disclosure; however, the Board and the Investment
Manager believe that the nature of JLEN's business and strategy is
intrinsically aligned to the goal of a greener and less carbon intensive
future. Initiatives such as the TCFD are therefore seen as a positive step in
this direction. JLEN has voluntarily included climate-related financial
disclosures consistent with the TCFD recommendations and recommended
disclosures in these financial statements with the following exception:
In respect to recommended disclosure 4C (found in the metrics and targets
section on pages 66 and 67 of the Annual Report 2022) to describe the targets
used by JLEN to manage climate-related risks and opportunities and performance
against these targets, while base-line data has been collected for
climate-related metrics for FY22, JLEN plans to set targets against these in
FY23..
Limitations of the disclosure
Both the Investment Manager and the Board of JLEN are fully supportive of
the TCFD's goals in bringing climate change considerations into mainstream
reporting. However, analytical frameworks for evaluating the complex impacts
that climate change will have on the markets in which JLEN operates are still
in their infancy.
The Board and the Investment Manager recognise the importance for
stakeholders of the Company to understand the climate change risks and
opportunities and how these are managed by the Company, but it should be
noted that there is no standardised way yet of assessing these risks.
The Investment Manager believes that in time, across JLEN's peer group and the
market generally, a more sophisticated approach to considering the climate
risks specific to the Company's business will be developed. In this first
report, JLEN has endeavoured to make disclosures against the TCFD
recommendations that are true to its understanding of the risks at this time
and also relevant and digestible for its range of stakeholders.
(1) The regulations were made on 17 January 2022 and apply to reporting
for financial years starting on or after 6 April 2022, with guidance provided
here:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1056085/mandatory-climate-related-financial-disclosures-publicly-quoted-private-cos-llps.pdf.
GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS
Description: Description: Description: Description:
Disclose the organisation's governance around climate-related issues and Disclose the actual and potential impacts of climate-related risks and Disclose how the organisation identifies, assesses and manages climate-related Disclose the metrics and targets used to assess and manage relevant
opportunities. opportunities on the organisation's business, strategy and financial planning risks. climate-related risks and opportunities where such information is material.
where such information is material.
Disclosure: Disclosure: Disclosure: Disclosure:
a. Describe the Board's oversight of climate-related risks a. Describe the climate-related risks and opportunities the organisation a. Describe the organisation's process for identifying and assessing a. Disclose the metrics used by the organisation to assess climate-related
and opportunities. has identified over the short, medium and long term. climate-related risks. risks and opportunities in line with its strategy and risk management process.
b. Describe management's role in assessing and managing climate-related b. Describe the impact of climate-related risks and opportunities on the b. Describe the organisation's process for managing climate-related risks. b. Disclose scope 1, scope 2 and, if appropriate, scope 3 GHG emissions,
risks and opportunities. organisation's businesses, strategy and financial planning.
and the related risks.
c. Describe how processes for identifying, assessing and managing
c. Describe the resilience of the organisation's strategy, taking into climate-related risks are integrated into the organisation's overall risk c. Describe the targets used by the organisation to manage climate-related
consideration different climate-related scenarios, including a 2°C or lower management. risks and opportunities and performance against targets.
scenario.
Key initiatives in 2021/22: Key initiatives in 2021/22: Key initiatives in 2021/22: Key initiatives in 2021/22:
· Enhanced the Company's oversight procedures in this area with the · Developed the internal and external approach to reporting on and · Reviewed and enhanced the approach to climate risk reporting within · Collected scope 1 and 2 emissions data in portfolio management
setting up of a separate ESG Committee to sit alongside the Risk and Audit assessing climate-related risks and opportunities the JLEN risk framework software tool
Committees
· Started to develop climate scenario modelling capabilities using · Undertook an exercise with Foresight's portfolio managers to review · Worked with portfolio data management software developer to tailor
· Welcomed Jo Harrison to the Board of Directors. Jo has specialist in-house resources and external expertise physical risks to the assets in the portfolio software specific to Foresight's ESG and sustainability requirements
knowledge in areas of sustainability and ESG
· Increased engagement with key counterparties at the asset level on · Further developed the JLEN reporting framework by classifying · Collected data against climate-related metrics as part of the ESG
· Included TCFD training as part of JLEN's training and strategy day the subject of sustainability principal risks that have a climate change aspect. Included a risk heat map metrics announced in the Annual Report 2021
that also shows climate change risk
· Streamlined the approach to asset-specific assessments for TCFD · Continued to develop approach to collect scope 3 emissions data
and EU taxonomy reporting
Planned initiatives in 2022/23: Planned initiatives in 2022/23: Planned initiatives in 2022/23: Planned initiatives in 2022/23:
· Further training on climate-related topics for both the Board and · Continue to develop scenario modelling capabilities and measure and · The Investment Manager's Head of Risk is conducting a comprehensive · Collect scope 3 emissions data
the Investment Manager assess the financial impact of these sensitivities review of the risk management framework, which is planned to include
significant climate risk analytics · Continue to develop the approach to ESG KPIs and set targets
against them
GOVERNANCE
TCFD recommended disclosures:
a) Describe the Board's oversight of climate-related risks and opportunities.
b) Describe management's role in assessing and managing climate-related risks
and opportunities.
a) Describe the Board's oversight of climate-related risks and opportunities
JLEN has a comprehensive risk management framework overseen by the Risk
Committee, comprising independent non-executive Directors, which is
responsible for overseeing and advising the Board on the current and potential
risk exposures of the Fund, with particular focus on the Group's principal
risks, being those with the greatest potential to influence shareholders'
economic decisions, and the controls in place to mitigate those risks,
including climate-related risk. The Group's risk register treats
climate-related physical risk as a principal risk and identifies various other
risks that have a direct relevance to the Company that are part of transition
risk, such as changing power prices and the extent of government support.
The Risk Committee meets on a quarterly basis and the duties of the Risk
Committee include the identification, measurement, management and monitoring
appropriately and regularly of all risks relevant to the Company's investment
strategy and to which the Company is, or may be, exposed, including climate
related risks.
The ESG Committee also meets on a quarterly basis and considers TCFD as a
standing agenda point. The ESG Committee is primarily concerned with setting
the guiding principles and strategies of the Company in respect of ESG matters
and TCFD falls under this remit for the purposes of the Committee. Where risks
are identified by the ESG Committee, these will be referred to the Risk
Committee for further consideration and inclusion in the risk register.
Over the financial year just passed, an update from the Investment Manager on
progress against TCFD reporting was delivered at the Board's annual strategy
and training day. Post the year end, in May 2022, a training session hosted by
a specialist consultant was delivered to the Board and further training over
the year is being planned.
While JLEN's portfolio of environmental infrastructure assets is not immune to
the effects of climate change on an individual asset basis, the Company's
purpose and investment policy is to reduce the rate of further climate change
by seeking to invest in assets that support more environmentally friendly
approaches to economic activity, support the transition to a low carbon
economy or which mitigate the effects of climate change.
Climate change-related training and informational sessions:
January 2022 - TCFD included as a topic at the JLEN strategy and training day
May 2022 - Climate change training session with external consultant
b) Describe management's role in assessing and managing climate-related risks
and opportunities
Assessing and managing climate-related risks
The identification, assessment and management of risks are integral aspects of
the Investment Manager'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 has established internal controls to manage risks and
reviews and considers the Group's key risks, with the Risk Committee, on a
quarterly basis, including climate risks, new risks arising and/or changes in
the likelihood of any particular risk occurring.
Assessing and managing climate-related opportunities
There are two key opportunities that the Investment Manager considers
holistically on a regular basis:
Sector opportunities - the Investment Manager frequently evaluates
opportunities for investments that reduce CO(2) emissions and enhance the move
to a low carbon economy.
Value-enhancing opportunities - the Investment Manager frequently assesses the
assets for opportunities to enhance climate-related performance.
At an investment level, the consideration of the sustainability credentials
of environmental infrastructure opportunities and their physical resilience
to climate-related risks is undertaken in accordance with a set of
sector-specific assessment parameters underlying the five key areas of
Foresight's proprietary Sustainability Evaluation Tool. Transition risks are
considered by the Investment Manager's valuation team and these risks are then
escalated to the Company's risk register and the Board, if appropriate.
Transition opportunities are considered more holistically by the Investment
Committee and as part of the Company's strategy. Further details of
Foresight's approach to sustainability and how this is carried through
practically to assessing climate-related risks and opportunities is set out on
pages 103 and 104 of the Annual Report 2022.
STRATEGY
TCFD recommended disclosures:
a) Describe the climate-related risks and opportunities the organisation has
identified over the short, medium and long term.
b) Describe the impact of climate-related risks and opportunities on the
organisation's businesses, strategy and financial planning.
c) Describe the resilience of the organisation's strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario.
Broadly, the TCFD climate-related risks and opportunities can be split into
two categories:
Transition risks:
These are risks related to the transition to a net zero or low carbon future.
These risks fall into four categories: policy and legal risk, technological
risk, market risk and reputational risk. See page 63 of the Annual Report
2022.
Physical risks:
These are the potential physical impacts of both acute and chronic extreme
weather events or changes to climate patterns. In this report the physical
risks as set out in the EU taxonomy were considered; more information is set
out on pages 61 to 62 of the Annual Report 2022.
Opportunities
The Investment Manager considers that aspects of physical and transition risks
may represent opportunities for the portfolio. By virtue of its investment
policy, JLEN aims to make a significant contribution to reducing CO(2) and
climate change.
Impact
The potential for climate-related risks to impact investments is considered as
part of acquisition due diligence and is subsequently monitored on an
ongoing basis.
While climate-related risks are being considered separately in this section,
they are not considered to pose a greater risk than those listed in the
principal risk register found on pages 42 to 48 of the Annual Report 2022 and
in some cases are duplicated.
The risks and opportunities and processes of assessment are considered in more
detail on pages 56 to 59 of the Annual Report 2022.
Top climate-related risks for the Company
Risks
Changes to power prices as a result of climate change Extreme weather-related events Changes in regulation and government support Displacement of existing assets with new or other technologies
Description Description Description Description
· Lower than forecast power prices due to warmer winters or increased · Extreme weather-related events, either chronic (e.g. changing wind · Changes in regulation to sectors in which JLEN is already invested · As more resource and scientific-backed research is dedicated to
renewables deployment patterns, heat stress, rising sea levels) or acute (e.g. storms, heat wave, e.g. energy-from-waste not meeting criteria to be considered aligned to the EU achieving net-zero goals, technologies could be developed that make current
drought, floods), causing damage to Company assets or negatively impacting taxonomy renewables or environmental infrastructure technologies obsolete. An example
· Increased power prices due to short-term shocks/decreased energy their production
of this could be fusion power displacing all other forms of energy
supplies from low wind resource or problems in the gas network could lead to · Changes in farming regulation which impact the agri AD portfolio
governments turning to less sustainable ways of generating energy that are
· Other technologies such as nuclear or coal being prioritised in the
available in the shorter term - e.g. coal · Government support for short-term energy solutions that negatively short to medium term
impact the transition to a low carbon future e.g. support of coal
Probability Probability Probability Probability
Likely Likely Possible Unlikely
Level of residual risk Level of residual risk Level of residual risk Level of residual risk
Moderate Negligible Negligible Minor
Physical or transition risk/opportunity Physical or transition risk/opportunity Physical or transition risk/opportunity Physical or transition risk/opportunity
Transition (market) Physical (acute, chronic) Transition (policy and regulation, reputational) Transition (technological)
Investment Manager response Investment Manager response Investment Manager response Investment Manager response
· The majority of assets in the portfolio earn revenues that are not · Having conducted a review of the physical risks to the portfolio · Given the diversified nature of the assets, the impact is likely · It is considered more likely that new technologies would be
dependent on merchant power sales and various mechanisms are in place to help (see pages 61 to 62 of the Annual Report 2022), the physical risks to be limited to a single asset or small part of the portfolio developed and JLEN is well positioned to invest in new energy solutions once
mitigate the risk of lower power prices (see principal risks on pages 42 to 48 are largely localised and the impact of a single event or limited set of
they become proven at scale. It is unlikely that a single solution would be
of the Annual Report 2022) events is deemed to have a negligible impact to the overall portfolio; · The risk over the long term is considered negligible as other found for all the energy needs, but if it were, this would necessitate
nevertheless, this is kept under close review by the Investment Manager avenues or solutions would be found for the asset or technology affected, considerable buildout beyond the lifetime of JLEN's assets
· Arguments for supporting less sustainable alternatives to manage
such as selling an asset or finding alternative sources of feedstock
short-term power price shocks are, on the whole, not supported by society · Further information on the mitigations considered against volume of
although sometimes short-term pragmatism overrides this resource can be found in the risk management section on pages 44 and 45 of the
Annual Report 2022
Impact Impact Impact Impact
S F C S C S F S F
Risk register Risk register Risk register Risk register
9 7 8 15 7 8 15 13 15 3 15
Time period key:
S = Short term (0-5 years)
M = Medium term (5-10 years)
L = Long term (10+ years)
Impact key:
S = Strategy
F = Financial planning
C = Company's investments
Risk register key:
3 Acquisitions and pipeline
7 Volume of wind, solar and rainfall resource
8 Volume and cost of feedstock resource
9 Power prices
13 Changes in regulation and government support
15 Climate change
Opportunities
Increased demand for environmental infrastructure and businesses which support Increased governmental support for environmental infrastructure projects Technological developments and buildouts in environmental infrastructure Changes in weather patterns leading to buildout of certain types of
the transition to a low-carbon economy environmental infrastructure or business
Description Description Description Description
· Increased demand for infrastructure which helps to balance the · Government policies aimed at facilitating the transition to a net · As new technologies become better developed, the Company is well · Changes in weather patterns could lead to opportunities for new
intermittent generation profile of renewables - e.g. battery storage zero carbon economy may subsidise certain technologies to increase their positioned to invest in a diversified range of projects types of infrastructure or further investment into existing categories. An
uptake or buildout, creating further opportunities for investment by JLEN example of this could be flood defence infrastructure in response to increased
· Increased demand for shorter-term solutions to reach net zero by rainfall or sea level rise or controlled environment agriculture facilities in
2050, e.g. CNG refuelling stations as a low carbon transport option while response to higher temperatures
other solutions such as hydrogen power are further developed
Level of opportunity Level of opportunity Level of opportunity Level of opportunity
High Medium Medium High
Time period Time period Time period Time period
S M L S M L S M M L
Physical or transition risk/opportunity Physical or transition risk/opportunity Physical or transition risk/opportunity Physical or transition risk/opportunity
Transition (market) Transition (policy and legal) Transition (technological) Physical
Investment Manager response Investment Manager response Investment Manager response Investment Manager response
· JLEN is already well positioned to invest in environmental · Government support of emerging sectors will change the risk profile · Attractiveness of investment opportunities will also depend on the · The Investment Manager reviews c. 500 deals a year in the
infrastructure sectors that support the transition to a low carbon economy, as and may open up areas that would otherwise be insufficiently attractive for business models as well as the proven nature of the technology environmental infrastructure space which allows it to take advantage of these
can be demonstrated in the market and opportunities section on pages 10 and JLEN investment opportunities as they arise
11 of the Annual Report 2022
Impact Impact Impact Impact
S F S F S F S F C
Time period key:
S = Short term (0-5 years)
M = Medium term (5-10 years)
L = Long term (10+ years)
Impact key:
S = Strategy
F = Financial planning
C = Company's investments
Resilience
JLEN believes that resilience is supported by owning a portfolio that is
diversified by location, technology, resource use and revenue make-up. At the
business level, the Investment Manager engages with a range of specialists
across different areas of expertise and levels of the business to help drive
and maintain a resilient portfolio. Risks and opportunities are also assessed
within the framework discussed on page 65 of the Annual Report 2022 and on an
ad hoc, day-to-day basis.
Climate change risk assessment methodology
What are climate change scenarios?
"Scenarios are alternative images of how the future might unfold and are an
appropriate tool with which to analyse how driving forces may influence future
emission outcomes and to assess the associated uncertainties."
Source: The IPCC
For the purposes of this report, JLEN considers climate change scenarios that
have been developed by the United Nations ("UN") Intergovernmental Panel on
Climate Change ("IPCC") in their Sixth Assessment Report.
In order to understand JLEN's physical climate risk, it considered low,
medium and high GHG emission scenarios as set out by the IPCC in their Sixth
Assessment Report.
Scenario Estimated warming (2041-2060)((1)) IPCC scenario
Very low GHG emissions: 1.6°C Net zero, broadly equivalent to SSP1-1.9((2))
CO(2) emissions cut to net zero around 2050. Considered best case scenario if
net-zero targets are met.
Intermediate GHG emissions: 2.1°C SSP2-4.5
CO(2) emissions around current levels until 2050, then falling but not
reaching net zero by 2100. Considered "middle of the road" scenario.
Very high GHG emissions: 2.5°C SSP5-8.5
CO(2) emissions triple by 2075. Considered worst case scenario.
(1) Relative to pre-industrial levels, all regions.
(2) Analysis received regarding power price scenarios does not explicitly
map to specific IPCC scenarios.
Physical risk assessment
Methodology
Physical risks have always been considered as part of due diligence when
acquiring an asset and on an ongoing monitoring basis.
This year an exercise was undertaken to review these risks through the lens of
specific climate-related risks. Initially, these risks were considered as part
of an exercise to review the portfolio's compliance with the EU taxonomy (more
information on page 103 of the Annual Report 2022). The EU taxonomy recognises
a non-exhaustive list of climate-related physical risks and this list was
adapted for the JLEN portfolio.
Temperature-related Wind-related Water-related Solid mass-related
Chronic Changing temperature (air, fresh water, marine water) Changing wind patterns Changing precipitation patterns and types (rain, hail, snow/ice) Soil degradation
Heat stress Precipitation or hydrological variability Soil erosion
Temperature variability Sea level rise
Water stress
Acute Heat wave Storm (including blizzards, dust and sandstorms) Drought Landslide
Cold wave/frost Heavy precipitation (rain, hail, snow/ice) Subsidence
Wildfire Flood (coastal, fluvial, pluvial, ground water)
The Investment Manager conducted an interview with each of its portfolio or
asset managers to determine the impact of each of the risks identified above
on the Company's assets.
These risks were then considered, where possible, using the IPCC's interactive
atlas set to the following parameters:
· region: Northern Europe (apart from ETA energy-from-waste plant
which is located in Southern Italy);
· climate change scenario model: SSP2-4.5;
· time frame: 2021-2040;
· baseline: 1995-2014; and
· mask: land.((1))
(1) Mask refers to a parameter of the IPCC atlas tool where the choices
are land, sea or mountains
For more information, please refer to the IPCC interactive atlas tool, found
here: https://interactive-atlas.ipcc.ch/.
Limitations of the assessment
Top climate-related physical risks (assuming methodology considered on page 61
of the Annual Report 2022)
Risk Description Mitigation
Heat stress Heat stress causes some loss of generation capacity within the solar The main mitigation is through the diversification of the portfolio. Loss of
portfolio; the bioenergy and AD portfolios also experience some loss production from the solar sites is marginal and technical solutions on the
in efficiency at higher temperatures. Increased stress on components is bioenergy and AD assets are available to help mitigate heat stress. Spare
expected to lead to a higher incidence of equipment failure. equipment is often stockpiled to quickly fix failures.
Drought Drought can be an issue for the feedstock of the AD portfolio. Drought is a In times of drought, alternative feedstocks can be sourced and substituted
possible risk given rising temperature expectations; however, Northern Europe with only a marginal loss of production and/or increase in the cost of
is forecast to have more rain as a result of climate change and consecutive feedstock.
dry days are expected to only increase by 0.3 days.
Storms It is difficult to calculate whether storms will increase as a result of Damage to sites from storms is more often limited to one site and not a risk
climate change; however, it is reasonable to think that storms will increase to the whole portfolio. Risk from storm damage is mitigated through the
in occurrence and strength as climatic conditions undergo changes. management of the site - experienced counterparties, reliable supply chains
and a ready stock of components that are likely to fail or be damaged can all
help to mitigate the risk.
Future climate scenarios
High physical risk scenario using SSP5-8.5 (2.5°C warming globally, in the
near term)
The IPCC pathway SSP5-8.5 was used to assess a high physical risk scenario
on the JLEN portfolio. The assessment was conducted using the
methodology described on page 61 of the Annual Report 2022.
96% of the JLEN portfolio is situated in the UK and the median remaining asset
life of the portfolio is 17.1 years. The assessment was therefore made through
the lens of land-based climate changes in the IPCC's Northern Europe region in
the period from 2021-2040.
In this scenario, mean temperatures in Northern Europe increase by 1.2°C
(median). Frost and snow decrease while mean precipitation increases 3.1%
(median). Consecutive dry days increase by 0.3 days (median) and surface wind
decreases by 0.5% (median). Sea level rises by 0.1 metres (median).
Therefore, the climate-related risks to the portfolio do not change
significantly from those assessed in the physical climate-related risk
assessment on a 2°C or lower scenario as detailed on page 62 Annual Report
2022.
The financial impact of this has not yet been modelled but, given the current
holdings, the portfolio is not expected to have material sensitivity to this
scenario.
High transition risk scenario using SSP1-1.9 (1.5°C to 2°C temperature
change)
As is standard market practice, long-term gas and power price projections used
in JLEN's portfolio valuation are informed by curves provided by independent
market forecasters that most closely represent a pathway between 2°C and
4°C.
In order to assess the potential long-term impact from climate change in a
high transition risk scenario, the Investment Manager has obtained price
projections produced under a net zero assumption that successful efforts are
made globally to limit warming to 2°C - which is broadly equivalent to
SSP1-1.9, under the United Nations IPCC scenarios.
It is important to note there are many different pathways to net zero, and
different choices could have very different implications for market prices and
revenues; not least such as government policy, technological advancement and
societal change. However, for the purposes of this scenario, we assume
decarbonisation targets are achieved such that negative emissions are reached
in the UK power sector by 2035 and economy-wide emission targets are met in
2050.
Whilst the Investment Manager will continue to refine its approach to climate
change modelling as both the policy and market landscape evolves, the current
projections suggest one potential outcome is to see reductions in forecast
annual baseload prices being driven by the accelerated roll out of low
marginal cost intermittent renewables and their associated impact on the merit
order price setting mechanism.
Based on current independent projections, the impact of this scenario has
been estimated as a reduction in portfolio value of approximately £52
million, equivalent to 6.6% of the portfolio or 7.9 pence per share of Net
Asset Value, although the true impact is expected to be softened by a
combination of operational, technological and market developments in the
coming years, which would at least partially offset the cannibalisation effect
currently projected in this scenario.
Limitations of the assessment
It should be noted that there is low model agreement across some areas of the
IPCC atlas tool. This could mean that some of their assessments change in
future.
While every effort was made to assess the probability and impact of the
physical risk correctly and accurately, it is anticipated that sophistication
in this area will increase over time as more data and different methods
of assessment are developed. It should be noted that there is low model
agreement across some areas of the IPCC atlas tool. This could mean that
some of their assessments change in future.
RISK MANAGEMENT
TCFD recommended disclosures:
a) Describe the organisation's processes for identifying and assessing
climate-related risk.
b) Describe the organisation's processes for managing climate-related risks.
c) Describe how processes for identifying, assessing and managing
climate-related risks are integrated into the organisation's overall risk
management.
a) Describe the organisation's processes for identifying and assessing
climate-related risk
JLEN has a comprehensive risk management framework and risk register that
assesses:
· a measure of the probability of each identified risk materialising;
and
· the potential impact that risk event may have on JLEN. Mitigation
actions have been developed with respect to each risk so as first to reduce
the likelihood of such risk occurring and secondly to minimise the severity of
its impact in the case that it does occur.
b) Describe the organisation's processes for managing climate-related risks
The financial performance of environmental infrastructure projects is
dependent on the volume of resources available, be it solar irradiation, wind,
feedstock yields, waste or water. These resources represent factors outside
the control of JLEN or the projects themselves. If assumptions made in
forecasting revenue and costs, and hence returns to JLEN, are incorrect, there
is a risk of a significant negative effect on performance. However, JLEN
considers the following mitigating factors for different parts of the
portfolio will ameliorate potential impacts:
Variability of weather resource
· For renewable energy projects there is a degree of protection from
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.
Falling volumes of resource on the waste and wastewater projects
· In addition, the waste and wastewater projects benefit from
"banded" volumetric payment arrangements that mean the projects are relatively
insensitive to falling volumes. The projects also benefit from contractual
exclusivity over the available waste or water stream and, in the case of the
waste projects, minimum guaranteed volumes, further mitigating this risk.
Assumptions made regarding resource
· 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.
Feedstock resource
· For AD sites, it is common to agree feedstock contracts that adjust
for the dry matter content in the biomaterial and relate pricing to that
energy content and volume which is delivered. Should a shortfall be likely,
for instance due to a poor harvest, substitute feedstocks are widely
available.
c) Describe how processes for identifying, assessing and managing
climate-related risks are integrated into the organisation's overall risk
management
All potential investments are evaluated in accordance with Foresight's
proprietary in-house tool - the Foresight Sustainability Evaluation Tool
("Foresight SET") - to ensure that they meet the Investment Manager's
definition of sustainable infrastructure, and that climate-related risks are
systematically identified, assessed and subsequently managed.
METRICS AND TARGETS
TCFD recommended disclosures:
a) Disclose the metrics used by the organisation to assess climate-related
risks and opportunities.
b) Disclose scope 1, scope 2 and scope 3 greenhouse gas emissions and the
related risks.
c) Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
a) Disclose the metrics used by the organisation to assess climate-related
risks and opportunities
To ensure that all potential investments meet our definition of sustainable
infrastructure, and that climate-related risks are systematically identified,
assessed and subsequently managed, they are evaluated in accordance with
Foresight's Sustainability Evaluation Tool ("SET"). The SET is made up of
five criteria that cover the key areas of sustainability and ESG
considerations to be assessed and there is a specific climate-change
resilience parameter comprising 30-40 sub-criteria.
The Sustainability team carry out regular in-house consultation to decide on
the individual "weighting" for each KPI within each climate change resilience
parameter. The weighting dictates the materiality of the KPI in the overall
asset score, which can be easily updated and amended based on new information
obtained.
The physical risks are assessed as part of the climate change resilience
assessment parameter of the SET. Alongside the assessment of the physical
risks, transition risks are also incorporated to the SET's climate change
resilience parameter.
More information on the Foresight SET can be found on pages 103 and 104 Annual
Report 2022.
b) Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse gas
emissions, and the related risks
What are scope 1, 2 and 3 emissions?
The Greenhouse Gas ("GHG") Protocol categorises greenhouse gas emissions into
three groups,
or "scopes":
Scope 1: direct emissions from owned or controlled sources.
Scope 2: indirect emissions from the generation of purchased energy.
Scope 3: indirect emissions (not included in scope 2) that occur in the value
chain of the reporting company.
The Company's focus for quantitative reporting of exposure to climate-related
risk is achieved using the universally accepted core metrics, as recommended
by the TCFD (shown below).
TCFD core metrics
Weighted average Total carbon Carbon Carbon
carbon intensity emissions footprint intensity Exposure to
(tCO(2)e/£m revenue)(1) (tCO(2)e) (tCO(2)e/€m invested) (tCO(2)e/£m revenue)(1) carbon-related assets (%)
Portfolio's exposure to carbon-intensive assets, expressed in tonnes The absolute greenhouse gas emissions associated with the portfolio, expressed Total carbon emissions for a portfolio normalised by the market value of the Volume of carbon emissions per million pounds of revenue (carbon efficiency of The amount or percentage of carbon-related assets in the portfolio,
CO(2)e/£m revenue. in tonnes CO(2)e. portfolio, expressed in tonnes CO(2)e/£m invested a portfolio), expressed in tonnes CO(2)e/£m revenue expressed in £m or percentage of the current portfolio value
To be calculated in 2023 75,166 99 To be calculated in 2023 16%
1. The Investment Manager continues to work with third party MSA providers to
define a consistent methodology for collation of this data.
At present, the calculation of these metrics is performed using scope 1 and
scope 2 emissions only, with scope 3 emissions to be incorporated in future
reports as the Investment Manager's sophistication in this area advances. An
update on this will be provided in the Annual Report 2023.
Scope tCO(2)e in 2021/22
Scope 1 Emissions (tCO(2)e) 68,368
Scope 2 Emissions (tCO(2)e) 6,798
Scope 3 Emissions (tCO(2)e) -
Total 75,166
Caveats to the data:
· Where it has not been possible to collect data, assumptions
have been made using proxy technologies, sites and time periods to provide as
accurate as possible data;
· scope 1 emissions do not yet include fugitive emissions from
AD sites (i.e. leaks, flaring, venting). There is work in progress to better
understand this aspect of the portfolio and will be reported going forward;
· where assets have renewables tariffs in place, this is deemed
to nullify their Scope 2 emissions and,
· for vehicles operating at the PFI sites, these are owned and
operated by third-party contractors, who should account for the vehicles'
fuel use in their own Scope 1 emissions.
Data sources:
Calculation methodologies available at TCFD Hub
c) Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets
JLEN's business is inherently linked to matters of climate change. JLEN's
ESG-linked loan facility includes a target against generation of clean energy
which can be directly linked to tonnes of CO(2) avoided. During 2021/22 JLEN
produced 1,314GWh of clean energy, which equates to 905,906 tCO(2)e avoided
(compared with burning coal to produce energy). Further information
and methodology can be found on page 106 of the Annual Report 2022.
A workstream is currently underway to develop methodologies to calculate the
carbon footprints of the Company's assets, which will help to further inform
the portfolio decision-making and target-setting processes.
JLEN records a range of other metrics that help to develop an understanding of
the direct and indirect environmental characteristics of the portfolio.
These can be found on pages 105 to 112 of the Annual Report 2022.
THE INVESTMENT MANAGER
JLEN is managed by Foresight Group LLP, an alternative investment fund manager
with over £8.7 billion of assets under management and over 300 infrastructure
assets.
Chris Tanner
Co-lead Investment Manager
Chris has been the co-lead Investment Manager to JLEN since IPO.
He joined Foresight in 2019 as a Partner and currently works in the London
office. He has over 23 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 Holmes
Co-lead Investment Manager
Chris has been co-lead Investment Manager to JLEN since January 2018.
He joined Foresight in 2019 as a Partner in the London office. He has over 24
years' experience in infrastructure investment and financing in PFI/PPP and
renewable energy projects.
Chris has a BA (Hons) in Business Economics from the University of Durham.
About Foresight Group
Foresight Group was founded in 1984 and is a leading infrastructure and
private equity investment manager. With a long-established focus on ESG and
sustainability-led strategies, it aims to provide attractive returns to its
institutional and private investors from hard-to-access private markets.
Foresight manages over 300 infrastructure assets with a focus on solar
and onshore wind assets, bioenergy and waste, as well as renewable energy
enabling projects, energy efficiency management solutions, social and core
infrastructure projects and sustainable forestry assets. Its private equity
team manages eight regionally focused investment funds across the UK and a SME
impact fund supporting Irish SMEs. This team reviews close to 2,500 business
plans each year and currently supports more than 130 SMEs. Foresight Capital
Management manages four strategies across six investment vehicles with an AUM
of over £1.6 billion.
Foresight operates from 12 offices across six countries in Europe and
Australia with AUM of £8.7 billion as at 31 March 2022. Foresight Group
Holdings Limited listed on the Main Market of the London Stock Exchange in
February 2021 www.fsg-investors.com/
Updates over the period
In January 2022, JLEN appointed its Investment Manager, Foresight Group LLP,
as its external alternative investment fund manager ("AIFM") with
discretionary investment management authority for the Company. For more
information, please see page 31 of the Annual Report 2022.
Q&A WITH LILY CROMPTON, GROUP SUSTAINABILITY LEAD
Tell us about your background
My background is very much as a sustainability professional, I've been working
in the sustainability field for over 13 years. I've worked on delivering
sustainable outcomes across major infrastructure projects such as Crossrail
and Thameslink in London, as well as working on new office buildings in
Canary Wharf under strict sustainability assessment methodologies. My work to
date has spanned rail, the built environment, infrastructure, including
offshore wind farms, and even a small amount of work on a proposed space port
up in Scotland. My work has also led me to create and deliver sustainability
strategies which is what my role at Foresight entails.
At university I studied Environmental Management and my career started off
with a heavy focus on the environment and quickly developed into the more
holistic approach to sustainability. I was always passionate about conserving
nature, managing resources better and being an efficient business through
better management of materials and money - however the shift towards
sustainability really opened my eyes to the social side of sustainability too
and this continues to be a big driver in everything that I do.
What have been your highlights over the last year working at Foresight?
I am now the Group Sustainability Lead at Foresight Group - I joined the
business last year originally to support the infrastructure division in
driving sustainability performance improvements across the portfolio. In that
role I developed a suite of sustainability KPIs for our assets under
management, working with asset managers and operations and maintenance
contractors to establish how best to report against these new metrics. The end
goal being to enable us to demonstrate continual improvement, identify
inefficiencies and establish improvement plans for our assets from
construction, into operation and through to disposal. The development of these
KPIs has been a real highlight for me and I was able to use the good work that
JLEN had already started on in this area to drive a wider approach for the
whole Group.
What is your vision for Sustainability at Foresight?
I will be spending some time later this year to put in place a formal
sustainability mission statement for the business which will lead to a set of
objectives that we can all support. My personal objective is for everyone in
our business to understand what their role is in delivering sustainable
outcomes, whatever their business function - we are all accountable and we can
all make a positive contribution to the company's sustainability outcomes. I
want to build a work environment that makes it obvious from the minute a new
member of staff or visitor walks into one of our offices that we make every
decision with sustainability in mind. Sustainability isn't just about
investing in the "right" products, it is about embedding it into the little
things too - I think a lot of us are switched on to being relatively
sustainable but there are always more things we can do to assist in this when
we have the proper frameworks in place.
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 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 represent a minimum
of 50% of the portfolio by value) and across different types of environmental
infrastructure in order to achieve a broad spread of risk in the Company's
portfolio.
The Company will also ensure that its investment portfolio comprises a minimum
of five 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 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, 25% or more of
the NAV is attributable to projects that are in construction and are not yet
fully operational;
· at least 50% of the portfolio (by value) will be based in the UK
and the 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 Net Asset Value 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 Net Asset Value immediately post-acquisition. In no
circumstances will a new acquisition exceed a maximum limit of 30% of the
Net Asset Value 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 within 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 Fund will seek to acquire
those investments that fit the investment objectives and investment policy of
the Company. If, in the opinion of the Directors, the risk characteristics,
valuation and price of the prospective investment are acceptable and
consistent with the Company's investment objective and investment policy, then
(subject to the Fund having sufficient sources of capital) an offer will be
made (without seeking the prior approval of shareholders) and, if successful,
the investment will be acquired by the Fund.
The Investment Manager will be subject to the overall supervision of the
Board, following appointment of Foresight Group as AIFM some investment
decisions have been delegated to Foresight Group. Approvals for large
investments or investments into sectors new to JLEN are reserved for the
Board, all of whom are independent of the Investment Manager.
Potential disposal of investments
Whilst the Directors 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 and report to the Directors
accordingly. The Directors only intend to dispose of investments where they
consider that appropriate value can be realised for the Company or where they
otherwise believe 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
Company, unless the Directors believe that such valuation materially
misrepresents the value of the Fund's investment interests at the time of the
relevant acquisition. The Fund will not be required to dispose of investment
interests and to rebalance its portfolio as a result of a change in the
respective valuations of investment interests.
In conjunction with the Investment Manager, the Board is considering whether
to amend the Investment Policy to allow the Company to deploy a limited amount
of capital into projects that are at a pre-construction stage. This is in
response to developments in the market for environmental infrastructure assets
where investors interested in long-term ownership of assets provide capital to
developers at an earlier stage in order to secure privileged access to
pipeline and potentially enhanced returns.
INVESTMENT PORTFOLIO AND VALUATION
Portfolio value increased to £795.4 million at 31 March 2022 from £571.4
million at 31 March 2021.
Investment portfolio
At 31 March 2022, the Group's investment portfolio comprised interests in 37
project vehicles and investments into several European projects through its
investment in FEIP.
Asset Location Type Ownership Capacity (MW) Commercial operations date
Bilsthorpe UK (Eng) Wind 100% 10.2 Mar 2013
Burton Wold Extension UK (Eng) Wind 100% 14.4 Sep 2014
Carscreugh UK (Scot) Wind 100% 15.3 Jun 2014
Castle Pill UK (Wal) Wind 100% 3.2 Oct 2009
Dungavel UK (Scot) Wind 100% 26.0 Oct 2015
Ferndale UK (Wal) Wind 100% 6.4 Sep 2011
Hall Farm UK (Eng) Wind 100% 24.6 Apr 2013
Llynfi Afan UK (Wal) Wind 100% 24.0 Mar 2017
Moel Moelogan UK (Wal) Wind 100% 14.3 Jan 2003 & Sep 2008
New Albion UK (Eng) Wind 100% 14.4 Jan 2016
Wear Point UK (Wal) Wind 100% 8.2 Jun 2014
Biogas Meden UK (Eng) Anaerobic digestion 100% 5.0((1)) Mar 2016
Egmere Energy UK (Eng) Anaerobic digestion 100% 5.0((2)) Nov 2014
Grange Farm UK (Eng) Anaerobic digestion 100% 5.0((2)) Sep 2014
Icknield Farm UK (Eng) Anaerobic digestion 53% 5.0((1)) Dec 2014
Merlin Renewables UK (Eng) Anaerobic digestion 100% 5.0((2)) Dec 2013
Peacehill Farm UK (Scot) Anaerobic digestion 49% 5.0((3)) Dec 2015
Rainworth Energy UK (Eng) Anaerobic digestion 100% 2.2((4)) Sep 2016
Vulcan Renewables UK (Eng) Anaerobic digestion 100% 13((2)) Oct 2013
Warren Energy UK (Eng) Anaerobic digestion 100% 5.0((2)) Dec 2015
Amber UK (Eng) Solar 100% 9.8 Jul 2012
Branden UK (Eng) Solar 100% 14.7 Jun 2013
CSGH UK (Eng) Solar 100% 33.5 Mar 2014 & Mar 2015
Monksham UK (Eng) Solar 100% 10.7 Mar 2014
Panther UK (Eng) Solar 100% 6.5 2011-2014
Pylle Southern UK (Eng) Solar 100% 5.0 Dec 2015
Bio Collectors UK (Eng) Waste management 70% 11.7((5)) Dec 2013
Codford Biogas UK (Eng) Waste management 100% 3.8((4)) 2014
Cramlington Renewable Energy Developments UK (Eng) Biomass combined heat and power 100% 32.0((6)) 2018
ELWA UK (Eng) Waste management 80% n/a 2006
Energie Tecnologie Ambiente ("ETA") Italy Energy-from-waste 45%((7)) 16.8 2012
Tay UK (Scot) Wastewater 33% n/a Nov 2001
Northern Hydropower UK (Eng) Hydropower 100% 1.8((8)) Oct 2011 & Oct 2017
Yorkshire Hydropower UK (Eng) Hydropower 100% 2.0((8)) Oct 2015 & Nov 2016
CNG Foresight UK (Eng) Low carbon transport 25%((9)) n/a Various
Sandridge Battery Storage UK (Eng) Battery storage 50% n/a Under construction
West Gourdie UK (Eng) Battery storage 100% n/a Under construction
FEIP
JLEN has a 2.5% allocation to FEIP.
Skaftåsen Vindkraft AB Sweden Wind n/a n/a Under construction
Torozos Spain Wind n/a n/a Dec 2019
Puskakorpi Finland Wind n/a n/a Under construction
85 Degrees Netherlands Portfolio of geothermal heat n/a((10)) n/a Operational/construction
MaresConnect Republic of Ireland High voltage n/a n/a Development and under construction
Carna Scotland Pumped storage hydro and co-located wind n/a n/a Under construction
Total 359.5
(1) MWth (thermal) and an additional 0.4MWe CHP engine for on-site
power provision.
(2) MWth (thermal) and an additional 0.5MWe CHP engine for on-site
power provision.
(3) MWth (thermal) and an additional 0.25MWe CHP engine for on-site
power provision.
(4) Electrical exporting plant measured as MWe.
(5) 10MWth and an additional 1.7MWe capacity through two CHP engines.
(6) 26MWe (electrical) and 6MWth (thermal).
(7) Not including FEIP's ownership.
(8) Includes a 1.2MW battery storage.
(9) JLEN holds 25% of the "A" shares. "A" shares have a different
economic entitlement than "B" shares, including a priority return.
(10) JLEN has committed €20 million to FEIP.
The JLEN portfolio comprises a diversified range of assets across different
geographies, sectors, technologies and revenue types, as illustrated in the
analysis below as at 31 March 2022 (by portfolio value and distributions
from projects):
Portfolio value split by sector
Wind 29%
Waste & bioenergy 28%
Anaerobic digestion 22%
Solar 17%
Low carbon & energy efficiency 3%
Hydro 1%
Portfolio value split by geography
UK 96%
Rest of Europe 4%
Portfolio value split by remaining asset life
Up to 10 years 9%
11 to 20 years 57%
More than 20 years 34%
Weighted average remaining asset life of the portfolio is 17.1 years.
Portfolio operator exposure (percentage of portfolio value)
SGRE 18%
Future Biogas 18%
BWSC 12%
ROC Energy 8%
Vestas 6%
Other 38%
Portfolio value split by operational status
Operational 98%
Construction 2%
Portfolio value split by valuation methodology
Discounted cash flow 97%
Construction cost 2%
Other 1%
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 Directors' valuation of the portfolio at 31 March 2022 was £795.4
million, compared to £571.4 million at 31 March 2021. The increase of
£224.0 million is the net impact of new acquisitions, cash received from
investments, changes in macroeconomic (including corporation tax rate), power
price and discount rate assumptions, and underlying growth in the portfolio.
A reconciliation of the factors contributing to the growth in the
portfolio during the year is shown in the chart found on page 77 of the
Annual Report 2022.
The movement in value of investments during the year ended 31 March 2022 is
shown in the table below:
2022 2021
£m £m
Valuation of portfolio at opening balance 571.4 537.1
Acquisitions in the year (including post-acquisition adjustments and deferred 82.4 62.9
consideration)
Cash distributions from portfolio (56.5) (48.2)
Rebased opening valuation of portfolio 597.3 551.8
Changes in forecast power prices 127.2 (15.2)
Changes in economic assumptions 26.1 (26.0)
Changes in discount rates 9.7 11.0
Changes in exchange rates (0.1) (0.1)
Balance of portfolio return 35.2 49.9
Valuation of portfolio at 31 March 795.4 571.4
Fair value of intermediate holding companies (32.5) (67.3)
Investments at fair value through profit or loss 762.9 504.1
Allowing for investments of £82.4 million (including post-acquisition
adjustments, deferred consideration and disposals) and cash receipts from
investments of £56.5 million, the rebased valuation is £597.3 million. The
portfolio valuation at 31 March 2022 is £795.4 million (2021: £571.4
million), representing an increase over the rebased valuation of 33% over the
year (2021: 3.5%).
Valuation assumptions
As at the valuation date, 97% of the investments in JLEN's portfolio are
valued by discounting the future cash flows forecast from the underlying
assets' financial models, with the remaining portfolio valued at cost.
Each movement between the rebased valuation and the 31 March 2022 valuation is
considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 31 March 2022
reflect contractual fixed price arrangements under PPAs, where they exist, and
short-term market forward prices for the next two years where they do not.
The Company maintains a programme of rolling price fixes for its energy
generating projects, typically having the majority of projects on fixed price
arrangements for the next six to 12 months in order to reduce the revenue
risk from price volatility.
Where generating projects in the portfolio do not have a fixed price under
their PPAs, JLEN has reflected the prices in the table below, along with the
comparable from last year in brackets (gross of PPA discounts):
Avg. £/MWh Summer Winter
Electricity 132 (52) 129 (61)
Gas 78 (14) 74 (17)
At 31 March 2022, 76% of the renewable energy portfolio's electricity and gas
price exposure was subject to fixed prices for the summer 2022 season and 64%
for the winter season 2022/23.
After the initial two-year period, for the UK portfolio, 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 as required.
For the Italian portfolio, project cash flows assume future electricity prices
informed by a leading independent market consultant's long-term projections.
Short-term wholesale electricity and gas prices have increased significantly
over the year. Prices for the current summer 2022 season for electricity
increased by close to 200% from April 2021 to March 2022. Gas prices were even
more volatile, with an increase of more than 400% from April 2021 to the peak
during March 2022, before falling back in April 2022 to a level still more
than 200% higher than a year earlier. Increases in prices across the wind,
solar and anaerobic digestion assets, including from the effect of replacing
expiring PPAs with new fixed price arrangements, have increased the NAV by 5.6
pence.
In addition to this, a further 8.4 pence has been generated from changes in
electricity price assumptions at two bioenergy projects that were previously
held at acquisition cost in the 31 December 2021 valuation. These assets,
ETA energy-from-waste in Italy and Cramlington biomass CHP in the UK, were
acquired in the summer of 2021 and prior to the invasion of Ukraine that has
contributed significantly to the subsequent volatility in power markets.
Both are baseload generators and had limited fixed price contracts in place
at the time of acquisition, making them well-placed to benefit from recent
rises.
The overall change in forecasts for future electricity and gas prices compared
to forecasts at 31 March 2021 has increased the valuation of the portfolio by
£127.2 million.
The graph on page 79 of the Annual Report 2022 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 curve is presented both with and without short-term PPA pricing secured
under fixed contract arrangements to illustrate the scale of variance between
weighted average pricing that the portfolio is expecting to achieve versus the
pricing available for a 100% floating project. Short-term fixes have been
secured at levels significantly above the valuation assumptions forecast last
year, which has both contributed an uplift in Net Asset Value as well as
serving to mitigate exposure to the risk of prices falling from their current
levels, but it also means that the portfolio may not always be free to capture
the very highest prices that are available from time to time.
Revenue analysis
The graph on page 79 of the Annual Report 2022 shows the way in which the
revenue mix of the renewables portfolio changes over time, given the
assumptions made regarding future power prices set out above. As one would
expect, merchant power revenues increase in later years as the subsidies that
projects currently enjoy expire.
On an NPV basis (using the discount rate applicable to each project), the
relative significance of each revenue category (including PFI) is as follows:
Contribution to
revenue type
portfolio value
Subsidy 56%
Long-term contracts 6%
Merchant power 29%
Other 9%
The proportion of Fund revenues that come from the sale of wholesale
electricity and gas is 25% and 4% respectively. Despite recent uplifts in
energy prices, merchant power revenue remains a low proportion and reflects
the broader diversification of JLEN's portfolio.
Economic assumptions
The 31 March 2022 valuation reflects an uplift in inflation assumptions based
on a combination of actual historic inflation and recent independent economic
forecasts.
Short-term RPI inflation rates (being the key index referenced in subsidy and
contractual mechanisms in JLEN's portfolio) assumed in the valuation reflect
an increased 2022 rate of 5% (2021: 3%) before reverting to the established
assumption of 3% until 2030, reducing to 2.25% from 2031 onwards (31 March
2021: 3% until 2030, reducing to 2.25% from 2031 onwards), whilst CPI
inflation rates assumed in the valuation at 31 March 2022 are 2.25% across all
years (31 March 2021: 2.25%) for UK assets and 1.3% for 2022, stepping to 2%
from 2025, for Italian assets (31 March 2021: not applicable).
In light of the current economic environment, near-term actual inflation may
vary from assumptions applied within the portfolio valuation, therefore the
Investment Manager will continue to monitor developments in this area. For
illustrative purposes, where inflation is higher than JLEN's valuation
assumption by 3% for the next three years, NAV would be expected to increase
by 7.5 pence per share.
Near-term UK corporation tax rates remain unchanged at 19%, stepping up to 25%
from April 2023 (31 March 2021: 19%, stepping up to 25% from April 2023). The
equivalent Italian assumption applies the national rate of 24% plus applicable
regional premiums (31 March 2021: not applicable).
UK deposit rates assumed in the valuation also remain unchanged at 0.25% to
2024 and 1% thereafter (31 March 2021: 0.25% to 2024 and 1% thereafter).
Italian deposit rates are presently assumed at 0% (31 March 2021: not
applicable).
The euro/sterling exchange rate used to value euro-denominated investments was
€1.18/£1 at 31 March 2022 (€1.17/£1 at 31 March 2021).
The overall uplift in value resulting from changes to economic assumptions in
the year is £26.0 million.
Discount rates
The discount rates used in the valuations represent the Investment Manager's
and Board's assessment of the rate of return in the market for assets with
similar characteristics and risk profile. The discount rates are reviewed on
a regular basis and updated to reflect changes in the market and in the
project risk characteristics.
During the year since 31 March 2021, there has continued to be strong demand
for income-producing infrastructure assets. The Investment Manager, based on
its experience of bidding in the secondary market, has proposed a reduction in
the discount rate used for valuing UK solar assets of 50 basis points and 75
basis points for UK wind assets. This reduction reflects market discount rate
observations. In addition to this, the discount rate for JLEN's investment
in low carbon refuelling infrastructure has also been reduced as the rollout
of new sites has continued satisfactorily.
A risk premium has been added to the discount rate for Cramlington biomass
CHP, as Cramlington is the asset most sensitive to changes in near-term
electricity prices. It is expected that the premium will be removed
progressively as uncertainty around actual prices captured reduces.
The discount rate used for 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.
The overall increase in value resulting from changes to discount rates in the
year is £9.7 million.
Taking the above into account and reflecting the change in mix of the
portfolio during the year, the overall weighted average discount rate ("WADR")
of the portfolio was 7.3% at 31 March 2022 (31 March 2021: 7.3%).
Balance of portfolio return
This represents the balance of valuation movements in the year excluding the
factors noted above. The balance of the portfolio return mostly reflects the
impact on the rebased portfolio value, all other measures remaining constant,
of the effect of the discount rate unwinding and also some additional
valuation adjustments from updates to individual project revenue assumptions.
The total represents an uplift of £35.2 million.
Valuation sensitivities
The Net Asset Value of the Company is the sum of the discounted value of the
future cash flows of the underlying asset financial models, the cash balances
of the Company and UK HoldCo, and the other assets and liabilities of the
Group less Group debt.
The portfolio valuation is the largest component of the Net Asset Value and
the key sensitivities are considered to be the discount rate applied in the
valuation of future cash flows and the principal assumptions used in respect
of future revenues and costs.
A broad range of assumptions is used in our valuation models. These
assumptions are based on long-term forecasts, 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 key assumptions are as follows:
Discount rate
The WADR of the portfolio at 31 March 2022 was 7.3% (31 March 2021: 7.3%). 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 £21.0 million (3.2 pence per share) compared
to an uplift in value of £22.0 million (3.3 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 presented on the basis 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 recent
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 6.0 pence per share, the impact from solar, wind and hydro
separately is only 1.3 pence per share, 4.4 pence per share and 0.3 pence
per share respectively, as shown in the chart overleaf.
Agricultural anaerobic digestion facilities do not suffer from similar
deviations as their feedstock input volumes (and consequently biogas
production) are controlled by the site operator.
For the waste and wastewater processing projects, forecasts are based on
projections of future flows and are informed by both the client authorities'
own business plans and forecasts and independent studies where appropriate.
Revenues in the PPP projects are generally not very sensitive to changes in
volumes due to the nature of their payment mechanisms.
Electricity and gas prices
Electricity and gas price assumptions are based on the following: for the
first two years, cash flows for each project use forward electricity and gas
prices based on market rates unless a contractual fixed price exists, in which
case the model reflects the fixed price followed by the forward price for the
remainder of the two-year period. For the remainder of the project life, a
long-term blend of central case forecasts from 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, 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 £43.6 million (6.6 pence per share) compared to a
downward movement in value of £44.3 million (6.7 pence per share) if prices
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 £9.0 million (1.4 pence per share) compared to
an uplift in value of £9.0 million (1.4 pence per share) if prices
were reduced by the same amount.
Inflation
Most projects in the portfolio receives a revenue stream which is either fully
or partially inflation-linked. The inflation assumptions are described in the
macroeconomic section on page 80 of the Annual Report 2022. 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 £19.4 million (2.9 pence per share) compared to a
decrease in value of £19.0 million (2.9 pence per share) if rates were
reduced by the same amount.
In light of the current economic environment, near-term actual inflation may
vary from assumptions applied within the portfolio valuation, therefore the
Investment Manager will continue to monitor developments in this area. For
illustrative purposes, where inflation is higher than JLEN's valuation
assumption by 3% for the next three years, NAV would be expected to increase
by 7.5 pence per share.
Euro/sterling exchange rates
As the proportion of the portfolio assets with cash flows denominated in euros
represented approximately less than 5% of the portfolio value at 31 March
2022, 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 on page 185 of the Annual Report 2022.
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 rates of 2% would result in a downward
movement in the portfolio valuation of £11.5 million (1.7 pence per share)
compared to an uplift in value of £11.7 million (1.8 pence per share) if
rates were reduced by the same amount.
Sensitivities - impact on NAV at 31 March 2022
The chart on page 83 of the Annual Report 2022 shows the impact of the key
sensitivities on Net Asset Value per share, with the £ labels indicating the
impact of the sensitivities on portfolio value.
OPERATIONAL REVIEW
Portfolio performance
Operating performance of the environmental infrastructure portfolio during the
year ended 31 March 2022 was stable with no material issues experienced. The
renewables segment of the portfolio produced 1,314GWh (2021: 977GWh) of green
energy, 6% below budget, primarily due to very low wind speeds experienced
over the year. The concession-based waste and wastewater projects performed in
line with their targets and the CNG portfolio of refuelling stations
outperformed against its fuel dispensed target.
Index power prices increased to unprecedented levels over the year under
review. Initial market volatility arose due to a combination of
low renewables contribution to the grid, a natural gas shortage and rising
carbon prices. This was then exacerbated at the end of the financial year by
the invasion of Ukraine and the implications for global power markets given
the importance of Russian oil and gas. While high prices had a relatively
modest effect upon the year under review due to the presence of earlier price
fixes on much of the portfolio's generation, the outlook for captured prices
in 2022/23 has increased significantly.
Portfolio performance to 31 March 2022
1,314GWh
green energy produced
16%
above CNG fuel dispensed target
>695,000
waste diverted from landfill (tonnes)
>35.6 billion
litres of wastewater treated
Renewable energy generating assets
Anaerobic digestion
The AD portfolio is the largest producer of energy on a GWh basis and
generated 39% of the GWh energy produced by the JLEN portfolio. Gas generation
(measured in GWh energy generated) was 508GWh, 3.1% ahead of target (2021
variance was 2.1% favourable).
Seven of the nine plants outperformed or reached their generation targets and
notably strong performances came from Icknield and Peacehill, which both
performed >10% above their generation targets.
The Vulcan plant, which underwent expansion and upgrade works in the previous
financial year, performed in line with its new generation target. During the
period under review, the plant successfully installed further hardware
upgrades which will improve biogas production and operations on site.
Wholesale gas prices have been at unprecedented levels in the latter part of
the financial year. At 31 March 2022, the Investment Manager has hedged gas
volumes for future winter and summer periods with 75% of capacity hedged until
March 2023 tapering down to 60% in summer 2023 and 41% in winter 2023.
The Investment Manager has seen an increase in demand for both crop and
waste-based green gas certificates and has been able to secure short to
medium-term contracts at favourable rates.
Waste & bioenergy
The renewable energy generating segment of the waste & bioenergy portfolio
is now the second largest producer of energy on a GWh basis and generated 28%
of the GWh energy produced by the JLEN portfolio. The waste & bioenergy
portfolio generated 363GWh over the year to 31 March 2022, 9.3% below target.
The assets suffered no material issues over the year but did experience some
short-term technical issues which led to downtime in the period. The
Investment Manager has been working with asset operators to remedy these
issues and improve resilience for the future.
Highlights from the year include Codford successfully winning its first
municipal food waste tender in 2022; this represents a long-term food waste
contract and a consistent supply of feedstock for the plant.
The Cramlington biomass plant, which was bought out of administration with an
identified list of operational matters to address, has made good progress
during the year, with scope for further process improvements in periods
to come.
Wind
The wind portfolio generated 359GWh over the year ended 31 March 2022 (27% by
GWh energy generated), 15.6% below target. The negative variance in production
was primarily the result of significantly lower wind resource. Monthly average
wind speeds were below long-term average through most of the period under
review; the only exception was February 2022, which saw the portfolio
generate 43% more electricity than anticipated.
The assets continued to perform well with turbine availability 1% above
warranted levels for the year. However, overall availability was down 2% on
expectations, largely due to grid outages and some intermittent issues with
data coverage.
Power prices were substantially fixed across the portfolio during the year and
revenues were not impacted by the market volatility in the period.
Value enhancements were ongoing over the year; the previously reported
aftermarket software and hardware upgrades which were installed at Carscreugh
were tested and proved a total uplift of 3.2% for the site's generation.
Additionally, aerodynamic enhancement hardware was installed at Burton Wold.
The impact will be quantified independently in the coming financial year and
the Investment Manager anticipates the impact to be c.2% uplift in
generation.
Solar
The solar portfolio performed well and overall availability was in line with
expectations. Generation from the solar assets (which represent 6% of the
portfolio energy generation for the year) at 78GWh was 0.7% above target
(2021: 1.8% above budget) primarily due to higher than forecast irradiance
levels.
Power prices were substantially fixed across the portfolio during the year and
revenues were not impacted by the market volatility in the period.
Hydro
The hydro assets performed 16.4% below generation target over the course of
the year. Although the measured annual rainfall was marginally below the
long-term average, the distribution of rainfall had a negative impact on
production. Periods of heavy rain were followed by extended dry spells, both
of which are detrimental to the production capacity of the hydro assets.
Despite this, the assets continued to perform well with virtually
no mechanical downtime over the year.
Portfolio generation 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Total since IPO
Wind portfolio actual generation (GWhe) 82 184 217 399 406 458 432 359 2,537
Variation from budget((1)) -7% +11% -15% 0% -9% +4% -1% -16% -5%
AD portfolio actual generation (GWhth/GWhe) - - - 51 262 352 461 508 1,634
Variation from budget - - - +8% +4% +4% +2% +3% +3%
Solar portfolio actual generation (GWhe) 10 30 40 64 79 75 79 78 455
Variation from budget((1)) -1% -2% -12% -9% +2% -3% +2% +1% -3%
Waste & bioenergy actual generation (GWhe) - - - - - - - 363 363((2))
Variation from budget - - - - - - - -9% -9%
Hydro portfolio actual generation (GWhe)((3)) - - - - - 3 5 5 13
Variation from budget - - - - - -17% -15% -16% -16%
(1) Budgets adjusted to reflect operational energy yield assessments
carried out under contracted true-up mechanisms post IPO.
(2) Does not include generation in 2020/21.
(3) Includes generation from Northern Hydropower Limited from 31 March
2020.
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 2022 is shown
in the table below:
Year ended Year ended
Average all-in energy price 31 Mar 2022 31 Mar 2021
Onshore wind £99.64 per MWhe £84.26 per MWhe
AD electric 81.19MWhe -
AD gas-to-grid £109.69MWth £101.0 per MWhth
Biomass £147.27/MWhe -
Energy from Waste €173.75/MWhe -
Solar £267.0 per MWhe £196.8 per MWhe((1))
Hydro £232.65 per MWhe £222.56 per MWhe
(1) Does not include Panther rooftop portfolio
The effects of monthly variability and seasonality in production expected in a
portfolio of intermittent renewables projects are reduced by the extent of
diversification in JLEN's portfolio. Although agricultural AD plants have some
indirect exposure to weather patterns through the yield of harvests
(feedstock), it is very unlikely to impact on their gas volumes. The
environmental processing assets, apart from Tay, have revenues independent of
weather and all have revenues that vary little with changes in volume of
waste and wastewater processed. The Company now separates the sensitivities
illustrating the effect of different levels of wind and solar resource on the
portfolio valuation as there is no indication that these weather resources are
positively correlated.
Assets which support the transition to a lower carbon future
Waste & bioenergy concessions
The ELWA waste project and the Tay wastewater project continue to meet their
contractual targets and operational performance has been stable while the
financial performance of both projects has been in line with expectations.
For the ELWA waste project, financial performance has been better than
expected and operational performance and compliance with contractual targets
were also exceeded or met. Operational performance targets were again exceeded
with diversion from landfill at 99.98%, substantially ahead of the 67%
contract target, and recycling at 29.8%, also ahead of the 22% contract
target, and ELWA was able to pay higher distributions than were budgeted.
The Tay wastewater project has performed well over the year and flows were in
line with expectations. As a result, distributions from the project were in
line with its budget.
Low carbon transport
The portfolio of CNG refuelling stations performed well over the financial
year, with 16% more CNG dispensed than budgeted for the year although delays
to new vehicle deliveries caused by global supply chain issues led to this
growth being lower than its full potential.
The stations are used by a range of national hauliers including Amazon and
Royal Mail.
During the period, the refuelling stations at Avonmouth and Eurocentral were
successfully completed, in line with the construction programme, and these
sites are now operational. A further refuelling station - Castleford - is due
to be completed in August 2022.
Battery storage assets
Operational assets
The operational batteries that are co-located at two of the Company's hydro
assets were traded exclusively in Firm Frequency Response over the period,
receipts for which were in line with expectations.
The nature of the metering arrangements at both sites precluded offering any
of the new suite of grid support services being gradually introduced by
National Grid. With Firm Frequency Response being phased out in 2022, the
Investment Manager is exploring options to install new metering hardware to
maximise the trading flexibility of the assets.
Development assets
JLEN owns two construction stage 50MW battery storage assets in the UK: West
Gourdie and Sandridge. Both sites have experienced delays to their
construction times due to increased lead times for battery components. West
Gourdie is expected to commence operations towards the end of 2022. Sandridge
is also faced with potential delays to the grid connection which means it will
likely commence operations in 2023. The effect of delayed operations is
expected to be offset by the improved market outlook for large-scale battery
assets.
Other investments
FEIP
In January 2020, JLEN announced a commitment of €25 million to Foresight
Energy Infrastructure Partners SCSp ("FEIP"), a Luxembourg limited partnership
investment vehicle. At 31 March 2022, the Fund has invested in seven projects
- two construction stage onshore wind projects located in Sweden and Finland
respectively, an operational 94MW wind farm located in Spain, a portfolio of
geothermal heat and district heating assets located in the Netherlands, a
construction stage interconnector cable to England located in Ireland and a
construction stage pumped storage hydro facility located in Scotland. FEIP
also owns a 45% stake in ETA, in which JLEN is also an investor. As at 31
March 2022 €4.8 million has been invested in the vehicle.
CNG Foresight investment
JLEN invested £3.8 million into CNG Foresight during the period under review.
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 three
years. Following a continuation of this programme post year end, the latest
extent of generation subject to fixes is as follows:
Summer 2022 Winter 2022 Summer 2023 Winter 2023
Wind 87% 77% 85% 85%
Solar 100% 100% 100% 100%
Thermal 56% 56% - -
AD - electric 100% 100% 26% 26%
AD - gas 77% 77% 60% 61%
Acquisitions
Sandridge Battery Storage
In May 2021, JLEN acquired a 50% equity stake in Sandridge Battery Storage
Limited, which holds the development rights to construct the Sandridge Battery
Storage project, a 50MW lithium-ion battery energy storage plant based
in Melksham in Wiltshire, UK.
Energie Tecnologie Ambiente
In May 2021, JLEN acquired a 45% equity stake in Energie Tecnologie Ambiente
S.r.l ("ETA"), a 16.8MW energy-from-waste power plant which processes refuse
derived fuel, located in the municipality of Manfredonia in the Apulia region
of southern Italy. The investment has been made alongside FEIP, which also
acquired a 45% equity stake. ETA was owned by Marcegaglia Investments S.r.l.
which retained a 10% equity stake in the EfW plant.
Cramlington Biomass
In June 2021, JLEN acquired a 100% equity stake in Cramlington Renewable
Energy Developments Ltd, which owns a biomass CHP Plant and its underlying
contracts. The CHP Plant is located to the north west of the town of
Cramlington in Northumberland and utilises proven technology to process a
diversified biomass fuel mix, creating up to 26MW of electrical power and 6MW
of heat for export via private wire to industrial customers and the grid.
Divestments
In January 2022, JLEN announced the sale of its two French onshore wind farms,
Parc Éolien Le Placis Vert and Energie Eolienne de Plouguernével for a
total consideration of €5.9 million.
Acquisitions and divestments
3
acquisitions made in the period
48.8MW
capacity added to the portfolio
2
new technology sub-sectors
2
Asset divestments
Financing
On 21 May 2021, JLEN announced that it had signed a new revolving credit
facility with a three-year facility agreement which provides for a committed
multi-currency revolving credit facility of £170 million and an uncommitted
accordion facility of up to £30 million.
The RCF provides an increased source of flexible funding outside of equity
raisings, with both sterling and euro drawdowns available at lower rates than
the existing facility. The agreement includes an uncommitted option to extend
for a further year and will 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 is linked to the Company's
ESG performance, with JLEN incurring a premium or discount to its margin and
commitment fee based on performance against defined targets. Those targets
include:
· environmental: increase in the volume of clean energy produced;
· social: the value of contributions to community funds; and
· governance: maintaining a low number of work-related accidents, as
defined under the Reporting of Injuries, Diseases and Dangerous Occurrences
("RIDDOR") 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 three of the four previous lenders (HSBC, ING and NIBC) plus two new
participants (National Australia Bank and Royal Bank of Scotland
International). The margin can vary between 195 bps and 205 bps over SONIA
("Sterling Overnight Index Average") for sterling drawings and EURIBOR for
euro drawings, depending on performance against the ESG targets.
The Board is pleased to advise that two of the three KPI targets were
successfully achieved in the first year of implementation of this facility,
and the Board remains committed to delivering all three KPI targets prior to
the end of the facility agreement period.
In addition to the revolving credit facility, several of the projects have
underlying project-level debt which is not reflected in these financial
statements. There is an additional gearing limit in respect of such debt of
85% of the aggregate gross project value (being the fair market value of
such portfolio companies increased by the amount of any financing held within
the projects) for PFI/PPP projects and 65% for renewable energy generation
projects.
As at 31 March 2022, drawings under the RCF were £53.6 million. Under its
investment policy, JLEN may borrow up to 30% of its NAV.
The project-level gearing at 31 March 2022 across the portfolio was 19.9% (31
March 2021: 28.4%), being 16.3% (31 March 2021: 25.1%) for the renewable
energy assets and 50.6% (31 March 2021: 51.2%) for the PFI processing assets.
Taking into account the amount drawn down under the revolving credit facility
of £53.6 million, the overall fund gearing at 31 March 2022 was
23.7% (31 March 2021: 36.1%).
As at 31 March 2022, the Group, which comprises the Company and the
intermediate holding companies, had cash balances of £18.0 million (31 March
2021: £13.5 million).
Financing
£53.6m
drawn on RCF
23.7%
fund gearing((1))
( )
(1) Gearing is an alternative performance measure ("APM"). The APMs within
the accounts are defined on page 193 of the Annual Report 2022.
VALUE ENHANCEMENT
The Investment Manager has achieved various operational and financial
enhancements to projects over the period.
Power price fixes
Index power prices increased to unprecedented levels in the last half of the
year due to a combination of low renewables contribution to the grid, a
natural gas shortage and rising carbon prices. The Investment Manager took
this opportunity to fix future seasons at prices above previous assumptions
across the portfolio. This was particularly beneficial to the Cramlington
biomass plant which has entered into a fix at a price that is more than
double the fees for the summer season 2022 than it had been previously
receiving in summer 2021.
Plant upgrades and technical optimisation on the waste & bioenergy
assets
Over the period a fuel preparation area was completed at Cramlington; the
area will be used to streamline the incoming fuel process and will be leased
to an external biomass supplier. This allows for efficiencies and cost savings
in the biomass supply chain. Other upgrades are planned in the coming year to
reduce inefficiencies at the plant caused by known equipment problems.
Meanwhile, at ETA, technical optimisations to improve the disposal of waste
ashes from the plant are being explored.
Technical optimisations on the wind portfolio
Aerodynamic enhancement hardware was installed at Burton Wold. The impact
will be quantified independently in the coming financial year; however, the
Investment Manager expects an uplift of c.2%. Other software upgrades have
been identified to boost performance on some sites and discussions
are ongoing to implement these upgrades.
General AD upgrades/improvements
An area of focus for the AD portfolio has been on improving resilience to
risks associated with digestate storage and removal. Across the portfolio new
digestate storage tanks and lagoons are being planned or have already been
installed.
CASE STUDY
Environmental, social and governance
Cramlington Renewable Energy Developments Limited
In June 2021, JLEN acquired a 100% stake in Cramlington Renewable Energy
Developments Limited ("Cramlington") which owns a biomass combined heat and
power plant and its underlying contracts.
The plant uses proven technology to process a diversified biomass fuel mix,
creating up to 26MW of electrical power and up to 6MW of heat for export via
private wire to industrial customers and the grid.
Cramlington
Project description Operational biomass combined heat and power plant
Acquisition date June 2021
Location Northumberland, UK
Ownership 100%
Commercial operations date 2018
Project information
The biomass cogeneration plant has a capacity to deliver 26MW of electricity
and 6MW of heat through combustion of c.245ktpa of biomass residues and waste
wood feedstock.
The project currently exports 21GWh of heat and 23GWh of electricity to two
neighbouring pharmaceutical companies.
What is biomass combined heat and power ("CHP")?
A CHP plant creates both electricity and heat from its fuel source, which in
Cramlington's case is a blend of woody biomass. The fuel is mixed, screened
and then fed onto a vibrating grate for combustion. This process produces a
hot flue gas which in turn raises water temperature inside a boiler to produce
superheated steam. This steam is then used in a turbine to generate
electricity and heat. All heat is exported along with some electricity to
adjacent industrial customers with the remaining electricity production
exported to the national grid.
Sustainability
Biomass CHP contributes to a net-zero economy as the biomass wood used to fuel
the plant comes from trees which have in turn absorbed carbon dioxide from the
atmosphere. This carbon dioxide is released during the combustion process but
will be reabsorbed provided the feedstock source is managed in line with
sustainable forest management standards. A proportion of Cramlington's
feedstock comes from waste-wood which could otherwise end up in landfill.
Meanwhile, the wood ash produced as a by-product of the process can be used as
a valuable fertiliser for crops. Cramlington's bottom ash has been used to
directly replace artificial or mined sources of potash and lime as a soil
conditioner on agricultural land in North East England. This provides
a significant cost saving to local farmers.
Biomass CHP also falls within the EU taxonomy which provides that subject to
prescribed calculations, a bioenergy asset must offer >80% GHG savings
when compared to a fossil fuel comparator in order to contribute substantially
to climate change mitigation.(1) Cramlington achieves 92.4% GHG savings on
heat and 88.8% savings on electricity. The sustainability of generation
depends on both the material used and the distance from where that material is
sourced, with EU regulation stating this should be within 500km. Cramlington
sources material from within 500km of the plant and uses a blend of clean,
recycled wood, forestry residues and small roundwood, all of which contribute
to meeting sustainability criteria.
(2) Contributing substantially to climate change mitigation is one of the
criteria prescribed for establishing whether an economic activity may be
classified as environmentally sustainable under the EU Taxonomy.
CASE STUDY
Diversified portfolio
Foresight Energy Infrastructure Partners ("FEIP")
In January 2020, JLEN announced a commitment of €25 million to Foresight
Energy Infrastructure Partners SCSp, a Luxembourg limited partnership
investment vehicle.
FEIP's strategy is to invest in 10-15 opportunities created by the
transformational change underway in global energy markets. FEIP is targeting a
diversified portfolio of high-quality energy infrastructure assets with strong
sustainability characteristics across the following sub-sectors:
i) renewable generation;
ii) renewable enabling infrastructure (e.g. energy storage); and
iii) transmission & distribution.
FEIP
Project description FEIP is a fund investing in energy infrastructure assets with strong
sustainability characteristics
Geography Europe (80%), Northern America and Australia
JLEN investment €25 million
Total commitments to FEIP as at 31 March 2022 €4.83 million
JLEN's investment benefits
JLEN and FEIP's investment strategy are broadly aligned. JLEN benefits from
its investment in FEIP through an increased exposure to European and
construction stage assets.
The investment in FEIP allows JLEN to further diversify its geographic and
technology exposure, while also gaining an allocation to construction stage
assets which are expected to enhance returns. Given construction stage assets
can only represent a small part of the Company's portfolio, the FEIP
investment allows a greater level of diversification than would be possible
with direct investments, providing for a more attractive risk-adjusted return
profile.
JLEN's commitment to FEIP has opened the possibility of selective,
co-investment opportunities such as the joint investment into ETA Manfredonia.
FEIP's portfolio of assets as at 31 March 2022
Investment Date of acquisition Ownership Country Technology MW capacity Stage
Skaftäsen April 2020 20.98% Sweden Onshore wind 231 Construction
Torozos August 2020 100% Spain Onshore wind 94 Operational
Puskakorpi May 2021 100% Finland Onshore wind 88 Construction
ETA Manfredonia May 2021 45% Italy EfW 16.8 Operational
85 Degrees October 2021 51% Netherlands Portfolio of geothermal heat 45 Operational/construction
MaresConnect February 2022 81.2% Republic of Ireland High voltage direct current interconnectors 750 Development and construction
Carna February 2022 100% Scotland Pumped storage hydro and co-located wind 210 pumped storage hydro + 33.6 wind Construction
SUSTAINABILITY AND ESG
CHAIRMAN'S FOREWORD
JLEN's approach to ESG is continually evolving and improving. This year the
focus has been on collecting baseline data against the ESG KPIs that
we announced in our 2021 Annual Report.
Richard Morse
Chairman
ESG has been at the heart of JLEN's ethos and operations from the outset, long
before the concept of ESG became an accepted acronym. Our assets all fall
within the top two tiers of the EU's sustainability hierarchy; we have always
had regard to social responsibility and good governance; and we were the first
environmental asset fund to establish an ESG sub-committee of the Board. JLEN
frequently assesses its approach to ESG, seeking to emulate and drive best
practice wherever possible. In 2020, for the first time, we articulated a set
of ESG objectives which were integrated into the Fund's objectives. In 2021 we
announced that we had developed and tested a range of ESG key
performance indicators ("KPIs").
This year the focus has been on collecting baseline data against these KPIs
which we hope will provide a consistent framework against which we can track
the ESG performance of our portfolio over time and help us to set ESG
performance benchmarks.
Also this year, a dedicated ESG Committee at the Board level has been set up
to sit alongside and complement the work already done in this area by the Risk
and Audit Committees. We are proud of the ongoing work that occurs to improve
our ESG practices and that the Company's investment activities are
contributing to the transition to a net-zero economy. We are conscious that
our assets may not be perfect from a sustainability perspective, but we are
confident that they will see improvement in this area under our stewardship.
This year, JLEN was recognised for its ESG communication efforts through the
AIC Communication Awards 2022, winning the award for "Best Communication of
ESG".
We continue to see ESG criteria as critical to the management of our business
activities in all areas and is an integral part of our day-to-day activities
at the Investment Manager level. This year, significant work has been done to
address the recommendations of the Task Force on Climate-related Financial
Disclosures and we present our analysis in this area on pages 49 to 67.
Our approach to both sustainability and ESG is progressing, but it is also
well established in its key themes and workstreams. We expect to continue to
evolve and improve our processes and use the KPI data that we have collected
this year to drive meaningful improvements across all areas of ESG.
Richard Morse
Chairman
15 June 2022
AT A GLANCE
Environmental performance 2021/22
c.1,314,000 MWh energy generated
>905,500 GHG emissions avoided (tCO(2)e)
>35.6bn wastewater treated (billion litres)
>695,000 waste diverted from landfill (tonnes)
>135,000 waste recycled (tonnes)
>473,000 organic fertiliser produced (tonnes)
Social performance 2021/22
>£418,000 community funding
Governance performance 2021/22
35 health and safety audits
370
Full time equivalent jobs
Awards
· AIC Communication Awards 2022 - Best Communication of ESG
Investment Manager PRI Scores
· Foresight Group is a signatory to the Principles for Responsible
Investment (PRI), a set of voluntary guidelines that help companies to address
social, ethical, environmental and corporate governance issues as part of the
investment process. Foresight's wider approach to the PRI's six responsible
investment principles were assessed in 2021 by the PRI for the year ending 31
December 2020 and a summary of the results are:
· A+ for Strategy & Governance
· A+ for Infrastructure
· A for Private Equity
· The 2020 assessment transparency report is available on our
website, or on the UN PRI website((1))
(1)
https://stpublic.blob.core.windows.net/pri-ra/2020/Investor/Public-TR/(Merged)_Public_Transparency_Report_Foresight%20Group%20LLP_2020.pdf.
JLEN'S APPROACH TO ESG
JLEN's approach to ESG is based on three core principles: Assess, Monitor and
Engage. Since the publication of the Fund's first ESG report, JLEN has been
focused on progressing each of these principles in order to maintain a robust
ESG framework. JLEN's three ESG objectives are:
ESG objectives
· Promote the efficient use of resources
· Develop positive relationships with the communities in which JLEN
works
· Ensure effective, ethical governance across the portfolio
ESG KPIs
Over 2021/22 JLEN has focused on advancing its approach to "Monitor" and
"Engage" by collecting baseline data against the ESG KPIs that were first
agreed in 2020/21. JLEN's KPIs are set out below and on page 25 of the Annual
Report 2022.
Each KPI has a direct or indirect link to performance of the investment and
the Investment Manager considers these to be important metrics in
understanding the resilience of the portfolio going forward. Each KPI feeds
back to the ESG objectives, allowing JLEN to quantify, where practicable, the
ESG performance of its investments. The table below sets out the full list of
KPIs.
Environmental Social Governance
Renewable energy generated Community funding Portfolio audits of health and safety practices
GHG emissions avoided Health and safety incidents Diversity of SPV directors
Tonnes of waste treated Community engagement procedures Portfolio audits of tax and financial practices
Litres of wastewater treatment FTE jobs supported Inclusion of ESG in SPV board agendas
Environmental incidents Accessibility of community fund documents Governance oversight
Purchased energy originating from renewable sources Assessment of major contractors against ESG criteria Assessment of major contractors against ESG criteria
Management of biodiversity
Assessment of major contractors against ESG criteria
Collection of KPI data
This was the first full year that the Investment Manager has collected the
extended set of ESG data. Care has been taken to validate this data and it
is accurate to the best of the Investment Manager's knowledge, however, as
methodologies for collecting or considering the data progress, it is
conceivable that the data will not be completely comparable year-on-year. In
some instances 12-month data was not available and in these cases, an average
was calculated from the data available. All percentages are calculated using
the total number of SPVs as a denominator.
Mapping JLEN's portfolio against the United Nations Sustainable Development
Goals
The United Nations Sustainable Development Goals ("SDGs") are a set of 17
goals for sustainable development.
To be achieved by 2030, they recognise that ending poverty must go
hand-in-hand with strategies that build economic growth and address a range of
social needs including education, health, social protection and job
opportunities, while tackling climate change and environmental protection.
JLEN has mapped its portfolio against the SDGs and the results of this
analysis are set out below:
SDG Target JLEN's performance
6 Clean water and sanitation 6.3 Improve water quality by reducing pollution, eliminating dumping and >35.6 billion litres of wastewater treated in 2021/22.
minimising release of hazardous chemicals and materials, halving the
proportion of untreated wastewater and substantially increasing recycling and
safe reuse globally.
7 Affordable and clean energy 7.2 Increase substantially the share of renewable energy in the global energy 359.5MW capacity renewable energy assets.
mix.
8 Decent work and economic growth 8.4 Improve progressively global resource efficiency in consumption and JLEN's portfolio is optimised to make the most of naturally available
production and endeavour to decouple economic growth from environmental resources such as wind power. By maximising the power produced by each
degradation, in accordance with the 10-year framework of programmes on turbine, JLEN ensures that its assets are operating as efficiently as they
sustainable consumption and production, with developed countries taking the can.
lead.
8.5 Achieve full and productive employment and decent work for all women and JLEN's KPI tracking jobs in the portfolio as full time equivalent ("FTE")
men, including for young people and persons with disabilities, and equal pay informs this target.
for work of equal value.
9 Industry, innovation and infrastructure 9.1 Develop quality, reliable, sustainable and resilient infrastructure, 359.5MW capacity contributing renewable energy to the local grid.
including regional and transborder infrastructure, to support economic
development and human wellbeing, with a focus on affordable and equitable
access for all.
15 Life on land 15.5 Take urgent and significant action to reduce the degradation of natural JLEN's KPI tracking biodiversity management plans and engagement across its
habitats, halt the loss of biodiversity and, by 2020, protect and prevent the portfolio informs this target.
extinction of threatened species.
Sustainability considerations are embedded throughout the JLEN investment
process and asset management procedures, from initial investment screening
through due diligence and into ongoing monitoring and reporting. Overall
responsibility for ESG resides with the Board of JLEN, with analysis and
reporting against ESG criteria provided by the Fund's Investment Manager.
Assess Monitor Engage
JLEN undertakes due diligence on each of its asset acquisitions, including Third-party service providers, sometimes with the assistance of technical Stakeholder engagement is an important part of JLEN's approach. Engagement
assessing a range of ESG criteria. These criteria will now incorporate the ESG advisers, monitor and manage the ongoing performance of each asset in the JLEN with stakeholders occurs through a combination of formal (e.g. contractual
KPIs as set out in this report. portfolio. Site visits are undertaken to ensure that the asset's day-to-day obligations or industry events) and informal channels (e.g. ongoing meetings
running and ESG performance is as expected, and there are a range and discussions). Further information on stakeholder engagement can be found
of environmental, governance and health and safety audits undertaken by on pages 31 to 37 of the Annual Report 2022.
third parties to maintain visibility over ESG performance in the portfolio.
Each asset is assessed against a range of sustainability evaluation criteria.
Assets are scored against these criteria, providing an overall picture of ESG
performance. Foresight has minimum thresholds for ESG performance, ensuring
This year, JLEN won the AIC's Communication Award 2022 for "Best Communication
that, where necessary, post-investment improvement plans are implemented. Last year, JLEN developed a series of ESG KPIs to help inform this principle of ESG".
and help to track the performance of individual assets, investment sectors and
the entire portfolio over time. This year JLEN has collected baseline data to
inform these KPIs.
Task Force on Climate-related Financial Disclosures
This year, for the first time, JLEN has included a TCFD disclosure (found on
pages 49 to 67 of the Annual Report 2022). As part of this exercise, an
initiative was undertaken to better map the portfolio's exposure to
climate-related physical risks. Climate risks and opportunities are also
assessed as part of the Foresight SET (more information below).
Sustainable Finance Disclosure Regulation
JLEN is categorised as an Article 9 product for the purposes of the EU
Sustainable Finance Disclosure Regulation ("SFDR"). Pursuant to Article 11 of
the SFDR, certain disclosures relating to the overall sustainability-related
impact of the Company by means of relevant sustainability indicators are set
out below.
Sustainable Investment Objective of the Company
During the period 2021/22, the Company has maintained a climate change
mitigation objective and supported the transition to a low carbon economy by
investing in a diversified portfolio of environmental infrastructure,
including infrastructure assets, projects and asset-backed businesses that
utilise natural or waste resources or support more environmentally friendly
approaches to economic activity.
Due to the inherent nature of JLEN's environmental infrastructure assets, the
Company's activities have contributed materially towards the emissions
reduction objectives set out under the Paris Climate Agreement.
Performance of sustainability indicators
During the period 2021/22, Foresight Group LLP (the "AIFM") has been using its
Sustainability Evaluation Tool ("SET") to assess the sustainability
credentials of new investments. Information to complete these assessments
was gathered during due diligence. On occasion, technical advisers were
required to provide feedback on pertinent questions relating to
sustainability, while project counterparties were required to have in place
policies that cover topics such as modern slavery, diversity promotion,
employee growth and corporate social responsibility.
Information around sustainability and ESG performance is available in the
annual report on pages 98 to 113 of the Annual Report 2022.
Taxonomy regulation
The Company has made investments in infrastructure assets that contribute to
the climate change mitigation objective. 97% of investments by value are
made into environmentally sustainable economic activities (as defined in
Article 3 of the Taxonomy Regulation).
Article 11 Periodic Disclosure
An article 11 SFDR Periodic Disclosure is available on the Company website
www.jlen.com and on request.
The Foresight Sustainability Evaluation Tool ("SET") and climate risk
To ensure that all potential investments undertaken meet our definition of
sustainable infrastructure, and that climate-related risks are systematically
identified, assessed and subsequently managed, they are evaluated in
accordance with Foresight's SET. The SET is made up of five criteria that
cover the key areas of sustainability and ESG considerations to be assessed:
· Sustainable Development Contribution: The contribution made towards
the global sustainability agenda, including an assessment of its resilience
to climate change-related risk and opportunity
· Environmental Footprint: The environmental impacts of an investment
· Social Welfare: The interaction with local communities and the
welfare of employees
· Governance: The compliance with relevant laws and regulations
· Third-Party Interactions: The sustainability of key counterparties
and the broader supply chain
The SET is an evolving tool and has been designed with flexibility in mind,
making it adaptable to new sectors, industry frameworks and impact standards
as the level of sophistication around climate-related risk grows. Moreover,
the materiality of certain issues within each of these areas can be subject to
frequent change, therefore a framework that can adapt easily to reflect these
changes is important. The Sustainability team carry out regular in-house
consultation to decide on the individual "weighting" for each KPI within each
Climate Change Resilience parameter. The weighting dictates the materiality of
the KPI in the overall asset score, which can be easily updated and amended
based on new information obtained.
The tool draws on IRIS+ indicators, which are an aggregation of a number of
widely recognised sustainability and climate-related frameworks to measure,
manage and optimise sustainability and climate-related performance. These
frameworks include GRESB, the Global Reporting Initiative ("GRI"), the
Sustainability Accounting Standards Board ("SASB"), the UN SDGs, the Global
Impact Investing Network ("GIIN") and Principles for Responsible Investment
("PRI").
The final SET assessment, and the asset's corresponding "Sustainability Web",
are produced as part of investment due diligence. An example of this web is
shown below, with the "Climate Change Resilience" parameter
being highlighted.
Before any investment goes ahead, an assessment of both physical and
transition climate-related risk is made in the Climate Change Resilience
assessment parameter of the SET. This parameter is made up of multiple KPIs,
each of which is weighted based on internal priority and materiality
assessments and scored in line with response bands corresponding to the
five-point scale below:
· 5 = High performance
· 4 = Above average
· 3 = Average performance
· 2 = Below average
· 1 = Low performance
An assessment of both physical and transition climate-related risk is made in
the Climate Change Resilience assessment parameter of the SET. This parameter
is made up of multiple KPIs, each is weighted based on internal priority and
materiality assessments and scored in line with response bands corresponding
to a five-point scale below.
The KPIs include:
· EU Taxonomy alignment assessment (the Taxonomy itself includes a
review of physical climate resilience)
· Risk heatmap for a number of physical risks using Carbon Brief
scenarios to inform future weather patterns
· Liability to pay carbon tax throughout asset life
· Whether a documented stranded asset risk assessment has been made
· Consideration of climate-related market-risks
An average is then calculated to produce an overall score for the Climate
Change Resilience assessment parameter, which is reviewed and updated annually
by the Asset Management team. This quantitative KPI-based approach to
assessing a project's exposure to climate risk helps to standardise the
quality of climate-related assessment applied across the portfolio and also
helps to guide and focus Investment and Asset Management team resource on the
areas that require the most attention. The output and identified action areas
of each assessment parameter of the SET - including Climate Change Resilience
- are tabled at the asset companies' board meetings to enable implementation
of an asset-specific plan to manage any material risks as required.
If the information required to complete the assessment is not readily
available through project documentation, technical advisers may be tasked with
conducting further investigation to address any sustainability or climate
change-related specific queries. Examples may include an enhanced focus on
flood risk under different climate scenarios, or the transitionary risk
presented by changing market dynamics.
The above-mentioned physical risks are assessed as part of the Climate Change
Resilience assessment parameter. A Climate Risk Heatmap is then produced which
is used to identify the most material physical risks an asset faces from
climate-related extreme weather events, allowing for further investigation to
be conducted or mitigation measures to be put in place.
Alongside the assessment of the physical risks, the above-mentioned transition
risks are also incorporated to the SET's Climate Change Resilience parameter.
ENVIRONMENTAL
Objective: Promote the efficient use of resources.
Environmental criteria are embedded in the structure of JLEN's investment and
portfolio management activities. With its Investment Manager, JLEN considers
the following key environmental criteria during due diligence of a potential
acquisition and thereafter the ongoing monitoring of its assets:
· resource management;
· life on land/below water; and
· climate change and resilience.
In order to inform its environmental objective, JLEN intends to consider the
following environmental KPIs and associated measurements.
Environmental KPI Measurement Baseline data 2021/22
Renewable energy generated MWh renewable electricity 742,331MWh((1)) 571,461MWh((1))
MWh renewable heat
GHG emissions avoided tCO(2)e avoided((2)) 905,906 tonnes CO(2) avoided
Waste treatment (t) waste recycled 135,203 tonnes
(t) waste diverted from landfill 695,498 tonnes
Water treatment (l) wastewater treated 35,620,619,000 litres
Environmental incidents Reportable environmental incidents 5((3))
Purchased energy originating from renewable sources % of total purchased energy((4)) in the portfolio originating from renewable 47%
sources
Management of biodiversity % of assets with biodiversity plans 30%
number of assets engaged with on biodiversity issues 49%
(1) For assets which have a dual generation profile of both electricity
and heat, energy is converted and measured in the energy profile that
is predominant.
(2) Further information on the GHG avoided of each asset is available on
the JLEN website.
(3) More information on environmental incidents can be found on page 111
of the Annual Report 2022.
(4) Purchased energy refers to the fact that all assets have their own
energy requirements and where these requirements are not met in full by
an asset's own generation, energy is purchased from energy suppliers for
delivery via the grid.
Environmental KPIs summary
Over the 2021/22 period JLEN has increased the number of assets in the
portfolio which has led to an increase in renewable energy generation and
further GHG emissions avoided. This year the Investment Manager has worked on
implementing an enhanced ESG mandate on its AD portfolio which has led to
greater engagement on various areas, including biodiversity. A workstream has
also been ongoing on the solar portfolio to implement landscape ecological
management plans. This work will be further expanded on in the coming year.
JLEN has expressed a preference for renewable energy suppliers to its SPV
operators, however, some assets are tied into long-term contracts with other
suppliers. The expectation is that energy purchased from renewable sources
will increase over time as energy supply contracts run out and are renewed.
Impact
In order to quantify some of the benefits being delivered by its portfolio,
JLEN works with Aardvark Certification Ltd to undertake an independent,
third-party assessment of the carbon impact of its assets. Individual reports
for each asset, as well as a portfolio summary report, are published on the
Fund's website.
JLEN considers that, in order to align with the goals of the Paris Agreement
on Climate Change, its assets should be minimising the carbon footprint of
their purchased energy. This year JLEN has been monitoring the percentage of
total purchased energy in its portfolio originating from renewable sources.
At present 47% of the portfolio assets purchase energy from renewable sources
and the Investment Manager is monitoring this to see where improvements can
be made when energy purchase contracts become available for renewal.
Biodiversity, or habitat management, plans have always been implemented as
part of JLEN's asset management activities where required by planning. This
year the Investment Manager has asked its asset managers to consider and
document biodiversity enhancement activities on its portfolio.
Finally, a significant mechanism by which JLEN is able to influence
environmental performance of the portfolio is through engagement with, and
expectations of, service providers to the portfolio. This year, the Investment
Manager has stepped up that engagement to communicate the levels of
environmental performance and this has resulted in enhanced initiatives being
undertaken on the AD portfolio, where its operator has an enhanced scope of
service to include more comprehensive ESG-focused management.
Portfolio electricity and carbon performance
A summary of the greenhouse gas benefits delivered by the portfolio is
provided in the table below.
Asset portfolio by sector 2021/22 annual greenhouse gas emissions avoidance (tCO(2)e)
Wind 290,714
Solar (including rooftop) 59,917
AD 447,410
Hydro 4,233
Biomass 97,101
Energy-from-Waste 6,531
Total 905,906
Methodology
· This calculation works on the premise that the marginal fuel type
being displaced is coal
· The calculations draw on the data presented in the IPCC's
(Intergovernmental Panel on Climate Change) Special Report on Renewable Energy
("SRREN"), which uses a wide variety of peer-reviewed research papers to
establish median figures for the lifecycle CO(2) intensities of different
renewable energy technologies. These are measured in gCO(2)e/kWh. AD and EfW
are not included in this report and have had their lifecycle intensities
informed by either third-party studies or EU directives. These can be provided
on request.
· The carbon savings of a given technology are calculated by
multiplying its total generation (in MWh) by the IPCC listed CO(2) intensity
for that technology. This figure is then subtracted from the CO(2) emissions
that would be generated by an equivalent amount of coal-powered generation.
· This therefore acknowledges the fact that there is still a CO(2)
footprint associated with the production, transportation, installation and
operation of all renewable energy asset classes, whilst simultaneously
demonstrating the net benefit that technology provides to the global
decarbonisation agenda.
· JLEN has moved from using an external consultant to provide the
total CO(2) avoided numbers and is now using the Investment Manager's in house
ESG team and management software for these calculations.
JLEN's portfolio delivered 1,314 GWh green energy
And avoid emissions of >905,906 tCO(2)e
Enough electricity to power >255,000 UK homes
Case study
Biodiversity on JLEN's solar portfolio
Ecological condition assessments were undertaken in 2021 for all solar sites
and Landscape Ecological Management Plans were updated, highlighting
compliance issues, recommendations for management and enhancement measures.
Additional biodiversity quantitative assessment activities were performed on a
trial basis across three sites including biodiversity net gain calculations,
species surveys and soil testing.
Key findings at the Higher Tregarne solar site:
· A Biodiversity Net Gain ("BNG") score of 110.18% was calculated
and showed that the retention and creation of valuable habitats as part of
the development plan has contributed significantly to the general ecological
value of the site. This score is extremely high (as the mandatory gain to be
introduced is 10% for developments) and shows that solar farms have an
important part to play in restoring ecological habitats;
· a different management regime will be introduced to further
diversify the grassland and it is anticipated that the BNG score could be
increased further and,
· a soil analysis has shown that nutrient levels are still moderately
high and this may be preventing a more diverse grassland from becoming
established. Consideration will be given to ways of removing grass cuttings
from the land and composting on the site.
SOCIAL
Objective: Develop positive relationships with
the communities in which JLEN works.
The following social criteria are typically considered during due diligence
and ongoing monitoring of assets:
· health and wellbeing;
· local economic impact - job creation;
· local social impact; and
· community engagement and benefit.
In order to inform its social objective, JLEN has identified a number of
indicators and metrics, as seen below. The Fund's investments are often
situated in rural areas where there is potential for both community benefit
as well as community disruption during construction and asset operation
activities.
Social KPI Measurement Baseline data 2021/22
Community funding £ provided to community projects £418,000
Health and safety incidents RIDDOR reportable accidents 3((1))
Community engagement procedures % of assets with formal stakeholder/community engagement policies 14%
and processes
% of assets with a clear, easily accessible complaints handling mechanism in 49%
place
Jobs supported number of "full time equivalent" ("FTE") jobs supported 376 jobs((2))
Accessibility of community fund documents % of community funds that are easily accessible and signposted for local 83%
communities
(1) More information can be found on page 111 of the Annual Report 2022.
(2) FTE jobs were calculated using total hours worked over the course of
the year. In some instances, 12 months of data was not available and in that
case, an average number of hours worked was calculated from the data
available.
Social KPIs summary 2021/22
Over the year, JLEN's SPVs contributed £418,000 to the communities in which
they operate, £38,000 more than in the previous year. The increase was due to
acquiring new assets and an increase in the community benefit funds available
from the AD portfolio. Further to this JLEN has endeavoured to make community
fund information more readily available by publishing this information on its
website and rolling out websites across the wind portfolio with clear
sign-posting to community benefit fund information. The work of rolling out
websites is continuing across the portfolio to provide clear, accessible
information about the SPVs, any associated community benefit funds and to
provide a contact for the asset.
In the year 2022/23, the focus will be on improving community engagement
processes and complaints handling mechanisms. Many of the assets already have
informal processes in place that can be articulated but work will be
undertaken to formalise these processes. This work has already started on the
AD portfolio.
The number of FTE jobs supported is expected to grow as the portfolio grows
and this measure is important to JLEN, showing the wider benefit of
employment that JLEN's portfolio provides and livelihoods it supports.
Skilled labour
Many of JLEN's assets are situated in rural areas, providing vital skilled
roles in smaller rural communities. A strong base of qualified engineers is
required in order to run the Fund's environmental assets in the long term and
to support increased capacity for environmental assets, both in the UK and
abroad. As a specialist investor into environmental assets, JLEN is committed
to ensuring that those assets are managed and maintained by skilled teams.
In order to support this, JLEN has collected data on the number of jobs
directly supported by the investment portfolio through its third-party asset
managers and other major contractors.
Community relationships
This year JLEN has tracked against its KPIs related to developing positive
relationships with the communities in which it works. These KPIs relate to
engagement procedures - ensuring that clear, formal stakeholder engagement
processes are in place for each investment. If problems do arise during
construction and operation of the projects that impact the local community,
JLEN is committed to ensuring that local communities have access to a clear,
easily accessible complaints handling mechanism so that complaints can be
addressed as soon as possible. The data has revealed that this is an area for
improvement and JLEN is working on improving this over the course of this
year.
Most of JLEN's assets have a community fund associated with them. Some of
these are triggered by planning conditions, while others have been put in
place by JLEN in order to drive good practice in community engagement.
Community funds are often managed by local bodies such as parish councils,
with funds allocated to projects designed to benefit the local community.
This year JLEN has been working to make information about these community
funds more accessible; community fund information was added to the JLEN
website to make it more readily accessible and this year an exercise was
undertaken to build websites for each of the wind SPVs so that local
communities have a readily available landing spot to find information about
community funds associated with an asset and have a means of contacting the
site in case of an issue. This work had already been undertaken on the AD
portfolio and most of the AD sites have a website and community fund in
place.
Projects supported by JLEN's community funds include:
· donation to a local bird conservation group;
· funding of local care home specialising in dementia;
· donation to a local food bank;
· purchase of sports equipment and play equipment for various parks;
· restoration of a parish church and contribution to repair of
another church;
· wildflower planting in village; and
· redevelopment of educational and social outreach centre.
Case study
Training to upskill operatives at the ELWA waste processing plant
In the financial year just passed, the ELWA waste plant, which provides more
than 190 full time equivalent jobs across its plants, has provided over 4,000
hours of training. This included a wide range of training from the management
team through to operators and maintenance teams. It also included both new
starter inductions and refresher training along with training provided to
upskill operatives and the management team and/or train operators/maintenance
teams on new equipment that has been installed.
This programme of training helps to keep ELWA's workforce skilled in the
various areas of the business and also helps to prevent health and safety and
environmental incidents from occurring.
Case study
Community fund that is supporting biodiversity
Egmere AD plant in North Norfolk contributes an annual sum of £7,500 to its
community benefit fund which is disbursed to a range of different local
projects. This year, one of the projects that Egmere has contributed to is the
North West Norfolk Ringing Group ("NWNRG") which supports the British Trust
for Ornithology ("BTO"), to undertake original ornithological research
projects and contribute to the national bird ringing scheme.
Recently, barn owls have been at the forefront of the group's conservation
work. To monitor numbers, the NWNRG tag any young owlets with leg rings issued
by the BTO.
The NWNRG and Holkham estate donated a barn owl box to Egmere Energy.
Previously, the owl box at Egmere has been inhabited and it is hoped that now
the box has been redesigned it will become another barn owl home very soon.
ENVIRONMENTAL AND HEALTH AND SAFETY INCIDENTS
JLEN takes its environmental and health and safety responsibilities very
seriously and seeks to ensure effective management of these issues in both its
own operations and in its investment portfolio. JLEN aims to manage risks and
incidents in a fair and transparent manner with appropriate action to reduce
risk wherever possible.
This report identifies the material environmental and health and safety
incidents in the JLEN portfolio in 2021/22.
Reportable environmental and health and safety incidents
2021/22
H&S incidents 3
Environmental incidents 5
The following reportable incidents were recorded for JLEN's portfolio during
2021/22:
· Waste & bioenergy plant reportable injuries:
· An operator at one of JLEN's waste plants required time off work
when an improperly secured lever struck him on the head.
· A sub-contractor working on a fixed ladder at the site fell through
one of the floors at the plant, necessitating an overnight stay in hospital.
· An employee had a needle pierce through the of their safety boot
which caused a puncture wound to their foot.
· Waste & bioenergy environmental incidents:
· At a waste plant, testing of surface water showed that a sample
exceeded the newly imposed Emission Limit Value ("ELV") for phosphorus, that
is included in the revised Environmental Permit issued by the Environment
Agency on 2 November 2021. The operator is monitoring phosphorus levels
and subsequent samples are within the ELV.
· Over the course of the year there were four incidences of a waste
plant exceeding its emissions limit, the root cause of this has been
investigated and the incident has been closed.
Health, safety and environmental incident recording and reporting
Third-party asset managers are responsible for the day-to-day management of
HSE issues and are required to report incidents to Foresight, which are
recorded through their portfolio management software. Depending on the
requirement, the software can deliver either a high degree of granularity on
individual assets or an aggregated snapshot of the portfolio's performance as
a whole. This allows the Investment Manager to monitor and report individual
asset performance as well as sector and portfolio level performance to a
range of internal stakeholders.
Foresight periodically contracts third parties to conduct comprehensive health
and safety audits of each site. This serves both to encourage best possible
working practices and acts as a means of highlighting areas for development.
Foresight staff also perform spot auditing and reporting functions on selected
assets on an ongoing basis. Any recommendations from the audits are allocated
to the Investment Manager's asset management team, which then becomes
responsible for ensuring the recommendations are actioned as necessary. These
tasks are tracked through Foresight's portfolio management software and
monitored to ensure they have been resolved in a timely manner. All audit
results, shortfalls and recommendations are included on the agenda of
the asset's board meetings.
GOVERNANCE
Objective: Ensure effective, ethical governance across the portfolio.
Good governance is essential for JLEN's portfolio to achieve its targeted
returns and to minimise downside risk.
JLEN holds Board positions for each of its assets, which are fulfilled by
Foresight on its behalf. The Board members work to promote good governance as
part of the Fund's active engagement with projects.
JLEN typically considers the following governance criteria during due
diligence and ongoing monitoring of assets:
· anti-bribery and corruption;
· modern slavery;
· audit and tax practices;
· environmental impact;
· health and safety practices; and
· Board composition.
In order to inform its governance objective, JLEN is formalising the reporting
of a number of governance indicators and has added some further indicators to
help promote improved performance over time.
Governance KPI Measurement Baseline data 2021/22
Portfolio audits of health and safety practices % of assets audited 81%
Portfolio audits of tax and financial practices % of assets audited 98%
Diversity of SPV directors % of assets with at least one female board member 7%
Inclusion of ESG in SPV board agendas % of assets with ESG embedded into board agendas 93%
Governance oversight % of assets which comply with a governance policy and associated documents, 81%
that are reviewed on a periodic basis
Assessment of major contractors against ESG criteria % of new and existing suppliers assessed against ESG criteria 49%
Governance KPIs summary 2021/22
Overall, governance across the JLEN portfolio SPVs is well established and
this area receives a lot of oversight from asset managers, both to adhere to
best practice and to ensure the smooth running of operations. All SPVs have
regular board meetings, usually on a quarterly basis and at least one
Foresight employee is a director of each SPV company. Health, Safety and
Environment issues are well documented and best practice solutions are shared
across the whole portfolio at monthly portfolio meetings attended by Foresight
asset managers.
JLEN mainly acquires operational assets which already have governance
processes in place, and it can take some time to embed Foresight processes at
the asset level. Work is continually undertaken to standardise these processes
and also in the course of this, improve this process.
This year work has been undertaken and is ongoing to install an improved suite
of policies at the SPV level, with a focus on installing voluntary slavery and
human trafficking statements at the SPV level.
Diversity of SPV directors
JLEN recognises that lack of gender diversity is a known issue in the
financial services industry. In order to drive progress and increase gender
diversity, JLEN has started tracking gender diversity of SPV directors across
all of its investments with the intention of proactively increasing the
proportion of female board members over time. The Investment Manager has
implemented the following mechanisms and initiatives to improve performance in
this area:
· Equal opportunities
· To guide equal employment practices, this is the third year that
Foresight requires hiring managers to undertake Unconscious Bias Training
· Foresight's Inclusion & Diversity Committee which develops and
monitors Foresight's policies and procedures to ensure qualifications, skill
and experience from the basis for the recruitment, placement, training and
advancement of staff at all levels
· Gender equality
· Foresight is a signatory to the Investing in Women Code, its
commitment is outlined on Foresight's website:
www.foresightgroup.eu/about-us/diversity-inclusion
· Foresight is a signatory of the HM Treasury's Women In Finance
Charter
· Foresight is proactively working towards its five-year target of
30% of women in senior management roles by 2024 and as at 30 September 2021 is
at 25%
Inclusion of ESG in SPV board agendas
While HSE reporting has been formally included in all board agendas for some
time, and wider ESG issues have been regularly included, this has historically
been done reactively. In order to support its stated ESG objectives, JLEN is
now mandating that all board agendas routinely include discussions around ESG
matters across each of its investments as a way to drive proactive approaches
to ESG going forward.
Modern slavery and human trafficking
As part of Foresight Group, JLEN's policy and practices in relation to modern
slavery and human trafficking are included in the Group's Modern Slavery Act
statement. The statement sets out Foresight's approach to matters such as
services and supply chain due diligence and training of employees, recruitment
and welfare.
Over the year, the Investment Manager participated in the PRI roundtable:
Human Rights in Private Market Investing, with discussions centring on how to
build an organisational approach to human rights, managing supply chain risk,
and empowering portfolio companies and assets.
Case study
Enhanced scope of management operations on the AD portfolio
This year, the largest operator on JLEN's AD portfolio has been contracted for
an enhanced scope of service to improve ESG monitoring and implementation of
ESG initiatives; as part of this, a specialist ESG coordinator has been
employed by the operator. Some key areas of the enhanced scope include:
· environment;
· biodiversity;
· greener farming;
· health and safety reporting;
· community engagement and,
· employee engagement.
This enhanced scope of activities is particularly beneficial on the AD
portfolio which has close ties with the area in which it works and local
farming communities.
Q&A WITH JO HARRISON
Tell us about your background
My professional career has been spent chiefly working in the water industry. I
have worked at United Utilities for 24 years and before joining United
Utilities I worked in environmental consultancy. My professional focus has
mainly been on leading environmental strategy and asset management
activities, so the long-term environmental impact on our water supply and
management systems is something I'm very interested in. My current main role
is Director of Environment Planning and Innovation at United Utilities, so I
investigate and plan for long-term requirements facing the water industry -
for example, meeting net-zero goals, climate change adaptation and making sure
we can meet ongoing sustainability targets in the future as they become more
stringent over time.
What have been your highlights over your first year as a Director of JLEN?
It has been fascinating to witness from the inside how JLEN drives a financial
return from delivering environmental benefits and I clearly see the
similarities with United Utilities as well as the differences. JLEN's sole
focus is operating environmental assets effectively and efficiently so there
have been many parallels - for example, both JLEN and UU operate anaerobic
digestor assets as well as some solar generators. There is a specific business
dynamic which comes from a more commercial mindset and whilst I have found my
time here educational, I have also been able to contribute a counterpoint
perspective and see that contribution make an impact - which is what being a
Board Director is all about.
How do you perceive the importance of Sustainability & ESG?
Looking at the topic from a top-down perspective, it is important for JLEN
(and other businesses) to ensure there is a clear overview of the
environmental benefits that our assets deliver - for ourselves as well as our
customers - because the assets JLEN manages have their own ESG footprint which
needs to be monitored. We are lucky to work in an organisation which
understands this need, taking proactive action to analyse and manage
the efficiency of assets and make consistent improvements to demonstrate that
we are living by our own environmental values. ESG data should be used to
drive business development as a matter of routine as well as helping
businesses identify the different opportunities that exist to drive the push
towards sustainability.
How do you see your role evolving over time?
I'm looking forward to advancing JLEN's reporting on ESG criteria over the
next 12-18 months. Impact measurement is at different stages of maturity
depending on whether you are talking about the E, the S, or the G, so there is
a lot of room to make a meaningful difference in this area. Six months ago we
established a formal ESG committee within JLEN and had our first meeting as
part and parcel of a normal Board process - this is important if we are to
establish business practices which prioritise ESG management as part of
everyday operations. Having launched our suite of ESG KPIs in 2021, I want to
use that data to learn and make continual improvements in our ESG reporting
as well as day-to-day decision making - particularly in how we report our
carbon emissions.
Jo Harrison
Director and Chair of the ESG Committee
CORPORATE SOCIAL RESPONSIBILITY
While JLEN does not have direct employees, it does have a corporate culture
which is guided by JLEN's Board of Directors and the Investment Manager,
Foresight. As Investment Manager to JLEN, Foresight believes an engaged and
empowered workforce supports the Company's purpose. Foresight seeks to
co-ordinate and manage its corporate practices to maximise positive social
and economic contributions and minimise the environmental impact of its
business operations. The JLEN Board and Foresight typically meet informally
on a fortnightly basis and this ensures good communication between these two
key stakeholders. Engagement with key clients, employees, community,
environmental stakeholders, regulators, business partners and
suppliers is central to Foresight's approach.
Foresight divides its commitment to CSR into four segments:
1. marketplace - how they work with their customers and counterparties;
2. workplace - where they work, how they recruit and how they work with
their staff;
3. environment - how they reduce their environmental impact; and
4. community - how they engage with the community.
Empowering the workforce of the future:
Since returning to a state of 'new normal', post the Covid-19 health crisis.
The Investment Manager has been able to re-establish its community outreach
initiatives. This is aimed at providing guidance and financial skills training
for children and young adults in the areas local to Foresight's offices. Some
initiative that Foresight has engaged on over the course of the year include:
· Foresight staff involvement in the Finance Industry Programme with
Amos Bursary, an organisation which helps young people of African and
Caribbean heritage to excel in education and other opportunities, providing
insights and an introduction to financial services to over 30 students;
· hosting a Careers Day for A-Level business students from the Sacred
Heart School in London Bridge. Foresight staff have also visited the school
for business and careers talks and,
· partnering with Diversity VC on their Future VC programme to offer
paid internships to talented individuals from diverse backgrounds and provide
them with hands-on experience that will help them succeed in their chosen
careers.
FINANCIAL REVIEW
Analysis of financial results
The financial statements of the Company for the year ended 31 March 2022 are
set out on pages 164 to 191 of the Annual Report 2022.
The Company prepared the financial statements for the year ended 31 March 2022
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 37 portfolio assets which make
distributions comprising returns on investments (interest on loans and
dividends on equity) together with repayments of investments (loan repayments
and equity redemptions).
Results for the year ended 31 March 2022
Year ended Year ended
31 Mar 31 Mar
All amounts presented in £million (except as noted) 2022 2021
Net assets((1)) 762.9 504.2
Portfolio value((2)) 795.4 571.4
Operating income and gains/(losses) on fair value of investments 192.9 14.8
Net assets per share 115.3p 92.2p
Distributions, repayments and fees from portfolio 56.5 48.2
Profit before tax 185.0 8.1
(1) Also referred to as Net Asset Value or "NAV".
(2) Classified as investments at fair value through profit or loss on
the statement of financial position.
Net assets
Net assets increased from £504.2 million at 31 March 2021 to £762.9 million
at 31 March 2022, primarily driven by acquisitions, the effect on the
portfolio value of the increase in long-term power price and short-term
inflation forecasts, partially offset by the increase of the long-term
corporation tax rate.
The net assets of £762.9 million comprise £795.4 million portfolio value of
environmental infrastructure investments and the Company's cash balances of
£2.0 million, partially offset by £32.5 million of intermediate holding
companies' net liabilities and other net liabilities of £2.0 million.
The intermediate holding companies' net liabilities of £32.5 million
comprises a £53.6 million credit facility loan, partially offset by cash
balances of £16.0 million and other net assets of £5.1 million.
Analysis of the Group's net assets at 31 March 2022
At 31 Mar At 31 Mar
All amounts presented in £million (except as noted) 2022 2021
Portfolio value 795.4 571.4
Intermediate holding companies' cash 16.0 11.6
Intermediate holding companies' revolving credit facility (53.6) (82.0)
Intermediate holding companies' other assets 5.1 3.1
Fair value of the Company's investment in UK HoldCo 762.9 504.1
Company's cash 2.0 1.9
Company's other liabilities (2.0) (1.8)
Net Asset Value at 31 March 762.9 504.2
Number of shares 661,531,229 546,720,025
Net Asset Value per share 115.3p 92.2p
At 31 March 2022, the Group (the Company plus intermediate holding companies)
had a total cash balance of £18.0 million (31 March 2021: £13.5 million),
including £2.0 million in the Company's balance sheet (31 March 2021: £1.9
million) and £16.0 million in the intermediate holding companies (31 March
2021: £11.6 million), which is included in the Company's balance sheet within
"investments at fair value through profit or loss".
At 31 March 2022, UK HoldCo had drawn £53.6 million of its revolving credit
facility (31 March 2021: £82.0 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 2021 to 31 March 2022 is
summarised as follows:
Year ended Year ended
31 Mar 31 Mar
All amounts presented in £million (except as noted) 2022 2021
Portfolio value at start of the year 571.4 537.1
Acquisitions and further investment (net of post-acquisition price 88.0 62.9
adjustments)
Disposal of assets (5.6) -
Distributions received from investments (56.5) (48.2)
Growth in value of portfolio 198.1 19.6
Portfolio value at 31 March 795.4 571.4
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 74 to 83 of the Annual Report 2022.
Income
The Company's profit before tax for the year ended 31 March 2022 is £185.0
million, generating earnings of 30.6 pence per share (year ended 31 Mar 2021:
1.5 pence per share), driven by the gains on fair value of investments
attributable to the increase in long-term power price and short-term inflation
forecasts.
Year ended Year ended
31 Mar 31 Mar
All amounts presented in £million (except as noted) 2022 2021
Interest received on UK HoldCo loan notes 28.8 28.7
Dividend received from UK HoldCo 21.3 14.9
Net gains/(losses) on investments at fair value 142.8 (28.8)
Operating income and gains/(losses) on fair value of investments 192.9 14.8
Operating expenses (7.9) (6.7)
Profit before tax 185.0 8.1
Earnings per share 30.6p 1.5p
In the year to 31 March 2022, the operating income and gains/(losses) on fair
value of investments was £192.9 million, including the receipt of £28.8
million of interest on the UK HoldCo loan notes, £21.3 million of dividends
also received from UK HoldCo and net gains on investments at fair value of
£142.8 million.
The operating expenses included in the income statement for the year were
£7.9 million, in line with expectations. These comprise £6.6 million
Investment Manager fees and £1.3 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 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 2022 was 1.19% (year
ended 31 March 2021: 1.24%). The ongoing charges have been calculated, in
accordance with AIC guidance, as annualised ongoing charges (i.e. excluding
acquisition costs and other non-recurring items) divided by the average
published undiluted Net Asset Value in the period. The ongoing charges
percentage has been calculated on the consolidated basis and therefore takes
into consideration the expenses of UK HoldCo as well as the Company. Adjusting
for the impact of the drawdown amount under the revolving credit facility, the
ongoing charges ratio would have been 1.03% (31 March 2021: 1.13%).
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 2022 of £2.0 million (31
March 2021: £1.9 million). The breakdown of the movements in cash during the
year is shown below.
Cash flows of the Company for the year (£million):
Year ended Year ended
31 Mar 31 Mar
2022 2021
Cash balance at 1 April 1.9 1.8
Net proceeds from share issues 115.7 (0.2)
Investment in UK HoldCo (equity and loan notes) (116.0) -
Interest on loan notes received from UK HoldCo 28.8 28.7
Dividends received from UK HoldCo 21.3 14.9
Directors' fees and expenses (0.3) (0.3)
Investment Manager fees (6.3) (5.5)
Administrative expenses (1.2) (0.7)
Dividends paid in cash to shareholders (41.9) (36.8)
Company cash balance at 31 March 2.0 1.9
The Group had a total cash balance at 31 March 2022 of £18.0 million (31
March 2021: £13.5 million) and borrowings under the revolving credit facility
of £53.6 million (31 March 2021: £82.0 million). The breakdown of the
movements in cash during the year is shown below.
Cash flows of the Group for the year (£million):
Year ended Year ended
31 Mar 31 Mar
2022 2021
Cash distributions from environmental infrastructure investments 56.5 48.2
Administrative expenses (1.1) (1.1)
Directors' fees and expenses (0.3) (0.3)
Investment Manager fees (6.3) (5.5)
Financing costs (net of interest income) (2.6) (1.8)
Cash flow from operations((1)) 46.2 39.5
Net proceeds from share issues 115.7 (0.2)
Debt arrangement fee cost (2.2) -
Acquisition of investment assets and further investment (86.1) (63.0)
Disposal of assets 3.7 -
Acquisition costs (including stamp duty) (3.0) (1.4)
Short-term projects debtors - 0.4
(Repayment)/drawdowns under the revolving credit facility (27.9) 53.0
Dividends paid in cash to shareholders (41.9) (36.8)
Cash movement in the year 4.5 (8.5)
Opening cash balance 13.5 22.0
Group cash balance at 31 March 18.0 13.5
During the year, the Group received cash distributions of £56.5 million from
its environmental infrastructure investments, an increase of 17.2% compared to
2021.
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 2022. Cash flow
from operations of the Group of £46.2 million covers dividends paid in the
year to 31 March 2022 of £41.9 million by 1.10x.
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 1.69 pence per share in
June 2021 (£10.2 million) in respect of the quarter to 31 March 2021.
Interim dividends of 1.70 pence per share were paid in September 2021 (£10.2
million) in respect of the quarter to 30 June 2021, of 1.70 pence per share
in December 2021 (£10.2 million) in respect of the quarter to
30 September 2021, and of 1.70 pence per share in March 2022 (£11.2
million) in respect of the quarter to 31 December 2021. On 17 May 2022, the
Company declared a final dividend of 1.70 pence per share in respect of the
quarter ended 31 March 2022 (£11.2 million), which is payable on 24 June
2022.
The target dividend for the year to 31 March 2023 is 7.14 pence per share, a
5.0% increase from the dividend declared in respect of the year to 31 March
2022.((2))
(1) "Cash flow from operations" is an alternative performance measure
("APM"). The APMs within the accounts are defined on page 193 of the Annual
Report 2022.
(2) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met.
GOVERNANCE
CHAIRMAN'S INTRODUCTION
The Board believes that a strong corporate governance culture is essential for
the Company to achieve its investment objectives, to mitigate downside risk,
and to take account of the interests of key stakeholders as part of its
decision-making process.
Introduction
The Listing Rules and the Disclosure Guidance and Transparency Rules
("Disclosure Rules") of the FCA require listed companies to disclose how they
have applied the principles and complied with the provisions of the Corporate
Governance Code to which the issuer is subject. The provisions of the UK
Corporate Governance Code ("UK Code"), as issued by the Financial Reporting
Council ("FRC") in July 2018, are applicable to the year under review and can
be viewed at www.frc.org.uk.
The related Code of Corporate Governance (the "AIC Code"), issued by the
Association of Investment Companies ("AIC") provides specific
corporate governance guidelines to investment companies. The AIC issued
their revised code for member companies in February 2019 and this applies to
accounting periods beginning on or after 1 January 2019. The FRC has confirmed
that AIC member companies who report against the AIC Code will be meeting
their obligations in relation to the UK Code and the associated disclosure
requirements of the Disclosure Rules. The AIC Code can be viewed at
www.theaic.co.uk.
The Guernsey Financial Services Commission ("GFSC") has issued a Finance
Sector Code of Corporate Governance. The Code comprises Principles and
Guidance and provides a formal expression of good corporate practice against
which shareholders, boards and the GFSC can better assess the governance
exercised over companies in Guernsey's finance sector. Companies which report
against the UK Code or the AIC Code are also deemed to meet the Guernsey
Code.
Statement of compliance with the AIC Code and Guide
The Board recognises the importance of a strong corporate governance culture
that meets the Listing Rules of the FCA. The Board has put in place a
framework for corporate governance that reflects the scale, nature and
complexity of the Company and its operations. All Directors contribute in a
meaningful way to Board discussions and debates. The Board believes in
providing as much transparency on the Company's activities for stakeholders as
is reasonably possible. It should be noted that most of the Company's
day-to-day responsibilities are delegated to third parties and the Company has
no employees.
The Company is a member of the AIC and is classified within the renewable
energy infrastructure sector. The Company currently complies (except as set
out in the next paragraph) with the principles and provisions of good
governance contained in the AIC Code (which complements the UK Code and
provides a framework of best practice for listed investment companies) and in
accordance with the AIC Code, the Company will be meeting its obligations in
relation to the UK Code and associated disclosure requirements of the Listing
Rules.
The UK Code includes provisions relating to the role of the Chief Executive,
executive Directors' remuneration and the need for an internal audit function.
The Board considers these provisions are not relevant to the position of the
Company, as all of the Company's day-to-day management and administrative
functions are outsourced to third parties and it has no executive Directors,
employees or internal operations. The independent compliance functions and
internal control frameworks in place by service providers undertaking the
Company's critical business functions, principally the Investment Manager and
the Administrator, provides comfort that the activities which would otherwise
have been undertaken by an internal audit function have been effectively
addressed through other means. Therefore, no further reporting has been
provided in respect of these provisions.
The functions which would typically be carried out by a management engagement
committee are performed by the Company's Board as a whole and the Board
has not considered it necessary to appoint a separate remuneration committee.
BOARD OF DIRECTORS
Members of JLEN's Board of Directors, all of whom are non-executive and
independent of the Investment Manager, are listed below.
Richard Morse
Chairman
Richard has more than 34 years' experience in energy and infrastructure,
including environmental energy. He is a partner at Opus Corporate Finance,
where he is a leader in the environmental energy practice. His current
boardroom experience includes Bazalgette Tunnel Limited (Deputy Chairman and
Chairman of the Audit & Treasury Committee), The Woodard Corporation
(Chairman), and Heathrow Southern Railway Limited (non-executive director).
Past experience
Richard trained as an investment banker, becoming Deputy Head of Corporate
Finance and head of the utilities and energy team at Dresdner Kleinwort
Wasserstein, before taking up senior roles in the energy and utilities
practices at Goldman Sachs and Greenhill International, and a Senior Adviser
role at Matrix Corporate Capital.
Committee memberships
Nomination Committee (Chair)
ESG Committee
Richard Ramsay
Senior Independent Director
Richard is a chartered accountant with considerable experience of the energy
sector and the closed-end fund industry. He is currently Chairman of
Momentum Multi Asset Value Trust plc, an investment trust.
Past experience
Richard's previous energy sector experience includes: leading the Barclays de
Zoete Wedd team that privatised the Scottish electricity industry; a period at
Ofgem as Managing Director Finance and Regulation; working as director of the
Shareholder Executive, principally involved with government businesses in the
nuclear sector; and chairman of Northcourt Ltd, a provider globally of nuclear
insurance. At Ivory & Sime, Barclays de Zoete Wedd and latterly at Intelli
Corporate Finance, he has worked as a corporate adviser in the closed-end
funds sector, completing over £2.5 billion of transactions. He has also
previously been a director of two investment trusts and one venture capital
trust.
Committee memberships
Audit Committee
Stephanie Coxon
Director
Stephanie is a Fellow of the Institute of Chartered Accountants in England and
Wales and is a non-executive director of several London listed companies.
Past experience
Prior to becoming a non-executive director, Stephanie led the investment trust
capital markets team at PwC for the UK and Channel Islands. During her time at
PwC, Stephanie specialised in advising FTSE 250 and premium London listed
companies on accounting, corporate governance, risk management and strategic
matters.
Committee memberships
Audit Committee (Chair)
Remuneration Committee
Nomination Committee
Hans Joern Rieks
Director
Hans has over 26 years' experience within the global wind industry and has
previously worked for Siemens Gamesa and Vestas Central Europe. He is highly
regarded in the energy sector and has successfully led growth agendas and
international strategies. An engineer by background, Hans has a strong
technical grounding and excellent operational experience of how to manage
the constantly evolving renewables landscape.
Past experience
Hans formerly led the Siemens wind business in EMEA, crafting and implementing
a growth strategy, as well as being directly involved in the merger with
Gamesa. Prior to this, he was President and CEO of Vestas Central Europe and
member of the Group Management of Vestas Wind Systems A/S.
Committee memberships
Remuneration Committee (Chair)
Nomination Committee
ESG Committee
Alan Bates
Director
Alan has over 31 years' experience in the energy and infrastructure sectors
including electricity, gas and water utilities. He has extensive experience in
infrastructure operations and has excellent strategic and commercial skills.
He has developed a broad understanding of the dynamics behind the energy
transition and has assisted the Government of Guernsey in developing its
energy policy. Alan has been the CEO of Guernsey Electricity since 2010 and is
a Director of the Channel Islands Electricity Grid and Alderney Electricity
Limited.
Alan is a Chartered Engineer, Fellow of the Institute of Mechanical Engineers
and a Member of the Institute of Engineering Technology.
Past experience
Alan commenced his career with P&O and Princess Cruises as a Marine
Engineering Officer, followed by 19 years in the oil and gas industry working
for Mobil Oil/BP Oil and then International Energy Group before becoming the
Managing Director of Manx Gas in the Isle of Man.
Committee memberships
Audit Committee
Remuneration Committee
Jo Harrison
Director
Jo has over 23 years' experience working in the water industry and is the
Director of Environment, Planning and Innovation at United Utilities, where
she is accountable for leading the approach to environmental and long-term
planning; including developing and strengthening the approach to all aspects
of the environment, climate change and carbon, asset management, risk and
resilience. Jo is a chartered member of the Institute of Water and
Environmental Managers and is a Chartered Environmentalist. She is also
a trustee of the Rivers Trust.
Past experience
Jo has worked for United Utilities since 1998 and has a BSc in Geography and
Ecology from the University of Sheffield and an MSc in Pollution and
Environmental Control from Manchester University. Jo was also previously a
trustee of the Community Forest Trust.
Committee memberships
ESG Committee (Chair)
Remuneration Committee
GOVERNANCE AT A GLANCE
The corporate governance and Board structure is outlined below.
Corporate governance framework
Chairman
Richard Morse
Directors Investment Manager
Stephanie Coxon Foresight Group led by Chris Holmes and
Hans Joern Rieks Chris Tanner as co-lead Investment Managers
Richard Ramsay
Jo Harrison
Alan Bates
Audit Committee Risk Committee ESG Committee Nomination Committee
Stephanie Coxon (Chair) Hans Joern Rieks (Chair) Jo Harrison (Chair) Jo Harrison (Chair)
Alan Bates Stephanie Coxon Richard Morse Richard Morse
Richard Ramsay Alan Bates Hans Joern Rieks Hans Joern Rieks
Jo Harrison
Board structure as at 31 March 2022
Board tenure
0-5 years = 4
6-8 years = 2
Board composition
Chairman = 1
Senior Independent Director = 1
Directors = 4
Gender diversity
Male = 4
Female = 2
Board activities
Strategy
Monitoring the evolution of the business development pipeline following the
changes introduced in March 2021 to the Company's investment policy,
particularly the relevance of emerging low carbon and energy efficiency,
agriculture and aquaculture technologies.
Divestment of two French onshore wind farms in January 2022, being the
Company's first divestment since launch, achieving an uplift to the valuation
prior to the receipt of firm bids and taking the opportunity to recycle
capital on a value-accretive basis for shareholders.
Ongoing assessment of the appropriateness of overseas markets and
opportunities to gain exposure through co-investment with other
Foresight-managed products.
Governance
Formation of a dedicated ESG Committee of the Board with delegated
responsibility for overseeing the development and implementation of the
Company's ESG strategy, which sets out the guiding principles, objectives,
strategic actions and policies with respect to ESG matters.
Appointment of Foresight Group as AIFM with delegated authority for taking
certain investment decisions and items of expenditure falling within the
parameters set by the Board.
Independent remuneration policy review to ensure the Board's practices remain
fair and reasonable in the context of the Company, reflect accepted market
convention, whilst providing a competitive basis for recruiting high-quality
candidates for Board succession.
Risk management
Monitoring of the impact from Brexit and the Ukraine crisis and rising
inflation to the supply chain, particularly where delays in the procurement of
spare parts or cost increases may be experienced.
Careful monitoring of macroeconomic factors creating market disruption,
assessing the impact of rising interest rates, inflation and volatile
short-term power prices on the Company's ability to maintain its target
dividend.
Operational
Several milestones within the operational initiatives programme, including
risk mitigation programmes across certain AD sites to secure additional
long-term digestate storage facilities, technical enhancements implemented
across several solar sites increasing yield, and early-stage investigations
into carbon off-take proposals involving the liquification and storage of
carbon dioxide AD plants.
Continued progress with the Group's value enhancement programme from
successful hardware upgrades on certain wind assets, and software upgrades
which enhanced the analytical and performance monitoring feedback, identifying
potential repairs earlier and reducing project downtime.
BOARD LEADERSHIP AND COMPANY PURPOSE
The Board places a high degree of importance on ensuring that high standards
of corporate governance are maintained throughout the Group.
Duties and responsibilities
The Board's annual cycle includes at least six scheduled meetings per year
and, should the nature of the activity of the Company require it, additional
meetings may be scheduled, some at short notice. Between meetings there is
regular contact with the Investment Manager and the Administrator and the
Board requires information to be supplied in a timely manner by the Investment
Manager, the Company Secretary and other advisers in a form and of a quality
appropriate to enable it to discharge its duties, and in a timely manner to
enable full and proper consideration to be given to the relevant issues.
Outside of the formal meeting schedule, informal sessions are held between the
Board and an annual strategy day is held by the Board with key advisers.
The Board has overall responsibility for the management of the Company's
affairs. Whilst discretionary management authority has been delegated to the
Investment Manager, the Board has adopted a set of reserved powers which set
out the particular areas where the Board wishes to retain control. Such
reserved powers include decisions relating to the determination of investment
policy and approval of certain investment transactions, strategy, capital
raising, statutory obligations and public disclosure, financial reporting,
entering into any material contracts by the Company and overseeing the
Company's sustainability strategy.
The Board actively promotes a culture of openness, constructive challenge and
debate in the boardroom, underpinned by robust internal controls and
governance frameworks. Assessment of the personality types of Board Directors
and their cognitive and interpersonal skills forms part of the Board's
consideration of the expected future leadership needs of the Company. In
considering these needs, the Board seeks to ensure that the practices and
behaviour throughout the Company's operations remain aligned with the
Company's purpose, values and strategy. No corrective actions were taken
during the year in response to matters arising which did not meet the Board's
expected standards.
An Investment Management Agreement between the Company and the Investment
Manager sets out the matters over which the Investment Manager has delegated
authority, including monitoring and managing the existing investment
portfolio, risk management, taking investment decisions within the agreed
parameters and also the limits on cost and expenditure above which Board
approval must be sought. All other matters are reserved for approval by the
Board of Directors.
In contributing to the delivery of the Company's strategy, the Board maintains
a high level of engagement with the Investment Manager and seeks to work in a
collegiate and co-operative manner, whilst encouraging open discussion,
challenge and debate of all significant matters relevant to the Investment
Manager's delegated authority. In addition to the Board's cycle of scheduled
meetings, members of the Board regularly attend fortnightly operational update
meetings hosted by the investment management team.
The Directors are expected to devote such time as is necessary to enable them
to discharge their duties. Where necessary, in carrying out their duties, the
Directors may seek independent professional advice at the expense of the
Company. The Company maintains appropriate Directors' and Officers' liability
insurance in respect of legal action against its Directors on an
ongoing basis.
The Board has responsibility for ensuring that the Company keeps proper
accounting records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable it to ensure that the
financial statements comply with The Companies (Guernsey) Law, 2008, as
amended. It is the Board's responsibility to present a fair, balanced and
understandable assessment, which extends to interim and other price-sensitive
public reports.
Board operation
The overall management of the Company is the responsibility of the Board,
which exercises all the powers of the Company subject to the relevant
statutes, the Company's Articles of Incorporation, and any directions given by
resolutions passed by shareholders. The Articles empower the Board to allot,
grant options, warrants or other rights over or otherwise dispose of the
Company's shares as the Board determines. The law permits the Company to make
market purchases of its own shares if the purchase has first been authorised
by a resolution of the Company.
Shareholders authorised the renewal of the Board's authority to allot ordinary
shares at the 2021 AGM and, subject to certain terms and conditions, to
repurchase ordinary shares on behalf of the Company. Similar authorities are
being sought at the forthcoming AGM and details are set out in the notice of
AGM.
The Board's annual cycle includes quarterly meetings where the Directors
follow a formal agenda which is fixed in advance and standing agenda items at
each quarterly meeting cover each area where the Board has reserved
decision-making power, in addition to receiving reports from key service
providers on portfolio performance, asset valuations and enhancements,
operational matters, business development and capital allocation, ESG matters,
risk management, peer group information, regulatory and industry developments.
The Board actively monitors the environment in which the Company operates to
ensure any developments which may affect the Company are considered. Strategy
sessions are held at least annually and are co-ordinated by the Investment
Manager and key advisers, which include site visits and technical briefings.
The Board's annual cycle also includes a dividend policy review session and
setting the target for the next financial year.
In order to discharge their duties and to operate effectively as a Board, the
Directors have full and timely access to all relevant information concerning
the Company.
The principal matters considered by the Board during the year (including
attending to matters formally reserved for its decision making) included:
· the appointment of Foresight as AIFM and the parameters of their
revised mandate;
· the strategic direction of the Company and the compatibility of
emerging technologies within the revised investment policy;
· composition of the Board, diversity and succession planning;
· the Annual Report and audited financial statements and the
Half-year Report;
· the dividend policy;
· the activities of the Board's formally constituted committees,
including the formation of the ESG Committee;
· the valuation policy, the recognition of value enhancements, the
inclusion of capture discounts and the ongoing appropriateness of the blended
power curve; and
· the risk management framework and the principal risks facing the
Company.
Committees of the Board
The Board has not deemed it necessary to appoint a separate remuneration
committee as, being comprised of six Directors, it considers that such
matters may be considered by the Board as a whole. At the launch of the Fund,
the remuneration of the Board was fixed after consultation with independent
external advisers and in subsequent years the Board has reviewed the
remuneration levels for the Company and received industry comparison
information from advisers in respect of Directors' remuneration. The Company's
remuneration policy was last subject to a full independent review in
May 2022. As noted in the Directors' remuneration report on pages 145 and 146
of the Annual Report 2022, an external review of remuneration levels was
undertaken subsequent to the financial year end and recommendations for fee
levels to apply from the financial year commencing April 2022 will be proposed
to shareholders as part of the remuneration policy at the 2022 annual
general meeting.
Following Foresight's appoint as AIFM, the Board will meet to consider any
investment proposals which fall outside of Foresight's delegated authority
(explained in further detail on page 31 of the Annual Report 2022). The Board
ensures compliance with the terms of the investment policy of the Company and
will consider and decide on any changes to the investment policy (subject to
obtaining the relevant shareholder approvals), including geographical and
sectorial spread of investments, risk profile, investment restrictions
and the approach to project selection.
Prior to January 2022 the Board was responsible for making discretionary
management decisions in respect of the investment portfolio (with reference
as necessary to advice provided by Foresight Group, which at that time acted
as the Company's Investment Adviser). In connection with Foresight's
appointment as discretionary Investment Manager, the Board and Foresight
agreed specific delegation parameters against which investment proposals are
to be assessed. In cases where the parameters are exceeded, the transaction
qualifies as a "Board Approval Transaction", therefore falling outside
the scope of Foresight's delegated authority. Further details of Foresight's
delegated authority are set out on page 31 of the Annual Report 2022.
The Board as a whole also fulfils the functions typically carried out by a
management engagement committee. The Board reviews and makes recommendations
on any proposed amendment to the Investment Management Agreement and keeps
under review the performance of the Investment Manager. The Board also
performs a review of the performance of other key service providers to the
Fund and meets at least once a year to undertake a qualitative performance
review. In the case of each service provider, the review seeks to ensure that:
· the terms of engagement remain fair and reasonable in the context
of the Company and the market;
· their objectives remain aligned with those of the Company;
· they have not been subject to any adverse event which may present
additional risk to the Company;
· they remain appropriately incentivised to perform their duties to a
high standard; and
· their continued engagement remains in the best interests of the
Company as a whole.
The Board notes the supporting guidance provided under provision 17 of the
2019 edition of the AIC Code on means by which investment companies may
assess the relationship with the manager. During 2021, the Board reviewed the
Company's position against each of the suggested considerations and concluded
that the relationship was operating effectively, that the duties of the
Investment Manager remained aligned with the objectives of the Company and
that the continued retention of the Investment Manager's services remained in
the best interests of the Company.
Audit Committee
The Company has established an Audit Committee, chaired by Stephanie Coxon,
which operates within clearly defined terms of reference and comprises three
non-executive Directors: Stephanie Coxon, Alan Bates and Richard Ramsay, whose
qualifications and experience are noted on pages 122 and 123 of the Annual
Report 2022. All members of the Audit Committee are independent Directors and
have no connections with the external auditor. The Audit Committee meets at
least three times a year, at times appropriate to the financial reporting
calendar.
Further details of the membership and activities of the Audit Committee are
described in this report on pages 139 to 123 of the Annual Report 2022.
Audit Committee performance evaluation
For the financial year ended 31 March 2022, the Board is undertaking an
internal evaluation of the performance of the Audit Committee. The evaluation
process will include feedback from all Committee members on the Committee's
discharge of the duties delegated under its terms of reference, and on the
performance and effectiveness of the Audit Committee Chair.
External audit
The Audit Committee is satisfied with the quality effectiveness and
independence of the audit process, and the effectiveness of the recent audit
and the performance of the external auditor is reviewed annually. The review
process includes receiving feedback from all key personnel involved in the
audit process and in the production of the annual financial statements.
Any findings from the audit effectiveness review are communicated to the
external auditor in advance of their next engagement and considered as part
of the subsequent audit planning process.
The Directors are not aware of any circumstances which would affect the
recommendation that Deloitte be reappointed as external auditor for the year
ending 31 March 2023, expected to be confirmed by the Board in the notice of
the 2022 annual general meeting. The Audit Committee also recommends the role
of the external auditor is retendered every 10 years, with the audit
partner changing every five years.
Risk Committee
The Company has also established a Risk Committee, which is chaired by Hans
Joern Rieks and comprises four non-executive Directors: Hans Joern Rieks,
Alan Bates, Jo Harrison and Stephanie Coxon. The duties of the
Risk Committee include the identification, measurement, management and
monitoring of all risks relevant to the Company's investment strategy and to
which the Company is or may be exposed. Drawing from this, the Risk
Committee is responsible for determining the principal risks to which the
Company is exposed, being those most likely to threaten the business model,
future performance, solvency or liquidity. It is the responsibility of the
Risk Committee to advise the Board on the overall risk appetite, tolerance and
strategy of the Company, and to oversee the Company's current risk exposures
and the controls in place to mitigate those risks. The Risk Committee meets at
least four times per year.
Nomination Committee
The Nomination Committee, chaired by Richard Morse, comprises three
non-executive Directors: Richard Morse, Hans Joern Rieks and Stephanie Coxon.
The Nomination Committee's main function is to regularly review the structure,
size and composition of the Board and to consider succession planning for
Directors. The Nomination Committee meets at least twice per year.
ESG Committee
The ESG Committee, chaired by Jo Harrison, comprises three non-executive
Directors: Jo Harrison, Richard Morse and Hans Joern Rieks. The ESG
Committee's main functions include guiding and monitoring the development of
the Company's sustainability and ESG strategy, agreeing the Company's ESG
objectives and monitoring progress against the KPIs linked to each objective.
The ESG Committee will also assess and prioritise ESG risks and opportunities
for the Company, including assessing climate change risks, and working with
the Risk Committee and the Investment Manager to ensure climate governance is
integrated into the Company's risk management.
Separate reports from the Audit, Risk, Nomination on their activities for the
year are set out on pages 135 to 144 of the Annual Report 2022. The terms of
reference for each of the Committees are available on the Company's website or
upon request from the Company Secretary.
Directors' attendance
The attendance record of Directors for the year to 31 March 2022 is set out
below.
Board Audit Risk Nomination ESG
meeting Committee Committee Committee Committee((1))
Number of meetings held 4 5 4 2 2
Richard Morse 4 - - 2 2
Stephanie Coxon 4 5 4 -((2)) -
Peter Neville (resigned on 2 September 2021) 2 3 2 2 -
Richard Ramsay 4 5 - - -
Hans Joern Rieks 4 - 4 1 2
Alan Bates (appointed on 10 June 2021) 3 3((3)) 3((4)) - -
Jo Harrison (appointed on 10 June 2021) 3 - 3((5)) - 2
(1) Jo Harrison, Hans Joern Rieks and Richard Morse were members of the
ESG Committee from its formation on 2 September 2021.
(2) Stephanie Coxon was a member of the Nomination Committee from 2
September 2021.
(3) Alan Bates was a member of the Audit Committee from 2 September 2021.
(4) Alan Bates was a member of the Risk Committee from 2 September 2021.
(5) Jo Harrison was a member of the Risk Committee from 2 September 2021.
A total of 18 other unscheduled Board meetings were held during the year for
specific purposes, which were attended by some, but not all, of the Directors.
RELATIONS WITH SHAREHOLDERS
The Board encourages active engagement with shareholders and the investment
community.
Dialogue with shareholders
The Company welcomes the views of all shareholders and places great importance
on effective communication with its shareholders through a variety of
channels. The Investment Manager produces a quarterly factsheet which is
available on the Company's website. The Chairman and senior members of the
Investment Manager make themselves available, as practicable, to meet with
principal shareholders, key sector analysts or other key stakeholders.
Meetings between institutional investors and the Investment Manager are
arranged periodically by the Company's broker and representatives of the
Company are open to meeting with all investors, on request.
Feedback from these meetings is provided to the Board on a regular basis. The
Board is also kept fully informed of all relevant market commentary on the
Company by the Company's financial PR agency, as well as receiving relevant
updates from the Investment Manager and the Company's broker.
Investor publications
All shareholders can address any feedback or queries concerning the Company in
writing at its registered address via the Company Secretary.
The Chairman or the Senior Independent Director are willing to meet with major
shareholders to discuss any particular items of concern or to understand their
views on governance and the performance of the Company, and the annual general
meeting of the Company provides a forum for shareholders to meet and discuss
issues with the Directors and the Investment Manager.
Company website
The Company's website, www.jlen.com, is regularly updated with new
information, research, videos and quarterly publications. The Company's
Prospectus, Key Information Document and Investor Disclosure Document are all
available for download. The Company also maintains an issuer services page
with the London Stock Exchange, providing details of key contacts and
corporate events over the financial year.
Stakeholders, business relationships and socially responsible investment
Section 172 statement
Whilst not directly applicable to companies incorporated outside the UK, the
Board recognises the intention of the AIC Code that matters set out in
Section 172 of the Companies Act 2006 are reported.
The Board strives to understand the views of the Company's key stakeholders
and to take these into consideration as part of its discussions and
decision-making process. Additionally, the Board promotes the success of the
Company for the benefit of our members as a whole as well as a broad range
of stakeholders that we recognise are material to the long-term success of
the business. We set out below the detail of how the Board has complied with
its duty under Section 172.
As an investment company, the Company does not have any employees and conducts
its core activities through third-party service providers. Each provider has
an established track record and through regulatory oversight is required to
have in place suitable policies and procedures to ensure they maintain high
standards of business conduct, treat shareholders fairly and employ corporate
governance best practice. The stakeholders which the Board has identified as
being key are the Company's shareholders, the Investment Manager, commercial
service providers, asset-level counterparties, local communities and debt
providers. Understanding the needs of each stakeholder group and ensuring the
Company's operations are conducted in a manner which recognises their
interests is crucial for ensuring the Company's long-term sustainable
success.
Further information on how the Company engages with stakeholders can be found
on pages 31 to 37 of the Annual Report 2022.
The Board's commitment to maintaining high standards of corporate governance,
combined with the Directors' duties enshrined in company law, the constitutive
documents, the Disclosure Guidance and Transparency Rules, and the UK version
of the Market Abuse Regulation, provides shareholders with regular and
detailed announcements concerning the Company and its activities sufficient
for investors to make informed decisions concerning their shareholding. A
significant amount of time is dedicated at each scheduled meeting to risk
management and how effectively the Company can preserve value for shareholders
over the long term through mitigating downside risk. Regular dialogue with the
Investment Manager and the corporate broker ensures the Board is aware of the
investment strategy and the views of major shareholders and for these to be
taken into consideration as part of the Board's decision-making process.
Representatives of the Investment Manager are involved in the governance
framework of each project. This reinforces the effective flow of relevant
information to the Board on the activities of the Company's significant
counterparty exposures involved in operating each project, and provides a
communication channel through which community stakeholders' views can be
shared, considered at each scheduled meeting of the Directors, and to ensure
their interests remain aligned with the objectives of the Company.
DIVISION OF RESPONSIBILITIES
The Board has overall responsibility for the management of the Company's
affairs.
Chairman
As Chairman, Richard Morse is responsible for leading the Board and for
ensuring its effectiveness in all aspects of its role. Specific duties of the
Chairman include demonstrating ethical leadership, objective judgement,
promoting the highest standards of integrity, probity and a culture of
openness and debate. The Chairman sets the Board's agenda and ensures the
Board has a clear understanding of the views of those who provide the
Company's capital and that effective decision-making processes are in place,
supported by high-quality information, that take into consideration the
interests of all the Company's key stakeholders.
The Chairman leads the annual performance evaluation of the Board, with
support from the Senior Independent Director, and acts as appropriate on the
results. One-on-one meetings are held between the Chairman and the Directors
each year, which provides an additional forum through which any potential
training needs are identified, experiences of the Company are shared,
or other relevant Board matters are addressed.
Senior Independent Director
Richard Ramsay is the Senior Independent Director and provides support to the
Chairman on matters of Board effectiveness, governance, and acting as an
intermediary for the Directors, shareholders and other key stakeholders. The
Senior Independent Director also provides an additional channel of
communication through which stakeholders may voice concerns, works annually
with the other Directors on reviewing the performance of the Chairman, and is
responsible for leading the succession planning arrangements for
the Chairman.
Non-executive Directors
Including the Chairman and the Senior Independent Director, the Company
currently has six independent non-executive Directors.
The Company Secretary
The Directors have access to the advice and services of Sanne Fund Services
(Guernsey) Limited, the Company Secretary and Administrator, which is
responsible to the Board for ensuring that Board procedures are followed and
that it complies with Guernsey law and applicable rules and regulations of the
Guernsey Financial Services Commission and the London Stock Exchange.
The Company Secretary is also responsible for the timely delivery of
information to the Board and ensuring that statutory obligations are met.
Market Abuse Regulation
The Board has formally adopted procedures in relation to the Company's
obligations under the UK version of the Market Abuse Regulation ("MAR"),
including procedures for the identification, management and disclosure of
price sensitive information, share dealing by persons discharging managerial
responsibility and their persons closely associated. The Board is responsible
for overseeing the Company's compliance with MAR, and ensuring compliance with
MAR by the Directors.
AIFM Directive
The Company is categorised as an externally managed non-EEA AIF for the
purposes of the Alternative Investment Fund Managers Regulations 2013 and the
AIFM Directive. The Investment Manager has received authorisation from the FCA
to act as AIFM to the Company. The Board has delegated responsibility for the
Company's risk management and portfolio management functions to
the Investment Manager, subject to specific delegation parameters described
in the Investment Management Agreement.
Although the Board delegates discretionary management authority to
the Investment Manager, it actively and continuously supervises the
Investment Manager in the performance of its functions and reserves the
right to take decisions in relation to the overall investment and risk
management policies and strategies of the Company or to terminate the
appointment of the Investment Manager (subject to the terms of the Investment
Management Agreement). The Board has the right to request additional
information or updates from the Investment Manager in respect of all
delegated matters, including in relation to the identity of any sub-delegates
and their sphere of operation.
AIFM Directive disclosures
The Company is required, pursuant to Regulation 597(2) of the Alternative
Investment Fund Managers Regulations 2013 and Article 42(1)(a) of the AIFM
Directive, to make certain specified disclosures to prospective investors
prior to their investment in the Company, in accordance with the FCA's
Investment Funds sourcebook and Article 23 of the AIFM Directive (the
"Article 23 Disclosures"). The Company has published an investor disclosure
document on its website (www.jlen.com) for the purposes of making the Article
23 Disclosures available to prospective investors prior to their investment
in the Company.
During the financial year ended 31 March 2022, there was one material change
to the Article 23 Disclosures made available on the Company's website, when
the Company appointed Foresight as Investment Manager on 11 January 2022, as
detailed further in this report.
AIFM Remuneration
The Investment Manager is categorised by the FCA as a Collective Portfolio
Management Investment ("CPMI") firm and is accordingly subject to certain
provisions of the FCA's AIFM Remuneration Code and MIFIDPRU Remuneration Code
for its MiFID business (the "Remuneration Code").
The Investment Manager's Remuneration Policy (the 'Policy') applies to all
staff whose professional activities have a material impact on the risk
profiles of the Investment Manager or of the funds it manages, including the
Company. This includes senior management, risk takers, control functions and
any employee/member receiving total remuneration that takes them into the same
remuneration bracket as senior management and risk takers.
The Manager's Remuneration Code Staff have been identified as:
· partners as members of the management body, of those responsible
for the prevention of money laundering and terrorist financing and managerial
responsibility for business units, departments and teams; and
· Directors/ Heads of Teams, including senior staff responsible for
investment management, IT, risk management and those with authority to take
decisions on the introduction of new products.
The Investment Manager ensures that the Policy is consistent with and
promotes, sound and effective risk management and does not encourage
risk-taking which is inconsistent with the risk profile of the funds it
manages, including the Company. The Manager recognises the importance of an
effective remuneration policy in order to attract, motivate and retain
individuals of the necessary ability and experience and to reward individuals
both on an annual basis and over the long term for their contributions to the
success of the Investment Manager, the Company and the Company's portfolio of
assets.
The Investment Manager ensures that were remuneration is performance related,
the total amount of remuneration is based on a combination of the assessment
of the performance of the individual and of the Company (as an AIF) and of the
Manager's overall results. When assessing individual performance, financial
and non-financial criteria are considered. Variable remuneration consists of
bonus payments of employees.
The Investment Manager has an established Employee Remuneration Committee to
oversee the implementation of its remuneration policies and practices
established under the Remuneration Codes.
The Company does not have any employees. The services in this regard are
provided by staff members of the Investment Manager in its role as AIFM.
In accordance with the Alternative Investment Fund Managers Regulations 2013
and related FCA rules, the Manager is required to make certain remuneration
disclosures available to investors and the FCA. In accordance with these
obligations, the Investment Manager's Policy and the numerical remuneration
disclosures in respect to the relevant reporting period are available from the
Investment Manager on request.
Non-mainstream pooled investments
The Board notes the rules of the UK FCA on the promotion of non-mainstream
pooled investments.
The Board confirms that it conducts the Company's affairs, and intends to
continue to do so, in order that the Company's shares will be excluded
securities under the FCA's rules. This is on the basis that the Company, which
is resident outside the EEA, would qualify for approval as an investment trust
by the Commissioners for HM Revenue and Customs under Sections 1158 and 1159
of the Corporation Tax Act 2010 if resident and listed in the United Kingdom.
Therefore, the Company's shares will not amount to non-mainstream pooled
investments. Accordingly, promotion of the Company's shares will not be
subject to the FCA's restriction on the promotion of non-mainstream pooled
investments.
Significant voting rights
Details of shareholders with notifiable interests in the voting rights of the
Company can be found on page 149 of the Annual Report 2022.
Share repurchase
Subject to the provisions of the law and the Company's Articles of
Incorporation, the Company may purchase all or any of its shares of any class,
including any redeemable shares, and may hold such shares as treasury shares
or cancel them. During the year no shares were acquired by the Company.
Amendment to the Company's Articles of Incorporation
Subject to the provisions of the law and the Company's Articles of
Incorporation, the Company's Articles can be amended by special resolution.
COMPOSITION, SUCCESSION AND EVALUATION
Nomination Committee Report
The Board ensures it has the appropriate balance of skills, experience,
diversity and knowledge to operate effectively.
Committee members
Richard Morse
Chair of the Nomination Committee
Hans Joern Rieks
Director
Stephanie Coxon
Director
The Board of Directors has established a Nomination Committee from the
non-executive Directors of the Company. The Nomination Committee, chaired by
Richard Morse, operates within clearly defined terms of reference which are
considered and are then referred to the Board for approval. A copy of the
terms of reference is available on the Company's website or upon request from
the Company Secretary.
The main roles and responsibilities of the Nomination Committee are to:
· regularly review the structure, size and composition of the Board
and make recommendations to the Board with regard to any changes, based on
merit and objective criteria (including skills, knowledge and experience,
and promoting diversity of gender, social and ethnic backgrounds, cognitive
and personal strengths);
· give full consideration to succession planning for Directors,
ensuring effective plans are in place for orderly succession to the Board and
to oversee the development of a diverse pipeline for succession, taking into
account the challenges and opportunities facing the Company; and
· lead the process for appointments and be responsible for
identifying and nominating for the approval of the Board, candidates to fill
Board vacancies as and when they arise.
The Nomination Committee reports formally to the Board on its proceedings on
all matters within its duties and responsibilities and how it has discharged
its responsibilities. The Committee typically meets at least twice a year and
at such other times as the Nomination Committee Chair shall require. Other
Directors and third parties may be invited by the Nomination Committee to
attend meetings as and when appropriate.
The initial and all subsequent members of the Board are selected following a
comprehensive recruitment exercise with the aim of establishing a Board with
the skills, knowledge, experience and diversity necessary for providing
effective leadership and maintaining a governance framework suitable for the
nature, scale and complexity of the Company.
The Nomination Committee met twice during the financial year. Matters
considered by the Committee during the year included, but were not limited to:
· the Company's policy on diversity, ensuring this remained aligned
with the Company's strategy and objectives;
· Director succession planning;
· Director training;
· the time requirements and independence of Directors; and
· consideration and agreement of the terms of reference of the
Nomination Committee for approval by the Board.
Four meetings of the Nomination Committee were held during the previous
financial year, which achieved significant progress in implementing the
Board's succession plans, notably the appointments of Alan Bates and
Jo Harrison in September 2021, broadening the operational, utilities industry
and environmental skill sets represented on the Board whilst also broadening
its diversity.
In early 2022, the Nomination Committee was notified of the intention of
Richard Morse to retire from the Board, having served as Chairman since the
Company's inception and in December 2022 would be reaching his ninth year on
the Board. In accordance with the Board's succession plan, the Committee
engaged a third party, Savannah Partners Limited, to support a comprehensive
recruitment exercise to identify potential candidates to succeed Richard as
Board Chairman. The process is in advanced stages and the Committee looks
forward to announcing the outcome of the recruitment exercise in due course.
Richard Ramsay has also indicated that, in line with the Company's succession
planning, he will be retiring from the Board by the end of the calendar year.
Savannah Partners have also been retained to identify potential candidates to
succeed him.
Savannah Partners Limited has no other connections with the Company or its
individual Directors.
A further meeting of the Nomination Committee was held subsequent to the
financial year end to receive and consider the findings of the Board
evaluation concerning the size, structure and composition of the Board and the
appropriateness of the current mix of skills, knowledge and experience for its
current activities, and how effectively members of the Board work together
to achieve their objectives. No material areas for improvement or matters
requiring further attention were identified in the findings from the Board's
internal performance evaluation.
The Nomination Committee continues to maintain and develop the Board's
succession planning arrangements to ensure the arrangements remain effective,
and that a diverse pipeline for succession is maintained which remains
aligned with the Company's strategy and future leadership needs. The Board is
committed to maintaining at least 40% female representation, and having at
least one Board member from an ethnic minority background before the December
2024 target.
Board succession timeline 2022
31 March 2022 31 July 2022 1 September 2022
At the year end, the Board consisted of six non-executive Directors: During July 2022 the Board expects to announce the outcome of the Board's At the Company's AGM on 1 September 2022, Richard Ramsay will retire from the
recruitment exercise and the successor to Richard Morse. Board, and will not stand for re-election. All other Directors will stand for
re-election at the AGM.
· Chairman - Richard Morse;
· SID - Richard Ramsay;
· Stephanie Coxon;
· Alan Bates;
· Jo Harrison; and
· Hans Joern Rieks.
Board independence and composition
The Board consists of six Directors, all of whom are non-executive and
independent of the Company's Investment Manager and other key service
providers. Board independence is formally reviewed annually against the
factors suggested in the AIC Code as likely to impair, or could appear to
impair, independence, in addition to any other relevant considerations. The
Board considers all of the Directors, including the Chairman, to be
independent. The Directors' details are contained on pages 122 and 123 of the
Annual Report 2022 and set out the range of investment, financial and business
skills and experience represented. Richard Morse has been appointed Chairman
and Richard Ramsay Senior Independent Director.
The Board believes that the Directors provide the appropriate balance of
skills, knowledge and diversity necessary to manage the affairs of the Company
and to operate effectively as a Board. Biographical details of the Directors
are provided on pages 122 and 123 of the Annual Report 2022. The composition
of the Board is formally reviewed annually by the Nomination Committee with
the objective of ensuring that it meets the current and expected future
leadership needs of the Company. The Board's formal performance evaluation
also provides feedback from the Directors on aspects of the Board's operation
where greater effectiveness may be achieved.
Tenure, succession planning and induction
The tenure of all Directors, including the Chairman, is expected not to
exceed nine years unless exceptional circumstances warrant, such as to allow
for phased Board appointments and retirements and to ensure that the Board
remains well balanced and that the skills, knowledge and experience of the
Board is refreshed at appropriate intervals.
In 2019 the Board began the implementation of its succession plan which
involved a staged process of rotating the Directors first appointed at the
Company's launch. In accordance with corporate governance best practice as set
out in the AIC Code, each Director will be subject to annual re-election by
shareholders at the annual general meeting. The Board maintains a succession
roadmap which documents the plans in place for a gradual phasing of the Board
and to avoid any undue disruption which may arise if more than one Director
were to retire within a short space of time.
On appointment to the Board, new Directors will be provided with an induction
pack by the Company Secretary containing all relevant information regarding
the Company, its history, operations, key relationships, and their duties and
responsibilities as Directors. New appointees meet with each of the Directors
and with representatives of the Investment Manager. The Chairman is
responsible for agreeing the programme of induction training with new
appointees, and that any training needs of the existing Directors are
addressed.
The Nomination Committee is responsible for ensuring that a diverse pipeline
for succession is maintained, relevant to the future leadership needs of the
Company.
Board diversity
The Board supports the recommendations issued by the FTSE Women Leaders
Review (building on the work of the former Hampton-Alexander and Davies
Reviews) and the Listing Rule requirement introduced in April 2022 requiring
listed companies to target at least 40% female board representation. The Board
further notes the recommendations of the Parker Review to have at least one
member of the Board from an ethnic minority background by December 2024.
The Board considers diversity in all its forms as part of its succession
planning and the Directors are committed to maintaining a gender-balanced
board, in addition to achieving the recommendations of the Parker Review in
advance of December 2024. Acting on the findings from the Nomination
Committee's review of the size, structure and composition of the Board, the
Directors were pleased to announce the appointments of Alan Bates and
Jo Harrison in June 2021.
No Director has a service contract with the Company and the terms and
conditions of appointment for each of the Directors are set out in writing
between each individual and the Company. Copies of the relevant appointment
letters are available for inspection at the Company's registered office.
Conflicts of interest
The Directors have undertaken to notify the Company Secretary as soon as they
become aware of any actual or potential new conflict of interest. Only
Directors who have no material interest in the matter being considered will be
able to participate in the Board approval process. Other business
relationships, including those that conflict or may potentially conflict with
the interests of the Company, are taken into account when appointing Board
members and are monitored on a regular basis. The terms of each Director's
appointment letter with the Company requires that they seek prior approval
from the Board before taking up any additional external appointments.
The Board recognises the holdings of ordinary shares in the Company held by
each of Richard Morse, Richard Ramsay, Stephanie Coxon and Hans Joern Rieks,
details of which are set out on page 150 of the Annual Report 2022. The Board
considers these interests at each scheduled meeting and remains satisfied
that they do not affect the ability of the Directors to exercise independent
judgement or their objectivity.
Performance and evaluation
The JLEN Board has adopted a process to review its performance on a regular
basis and such reviews are carried out internally on an annual basis, with
externally facilitated evaluation expected to take place every three years.
The annual evaluation of the Board and the performance of its committees has
taken the form of questionnaires and discussion to assess Board effectiveness
and individual Director performance in various areas. The review of the
Chairman's performance is led by the Senior Independent Director.
The last externally facilitated performance evaluation was undertaken by
Aspida Advisory Services Limited in respect of the financial year ended 31
March 2020. The findings from the external review were generally satisfactory
and no material deficiencies were identified. The next externally facilitated
Board evaluation will take place in 2023.
For the financial year ended 31 March 2022, the Directors undertook an
internal evaluation of the Board. The evaluation process covered the
composition of the Board and meeting process, Board information, training and
development, Board dynamics, accountability and effectiveness.
Additional reviews were undertaken in respect of the performance and
effectiveness of the Chairman, and of the Audit Committee. Certain points
identified during the assessment which we have agreed to take forward in the
coming year include:
· broadening the diversity of the Board with the objective
of meeting the targets set by the Parker Review before December 2024;
· implementing a remuneration policy which better reflects market
practice and the time commitment and demands placed on the Directors (as
further explained in the Directors' Remuneration report); and
· certain enhancements to the Company's induction programme for new
Directors, based on the learning gained during stages of the pandemic
lockdown.
AUDIT, RISK AND INTERNAL CONTROL
Audit Committee report
Stephanie Coxon, Chair of the Audit Committee, is pleased to present the Audit
Committee report for the year ended 31 March 2022.
Committee members
Stephanie Coxon
Chair of the Audit Committee
Alan Bates
Director
Richard Ramsay
Director
The Audit Committee is appointed by the Board from the non-executive
Directors of the Company. The Audit Committee, chaired by Stephanie Coxon,
operates within clearly defined terms of reference and includes all matters
indicated by Disclosure Guidance and Transparency Rule 7.1 and the UK
Corporate Governance Code. The terms of reference are considered by the Audit
Committee at each meeting and any changes are then referred to the Board for
approval. A copy of the terms of reference is available on the Company's
website or upon request from the Company Secretary.
Summary of the roles and responsibilities of the Audit Committee
The main roles and responsibilities of the Audit Committee are:
· monitoring the integrity of the financial statements of the Company
and any formal announcements relating to the Company's financial performance
and reporting to the Board on significant financial reporting issues and
judgements contained therein;
· reviewing the content of the Half-year and Annual Reports and
financial statements and advising the Board on whether, taken as a whole, it
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position, performance, business model
and strategy;
· agreeing with the external auditor the audit plan and reviewing the
auditor's report related to the Half-year Report and the Annual Report and
financial statements;
· maintaining the Company's policy on the provision of non-audit
services by the external auditor;
· reviewing and recommending for approval the audit, audit-related
and non-audit fees payable to the external auditor and the terms of their
engagement;
· taking into account the principal risks, reviewing the long-term
viability and going concern statements, including the underlying documentation
prepared by the Investment Manager;
· reviewing, in conjunction with the Risk Committee, the adequacy
and effectiveness of the Company's internal financial controls and internal
control and risk management systems;
· reviewing the adequacy and security of the Company's arrangements
for regulatory compliance, whistleblowing and fraud, recognising that
responsibilities for whistleblowing arrangements reside with the Board as a
whole;
· making recommendations to the Board, to be put to shareholders for
approval at the annual general meeting, in relation to the appointment,
re-appointment and removal of the Company's external auditor; and
· assessing annually the effectiveness of the audit process and the
external auditor's independence and objectivity taking into account relevant
professional and regulatory requirements and the relationship with the auditor
as a whole, including the provision of any non-audit services and the
effectiveness of the audit process.
The Audit Committee reports formally to the Board on its proceedings on all
matters within its duties and responsibilities and how it has discharged its
responsibilities.
Meetings
The Audit Committee meets at least three times a year and at such other times
as the Audit Committee Chair shall require.
In addition to the Audit Committee meeting formally with the external auditor,
the Chair of the Audit Committee has met them informally on six further
occasions and the independent valuations specialists three times.
These informal meetings have been held to ensure the Audit Committee Chair is
kept up-to-date with the progress of their work and that their formal
reporting meets the Audit Committee's needs. Any member of the Audit
Committee may request that a meeting be convened by the Company Secretary.
The external auditor may request that a meeting be convened if it is deemed
necessary.
Other Directors and third parties may be invited by the Audit Committee to
attend meetings as and when appropriate.
Annual general meeting
The Audit Committee Chair attends the annual general meeting to answer
shareholder questions on the Committee's activities.
Significant issues
The Audit Committee considered the following significant issues during the
year and in relation to the financial statements:
Valuation of investments
The Company is required to calculate the fair value of its investments.
Whilst a relatively high volume of transactions for investments of this nature
take place, there is not a suitable listed or other public market in these
investments against which their value can be benchmarked. As a result, a
valuation is performed based on a discounted cash flow methodology in line
with IFRS 13 Fair Value Measurement.
The calculation of the fair value of the investments carries elements of risk,
mainly in relation to the assumptions and factors such as:
· the determination of the appropriate macroeconomic assumptions
underlying the forecast investment cash flows;
· the determination of the appropriate assumptions regarding future
power prices, inflation forecasts, energy generation and volumes underlying
the forecast investment cash flows;
· the determination of appropriate sensitivities to apply to meet the
required disclosures;
· the impact of project-specific matters on the forecast cash flows
for each investment;
· the determination of the appropriate discount rate for each
investment that is reflective of current market conditions;
· the tax deductibility of interest expense under the Base Erosion
and Profit Shifting ("BEPS") legislation;
· the underlying project financial models may not reflect the
underlying performance of the investment;
· terms and costs of the future refinancing of senior debt on certain
projects;
· the cash flows from the underlying financial models may not take
into account current known issues; and
· the updates performed on the underlying financial models may result
in errors in forecasting.
The Audit Committee is satisfied that the Investment Manager's assumptions
have been reviewed and challenged for:
· the macroeconomic assumptions, including inflation and the
comparison of these assumptions to observable market data, actual results and
prior year comparatives;
· the electricity price, gas price, energy generation and volume
assumptions, including the comparison of these assumptions to observable
market data, actual results and prior year comparatives; and
· the build-up of the discount rates for consistency and
reasonableness, benchmarking against market data and peers and
project-specific items.
The Audit Committee is also satisfied that the portfolio valuation and
associated disclosures have been audited for mechanical accuracy, ensuring
that the investments are brought on balance sheet at fair value and that the
independent valuation carried out by an independent firm has been reviewed and
challenged by the Audit Committee, Board, and by the auditor.
Internal audit
The Audit Committee considers at least once a year whether or not there is a
need for an internal audit function. Currently, the Audit Committee does not
consider there to be a need for an internal audit function specific to the
Company, given that there are no employees in the Company and the systems and
procedures employed by the Administrator and Investment Manager, including
their own internal controls and procedures in place in relation to the Company
and its subsidiaries, provide sufficient assurance that a sound system of
internal control, which safeguards the Company's assets, is maintained.
External audit
Deloitte LLP has been the Company's auditor since incorporation on 12 December
2013 and this is the eighth set of financial statements on which it has
expressed an audit opinion.
The Audit Committee has assessed the quality and the effectiveness of the
audit process. To draw its conclusions, the Audit Committee reviewed:
· the scope of the audit, the audit fee and the external auditor's
fulfilment of the agreed audit plan;
· the degree of diligence demonstrated by them in the course of
their interaction with the Board, the Audit Committee and the Administrator
and Investment Manager;
· the external auditor's assessment of the Group's principal risks;
and
· the report highlighting the matters that arose during the course of
the audit and the recommendations made by the external auditor.
The Audit Committee has noted the recommendations under the UK Code and the
AIC Code to put the external audit out to tender every five to 10 years. The
Audit Committee has also noted the requirements of the Competition and Markets
Authority with respect to external auditor services and retendering. This is
the eighth year of Deloitte's appointment as the Company's auditor.
The Audit Committee is satisfied with the quality, effectiveness and
independence of the audit process and it is recommended to the Board that
Deloitte LLP be reappointed as external auditor for the year ending 31 March
2023. Following this year's audits, a detailed auditor evaluation of the
external auditors will be undertaken. This evaluation will include obtaining
feedback from senior finance personnel who were exposed to the audit process
to obtain their input on the effectiveness of the external audit process
Non-audit services
The Audit Committee considered the extent of non-audit services provided by
the external auditor. The Company has adopted a formal policy in relation to
the provision of non-audit services, pursuant to which the external auditor's
objectivity and independence is safeguarded through limiting non-audit
services to their role as reporting accountants for capital raising services
and in relation to the half-year interim review, subject to a cap.
The Company paid £37,432 during the year for non-audit services to Deloitte
LLP, all in relation to the half-year interim review.
Internal control
The Board is responsible for the Company's system of internal control and for
reviewing its effectiveness, and the Board has therefore established an
ongoing process designed to meet the particular needs of the Company
in managing the risks to which it is exposed.
The process is based on a risk-based approach to internal control through a
matrix which identifies the key functions carried out by the Investment
Manager, Administrator and other key service providers, the various activities
undertaken within those functions, the risks associated with each activity and
the controls employed to minimise and mitigate those risks and the risks at
the operating companies. The Audit Committee works in close co-operation with
the Risk Committee, with the prime responsibility of the Audit Committee being
the review of internal financial controls and processes, and of the Risk
Committee being the principal risks and uncertainties facing the Company. A
separate report on the activities of the Risk Committee is set out on pages
143 and 144 of the Annual Report 2022.
Activities of the Audit Committee
The Audit Committee met on five occasions during the year ended 31 March 2022.
Matters considered at these meetings included, but were not limited to:
· reviewing the independent internal controls assurance process put
in place by the Investment Manager;
· meeting with the independent valuation provider and with the
external auditor without representatives of the Investment Manager present to
receive their views in relation to the half-year and year-end valuation and
the appropriateness and implementation of the Company's asset valuation
methodology;
· monitoring the ongoing appropriateness of the Company's blended
power price curve;
· reviewing the reappointment of the external auditor;
· reviewing the effectiveness of the external auditor and the
external audit process;
· considering the short and long-term implications to asset
valuations and cash flows from the significant dislocation in energy markets,
rising inflation and interest rates;
· reviewing the long-term viability and going concern statements,
including the underlying documentation;
· approving the external audit fees;
· considering and agreeing the terms of reference of the Audit
Committee for approval by the Board;
· reviewing the proposed accounting policies and format of the
financial statements;
· reviewing the audit plan and timetable for the preparation of the
Annual Report and financial statements;
· reviewing the Company's asset valuation methodology;
· reviewing the independent valuation report; and
· reviewing the 2022 Annual Report and financial statements and the
2021 Half-year Report.
No areas of significant disagreement or concern were highlighted during the
Audit Committee's activities during the year which necessitated further action
being taken outside of the Committee's routine duties.
As a result of its work during the year, the Audit Committee has concluded
that it has acted in accordance with its terms of reference.
Approval
On behalf of the Audit Committee:
Stephanie Coxon
Chair of the Audit Committee
15 June 2022
Risk Committee report
We are pleased to present the Risk Committee report for the year ended 31
March 2022.
Committee members
Hans Joern Rieks
Chair of the Risk Committee
Stephanie Coxon
Director
Alan Bates
Director
Jo Harrison
Director
The Board of Directors has established a Risk Committee from the non-executive
Directors of the Company. The Risk Committee, chaired by Hans Joern Rieks,
operates within clearly defined terms of reference and works closely with the
Audit Committee in monitoring the internal controls and risk management of
the Company.
The terms of reference are considered at least annually by the Risk Committee
and are then referred to the Board for approval. A copy of the terms of
reference is available on the Company's website or upon request from the
Company Secretary.
The main roles and responsibilities of the Risk Committee are to:
· when requested to do so, advise the Board on the overall risk
appetite, tolerance and strategy of the Fund, taking account of the extent to
which the risk profile of the Company corresponds to the size, structure and
objectives of the Company, in addition to the current and prospective
macroeconomic, financial and regulatory environment, including relevant
stakeholder issues;
· oversee and advise the Board on the current risk exposures of the
Fund with particular focus on the Fund's principal risks, being those which
could influence shareholders' economic decisions, and the controls in place
to mitigate those risks;
· keep under review the Fund's overall risk identification and
assessment processes and, in conjunction with the Audit Committee, review the
adequacy and effectiveness of the risk management systems;
· in conjunction with the Audit Committee, ensure that a framework
of strong corporate governance and best practice is in place, which enables
the Company to comply with the main requirements of the Guernsey Code, UK Code
or the AIC Code where considered appropriate;
· in conjunction with the ESG Committee, ensure the effective
integration of climate risk into the Company's risk management framework;
· when requested to do so, advise the Board on proposed strategic
transactions including acquisitions or disposals, ensuring that a due
diligence appraisal of the proposition is undertaken, focusing in particular
on risk aspects and implications for the risk appetite and tolerance of the
Fund, and taking independent external advice where appropriate and available;
and
· oversee the remit of the risk management function, its resources,
access to information and independence.
The Risk Committee reports formally to the Board on its proceedings on all
matters within its duties and responsibilities and how it has discharged its
responsibilities. The Committee must meet at least four times a year and at
such other times as the Risk Committee Chair shall require. Other Directors
and third parties may be invited by the Risk Committee to attend meetings as
and when appropriate. The Risk Committee met four times in the year.
In order to assist it in fulfilling its role on behalf of the Board, the
Committee has established, in conjunction with the Investment Manager, an
ongoing process designed to meet the particular needs of the Company
in managing the risks to which it is exposed. This is a risk-based approach
through the maintenance of a register which identifies the key risk areas
faced by the Company and the controls employed to minimise and mitigate those
risks. Scoring based on a traffic light system for likelihood and impact is
used to assess the significance to the Fund of each individual risk.
The register is updated quarterly and the Committee considers all material
changes to the risk ratings and the action which has been, or is being, taken.
By their nature, these procedures will provide a reasonable, but not absolute,
assurance against material misstatement or loss.
Activities of the Risk Committee
The Risk Committee met on four occasions during the year ended 31 March 2022.
Matters considered at these meetings included, but were not limited to:
· challenging the Investment Manager's views on risk movements during
the period,
· considering and agreeing the Company's principal risks;
· monitoring developments with the Company's major counterparty
exposures;
· considering changes to the risk profile of the portfolio arising
from proposed investments in new asset classes or geographies;
· monitoring the development of emerging risks and assessing their
impact on the Company;
· agreeing the elevation of certain ESG-related risks into the risk
management framework;
· reviewing the effectiveness of the risk management function;
· considering and agreeing the risk management responsibilities
transferring to Foresight on their appointment as AIFM; and
· considering the regulatory risks associated with the implementation
of the TCFD and SFDR requirements.
REMUNERATION
Directors' remuneration report
Introduction
The Board has established separate Risk, Audit, ESG and Nomination Committees
to effectively oversee the activities of the Group.
The Board has not deemed it necessary to appoint a remuneration committee as,
being comprised of six Directors, it considers that such matters may be
considered by the whole Board, provided that no Director is involved in
deciding their own remuneration.
The Board determines and agrees the policy for the remuneration of the
Directors of the Company, including the approval of any ad hoc payments in
respect of exceptional work required. No Director is involved in determining
his or her own remuneration.
As all Directors of the Company are non-executive, they receive an annual fee
appropriate for their responsibilities and time commitment, but no other
incentive programmes or performance-related emoluments.
At IPO, the remuneration of the Board was fixed after consultation with
independent external advisers. The remuneration policy is reviewed annually by
the Directors to ensure it remains appropriate in the context of the
activities of the Company, that the practices continue to support strategy and
promote the Company's long-term sustainable success, and that they reflect the
time commitment and responsibility of the role.
In 2022 an external review of the Company's remuneration policy was carried
out by Trust Associates and their recommendations were considered by the Board
as a whole prior to determining the policy to apply for the financial year
commencing 1 April 2022. Internal remuneration policy reviews are undertaken
annually by the Directors for each year intervening an externally facilitated
review of remuneration.
The external remuneration review included a desktop benchmarking exercise,
comparing the Company's remuneration practices against the broader listed
investment company sector, companies based in the Channel Islands, in addition
to a selected peer group comparison. Account was taken for the time,
complexity and level of risk involved for Directors, which was assessed based
on the findings of questionnaires and calls held with each Director, in
addition to comments received from the Investment Manager, corporate brokers
and the Company Secretary.
The findings confirmed that the Board continued to be highly responsive to
Company demands, demonstrated by the attendance record at scheduled and ad hoc
meetings held during the financial year. It was also acknowledged that the
Board had adopted a conservative approach to reviewing its own remuneration by
applying only an inflationary increase in the 2019/20 financial year, then
retaining those fee levels for 2020/21 in light of the ongoing uncertainty and
market volatility caused by the Covid-19 pandemic.
The Directors are mindful of maintaining remuneration levels at a level
broadly consistent with market expectations to avoid fees being a limiting
factor by prospective Board candidates, whilst also taking account of the time
requirement expected for each Board position and any additional
responsibilities. In considering the findings of the external remuneration
review, relevant factors included the Company remaining competitive against
peers, the additional scrutiny placed on FTSE 250 constituents, and to avoid
the need for substantial fee increases over future years as inflation levels
remain high. Having considered the recommendations of the external review,
the Board has agreed to adopt each recommendation, without variation,
conditional on ratification by shareholders at the 2022 annual general
meeting. The proposed remuneration policy applicable for the financial year
ending 31 March 2023 is set out below.
Remuneration policy
Each Director receives a fixed fee per annum based on their role and
responsibility within the Company and the time commitment required. It is not
considered appropriate that Directors' remuneration should be performance
related and none of the Directors are eligible for pension benefits, share
options, long-term incentive schemes or other benefits in respect of their
services as non-executive Directors of the Company. Shares held by the
Directors are disclosed in the report of the Directors. The total remuneration
of non-executive Directors has not exceeded the £300,000 per annum limit set
out in the Articles of Incorporation of the Company (subsequently increased to
£400,000 at the EGM held on 8 March 2021).
The Company's Articles of Incorporation empower the Board to award additional
remuneration where any Director has been engaged in exceptional work on a time
spent basis to compensate for the additional time spent over their expected
time commitment.
All of the Directors have been provided with letters of appointment which
stipulate that their initial term shall be for three years, subject to annual
re-election. The Articles of Incorporation provide that Directors retire and
offer themselves for re-election at the first annual general meeting after
their appointment and at least every three years thereafter. Pursuant to the
AIC Code, each Director retires and offers themselves for re-election at each
annual general meeting. A Director's appointment may at any time be terminated
by, and at the discretion of, either party upon three months' written notice.
A Director's appointment will automatically end without any right to
compensation whatsoever if they are not re-elected by the shareholders. A
Director's appointment may also be terminated with immediate effect and
without compensation in certain other circumstances.
The terms and conditions of appointment of non-executive Directors are
available for inspection at the Company's registered office.
Details of individual remuneration
For comparative purposes, the table below sets out the Directors' remuneration
approved and actually paid for the year to 31 March 2022, as well as that
proposed for the year ending 31 March 2023.
Annual base
proposed for Paid
Director Role 2022/23 2021/22
Richard Morse Chairman and Nomination Committee Chair £75,000 £67,250
Richard Ramsay Senior Independent Director £50,600 £49,000
Hans Joern Rieks Risk Committee Chair £48,000 £42,500
Stephanie Coxon Audit Committee Chair (from 3 September 2021) £55,000 £46,696
Jo Harrison (appointed 10 June 2021) ESG Committee Chair £48,000 £34,327
Alan Bates (appointed 10 June 2021) £46,000 £34,327
Peter Neville (resigned 2 September 2021) - £21,196
Total £295,295
Where the Company requires Directors to work on specific corporate actions, an
additional fee may be appropriately determined. No additional fees were paid
to the Directors for the year ended 31 March 2022.
Directors are entitled to claim reasonable expenses which they incur
attending meetings or otherwise in performance of their duties relating to
the Company.
The total amount of Directors' expenses paid for the year
ended 31 March 2022 was £1,653 (31 March 2021: £356).
Approval of report
The Board will seek approval at the annual general meeting on 1 September 2022
for both the remuneration policy and the annual Directors' fees for routine
business for the year ended 31 March 2023, as set out above.
REPORT OF THE DIRECTORS
The Directors are pleased to submit their report and the audited financial
statements of the Company for the year ended 31 March 2022.
Principal activities
JLEN Environmental Assets Group Limited is a company incorporated and
registered in Guernsey under the Companies (Guernsey) Law, 2008. The Company
was incorporated on 12 December 2013 with the Company registered number 57682.
At 31 March 2022, the total number of ordinary shares of the Company in issue
was 661,531,229 following two oversubscribed equity issues, 54,672,002 and
60,139,202 new ordinary shares were issued in May 2021 and January 2022
respectively.
The Company is a registered fund under the Registered Collective Investment
Scheme Rules and Guidance, 2021 and is regulated by the Guernsey Financial
Services Commission and, during the year, its principal activity was as an
investor in environmental infrastructure that utilise natural or waste
resources or support more environmentally friendly approaches to economic
activity.
Business review
The Company is required to present a fair review of its business during the
year ended 31 March 2022, its position at the year end and a description of
the principal risks and uncertainties it faces.
This information is contained within the strategic report on pages 21 to 119
of the Annual Report 2022.
Disclosure of information under Listing Rule 9.8.4
The Company is required to disclose information on any contract of
significance subsisting during the period under review:
· to which the Company, or one of its subsidiary undertakings, is a
party and in which a Director of the Company is or was materially interested;
and
· between the Company, or one of its subsidiary undertakings, and a
controlling shareholder.
Details can be found in note 15 to the financial statements.
The Directors note that no shareholder has waived or agreed to waive any
dividends.
Results and dividends
The results for the year are set out in the financial statements on pages 164
to 191 of the Annual Report 2022. On 17 May 2022, the Directors declared a
dividend in respect of the period 1 January 2022 to 31 March 2022 of 1.70
pence per share to shareholders on the register as at the close of business on
6 June 2022, payable on 24 June 2022.
Going concern
The Company's business activities, together with the factors likely to affect
its future development, performance and prospects, are set out in the
strategic report. The financial position of the Company, its cash flows and
its liquidity position are also described in the strategic report. In
particular, the current economic conditions, including the impact of the
ongoing Ukraine crisis on electricity and gas prices, have created a number of
risks and uncertainties for the Company and these are set out in the risks and
risk management section on pages 38 to 67 of the Annual Report 2022. As part
of the going concern assessment, the Directors have also reviewed the results
of the reverse stress test and downside case which includes significant
reduction in projects' cash flows under severe negative power price and
generation volume assumptions. The financial risk management objectives and
policies of the Company and the exposure of the Company to credit risk, market
risk and liquidity risk are discussed in note 16 to the financial statements.
The Company continues to meet its requirements and day-to-day liquidity needs
through both its own cash resources and those of its investment entities, to
which it has full recourse.
As a result the Company forecasts to meet all RCF covenants requirements.
At 31 March 2022, the Company had net current assets of £0.1 million (31
March 2021: £0.1 million), including a cash balance of £2.0 million (31
March 2021: £1.9 million). At UK HoldCo level, the £170 million revolving
credit facility was drawn to a level of £53.6 million (31 March 2021:
£82.0 million), with the balance available for future acquisitions and
working capital. JLEN has sufficient cash balances to meet other current
obligations as they fall due, while all key financial covenants are forecast
to continue to be complied with.
Since 21 May 2021, JLEN has benefited from a £170 million multi-currency
revolving credit facility with accordion facility of up to £30 million with
ING, HSBC, NIBC, RBSI and NAB. This revolving credit facility expires in May
2024. In addition, the Company raised £56.9 million equity in May 2021 and
£60.7 million equity in January 2022.
The Directors have reviewed Company forecasts and projections which cover a
period of not less than 12 months from the date of the Annual Report, taking
into account reasonably likely changes in investment and trading performance,
which show that the Company has sufficient financial resources.
On the basis of this review, and after making due enquiries, the Directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the financial
statements.
Long-term viability statement
The Directors have assessed the viability of the Group over the three-year
period to June 2025, taking account of the Group's current position and the
potential impact of the principal risks documented in the strategic report.
Based on this robust assessment, the Directors have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities
as they fall due over the period to June 2025.
In making this statement, the Directors have considered and challenged the
reports of the Investment Manager in relation to the resilience of the Group,
taking into account its current position, the principal risks facing it in
severe but reasonable scenarios, the effectiveness of any mitigating actions
and the Group's risk appetite. Sensitivity analysis has been undertaken to
consider the potential impacts of such risks on the business model, future
performance, solvency and liquidity over the period. In particular, this has
considered the achievement of budgeted energy yields, the level of future
power prices in this very volatile market, continued government support for
renewable energy subsidy payments and the impact of a proportion of the
portfolio not yielding.
The Directors have determined that a three-year look forward to June 2025 is
an appropriate period over which to provide its viability statement. This is
consistent with the outlook period used in economic and other medium-term
forecasts regularly prepared for the Board by the Investment Manager and the
discussion of any new strategies undertaken by the Board in its normal course
of business. These reviews consider both the market opportunity and the
associated risks, principally the ability to raise third-party funds and
invest capital, or mitigating actions taken, such as a reduction of dividends
paid to shareholders or utilisation of additional borrowings available under
the RCF.
Internal controls review
Taking into account the information on principal risks and uncertainties
provided on pages 38 to 67 of the Annual Report 2022 of the strategic report
and the ongoing work of the Audit and Risk Committees in monitoring the risk
management and internal control systems on behalf of the Board,
the Directors:
· are satisfied that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity; and
· have reviewed the effectiveness of the risk management and internal
control systems and no significant failings or weaknesses were identified.
Share capital
The Company has one class of ordinary shares which carry no rights to fixed
income. On a show of hands, each member present in person or by proxy has the
right to one vote at general meetings. On a poll, each member is entitled to
one vote for every share held.
The issued nominal value of the ordinary shares represents 100% of the total
issued nominal value of all share capital. There are no specific restrictions
on the size of a holding nor on the transfer of shares, which are both
governed by the general provisions of the Articles of Incorporation and
prevailing legislation. The Directors are not aware of any agreements between
holders of the Company's shares that may result in restrictions on the
transfer of securities or on voting rights. No person has any special rights
of control over the Company's share capital and all issued shares are fully
paid.
The Company's Memorandum and Articles of Incorporation contain details
relating to the rules that the Company has about the appointment and removal
of Directors or amendment to the Company's Articles of Incorporation, which
are incorporated into this report by reference.
Authority to purchase own shares
A resolution to provide the Company with authority to purchase its own shares
will be tabled at the annual general meeting on 1 September 2022. This
shareholder authority was last renewed at the 2021 annual general meeting.
Major interests in shares and voting rights
As at 31 March 2022, the Company had been notified, in accordance with
Chapter 5 of the Disclosure Guidance and Transparency Rules, of the following
interests in 5% or more of the voting rights as a shareholder in
the Company.
Percentage
of voting rights Number of
and issued ordinary
Shareholder share capital shares
Gravis Capital Management 7.46% 49,320,619
Newton Investment Management Limited 7.11% 47,036,377
Smith & Williamson Wealth Management 5.48% 36,257,959
Board of Directors
The Board members that served during the year and up until the date of this
report, all of whom are non-executive Directors and independent of the
Investment Manager, are listed below. Their biographical details are shown on
pages 122 and 123 of the Annual Report 2022.
Name Function
Richard Morse Chairman
Peter Neville (resigned 2 September 2021) Director
Richard Ramsay Senior Independent Director
Hans Joern Rieks Director
Stephanie Coxon Director
Alan Bates (appointed 10 June 2021) Director
Jo Harrison (appointed 10 June 2021) Director
Re-election of Directors
At the first annual general meeting of the Company on 14 August 2014, all of
the Directors offered themselves for re-election and were duly re-elected. In
compliance with the provisions of the AIC Code of Corporate Governance,
all of the Directors will stand for re-election at each annual general
meeting. Having considered the results of the internal performance evaluation
for the year ended 31 March 2022, the Directors are satisfied that the Board
continues to perform effectively, and that each Director continues to
demonstrate commitment to their roles. Each of the Directors has a letter of
appointment rather than a service contract.
Directors' interests
Directors who held office during the year and had interests in the shares of
the Company as at 31 March 2022 were:
Ordinary Ordinary
shares of shares of
no par value no par value
each held at each held at
31 Mar 2022 31 Mar 2021
Richard Morse 103,535 103,535
Stephanie Coxon 15,000 -
Peter Neville (resigned 2 September 2021) n/a 29,896
Richard Ramsay 53,813 53,813
Hans Joern Rieks 95,000 -
Alan Bates - -
Jo Harrison - -
There have been no changes in the Directors' interests from 31 March 2022 to
the date of this report.
Annual general meeting
The Company's annual general meeting will be held at 10.00am on 1 September
2022 at Sarnia House, Le Truchot, St Peter Port, Guernsey, Channel Islands.
Details of the business to be conducted are contained in the notice of annual
general meeting.
Appointment of the Investment Manager
On 1 July 2019, the Company changed Investment Adviser from John Laing Capital
Management Limited to Foresight Group. The existing team that had been
providing investment advice since JLEN's launch in 2014 transferred to
Foresight to continue working with the Company. In January 2022, the former
Investment Advisory Agreement was terminated and the Company entered into a
new Investment Management Agreement with Foresight. Save for the addition of
certain additional regulatory obligations in connection with their role as
Alternative Investment Fund Manager and the delegation of discretionary
decision-making authority in relation to routine investment transactions, the
material terms, fees and provisions of the Investment Management Agreement
with Foresight Group are the same as the previous Investment Advisory
Agreement. It is the Directors' opinion that the appointment of Foresight
Group on the agreed terms is in the best interests of the shareholders as a
whole.
Auditor
The Audit Committee reviews the appointment of the external auditor, its
effectiveness and its relationship with the Company and its subsidiaries and
joint ventures, which includes monitoring use of the auditor for non-audit
services and the balance of audit and non-audit fees paid. Following a review
of the independence and effectiveness of the auditor, a resolution will be
proposed at the 2022 annual general meeting to reappoint Deloitte LLP.
So far as the Directors are aware, there is no relevant audit information of
which the Company's auditor is unaware. Each has taken all the steps
necessary, as a Director, to be aware of any relevant audit information and to
establish that Deloitte LLP is made aware of any pertinent information. This
confirmation is given, and should be interpreted in accordance with, the
provisions of Section 249 of the Companies (Guernsey) Law, 2008.
By order of the Board
Richard Morse
Chairman
15 June 2022
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors' report and
financial statements in accordance with applicable laws and regulations. The
Companies (Guernsey) Law, 2008 requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors are required
to prepare the financial statements in accordance with UK adopted
international accounting standards and the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that year.
In preparing these financial statements, International Accounting Standard 1
requires that Directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in UK adopted international accounting standards are insufficient
to enable users to understand the impact of particular transactions, other
events and conditions on the entity's financial position and financial
performance; and
· make an assessment of the Company's ability to continue as a going
concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
which enable them to ensure that the financial statements comply with the
Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey and the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with IFRS, give a
true and fair view of the assets, liabilities, financial position and profit
or loss of the Company;
· the strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings taken as a whole, together with a description of the principal
risks and uncertainties that we face; and
· the Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's position, performance, business model and
strategy.
By order of the Board
Richard Morse
Chairman
15 June 2022
INCOME STATEMENT
for the year ended 31 March 2022
2022 2021
Notes £'000s £'000s
Operating income and gains on fair value of investments 9 192,890 14,753
Operating expenses 5 (7,883) (6,649)
Operating profit 185,007 8,104
Profit before tax 185,007 8,104
Tax 6 - -
Profit for the year 185,007 8,104
Earnings per share
Basic and diluted (pence) 8 30.6 1.5
The accompanying notes form an integral part of the financial statements.
All results are derived from continuing operations.
There is no other comprehensive income in either the current year or the
preceding year, other than the profit for the year, and therefore no separate
statement of comprehensive income has been presented.
STATEMENT OF FINANCIAL POSITION
as at 31 March 2022
2022 2021
Notes £'000s £'000s
Non-current assets
Investments at fair value through profit or loss 9 762,855 504,093
Total non-current assets 762,855 504,093
Current assets
Trade and other receivables 10 219 14
Cash and cash equivalents 2,022 1,874
Total current assets 2,241 1,888
Total assets 765,096 505,981
Current liabilities
Trade and other payables 11 (2,191) (1,780)
Total current liabilities (2,191) (1,780)
Total liabilities (2,191) (1,780)
Net assets 762,905 504,201
Equity
Share capital account 13 664,401 548,848
Retained earnings 14 98,504 (44,647)
Equity attributable to owners of the Company 762,905 504,201
Net assets per share (pence per share) 115.3 92.2
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 15 June 2022.
They were signed on its behalf by:
Richard Morse
Chairman
Stephanie Coxon
Director
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2022
Year ended 31 March 2022
Share capital Retained
account earnings Total
Notes £'000s £'000s £'000s
Balance at 1 April 2021 548,848 (44,647) 504,201
Profit for the year - 185,007 185,007
Profit and total comprehensive income for the year - 185,007 185,007
Issue of share capital 13 117,599 - 117,599
Expenses of issue of equity shares 13 (2,046) - (2,046)
Dividends paid 7 - (41,856) (41,856)
Balance at 31 March 2022 664,401 98,504 762,905
Year ended 31 March 2021
Share capital Retained
account earnings Total
Notes £'000s £'000s £'000s
Balance at 1 April 2020 548,943 (15,929) 533,014
Profit for the year - 8,104 8,104
Profit and total comprehensive income for the year - 8,104 8,104
Expenses of issue of equity shares 13 (95) - (95)
Dividends paid 7 - (36,822) (36,822)
Balance at 31 March 2021 548,848 (44,647) 504,201
The accompanying notes form an integral part of the financial statements.
CASH FLOW STATEMENT
for the year ended 31 March 2022
2022 2021
Notes £'000s £'000s
Profit from operations 185,007 8,104
Adjustments for:
Investment interest (28,827) (28,701)
Dividends received (21,300) (14,900)
Net (gain)/loss on investments at fair value through profit or loss (142,763) 28,848
Operating cash flows before movements in working capital (7,883) (6,649)
(Increase)/decrease in receivables (204) 17
Increase in payables 411 60
Net cash outflow used in operating activities (7,676) (6,572)
Investing activities
Investments in subsidiaries (116,000) -
Investment interest 28,827 28,701
Dividends received 21,300 14,900
Net cash (used in)/from investing activities (65,873) 43,601
Financing activities
Proceeds on issue of share capital 13 117,599 -
Expenses relating to issue of shares 13 (2,046) (95)
Dividends paid 7 (41,856) (36,822)
Net cash from/(used in) financing activities 73,697 (36,917)
Net increase in cash and cash equivalents 148 112
Cash and cash equivalents at beginning of the year 1,874 1,762
Cash and cash equivalents at end of the year 2,022 1,874
The accompanying notes form an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2022
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 2022 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. Significant accounting policies
(a) Basis of preparation
The financial statements were approved and authorised for issue by the Board
of Directors on 15 June 2022. 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.
IFRS as adopted by the European Union was brought into the UK law and became
UK adopted international accounting standards effective 31 December 2020, with
future changes being subject to endorsement by the UK Endorsement Board. As
such, the transition of the Group and the Company to UK adopted international
accounting standards took place on 1 April 2021. There was no impact or
changes in accounting from the transition.
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 2022 principally comprise working capital
balances, the revolving credit facility and investments in projects, are
required to be included at fair value in the carrying value of investments.
Consequently, the Company does not consolidate its subsidiaries or apply IFRS
3 Business Combinations when it obtains control of another entity as it is
considered to be an investment entity under IFRS. Instead, the Company
measures its investment in its subsidiary at fair value through profit or
loss.
The financial statements incorporate the financial statements of the Company
only.
UK HoldCo is itself an investment entity. Consequently, the Company need not
have an exit strategy for its investment in UK HoldCo.
Each investment indirectly held has a finite life. For the PPP assets, the
shareholder debt will mature towards the end of the concession, and at the end
of the concession the investment will be dissolved. In the case of renewable
energy assets, the life of the project is based on the expected asset life and
the land lease term, after which the investment will also be dissolved. The
exit strategy is that investments will normally be held to the end of the
concession, unless the Company sees an opportunity in the market to dispose of
investments. Foresight Group, the Company's Investment 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 standards which have not been applied in these financial
statements were in issue but not yet effective:
· Reference to the Conceptual Framework - Amendments to IFRS 3
(applicable for annual periods beginning on or after 1 January 2022);
· Property, Plant and Equipment: Proceeds Before Intended Use -
Amendments to IAS 16 (applicable for annual periods beginning on or after 1
January 2022);
· Onerous Contracts - Costs of Fulfilling a Contract - Amendments
to IAS 37 (applicable for annual periods beginning on or after 1 January
2022);
· AIP IFRS 1 First-time Adoption of International Financial
Reporting Standards - Subsidiary as a First-time Adopter (applicable for
annual periods beginning on or after 1 January 2022);
· AIP IFRS 9 Financial Instruments - Fees in the "10 per cent" Test
for Derecognition of Financial Liabilities (applicable for annual periods
beginning on or after 1 January 2022);
· AIP IAS 41 Agriculture - Taxation in Fair Value Measurements
(applicable for annual periods beginning on or after 1 January 2022);
· Annual improvements to IFRS standards 2018-2020 Cycle (effective
for annual periods beginning on or after 1 January 2022)
· IFRS 17 Insurance Contracts (applicable for annual periods
beginning on or after 1 January 2023);
· Classification of Liabilities as Current or Non-current -
Amendments to IAS 1 (applicable for annual periods beginning on or after 1
January 2023);
· Definition of Accounting Estimates - Amendments to IAS 8
(applicable for annual periods beginning on or after 1 January 2023);
· 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
· Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (applicable for
annual periods beginning on or after 1 January 2023).
The Directors do not expect that the adoption of the standards listed above
will have a material impact on the financial statements of the Company in
future periods.
The following standards became effective during the year and did not have a
material impact on the Company's reported results:
· Covid-19-Related Rent Concessions - Amendment to IFRS 16
(applicable for annual periods beginning on or after 1 June 2020);
· Covid-19-Related Rent Concessions beyond 30 June 2021 - Amendment
to IFRS 16 (applicable for annual periods beginning on or after 1 April 2021
and,
· Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16 (applicable for annual periods beginning on
or after 1 January 2021).
(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, a reasonable
worst case and a stress test 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 impact of the
Covid-19 pandemic on operations, the potential risks of the recent energy
market disruption that has led to very high energy prices and the risk of
energy suppliers that provide PPAs to renewable generators becoming insolvent.
The Investment Manager has reviewed the portfolio's exposure to this risk and
has concluded that it is currently not material to the Fund, although it
continues to monitor the market attentively.
The Directors also considered that the Company has adequate financial
resources, and were mindful that the Group had unrestricted cash of £18.0
million (including £2.0 million in the Company) as at 31 March 2022 and a
revolving credit facility (available for investment in new or existing
projects and working capital) of £170 million. As at 31 March 2022, the
Company's wholly owned subsidiary UK HoldCo had borrowed £53.6 million under
the facility, and as such £116.4 million is available to draw. All key
financial covenants under this facility are forecast to continue to be
complied with for at least 12 months from the date of signing the annual
financial statements.
The Directors are satisfied that the Company has sufficient resources to
continue to operate for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, they continue to adopt the
going concern basis in preparation of these financial statements.
Refer to the report of the Directors for further information.
(c) Revenue recognition - Operating income and gains/(losses) on fair value of
investments
Operating income and gains/(losses) on fair value of investments in the income
statement represents gains or losses that arise from the movement in the fair
value of the Company's investment in UK HoldCo, dividend income and interest
received from UK HoldCo. Dividends from UK HoldCo are recognised when the
Company's right to receive payment has been established. Interest income is
accrued by reference to the loan principal outstanding, applicable interest
rate, and in accordance with the loan note agreement. Refer to note 9 for
details.
(d) Taxation
Under the current system of taxation in Guernsey, the Company itself is exempt
from paying taxes on income, profits or capital gains. Dividend income and
interest income received by the Company may be subject to withholding tax
imposed in the country of origin of such income. The underlying intermediate
holding companies and project companies in which the Company invests provide
for and pay taxation at the appropriate rates in the countries in which they
operate. This is taken into account when assessing the fair value of the
Company's investments.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held on call with
banks and other short-term highly liquid deposits with original maturities of
three months or less. Bank overdrafts that are repayable on demand are
included as a component of cash and cash equivalents for the purpose of the
cash flow statements. Deposits held with original maturities of greater than
three months are included in other financial assets.
(f) Financial instruments
Financial assets and financial liabilities are recognised on the Company's
statement of financial position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash flows from the instrument expire or
the asset is transferred and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments.
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 revolving credit facility, and are
recognised at fair value, which is equivalent to their net assets. Although
the working capital and the revolving credit facility 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 2022 were in the range 5% to
10% (31 March 2021: 5.5% to 13%). 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.
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.
We have recently seen a sharp increase in power prices arising from a
combination of worldwide events, evidenced by a c.250% uplift in the average
monthly day ahead auction prices versus the prior year. Since the year end,
wholesale market forward prices continue to demonstrate significant levels of
volatility, however the Investment Manager does not anticipate that this scale
of fluctuation is likely to be repeated and the following steps have been
taken to partially mitigate the portfolio's exposure to further movement: i)
shortterm PPAs are used to fix prices for between one and three years ahead
depending on market conditions; ii) where there is no fix in place, forward
prices based on market rates are used for the first two years following the
valuation date; and iii) quarterly reports from independent established market
consultants are used to inform prices over the longer term. The net result
being that current elevated prices are forecast to normalise before the end of
the decade, as shown in the illustrative blended power curves on page 79 of
the Annual Report 2022, with the curve applied to 31 March 2022 valuations
being on average 16% higher per annum than the comparable curve applied at 31
March 2021.
Therefore while power markets can experience unexpected short term movements,
the Directors believe reporting a +/-10% sensitivity remains appropriate to
provide insight into the effect on the NAV of persistently higher or lower
power prices over the whole life of the portfolio. The sensitivity is also
consistent with that shown in previous reports and with that shown by the
Company's listed environmental infrastructure peers, allowing for comparisons
to be determined.
Information on the sensitivity of the portfolio valuation to movements in
power price 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 2022 31 Mar 2021
£'000s £'000s
Investment management/advisory fees 6,644 5,563
Directors' fees and expenses 297 264
Administration fee 110 112
Other expenses 832 710
7,883 6,649
The Company had no employees during the year (31 March 2021: nil). There was
no Directors' remuneration for the year other than Directors' fees as detailed
in note 15 (31 March 2021: nil).
Included within other expenses is an amount of £120,000 to Deloitte LLP for
the audit of the Company for the year ended 31 March 2022 (year ended 31 March
2021: £105,000).
The Company paid £37,432 during the year for non-audit services to Deloitte
LLP, all in relation to the half-year interim review (year ended 31 March
2021: £30,100 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 £1,200.
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 2022 31 Mar 2021
£'000s £'000s
Amounts recognised as distributions to equity holders during the year (pence
per share):
Final dividend for the year ended 31 March 2021 of 1.69 (31 March 2020: 1.665) 10,164 9,103
Interim dividend for the quarter ended 30 June 2021 of 1.70 (30 June 2020: 10,224 9,240
1.69)
Interim dividend for the quarter ended 30 September 2021 of 1.70 (30 September 10,224 9,240
2020: 1.69)
Interim dividend for the quarter ended 31 December 2021 of 1.70 (31 December 11,246 9,240
2020: 1.69)
41,857((1)) 36,822((1))
(1) Total may not cast due to rounding.
A dividend for the quarter ended 31 March 2022 of 1.70 pence per share was
approved by the Board on 16 May 2022 and is payable on 24 June 2022.
8. Earnings 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 2022 31 Mar 2021
£'000s £'000s
Earnings
Earnings for the purposes of basic and diluted earnings per share, being net 185,007 8,104
profit attributable to owners of the Company
Number of shares
Time weighted average number of ordinary shares for the purposes of basic and 604,222,988 546,720,025
diluted earnings per share
The denominator for the purposes of calculating both basic and diluted
earnings per share is the same, as the Company has not issued any share
options or other instruments that would cause dilution.
Pence Pence
Basic and diluted earnings per share 30.6 1.5
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 2022 31 Mar 2021
£'000s £'000s
Fair value of environmental infrastructure investments 795,408 571,414
Fair value of intermediate holding companies (32,553) (67,321)
Total fair value of investments 762,855 504,093
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 2022, by incorporating the fair
value of these intermediate holding companies.
Portfolio value Cash, working capital and debt in intermediate holdings Total Portfolio value Cash, working capital and debt in intermediate holdings Total
31 Mar 2022 31 Mar 2022 31 Mar 2022 31 Mar 2021 31 Mar 2021 31 Mar 2021
£'000s £'000s £'000s £'000s £'000s £'000s
Opening balance 571,414 (67,321) 504,093 537,094 (4,153) 532,941
Acquisitions
Portfolio of assets acquired 87,972 - 87,972 62,962 - 62,962
Disposal of assets (5,559) - (5,559) - - -
82,413 - 82,413 62,962 - 62,962
Growth in portfolio((1)) 198,129 - 198,129 19,588 - 19,588
Yields from portfolio to intermediate holding companies (56,548) 56,548 - (48,230) 48,230 -
Yields from intermediate holding companies
Interest on loan notes((1)) - (28,827) (28,827) - (28,701) (28,701)
Dividend payments from UK HoldCo to the Company((1)) - (21,300) (21,300) - (14,900) (14,900)
- (50,127) (50,127) - (43,601) (43,601)
Other movements
Movement in working capital in UK HoldCo - 5,189 5,189 - (10,327) (10,327)
Expenses borne by intermediate holding companies((1)) - (5,239) (5,239) - (4,835) (4,835)
Repayment/(drawdown) of UK HoldCo revolving credit facility borrowings - 28,397 28,397 - (52,635) (52,635)
Fair value of the Company's investment in UK HoldCo 795,408 (32,553) 762,855 571,414 (67,321) 504,093
(1) The net gain on investments at fair value through profit or loss for
the year ended 31 March 2022 is £142,763,000 (31 March 2021: net loss of
£28,848,000). This, together with interest received on loan notes of
£28,827,000 (31 March 2021: £28,701,000) and dividend income of £21,300,000
(31 March 2021: £14,900,000) comprises operating income and gains/(losses) on
fair value of investments in the income statement.
The balances in the table above represent the total net movement in the fair
value of the Company's investment. The "cash, working capital and debt in
intermediate holding companies" balances reflect investment in, distributions
from or movements in working capital and are not value generating.
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of the
investments as at 31 March 2022. 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 5% to 10% (31
March 2021: 5.5% to 13.0%). The weighted average discount rate of the
portfolio at 31 March 2022 is 7.3% (31 March 2021: 7.3%).
The following economic assumptions have been used in the discounted cash flow
valuations:
31 Mar 2022 31 Mar 2021
UK - inflation rates 5% for 2022, decreasing to 3% until 2030, 3% for 2021,
decreasing to 2.25% from 2031 decreasing to 2.25% from 2031
Italy - inflation rates 1.3% for 2022, n/a
stepping to 2% from 2025
UK - deposit interest rates 0.25% for 2022, 0.25% for 2021,
rising to 1% from 2025 rising to 1% from 2025
Italy - deposit rates 0% n/a
UK - corporation tax rates 19% to April 2023, n/a
increasing to 25% thereafter
Italy - corporation tax rates National rate of 24%, n/a
plus applicable regional premiums
Euro/sterling exchange rate 1.18 1.17
Refer to note 16 for details of the sensitivity of the portfolio to movements
in the discount rate and economic assumptions.
The assets in the intermediate holding companies substantially comprise
working capital, cash balances and the outstanding revolving credit facility
debt; therefore, the Directors consider the fair value to be equal to the
amortised cost.
Details of environmental infrastructure project investments were as follows:
% holding at 31 Mar 2022 % holding at 31 Mar 2021
Shareholder Shareholder
Project name Equity loan Equity loan
Amber 100% 100% 100% 100%
Bilsthorpe 100% 100% 100% 100%
Bio Collectors 70% 100% 70% 100%
Branden 100% 100% 100% 100%
Burton Wold Extension 100% 100% 100% 100%
Carscreugh 100% 100% 100% 100%
Castle Pill 100% 100% 100% 100%
CNG Foresight 25% 25% 25% 25%
Codford 100% n/a 100% n/a
Cramlington 100% 100% n/a n/a
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% n/a n/a
Ferndale 100% 100% 100% 100%
Grange Farm 100% 100% 100% 100%
Hall Farm 100% 100% 100% 100%
Icknield 53% 100% 53% 100%
Le Placis Vert((1)) n/a n/a 100% 100%
Llynfi 100% 100% 100% 100%
Biogas Meden 100% 100% 100% 100%
Merlin Renewables 100% 100% 100% 100%
Moel Moelogan 100% 100% 100% 100%
Monksham 100% 100% 100% 100%
New Albion Wind Farm 100% 100% 100% 100%
Northern Hydro 100% n/a 100% n/a
Panther 100% 100% 100% 100%
Peacehill 49% 100% 49% 100%
Plouguernével((1)) n/a 100% n/a 100%
Pylle Southern 100% 100% 100% 100%
Rainworth 100% 100% 100% 100%
Sandridge 50% 50% n/a n/a
Tay 33% 33% 33% 33%
Vulcan 100% 100% 100% 100%
Warren 100% 100% 100% 100%
Wear Point 100% 100% 100% 100%
West Gourdie 100% n/a 100% n/a
Yorkshire Hydro 100% n/a 100% n/a
(1) Assets were disposed of in January 2022.
Additionally, the fair value of the portfolio of assets includes the Fund's
investment into FEIP, details of which can be found on page 88 of the Annual
Report 2022.
Details of investments made during the year
In May 2021, the Group acquired a 50% equity stake in Sandridge Battery
Storage Limited, which holds the development rights to construct a 50MW
lithium-ion battery energy storage plant based in Wiltshire, UK. Total amount
invested as at 31 March 2022 was £3.1 million.
In May 2021, the Group acquired a 45% equity stake in Energie Tecnologie
Ambiente S.r.l. ("ETA"). ETA is a 16.8MW energy-from-waste power plant which
processes refuse derived fuel, located in the municipality of Manfredonia,
Italy. The total consideration paid was €27.5 million.
In June 2021, the Group acquired a 100% equity stake in Cramlington Renewable
Energy Developments Limited, a biomass combined heat and power plant project,
based in Northumberland, UK.
During the period, £4.4 million was injected into CNG Foresight Limited. The
portfolio holds eight natural gas refuelling stations, of which one is in
construction phase.
The Group invested €0.4 million into Foresight Energy Infrastructure
Partners SCSp ("FEIP") during the period.
The Group also invested £1.0 million into the Vulcan Renewables upgrade,
£3.9 million into the FS West Gourdie construction asset and £1.9 million to
various projects for value enhancement initiatives.
10. Trade and other receivables
31 Mar 2022 31 Mar 2021
£'000s £'000s
Prepayments 219 14
Balance at 31 March 219 14
11. Trade and other payables
31 Mar 2022 31 Mar 2021
£'000s £'000s
Accruals 2,191 1,780
Balance at 31 March 2,191 1,780
12. Loans and borrowings
The Company had no outstanding loans or borrowings at 31 March 2022 (31 March
2021: £nil), as shown in the Company's statement of financial position.
As at 31 March 2022, the Company held loan notes of £348.9 million which were
issued by UK HoldCo (31 March 2021: outstanding amount of £318.9 million).
On 21 May 2021, UK HoldCo successfully refinanced its revolving credit
facility with a three-year agreement with ING, HSBC, RBSI, NAB and NIBC which
provides for a committed facility of £170 million. The consortium of lenders
includes three existing lenders (ING, HSBC and NIBC) and two new participants
(RBSI and NAB). The margin can vary between 195 bps and 205 bps over SONIA
("Sterling Overnight Index Average") for sterling drawings, and over EURIBOR
for euro drawings, depending on the Company's performance against pre-defined
ESG targets. The facility will be used to finance the acquisitions of
environmental infrastructure projects and to cover working capital
requirements.
As at 31 March 2022, UK HoldCo had an outstanding balance of £53.6 million
under the facility (31 March 2021: £82.0 million). The loan bears interest
of SONIA + 195 to 205 bps and is intended to be repaid by proceeds from
future capital raises.
There were no other outstanding loans and borrowings in either the Company, UK
HoldCo or HWT at 31 March 2022.
13. Share capital account
Number of 31 Mar 2022 31 Mar 2021
shares £'000s £'000s
Opening balance at 1 April 2021 546,720,025 548,848 548,943
Shares issued in the year 114,811,204 117,599 -
Expenses of issue of equity shares - (2,046) (95)
Balance at 31 March 2022 661,531,229 664,401 548,848
In May 2021, the Company raised gross proceeds of £56.9 million by way of
issuing a total of 54,672,002 new ordinary shares at 104 pence per new
ordinary share.
In January 2022, the Company raised gross proceeds of £60.7 million by way of
issuing a total of 60,139,202 new ordinary shares at 101 pence per new
ordinary share.
Following these issuances, at 31 March 2022, the Company's share capital is
comprised of 661,531,229 fully paid-up ordinary shares of no par value.
All new shares issued rank pari passu and include the right to receive all
future dividends and distributions declared, made or paid.
14. Retained earnings
31 Mar 2022 31 Mar 2021
£'000s £'000s
Opening balance (44,647) (15,929)
Profit for the year 185,007 8,104
Dividends paid (41,856) (36,822)
Balance at 31 March 98,504 (44,647)
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
In January 2022, Foresight Group was appointed AIFM, pursuant to an investment
management and AIFM agreement in substitution for, and on materially the same
commercial terms as, the previous Investment Advisory Agreement between the
Company and Foresight Group, which has now been terminated.
Foresight Group is the Company's Investment Manager. Foresight's appointment
as Investment Manager is governed by an Investment Management Agreement.
Foresight Group is entitled to a base fee equal to:
a) 1.0% per annum of the Adjusted Portfolio Value((1)) of the Fund((2)) up
to and including £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 2022 was £6,644,000 (31 March 2021: £5,563,054), of which
£1,734,909 remained payable as at 31 March 2022 (31 March 2021: £1,440,832).
(1) "Adjusted Portfolio Value" is defined in the Investment Advisory
Agreement as:
a) the fair value of the investment portfolio; plus
b) any cash owned by or held to the order of the Fund; plus
c) the aggregate amount of payments made to shareholders by way of
dividend in the quarterly period ending on the relevant valuation day, less
i. any other liabilities of the Fund (excluding borrowings); and
ii. any uninvested cash.
(2) "Fund" means the Company and JLEN Environmental Assets Group (UK)
Limited together with their wholly owned subsidiaries or subsidiary
undertakings (including companies or other entities wholly owned by them
together, individually or in any combination, as appropriate) but excluding
project entities.
Transactions with related parties
During the year, the Directors of the Company, who are considered to be key
management, received fees of £295,295 (31 March 2021: £263,754) for their
services. The Directors of the Company were also paid £1,653 of expenses
(31 March 2021: £355).
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 2022 31 Mar 2021
Richard Morse 103,535 103,535
Peter Neville (resigned 2 September 2021) n/a 29,896
Richard Ramsay 53,813 53,813
Hans Joern Rieks 95,000 -
Stephanie Coxon 15,000 -
Alan Bates - -
Joanne Harrison - -
All of the above transactions were undertaken on an arm's length basis.
The Directors were paid dividends in the year of £14,929 (31 March 2021:
£13,696).
16. Financial instruments
Financial instruments by category
The Company held the following financial instruments at 31 March 2022. There
have been no transfers of financial instruments between levels of the fair
value hierarchy. There are no non-recurring fair value measurements.
31 March 2022
Financial Financial Financial
assets held at assets at fair liabilities at
Cash and amortised value through amortised
bank balances cost profit or loss cost Total
£'000s £'000s £000s £000s £000s
Non-current assets
Investments at fair value through profit or loss (Level 3) - - 762,855 - 762,855
Current assets
Trade and other receivables - 219 - - 219
Cash and cash equivalents 2,022 - - - 2,022
Total financial assets 2,022 219 762,855 - 765,096
Current liabilities
Trade and other payables - - - (2,191) (2,191)
Total financial liabilities - - - (2,191) (2,191)
Net financial instruments 2,022 219 762,855 (2,191) 762,905
31 March 2021
Financial
Financial assets at fair Financial
Cash and bank assets held at value through liabilities at
balances amortised cost profit or loss amortised cost Total
£'000s £'000s £000s £000s £000s
Non-current assets
Investments at fair value through profit or loss (Level 3) - - 504,093 - 504,093
Current assets
Trade and other receivables - 14 - - 14
Cash and cash equivalents 1,874 - - - 1,874
Total financial assets 1,874 14 504,093 - 505,981
Current liabilities
Trade and other payables - - - (1,780) (1,780)
Total financial liabilities - - - (1,780) (1,780)
Net financial instruments 1,874 14 504,093 (1,780) 504,201
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 discount rate is considered the most significant unobservable input
through which an increase or decrease would have a material impact on the fair
value of the investments at fair value through profit or loss.
The sensitivity of the portfolio to movements in the discount rate is as
follows:
31 March 2022
Discount rate Minus 0.5% Base 7.3% Plus 0.5%
Change in portfolio valuation Increases £22.0m £795.4m Decreases £21.0m
Change in NAV per share Increases 3.3p 115.3p Decreases 3.2p
31 March 2021
Discount rate Minus 0.5% Base 7.3% Plus 0.5%
Change in portfolio valuation Increases £18.8m £571.4m Decreases £17.8m
Change in NAV per share Increases 3.4p 92.2 Decreases 3.3p
The sensitivity of the portfolio to movements in long-term inflation rates is
as follows:
In light of the current economic environment, near-term actual inflation may
vary from assumptions applied within the portfolio valuation, therefore the
Investment Manager will continue to monitor developments in this area.
For illustrative purposes, where inflation is higher than JLEN's valuation
assumption by 3% for the next three years, NAV would be expected to increase
by 7.5 pence per share.
31 March 2022
Inflation rates Minus 0.5% Base 5% (2022) then 3% to 2030 then 2.25% Plus 0.5%
Change in portfolio valuation Decreases £19.0m £795.4m Increases £19.4m
Change in NAV per share Decreases 2.9p 115.3p Increases 2.9p
31 March 2021
Inflation rates Minus 0.5% Base 3% then 2.25% Plus 0.5%
Change in portfolio valuation Decreases £19.0m £571.4m Increases £19.7m
Change in NAV per share Decreases 3.5p 92.2p Increases 3.6p
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
sensitivities of the investments to movements in the level of electricity
output are as follows:
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 2022
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £28.8m £795.4m Increases £28.8m
Change in NAV per share Decreases 4.4p 115.3p Increases 4.4p
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £8.7m £795.4m Increases £8.8m
Change in NAV per share Decreases 1.3p 115.3p Increases 1.3p
Energy yield: hydro P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £2.2m £795.4m Increases £2.7m
Change in NAV per share Decreases 0.3p 115.3p Increases 0.4p
31 March 2021
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £24.4m £571.4m Increases £25.0m
Change in NAV per share Decreases 4.5p 92.2p Increases 4.6p
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £6.4m £571.4m Increases £7.1m
Change in NAV per share Decreases 1.2p 92.2p Increases 1.3p
Project cash flows used in the portfolio valuation reflect contractual fixed
price arrangements under PPAs, where they exist, and short-term market forward
prices for the next two years following the valuation date where they do not.
After the initial two-year period, 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
as required.
The sensitivity of the portfolio to movements in electricity and gas prices is
as follows:
The Directors have assessed that a reasonable possible long-term movement of
energy prices continues to be +/-10% given the long-term nature of the
portfolio, notwithstanding that significant short-term energy price movements
have occurred in the period due to the recent energy market disruption.
31 March 2022
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases £44.3m £795.4m Increases 43.6m
Change in NAV per share Decreases 6.7p 115.3p Increases 6.6p
31 March 2021
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases £24.8m £571.4m Increases £25.0m
Change in NAV per share Decreases 4.5p 92.2p Increases 4.6p
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.
The sensitivity of the portfolio to movements in corporation tax rate is as
follows:
31 March 2022
Corporation tax Minus 2% Base 19% then 25% Plus 2%
Change in portfolio valuation Increases £11.7m £795.4m Decreases £11.5m
Change in NAV per share Increases 1.8p 115.3p Decreases 1.7p
31 March 2021
Corporation tax Minus 2% Base 19% then 25% Plus 2%
Change in portfolio valuation Increases £8.4m £571.4m Decreases £8.3m
Change in NAV per share Increases 1.5p 92.2p Decreases 1.5p
The sensitivity of the portfolio to movements in AD feedstock prices is as
follows:
31 March 2022
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases £9.0m £795.4m Decreases £9.0m
Change in NAV per share Increases 1.4p 115.3p Decreases 1.4p
31 March 2021
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases £8.9m £571.4m Decreases £9.3m
Change in NAV per share Increases 1.6p 92.2p Decreases 1.7p
Euro/sterling exchange rate sensitivity
As the proportion of the portfolio assets with cash flows denominated in euros
represented less than 5% of the portfolio value at 31 March 2022, the
Directors consider the sensitivity to changes in the euro/sterling exchange
rate to be insignificant.
The Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
Capital risk management
Capital management
The Group, which comprises the Company and its non-consolidated subsidiaries,
manages its capital to ensure that it will be able to continue as a going
concern while maximising the return to shareholders through the optimisation
of the debt and equity balances. The capital structure of the Group
principally consists of the share capital account and retained earnings as
detailed in notes 13 and 14, 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.
As at 31 March 2022, the Company had no outstanding debt. However, as set out
in note 12, the Company's subsidiary UK HoldCo has a £170 million revolving
credit facility, which was drawn by £53.6 million at 31 March 2022.
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
2022, the Company had no recourse debt, although as set out in note 17, the
Company is a guarantor for the revolving credit facility of UK HoldCo.
Liquidity risk
The Directors monitor the Company's liquidity requirements to ensure there is
sufficient cash to meet the Company's operating needs.
The Company's liquidity management policy involves projecting cash flows and
forecasting the level of liquid assets necessary to meet these. Due to the
nature of its investments, the timing of cash outflows is reasonably
predictable and, therefore, is not a major risk to the Company.
The Company was in a net cash position and had no outstanding debt at the
balance sheet date. At the balance sheet date, the Group had debt of £53.6
million, being the amount drawn on the revolving credit facility.
Market risk - foreign currency exchange rate risk
As the proportion of the portfolio assets with cash flows denominated in euros
represented less than 5% of the portfolio value at 31 March 2022, the
Directors consider the sensitivity to changes in the euro/sterling exchange
rate to be insignificant.
Where investments are made in currencies other than pounds sterling, the
Company will consider whether to hedge currency risk in accordance with the
Company's currency and hedging policy as determined from time to time by the
Directors. A portion of the Company's underlying investments may be
denominated in currencies other than pounds sterling. However, any dividends
or distributions in respect of the ordinary shares will be made in pounds
sterling and the market prices and Net Asset Value of the ordinary shares will
be reported in pounds sterling.
Currency hedging may be carried out to seek to provide some protection for the
level of 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 revolving
credit facility borrowings and floating rate deposits. Borrowings issued at
variable rates expose those entities to variability of interest payment cash
flows. Interest rate hedging may be carried out to seek to provide protection
against increasing costs of servicing debt drawn down by UK HoldCo as part of
its revolving credit facility. This may involve the use of interest rate
derivatives and similar derivative instruments.
Each infrastructure investment hedges their interest rate risk at the
inception of a project. This will either be done by issuing fixed rate debt or
variable rate debt which will be swapped into fixed rate by the use of
interest rate swaps.
Market risk - inflation risk
Some of the Company's investments will have part of their revenue and some of
their costs linked to a specific inflation index at inception of the project.
In most cases this creates a natural hedge, meaning a derivative does not need
to be entered into in order to mitigate inflation risk.
Market risk - power price risk
The wholesale market price of electricity and gas is volatile and is affected
by a variety of factors, including market demand for electricity and gas, the
generation mix of power plants, government support for various forms of power
generation, as well as fluctuations in the market prices of commodities and
foreign exchange. Whilst some of the Company's renewable energy projects
benefit from fixed prices, others have revenue which is in part based on
wholesale electricity and gas prices.
A decrease and/or prolonged deterioration in economic activity in the UK, for
any reason, could result in a decrease in demand for electricity and gas in
the market. Short-term and seasonal fluctuations in electricity and gas demand
will also impact the price at which the investments can sell electricity and
gas. The supply of electricity and gas also impacts wholesale electricity and
gas prices. Supply of electricity and gas can be affected by new entrants to
the wholesale power market, the generation mix of power plants in the UK,
government support for various generation technologies, as well as the market
price for fuel commodities.
Volume risk - electricity generation risk
Meteorological conditions poorer than forecast can result in generation of
lower electricity volumes and lower revenues than anticipated.
Credit risk
Credit risk is the risk that a counterparty of the Company or its subsidiaries
will default on its contractual obligations it entered into with the Company
or its subsidiaries. Credit risk arises from cash and cash equivalents,
derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers. The Company and its
subsidiaries mitigate their risk on cash investments and derivative
transactions by only transacting with major international financial
institutions with high credit ratings assigned by international credit rating
agencies.
The Company's infrastructure investments receive regular, long-term, partly or
wholly index-linked revenue from government departments, local authorities or
clients under the Renewables Obligation and Feed-in Tariff regimes.
The Directors believe that the Group is not significantly exposed to the risk
that the customers of its investments do not fulfil their regular payment
obligations because of the Company's policy to invest in jurisdictions with
satisfactory credit ratings.
Given the above factors, the Board does not consider it appropriate to present
a detailed analysis of credit risk.
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 2022, the Company has provided a guarantee over the Company's
wholly owned subsidiary UK HoldCo's obligations under the £170 million RCF
signed on 21 May 2021.
On 28 January 2020, the Group committed €25 million to Foresight Energy
Infrastructure Partners SCSp ("FEIP"), a Luxembourg limited partnership
investment vehicle, of which €4.8 million has been invested at the balance
sheet date (equivalent to £4.1 million at the 31 March 2022 prevailing
exchange rate).
On 4 December 2020, the Group committed up to £20 million to CNG Foresight
Limited, to fund the construction of a further pipeline of CNG refuelling
stations as part of a national network. A total of £11.1 million has been
invested at the balance sheet date (£6.6 million as at 31 March 2021).
The Company had no other commitments or guarantees.
18. Subsidiaries
The following subsidiaries have not been consolidated in these financial
statements as a result of applying the requirements of "Investment Entities:
Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
27)":
Place of Registered Ownership Voting
Name Category business office interest rights
JLEN Environmental Assets Group (UK) Limited((1)) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Operating subsidiary UK C 100% 100%
Croft Solar PV Limited Operating subsidiary (dormant) 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%
Ecossol Limited Operating subsidiary (dormant) UK C 100% 100%
Hill Solar PV Limited Operating subsidiary (dormant) UK C 100% 100%
Share Solar PV Limited Operating subsidiary (dormant) UK C 100% 100%
Tor Solar PV Limited Operating subsidiary (dormant) UK C 100% 100%
Residential PV Trading Limited Operating subsidiary (dormant) UK C 100% 100%
South-Western Farms Solar Limited Operating subsidiary (dormant) UK C 100% 100%
Angel Solar 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 E 80% 80%
ELWA Limited((2)) Operating subsidiary UK E 80% 81%((2))
JLEAG Wind Holdings Limited Project holding company UK A 100% 100%
JLEAG Wind Limited Project holding company UK A 100% 100%
Amber Solar Parks (Holdings) Limited Project holding company UK 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 A 100% 100%
Llynfi Afan Renewable Energy Park Limited Operating subsidiary UK A 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 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 70% 70%
Bio Collectors Limited Operating subsidiary UK M 70% 70%
Riverside Bio Limited Operating subsidiary UK M 70% 70%
Riverside AD Limited Operating subsidiary UK M 70% 70%
Spruce Bioenergy Limited Project holding company UK A 100% 100%
Cramlington Renewable Energy Developments Limited Operating subsidiary UK N 100% 100%
(3) JLEN Environmental Assets Group (UK) Limited is the only entity
directly held by the Company.
(4) ELWA Holdings Limited holds 81% of the voting rights and a 100% share
of the economic benefits in ELWA Limited.
(5) Underlying French Wind Assets were disposed of in January 2022.
Registered offices
A. The Shard, 32 London Bridge Street, London SE1 9SG
B. 50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ
C. 1 Filament Walk, Suite 203, Wandsworth, London SW18
D. Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF
E. Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU
F. C/O Res White Limited, Beaufort Court, Egg Farm Lane, Kings Langley,
Hertfordshire WD4 8LR
G. 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. Upton Wold, Moreton-in-Marsh, Gloucestershire GL56 9TR
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
19. Events after balance sheet date
A dividend for the quarter ended 31 March 2022 of 1.70 pence per share,
amounting to £11.2 million, was approved by the Board on 16 May 2022 for
payment on 24 June 2022.
GLOSSARY OF KEY TERMS
AD
anaerobic digestion
agri AD
anaerobic digestion plant that accepts agricultural feedstocks such as grain
and/or animal manure
AIFM Directive
the EU Alternative Investment Fund Managers Directive (No. 2011/61/EU)
APMs
alternative performance measures are financial measures that are not currently
defined or specified in the applicable financial reporting framework
bps
basis points
Brexit
the UK referendum on 23 June 2016 in which a majority of voters voted to exit
the EU
CfD
Contracts for Difference
CHP
Combined heat and power plant
the Company or JLEN or the Fund
JLEN Environmental Assets Group Limited
CPI
Consumer Price Index
DCF
Discounted cash flow
EU
European Union
FiT
the Feed-in Tariff
gross project value
the fair market value of the investment interests held in a project as
increased by the amount of any financing in the relevant project entity
Group
JLEN Environmental Assets Group Limited and its intermediate holding companies
UK HoldCo and HWT Limited
GWh
gigawatt hour
intermediate holding companies
companies within the Group which are used as pass-through vehicles to invest
in underlying environmental infrastructure assets, namely UK HoldCo and HWT
Limited
Investment Manager or Foresight
Foresight Group LLP
IPO
Initial Public Offering
IRR
internal rate of return
MWe
megawatt electric
MWh
megawatt hour
MWth
megawatt thermal
NAV
Net Asset Value
OECD
Organisation for Economic Co-operation and Development
portfolio
the 37 assets in which JLEN had a shareholding as at 31 March 2022
portfolio valuation
the sum of all the individual investments' net present values
PPAs
Power Purchase Agreements
PPP/PFI
the Public Private Partnership procurement model
price cannibalisation
the depressive influence on the wholesale power price at timings of high
output from intermittent weather-driven generation such as solar and wind
PV
photovoltaic
RCF
revolving credit facility
RHI
Renewable Heat Incentive
RPI
Retail Price Index
ROCs
Renewables Obligation Certificates
SPV
special purpose vehicle
UK HoldCo
JLEN Environmental Assets Group (UK) Limited, wholly owned subsidiary of JLEN
Environmental Assets Group Limited
WADR
the weighted average discount rate
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
APM Purpose Calculation
Total shareholder return (since IPO & annualised) Measure of financial performance, indicating the amount an investor reaps from Since IPO: closing share price as at 31 March 2022 plus all dividends since
investing since IPO and expressed as a percentage (annualised or total since IPO assumed reinvested, divided by the share price at IPO, expressed as
IPO of the Fund) a percentage
Annualised: closing share price as at 31 March 2022 plus all dividends since
IPO assumed reinvested, divided by the share price at IPO, to the power of 1
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 premium or a discount The net assets divided by the number of ordinary shares in issuance
by comparing the Net Asset Value per share with the share price
Market capitalisation Provides an indication of the size of the Company. Closing share price as at 31 March 2022 multiplied by closing no. of ordinary
shares in issuance.
Gearing Ascertain financial risk in the Group's balance sheet Total debt in the Company and its Group as a % of the sum of the Company's and
its Group net asset + debt
Cash flow from operations Gauge operating revenues and expenses of the Group Cash flow of the Group. Breakdown can be observed on page 119 of the Annual
Report 2022 (financial review)
Cash dividend cover Investors can gauge the ability of the Group to generate cash surplus after Cash flow from operations of the group (refer to page 119 of the Annual Report
payment of dividend 2022) divided by dividend paid within the reporting period (FY 21/22: 1.10x)
Cash dividend cover on a declared basis for FY 21/22 is 1.08x
COMPANY SUMMARY
Below are the Company key facts, advisers and other information.
Company information JLEN Environmental Assets Group Limited is a Guernsey-registered closed-ended
investment company (registered number 57682) with a premium listing on the
London Stock Exchange
Registered address Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR
Ticker/SEDOL JLEN/BJL5FH8
Company year end 31 March
Dividend payments Quarterly in March, June, September and December
Investment Manager Foresight Group LLP, No OC300878, registered in England and Wales and
authorised and regulated by the Financial Conduct Authority
Company Secretary and Administrator Sanne Fund Services Limited, a company incorporated in Guernsey on
13 April 2005 (registered number 43046)
Market capitalisation £746.2 million at 31 March 2022
Investment Manager fees 1.0% per annum of the Adjusted Portfolio Value of the investments up to £0.5
billion, falling to 0.8% per annum for investments above £0.5 billion.
No performance or acquisitions fees
Investment Manager term Rolling one-year notice
ISA, PEP and SIPP status The ordinary shares are eligible for inclusion in PEPs and ISAs (subject to
applicable subscription limits) provided that they have been acquired in the
market, and they are permissible assets for SIPPs
AIFMD status The Company is classed as an externally managed Alternative Investment Fund
under the Alternative Investment Fund Managers Regulations 2013 and the
European Union's Alternative Investment Fund Managers Directive
Non-mainstream pooled investment status The Board conducts the Company's affairs, and intends to continue to conduct
the Company's affairs, such that the Company would qualify for approval as an
investment trust if it were resident in the United Kingdom. It is the Board's
intention that the Company will continue to conduct its affairs in such a
manner and that independent financial advisers should therefore be able to
recommend its ordinary shares to ordinary retail investors in accordance with
the FCA's rules relating to non-mainstream investment products
FATCA The Company has registered for FATCA and has a GIIN number 2BN95W.99999.SL.831
Investment policy The Company's investment policy is set out on pages 70 to 73 of the Annual
Report 2022
Website www.jlen.com (http://www.jlen.com)
DIRECTORS AND ADVISERS
Directors
Richard Morse (Chairman)
Alan Bates (appointed on 10 June 2021)
Stephanie Coxon
Jo Harrison (appointed on 10 June 2021)
Peter Neville (resigned 2 September 2021)
Richard Ramsay
Hans Joern Rieks
Administrator to the Company, Company Secretary and registered office
Sanne Fund Services Limited (formerly Praxis Fund Services)
Sarnia House
Le Truchot
St Peter Port
Guernsey GY1 1GR
Channel Islands
Registrar
Link Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
UK transfer agent
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent B43 4TU
United Kingdom
Auditor
Deloitte LLP
Regency Court
Glategny Esplanade
St Peter Port
Guernsey GY1 3HW
Channel Islands
Investment Manager
Foresight Group LLP
The Shard
32 London Bridge Street
London SE1 9SG
United Kingdom
Public relations
SEC Newgate
14 Greville Street
London EC1N 8SB
United Kingdom
Corporate broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Corporate bankers
HSBC
PO Box 31
St Peter Port
Guernsey GY1 3AT
Channel Islands
Public company directorships
Richard Morse
JLEN Environmental Assets Group Limited
Alan Bates
JLEN Environmental Assets Group Limited
Stephanie Coxon
JLEN Environmental Assets Group Limited
Apax Global Alpha Limited
International Public Partnerships Limited
PPHE Hotels Group Limited
PraxisIFM Group Limited
Jo Harrison
JLEN Environmental Assets Group Limited
Richard Ramsay
JLEN Environmental Assets Group Limited
Momentum Multi Asset Value Trust plc
Hans Joern Rieks
JLEN Environmental Assets Group Limited
CAUTIONARY STATEMENT
Pages 01 to 117 of the Annual Report 2022, including our purpose, about us, at
a glance, portfolio at a glance, market opportunities, year at a glance, the
Chairman's statement, investment objectives, fund objectives, business model,
fund structure, stakeholder engagement, risks and risk management, the
Investment Manager, investment policy, investment portfolio and valuation,
operational review, value enhancement, case studies, sustainability and ESG,
and financial review (together, the review section) have been prepared solely
to provide additional information to shareholders to assess JLEN's strategies
and the potential for those strategies to succeed. These should not be relied
on by any other party or for any other purpose.
The review section may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "forecasts", "projects", "expects",
"intends", "may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology.
These forward-looking statements include all matters that are not historical
facts. They appear in a number of places throughout this report and include
statements regarding the intentions, beliefs or current expectations of the
Directors and the Investment Manager concerning, amongst other things, the
investment objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity, prospects,
opportunities and distribution policy of the Company and the markets in which
it invests.
These forward-looking statements reflect current expectations regarding future
events and performance and speak only as at the date of this report. By their
nature, forward-looking statements involve risks and uncertainties because
they relate to events and depend on circumstances that may or may not occur in
the future.
Forward-looking statements are not guarantees of future performance or results
and will not necessarily be accurate indications of whether or not or the
times at or by which such performance or results will be achieved. The
Company's actual investment performance, results of operations, financial
condition, liquidity, prospects, opportunities, distribution policy and the
development of its financing strategies may differ materially from the
impression created by the forward-looking statements contained in this
report.
Subject to their legal and regulatory obligations, the Directors and the
Investment Manager expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
In addition, the review section may include target figures for future
financial periods. Any such figures are targets only and are not forecasts.
This Annual Report has been prepared for the Group as a whole and therefore
gives greater emphasis to those matters which are significant to JLEN
Environmental Assets Group Limited and its subsidiary undertakings when viewed
as a whole.
ENDS
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. END FR BKPBNNBKBKAD