21 June 2024

JLEN Environmental Assets Group Limited

 

JLEN reports results for the year ended 31 March 2024

 

JLEN Environmental Assets Group Limited ("JLEN" or the "Company"), the listed environmental infrastructure fund, is pleased to announce the Company's results for the year ended 31 March 2024.

 

Highlights

 

Resilient earnings and Net Asset Value ("NAV"):

·      NAV per share of 113.6 pence following payment of dividends to shareholders in line with targets

·      Strong annualised NAV total return of 8.0% since IPO

·      On course to deliver dividend of 7.57 pence in line with annual target, representing a yield of 8.1% on the closing share price at 31 March 2024

 

Summary of changes in NAV:

	NAV per share
NAV at 31 March 2023	123.1p
Dividends paid in the year	-7.5p
Power prices forecast	-5.4p
Battery revenue outlook	-2.2p
Guarantee of origin certificates	+1.7p
Inflation	+0.9p
Discount rate changes	-4.9p
Revaluation of cost asset(s)	+0.7p
Other movements (including discount rate unwind and actual performance)	+7.2p
NAV at 31 March 2024	113.6p

 

Record cash generation from underlying assets:

·      Consecutive year of record distributions received from investments

·      1.30x dividend cover - second highest since IPO

·      Prudent balance sheet management maintaining low levels of gearing

 

Clear and effective capital allocation strategy:

·      Continued progress on development and construction assets - unlocking potential for capital growth

·      Progress made on several credible selective asset disposal opportunities

·      Sales proceeds will provide flexibility to pay down debt and consider share buybacks where accretive to NAV

·      Existing commitments to development and construction-stage assets prioritised, with any new investment activity highly selective

 

Key investment metrics

 

All amounts presented in £million (except as noted)	Year ended 31 March 2024	Year ended 31 March 2023
Net assets(1)	751.2	814.6
Portfolio value(2)	891.9	898.5
Operating income and (losses)/gains on fair value of investments	(3.8)	108.4
Net Asset Value per share(3)	113.6p	123.1p
Distributions, repayments and fees from portfolio	87.0	83.6
(Loss)/profit before tax	(13.9)	98.3
Gross asset value(3)	1,091.8	1,119.8
Share price(3)	93.7p	119.6p

(1) Also referred to as "NAV".

(2) Classified as investments at fair value through profit or loss on the statement of financial position.

(3) Net Asset Value per share, share price and gross asset value are alternative performance measures ("APMs").

 

Ed Warner, Chair of JLEN, said:

"As we celebrate JLEN's 10th anniversary as a listed company, this year's performance is another demonstration of our resilience, despite it being a challenging year for the listed renewable investment company sector, including JLEN. We have delivered consecutive years of record distributions received from investments, resulting in a dividend cover of 1.30 times - the second highest since IPO.

 

"In the current difficult operating environment, we have maintained our disciplined approach to investment activity during the year. Future cash flows remain robust, with comfort provided from near-term fixes, such that the Board has set a dividend target of 7.80 pence per share for the current year, an increase of 3%. We have also taken steps to strengthen our balance sheet, completing a successful refinancing of our RCF post period end.

 

"We are progressing several asset sales processes.  We hope to complete the first transaction in the coming months.

 

"The Board has agreed a new fee structure with our Investment Manager which we believe will deliver excellent value for shareholders. We are proud of JLEN's performance over the past 10 years, including the Company's record of delivering consecutive dividend growth since its launch in 2014, and believes strongly in the Company's purpose and prospects."

 

Annual report

A copy of the annual report has been submitted to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The annual report will also be available on the Company's website at http://www.jlen.com where further information on JLEN can be found.

 

Details of the conference call for analysts and investors

A webinar and in-person event for the annual results will be held at 10:00 am (UK time) today, 21 June 2024, hosted by Chris Tanner and Edward Mountney, Investment Managers to JLEN. To register for the webinar, please contact SEC Newgate by email at JLEN@secnewgate.co.uk.

 

Retail Investor Webinar

On 25 June 2024, Chris Tanner and Edward Mountney will also provide a live presentation relating to its full year results via Investor Meet Company at 12:30 pm BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9:00 am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet JLEN Environmental Assets Group Limited via: https://www.investormeetcompany.com/jlen-environmental-assets-group-limited/register-investor

Investors who already follow JLEN Environmental Assets Group Limited on the Investor Meet Company platform will automatically be invited.

 

For further information and enquiries, please contact:

 

Foresight Group Chris Tanner Edward Mountney Wilna de Villiers ---------	+44(0)20 3667 8100 institutionalir@foresightgroup.eu
Winterflood Securities Limited Neil Langford	+44(0)20 3100 0000
SEC Newgate Elisabeth Cowell Alice Cho Harry Handyside	+44 (0)20 3757 6882 Jlen@secnewgate.co.uk
Apex Fund and Corporate Services (Guernsey) Limited Matt Lihou Matt Falla	+44(0)20 3530 3600

 

About JLEN

JLEN's investment policy is to invest in a diversified portfolio of Environmental Infrastructure. Environmental Infrastructure is defined by the Company as infrastructure assets, projects and asset-backed businesses that utilise natural or waste resources or support more environmentally friendly approaches to economic activity, support the transition to a low carbon economy or which mitigate the effects of climate change. Such investments will typically feature one or more of the following characteristics:

 

·           long-term, predictable cash flows, which may be wholly or partially inflation-linked cash flows;

·           long-term contracts or stable and well-proven regulatory and legal frameworks; or

·           well-established technologies, and demonstrable operational performance

 

JLEN's aim is to provide investors with a sustainable, progressive dividend per share, paid quarterly and to preserve the capital value of the portfolio over the long term on a real basis. The target dividend for the year to 31 March 2025 is 7.80 pence per share¹.  The dividend is payable quarterly.

 

JLEN is an Article 9 fund under the EU Sustainable Finance Disclosure Regulation and has a transparent and award winning approach to ESG.

 

Further details of the Company can be found on its website www.jlen.com

 

LEI: 213800JWJN54TFBMBI68

 

(1) These are targets only and not profit forecasts.  There can be no assurance that these targets will be met or that the Company will make any distributions at all.

 

-ENDS-

 

JLEN Environmental Assets Group Limited

Annual Report 2024

 

 

About jlen

 

JLEN Environmental Assets Group Limited ("JLEN" or the "Company") is an environmental infrastructure investment fund, investing in a diversified portfolio of assets that support the drive towards decarbonisation, resource efficiency and environmental sustainability. The Company's portfolio comprises 42 assets located across the UK and mainland Europe.

 

JLEN is Guernsey-incorporated with a premium listing on the London Stock Exchange and is a constituent of the FTSE 250 Index. The Company has an award‑winning approach to environmental, social and governance ("ESG").

 

 

PERFORMANCE HIGHLIGHTS

 

Our results summary for the full year ended 31 March 2024.

 

Net Asset Value ("NAV") £751.2m 2023: £814.6m	NAV per share(1) 113.6p 2023: 123.1p	Annualised NAV total return(1) 8.0% 2023: 9.3%
Portfolio value £891.9m 2023: £898.5m	Gearing 31.2% 2023: 27.3%	Market capitalisation(1) £619.9m 2023: £791.2m
2024 dividend declared 7.57p (+6% increase) 2023: 7.14p	2025 dividend target(2) 7.80p (+3% increase) 2024: 7.57p	Dividend cover(1,3) 1.30x 2023: 1.51x
Diversified portfolio 42 assets 2023: 42 assets	Renewable energy generated 1,358GWh 2023: 1,325GWh	GHG emissions avoided 212,917 tCO2e 2023: 212,263 tCO2e
Tonnes of waste diverted from landfill 680,825 2023: 684,181	Contributed to community funds £655,076 2023: £432,756	FTE jobs supported 467 2023: 347

 

(1)   The market capitalisation, NAV total return, Net Asset Value per share and dividend cover are alternative performance measures ("APMs"). The APMs within the Annual Report.

(2)   This is a target only, there can be no guarantee this target will be met.

(3)   On a paid basis.

 

Resilient earnings and NAV:

·     NAV per share of 113.6 pence following payment of dividends to shareholders in line with targets

·     Strong annualised NAV total return of 8.0% since IPO

·     On course to deliver dividend of 7.57 pence in line with annual target, representing a yield of 8.1% on the closing share price at 31 March 2024

 

Record cash generation from underlying assets:

·     Consecutive year of record distributions received from investments

·     1.30x dividend cover - second highest since IPO

·     Prudent balance sheet management maintaining low levels of gearing

 

Clear and effective capital allocation strategy:

·     Continued progress on development and construction assets - unlocking potential for capital growth

·     Progress made on several credible selective asset disposal opportunities

·     Sales proceeds will provide flexibility to pay down debt and consider share buybacks where accretive to NAV

·     Existing commitments to development and construction-stage assets prioritised, with any new investment activity highly selective

 

 

Our Portfolio at a glance

 

JLEN's portfolio comprises a diversified mix of environmental infrastructure assets.

 

Total assets (split by sector)

42 assets

11 Wind

6 Waste & bioenergy

9 Anaerobic digestion

6 Solar

6 Low carbon & sustainable solutions

2 Controlled environment

2 Hydro

 

Portfolio value (split by operational status)

91% Operational

7% Construction

2% Development

 

Portfolio value (split by geography)

90% UK

10% Rest of Europe

 

Assets by location:

Norway | 1 asset

United Kingdom | 39 assets

Germany | 1 asset

Italy | 1 asset

 

Does not include investment into FEIP.

 

See more online: https://jlen.com

 

 

Chair's Statement

 

"The Board is proud of JLEN's performance over the past 10 years and believes strongly in the Company's purpose and prospects."

 

On behalf of the Board, I am pleased to present the audited Annual Report and financial statements for the Company for the year ended 31 March 2024.

 

We celebrate JLEN's 10th anniversary as a listed company and this year's performance is another demonstration of our resilience, despite it being a challenging year for the listed renewable investment company sector, including JLEN. While short-term interest rates are expected to fall, and with them bond yields, the first official reduction will be later than originally expected by markets and the eventual pace of decline likely to be slower. At the same time, subsiding inflation has reduced the index‑linked cash flows from energy generating assets. Add in the uncertainty created by continued geopolitical crises and the net effect has been that shares in all infrastructure companies traded at wide discounts to Net Asset Value ("NAV") throughout the year.

 

We recognise that the recent returns have been frustrating for investors and we believe that the capital allocation decisions that we are taking, together with the anticipated change in the future rate environment, will see a re-rating of the Company's shares in due course. We also recognise the imperative for our Investment Manager to focus on stewardship of JLEN's existing portfolio, rather than targeting new investments, to ensure that it remains very well placed to deliver strong cash flows and value accretion in the coming years.

 

Over the 12 months to 31 March 2024, JLEN's NAV per share declined by 7.7% to 113.6 pence. After taking account of the dividend, the NAV total return for the year was marginally negative at -1.6%.

 

The operational review provides detail on the performance of the individual assets within the portfolio, overall this has been satisfactory. The Company has delivered consecutive years of record distributions received from investments, resulting in a dividend cover of 1.30 times - the second highest since IPO. We are particularly pleased with the progress made on construction assets which are already providing capital growth - most recently West Gourdie BESS and the glasshouse became operational. Conversely, overall electricity generation across JLEN's assets was marginally short of budget, 4.1% behind on a MWh basis.

 

We are pleased to have met our stated target dividend of 7.57 pence per share for the year, up 6% compared to the prior year and still well covered by net cash flows from the Company's diversified portfolio. Despite the difficult operating environment, future cash flows remain robust with comfort provided from near-term fixes, such that the Board has set a dividend target of 7.80 pence per share for the current year, an increase of 3%. This will be paid in quarterly instalments as usual.

 

Investment activity has remained highly disciplined, with priority given to existing commitments to construction-stage assets and opportunities directly linked to the Company's current portfolio. We have purchased the remaining 30% shareholding in the Bio Collectors anaerobic digestion ("AD") and waste collections business and continued to build JLEN's exposure to German green hydrogen developer, HH2E, where the Investment Manager is excited by the combination of technology and market opportunity. During the year, the Company deployed £69.2 million overall into the portfolio.

 

Balance sheet strength is especially important at present. To that end, I am pleased that JLEN has successfully refinanced its revolving credit facility ("RCF"), with an enhanced £200 million three‑year multi-currency facility and a further uncommitted accordion facility of up to £30 million with an option to extend for another year.

 

This facility provides the Company with more than sufficient headroom to meet our outstanding commitments and pursue future investment opportunities on a highly selective basis, including planned follow-on investments.

 

At the same time, the Board and the Investment Manager have been actively reviewing JLEN's portfolio with a view to undertaking targeted asset sales to generate capital to meet the Company's objectives while also ensuring that we have an optimal mix of technologies, cash flows, asset maturities and growth opportunities.

 

In that regard, we are currently engaged in several asset sale processes across different sub-sectors of the portfolio. The asset sales processes are at various stages of progression and we expect to complete the first transaction in the coming months.

 

During the year, the Board set out its asset allocation priorities, making it clear that share buybacks are under constant consideration as a means of deploying any surplus cash within an overall imperative of prudent balance sheet management. We anticipate that any buybacks will be funded from the proceeds of asset sales after ensuring the Company maintains a robust balance sheet and can meet its commitments.

 

One consequence of the persistent discount that JLEN's shares have traded at is that shareholders will be presented with a discontinuation vote at our Annual General Meeting ("AGM") in September. The trigger for this vote is a discount that has averaged more than 10% in the financial year under review.

 

The Board very much hopes that JLEN's excellent record of delivering consecutive dividend growth since the Company's launch in 2014, combined with the exciting prospects for the broad range of technologies and assets that it invests in, will encourage all shareholders to vote "against" the discontinuation resolution put forward at the AGM. This will ensure that the Company continues into the future, pursuing opportunities that help create a sustainable world for coming generations.

 

The Board, conscious of the continuous requirement to ensure that JLEN is as attractive as possible to current and potential shareholders, has identified two initiatives that are intended to achieve this objective. The first is a reduction in the fee paid to our

Investment Manager, Foresight Group LLP, as follows:

 

·      A change in the basis of calculating the fee from Adjusted Portfolio Value to NAV;

·      A change in the first tier of fee (up to and including £500 million) from 1.0% to 0.95% of net assets;

·      The second tier fee of 0.8% now only applies from net assets of £500 million to £1 billion; and

·      A third tier fee of 0.75% is introduced for net assets in excess of £1 billion.

 

The Board believes that this will deliver excellent value for JLEN's shareholders, while continuing to provide a fair reward and incentive for the Investment Manager.

 

The second, included as a proposed resolution at the AGM, is to change the name of the Company to Foresight Environmental Infrastructure. It is five years now since Foresight acquired the investment management team of John Laing that managed JLEN and which effectively gave the Company its name. The Board has assessed the benefits available through a closer association with the Investment Manager - including the scale afforded by its broader marketing initiatives and strong market reputation - and believes that there are clear commercial benefits to renaming the Company. The Board encourages shareholders to approve the proposed change of name.

 

We continue to evolve and progress our sustainability initiatives across the portfolio. This year, we set a decarbonisation target, aiming to achieve net zero greenhouse gas emissions by 2050. This goal will be supported by a Transition Plan, which is under development. At the asset level, biodiversity improvement works have been undertaken in a number of locations to increase the variety of habitats and support birds and mammals across our sites. In addition, we have restructured our ESG and Task Force on Climate-related Financial Disclosures ("TCFD") reports to bring them together with the goal of aligning more closely with emerging standards and regulations.

Further details on our efforts to promote resource efficiency, foster positive community relationships and ensure effective and ethical governance are set out in the consolidated ESG report.

 

During the year, the Board has continued to engage actively with all of JLEN's stakeholders. This engagement has taken the form of meetings with major shareholders, dialogue with senior executives at Foresight Group, as well as site visits to the newly constructed glasshouse and adjacent anaerobic digestion plant.

 

Our longest-serving Director, Hans Joern Rieks, is not seeking re-election at this year's AGM. Hans has been a fantastic contributor to the work of the Board over the past five years, supportive and challenging in equal measure, and on behalf of all shareholders and my colleagues I would like to thank him for his service and wish him well for the future.

 

Finally, I would like to thank all of JLEN's shareholders for the support you have shown us over the past year. It is greatly appreciated. The Board is proud of JLEN's performance over the past 10 years, believes strongly in the Company's purpose and prospects and hopes that you will continue to share with us in its success in the years to come.

 

Ed Warner

Chair

20 June 2024

 

 

KEY PERFORMANCE INDICATORS

 

NAV total return (annualised)

8.0%

 

2024	8.0%
2023	9.3%
2022	8.7%
2021	5.5%
2020	6.1%

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

 

KPI performance

·     Annualised NAV total return since IPO of 8.0%, against the backdrop of a depressed market for listed infrastructure

 

Objectives for 2025

·     Invest selectively in opportunities that are accretive to the Company on a risk-adjusted basis

·     Consider returns of new investments against portfolio WADR of 9.4% and target returns of 7.5-8.5%, net of fees and expenses

 

Principal risks

·     See risk and risk management section in the 2024 Annual Report. Refer to risks: 2, 3, 5, 6, 7, 9, 10 and 11.

 

 

NAV per share

113.6p

 

2024	113.6p
2023	123.1p
2022	115.3p
2021	92.2p
2020	97.5p

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

KPI performance

·     NAV £751.2 million, down from £814.6 million at 31 March 2023

·     NAV per share 113.6 pence, down 7.7% compared to 31 March 2023

·     -1.6% NAV total return for the 12 months ended 31 March 2024

 

Objectives for 2025

·     Prioritise progress in development and construction-stage assets to drive NAV growth

·     Continue to progress value enhancement initiatives

·     Share buybacks considered as NAV accretive option as part of overall capital allocation strategy

 

Principal risks

·     See risk and risk management in the 2024 Annual Report. Refer to risks: 2, 3, 5, 6, 7, 9, 10 and 11.

 

Dividend cover

1.30x

 

2024	1.30x
2023	1.51x
2022	1.10x
2021	1.07x
2020	1.10x

 

Link to Fund objectives:

Predictable income growth for shareholders

 

KPI performance

·     1.30x dividend cover for the year

 

Objectives for 2025

·     Manage cover in light of lower power prices compared to recent years

 

Principal risks

·     See risk and risk management in the 2024 Annual Report. Refer to risks: 2, 3, 5, 6, 7, 9 and 11

 

Dividend

7.57p

 

2025 target	7.80p(1)
2024	7.57p
2023	7.14p
2022	6.80p
2021	6.76p

 

Link to Fund objectives:

Predictable income growth for shareholders

 

KPI performance

·     7.57 pence dividend declared for the year, in line with target

 

Objectives for 2025

·     Target dividend for the next financial year of 7.80 pence, up 3.0% from 2024

 

Principal risks

·     See risk and risk management in the 2024 Annual Report. Refer to risks: 2, 3, 5, 6, 7, 9 and 11.

 

Asset concentration (proportion of portfolio value from top 10 assets)

46.0%

 

2024	46.0%
2023	49.9%
2022	54.0%
2021	53.6%
2020	56.3%

 

Link to Fund objectives:

Preservation of shareholder value

Investment, growth and diversification

 

KPI performance

·     The top 10 largest assets now provide 46.0% of the total portfolio value, down from 49.9% at 31 March 2023

·     Follow-on investments in the year, combined with ongoing buildout of construction‑stage investments, continue to further diversify the portfolio

 

Objectives for 2025

·     Continue to focus on the buildout of the Company's development and construction-stage investments to increase the value of these assets in the portfolio

·     Manage new investment activity carefully in line with capital allocation policy

 

Principal risks

·     See risk and risk management on in the 2024 Annual Report. Refer to risks: 1, 4, 10 and 11.

 

Renewable energy generated

1,358GWh

2023: 1,325GWh

 

GHG emissions avoided

212,917 tCO₂e

2023: 212,263 tCO₂e

 

Tonnes of waste diverted from landfill

680,825 tonnes

2023: 684,181 tonnes

 

Contributed to community funds

£655,076

2023: £432,756

 

FTE jobs supported

467

2023: 347

 

Number of SDGs(²) the portfolio aligns to

8

2023: 8

 

(1)   This is a target only, there can be no guarantee this target will be met.

(2)   Sustainable Development Goals.

 

 

The investment manager's report

 

JLEN is managed by Foresight Group LLP ("Foresight" or "Foresight Group") as its external alternative investment fund manager ("AIFM") with discretionary investment management authority for the Company.

 

Chris Tanner

Investment Manager

Chris has been an Investment Manager⁽¹⁾ to JLEN since IPO in 2014. He joined Foresight in 2019 as a Partner. He has over 24 years of industry experience. Chris is a Member of the Institute of Chartered Accountants in England and Wales and has an MA in Politics, Philosophy and Economics from Oxford University. Chris also serves as Chair of the Finance Forum for The Association of Renewable Energy and Clean Technology ("REA").

 

Edward Mountney

Investment Manager

Edward has been involved with JLEN since 2016, joining the management team in 2022. Prior to that, Edward was Head of Valuations for Foresight Group and John Laing Capital Management before then. He has over 14 years' experience in infrastructure and renewables, is a Member of the Institute of Chartered Accountants in England and Wales and holds a BA (Hons) in Business and Management from Oxford Brookes University.

 

About Foresight Group

Foresight is the Investment Manager for the Company. Founded in 1984, Foresight is a leading investment manager in real assets and providing capital for growth, operating across Europe and Australia.

 

Foresight's Infrastructure division

The division manages over 435 infrastructure assets with a focus on renewable energy generation (in particular wind and solar power, but also bioenergy, hydropower and geothermal energy), energy storage, grid infrastructure, as well as energy efficiency management solutions, social and transport infrastructure projects and sustainable forestry assets.

 

Breadth of expertise

The Foresight infrastructure team comprises 175 investment, commercial and technical professionals across offices in the UK, Italy, Spain, Luxembourg and Australia, bringing extensive investment origination and execution capabilities to JLEN. The team considers close to 900 opportunities a year across all strategies, selecting only those for JLEN which meet its risk appetite and where JLEN has a realistic chance of successfully completing a transaction for further investigation. The breadth of experience within the team suits JLEN's broad environmental infrastructure mandate and this experience has been critical in determining which projects to pursue as JLEN has diversified beyond core renewable energy projects.

 

£11.9bn⁽²⁾

Assets under management

 

900⁽⁴⁾

Investment opportunities reviewed

 

8⁽³⁾

Countries with operations

 

435⁽³⁾

Infrastructure assets

 

175⁽⁵⁾

Infrastructure professionals

 

4.7GW⁽⁵⁾

Renewable energy generation

 

(1)   Prior to January 2022, JLEN engaged Foresight in an investment advisory capacity rather than as the Investment Manager.

(2)   Based on Foresight Group Trading Update for financial year ending 31 March 2024 on the LSE.

(3)   Foresight Group information as at 31 March 2024.

(4)   For the period 1 April 2023 - 31 March 2024.

(5)   Foresight Group information as at 30 September 2023.

 

The infrastructure investment team utilise established international networks to access market opportunities as they arise. The team is able to deploy and manage capital across a wide range of infrastructure sectors at various stages of an asset's life, through development, construction and operational stages. Foresight's construction management capabilities are valuable to JLEN as bringing development and construction-stage assets through to operations provides potential for capital appreciation. The team is also experienced in managing exits, having carried out several such transactions in the last 12 months.

 

Active asset management with a strong sustainability focus

JLEN benefits from a team of portfolio management experts who are focused on operational performance, asset optimisation and commercial management, as well as assessing enhancement opportunities for the Company's portfolio. Sustainability and ESG is fully integrated into JLEN's business model and the portfolio team is supported by a dedicated team of sustainability experts providing a data-driven approach to monitoring, reporting and improving sustainability and ESG performance across JLEN's portfolio.

 

Co-investment

Given JLEN's broad mandate, its investment activities can overlap with other Foresight‑managed funds. Foresight maintains a clear allocation policy that sets out the way in which common interest in an investment across funds shall be managed.

 

In keeping with this policy, JLEN is currently co-invested in seven projects with other Foresight funds, enabling JLEN to achieve greater diversification with the same level of funds and amplifying Foresight‑managed funds' influence on these assets. All co‑investments have market-standard shareholder protections and are ultimately subject to the approval of JLEN's Board, which will take independent advice as appropriate.

 

Diversification

Foresight considers that the benefits of diversification for JLEN are as follows:

 

·     spreading of risks such that no one set of risks associated with a particular technology or set of climactic conditions predominates;

·     wider opportunity set provides scope to assess risk‑adjusted returns across the range of environmental infrastructure opportunities, avoiding highly competitive markets; and

·     ability to construct a portfolio that combines higher returning investments with lower risk investments to provide an attractive mix of sustainable income and capital growth.

 

Foresight does not advocate diversification for its own sake for JLEN. New investment sectors must comply with the investment policy and present a risk/return profile that compares favourably with investments that are already present within the JLEN portfolio. See the "market and opportunities" section for an assessment of the relative attractiveness of different sectors.

 

 

Performance summary

 

NAV per ordinary share at 31 March 2024 was 113.6 pence (31 March 2023: 123.1 pence per share). The details on NAV movements over the annual period are set out in the Annual Report. The Company's portfolio valuation was £891.9 million (31 March 2023: £898.5 million). Losses per share for the year were 2.1 pence, (31 March 2023: earnings per share 14.9 pence) driven by the loss on fair value of investments as a result of power price forecast contraction and increase in discount rate during the financial year.

 

We continued to manage the portfolio prudently with the aim of generating consistent and predictable cash flows with a high degree of inflation linkage. Cash received from the portfolio by way of distributions, which includes interest, loan repayments and dividends, was £87.0 million (31 March 2023: £83.6 million). Net cash inflows from the investment portfolio (after operating and finance costs) cover the cash dividends of £49.4 million paid to shareholders in the 12-month period by 1.30x (31 March 2023: 1.51x).

 

Despite operating in a challenging macroeconomic and geopolitical environment, our performance benefited from:

 

·     the Company's diversification strategy which ensures the portfolio benefits from a significant proportion of contracted revenues and revenues earned by non‑energy generating assets;

·     having a substantial portion of generation for both electricity and gas on fixed price arrangements, partially insulating the portfolio from price fluctuations;

·     good progress made on development and construction-stage assets - unlocking potential for capital growth as they become operational;

·     active asset management of the portfolio identifying value enhancement opportunities to optimise performance across the portfolio; and

·     prudent balance sheet management maintaining low levels of gearing relative to sector norms.

 

 

Market and opportunities

 

2024 has been billed as "the year of elections", with national elections (including elections for the European Union) covering a combined population of about 49% of the people of the world⁽¹⁾. For many of the people voting in the UK and Europe, key markets for JLEN, climate change will be a significant issue⁽²⁾. The choice in the US appears to be stark, with Donald Trump signalling intent to unwind key components of President Biden's signature Inflation Reduction Act⁽³⁾, that aims to incentivise investment in green technology in the US. There appears to be more consensus between the main political parties in the UK and the European Union, but even here there are differences in emphasis and in speed of action. So while the case for environmental infrastructure remains as clear as ever, with the International Energy Agency ("IEA") estimating that full year investments in the energy sector will account for US$2.8 trillion in 2023⁽⁴⁾, of which more than 60% will be invested in clean energy technology such as renewables, low-carbon fuels, nuclear, grids and battery storage, there is some uncertainty in the near term due to the political situation, particularly in the European Union⁽⁵⁾.

 

The Company continues to be presented with a substantial opportunity set by virtue of its broad investment policy. However, the Board and the Investment Manager are very aware of the current state of the market for listed renewable infrastructure; the model that applied for most of JLEN's first 10 years, where acquisitions supported by frequent equity raises were the norm, is over. Further additions into the portfolio will require capital to be recycled from existing assets and any acquisitions will need to compare favourably to returns from the existing portfolio and also the implied returns to shareholders from buying back shares at a discount.

 

As a result, the Investment Manager expects new investment activity in the upcoming year to be limited. The Company will continue to deploy capital to meet its existing commitments to construction assets and will consider opportunities to support value enhancements and follow‑on investments within the portfolio on their merits. Beyond this, new investments will be selective, making full use of the investment mandate and the Investment Manager's ability to originate in the UK and Europe to pursue only those opportunities that clearly benefit shareholder returns. This is likely to favour operational assets that make a clear contribution to dividend cover, but may also include short-duration development and construction opportunities where outlay is modest and funds are only deployed for a relatively short period of time before earning a return.

 

(1)   Time Magazine https://time.com/6550920/world-elections-2024/.

(2)   https://www.euronews.com/green/2024/03/25/over-half-of-european-voters-think-climate-action-is-a-priority-exclusive-euronews-poll-re; https://www.kcl.ac.uk/.news/britons-more-likely-to-prefer-party-that-takes-strong-action-on-climate-change.

(3)   https://www.technologyreview.com/2024/02/26/1088921/trump-wants-to-unravel-bidens-landmark-climate-law-here-is-whats-most-at-risk/.

(4)   International Energy Agency ("IEA"), "Clean energy investment is extending its lead over fossil fuels, boosted by energy security strengths," 25 May, 2023.

(5)   https://www.climateforesight.eu/articles/eu-elections-climate-policy/.

 

Wind

Market developments:

Wind remains the predominant renewable generation technology in the UK, particularly in the offshore sector with the UK Government targeting deployment of 50GW of capacity by 2030. The onshore wind market continues to face certain challenges from a planning perspective, though steps have been taken to address this via amendments in late 2023 which should have a positive effect on development rates in the medium‑to‑long term. The UK Government continues to offer support for onshore and offshore wind projects through the Contracts for Difference ("CfD") subsidy mechanism, which has come under scrutiny over the last 12 months due to strike prices that have proven too low to support the buildout of new sites. However, the UK Government has taken positive steps to address this in the latest rounds, and so the regulatory environment remains demonstrably supportive, also via other measures such as the Energy Act 2023.

 

Wind markets in other European geographies have come under those same cost pressures, which has led to a slowdown in capacity buildout. However, in part driven by energy security concerns, EU targets for onshore and offshore capacity have increased over the last year or so and whilst subsidies in their previous form are no longer available, many countries still provide revenue support via auctions or tender processes. Therefore, whilst the industry has come under pressure over the last 12 months, wind energy remains critical to wider decarbonisation targets and so we expect the slowdown in buildout to be short term only.

 

JLEN investment outlook:

JLEN has historically invested in operational onshore wind farms, although has not made new investments in this area since 2017. It remains unlikely that JLEN will make new investments into operational onshore wind in the short-to-medium term due to high competition and resultant return levels, but given the impact of interest rates on both target returns and market-wide funding capacity, opportunistic acquisitions of attractively priced assets is a possibility. The Investment Manager estimates that discount rates for UK and European onshore wind are typically in the range of 7-9%, ultimately dependent on project revenue structures, market and the nature of the sale or origination process. A benefit for JLEN is its wide geographic remit and the ability to target markets that might offer better risk-adjusted returns compared to the UK or over-reliance on a single jurisdiction.

 

The Investment Manager has previous experience in both construction-stage and development-stage wind investments. Therefore, JLEN may consider construction and development-stage wind investments if risk‑adjusted returns are considered attractive. JLEN may particularly consider late-stage development investment where the wind developer is credible and has demonstrable pipeline, and where the investment is structured via secured positions with controlled expenditure, to enable JLEN to benefit from development gains and/or secure future wind deployment at favourable rates of return.

 

Solar

Market developments:

Similar to wind, the UK Government has ambitious targets for solar capacity, targeting a five-fold increase of current capacity to achieve 70GW by 2035, supported in part by the CfD programme which saw c.2GW securing tariffs in 2023. Given increasing cost pressures, strike prices have been increased in the latest round as an indication of the continued regulatory support. A key challenge for solar is securing viable grid connections, with some quoted connection dates as late as 2036. However, National Grid has been tasked with the better management of connection queues to free up capacity for projects that are ready to start operations.

 

Across Europe, solar capacity targets remain ambitious via legislation such as the REPowerEU plan. Whilst there are similar macro challenges as per the UK across different European solar markets, for example cost pressures and grid availability, there continues to be a high degree of regulatory support across large and mature markets such as Germany, Spain, Netherlands and France.

 

JLEN investment outlook:

JLEN has historically invested in operational grid-scale solar parks, although has not made new investments in this sector since 2017. It remains unlikely that JLEN will make new investments into operational solar in the short-to-medium term as competition for assets continues to make returns less attractive than other sectors, albeit within a mature and well understood asset class. The Investment Manager estimates that discount rates for UK ground-mounted solar are in the range 6-8%, often with optimistic cash flow assumptions.

 

As per wind, and given the Investment Manager's experience, in addition to construction-stage opportunities JLEN may consider late-stage development investment where the developer is credible and has demonstrable pipeline, and where the investment is structured via secured positions with controlled expenditure, to enable JLEN to benefit from development gains and/or secure future solar deployment at favourable rates of return.

 

Anaerobic digestion

Market developments:

The UK Government published its "Biomass Strategy" during the year under review. This contained a section on "greening the gas grid", which recognised that biomethane can directly replace natural gas across a range of end uses and has a part to play in increasing energy security. The Strategy indicates that 30-40 TWh of biomethane production would be beneficial in helping the UK to reach net zero in a cost-effective manner, but also notes that this level of production is not supported by current government subsidy regimes and that it is considering future options.

 

The UK Government's Simpler Recycling consultation stated that the government's "preference is for food waste to be collected for treatment by AD, which presents the best environmental outcome for the treatment of unavoidable food waste". The government intends for all local authorities to implement food waste collections for households by the end of March 2026, with an earlier date of 2025 for firms to make arrangements for food waste collection. This should benefit operators of AD facilities capable of processing food waste, such as the Company's Codford and Bio Collectors assets.

 

There was also an extension to the deadline for applications for the Green Gas Support Scheme, the main government support scheme for new AD facilities. New AD sites now have until March 2028 (previously November 2025) to qualify for support, which can be seen as working in tandem with the increase in food waste feedstock expected from Simpler Recycling.

 

The European Union ("EU") has continued to make progress towards its ambition of producing 35bcm of biomethane by 2030 under the REPowerEU plan, setting a record for biomethane production according to the latest figures available to the European Biogas Association⁽¹⁾. However, while there have been positive signs, investment and support needs to increase further if the target of 35bcm by 2030 is to be met from the most up-to-date assessment of c.4bcm.   

 

(1)   https://www.europeanbiogas.eu/strongnew-record-for-biomethane-production-in-europebrshows-eba-gie-biomethane-map-2022-2023-strong/.

 

JLEN investment outlook:

JLEN has invested in a portfolio of operational gas-to-grid and gas-to-electric AD plants using a range of agricultural and waste feedstocks and remains active in the market. Further investments in UK and European plants are possible across the spectrum of development-stage, ready-to-build and operational assets based on risk-adjusted returns available.

 

The Investment Manager also notes increased belief in the market of use cases for AD assets beyond the life of their primary subsidy (e.g. the Renewable Heat Incentive). While there is not a clear and defined path to follow, there are a range of options that may be feasible, such as monetisation of captured carbon and corporate gas purchase agreements with companies interested in decarbonising their heat usage. Further investment in existing plants may be attractive to make them more resilient and prepare them for a life beyond subsidy. No value is currently recognised for life extensions of AD assets.

 

Biomass and energy-from-waste

Market developments:

The UK Biomass Strategy stressed the significant role that biomass can play in decarbonising major sectors of the economy, including heat, transport and electricity. It also emphasised the government's interest in bioenergy with carbon-capture and storage ("BECCS") which can produce negative emissions as well as a source of baseload power, making it a useful tool in reaching net zero. Alongside these benefits, the Strategy recognises the need to build upon the existing arrangements within subsidy arrangements regarding sustainability of feedstocks and states a desire to deal with inconsistencies between them in order to develop an overarching framework including areas such as implementation of a common greenhouse gas ("GHG") emission calculation methodology and accounting for soil carbon changes.

 

The UK Government also published consultations regarding the expansion of the UK Emissions Trading Scheme ("UK ETS") to the energy-from-waste ("EfW") incineration sector and how to integrate Greenhouse Gas Removals ("GGR") schemes into the UK ETS, including engineering-based solutions like BECCS and nature-based solutions like afforestation.

 

EU countries are also focused on the sustainability of biomass, with the European Environment Agency publishing a report on the need to prioritise between the various uses of biomass foreseen within the policy ambitions of the European Green Deal given the potential shortage of sustainable biomass in the future given possible impacts of a changing climate.

 

JLEN investment outlook:

JLEN remains open to new investments in this sector, providing the sustainability credentials of an asset are satisfactory in the light of new, more stringent expectations being flagged by UK and European governments. However, biomass and EfW assets can be large and in the current capital-constrained environment may not be the first priority. The Investment Manager will continue to look for assets in special circumstances, such as the Cramlington biomass facility that was bought out of administration, as these may represent an opportunity for enhanced returns. The Investment Manager will also consider value enhancements and measures to improve resilience for existing bioenergy assets within its portfolio as these can have attractive investment cases and typically involve a lower outlay of capital than purchase of a new asset.

 

Controlled environment ("CE")

Market developments:

Prices for salmonids have increased since the time of JLEN's investment into controlled environment aquaculture, driven by demand as supply from traditional farming methods faces headwinds. Norway introduced a resource rent tax on sea-based aquaculture of 25% during the year in addition to general corporate taxation. This does not apply to fully land-based facilities such as the Company's Rjukan facility and so presents a cost advantage for land-based controlled environment projects. Other factors such as licence costs and maturing technology also favour land-based solutions over traditional sea-based pens.

 

JLEN investment outlook:

The current focus is on bringing JLEN's existing CE Rjukan and CE Glasshouse projects to steady state production in order to validate the investment case. While the projects have made good progress to date, there is no intention to increase portfolio allocation to controlled environment projects until a full cycle has been observed, including an exit.

 

Low-carbon transport

Market developments:

Transport remains a key sector for decarbonisation as the second largest emitter of GHG emissions after the power sector(¹) and a key plank for driving decarbonisation is the switch from fossil fuel-powered internal combustion engines to electric for smaller vehicles. In the UK, the Zero Emission Vehicle mandate became law during the year, requiring 80% of new cars and 70% of new vans sold to be zero emission by 2030, increasing to 100% by 2035. With this commitment, a substantial expansion of charging infrastructure and other incentives is required, potentially opening up investment opportunities. A similar requirement is in place for EU Member States.

 

The UK Government also put in place new targets for jet fuel, requiring 10% of all jet fuel for flights taking off from the UK to come from sustainable sources by 2030. The Investment Manager has seen several development-stage opportunities for projects producing sustainable aviation fuel and other biofuels for transport.

 

JLEN investment outlook:

JLEN continues to see good potential in the sector, as evidenced by the annual growth of 39% in fuel dispensed seen in its investment into CNG refuelling ("CNG"). In keeping with JLEN's wider investment approach in the near term, any further investments in low-carbon transport will be highly selective, focusing on risk profile and quality of cash flows.

 

(1)   https://www.statista.com/statistics/1129656/global-share-of-co2-emissions-from-fossil-fuel-and-cement/.

 

Battery storage

Market developments:

2023 was a challenging year for the battery storage market in the UK. The industry as a whole suffered from weakened revenues driven by factors such as lower power price volatility and the saturation of ancillary services as a result of the rapid buildout of BESS capacity, in stark contrast to the high profits in FY23. The reduction in actual and forecast revenues has impacted JLEN's NAV, but independent market analysis and recent actual revenues suggest that 2023 could be the bottom of the cycle, with sound long-term market fundamentals driven by the continued electrification of heating and transport and greater renewables penetration. The general trend towards long-duration batteries, and other forms of long-duration energy storage ("LDES"), is likely to continue given the finite opportunity of grid services provision. The Investment Manager has experience in other forms of LDES, such as pump-hydro, and so JLEN will continue to monitor developments across other storage technologies.

 

The Investment Manager has seen an increasing pipeline of grid-scale battery projects in other European markets, notably Germany, Netherlands and the Nordics, and is assessing those markets and their underlying characteristics including power price volatility, arbitrage opportunities and ancillary services.

 

JLEN investment outlook:

JLEN has four grid-scale battery projects within the portfolio at various stages of development. West Gourdie completed construction during the year and is now fully operational. Sandridge is in construction and expected to connect during FY24/25. The two other investments are still at ready-to-build stage with strategic decisions to be taken shortly on either starting construction during the year or pursuing exits at an opportune time in the future.

 

Whilst the Investment Manager believes that the long-term outlook for the UK BESS market is positive, JLEN is likely to pause further investment into the sector until there's been further validation of the revenue model and greater clarity around storage capacity and utilisation rates following a period of rapid growth. It will continue to monitor other European markets in order to stay ahead of developments and will consider opportunities where underpinned by supportive frameworks, for example in the form of capacity-based revenue streams.

 

Hydrogen

Market developments:

Market analysts believe that the global decarbonisation agenda sets a favourable market context for the rise of the low-carbon hydrogen industry. Hydrogen infrastructure represents a significant portion of total investment requirement to reach net zero targets especially where electrification is not a viable solution, research estimates a minimum of €4.6 trillion investments required in the clean hydrogen supply chain to achieve that goal. In that context, researchers have identified an immediate funding gap of €268 billion through 2030 as €295 billion direct investments have been announced in low-carbon hydrogen projects globally through 2030(¹), but only €27 billion have passed FID or is in more advanced stages.

 

JLEN investment outlook:

Green hydrogen production and its derivatives is an area of focus for Foresight Group. The investment management team has access to the wider Foresight efforts in this area and can evaluate pipeline opportunities as they arise. JLEN has an existing position in a development-stage opportunity in Germany through its investment in the developer HH2E and the expectation is that this position will fulfil JLEN's allocation to hydrogen projects for the short-to-medium term.

 

Germany has a favourable outlook for green hydrogen, with the National Hydrogen Strategy aiming for 10GW of electrolyser capacity by 2030 and legislative and regulatory initiatives in train that should support the investment case for greenfield plants, such as a green gas quota. HH2E has several projects in development and JLEN can increase its investment as projects move into construction should it so wish, depending on funding capacity and risk-adjusted returns available.

 

(1)   Hydrogen Insights 2023, Hydrogen Council.

 

 

Our portfolio

 

Wind

 

"JLEN's wind portfolio contains mature assets with established counterparties. As intermittent generators, we seek to fix a higher proportion of merchant power revenues than for baseload and Renewable Energy Certificates ("ROCs") earned by the wind farms also provide an attractive RPI-linked revenue stream for investors."

 

11

assets

 

Share of portfolio value

27%

 

Joe Hardy

Portfolio Manager

 

Assets include operating onshore wind farms in the UK.

 

Investment attractions:

·     Government-backed incentives (ROC)

·     Index-linked incentives

·     Low technology risk

·     Readily available input resource

 

Profile:

·     Intermittent energy generation profile

 

First investment:

·     IPO in 2014

 

Potential risks:

·     Merchant electricity prices

·     Wind resource risk

·     Operational issues

 

Waste & bioenergy

 

"JLEN's waste and bioenergy assets include baseload generating plants and waste processing concessions. They generate a range of different revenue streams, many of which are fixed price and index‑linked. Common to all of them is a need to consider the feedstocks that are going into the plants and to maintain the assets with a long-term mindset."

 

6

assets

 

Share of portfolio value

24%

 

Stefania Trivellato

Portfolio Manager

 

Assets include municipal waste management, wastewater treatment and biomass projects across the UK and an energy-from-waste project in Southern Italy.

 

Investment attractions:

·     Combination of ROCs, Feed-in Tariffs ("FiT") and Renewable Heat Incentives ("RHI") accreditation or long‑term government‑backed contracts

 

Profile:

·     Baseload energy generation profile⁽¹⁾

·     Range of revenue streams - FiT, RHI, ROC, private wire, concession-based, merchant

 

First investment:

·     IPO in 2014

 

Potential risks:

·     Risks around cost and supply of feedstock

·     Operational issues

·     Handback risk (ELWA, Tay)

 

(1)   Excludes waste management and wastewater treatment which are non-energy generating.

 

Solar

 

"JLEN's solar portfolio includes older vintage assets with high value subsidy tariffs. These assets provide a high proportion of RPI-linked income and our focus now is on managing the assets as they age to maintain, and where possible enhance, performance."

 

6

assets

 

Share of portfolio value

14%

 

Moritz Ilg

Portfolio Manager

 

Assets include operational ground-mounted and rooftop solar plants across the UK.

 

Investment attractions:

·     Government-backed incentives (ROC and FiT)

·     Index-linked incentives

·     Low technology risk

·     Readily available input resource

 

Profile:

·     Intermittent energy generation profile

 

First investment:

·     IPO in 2014

 

Potential risks:

·     Merchant electricity prices

·     Solar resource risk

·     Lifecycle maintenance and component replacements

 

Anaerobic digestion

 

"JLEN's AD assets use energy crops and agricultural waste to generate biomethane that replaces fossil gas in the GB gas network. Not only do the assets contribute to the decarbonising of the heat sector, they offer farmers a means to diversify their revenue sources and to use digestate, the by‑product from the process, as an alternative to chemical fertilisers."

 

9

assets

 

Share of portfolio value

18%

 

Sam Matthews

Portfolio Manager

 

The assets consist of operational agricultural anaerobic digestion plants across the UK.

 

Investment attractions:

·     Government-backed incentives (FiT and RHI accreditation)

·     Index-linked incentives

·     Low technology risk

·     Higher returns than solar and wind

 

Profile:

·     Baseload energy generation profile

 

First investment:

·     2017

 

Potential risks:

·     Risks around cost and supply of feedstock

·     Merchant gas and electricity prices

·     Operational issues

 

Low carbon & sustainable solutions

 

"Battery assets and other forms of storage are necessary for the energy transition if we are to harness increasing levels of intermittent renewable generation on the system. JLEN's assets are in construction or newly commissioned and so we are focused on bringing them into operations as effectively as possible."

 

6

assets

 

Share of portfolio value

9%

 

Saadat Ullah

Portfolio Manager

 

Assets provide sustainable approaches to economic activity, and currently include Battery Energy Storage System ("BESS"), low‑carbon CNG refuelling stations and green hydrogen development platforms.

 

Investment attractions:

·     Strong cash yield expected from sites once established

·     Mainly merchant revenues, although some contracts exist

 

Profile:

·     Non‑energy generating environmental infrastructure

 

First investment:

·     2020

 

Potential risks:

·     Construction risk

·     Merchant nature of trading revenue streams

·     Evolving market and increased competition

·     Shorter track record of operations than for other technologies

 

Controlled environment

 

"Construction activities at JLEN's controlled environment projects are progressing well. We aim to build good relationships with our project counterparties to promote a collaborative approach to construction management that should then carry over into the projects' operations."

 

2

assets

 

Share of portfolio value

7%

 

Amit Thakrar

Portfolio Manager

 

Sustainable solutions to food production and agriculture. Key environmental infrastructure needed to enable populations to live sustainably.

 

Investment attractions:

·     Established technologies with deep revenue markets

·     Potential for capital growth

 

Profile:

·     Non-energy generating environmental infrastructure

 

First investment:

·     2022

 

Potential risks:

·     Merchant revenues

·     New markets for the Investment Manager

·     Construction risk

 

Hydro

 

"Hydropower plays a key role in the transition to clean energy, not only through the low-carbon electricity it produces, but also because of its strong capabilities for providing flexibility and storage."

 

2

assets

 

Share of portfolio value

1%

 

Joe Hardy

Portfolio Manager

 

Operational UK run-of-river hydro assets with two co‑located batteries.

 

Investment attractions:

·     FiT accredited

 

Profile:

·     Intermittent energy generation profile

 

First investment:

·     2019

 

Potential risks:

·     Resource risk - rainfall

·     Merchant electricity revenues

·     Operational issues

 

 

Investment portfolio and valuation

 

Investment portfolio

Diversification continues to play a key role for the Company, reducing dependency on a single market, technology type or set of climatic conditions, whilst allowing exposure to a wide opportunity set, as illustrated in the analysis below at 31 March 2024, according to share of portfolio value:

 

Sector split

27%	Wind
24%	Waste & bioenergy
18%	Anaerobic digestion
14%	Solar
9%	Low carbon & sustainable solutions
7%	Controlled environment
1%	Hydro

 

Geography

90%	UK
10%	Rest of Europe

 

Remaining asset life⁽¹⁾

13%	Up to 10 years
60%	11 to 20 years
27%	More than 20 years

 

Weighted average remaining asset life⁽¹⁾ of the portfolio is 16.3 years.

 

(1)   Based on project revenues from volumes/ generation during the period and assumes project cash flow distributions reflect revenue split at each project.

 

Operational status

91%	Operational
7%	Construction
2%	Development

 

Operator exposure

16%	SGRE
16%	Future Biogas
9%	BWSC
7%	Brighter Green Engineering
5%	Vestas
47%	Other

 

Asset concentration

9%	Largest asset
5%	2nd largest asset
5%	3rd largest asset
5%	4th largest asset
5%	5th largest asset
17%	Top 6-10
54%	Other

 

Valuation method

89%	Discounted cash flow
11%	Cost

 

Portfolio valuation

The Investment Manager is responsible for carrying out the fair market valuation of the Company's investments, which is presented to the Directors for their approval and adoption. The valuation is carried out on a quarterly basis as at 30 June, 30 September, 31 December and 31 March each year.

 

The valuation is based on a discounted cash flow analysis of the future expected equity and loan note cash flows accruing to the Group from each operational portfolio investment. Assets under construction are valued at cost until such time as the risks associated with construction have substantially passed. For some technologies with more complex construction activities, this will be when the asset reaches the start of commercial operations, while for others this may be during late-stage construction.

 

This valuation uses key assumptions which are recommended by Foresight using its experience and judgement, having considered available comparable market transactions and financial market data in order to arrive at a fair market value. An independent verification exercise of the methodology and assumptions applied by Foresight is performed by a leading accountancy firm and an opinion is provided to the Directors. The Directors have satisfied themselves as to the methodology used and the assumptions adopted and have approved the valuation.

 

The Directors' valuation of the portfolio at 31 March 2024 was £891.9 million, compared to £898.5 million at 31 March 2023. The decrease of £6.6 million is the net impact of new acquisitions, cash received from investments, changes in macroeconomic, power price and discount rate assumptions and underlying growth in the portfolio. A reconciliation of the factors contributing to the change in the portfolio during the period is shown in the chart below.

 

The movement in value of investments during the year ended 31 March 2024 is shown in the table below:

 

	2024	2023
	£m	£m
Valuation of portfolio at opening balance	898.5	795.4
Acquisitions in the year (including deferred consideration)	69.2	72.1
Cash distributions from portfolio	(87.0)	(83.6)
Rebased opening valuation of portfolio	880.7	783.9
Changes in forecast power prices	(36.0)	57.7
Changes in economic assumptions	8.6	67.7
Changes in discount rates	(29.0)	(39.1)
Changes in exchange rates	(0.5)	1.0
Balance of portfolio return	68.1	27.3
Valuation of portfolio at 31 March	891.9	898.5
Fair value of intermediate holding companies	(138.3)	(81.7)
Investments at fair value through profit or loss	753.6	816.8

 

Allowing for investments of £69.2 million (including deferred consideration) and cash receipts from investments of £87.0 million, the rebased valuation is £880.7 million. The portfolio valuation at 31 March 2024 is £891.9 million (31 March 2023: £898.5 million), representing an increase over the rebased valuation of 1.3% during the year.

 

Valuation assumptions

Each movement between the rebased valuation and the 31 March 2024 valuation is considered below:

 

Forecast power prices

The project cash flows used in the portfolio valuation at 31 March 2024 reflect contractual fixed price arrangements under PPAs, where they exist, and short‑term market forward prices for the next two years where they do not.

 

After the initial two-year period, the project cash flows assume future electricity and gas prices in line with a blended curve informed by the central forecasts from three established market consultants, adjusted by the Investment Manager for project-specific arrangements and price cannibalisation.

 

For the Italian investment, project cash flows assume future electricity prices informed by a leading independent market consultant's long‑term projections.

 

The overall change in forecasts for future electricity and gas prices compared to forecasts at 31 March 2023, net of the EGL, has decreased the valuation of the portfolio by £36.0 million.

 

The graph in the 2024 Annual Report represents the blended weighted power curve used by the Company, reflecting the forecast of three leading market consultants, adjusted by the Investment Manager to reflect its judgement of capture discounts and a normalised view across the portfolio of expectations of future price cannibalisation resulting from increased penetration of low marginal cost, intermittent generators on the GB network. The solid line represents the weighted average realised price forecast - including short term price fixes under PPAs, and whereas the dotted line shows the equivalent merchant price for unhedged generation.

 

Guarantees of origin certificates

As the portfolio includes a number of renewable energy generation projects, it is able to generate revenue from the sale of Renewable Energy Certificates in addition to income from the sale of gas and electricity. A certificate is issued by Ofgem for each unit of renewable electricity or gas generated, and can be sold as part of, or independently of, the offtake contracts in place for the wholesale electricity and/or gas. The certificates received for UK projects are Renewable Energy Guarantee of Origin ("REGO") and Renewable Gas Guarantee of Origin ("RGGO") for electricity and gas, respectively. Being traded on the open market, the price is variable and subject to typical demand and supply dynamics.

 

As with forecast power prices, valuations reflect contractual fixed price arrangements where they exist, or the following assumptions informed by forecasts provided from a range of independent market consultants where they do not:

 

Year	2024	2025	2026-28	2029+
REGO	£5/MWh	£5/MWh	£5/MWh	£2/MWh
RGGO	£8.5/MWh	£7.5/MWh	£7/MWh	£7/MWh

 

Revenue analysis

The graph in the 2024 Annual Report shows the way in which the revenue mix of the portfolio changes over time for future financial years, given the assumptions made regarding future power prices set out in the 2024 Annual Report. As expected, the proportion of merchant revenues increases in later years as the subsidies that projects currently benefit from expire.

 

On a net present value ("NPV") basis (using the discount rate applicable to each project), the relative significance of each revenue category illustrated above is as follows:

 

Revenue NPV

 

47%	Subsidy
29%	Merchant power
12%	Long-term contracts
2%	Flexible generation
10%	Other merchant revenues

 

Energy generating portfolio

JLEN's energy generating portfolio includes wind, solar, anaerobic digestion, biomass, EfW and hydropower investments. Revenues in these projects typically consist of a combination of government-backed inflation-linked subsidies, short-term price fixes contracted under a PPA, merchant revenue or other revenues such as those earned from private wire contracts.

 

Merchant prices have reduced materially from the elevated levels experienced recently. The Company seeks to minimise the impact of power price volatility by maintaining a programme of rolling price fixes for its energy generating projects, typically having the majority of projects on fixed price arrangements in the near term.

 

At 31 March 2024, 61% of the renewable energy portfolio's electricity and gas price exposure was subject to fixed prices for the summer 2024 season and 58% for the winter 2024/25 season. See the power price hedging section in the Operational Review for more detail about the latest price fixes in place across the portfolio.

 

Taking the proportion of merchant revenues hedged under fixed price short term PPAs, along with subsidy revenues and revenues from long term contracts outside of the energy generating assets, 81% of total revenues are subject to a fixed price for the financial year to 31 March 2025. Showing that merchant revenue remains a low proportion and reflects the broader diversification of JLEN's portfolio.

 

Development‑stage investments are not included within the revenue and other analysis in this section due to the nature of their early stage investment lifecycle.

 

Waste and wastewater treatment concessions

This category consists of availability-based assets structured under the Private Finance Initiative ("PFI")/Public Private Partnership ("PPP") procurement models, whereby revenue is derived from long-term contracts with local authorities.

 

Other non-energy generating portfolio

The desire to mitigate the effects of climate change stimulate not only opportunities connected to the energy transition, but also in wider environmental infrastructure that has improved sustainability credentials over traditional infrastructure approaches in sectors like transport and food production.

 

This is reflected in JLEN's diversified portfolio, which includes both grid-scale batteries and non-energy generating assets such as low-carbon transport (CNG Foresight) and controlled environment projects, CE Glasshouse (sustainable agriculture) and CE Rjukan (sustainable aquaculture).

 

Low-carbon transport

In the case of JLEN's investment into CNG Foresight, a portfolio of CNG refuelling stations for heavy goods vehicles located across the UK, the asset generates revenue through a specified margin on CNG dispensed.

 

Per the terms of the fuel supply contracts, the asset reserves the right to revise pricing to reflect changes in the wholesale price of natural gas and fuel duty, and will annually adjust prices (upwards only) in line with CPI inflation.

 

Batteries

JLEN's portfolio includes one operational and three c.50MW Battery Energy Storage Systems ("BESS") at varying stages of construction at 31 March 2024.

 

Whilst the portfolio only has one operational asset, lower revenue projections have impacted pricing and valuations in the market for assets at all stages of their lifecycle. Moving into April and the new financial year, revenues have started to rise, and independent market analysis suggests this trend to continue through 2024 and 2025 as well as continued strong fundamentals for the long-term outlook of the sector.

 

Revenues for BESS assets can be generated in a variety of ways with third-party consultants continuing to indicate the importance of prioritising the capture of trading margins over the finite opportunity from revenues generated by the provision of grid services. Therefore, merchant revenues are likely to make up the largest part of the revenue model for these assets. As such, these investments do not currently have long-term contractual inflation linkage, although revenues are driven by a margin over costs which is expected to be sustained regardless of inflation.

 

Controlled environment

Controlled environment projects typically face a greater level of market risk than environmental infrastructure projects with subsidy support or with long-term contracts. Therefore, the Company has only invested in projects that enjoy a privileged market position over competitors, for example due to physical location, technology or product differentiation.

 

In the case of JLEN's glasshouse, the investment is primarily built around the debt service on its senior secured shareholder loan, with some equity participation over time from growth of the underlying horticultural products. The glasshouse is co-located with an existing JLEN anaerobic digestion facility, which itself will receive an additional source of revenue via a private wire supplying low-carbon heat and power to the glasshouse. Wastage from the glasshouse produce may also be returned to the AD digester, creating a circular ecosystem.

 

In the case of CE Rjukan, revenues will primarily be generated from the production of approximately 8,000 tonnes of trout annually, once the site is fully ramped up in 2025. This will be sold to European and international salmonid markets via an offtake agreement with an established Norwegian seafood distribution company with global reach.

 

The Rjukan investment case is built on the premise of achieving average historic prices evidenced by the Fish Pool Index; however, our experienced operational partner is targeting sales at levels between c.5% and 50% higher than this; underpinned by the higher quality of fish production at Rjukan versus the typical fish sold in commodity-based markets.

 

Whilst these investments do not currently have long-term contractual inflation linkage, the projects retain pricing power and are able to increase prices to maintain margins as the underlying cost base inflates.

 

The Company's diversification strategy ensures the portfolio benefits from a significant proportion of contracted revenues and revenues earned by non-energy generating assets. Under current forecasts, dividend cover is expected to be healthily covered for the years ahead.

 

Useful economic lives

Useful economic lives ("UELs") of assets are based on the Investment Manager's estimates of the period over which the assets will generate revenue and are periodically reviewed for continued appropriateness. The assumption used for the useful life of investments is the lower of lease duration and 35 years for solar assets, 30 years for wind farms and 20 years for anaerobic digestion facilities - being the life of the RHI subsidy, after which point the Investment Manager conservatively assumes that facilities will cease to operate.

 

In light of growing evidence to suggest AD facilities may be able to successfully operate for longer durations, the Investment Manager has provided a sensitivity in the Annual Report to illustrate the potential impact on extending the maximum UEL for AD by five years to 25 years.

 

Economic assumptions

The valuation reflects an update in inflation assumptions based on a combination of actual historic inflation and recent independent economic forecasts.

 

Valuation assumptions for operational assets are set out below:

 

Economic assumptions used in the portfolio valuation (31 March 2023 figures shown in brackets)

 

	2024	2025-2030	2031+
UK
RPI	3.5%	3.0%	2.25%
	(3.0%)	(3.0%)	(2.25%)
CPI	2.50%	2.25%	2.25%
	(2.25%)	(2.25%)	(2.25%)
Deposit rates	2.0%	2.0%	2.0%
	(1.5%)	(1.5%)	(1.5%)
Corporation tax	25.0%	25.0%	25.0%
	(25.0%)	(25.0%)	(25.0%)
Italy
Inflation	2.0%	2.0%	2.0%
	(2.9%)	(1.8%-2.2%)(1)	(2.0%)
Deposit rates	-%	-%	-%
	(-%)	(-%)	(-%)
Corporation tax (IRES)	24.0%	24.0%	24.0%
	(24.0%)	(24.0%)	(24.0%)
Regional tax (IRAP)	4.8%	4.8%	4.8%
	(4.8%)	(4.8%)	(4.8%)

(1)   2025 to 2027 Italian inflation assumptions at 31 March 2023 ranged between 1.8% to 2.2%, before reverting to a long term assumption of 2.0%.

 

The euro/sterling exchange rate used to value euro-denominated investments was €1.17/£1 at 31 March 2024 (€1.14/£1 at 31 March 2023).

 

The overall uplift in value resulting from changes to economic assumptions in the year is £8.6 million.

 

Discount rates

The discount rates used in the valuation exercise represent the Investment Manager's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. The discount rates are reviewed on a regular basis and updated to reflect changes in the market and in the project risk characteristics.

 

Reflecting the sustained increase in UK gilt yields since the start of the year, discount rates have been increased by an average of 0.75% since 31 March 2023 - of which 0.50% was applied at the 30 June 2023 valuation and a further 0.25% at the 30 September 2023 valuation date. No changes to discount rates were made in December 2023 or March 2024 in relation to the macroeconomic backdrop.

 

In addition to gilt-driven changes, the weighted average discount rate has also increased as a result of continued investment into JLEN's ongoing development and construction projects, with discount rates in excess of the portfolio weighted average.

 

Mitigating these movements is a reduction in the discount rate applied to JLEN's controlled environment glasshouse investment, reflecting successful delivery of key construction milestones as the project nears full operational status. The impact of the change is an uplift in value of £4.8 million (0.7 pence per share). Additionally, an uplift of £1.8 million (0.3 pence per share) has been recognised for further project-specific adjustments to discount rates across three assets, Warren Energy, Bio Collectors and West Gourdie. These relate to operational performance, transactional data and wider sector benchmarking, respectively.

 

As in previous valuations, the discount rate used for energy generating asset cash flows which have received lease extensions beyond the initial investment period of 25 years retains a premium of 1% for subsequent years, reflecting the merchant risk of the expected cash flows beyond the initial 25-year period.

 

Taking the above into account and including an increase in the value of assets in construction, the overall weighted average discount rate ("WADR") of the portfolio is 9.4% at 31 March 2024 (31 March 2023: 8.4%).

 

The WADR applied to each of the principal operational sectors within the portfolio is displayed in the table below, noting this represents a blend of levered and unlevered investments and therefore the relevant gearing of each sector is also shown.

 

 

	Sector WADRs	Gearing
Wind	8.7%	36%
Waste & bioenergy	9.8%	10%
Anaerobic digestion	8.6%	-
Solar	7.6%	10%
Batteries	10.0%	-
Hydropower	8.0%	40%
Weighted average	9.4%	16.9%

 

Sectors in which the Investment Manager retains proprietary information, such as controlled environment and low-carbon transport, are not disclosed in the table above, although discount rates used in these sectors feed into the portfolio WADR of 9.4%.

 

The overall decrease in value resulting from changes to discount rates in the year is £29.0 million.

 

Balance of portfolio return

This represents the balance of valuation movements in the year, excluding the factors noted above. The balance of the portfolio return mostly reflects the impact on the rebased portfolio value, all other measures remaining constant, of the effect of the discount rate unwinding and also some additional valuation adjustments from updates to individual project assumptions. The total represents an uplift of £68.1 million.

 

Of this, the key valuation adjustments include an uplift of £11.5 million (1.7 pence per share) arising from a review of green certificate price forecasts on the renewables portfolio (REGOs and RGGOs), offset by an £18.7 million (2.8 pence per share) reduction in value attributable to the Company's investments in Battery Energy Storage Systems ("BESS"), reflecting the lower revenue outlook for operational projects and a review of the ready-to-build projects (Lunanhead and Clayfords).

 

In addition to this, the Company has recognised a number of other lower-value cost adjustments and other commercial assumptions following the normal course of ongoing reassessment throughout the period.

 

Valuation sensitivities

The Net Asset Value ("NAV") of the Company is the sum of the discounted value of the future cash flows of the underlying asset financial models, construction and development spend, the cash balances of the Company and UK HoldCo, and the other assets and liabilities of the Group less Group debt.

 

The portfolio valuation is the largest component of the NAV and the key sensitivities are considered to be the discount rate applied in the valuation of future cash flows and the principal assumptions used in respect of future revenues and costs.

 

A broad range of assumptions is used in our valuation models. These assumptions are based on long‑term forecasts and are not affected by short‑term fluctuations in inputs, whether economic or technical. The Investment Manager exercises its judgement in assessing both the expected future cash flows from each investment based on the project's life and the financial models produced by each project company and the appropriate discount rate to apply.

 

The sensitivities in the 2024 Annual Report include the impact of the EGL.

 

The key assumptions are as follows:

 

Discount rate

The WADR of the portfolio at 31 March 2024 was 9.4% (31 March 2023: 8.4%). A variance of plus or minus 0.5% is considered to be a reasonable range of alternative assumptions for discount rates.

 

An increase in the discount rate of 0.5% would result in a downward movement in the portfolio valuation of £19.8 million (3.0 pence per share) compared to an uplift in value of £20.7 million (3.1 pence per share) if discount rates were reduced by the same amount.

 

Volumes

Base case forecasts for intermittent renewable energy projects assume a "P50" level of electricity output based on reports by technical consultants. The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50% probability of being exceeded - both in any single year and over the long term - and a 50% probability of being underachieved. Hence the P50 is the expected level of generation over the long term.

 

The P90 (90% probability of exceedance over a 10‑year period) and P10 (10% probability of exceedance over a 10‑year period) sensitivities reflect the future variability of wind, hydropower and solar irradiation and the uncertainty associated with the long‑term data source being representative of the long‑term mean.

 

Separate P10 and P90 sensitivities are determined for each asset and historically the results are presented on the basis that they are applied in full to all wind, hydro and solar assets. This implies individual project uncertainties are completely dependent on one another; however, a portfolio uncertainty benefit analysis performed by a third-party technical adviser identified a positive portfolio effect from investing in a diversified asset base.

 

That is to say that the lack of correlation between wind, hydro and solar variability means P10 and P90 sensitivity results should be considered independent. Therefore, whilst the overall P90 sensitivity decreases NAV by 5.9 pence, the impact from wind, hydro and solar separately is only 4.3 pence per share, 1.4 pence per share and 0.2 pence per share respectively, as shown in the chart in the Annual Report.

 

Agricultural anaerobic digestion facilities do not suffer from similar deviations as their feedstock input volumes (and consequently biogas production) are controlled by the site operator.

 

For the waste & bioenergy projects, forecasts are based on projections of future input volumes and are informed by both forecasts and independent studies where appropriate. Revenues in the PPP projects are generally not very sensitive to changes in volumes due to the nature of their payment mechanisms.

 

Electricity and gas prices

Electricity and gas price assumptions are based on the following: for the first two years, cash flows for each project use forward electricity and gas prices based on market rates unless a contractual fixed price exists, in which case the model reflects the fixed price followed by the forward price for the remainder of the two‑year period. For the remainder of the project life, a long‑term blend of central case forecasts from three established market consultants and other relevant information is used, and adjusted by the Investment Manager for project‑specific arrangements and price cannibalisation.

 

The sensitivity assumes a 10% increase or decrease in power prices relative to the base case for each year of the asset life after the first two‑year period. While power markets can experience movements in excess of +/-10% on a short‑term basis, as has been the case recently, the sensitivity is intended to provide insight into the effect on the NAV of persistently higher or lower power prices over the whole life of the portfolio. The Directors feel that +/-10% remains a realistic range of outcomes over this very long time horizon, notwithstanding that significant movements will occur from time to time.

 

An increase in electricity and gas prices of 10% would result in an uplift in the portfolio valuation of £37.0 million (5.6 pence per share) compared to a downward movement in value of £37.4 million (5.7 pence per share) if prices were reduced by the same amount.

 

Should electricity prices fall to £50/MWh, and gas prices also fall by a corresponding amount, the Company would maintain a resilient dividend cover for the next three financial years. Alternatively, should prices fall to £40/MWh, the Company would still expect to cover the dividend, albeit with reduced headroom by year three.

 

Useful economic lives

In line with JLEN's original investment case for anaerobic digestion, the Company continues to apply the conservative valuation assumption that facilities will simply cease to operate beyond the life of their RHI tariff. In recent months, the Investment Manager has seen a growing case of evidence, including several transactional datapoints, pointing towards a positive change in market sentiment for valuing these assets - including the potential to run anaerobic digestion facilities on an unsubsidised basis.

 

In light of this change, the Investment Manager has once again provided a sensitivity extending the useful economic lives of its AD portfolio by up to five years - capped at the duration of land rights already in place. Such an extension would result in an uplift in the portfolio valuation of £21.9 million (3.3 pence per share).

 

Uncontracted revenues on non-energy generating portfolio

Non-energy generating assets, such as batteries and controlled environment agriculture and aquaculture, make up a growing proportion of the portfolio. These assets are not materially affected by either scarcity of natural resource nor power price markets. Therefore, the Investment Manager has presented a sensitivity illustrating an assumed 10% increase or decrease on all uncontracted revenues for each year of the asset lives.

 

An increase in uncontracted revenues of 10% would result in an upward movement in the portfolio valuation of £17.9 million (2.7 pence per share) compared to a decrease in value of £20.2 million (3.0 pence per share) if those revenues were reduced by the same amount.

 

Feedstock prices

Feedstock accounts for over half of the operating costs of running an AD plant. As feedstocks used for AD are predominantly crops grown within existing farming rotation, they are exposed to the same growing risks as any agricultural product. The sensitivity assumes a 10% increase or decrease in feedstock prices relative to the base case for each year of the asset life.

 

An increase in the feedstock prices of 10% would result in a downward movement in the portfolio valuation of £8.9 million (1.3 pence per share) compared to an uplift in value of £8.7 million (1.3 pence per share) if prices were reduced by the same amount.

 

No such sensitivity is applicable to JLEN's biomass investment, where fuel costs are tied under long-term contracts.

 

Inflation

Most projects in the portfolio receive a revenue stream which is either fully or partially inflation‑linked. The inflation assumptions are described in the macroeconomic section In the Annual Report. The sensitivity assumes a 0.5% increase or decrease in inflation relative to the base case for each year of the asset life.

 

An increase in the inflation rates of 0.5% would result in an uplift in the portfolio valuation of £19.3 million (2.9 pence per share) compared to a decrease in value of £18.9 million (2.9 pence per share) if rates were reduced by the same amount.

 

Euro/sterling exchange rates

As the proportion of the portfolio assets with cash flows denominated in euros represents a small proportion of the portfolio value at 31 March 2024, the Directors consider the sensitivity to changes in euro/sterling exchange rates to be insignificant.

 

Corporation tax

The UK corporation tax assumptions applied in the portfolio valuation are outlined in the notes to the accounts.The sensitivity below assumes a 2% increase or decrease in the rate of UK corporation tax relative to the base case for each year of the asset life.

 

An increase in the UK corporation tax rate of 2% would result in a downward movement in the portfolio valuation of £13.9 million (2.1 pence per share) compared to an uplift in value of £13.6 million (2.1 pence per share) if rates were reduced by the same amount.

 

Sensitivities - impact on NAV at 31 March 2024

The chart contained in the 2024 Annual Report shows the impact of the key sensitivities on NAV per share, with the £ labels indicating the impact of the sensitivities on portfolio value.

 

Investment portfolio

At 31 March 2024, the Group's investment portfolio comprised interests in 42 projects and investments into several European opportunities through its investment in FEIP.

 

Type	Asset	Location	Ownership	Capacity (MW)	Commercial operations date
Wind	Bilsthorpe	England	100%	10.2	Mar 2013
	Burton Wold Extension	England	100%	14.4	Sep 2014
	Carscreugh	Scotland	100%	15.3	Jun 2014
	Castle Pill	Wales	100%	3.2	Oct 2009
	Dungavel	Scotland	100%	26.0	Oct 2015
	Ferndale	Wales	100%	6.4	Sep 2011
	Hall Farm	England	100%	24.6	Apr 2013
	Llynfi Afan	Wales	100%	24.0	Mar 2017
	Moel Moelogan	Wales	100%	14.3	Jan 2003 & Sep 2008
	New Albion	England	100%	14.4	Jan 2016
	Wear Point	Wales	100%	8.2	Jun 2014
			Total	161.0
Waste & bioenergy	Bio Collectors waste management	England	70%	11.7(1)	Dec 2013
	Codford Biogas waste management	England	100%	3.8(2)	2014
	ELWA waste management	England	80%	n/a	2006
	Cramlington biomass combined heat and power	England	100%	32.0(3)	2018
	Energie Tecnologie Ambiente ("ETA") energy‑from-waste	Italy	45%(4)	16.8	2012
	Tay wastewater treatment	Scotland	33%	n/a	Nov 2001
			Total	64.3
Anaerobic digestion	Biogas Meden	England	100%	5.0(5)	Mar 2016
	Egmere Energy	England	100%	5.0(6)	Nov 2014
	Grange Farm	England	100%	5.0(6)	Sep 2014
	Icknield Farm	England	53%	5.0(5)	Dec 2014
	Merlin Renewables	England	100%	5.0(6)	Dec 2013
	Peacehill Farm	Scotland	49%	5.0(7)	Dec 2015
	Rainworth Energy	England	100%	2.2(2)	Sep 2016
	Vulcan Renewables	England	100%	13.0(6)	Oct 2013
	Warren Energy	England	100%	5.0(6)	Dec 2015
			Total	50.2
Solar	Amber	England	100%	9.8	Jul 2012
	Branden	England	100%	14.7	Jul 2013
	CSGH	England	100%	33.5	Mar 2014 & Mar 2015
	Monksham	England	100%	10.7	Mar 2014
	Panther	England	100%	6.5	2011-2014
	Pylle Southern	England	100%	5.0	Dec 2015
			Total	80.2
Low carbon & sustainable solutions	West Gourdie battery storage	Scotland	100%	n/a	May 2023
	Clayfords battery storage	Scotland	50%	n/a	Ready to build
	Lunanhead battery storage	Scotland	50%	n/a	Ready to build
	Sandridge battery storage	England	50%	n/a	Under construction
	CNG Foresight low-carbon transport	England	25%(8)	n/a	Various
	HH2E green hydrogen	Germany	n/a	n/a	Development phase
			Total	n/a
Controlled environment	Glasshouse	England	Minority stake	n/a	Partially operating
	Rjukan aquaculture system	Norway	Minority stake	n/a	Under construction
			Total	n/a
Hydro	Northern Hydropower	England	100%	2.0(9)	Oct 2011 & Oct 2017
	Yorkshire Hydropower	England	100%	1.8(9)	Oct 2015 & Nov       2016
			Total	3.8
FEIP(10) JLEN has committed €25 million to FEIP	Avalon solar and green hydrogen	Spain	n/a	n/a	Development
	Carna pumped storage hydro and co-located wind	Scotland	n/a	n/a	Under construction
	Inca pumped storage hydro	Ireland	n/a	n/a	Development
	Kölvallen wind	Sweden	n/a	n/a	Under construction
	MaresConnect interconnector	Republic of Ireland	n/a	n/a	Development and under construction
	Puskakorpi wind	Finland	n/a	n/a	Dec 2022
	Quartz battery storage	England	n/a	n/a	Development
	Skaftåsen Vindkraft AB wind	Sweden	n/a	n/a	June 2023
	Torozos wind	Spain	n/a	n/a	Dec 2019
	85 Degrees geothermal heat	Netherlands	n/a	n/a	Operational /under construction
	Beleolico	Italy	n/a	n/a	July 2022
	Blue Jay	Scotland	n/a	n/a	Development and under construction
			Total	n/a
Total portfolio			Total	359.5

(1)   10MWth and an additional 1.7MWe capacity through two CHP engines.

(2)   Electrical exporting plant measured as MWe.

(3)   26MWe (electrical) and 6MWth (thermal).

(4)   Not including FEIP's 45% ownership.

(5)   MWth (thermal) and an additional 0.4MWe CHP engine for on-site power provision.

(6)   MWth (thermal) and an additional 0.5MWe CHP engine for on-site power provision.

(7)   MWth (thermal) and an additional 0.25MWe CHP engine for on-site power provision.

(8)   JLEN holds 25% of the "A" shares. "A" shares have a different economic entitlement than "B" shares, including a priority return.

(9)   Includes a 1.2MW battery storage.

(10) Foresight Energy Infrastructure Partners ("FEIP").

 

 

Operational review

 

Investment performance

The NAV per share at 31 March 2024 was 113.6 pence, down from 123.1 pence last year.

 

JLEN has announced an interim dividend of 1.89 pence per share for the quarter ended 31 March 2024, meeting its full‑year target of 7.57 pence per share.

 

Despite ending the year below budget, the Fund has delivered consecutive years of record distributions received from investments, resulting in a dividend cover of 1.30x.

 

Financial performance

The financial performance chart to the right shows the budgeted proportion of cash distributions forecast to be received from underlying investments at the start of the financial year, versus the relative over or under-performance during the year under review.

 

The main differences from budget relate to the waste & bioenergy portfolio (9.4%) - although a large part of this is due to timing of payments and will be recovered next year, and the wind portfolio (3.6%), which experienced lower-than-expected wind speeds.

 

Operational performance

The operational performance chart to the right shows the forecast generation target expected to be achieved at the start of the financial year, versus the relative sector-level over or under-performance against this target during the year.

 

Overall operating performance of the environmental infrastructure portfolio was satisfactory. The renewables segment of the portfolio produced 1,358GWh (2023: 1,325GWh) of green energy, an uplift of 3% over the previous year but 4.1% below budget. The main factors causing the negative deviation were low wind speeds during Q1 and Q3. along with a prolonged outage at Cramlington for planned maintenance works, although the agri- and food waste AD portfolio, the largest part of the portfolio by generation, performed 1.2% above budget.

 

The concession-based projects, hydros, controlled environment and low carbon and sustainable solutions portfolios performed in line with their respective targets.

 

The average all-in price received by the differing technology classes in the UK for their energy volumes generated in the year ended 31 March 2024 is shown in the table below:

 

Average all‑in energy price	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Wind	£148 per MWhe	£383 per MWhe
AD electric	£317 per MWhe	£198 per MWhe
AD gas-to-grid	£148 per MWhth	£129 per MWhth
Biomass	£205 per MWhe	£307 per MWhe
Energy-from-waste	€109 per MWhe	€129 per MWhe
Solar	£217 per MWhe	£242 per MWhe
Hydro	£308 per MWhe	£286 per MWhe

 

Power price hedging

JLEN's exposure to wholesale power prices is mitigated by the practice of having a substantial proportion of generation for both electricity and gas on fixed price arrangements for durations ranging from six months out to two years. The extent of generation subject to fixes at 31 March 2024 is as follows:

 

	Summer 2024	Winter 2024	Summer 2025	Winter 2025
Wind	81%	74%	38%	6%
Solar	100%	80%	-	-
Biomass	-	-	-	-
Energy-from-waste	70%	41%	-	-
AD - electric	100%	100%	32%	32%
AD - gas	71%	74%	53%	50%
Weighted average	61%	58%	32%	20%

The Investment Manager continues to monitor the market beyond March 2025 for opportunities to fix prices to mitigate risk across the portfolio.

 

Renewable energy-generating assets

 

Anaerobic digestion

The AD portfolio is the largest producer of energy on a GWh basis and generated 37% ofthe energy produced by the JLEN portfolio. Gas generation (measured in GWh thermal generated) was 496GWh, 3.6% ahead of its sector target (2023 variance was 1.5% favourable).

 

Eight of the nine plants outperformed or reached their generation targets, notably strong performances came from Icknield and Peacehill, which both performed >15% above their generation targets. Biogas Meden struggled in the latter half of the year (5% below generation target) as a result of issues with its chiller units, the operator has invested in a duty-standby system to ensure the problem does not continue.

 

The poor maize harvest in 2022 resulted in widespread feedstock shortages and increased competition for tonnages across the UK agri-AD sector, this in combination with the residual impacts of the Ukraine war meant feedstock costs were inflated in the financial year ended 31 March 2024.

 

Conversely, the maize harvest in 2023 produced good yields, leaving the portfolio in a more stable position.

 

The high rainfall experienced during the winter months prevented digestate application for prolonged periods, resulting in increased storage costs. Though investment in greater digestate storage capacity has been carried out, the extreme weather conditions still had a negative impact on the portfolio. Further investment in projects like clamp extensions and digestate storage tanks will take place to promote greater climate change resilience.

 

Wholesale gas and power prices stabilised during the first six months of the financial year, while a further drop was observed in the latter half due to the mild winter and resulting high gas storage volumes across Europe. The Investment Manager has taken the opportunity to hedge 70%+ of the gas grid capacity for summer and winter 2024, while 50%+ is hedged for summer and winter 2025.

 

Renewable energy-generating assets

 

Wind

The wind portfolio generated 390GWh (31 March 2023: 383GWh), representing 29% of the total energy generated by the portfolio. This was 8% below the sector target. The negative variance in production was primarily the result of low wind resource.

 

Although a majority of the assets performed as expected, there were five downtime events across the wind portfolio which resulted in the overall availability being 0.4% below anticipated levels (1.5% below target for year ended 31 March 2023).

 

Three of the events will be compensated for via the O&M performance mechanism at the conclusion of their respective contractual years. The remaining two have been raised with the asset's insurers and discussions with loss adjusters are ongoing.

 

The average power price realised for the wind assets was 49% above the average variable price through FY24 due to the high level of fixes in place across the portfolio. 70%+ of the wind generational capacity is now hedged until March 2025.

 

Value enhancements were ongoing over the year and the Investment Manager undertook a market tender process to renew its O&M contract at one of the sites under management. The renegotiated contract has resulted in a significant cost saving which will be realised over the remaining life of the asset. This tender process also served to validate the Investment Manager's pricing assumptions for O&M services beyond existing contracts.

 

Another value enhancement realised this financial year is attributed to a business rates appeal for 10 of the wind assets, the resulting revision has generated material cost savings and increased the asset value.

 

Waste & bioenergy

The renewable energy-generating segment of the waste & bioenergy portfolio is the second largest producer of energy on a GWh basis and generated 29% of the energy produced by the portfolio. The waste & bioenergy portfolio generated 394GWh

(31 March 2023: 334GWh), representing a 9% uplift over the prior year, though this was 8% below the sector target. 

 

For three quarters of the financial year, Cramlington exceeded its generational target, unfortunately following the discovery of corrosion within the flue gas treatment system, the operator was forced to conduct a six-week outage from mid-February to late March 2024. The asset finished the year 10.9% below the target, the downtime is expected to be compensated for via the O&M agreement's performance mechanism.

 

Though the performance at Bio Collectors showed a marked improvement for the first half of the financial year, digestate storage issues in December 2023, along with a critical failure of the biogas upgrading unit in February 2024, resulted in the asset finishing the year 15% below the generation target. The Investment Manager is working alongside the site operations team to improve digestate offtake provisions and review site maintenance contracts.

 

The private wire and heat network linking Codford Biogas with an adjacent glasshouse has now been installed and is providing renewable power and heat to the sustainable farming operation at a rate that benefits both businesses.

 

Renewable energy-generating assets

 

Solar

The solar portfolio generated 73GWh (31 March 2023: 76GWh), which was 3% below the sector target; this represents 5.4% of the total energy generated by the portfolio. Irradiation levels across the financial year were 0.6% below expectation. The generation from most of the sites was at or above the target during the year, the Amber and Branden sites experienced some lost generation due to distribution network operators ("DNO") works and technical issues at the inverters. Unfortunately, the lost revenue is not recoverable under the O&M contract; the sites have however invested in a number of spare parts and additional training for the O&M contractor to ensure the technical issues experienced are addressed more effectively going forward.

 

Value enhancements were ongoing throughout the year, one of which involved a tender for the solar portfolio asset management services. Following the review and analysis of a number of proposals, a new contractor was appointed on four of the solar sites in April 2024, with a further four solar sites transitioning to the new contractor in July 2024.

 

The agreement with the new contractor includes an improvement plan for each of the sites and the change is expected to enhance the overall profitability and performance of the portfolio.

 

In late 2023 repowering works were carried out at Monksham, see the case study in the Annual Report for more information on this value enhancement.

 

PPA prices at most of the solar sites are now fixed until March 2025.

 

Hydro

The hydro portfolio generated 5GWh, which was 10% below target (31 March 2023: 4GWh). This is a very small part of JLEN's portfolio and represents less than 1% of the total energy generation for the year. Though rainfall levels were in line with expectation, mechanical issues at two of the sites brought overall generation below the target for the year. An insurance claim for one of the mechanical downtime events is ongoing and is expected to ensure the plant is compensated for the loss of revenue.

 

Assets which support the transition to a lower-carbon economy

 

Waste & bioenergy concessions

The ELWA waste project continues to deliver operational and financial performance which is in line with expectations. Operational performance targets were again exceeded with diversion from landfill at 99.98%, substantially ahead of the 67% contract target, and recycling at 30.75%, also ahead of the 22% contract target. Waste tonnages delivered remained stable throughout the year and were in line with expectations.

 

Preparations for the handback of this project to the authority in 2027 have been initiated, in addition the Investment Manager continues to monitor the operator in light of a proposed change in ownership between Renewi and Biffa that was announced post the year end.

The Tay wastewater project had another stable year operationally, with cash flows substantially in line with expectation and as a result, distributions from the project were in line with expected budgets.

 

Low carbon & sustainable solutions

Low-carbon transport

The CNG refuelling stations achieved a 39% increase in fuel dispensed year-on-year as customers brought new vehicles into service and new stations became established. Truck deliveries have significantly improved over FY24, and reported sales going into FY25 are strong.

 

During this financial year, three construction assets were commissioned at Newton Aycliffe, Corby and Bangor, additionally, one existing operational asset, Newark, was acquired. There are currently two assets under construction located at Doncaster and Aylesford.

 

JLEN invested £8.4 million into CNG during the year. As at 31 March 2024, the portfolio held 14 natural gas refuelling stations, including the sites in construction phase. JLEN invested a total of £25.3 million as at the balance sheet date.

 

Battery storage assets

Operational assets

West Gourdie is JLEN's recently constructed 50MW battery asset located in Dundee, Scotland. In May 2023, the Take Over certificate was issued to the EPC contractor and the site went into the operational phase. The asset has been participating in various services such as: Dynamic Containment (DC), Moderation (DM), Regulation (DR), day‑ahead (DA), intraday, and capacity market. The open balancing platform launched by the National Grid in December 2023 allowed the site to start earning revenues in the balancing mechanism market.

 

The availability across the year was 93%, which was 5% below the O&M contractual target, the downtime events contributing to this are expected to be compensated for via the performance mechanism in the O&M contract.

 

The route-to-market provider for the batteries co-located at the Company's hydro assets continues to pursue hardware changes, allowing participation in new grid services.

 

Construction and development-stage projects

 

Battery storage assets

JLEN owns three construction-stage 50MW battery storage assets in the UK. The Sandridge project has progressed well with on-site works largely complete in anticipation of the distribution network operators ("DNO") energisation in FY25. Take over is expected soon after. The Investment Manager has not started construction at Lunanhead and Clayfords due to volatility in the level of expected revenues for battery assets and lower forecast returns. The Investment Manager is considering options for these assets.

 

Controlled environment

Glasshouse project

Construction of the Glasshouse was achieved in September 2023, with the first plants being delivered soon after. The operation will continue to ramp-up in FY25 as offtake contracts are negotiated and finalised.

 

Rjukan project

The CE Rjukan project reached a significant milestone at the beginning of 2024 with the successful introduction of its first fish into the facility and continues to achieve its section handover milestones. Progressing according to schedule, the project is expected to be fully completed in FY26.

 

Green hydrogen

HH2E development platform

JLEN's first investment into the green hydrogen sector is expected to reach the Final Investment Decision in the coming months.

 

Other investments

FEIP

JLEN has committed to investing €25 million to Foresight Energy Infrastructure Partners SCSp ("FEIP"), a Luxembourg limited partnership investment vehicle. At 31 March 2024, the Fund has invested in nine projects and is no longer seeking to make new investments. The investment in FEIP allows JLEN to further diversify its geographic and technology exposure, while also gaining an allocation to construction-stage assets which is expected to enhance returns.

 

Given construction-stage assets can only represent a small part of the Company's portfolio, the FEIP investment allows a greater level of diversification than would be possible with direct investments, providing for a more attractive risk-adjusted return profile. JLEN is excused from any FEIP investment that is not consistent with JLEN's investment policy. No management fees are payable on the amounts invested by JLEN. FEIP also owns a 45% stake in ETA, the Italian EfW plant, in which JLEN is also an investor. As at 31 March 2024, €16.9 million has been invested in the vehicle.

 

Acquisitions

Lubmin green hydrogen investment

In July 2023, the Company announced its second green hydrogen development opportunity alongside a consortium including other Foresight-managed funds and its development partner HH2E, a specialist in developing green hydrogen projects to decarbonise the industry. The production site is located in Lubmin, Germany. The consortium of investors has approved the Preliminary Investment Decision and the initial investment of up to €9.2 million is being utilised for detailed engineering designs and the procurement of long lead items. The Final Investment Decision is expected in the coming months.

 

Bio Collectors Holdings Limited

In December 2023, the Company acquired the remaining 30% shareholding in Bio Collectors Holdings Limited ("BCH"). BCH, through its subsidiary companies, holds the rights and operational assets that make up an anaerobic digestion ("AD") plant and the Bio Collectors waste collections business. JLEN acquired a 70% interest in BCH in December 2019, at which time, a mechanism was agreed for the acquisition of the remaining 30% following the expiry of an initial holding period.

 

The acquisition increases JLEN's exposure to an investment that is expected to deliver attractive returns for shareholders and of which it has direct operational knowledge and expertise. It also allows JLEN to consolidate its control of BCH, creating the potential for JLEN to deliver operational synergies across its portfolio of food waste AD plants.

 

Financing

On 13 June 2024, JLEN completed the refinancing of its fund-level debt facility - securing a committed multi-currency RCF of £200 million, with an uncommitted accordion facility of up to £30 million and an uncommitted option to extend for a further year.

The RCF provides an increased source of flexible funding outside equity raisings, with both sterling and euro drawdowns available on attractive terms. The facility will principally be used to make future acquisitions of environmental infrastructure to add to the current portfolio, as well as covering any working capital requirements.

 

The interest charged in respect of the renewed RCF continues to be linked to the Company's ESG performance, with JLEN incurring a 5 bps premium or discount to its margin based on performance against defined targets. Those targets include:

 

·     environmental: increase coverage of independent biodiversity assessments and implement initiatives to enhance biodiversity net gain across the portfolio;

·     social: increased volume of contributions to local communities; and

·     governance: maintaining a low number of work-related accidents, as defined under the Reporting of Injuries, Diseases and Dangerous Occurrences ("RIDDORS") by the Health and Safety Executive.

 

Performance against these targets will be measured annually, with the cost of the RCF being amended in the following financial year. Lenders to the facility include HSBC, ING, Clydesdale Bank, National Australia Bank and Royal Bank of Scotland International. The margin can vary between 205 bps and 215 bps over SONIA (Sterling Overnight Index Average) for sterling drawings and Euribor (Euro Interbank Offered Rate) for euro drawings, depending on performance against the ESG targets.

 

In addition to the RCF, several of the projects have underlying project-level debt. There is an additional gearing limit in respect of such debt of 85% of the aggregate gross project value (being the fair market value of such portfolio companies increased by the amount of any financing held within the projects) for PFI/PPP projects and 65% for renewable energy generation projects.

 

As at 31 March 2024, drawings under the RCF were £159.3 million. Under its investment policy, JLEN may borrow up to 30% of its NAV.

 

The project-level gearing at 31 March 2024 across the portfolio was 16.9% (31 March 2023: 18.3%). Taking into account the amount drawn down under the RCF of £159.3 million, the overall fund gearing at 31 March 2024 was 31.2% (31 March 2023: 27.3%).

 

As at 31 March 2024, the Group, which comprises the Company and the intermediate holding companies, had cash balances of £18.1 million (31 March 2023: £18.0 million).

 

 

Risks and risk management

 

JLEN has a comprehensive risk management framework overseen by the Risk Committee, comprising independent non‑executive Directors.

 

Risk is the potential for events to occur that may result in damage, liability or loss. Such occurrences could adversely impact the Company's business model, reputation or financial standing. Alternatively, under a well‑formed risk management framework, potential risks can be identified in advance and can either be mitigated or possibly even converted into opportunities.

 

The risk and risk management section details the principal risks that the Directors consider are material which potentially could impact the Company or occur in an environmental infrastructure project such as those invested in by the Company.

 

In assessing these risks for the purposes of this report, the Directors typically considers the next 12-18 months as being the critical window for risks to materialise. Environmental infrastructure assets are long-term assets and risks can crystallise throughout an asset's life; nevertheless, this report is intended to give the reader an understanding of the current risk outlook for the Company and the risks that the Board and the Investment Manager feel have the most significance at the present time. This outlook is updated regularly in the publications that the Company puts into the market and so readers can get a sense of how the Board and the Investment Manager's view of risks changes over time.

 

Given that the Company delegates certain activities to the Investment Manager and Administrator, reliance is also placed on the controls of the Group's service providers.

 

In the normal course of business, each project will have developed a rigorous risk management framework, including a comprehensive risk register, that is reviewed and updated regularly and approved by its board. The purpose of JLEN's risk management policies and procedures is not to eliminate risk completely, as this is neither possible nor commercially viable. Rather, it is to reduce the consequence of occurrence and to ensure that JLEN is adequately prepared to deal with risks so as to minimise their effect should they materialise.

 

Risk identification and monitoring

JLEN has a separate Risk Committee, comprising six non‑executive Directors, which is responsible for overseeing and advising the Board on the current and potential risk exposures of the Company, with particular focus on the Group's principal risks, being those with the greatest potential to influence shareholders' economic decisions, and the controls in place to mitigate those risks.

 

The identification, assessment and management of risk are integral aspects of the Investment Manager's and Administrator's work in both managing the existing portfolio on a day‑to‑day basis and pursuing new investment opportunities (though the Board has ultimate responsibility for the risk management activities of the Group).

 

The Investment Manager and Administrator have established internal controls to manage these risks and they review and consider the Group's key risks with the Risk Committee on a quarterly basis, including new risks arising and/or changes in the likelihood of, or impact from, any particular risk occurring. In the case of new and emerging risks, assessment occurs outside of the quarterly cycle. These systems of internal control were in place for the year under review and continue to be in operation.

 

The Board reviews the performance of the Investment Manager and Administrator, as well as other key service providers, annually.

 

JLEN has a comprehensive risk management framework and risk register that assesses: a) the probability of each identified risk materialising; and b) the impact it may have on JLEN.

 

Mitigations and, where applicable, controls have been developed with respect to each risk so as first to reduce the likelihood of such risk occurring and secondly to minimise the severity of its impact in the case that it does occur.

 

The risk register is a "live" document that is reviewed and updated regularly by the Risk Committee as new risks emerge and existing risks change. The principal risks faced by the Group are formally reviewed by the Risk Committee at each quarterly meeting and the Committee reports to the Board in respect of changes to the general risk environment and material developments in already identified risks. Each of the underlying projects is overseen by an experienced portfolio manager who reports to their individual project board. The portfolio managers maintain strong relationships between counterparties, contractors, third-party asset managers and other stakeholders. This ensures effective management of potential risks.

 

Emerging risks and risks relevant to the year under review

Power prices

Exposure to market power prices continues to be assessed as the most impactful risk faced by the Company. While the Company is less exposed to this risk than some peers in the renewable infrastructure sector due to its diversified portfolio which has a relatively high proportion of fixed revenues and many assets whose revenues are not exposed to wholesale energy prices at all, the year under review demonstrates that this risk can still impact the portfolio valuation.

 

Changes to power price assumptions used in valuing the portfolio has reduced the portfolio valuation by £36.0 million/5.4 pence during the year. Even though the last months of the previous year had already seen electricity prices fall precipitously from the highs seen during the energy crisis in 2022, electricity prices have continued to fall further and faster than anticipated. In the year under review, power prices have reduced by a further £40/MWh - equivalent to approximately 40%.

 

The Investment Manager monitors prices regularly and seeks to enter into fixed price arrangements in order to limit short-term exposure, although there is no certainty that the Company will maintain a similar level of price fixes as currently in place as this depends on pricing available in the market.

 

Risks associated with development or construction-stage assets

In recent years, the Company has increased its exposure to assets in the development or construction stages, on the basis that such assets can offer higher returns than similar ones acquired at the operational stage. There is also potential for capital growth as these assets achieve milestones that denote the reduction of development and construction-related risks and are re‑rated, typically through the reduction of the discount rate used for valuation.

 

At the year end, the Company had 9% of the portfolio across 42 assets, either in construction or development stages; an decrease of 1% from 2023. This decrease is due to the JLEN's glasshouse investment commencing partial operations during the year, offset by further deployment into other ongoing construction and development‑stage assets during the year in the normal course. In light of the continued allocation to construction or development assets, the Directors have raised risks associated with such projects, including cost overruns or failure to achieve key milestones, as principal risks faced by the Company.

 

Risks associated with interest rates and changes to tax legislation and rates

In the 2023 Annual Report, risks associated with interest rates and changes to tax legislation and rates were included as being among the Company's principal risks. These are not assessed as being principal risks at the current time.

 

While infrastructure assets such as those in the Company's portfolio are long-term assets, and they are very likely to experience further periods of higher perceived risk due to interest rates and tax, the Directors consider that these risks have receded when looking over the 12-18-month horizon for this report. Interest rates are expected to decrease modestly over the period, which should be positive for the valuation of the Company's portfolio. Following the introduction of the Energy Generator Levy, the Directors are not aware of any further changes to taxes that are proposed, either by the current government or by an incoming Labour government, that would negatively impact the portfolio materially.

 

Discontinuation vote

In common with several peers, the Company faces a discontinuation vote at the upcoming AGM in September 2024 as a result of the share price trading at a discount to NAV of greater than 10% on average for the year under review. While the Directors are confident in their view that the Company offers investors an attractive dividend and access to otherwise hard-to-access opportunities in environmental infrastructure and that shareholders should reject the discontinuation motion as not being in their best interests, the vote creates a risk that the Company will be required to change strategy and seek to sell assets at a sub-optimal time, such as construction and development‑stage assets.

 

JLEN's risk register covers six main areas of risk:

Strategic, economic and political

Operational, business, processes and resourcing

Financial and taxation

Compliance and legal

Asset specific

ESG

 

See more on climate-related risks in our Sustainability and ESG report.

 

This year we are only detailing the most pertinent principal risks affecting the Company. We have identified 11 risks within two of the above-mentioned categories. These risks are summarised below, followed by a detailed discussion of the mitigating factors.

 

Strategic, economic and political

 

1 Funding commitments

 

Change in year: increased

 

Potential impact:

·     Unable to meet commitments as they fall due, leading to the loss of value in unfunded portfolio assets and loss of investor confidence.

 

Mitigation and controls:

·     The Investment Manager carries out detailed forecasting of Fund cash position and RCF headroom.

·     The Investment Manager is progressed in several asset sales processes, the final approval relating to asset sales sits with the JLEN Board.

·     Where necessary, the Investment Manager will renegotiate contractual commitments and timeframes to reschedule the injection of cash.

·     New investment will be highly selective until the Company is able to raise new capital or recycle capital from existing assets.

 

Link to Fund objectives:
Investment, growth and diversification

 

Residual risk:

Medium

 

2 Adverse movement in inflation

 

Change in year: decreased

 

Potential impact:

·     The underlying assets in the portfolio, and therefore the returns expected from them, have some exposure to inflation. This ranges from direct exposure, such as subsidies and service contracts that increase in line with RPI annually, to other revenue and cost items where the link to inflation is not contractual and its effect must be estimated.

·     In the current inflation environment, there is greater uncertainty than previously about the path that inflation will follow. If inflation is materially lower than the assumptions used in valuations, then there is a risk that the portfolio value will fall. JLEN has adopted an assumption of 3.5% RPI inflation for the current year, dropping to 3% until 2030.

·     Nominal discount rates are used in the discounted cash flow ("DCF") valuation methodology used to value portfolio assets. There is a risk that discount rates increase in a high inflation environment, impacting valuations.

 

Mitigation and controls:

·     Monitoring of market forecasts for inflation and input from the Company's independent valuations specialist regarding inflation assumptions seen in the market. Returns from the assets in the portfolio are highly correlated with inflation due to revenues from PFI assets, green benefits for renewable energy assets and most operational costs being directly linked to an inflation index. This results in a "natural hedge", removing the need for the use of derivatives to mitigate inflation risk.

·     The adoption of a "progressive" dividend policy rather than an explicitly "inflation-linked" one gives the Company additional flexibility to set dividend targets at a sustainable level. Higher inflation rates may mitigate the impact of higher interest rates.

·     The Foresight Valuation Committee will approve assumptions used in the valuation and the JLEN Board has ultimate authority over the portfolio valuation.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

 

Residual risk:

Medium

 

3 Changes in regulation and government support

 

Change in year: increased

 

Potential impact:

·     Risk that regulatory, legal or contractual change in general structure of electricity network charging regime or basis of use leads to increased costs for JLEN's renewable energy projects or lower revenues than forecast, negatively impacting cash flow and portfolio valuation.

·     JLEN is required to comply with certain regulations, being a Guernsey company listed on the London Stock Exchange ("LSE"), including those under the Alternative Investment Fund Managers Directive ("AIFMD") and the Foreign Account Tax Compliance Act ("FATCA"). There is a risk that failure to comply with any of the relevant rules could result in a negative reputational or financial impact on the Company.

·     The newly emerging area of climate-related disclosures is changing rapidly as understanding of what constitutes best practice evolves. There is a risk that JLEN fails to disclose properly against the new requirements or that investors consider disclosures to be insufficient.

 

Mitigation and controls:

·     Cultivate links with trade bodies and relevant government departments in order to keep abreast of proposed regulatory changes and lobby for the Fund's interests.

·     Maintaining a diversified portfolio so no one set of regulatory risks related to a single technology predominates.

·     The Investment Manager engages with specialist consultants to assist with developing forecasts reflecting changing network regulations.

·     Through a comprehensive compliance monitoring programme, JLEN ensures that it remains well informed as to the legislation, regulation and guidance relevant to both the Company itself as well as the project entities in which it invests. The Board monitors compliance information provided by the Administrator, Company Secretary, Investment Manager and legal counsel and monitors ongoing compliance developments relevant to a Guernsey company listed on the LSE.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

Residual risk:

Medium

 

4 Reputational

 

Change in year: Unchanged

 

Potential impact:

·     Risk that something occurs that is perceived by investors or other market participants to damage JLEN's reputation, such that they do not wish to do business with JLEN.

·     JLEN's activities span a range of environmental infrastructure sectors with multiple touchpoints with local stakeholders, regulators, contractual counterparties, local communities and other parties who are active in the areas in which JLEN operates. As JLEN grows and its operations become more complex, the risk that JLEN is considered to have acted improperly increases, leading to reputational damage and investors avoiding the Company's shares.

·     JLEN aims to conduct its business in accordance with ESG principles and is public in this aim. The ESG landscape is changing rapidly and there is increased scrutiny of businesses' claims in this area. JLEN could suffer reputational damage if it is considered to be "greenwashing", leading to investors avoiding the Company's shares.

·     Risk that JLEN falls short of ESG standards, whether those that it sets itself, those set by regulation or those that are expected by wider society or influential groups within society. The consequences could include loss of reputation, direct action by interested groups or investors determining that JLEN does not fit their own ESG criteria

 

Mitigation and controls:

·     Primary mitigation is that risks to reputation are controlled and monitored through the Risk Committee. JLEN engages its own PR advisers, who would be able to assist in the event of risk to reputation. It will also need to consider the possibility of reputational events occurring that effect the Foresight brand.

·     The JLEN Investment Committee also has responsibility for approving investments where risk to reputation is a possibility.

·     On sustainability matters, the Company is advised by the Investment Manager and where appropriate it is advised by external consultants with specific expertise.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

Residual risk:

Medium

 

Operational, business, processes and resourcing

 

5 Asset exposure to weather resource

 

Change in year: Increased

 

Potential impact:

·     By the very nature of wind, solar and water-related environmental infrastructure projects, their financial performance is dependent on the volume of weather resource available over time, whether measured through wind speeds, irradiance or millimetres of rainfall. These are factors outside the control of JLEN or the projects themselves, with the risk of a significant effect on performance if the outcome is significantly different from the assumptions made in forecasting revenue and costs and hence returns to JLEN.

 

Mitigation and controls:

·     For renewable energy projects there is a degree of protection from this variability in weather resource from portfolio diversification, as solar is more productive in the summer and wind more productive in the winter, with the absolute level of resource being weakly negatively correlated.

·     On all projects, technical consultants are employed to advise on the assumptions which should be made regarding volume and its impact on performance for each individual asset. Risks in this area diminish over time as operational track record provides a stronger base for forecasts than consultants' estimates.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

Residual risk:

Medium

 

6 Climate change - physical risk   

 

Change in year: Unchanged

 

Potential impact:

·     Climate-related physical risks are related to the potential physical impacts of both acute (extreme) weather events and chronic changes to climate patterns.

·     This risk has the potential to impact JLEN's assets which could impact portfolio returns.

 

Mitigation and controls:

·     Climate-related risks are monitored by the Investment Manager and reported to the ESG Committee and Risk Committee.

·     The risk is mitigated in part by owning a portfolio that is diversified by location, technology, resource use and revenue make-up.

·     The portfolio has been subject to independent scenario analysis this year, helping to inform the strategy going forward.

·     Further information on mitigants is provided in the Sustainability and ESG report.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

Residual risk:

Medium

 

7 Volume and cost of feedstock resource   

 

Change in year: Decreased

 

Potential impact:

·     For environmental infrastructure assets that need to source feedstock or analogous resources, there are risks associated with the volume of feedstock available and the costs or revenues associated with it. If sufficient feedstock is not available for an asset to operate at its optimum level, or feedstock is only available at a cost that is more expensive than the investment case, then JLEN's returns can be materially affected.

 

Mitigation and controls:

·     The feedstock assumptions used for valuations are based on recent experience and the views of dedicated staff who are active in those markets.

·     The assets in JLEN's portfolio that rely on supplies of feedstock benefit from dedicated staff (whether employed by service providers or directly by the asset) who work to source suitable feedstock at the best price available.

·     For agri-anaerobic digestion sites, it is common to agree feedstock contracts that adjust for the dry matter content in the biomaterial and relate pricing to that energy content and volume which is delivered.  Should a shortfall of a particular feedstock be likely, for instance due to a poor harvest, substitute feedstocks are widely available.

·     The Foresight Valuation Committee will approve assumptions used in the valuation and the JLEN Board has ultimate authority over the portfolio valuation.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

 

Residual risk:

Medium

 

8 Cyber risk 

 

Change in year: Unchanged

 

Potential impact:

·     There exists a threat of cyber attack in which a hacker or computer virus may attempt to access the IT systems of the Group, the Investment Manager, the Administrator or one of the project companies and attempt to destroy or use the data for malicious purposes. While JLEN considers that it is unlikely to be the deliberate target of a cyber attack, there is the possibility that it could be targeted as part of a random or general act.

 

Mitigation and controls:

·     JLEN has no dedicated IT systems and it relies on those of its service providers, principally the Investment Manager and Administrator, which have procedures in place to mitigate cyber attacks and have robust business continuity plans in place.

·     Renewables assets are also susceptible to cyber attack, for example if the control systems of wind turbines are targeted, and the Investment Manager is working to understand weaknesses in this area better in order to continue to improve controls to increase security.

·     JLEN and the project SPVs information technology providers have procedures in place to mitigate cyber attacks, they also have in place business continuity plans and data is separately stored on multiple servers which is backed up regularly.

·     A service provider has been engaged to provide enhanced cyber security for the wind portfolio including monitoring of all internet traffic into the wind sites. This is now being rolled out to the rest of the portfolio.

·     See the "Improving cyber resilience across the portfolio" case study in the Annual Report.

 

Link to Fund objectives:

Predictable income growth for shareholders

Preservation of shareholder value

 

Residual risk:

Low

 

9 Exposure to market power prices

 

Change in year: Decreased

 

Potential impact:

·     The revenues of the renewable energy-generating assets are dependent to some extent on the market price of electricity and natural gas, which is out of the control of JLEN. There is a risk that the actual prices received vary significantly from the model assumptions, leading to a shortfall in anticipated revenues to JLEN.

·     The Company has introduced battery storage assets into the portfolio, the first of which has become operational post year end. These assets also earn revenues that are determined by electricity markets, although the business model is more complex than for generators such as wind and solar assets.

 

Mitigation and controls:

·     The risk of exposure to variations in electricity and gas prices from assumptions made is mitigated by JLEN in the following ways: i) short‑term PPAs are used to fix electricity and gas prices for between one and three years ahead depending on market conditions and many have floor prices; ii) forward prices based on market rates are used for the first two years where no fix is in place; and iii) quarterly reports from independent established market consultants are used to inform the electricity prices over the longer term used in the financial models. JLEN blends forecasts from three consultants to reduce volatility in assumed prices from period to period.

·     JLEN invests in a diversified portfolio of environmental infrastructure assets that earn revenues that do not depend on merchant power sales. At the year end, 71% of the portfolio's underlying lifetime revenues, on an NPV basis, were not related to sales of merchant power.

 

Link to Fund objectives:                    

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

Residual risk:

Very high

 

10 Construction and development issues

 

Change in year: Increased

 

Potential impact:

·     Projects in the pre-construction or construction stages are subject to risks associated with the underestimation of the time or costs involved in bringing the project to operations. Projects may also not operate as well in practice as was assumed in the investment case.

·     Projects in the development stage face additional risks associated with bringing the project to ready‑to‑build, including permit risk and risk of failure to secure key contracts on acceptable terms.

 

Mitigation and controls:

·     The Investment Manager conducts due diligence by suitable external consultants on material aspects of the project, including, but not limited to, market, regulatory environment, land and permits and construction programme.

·     The Foresight Investment Committee and the JLEN Investment Committee assess the opportunity, including the findings from and the adequacy of the due diligence programme, prior to committing funds.

·     Ongoing monitoring of the project by the Investment Manager, including potential delays and cost overruns.

 

Link to Fund objectives:                    

Predictable income growth for shareholders

Preservation of shareholder value

 

Residual risk:

Very high

 

11 Operational risks  

 

Potential impact:

·     There is a risk that a health and safety event at a JLEN-owned site could lead to increased costs to prevent further occurrences and loss in revenue. JLEN's reputation could be adversely affected by publicity generated by a health and safety event.

·     There is a risk that poor performance by sub‑contractors, or in the event of having to replace a sub‑contractor, that a replacement may only be found at a higher cost, could adversely affect project cash flows.

·     In the event of a single project suffering from a material issue, distributions to the Fund could possibly be impacted absolutely or for a period of time whilst the issue is resolved. This includes grid outages and constraints resulting in a project being unable to export power and earn associated revenues.

 

Mitigation and controls:

·     Assets are monitored by the Investment Manager to address risks as they are identified.

·     The use of a diverse range of service providers supplying management, operational and maintenance services ensures any failure of a single service provider has a minimal impact. This risk is mitigated in part by the diversification represented by JLEN's portfolio of assets.

·     The portfolio has material damage and business interruption insurance policies in place to cover against potential losses, although these do not typically cover grid outages. Asset managers mitigate the impact of this by maintaining a dialogue with network operators and influencing when such outages occur.

·     The Board has in place a regime, overseen by the Audit Committee, which provides the necessary comfort that the internal control systems at the Investment Manager, the Administrator and the operating companies are effective.

·     Each of the project assets has health and safety policies that are adopted and monitored by the project board of directors. Health and safety is a standing item on board agendas, and Reporting of Injuries, Diseases and Dangerous Occurrences Regulations ("RIDDORs") is received at every board meeting. Regular health and safety audits on the projects are carried out by independent specialists.

 

Link to Fund objectives:                    

Predictable income growth for shareholders

Preservation of shareholder value

Investment, growth and diversification

 

Residual risk:

Low

 

 

INVESTMENT POLICY

 

The Company seeks to achieve its objectives by investing in a diversified portfolio of environmental infrastructure.

 

JLEN defines environmental infrastructure as infrastructure assets, projects and asset-backed businesses that utilise natural or waste resources or support more environmentally friendly approaches to economic activity, support the transition to a low-carbon economy or which mitigate the effects of climate change.

 

Environmental infrastructure that the Company invests in typically has one or more of the following characteristics:

 

·     they have the benefit of long-term, predictable cash flows, which may be wholly or partially inflation-linked; and/‌or

·     they are supported by long-term contracts or stable and well‑proven regulatory and legal frameworks; and/‌or

·     they feature well-established technologies and demonstrable operational performance.

 

The Company will invest in environmental infrastructure either directly or through holding or other structures that give the Company an investment exposure to environmental infrastructure. The Company's investment interests in environmental infrastructure may include partnership equity, partnership loans, membership interests, share capital, trust units, shareholder loans and/or debt interests in or to project entities or any other entities or undertakings in which the Company invests or may invest.

 

Whilst there are no restrictions on the amount of the Company's assets that may be invested in any individual type of environmental infrastructure, the Company will, over the long term, seek to invest in a diversified spread of investments both geographically (although the UK will always represent a minimum of 50% of the portfolio by value) and across different types of environmental infrastructure in order to achieve a broad spread of risk in the Company's portfolio.

 

Whilst the Company invests predominantly in operational assets, it may also invest in environmental infrastructure which is in its construction or development phase, which includes investment in developers of environmental infrastructure or development funding structures relating to environmental infrastructure.

 

The Company will also ensure that its investment portfolio comprises a minimum of five investments at any given time, save that this requirement shall not apply when the Company is being wound up or dissolved.

 

As technologies and the markets in which they contract into develop and become established, future investments may differ from those currently within the portfolio. These assets may incorporate new technologies that have a demonstrable track record or traditional infrastructure projects with features such as greater exposure to merchant markets in feedstock or by‑products.

 

Investment restrictions

With the objective of achieving a spread of risk, the following investment restrictions will apply to the acquisition of investment interests in the portfolio:

 

·     the substantial majority of investments in the portfolio by value and number will be operational. The Company will not acquire investment interests in any investment if, as a result of such investment: (i) 5% or more of the NAV is attributable to environmental infrastructure in the development phase (including in developers or development funding structures);

·     or (ii) 25% or more of the NAV is attributable to projects that are either in the development phase (including in developers or development funding structures) or are in construction and are not yet fully operational;

·     at least 50% of the portfolio (by value) will be based in the UK and the Company will only invest in environmental infrastructure located in the UK, member states of the European Union or OECD countries and, accordingly, the Company will not make any investment if, as a result of such investment, more than 50% of the NAV immediately post‑acquisition would be attributable to investments that are not based in the UK; and

·     it is intended that interests in any single investment acquired will not have an acquisition price (aggregated with the value of any existing investment in the relevant project, asset or business if relevant) greater than 25% of the NAV immediately post‑acquisition. In no circumstances will a new acquisition exceed a maximum limit of 30% of the NAV immediately post‑acquisition.

 

Borrowing and gearing

The Company intends to make use of short‑term debt financing to facilitate the acquisition of investments (either by itself or by one of its subsidiaries). Borrowing may be secured against the assets comprising the portfolio. It is intended that such debt will be repaid periodically by the raising of new equity finance by the Company. The level of such debt is limited to 30% of the Company's Net Asset Value immediately after the acquisition of any further investment. Such debt will not include (and will be subordinate to) any project-level gearing or borrowings by assets or businesses in which the Company may invest which shall be in addition to any borrowing at Company level.

 

The Company may acquire investment interests in respect of projects that have non-recourse project finance in place at the project entity level. The Company will target aggregate non-recourse financing attributable to renewable energy generation projects not exceeding 65% of the aggregate gross project value of such projects. The Company will target aggregate non‑recourse financing attributable to projects structured as PFI/PPP projects not exceeding 85% of the aggregate gross project value of such projects. The Company will not invest in any project that would cause the Company to be in breach of the targeted limits set out in this paragraph if the Directors do not reasonably believe that the relevant target leverage limit can be achieved within six months of the date of investment in that project.

 

It is therefore possible that the Company may exceed the targeted gearing limits set out in this paragraph, but only in circumstances where the Directors reasonably believe that such breach can be cured (by achieving the relevant target leverage limit) within six months of the date of investment in the relevant project.

 

Hedging

Where investments are made in currencies other than pounds sterling, the Company will consider whether to hedge currency risk in accordance with the Company's currency and hedging policy as determined from time to time by the Directors. Interest rate hedging may be carried out to provide protection against increasing costs of servicing debt drawn down by the Company to finance investments.

 

This may involve the use of interest rate derivatives and similar derivative instruments. Hedging against inflation may also be carried out where appropriate and this may involve the use of RPI swaps and similar derivative instruments. The currency, interest rate and any inflationary hedging policies will be reviewed by the Directors on a regular basis to ensure that the risks associated with movements in foreign exchange rates, interest rates and inflation are being appropriately managed.

 

Any hedging transactions (if carried out) will only be undertaken for the purpose of efficient portfolio management to enhance returns from the portfolio and will not be carried out for speculative purposes. The execution of hedging transactions is at the discretion of the Investment Manager, subject to the policies set by, and the overall supervision, of the Directors.

 

Cash balances

Pending reinvestment or distribution of cash receipts or repayments of any outstanding indebtedness, cash received by the Company will be invested in cash, cash equivalents, near-cash instruments, money market instruments and money market funds and cash funds. The Company may also hold derivative or other financial instruments designed for efficient portfolio management or to hedge interest, inflation or currency rate risks. The Company and any other member of the Group may also lend cash which it holds as part of its cash management policy.

 

Origination of further investments

Each of the investments comprising the portfolio comply with the Company's investment policy and further investments will only be acquired if they comply with the Company's investment policy.

 

Subject to due diligence and agreement on price, the Company will seek to acquire those investments that fit the investment objectives and investment policy of the Company. If, in the opinion of the Investment Manager, the risk characteristics, valuation and price of the prospective investment are acceptable and consistent with the Company's investment objective and investment policy, then (subject to the Company having sufficient sources of capital and, in respect of certain transactions, the approval of Directors) an offer will be made (without seeking the prior approval of shareholders) and, if successful, the investment will be acquired by the Company.

 

The Investment Manager will be subject to the overall supervision of the Board, all of whom are independent of the Investment Manager.

 

Potential disposal of investments

Whilst the Investment Manager may elect to retain investment interests in the portfolio of investments that the Company acquires, and any other further investments made by the Company over the long term, the Investment Manager will regularly monitor the valuations of such investments and any secondary market opportunities to dispose of investments. The Investment Manager only intends to dispose of investments where it considers that appropriate value can be realised for the Company or where it otherwise believes that it is appropriate to do so. Proceeds from the disposal of investments may be reinvested or distributed at the discretion of the Directors.

 

Amendments to and compliance with the investment policy

Material changes to the investment policy of the Company may only be made in accordance with the approval of the shareholders by way of ordinary resolution and (for so long as the ordinary shares are listed on the official list maintained by the Financial Conduct Authority) in accordance with the Listing Rules. Minor changes to the investment policy must be approved by the Directors.

 

The investment restrictions detailed above apply at the time of the acquisition of investment interests and the values of existing investment interests shall be as at the date of the most recently published NAV of the Fund, unless the Directors believe that such valuation materially misrepresents the value of the Company's investment interests at the time of the relevant acquisition. The Fund will not be required to dispose of investment interests and to rebalance its portfolio as a result of a change in the respective valuations of investment interests.

 

 

Financial Review

 

Analysis of financial results

The financial statements of the Company for the year ended 31 March 2024 are set out on pages 145 to 174 of the 2024 Annual Report.

 

The Company prepared the financial statements for the year ended 31 March 2024 in accordance with UK-adopted international accounting standards as applicable to companies reporting under those standards. In order to continue providing useful and relevant information to its investors, the financial statements also refer to the "Group", which comprises the Company, its wholly owned subsidiary (JLEN Environmental Assets Group (UK) Limited ("UK HoldCo")) and the indirectly held wholly owned subsidiary HWT Limited (which holds the investment interest in the Tay project).

 

Basis of accounting

The Company applies IFRS 10 and Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 28, which states that investment entities should measure all their subsidiaries that are themselves investment entities at fair value. The Company accounts for its interest in its wholly owned direct subsidiary JLEN Environmental Assets Group (UK) Limited as an investment at fair value through profit or loss.

 

The primary impact of this application, in comparison to consolidating subsidiaries, is that the cash balances, the working capital balances and borrowings in the intermediate holding companies are presented as part of the Company's fair value of investments.

 

The Company's intermediate holding companies provide services that relate to the Company's investment activities on behalf of the parent which are incidental to the management of the portfolio. These companies are recognised in the financial statements at their fair value, which is equivalent to their net assets.

 

The Group holds investments in the 42 portfolio assets which make distributions comprising returns on investments (interest on loans and dividends on equity) together with repayments of investments (loan repayments and equity redemptions).

 

Key investment metrics

 

All amounts presented in £million (except as noted)	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Net assets(1)	751.2	814.6
Portfolio value(2)	891.9	898.5
Operating income and (losses)/gains on fair value of investments	(3.8)	108.4
Net Asset Value per share(3)	113.6p	123.1p
Distributions, repayments and fees from portfolio	87.0	83.6
(Loss)/profit before tax	(13.9)	98.3
Gross asset value(3)	1,091.8	1,119.8
Market capitalisation(3)	619.9	791.2
Share price(3)	93.7p	119.6p
Total shareholder return(3)	68.4%	99.0%
Annualised total shareholder return(3)	5.4%	7.9%

(1)   Also referred to as "NAV".

(2)   Classified as investments at fair value through profit or loss in the statement of financial position.

(3)   Net Asset Value per share, share price, market capitalisation, gross asset value, total shareholder return and annualised total shareholder return are alternative performance measures ("APMs"). The APMs within the accounts are defined on pages 175 and 176 of the 2024 Annual Report.

                                                                                                                                                                                               

Net assets

Net assets decreased from £814.6 million at 31 March 2023 to £751.2 million at 31 March 2024. This decrease was principally due to the reduction in power price forecasts and the increase in discount rates during the financial year.

 

The net assets of £751.2 million comprise £891.9 million portfolio value of environmental infrastructure investments and the Company's cash balances of £0.3 million, partially offset by £138.4 million of intermediate holding companies' net liabilities and other net liabilities of £2.6 million.

 

The intermediate holding companies' net liabilities of £138.4 million comprises a £159.3 million credit facility loan, partially offset by cash balances of £17.8 million and other net assets of £3.1 million.

 

Analysis of the Group's net assets at 31 March 2024

 

All amounts presented in £million (except as noted)	At 31 Mar 2024	At 31 Mar 2023
Portfolio value	891.9	898.5
Intermediate holding companies' cash	17.8	17.9
Intermediate holding companies' revolving credit facility	(159.3)	(103.5)
Intermediate holding companies' other assets	3.1	3.9
Fair value of the Company's investment in UK HoldCo	753.5	816.8
Company's cash	0.3	0.1
Company's other liabilities	(2.6)	(2.3)
Net Asset Value at 31 March	751.2	814.6
Number of shares	661,531,229	661,531,229
Net Asset Value per share(1)	113.6p	123.1p

(1)   Net Asset Value per share is an alternative performance measure ("APM"). The APMs within the accounts are defined on pages 175 and 176 of the 2024 Annual Report.

 

At 31 March 2024, the Group (the Company plus intermediate holding companies) had a total cash balance of £18.1 million (31 March 2023: £18.0 million), including £0.3 million in the Company's balance sheet (31 March 2023: £0.1 million) and £17.8 million in the intermediate holding companies (31 March 2023: £17.9 million), which is included in the Company's balance sheet within "investments at fair value through profit or loss".

 

At 31 March 2024, UK HoldCo had drawn £159.3 million of its RCF (31 March 2023: £103.5 million), which is included in the Company's balance sheet within "investments at fair value through profit or loss".

 

The movement in the portfolio value from 31 March 2023 to 31 March 2024 is summarised as follows:

 

All amounts presented in £million (except as noted)	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Portfolio value at start of the year	898.5	795.4
Acquisitions and further investment	69.2	72.0
Distributions received from investments	(87.0)	(83.6)
Growth in value of portfolio	11.2	114.7
Portfolio value at 31 March	891.9	898.5

 

Further details on the portfolio valuation and an analysis of movements during the year are provided in the investment portfolio and valuation section on pages 32 to 43 of the 2024 Annual Report.

 

Income

The Company's loss before tax for the year ended 31 March 2024 is £13.9 million, a loss of 2.1 pence per share (year ended 31 March 2023: earnings 14.9 pence per share), driven by the loss on fair value of investments as a result of power price forecast contraction and increase in discount rate during the financial year.

 

All amounts presented in £million (except as noted)	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Interest received on UK HoldCo loan notes	31.4	31.4
Dividend received from UK HoldCo	28.0	23.1
Net (losses)/gains on investments at fair value	(63.2)	53.9
Operating income and (losses)/gains on fair value of investments	(3.8)	108.4
Operating expenses	(10.1)	(10.1)
(Loss)/profit before tax	(13.9)	98.3
(Losses)/earnings per share	(2.1)p	14.9p

 

In the year to 31 March 2024, the operating loss on fair value of investments was £3.8 million, including the receipt of £31.4 million of interest on the UK HoldCo loan notes, £28.0 million of dividends also received from UK HoldCo and net losses on investments at fair value of £63.2 million.

 

The operating expenses included in the income statement for the year were £10.1 million, in line with expectations. These comprise £8.5 million Investment Manager fees and £1.6 million operating expenses. The details on how the Investment Manager fees are charged are set out in note 15 to the financial statements.

 

Ongoing charges

The "ongoing charges" ratio(¹) is an indicator of the costs incurred in the day‑to‑day management of the Fund. JLEN uses the AIC-recommended methodology for calculating this ratio, which is an annual figure.

 

The ongoing charges percentage for the year to 31 March 2024 was 1.24% (year ended 31 March 2023: 1.18%). The ongoing charges have been calculated, in accordance with AIC guidance, as annualised ongoing charges (i.e. excluding acquisition costs and other non‑recurring items) divided by the average published undiluted Net Asset Value in the period. The ongoing charges percentage has been calculated on the consolidated basis and therefore takes into consideration the expenses of UK HoldCo as well as the Company. Adjusting for the impact of the drawn down amount under the RCF, the ongoing charges ratio would have been 1.06% (31 March 2023: 1.08%). Foresight believes this to be competitive for the market in which JLEN operates and the stage of development and size of the Fund, demonstrating that management of the Fund is efficient with minimal expenses incurred in its ordinary operation.

 

Cash flow

The Company had a total cash balance at 31 March 2024 of £0.3 million (31 March 2023: £0.1 million).

 

The breakdown of the movements in cash during the year is shown below.

 

Cash flows of the Company for the year (£million):

 

	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Cash balance at 1 April	0.1	2.0
Net proceeds from share issue/(expenses from previous issues)	-	(0.2)
Interest on loan notes received from UK HoldCo	31.4	31.4
Dividends received from UK HoldCo	28.0	23.1
Directors' fees and expenses	(0.3)	(0.3)
Investment Manager fees	(8.4)	(8.1)
Administrative expenses	(1.1)	(1.2)
Dividends paid in cash to shareholders	(49.4)	(46.6)
Company cash balance at 31 March	0.3	0.1

 

(1)   The ongoing charges ratio is an alternative performance measure ("APM"). The APMs within the accounts are defined on pages 175 and 176 of the 2024 Annual Report.

 

The Group had a total cash balance at 31 March 2024 of £18.1 million (31 March 2023: £18.0 million) and borrowings under the revolving credit facility of £159.3 million (31 March 2023: £103.5 million).

 

The breakdown of the movements in cash during the year is shown below.

 

Cash flows of the Group for the year (£million):

 

	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Cash distributions from environmental infrastructure investments	87.0	83.6
Administrative expenses	(1.3)	(1.3)
Directors' fees and expenses	(0.3)	(0.3)
Investment Manager fees	(8.4)	(8.1)
Financing costs (net of interest income)	(7.3)	(3.4)
Energy Generator Levy	(5.5)	-
Cash flow from operations(1)	64.2	70.5
Expenses from share issues	-	(0.2)
Debt arrangement fee cost	(1.0)	(0.1)
Acquisition of investment assets and further investment	(69.2)	(72.5)
Disposal of assets	-	1.6
Acquisition costs (including stamp duty)	(0.4)	(1.9)
Short-term project debtors	(0.9)	-
Drawdown under the revolving credit facility	56.8	48.9
Dividends paid in cash to shareholders	(49.4)	(46.6)
Cash movement in the year	0.1	(0.3)
Opening cash balance	18.0	18.0
Exchange gains on cash	-	0.3
Group cash balance at 31 March	18.1	18.0

 

During the year, the Group received cash distributions of £87.0 million from its environmental infrastructure investments, an increase of 4.1% compared to 2023.

 

Cash received from investments in the year covers the operating and administrative expenses and financing costs, as well as the dividends declared to shareholders in respect of the year ended 31 March 2024. Cash flow from operations of the Group of £64.2 million covers dividends paid in the year to 31 March 2024 of £49.4 million by 1.30x.

 

The Group anticipates that future revenues from its environmental infrastructure investments will continue to be in line with expectations and therefore will continue to cover fully future costs as well as planned dividends payable to its shareholders⁽²⁾.

 

Dividends

During the year, the Company paid a final dividend of 1.79 pence per share in June 2023 (£11.8 million) in respect of the quarter to 31 March 2023.

 

Interim dividends of 1.89 pence per share were paid in September 2023 (£12.5 million) in respect of the quarter to 30 June 2023, of 1.89 pence per share in December 2023 (£12.5 million) in respect of the quarter to 30 September 2023, and of 1.90 pence per share in March 2024 (£12.6 million) in respect of the quarter to 31 December 2023. On 29 May 2024, the Company declared a final dividend of 1.89 pence per share in respect of the quarter ended 31 March 2024 (£12.5 million), which is payable on 28 June 2024.

 

The target dividend for the year to 31 March 2025 is 7.80 pence per share, a 3.0% increase from the dividend declared in respect of the year to 31 March 2024⁽²⁾.

 

(1)   Cash flow from operations is an alternative performance measure ("APM"). The APMs within the accounts are defined on pages 175 and 176 of the 2024 Annual Report.

(2)   These are targets only and not profit forecasts. There can be no assurance that these targets will be met.

 

 

INDEPENDENT AUDITOR'S REPORT

to the members of JLEN Environmental Assets Group Limited

 

Our opinion is unmodified

We have audited the financial statements of JLEN Environmental Assets Group Limited (the "Company"), which comprise the statement of financial position as at 31 March 2024, the income statement, statement of changes in equity and cash flow statement for the year then ended, and notes, comprising material accounting policies and other explanatory information.

 

In our opinion, the accompanying financial statements:

 

·     give a true and fair view of the financial position of the Company as at 31 March 2024, and of the Company's financial performance and cash flows for the year then ended;

·     are prepared in accordance with UK-adopted international accounting standards; and

·     comply with the Companies (Guernsey) Law, 2008.

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies' Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

 

Key audit matters: our assessment of the risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows:

 

	The risk	Our response
Investments at fair value through profit or loss:   £753,572,000   Refer to Audit Committee report (page 125 of 2024 Annual Report), note 2(f) accounting policy and note 9 disclosures	Basis: The Company's investment in its immediate subsidiary (the "UK HoldCo") is carried at fair value through profit or loss and represents a significant proportion of the Company's net assets. The UK HoldCo in turn owns investments in intermediate holding companies and environmental infrastructure projects.   The fair value of the investment in the UK HoldCo, which is reflective of its Net Asset Value, predominantly comprises of the fair value of underlying environmental infrastructure projects.   The fair value of the underlying environmental infrastructure projects has been primarily determined using the income approach discounting the future cash flows to be received from the underlying projects (the "Valuations"), for which there is no active market. The Valuations incorporate certain assumptions including generation output assumptions, discount rates, power price forecasts, inflation rates and other macroeconomic assumptions.   Management engages an independent valuation specialist to review the Valuations and form an opinion on the appropriateness of the Valuations.	Our audit procedures included:   Internal controls: We have obtained an understanding of the valuation process and tested the design and implementation of the valuation process control.   We performed the procedures below rather than seeking to rely on the control as the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described.   Managements independent valuation specialist valuation report:   ·     we assessed the objectivity, capabilities and competence of management's independent valuation specialist; ·     we assessed the scope of management's independent valuation specialist review of the Valuations and read their valuation report and the investment valuation memoranda produced by the Investment Manager; and ·     we held discussions with management's independent valuation specialist to understand the nature of the procedures performed by them in arriving at their opinion on the appropriateness of the Valuations.   Challenging managements' assumptions and inputs, including use of KPMG valuation specialist:   With the support of a KPMG valuation specialist, we challenged the appropriateness of the Company's valuation methodology and key assumptions such as discount rates, power price forecasts, inflation rates and other macroeconomic assumptions applied, by:   i)    assessing the appropriateness of the valuation methodology applied; ii)   benchmarking the discount rates applied against independent market data and relevant peer group companies; iii)  assessing the reasonableness of the power price forecasts used by reference to power price curves supplied to management by external consultants; iv)  challenging inflation rates and other macroeconomic assumptions used, by reference to observable market data and market forecasts; v)   agreeing significant additions of operational and non-operational environmental infrastructure projects to supporting documentation; vi)  comparing, where appropriate, the valuation of the underlying environmental infrastructure projects to indicative non-binding offers received by management; and vii) using our KPMG valuation specialist's experience in valuing similar investments.
	Risk: The Valuations represent both a risk of fraud and error associated with estimating the timing and amounts of long-term forecasted cash flows alongside the selection, and application, of appropriate assumptions. Changes to long-term forecasted cash flows and/or the selection and application of different assumptions may result in a materially different valuation of investments held at fair value through profit or loss.   We therefore have determined that the Valuations have a high degree of estimation uncertainty, giving rise to a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole.	For a risk-based sample of the cash flow valuation models:   ·     we tested their mathematical accuracy including, but not limited to, material formulae errors; ·     we challenged the generation output assumptions, by reference to due diligence reports prepared by third-party engineers or historical performance, where available; ·     we agreed other key inputs, such as contracted revenue to supporting documentation; ·     we assessed the appropriateness of changes to operational assumptions and cash flows in the underlying models, through reference to third-party support and historical experience where required; and ·     in order to assess the reliability of management's forecasts, we assessed the historical accuracy of the cash flow forecasts against actual results.   Assessing disclosures: We considered the appropriateness and adequacy of the disclosures made in the financial statements (see notes 2(f), 9 and 16) in relation to the use of estimates and judgements regarding the fair value of investments, the valuation estimation techniques inherent therein and fair value disclosures for compliance with UK-adopted international accounting policies.

 

Our application of materiality and an overview of the scope of our audit

Materiality for the financial statements as a whole was set at £15.8 million, determined with reference to a benchmark of net assets of £751.2 million, of which it represents approximately 2%.

 

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 65% of materiality for the financial statements as a whole, which equates to £10.2 million. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.

 

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.79 million, in addition to other identified misstatements that warranted reporting on qualitative grounds.

 

Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas, as detailed above.

 

Going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the "going concern period").

 

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to affect the Company's financial resources or ability to continue operations over this period were:

 

·     availability of capital to meet operating costs and other financial commitments;

·     the outcome of the upcoming discontinuation vote.

 

We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Company's financial forecasts.

 

We also considered the risk that the outcome of the discontinuation vote could affect the Company over the going concern period, by inspecting summaries of discussions held with the broker, and considering key financial metrics including the discount of the Company's share price against its reported Net Asset Value per share, over the last 12 months.

 

We considered whether the going concern disclosure in note 2(b) to the financial statements gives a full and accurate description of the Directors' assessment of going concern.

 

Our conclusions based on this work:

 

·     we consider that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate;

·     we have not identified, and concur with the Directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; and

·     we have nothing material to add or draw attention to in relation to the Directors' statement in the notes to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company's use of that basis for the going concern period, and that statement is materially consistent with the financial statements and our audit knowledge.

 

However, as we cannot predict all future events or conditions, and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation.

 

Fraud and breaches of laws and regulations - ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud ("fraud risks"), we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

 

·     enquiring of management as to the Company's policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;

·     reading minutes of meetings of those charged with governance; and

·     using analytical procedures to identify any unusual or unexpected relationships.

 

As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates such as valuation of unquoted investments. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company's revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks.

 

We performed procedures including:

 

·     identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation;

·     incorporating an element of unpredictability in our audit procedures; and

·     assessing significant accounting estimates for bias.

 

Further detail in respect of valuation of unquoted investments is set out in the key audit matter section of this report.

 

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company's regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.

 

The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

 

The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company's ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Company's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

 

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

 

In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

 

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency between the Directors' disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. We have nothing material to add or draw attention to in relation to:

 

·     the Directors' confirmation within the long-term viability statement (pages 133 and 134 of the 2024 Annual Report) that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;

·     the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated; and

·     the Directors' explanation in the long-term viability statement (pages 133 and 134 of the 2024 Annual Report) as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

 

We are also required to review the long-term viability statement, set out on pages 133 and 134 of the 2024 Annual Report under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.

 

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency between the Directors' corporate governance disclosures and the financial statements and our audit knowledge.

 

Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge:

 

·     the Directors' statement that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;

·     the section of the Annual Report describing the work of the Audit Committee, including the significant issues that the Audit Committee considered in relation to the financial statements, and how these issues were addressed; and

·     the section of the Annual Report that describes the review of the effectiveness of the Company's risk management and internal control systems.

 

We are required to review the part of the corporate governance statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.

 

We have nothing to report on other matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008, requires us to report to you if, in our opinion:

 

·     the Company has not kept proper accounting records; or

·     the financial statements are not in agreement with the accounting records; or

·     we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

 

Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 136 of the 2024 Annual Report, the Directors are responsible for: the preparation of the financial statements, including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

 

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

 

The purpose of this report and restrictions on its use by persons other than the Company's members as a body

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

 

Barry Ryan

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants and Recognised Auditors

Guernsey

20 June 2024

 

 

INCOME STATEMENT

for the year ended 31 March 2024

 

		2024	2023
	Notes	£'000s	£'000s
Operating income and (loss)/gains on fair value of investments	9	(3,827)	108,445
Operating expenses	5	(10,110)	(10,145)
Operating (loss)/profit		(13,937)	98,300
(Loss)/profit before tax		(13,937)	98,300
Tax	6	-	-
(Loss)/profit for the year		(13,937)	98,300
(Loss)/earnings per share
Basic and diluted (pence)	8	(2.1)	14.9

 

The accompanying notes form an integral part of the financial statements.

 

All results are derived from continuing operations.

 

There is no other comprehensive income in either the current year or the preceding year, other than the loss for the year, and therefore no separate statement of comprehensive income has been presented.

 

 

STATEMENT OF FINANCIAL POSITION

as at 31 March 2024

 

		2024	2023
	Notes	£'000s	£'000s
Non-current assets
Investments at fair value through profit or loss	9	753,572	816,800
Total non‑current assets		753,572	816,800
Current assets
Trade and other receivables	10	25	143
Cash and cash equivalents		271	143
Total current assets		296	286
Total assets		753,868	817,086
Current liabilities
Trade and other payables	11	(2,654)	(2,518)
Total current liabilities		(2,654)	(2,518)
Total liabilities		(2,654)	(2,518)
Net assets		751,214	814,568
Equity
Share capital account	13	664,401	664,401
Retained earnings	14	86,813	150,167
Equity attributable to owners of the Company		751,214	814,568
Net assets per share (pence per share)		113.6	123.1

 

The accompanying notes form an integral part of the financial statements.

 

The financial statements were approved by the Board of Directors and authorised for issue on 20 June 2024.

 

They were signed on its behalf by:

 

Ed Warner

Chair

 

Stephanie Coxon

Director

 

 

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2024

 

		Year ended 31 March 2024
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at 1 April 2023		664,401	150,167	814,568
Loss for the year		-	(13,937)	(13,937)
Loss and total comprehensive income/(expense) for the year		-	(13,937)	(13,937)
Dividends paid	7	-	(49,417)	(49,417)
Balance at 31 March 2024		664,401	86,813	751,214

 

		Year ended 31 March 2023
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at 1 April 2022		664,401	98,504	762,905
Profit for the year		-	98,300	98,300
Profit and total comprehensive income for the year		-	98,300	98,300
Dividends paid	7	-	(46,637)	(46,637)
Balance at 31 March 2023		664,401	150,167	814,568

 

The accompanying notes form an integral part of the financial statements.

 

 

CASH FLOW STATEMENT

for the year ended 31 March 2024

 

		2024	2023
	Notes	£'000s	£'000s
Cash flows from operating activities
(Loss)/profit from operations		(13,937)	98,300
Adjustments for:
Investment interest		(31,401)	(31,401)
Dividends received		(28,000)	(23,100)
Net loss/(gain) on investments at fair value through profit or loss		63,228	(53,944)
Operating cash flows before movements in working capital		(10,110)	(10,145)
Decrease in receivables		118	76
Increase in payables		136	476
Net cash outflow used in operating activities		(9,856)	(9,593)
Investing activities
Investment interest		31,401	31,401
Dividends received		28,000	23,100
Net cash from investing activities		59,401	54,501
Financing activities
Expenses relating to issue of shares		-	(150)
Dividends paid	7	(49,417)	(46,637)
Net cash used in financing activities		(49,417)	(46,787)
Net increase/(decrease) in cash and cash equivalents		128	(1,879)
Cash and cash equivalents at beginning of the year		143	2,022
Cash and cash equivalents at end of the year		271	143

 

The accompanying notes form an integral part of the financial statements.

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2024

 

1. General information

JLEN Environmental Assets Group Limited (the "Company" or "JLEN") is a closed‑ended investment company domiciled and incorporated in Guernsey, Channel Islands, under Section 20 of the Companies (Guernsey) Law, 2008. The shares are publicly traded on the London Stock Exchange under a premium listing. The audited financial statements of the Company are for the year ended 31 March 2024 and have been prepared on the basis of the accounting policies set out below. The financial statements comprise only the results of the Company, as its investment in JLEN Environmental Assets Group (UK) Limited ("UK HoldCo") is measured at fair value as detailed in the key accounting policies below. The Company and its subsidiaries invest in environmental infrastructure that utilise natural or waste resources or support more environmentally friendly approaches to economic activity.

 

 

2. Accounting policies

(a) Basis of preparation

The financial statements, which give a true and fair view, were approved and authorised for issue by the Board of Directors on 20 June 2024. The set of financial statements included in this financial report has been prepared in accordance with UK-adopted international accounting standards as applicable to companies reporting under those standards and complies with the Companies (Guernsey) Law, 2008.

 

As a result of adopting the amendments to IFRS 10, IFRS 12 and IAS 28 first adopted in the Company's Annual Report to 31 March 2015, the Company is required to hold its subsidiaries that provide investment services at fair value, in accordance with IFRS 9 Financial Instruments Recognition and Measurement, and IFRS 13 Fair Value Measurement. The Company accounts for its investment in its wholly owned direct subsidiary UK HoldCo at fair value. The Company, together with its wholly owned direct subsidiary UK HoldCo and the intermediate holding subsidiary HWT Limited, comprise the Group (the "Group") investing in environmental infrastructure assets.

 

The net assets of the intermediate holding companies (comprising UK HoldCo and HWT Limited), which at 31 March 2024 principally comprise working capital balances, the revolving credit facility ("RCF") and investments in projects, are required to be included at fair value in the carrying value of investments.

 

Consequently, the Company does not consolidate its subsidiaries or apply IFRS 3 Business Combinations when it obtains control of another entity as it is considered to be an investment entity under UK-adopted international accounting standards. Instead, the Company measures its investment in its subsidiary at fair value through profit or loss.

 

The financial statements incorporate the financial statements of the Company only.

 

UK HoldCo is itself an investment entity. Consequently, the Company need not have an exit strategy for its investment in UK HoldCo.

 

Each investment indirectly held has a finite life. For the PPP assets, the shareholder debt will mature towards the end of the concession, and at the end of the concession the investment will be dissolved. In the case of renewable energy assets, the life of the project is based on the expected asset life and the land lease term, after which the investment will also be dissolved. The exit strategy is that investments will normally be held to the end of the concession, unless the Company sees an opportunity in the market to dispose of investments. Foresight Group, the Company's Investment Manager, and the Company's Board regularly consider whether any disposals should be made.

 

The Directors continue to consider that the Company demonstrates the characteristics and meets the requirements to be considered as an investment entity.

 

The following relevant standards which have not been applied in these financial statements were in issue but not yet effective:

 

·     Classification of Liabilities as Current or Non-current - Amendments to IAS 1 (applicable for annual periods beginning on or after 1 January 2024);

·     Non-current Liabilities with Covenants (Amendments to IAS 1) (applicable for annual periods beginning on or after 1 January 2024);

·     International tax reform - Pillar Two Model Rules - Amendments to IAS 12 (applicable for annual periods beginning on or after 23 May 2023; and

·     Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 (applicable for annual periods beginning on or after 1 January 2024).

 

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Company in future periods.

 

The following relevant standards became effective during the year and did not have a material impact on the Company's reported results:

 

·     Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2 (applicable for annual periods beginning on or after 1 January 2023); and

·     Definition of Accounting Estimates - Amendments to IAS 8 (applicable for annual periods beginning on or after 1 January 2023).

 

(b) Going concern

The Directors, in their consideration of going concern, have reviewed comprehensive cash flow forecasts prepared by the Company's Investment Manager, Foresight Group, which are based on prudent market data and a reasonable worst case scenario and believe, based on those forecasts and an assessment of the Company's subsidiary's banking facilities, that it is appropriate to prepare the financial statements of the Company on the going concern basis.

 

In arriving at their conclusion, the Directors assessed the risks of the volatility of energy prices, the potential impact of the principal risks (documented in the strategic report) and the triggering of the discontinuation vote.

 

In addition to the risks outlined above, the Directors have also considered the sustainability‑related risks covering environmental, social and governance factors, including climate change (in line with the recommendations of the Task Force on Climate-related Financial Disclosures ("TCFD"), which is integrated throughout the Sustainability and ESG report found in the 2024 Annual Report). The Investment Manager has reviewed the portfolio's exposure to these risks in the period under review and has concluded that it is currently not material to the Fund, although it continues to monitor the market attentively.

 

The Board considers the going concern assessment period of 18 months to 30 September 2025 to be appropriate. A longer period than the typical requirement of 12 months has been adopted to factor in the full payment of the March 2025 dividend.

 

The Directors also considered that the Company has adequate financial resources, and were mindful that the Group had unrestricted cash of £18.1 million (including £0.3 million in the Company) as at 31 March 2024 and a revolving credit and accordion facility (available for investment in new or existing projects and working capital) of £200 million. As at 31 March 2024, the Company's wholly owned subsidiary, UK HoldCo, had borrowed £159.3 million under the facility, leaving £40.7 million undrawn. All key financial covenants under this facility are forecast to continue to be complied for the duration of the going concern assessment period.

 

On 13 June 2024, the Fund successfully refinanced its revolving credit facility with a three‑year agreement with ING, HSBC, RBSI, NAB and Clydesdale Bank, which provides for a committed facility of £200 million (of which £159.3 million was drawn at the balance sheet date), with an uncommitted accordion facility of up to £30 million and an uncommitted option to extend for a further year.

 

The RCF provides the flexibility for the Fund to continue meeting existing funding commitments to portfolio assets. The Company also has sufficient headroom in its revolving credit facility to finance its hard commitments relating to construction assets held within the portfolio.

 

The revolving credit facility covenants have been tested on downside risk scenarios, with the assumption of 10% lower power price projections compared to the base case, reduced generation levels assuming a P90, a proportion of the portfolio not yielding and a combination of these scenarios. In all scenarios run, including the combined downside case, the Company remained compliant with its key covenants.

 

The shareholders will be presented with a discontinuation vote at the AGM in September. The trigger for this vote is the share price has traded, on average, at a discount in excess of 10% to the Net Asset Value per share in the financial year under review.

 

The Directors have made the following considerations surrounding the discontinuation vote:

 

·     recent interactions with shareholders, whilst assessing their indications of intent; and

·     macroeconomic factors prevalent in the entire renewables sector. Notwithstanding the average share price discount to NAV, which has triggered the discontinuation vote, the presence of discounts is a market-wide event and the tighter rating for JLEN reflects the relative strong demand for its shares. The Investment Manager and the Directors are confident that JLEN's discount to NAV and associated triggering of the discontinuation vote is not due to the individual performance of JLEN, its Investment Manager or its Board of Directors.

 

Based on the considerations outlined in the 2024 Annual Report, the Investment Manager and the Directors have no reason to believe that the special resolution (75% of the total voting members) will be passed by the shareholders.

 

Based on the above, the Directors are satisfied that the Company has sufficient resources to continue to operate for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparation of these financial statements.

 

(c) Revenue recognition - Operating income and gains/(losses) on fair value of investments

Operating income and gains/(losses) on fair value of investments in the income statement represents gains or losses that arise from the movement in the fair value of the Company's investment in UK HoldCo, dividend income and interest received from UK HoldCo. Dividends from UK HoldCo are recognised when the Company's right to receive payment has been established. Interest income is accrued by reference to the loan principal outstanding, applicable interest rate and in accordance with the loan note agreement. Refer to note 9 for details.

 

(d) Taxation

Under the current system of taxation in Guernsey, the Company itself is exempt from paying taxes on income, profits or capital gains. Dividend income and interest income received by the Company may be subject to withholding tax imposed in the country of origin of such income. The underlying intermediate holding companies and project companies in which the Company invests provide for and pay taxation at the appropriate rates in the countries in which they operate. This is taken into account when assessing the fair value of the Company's investments.

 

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, deposits held on call with banks and other short‑term highly liquid deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand are included as a component of cash and cash equivalents for the purpose of the cash flow statements. Deposits held with original maturities of greater than three months are included in other financial assets.

 

(f) Financial instruments

Financial assets and financial liabilities are recognised on the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the instrument expire or the asset is transferred and the transfer qualifies for derecognition in accordance with IFRS 9 Financial Instruments.

 

I) Financial assets

The Company classifies its financial assets as either investments at fair value through profit or loss or financial assets at amortised cost. The classification depends on the results of the "solely payments of principal and interest" and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how management are compensated. Monitoring is part of the Company's continuous assessment of whether the business model, for which the remaining financial assets are held, continues to be appropriate and, if it is not appropriate, whether there has been a change in business model and so a prospective change to the classification of those assets.

 

i) Investments at fair value through profit or loss

Investments at fair value through profit or loss are recognised upon initial recognition as financial assets at fair value through profit or loss in accordance with IFRS 10. In these financial statements, investments at fair value through profit or loss is the fair value of the Company's subsidiary, UK HoldCo, which comprises the fair value of UK HoldCo and HWT Limited and the environmental infrastructure investments.

 

The intermediate holding companies' net assets (UK HoldCo and HWT Limited) are mainly composed of cash, working capital balances and borrowings under the Company's wholly owned direct subsidiary's RCF, and are recognised at fair value, which is equivalent to their net assets. Although the working capital and the RCF outstanding balance are measured at amortised cost, their fair values do not materially differ from their amortised costs.

 

The Company's investment in UK HoldCo comprises both equity and loan notes. Both elements are exposed to the same primary risk, being performance risk. This performance risk is taken into consideration when determining the discount rate applied to the forecast cash flows. In determining fair value, the Board considered observable market transactions and has measured fair value using assumptions that market participants would use when pricing the asset, including assumptions regarding risk. The loan notes and equity are considered to have the same risk characteristics. As such, the debt and equity form a single class of financial instrument for the purposes of disclosure. The Company measures its investment as a single class of financial asset at fair value in accordance with IFRS 13 Fair Value Measurement.

 

ii) Financial assets at amortised cost

Trade receivables, loans and other receivables that are non‑derivative financial assets and that have fixed or determinable payments that are not quoted in an active market are classified as "loans and other receivables". Loans and other receivables are measured at amortised cost using the effective interest method, less any impairment. They are included in current assets, except where maturities are greater than 12 months after the reporting date, in which case they are classified as non‑current assets. The Company's loans and receivables comprise "trade and other receivables" and "cash and cash equivalents" in the statement of financial position.

 

The loan notes issued by the Company's wholly owned subsidiary UK HoldCo are held at fair value, which is included in the balance of the investments at fair value through profit or loss in the statement of financial position.

 

II) Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

i) Equity instruments

Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares that would otherwise have been avoided are written off against the balance of the share capital account as permitted by Companies (Guernsey) Law, 2008.

 

ii) Financial liabilities

Financial liabilities are classified as other financial liabilities, comprising:

 

·     loans and borrowings which are recognised initially at the fair value of the consideration received, less transaction costs. Subsequent to initial recognition, loans and borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis; and

·     other non‑derivative financial instruments, including trade and other payables, which are measured at amortised cost using the effective interest method less any impairment losses.

 

In accordance with IFRS 9, financial guarantee contracts are recognised as a financial liability. The liability is measured at fair value and subsequently in accordance with the expected credit loss model under IFRS 9. The fair value of financial guarantees is determined based on the present value of the difference in cash flows between contracted payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.

 

III) Effective interest method

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the relevant asset's carrying amount.

 

IV) Fair value estimation for investments at fair value

The Company's investments at fair value are not traded in active markets.

 

Fair value is calculated by discounting at an appropriate discount rate future cash flows expected to be received by the Company's intermediate holdings, from investments in both equity (dividends and equity redemptions), shareholder and inter-company loans (interest and repayments). The discount rates used in the valuation exercise represent the Investment Manager's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. The discount rates are reviewed on a regular basis and updated, where appropriate, to reflect changes in the market and in the project risk characteristics. The discount rates that have been applied to the financial assets at 31 March 2024 were in the range of 7.0% to 17.7% (31 March 2023: 5.75% to 10.30%). Refer to note 9 for details of the areas of estimation in the calculation of the fair value.

 

For subsidiaries which provide management/investment‑related services, the fair value is estimated to be the net assets of the relevant companies, which principally comprise cash, loans and working capital balances.

 

(g) Segmental reporting

The Board is of the opinion that the Company is engaged in a single segment of business, being investment in environmental infrastructure to generate investment returns while preserving capital. The financial information used by the Board to allocate resources and manage the Company presents the business as a single segment comprising a homogeneous portfolio.

 

(h) Statement of compliance

Pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 2020, the Company is a registered closed‑ended investment scheme. As a registered scheme, the Company is subject to certain ongoing obligations to the Guernsey Financial Services Commission, and is governed by the Companies (Guernsey) Law, 2008, as amended.

 

 

3. Critical accounting judgements, estimates and assumptions

In the application of the Company's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions about the fair value of assets and liabilities that affect reported amounts. Actual results may differ from these estimates.

 

Key sources of estimation uncertainty

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Investments at fair value through profit or loss

The fair value of environmental infrastructure investments is calculated by discounting at an appropriate discount rate future cash flows expected to be received by the Company's intermediate holdings, from investments in both equity (dividends and equity redemptions), shareholder and inter-company loans (interest and repayments). Estimates such as the cash flows are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the fair value of assets not readily available from other sources. Actual results may differ from these estimates.

 

The project cash flows used in the portfolio valuation at 31 March 2024 reflect contractual fixed price arrangements under PPAs, where they exist, and short‑term market forward prices for the next two years where they do not.

 

After the initial two-year period, the project cash flows assume future electricity and gas prices in line with a blended curve informed by the central forecasts from three established market consultants, adjusted by the Investment Manager for project-specific arrangements and price cannibalisation.

 

For the Italian investment, project cash flows assume future electricity prices informed by a leading independent market consultant's long‑term projections.

 

The power price assumptions, including the discount to the near-term power price assumptions, are a key source of estimation and uncertainty. Information on the sensitivity of the portfolio to movement in power price is disclosed in note 16.

 

Discount rates used in the valuation represent the Investment Manager's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. The discount rate is deemed to be one of the most significant unobservable inputs and any change could have a material impact on the fair value of investments. Underlying assumptions and discount rates are disclosed in note 9 and sensitivity analysis is disclosed in note 16.

 

Due to the current economic environment, the Investment Manager and the Board believe that the rate of inflation should also be a considered a key source of estimation uncertainty. Information on the sensitivity of the portfolio valuation to movements in inflation rate is disclosed in note 16.

 

Critical accounting judgements

Equity and debt investment in UK HoldCo

In applying their judgement, the Directors have satisfied themselves that the equity and debt investments in UK HoldCo share the same investment characteristics and, as such, constitute a single asset class for IFRS 7 disclosure purposes. Please refer to the accounting policies in note 2 for further detail.

 

Investment entities

The Directors consider that the Company demonstrates the characteristics and meets the requirements to be considered as an investment entity. Please refer to the accounting policies in note 2 for further detail.

 

 

4. Seasonality

Neither operating income nor profit are impacted significantly by seasonality. While meteorological conditions resulting in fluctuation in the levels of wind and sunlight can affect revenues of the Company's environmental infrastructure projects, due to the diversified mix of projects, these fluctuations do not materially affect the Company's operating income or profit.

 

 

5. Operating expenses

	Year ended	Year ended
	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
Investment management fee	8,468	8,448
Directors' fees and expenses	343	332
Administration fee	104	111
Other expenses	1,195	1,254
	10,110	10,145

 

The Company had no employees during the year (31 March 2023: nil). There was no Directors' remuneration for the year other than Directors' fees as detailed in note 15 (31 March 2023: £nil).

 

Included within other expenses is an amount of £170,775 to KPMG Channel Islands Limited for the audit of the Company for the year ended 31 March 2024 (year ended 31 March 2023: £225,000 paid to Deloitte LLP).

 

The Company paid £54,532 during the year for non‑audit services to KPMG Channel Islands Limited, all in relation to the half-year interim review (year ended 31 March 2023: £57,720 paid to Deloitte LLP).

 

 

6. Tax

Income tax expense

The Company has obtained exempt status from income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. JLEN is charged an annual exemption fee of £1,600 (year ended March 2023: £1,200).

 

The income from its investments is therefore not subject to any further tax in Guernsey, although the investments provide for and pay taxation at the appropriate rates in the countries in which they operate. The underlying tax within the subsidiaries and environmental infrastructure assets, which are held as investments at fair value through profit or loss, are included in the estimate of the fair value of these investments.

 

 

7. Dividends

	Year ended	Year ended
	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
Amounts recognised as distributions to equity holders during the year (pence per share):
Final dividend for the year ended 31 March 2023 of 1.79 (31 March 2022: 1.70)	11,841	11,246
Interim dividend for the quarter ended 30 June 2023 of 1.89 (30 June 2022: 1.78)	12,503	11,775
Interim dividend for the quarter ended 30 September 2023 of 1.89 (30 September 2022: 1.79)	12,503	11,841
Interim dividend for the quarter ended 31 December 2023 of 1.90 (31 December 2022: 1.78)	12,569	11,775
	49,417(1)	46,637(1)

(1)   Total may not cast due to rounding.

 

A dividend for the quarter ended 31 March 2024 of 1.89 pence per share was approved by the Board on 28 May 2024 and is payable on 28 June 2024.

 

 

8. Earnings/(loss) per share

Earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the time weighted average number of ordinary shares in issue during the year:

 

	Year ended	Year ended
	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
(Loss)/earnings
(Loss)/earnings for the purposes of basic and diluted earnings per share, being net profit attributable to owners of the Company	(13,937)	98,300
Number of shares
Time weighted average number of ordinary shares for the purposes of basic and diluted earnings per share	661,531,229	661,531,229

 

The denominator for the purposes of calculating both basic and diluted earnings per share is the same, as the Company has not issued any share options or other instruments that would cause dilution.

 

	Pence	Pence
Basic and diluted (loss)/earnings per share	(2.1)	14.9

 

 

9. Investments at fair value through profit or loss

As set out in note 2, the Company accounts for its interest in its 100% owned subsidiary UK HoldCo as an investment at fair value through profit or loss. UK HoldCo in turn owns investments in intermediate holding companies and environmental infrastructure projects.

 

The table below shows the movement in the Company's investment in UK HoldCo as recorded on the Company's statement of financial position:

 

	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
Fair value of environmental infrastructure investments	891,927	898,539
Fair value of intermediate holding companies	(138,355)	(81,739)
Total fair value of investments	753,572	816,800

 

Reconciliation of movement in fair value of portfolio of assets

The table below shows the movement in the fair value of the Company's portfolio of environmental infrastructure assets. These assets are held through other intermediate holding companies. The table also presents a reconciliation of the fair value of the asset portfolio to the Company's statement of financial position as at 31 March 2024, by incorporating the fair value of these intermediate holding companies.

 

		Cash, working			Cash, working
		capital and			capital and
		debt in			debt in
	Portfolio	intermediate		Portfolio	intermediate
	value	holdings	Total	value	holdings	Total
	31 Mar 2024	31 Mar 2024	31 Mar 2024	31 Mar 2023	31 Mar 2023	31 Mar 2023
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Opening balance	898,539	(81,739)	816,800	795,408	(32,553)	762,855
Acquisitions
Portfolio of assets acquired	69,221	-	69,221	72,050	-	72,050
	69,221	-	69,221	72,050	-	72,050
Growth in portfolio(1)	11,181	-	11,181	114,690	-	114,690
Yields from portfolio to intermediate holding companies	(87,014)	87,014	-	(83,609)	83,609	-
Yields from intermediate holding companies
Interest on loan notes(1)	-	(31,401)	(31,401)	-	(31,401)	(31,401)
Dividend payments from UK HoldCo to the Company(1)	-	(28,000)	(28,000)	-	(23,100)	(23,100)
	-	(59,401)	(59,401)	-	(54,501)	(54,501)
Other movements
Movement in working capital in UK HoldCo	-	(13,425)	(13,425)	-	(22,145)	(22,145)
Expenses borne by intermediate holding companies(1)	-	(15,008)	(15,008)	-	(6,245)	(6,245)
Drawdown of UK HoldCo revolving credit facility borrowings	-	(55,796)	(55,796)	-	(49,904)	(49,904)
Fair value of the Company's investment in UK HoldCo	891,927	(138,355)	753,572	898,539	(81,739)	816,800

(1)   The net loss on investments at fair value through profit or loss for the year ended 31 March 2024 is £63,228,000 (31 March 2023: net gain of £53,944,000). This, together with interest received on loan notes of £31,401,000 (31 March 2023: £31,401,000) and dividend income of £28,000,000 (31 March 2023: £23,100,000) comprises operating income and gains/(losses) on fair value of investments in the income statement.

 

The balances in the table above represent the total net movement in the fair value of the Company's investment. The "cash, working capital and debt in intermediate holdings" balances reflect investment in, distributions from or movements in working capital and are not value generating.

 

Fair value of portfolio of assets

The Investment Manager has carried out fair market valuations of the investments as at 31 March 2024. The Directors have satisfied themselves as to the methodology used and the discount rates applied for the valuation. Investments are all investments in environmental infrastructure projects and are valued using a discounted cash flow methodology, being the most relevant and most commonly used method in the market to value similar assets to the Company's. The Company's holding of its investment in UK HoldCo represents its interest in both the equity and debt instruments. The equity and debt instruments are valued as a whole using a blended discount rate and the value attributed to the equity instruments represents the fair value of future dividends and equity redemptions in addition to any value enhancements arising from the timing of loan principal and interest receipts from the debt instruments, while the value attributed to the debt instruments represents the principal outstanding and interest due on the loan at the valuation date.

 

The valuation techniques and methodologies have been applied consistently with the valuations performed since the launch of the Fund in March 2014.

 

Discount rates applied to the portfolio of assets range from 7.0% to 17.7% (31 March 2023: 5.75% to 10.30%). The weighted average discount rate of the portfolio at 31 March 2024 is 9.4% (31 March 2023: 8.4%).

 

The following economic assumptions have been used in the discounted cash flow valuations:

 

	31 Mar 2024	31 Mar 2023
UK - inflation rates	3.5% for 2024, decreasing to 3% until 2030, decreasing to 2.25% from 2031	6.5% for 2023, decreasing to 3% until 2030, decreasing to 2.25% from 2031
Italy - inflation rates	2.0% from 2024 onwards	5.3% for 2023, stepping to 2.9% for 2024, decreasing to 2.2% for 2025, decreasing to 1.9% for 2026, decreasing to 1.8% for 2027, increasing to 2.0% from 2028
UK - deposit interest rates	2.0% from 2024 onwards	2.0% for 2023, decreasing to 1.5% from 2024
Italy - deposit rates	0%	0%
UK - corporation tax rates	25% from April 2024 onwards	25% from April 2023 onwards
Italy - corporation tax rates	National rate of 24%, plus applicable regional premiums	National rate of 24%, plus applicable regional premiums
Euro/sterling exchange rate	1.17	1.14

 

Refer to note 16 for details of the sensitivity of the portfolio to movements in the discount rate and economic assumptions.

 

The assets in the intermediate holding companies substantially comprise working capital, cash balances and the outstanding RCF debt; therefore, the Directors consider the fair value to be equal to the amortised cost.

 

Details of environmental infrastructure project investments are as follows:

 

	% holding at 31 Mar 2024		% holding at 31 Mar 2023
		Shareholder		Shareholder
Project name	Equity	loan	Equity	loan
Amber	100%	100%	100%	100%
Bilsthorpe	100%	100%	100%	100%
Bio Collectors	100%	100%	70%	100%
Biogas Meden	100%	100%	100%	100%
Branden	100%	100%	100%	100%
Burton Wold Extension	100%	100%	100%	100%
Carscreugh	100%	100%	100%	100%
Castle Pill	100%	100%	100%	100%
Clayfords	50%	50%	50%	50%
CNG Foresight	25%	25%	25%	25%
Codford	100%	100%	100%	100%
Cramlington	100%	100%	100%	100%
CSGH	100%	100%	100%	100%
Dungavel	100%	100%	100%	100%
Egmere Energy	100%	100%	100%	100%
ELWA	80%	80%	80%	80%
ETA Manfredonia	45%	45%	45%	45%
Ferndale	100%	100%	100%	100%
Glasshouse	10%	100%	10%	100%
Grange Farm	100%	100%	100%	100%
Hall Farm	100%	100%	100%	100%
Icknield	53%	100%	53%	100%
Llynfi	100%	100%	100%	100%
Lunanhead	50%	50%	50%	50%
Merlin Renewables	100%	100%	100%	100%
Moel Moelogan	100%	100%	100%	100%
Monksham	100%	100%	100%	100%
New Albion Wind Farm	100%	100%	100%	100%
Northern Hydro	100%	n/a	100%	n/a
Panther	100%	100%	100%	100%
Peacehill	49%	100%	49%	100%
Pylle Southern	100%	100%	100%	100%
Rainworth	100%	100%	100%	100%
Rjukan	25%	33%	25%	33%
Sandridge	50%	50%	50%	50%
Tay	33%	33%	33%	33%
Thierbach	36%	25%	25%	25%
Lubmin	30%	5%	-	-
Vulcan	100%	100%	100%	100%
Warren	100%	100%	100%	100%
Wear Point	100%	100%	100%	100%
West Gourdie	100%	100%	100%	100%
Yorkshire Hydro	100%	n/a	100%	n/a

 

Additionally, the fair value of the portfolio of assets includes the Fund's investment into FEIP, details of which can be found on page 51 of the 2024 Annual Report.

 

Details of investments made during the year

In July 2023, the Company announced its second green hydrogen development opportunity alongside a consortium including other Foresight-managed funds and its development partner HH2E, a specialist in developing green hydrogen projects to decarbonise industry. The production site is located in Lubmin, Germany. As at 31 March 2024, the amount invested was €16.9 million.

 

In December 2023, the Company announced the acquisition of the remaining 30% shareholding in Bio Collectors Holding Limited, for a total consideration of £8.0 million, taking its ownership in the business to 100%.

 

During the year, £8.4 million was injected into CNG Foresight Limited. As at 31 March 2024, the portfolio held 14 natural gas refuelling stations, including the sites in construction phase.

 

The Group invested €3.3 million into Foresight Energy Infrastructure Partners SCSp ("FEIP") during the year.

 

The Group invested a total of £9.3 million into battery energy storage projects during the year, including £6.4 million into Sandridge battery storage, £2.0 million into FS West Gourdie, £0.5 million into Lunanhead battery storage and £0.4 million into Clayfords battery storage.

 

The Group also invested £14.3 million into Rjukan Holdings Limited, €2.6 million into Thierbach, £4.7 million into the Glasshouse project, £2.6 million into Vulcan Renewables Limited and £2.4 million to various other projects.

 

 

10. Trade and other receivables

	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
Prepayments	25	143
Balance at 31 March	25	143

 

 

11. Trade and other payables

	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
Accruals	2,654	2,518
Balance at 31 March	2,654	2,518

 

 

12. Loans and borrowings

The Company had no outstanding loans or borrowings at 31 March 2024 (31 March 2023: £nil), as shown in the Company's statement of financial position.

 

As at 31 March 2024, the Company held loan notes of £348.9 million which were issued by UK HoldCo (31 March 2023: outstanding amount of £348.9 million).

 

As at 31 March 2024, UK HoldCo had an outstanding balance of £159.3 million under a revolving credit facility (31 March 2023: £103.5 million). The loan bears interest of SONIA + 195 to 205 bps.

 

There were no other outstanding loans and borrowings in either the Company, UK HoldCo or HWT at 31 March 2024.

 

 

13. Share capital account

	Number of	31 Mar 2024	31 Mar 2023
	shares	£'000s	£'000s
Opening balance at 1 April 2023	661,531,229	664,401	664,401
Balance at 31 March 2024	661,531,229	664,401	664,401

 

At 31 March 2024, the Company's share capital is comprised of 661,531,229 fully paid-up ordinary shares of no par value.

 

 

14. Retained earnings

	31 Mar 2024	31 Mar 2023
	£'000s	£'000s
Opening balance	150,167	98,504
(Loss)/profit for the year	(13,937)	98,300
Dividends paid	(49,417)	(46,637)
Balance at 31 March	86,813	150,167

 

 

15. Transactions with Investment Manager and related parties

Transactions between the Company and its subsidiaries, which are related parties of the Company, are fair valued and are disclosed within note 9. Details of transactions between the Company and related parties are disclosed below. This note also details the terms of the Company's engagement with Foresight Group as Investment Manager.

 

Transactions with the Investment Manager

Foresight Group ("Foresight") is the Company's Investment Manager. Foresight's appointment as Investment Manager is governed by an Investment Management Agreement.

 

Foresight is entitled to a base fee equal to:

 

a)     1.0% per annum of the Adjusted Portfolio Value⁽¹⁾ of the Fund⁽²⁾ up to and including £500 million; and

b)     0.8% per annum of the Adjusted Portfolio Value of the Fund in excess of £500 million.

 

The total Investment Manager fee charged to the income statement for the year ended 31 March 2024 was £8,468,000 (31 March 2023: £8,448,000), of which £2,147,000 remained payable as at 31 March 2024 (31 March 2023: £2,057,000).

 

(1)   "Adjusted Portfolio Value" is defined in the Investment Management Agreement as:

a)    the fair value of the investment portfolio; plus

b)    any cash owned by or held to the order of the Fund; plus

c)    the aggregate amount of payments made to shareholders by way of dividend in the quarterly period ending on the relevant valuation day, less:

i.     any other liabilities of the Fund (excluding borrowings); and

ii.    any uninvested cash.

(2)   "Fund" means the Company and JLEN Environmental Assets Group (UK) Limited together with their wholly owned subsidiaries or subsidiary undertakings (including companies or other entities wholly owned by them together, individually or in any combination, as appropriate) but excluding project entities.

 

Transactions with related parties

During the year, the Directors of the Company, who are considered to be key management, received fees of £334,500 (31 March 2023: £322,480) for their services. The Directors of the Company were also paid £8,495 of expenses (31 March 2023: £9,953).

 

The Directors held the following shares:

 

	Ordinary	Ordinary
	shares	shares
	of no par	of no par
	value each	value each
	held at	held at
	31 Mar 2024	31 Mar 2023
Ed Warner	60,000	60,000
Alan Bates	12,500	12,500
Stephanie Coxon	15,000	15,000
Jo Harrison	8,066	8,066
Hans Joern Rieks	95,000	95,000
Nadia Sood	-	-

 

All of the above transactions were undertaken on an arm's length basis.

 

The Directors were paid dividends in the year of £14,235 (31 March 2023: £16,885).

 

 

16. Financial instruments

Financial instruments by category

The Company held the following financial instruments at 31 March 2024. There have been no transfers of financial instruments between levels of the fair value hierarchy. There are no non‑recurring fair value measurements.

 

	31 Mar 2024
		Financial	Financial
		assets	assets	Financial
		held at	at fair value	liabilities
	Cash and	amortised	through profit	at amortised
	bank balances	cost	or loss	cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Non‑current assets
Investments at fair value through profit or loss (Level 3)	-	-	753,572	-	753,572
Current assets
Trade and other receivables	-	25	-	-	25
Cash and cash equivalents	271	-	-	-	271
Total financial assets	271	25	753,572	-	753,868
Current liabilities
Trade and other payables	-	-	-	(2,654)	(2,654)
Total financial liabilities	-	-	-	(2,654)	(2,654)
Net financial instruments	271	25	753,572	(2,654)	751,214

 

	31 Mar 2023
		Financial	Financial
		assets	assets	Financial
		held at	at fair value	liabilities
	Cash and	amortised	through profit	at amortised
	bank balances	cost	or loss	cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Non‑current assets
Investments at fair value through profit or loss (Level 3)	-	-	816,800	-	816,800
Current assets
Trade and other receivables	-	143	-	-	143
Cash and cash equivalents	143	-	-	-	143
Total financial assets	143	143	816,800	-	817,086
Current liabilities
Trade and other payables	-	-	-	(2,518)	(2,518)
Total financial liabilities	-	-	-	(2,518)	(2,518)
Net financial instruments	143	143	816,800	(2,518)	814,568

 

The Company's investments at fair value through profit or loss are classified at Level 3 within the IFRS fair value hierarchy.

 

The Level 3 fair value measurements derive from valuation techniques that include inputs to the asset or liability that are not based on observable market data (unobservable inputs).

 

In the tables above, financial instruments are held at carrying value as an approximation to fair value unless stated otherwise.

 

Reconciliation of Level 3 fair value measurement of financial assets and liabilities

An analysis of the movement between opening and closing balances of the investments at fair value through profit or loss is given in note 9.

 

The fair value of the investments at fair value through profit or loss includes the use of Level 3 inputs. Please refer to note 9 for details of the valuation methodology.

 

Sensitivity analysis of the portfolio

The sensitivities below include the impact of the EGL.

 

The sensitivity of the portfolio to movements in the discount rate is as follows:

 

31 March 2024
Discount rate	Minus 0.5%	Base 9.4%	Plus 0.5%
Change in portfolio valuation	Increases £20.7m	£891.9m	Decreases £19.8m
Change in NAV per share	Increases 3.1p	113.6p	Decreases 3.0p

 

31 March 2023
Discount rate	Minus 0.5%	Base 8.4%	Plus 0.5%
Change in portfolio valuation	Increases £21.7m	£898.5m	Decreases £20.7m
Change in NAV per share	Increases 3.3p	123.1p	Decreases 3.1p

 

The sensitivity of the portfolio to movements in long‑term inflation rates is as follows:

 

31 March 2024
Inflation rates	Minus 0.5%	Base 3.5% (2024), then 3% to 2030, then 2.25%	Plus 0.5%
Change in portfolio valuation	Decreases £18.9m	£891.9m	Increases £19.3m
Change in NAV per share	Decreases 2.9p	113.6p	Increases 2.9p

 

31 March 2023
Inflation rates	Minus 0.5%	Base 6.5% (2023), then 3% to 2030, then 2.25%	Plus 0.5%
Change in portfolio valuation	Decreases £21.1m	£898.5m	Increases £21.4m
Change in NAV per share	Decreases 3.2p	123.1p	Increases 3.2p

 

The fair value of the investments is based on a "P50" level of electricity generation for the renewable energy assets, being the expected level of generation over the long term.

 

Wind, solar and hydro assets are subject to electricity generation risks.

 

The sensitivity of the portfolio to movements in energy yields based on an assumed "P90" level of electricity generation (i.e. a level of generation that is below the "P50", with a 90% probability of being exceeded) and an assumed "P10" level of electricity generation (i.e. a level of generation that is above the "P50", with a 10% probability of being achieved) is as follows:

 

31 March 2024
Energy yield: wind	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £28.3m	£891.9m	Increases £27.0m
Change in NAV per share	Decreases 4.3p	113.6p	Increases 4.1p

 

Energy yield: solar	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £9.3m	£891.9m	Increases £9.5m
Change in NAV per share	Decreases 1.4p	113.6p	Increases 1.4p

 

Energy yield: hydro	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £1.3m	£891.9m	Increases £1.4m
Change in NAV per share	Decreases 0.2p	113.6p	Increases 0.2p

 

 

31 March 2023
Energy yield: wind	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £27.3m	£898.5m	Increases £26.2m
Change in NAV per share	Decreases 4.1p	123.1p	Increases 4.0p

 

Energy yield: solar	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £10.7m	£898.5m	Increases £10.5m
Change in NAV per share	Decreases 1.6p	123.1p	Increases 1.6p

 

Energy yield: hydro	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £1.4m	£898.5m	Increases £1.7m
Change in NAV per share	Decreases 0.2p	123.1p	Increases 0.3p

 

Agricultural anaerobic digestion facilities do not suffer from similar deviations as their feedstock input volumes (and consequently biogas production) are controlled by the site operator.

 

For the waste & bioenergy projects, forecasts are based on projections of future input volumes and are informed by both forecasts and independent studies where appropriate. Revenues in the PPP projects are generally not very sensitive to changes in volumes due to the nature of their payment mechanisms.

 

Electricity and gas price assumptions are based on the following: for the first two years, cash flows for each project use forward electricity and gas prices based on market rates unless a contractual fixed price exists, in which case the model reflects the fixed price followed by the forward price for the remainder of the two‑year period. For the remainder of the project life, a long‑term blend of central case forecasts from three established market consultants and other relevant information is used, and adjusted by the Investment Manager for project-specific arrangements and price cannibalisation.

 

The sensitivity assumes a 10% increase or decrease in power prices relative to the base case for each year of the asset life after the first two‑year period. While power markets can experience movements in excess of +/-10% on a short‑term basis, as has been the case recently, the sensitivity is intended to provide insight into the effect on the NAV of persistently higher or lower power prices over the whole life of the portfolio. The Directors feel that +/-10% remains a realistic range of outcomes over this very long time horizon, notwithstanding that significant movements will occur from time to time.

 

The sensitivity of the portfolio to movements in electricity and gas prices is as follows:

 

31 March 2024
Energy prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Decreases £37.4m	£891.9m	Increases £37.0m
Change in NAV per share	Decreases 5.7p	113.6p	Increases 5.6p

 

31 March 2023
Energy prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Decreases £40.9m	£898.5m	Increases £40.4m
Change in NAV per share	Decreases 6.2p	123.1p	Increases 6.1p

 

Should electricity prices fall to £50/MWh, and gas prices also fall by a corresponding amount, the Company would maintain a resilient dividend cover for the next three financial years. Alternatively, should prices fall to £40/MWh, the Company would still expect to cover the dividend, albeit with reduced headroom by year three.

 

Waste & bioenergy assets (excluding Bio Collectors) do not have significant volume and price risks and therefore are not included in the above volume and price sensitivities.

 

In line with JLEN's original investment case for anaerobic digestion, the Company continues to apply the conservative valuation assumption that facilities will simply cease to operate beyond the life of their RHI tariff. In recent months, the Investment Manager has seen a growing case of evidence, including several transactional datapoints, pointing towards a positive change in market sentiment for valuing these assets - including the potential to run anaerobic digestion facilities on an unsubsidised basis.

 

In light of this change, the Investment Manager has once again provided a sensitivity extending the useful economic lives of its AD portfolio by up to five years - capped at the duration of land rights already in place. Such an extension would result in an uplift in the portfolio valuation of £21.9 million (3.3 pence per share).

 

The sensitivity of the portfolio to movements in AD feedstock prices is as follows:

 

31 March 2024
Feedstock prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Increases £8.7m	£891.9m	Decreases £8.9m
Change in NAV per share	Increases 1.3p	113.6p	Decreases 1.3p

 

31 March 2023
Feedstock prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Increases £7.3m	£898.5m	Decreases £7.8m
Change in NAV per share	Increases 1.1p	123.1p	Decreases 1.2p

 

No such sensitivity is applicable to JLEN's biomass investment, where fuel costs are tied under long-term contract.

 

The sensitivity of the portfolio to movements in corporation tax rate is as follows:

 

31 March 2024
Corporation tax	Minus 2%	Base 25%	Plus 2%
Change in portfolio valuation	Increases £13.6m	£891.9m	Decreases £13.9m
Change in NAV per share	Increases 2.1p	113.6p	Decreases 2.1p

 

31 March 2023
Corporation tax	Minus 2%	Base 25%	Plus 2%
Change in portfolio valuation	Increases £15.0m	£898.5m	Decreases £15.3m
Change in NAV per share	Increases 2.3p	123.1p	Decreases 2.3p

 

Euro/sterling exchange rate sensitivity

As the proportion of the portfolio assets with cash flows denominated in euros represents a small proportion of the portfolio value at 31 March 2024, the Directors consider the sensitivity to changes in euro/sterling exchange rates to be insignificant.

 

The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.

 

Uncontracted revenues on non-energy generating portfolio sensitivity

Non-energy generating assets, such as batteries and controlled environment agriculture and aquaculture, make up a growing proportion of the portfolio. These assets are not materially affected by either scarcity of natural resource nor power price markets. Therefore the Investment Manager has presented a sensitivity illustrating an assumed 10% increase or decrease on all uncontracted revenues for each year of the asset lives.

 

An increase in uncontracted revenues of 10% would result in an upward movement in the portfolio valuation of £17.9 million (2.7 pence per share) compared to a decrease in value of £20.2 million (3.0 pence per share) if those revenues were reduced by the same amount.

 

Capital risk management

Capital management

The Group, which comprises the Company and its non‑consolidated subsidiaries, manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances. The capital structure of the Group principally consists of the share capital account and retained earnings as detailed in notes 13 and 14, and debt as detailed in note 12. The Group aims to deliver its objective by investing available cash and using leverage whilst maintaining sufficient liquidity to meet ongoing expenses and dividend payments.

 

Gearing ratio

The Company's Investment Manager reviews the capital structure of the Company and the Group on a semi‑annual basis. The Company and its subsidiaries intend to make prudent use of leverage for financing acquisitions of investments and working capital purposes. Under the Company's Articles, and in accordance with the Company's investment policy, the Company's outstanding borrowings, excluding the debts of underlying assets, will be limited to 30% of the Company's Net Asset Value ("NAV").

 

As at 31 March 2024, the Company had no outstanding debt. However, as set out in note 12, as at 31 March 2024, the Company's subsidiary UK HoldCo had an outstanding balance of £159.3 million under a revolving credit facility (31 March 2023: £103.5 million).

 

Financial risk management

The Group's activities expose it to a variety of financial risks: capital risk, liquidity risk, market risk (including interest rate risk, inflation risk and power price risk) and credit risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

 

For the Company and the intermediate holding companies, financial risks are managed by the Investment Manager, which operates within the Board-approved policies. For the environmental infrastructure investments, due to the nature of the investments, certain financial risks (typically interest rate and inflation risks) are hedged at the inception of a project. All risks continue to be managed by the Investment Manager. The various types of financial risk are managed as follows:

 

Financial risk management - Company only

The Company accounts for its investments in its subsidiaries at fair value. Accordingly, to the extent there are changes as a result of the risks set out below, these may impact the fair value of the Company's investments.

 

Capital risk

The Company has implemented an efficient financing structure that enables it to manage its capital effectively. The Company's capital structure comprises equity only (refer to the statement of changes in equity). As at 31 March 2024, the Company had no recourse debt, although as set out in note 17, the Company is a guarantor for the RCF of UK HoldCo.

 

Liquidity risk

The Directors monitor the Company's liquidity requirements to ensure there is sufficient cash to meet the Company's operating needs.

 

The Company's liquidity management policy involves projecting cash flows and forecasting the level of liquid assets necessary to meet these. Due to the nature of its investments, the timing of cash outflows is reasonably predictable and, therefore, is not a major risk to the Company.

 

The Company was in a net cash position and had no outstanding debt at the balance sheet date. At the balance sheet date, the Group had debt of £159.3 million, being the amount drawn on the RCF.

 

Market risk - foreign currency exchange rate risk

As the proportion of the portfolio assets with cash flows denominated in euros represents a small proportion of the portfolio value at 31 March 2024, the Directors consider the sensitivity to changes in the euro/sterling exchange rate to be insignificant.

 

Where investments are made in currencies other than pounds sterling, the Company will consider whether to hedge currency risk in accordance with the Company's currency and hedging policy as determined from time to time by the Directors. A portion of the Company's underlying investments may be denominated in currencies other than pounds sterling. However, any dividends or distributions in respect of the ordinary shares will be made in pounds sterling and the market prices and NAV of the ordinary shares will be reported in pounds sterling.

 

Currency hedging may be carried out to seek to provide some protection for the level of pounds sterling dividends and other distributions that the Company aims to pay on the ordinary shares, and in order to reduce the risk of currency fluctuations and the volatility of returns that may result from such currency exposure. Such currency hedging may include the use of foreign currency borrowings to finance foreign currency assets and forward foreign exchange contracts.

 

Financial risk management - Company and non‑consolidated subsidiaries

The following risks impact the Company's subsidiaries and in turn may impact the fair value of investments held by the Company.

 

Market risk - interest rate risk

Interest rate risk arises in the Company's subsidiaries on the RCF borrowings and floating rate deposits. Borrowings issued at variable rates expose those entities to variability of interest payment cash flows. Interest rate hedging may be carried out to seek to provide protection against increasing costs of servicing debt drawn down by UK HoldCo as part of its RCF. This may involve the use of interest rate derivatives and similar derivative instruments.

 

Each infrastructure investment hedges their interest rate risk at the inception of a project. This will either be done by issuing fixed rate debt or variable rate debt which will be swapped into fixed rate by the use of interest rate swaps.

 

Market risk - inflation risk

Some of the Company's investments will have part of their revenue and some of their costs linked to a specific inflation index at inception of the project. In most cases this creates a natural hedge, meaning a derivative does not need to be entered into in order to mitigate inflation risk.

 

Market risk - power price risk

The wholesale market price of electricity and gas is volatile and is affected by a variety of factors, including market demand for electricity and gas, the generation mix of power plants, government support for various forms of power generation, as well as fluctuations in the market prices of commodities and foreign exchange. Whilst some of the Company's renewable energy projects benefit from fixed prices, others have revenue which is in part based on wholesale electricity and gas prices.

 

A decrease and/or prolonged deterioration in economic activity in the UK, for any reason, could result in a decrease in demand for electricity and gas in the market. Short‑term and seasonal fluctuations in electricity and gas demand will also impact the price at which the investments can sell electricity and gas. The supply of electricity and gas also impacts wholesale electricity and gas prices. Supply of electricity and gas can be affected by new entrants to the wholesale power market, the generation mix of power plants in the UK, government support for various generation technologies, as well as the market price for fuel commodities.

 

Volume risk - electricity generation risk

Meteorological conditions poorer than forecast can result in generation of lower electricity volumes and lower revenues than anticipated.

 

Credit risk

Credit risk is the risk that a counterparty of the Company or its subsidiaries will default on its contractual obligations it entered into with the Company or its subsidiaries. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Company and its subsidiaries mitigate their risk on cash investments and derivative transactions by only transacting with major international financial institutions with high credit ratings assigned by international credit rating agencies.

 

The Company's infrastructure investments receive regular, long‑term, partly or wholly index‑linked revenue from government departments, local authorities or clients under the Renewables Obligation Certificates and Feed‑in Tariff regimes. The Directors believe that the Group is not significantly exposed to the risk that the customers of its investments do not fulfil their regular payment obligations because of the Company's policy to invest in jurisdictions with satisfactory credit ratings.

 

Given the above factors, the Board does not consider it appropriate to present a detailed analysis of credit risk.

 

The Company's maximum exposure to credit risk is the £348.9 million owed by HoldCo, detailed in note 12.

 

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group adopts a prudent approach to liquidity management by ensuring it maintains adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

 

The Directors monitor the Company's liquidity requirements to ensure there is sufficient cash to meet the Company's operating needs.

 

The Company's liquidity management policy involves projecting cash flows and forecasting the level of liquid assets required to meet its obligations. Due to the nature of its investments, the timing of cash outflows is reasonably predictable and, therefore, is not a major risk to the Group.

 

Debt raised by asset investments from third parties is without recourse to the Group.

 

 

17. Guarantees and other commitments

As at 31 March 2024, the Company provided a guarantee over the Company's wholly owned subsidiary UK HoldCo's obligations under the £200 million RCF, which was subsequently refinanced post balance sheet date.

 

As at 31 March 2024, the Group has the following future investment obligations over a 12-month horizon: €3.6 million (equivalent to £3.0 million) to FEIP, £1.4 million to the CNG Foresight project, 158.4 million NOK (equivalent to £11.6 million) to the CE Rjukan project, £0.9 million to the CE Glasshouse project, £4.2 million to Sandridge battery storage, €0.6 million (equivalent to £0.5 million) to HH2E Werk Thierbach GmbH, £0.1 million to the private wire, £3.5 million to Vulcan gas shipping, £0.1 million into Clayfords, £0.2 million into Lunanhead, CE Glasshouse project deferred consideration of £0.4 million, £0.6 million into Vulcan D2 feeder value enhancements and £0.1 million into Vulcan off gas value enhancements.

 

The Company had no other commitments or guarantees.

 

 

18. Subsidiaries

The following subsidiaries have not been consolidated in these financial statements as a result of applying the requirements of "Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 27)":

 

		Place of	Registered	Ownership
Name	Category	business	office	interest	Voting rights
JLEN Environmental Assets Group (UK) Limited(1)	Intermediate holding	UK	A	100%	100%
HWT Limited	Intermediate holding	UK	B	100%	100%
JLEAG Solar 1 Limited	Operating subsidiary	UK	C	100%	100%
Cross Solar PV Limited	Operating subsidiary (dormant)	UK	C	100%	100%
Domestic Solar Limited	Operating subsidiary (dormant)	UK	C	100%	100%
Residential PV Trading Limited	Operating subsidiary (dormant)	UK	C	100%	100%
Easton PV Limited	Project holding company	UK	D*	100%	100%
Pylle Solar Limited	Project holding company	UK	D*	100%	100%
Second Energy Limited	Operating subsidiary	UK	D*	100%	100%
ELWA Holdings Limited	Project holding company	UK	N	80%	80%
ELWA Limited(2)	Operating subsidiary	UK	N	80%	81%(2)
JLEAG Wind Holdings Limited	Project holding company	UK	A	100%	100%
JLEAG Wind Limited	Project holding company	UK	A	100%	100%
Amber Solar Parks (Holdings) Limited	Project holding company	UK	D	100%	100%
Amber Solar Park Limited	Operating subsidiary	UK	D	100%	100%
Fryingdown Solar Park Limited	Operating subsidiary (dormant)	UK	D	100%	100%
Five Oaks Solar Parks Limited	Operating subsidiary (dormant)	UK	D	100%	100%
Bilsthorpe Wind Farm Limited	Operating subsidiary	UK	F	100%	100%
Ferndale Wind Limited	Project holding company	UK	F	100%	100%
Castle Pill Wind Limited	Project holding company	UK	F	100%	100%
Wind Assets LLP	Operating subsidiary	UK	F	100%	100%
Hall Farm Wind Farm Limited	Operating subsidiary	UK	F	100%	100%
Branden Solar Parks (Holdings) Limited	Project holding company	UK	D	100%	100%
Branden Solar Parks Limited	Operating subsidiary	UK	D	100%	100%
KS SPV 3 Limited	Operating subsidiary	UK	D	100%	100%
KS SPV 4 Limited	Operating subsidiary	UK	D	100%	100%
Carscreugh Renewable Energy Park Limited	Operating subsidiary	UK	F	100%	100%
Wear Point Wind Limited	Operating subsidiary	UK	F	100%	100%
Monksham Power Ltd	Project holding company	UK	D	100%	100%
Frome Solar Limited	Operating subsidiary	UK	D*	100%	100%
BL Wind Limited	Operating subsidiary	UK	F	100%	100%
Burton Wold Extension Limited	Operating subsidiary	UK	F	100%	100%
New Albion Wind Limited	Operating subsidiary	UK	F	100%	100%
Dreachmhor Wind Farm Limited	Operating subsidiary	UK	F	100%	100%
France Wind GP Germany GmbH(3)	Project holding company	DE	G	100%	100%
France Wind Germany GmbH & Co. KG(3)	Project holding company	DE	G	100%	100%
CSGH Solar Limited	Project holding company	UK	A	100%	100%
CSGH Solar (1) Limited	Project holding company	UK	A	100%	100%
sPower Holdco 1 (UK) Limited	Project holding company	UK	D	100%	100%
sPower Finco 1 (UK) Limited	Project holding company	UK	D	100%	100%
Higher Tregarne Solar (UK) Limited	Operating subsidiary	UK	D	100%	100%
Crug Mawr Solar Farm Limited	Operating subsidiary	UK	D	100%	100%
Golden Hill Solar (UK) Limited	Project holding company	UK	D	100%	100%
Golden Hill Solar Limited	Operating subsidiary	UK	D	100%	100%
Shoals Hook Solar (UK) Limited	Operating subsidiary	UK	D	100%	100%
CGT Investment Limited	Project holding company	UK	H	100%	100%
CWMNI GWYNT TEG CYF	Operating subsidiary	UK	H	100%	100%
Moelogan 2 (Holdings) Cyfyngedig	Project holding company	UK	H	100%	100%
Moelogan 2 C.C.C.	Operating subsidiary	UK	H	100%	100%
Vulcan Renewables Limited	Operating subsidiary	UK	I	100%	100%
Llynfi Afan Renewable Energy Park (Holdings) Limited	Project holding company	UK	F	100%	100%
Llynfi Afan Renewable Energy Park Limited	Operating subsidiary	UK	F	100%	100%
Green Gas Oxon Limited	Project holding company	UK	J	52.6%	52.6%
Icknield Gas Limited	Operating subsidiary	UK	J	52.6%	52.6%
Egmere Energy Limited	Operating subsidiary	UK	I	100%	100%
Grange Farm Energy Limited	Operating subsidiary	UK	I	100%	100%
Merlin Renewables Limited	Operating subsidiary	UK	I	100%	100%
Biogas Meden Limited	Operating subsidiary	UK	I	100%	100%
Yorkshire Hydropower Holdings Limited	Project holding company	UK	F	100%	100%
Yorkshire Hydropower Limited	Operating subsidiary	UK	F	100%	100%
Warren Power Limited	Project holding company (dormant)	UK	I	100%	100%
Warren Energy Limited	Operating subsidiary	UK	I	100%	100%
Northern Hydropower Holdings Limited	Project holding company	UK	F	100%	100%
Northern Hydropower Limited	Operating subsidiary	UK	F	100%	100%
Codford Biogas Limited	Operating subsidiary	UK	K	100%	100%
FS West Gourdie Limited	Operating subsidiary	UK	D	100%	100%
Rainworth Energy Limited	Operating subsidiary	UK	L	100%	100%
Bio Collectors Holdings Limited	Project holding company	UK	M	100%	100%
Bio Collectors Limited	Operating subsidiary	UK	M	100%	100%
Riverside Bio Limited	Operating subsidiary	UK	M	100%	100%
Riverside AD Limited	Operating subsidiary	UK	M	100%	100%
Spruce Bioenergy Limited	Project holding company	UK	A	100%	100%
Cramlington Renewable Energy Developments Limited	Operating subsidiary	UK	N	100%	100%

(1)   JLEN Environmental Assets Group (UK) Limited is the only entity directly held by the Company.

(2)   ELWA Holdings Limited holds 81% of the voting rights and a 100% share of the economic benefits in ELWA Limited.

(3)   Underlying French wind assets were disposed of in January 2022.

 

Registered offices

A.   C/O Foresight Group LLP, The Shard, 32 London Bridge Street, London SE1 9SG

B.   50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ

C.   C/O Freetricity, 1 Filament Walk, Suite 203, Wandsworth, London SW18 4GQ

D.   Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF

E.   Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU

F.   C/O Res White Limited, Beaufort Court, Egg Farm Lane, Kings Langley, Hertfordshire WD4 8LR

G.  Steinweg 3-5, Frankfurt am Main, 60313, Germany

H.   Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy LL28 5UN

I.    10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD

J.   Friars Ford, Manor Road, Goring, Reading RG8 9EL

K.   C/O External Services Limited 20 Central Avenue, St Andrews Business Park, Norwich NR7 0HR

L.   C/O Material Change, The Watering Farm, Creeting St. Mary, Ipswich, Suffolk IP6 8ND

M.  10 Osier Way, Mitcham, Surrey CR4 4NF

N.   8 White Oak Square, London Road, Swanley BR8 7AG

 

D*  Post balance sheet registered office address changed from Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF to C/O Foresight Group LLP, The Shard, 32 London Bridge Street, London SE1 9SG.

 

 

19. Events after balance sheet date

A dividend for the quarter ended 31 March 2024 of 1.89 pence per share, amounting to £12.5 million, was approved by the Board on 28 May 2024 for payment on 28 June 2024.

 

On 13 June 2024, the Fund successfully refinanced its revolving credit facility with a three-year agreement with ING, HSBC, RBSI, NAB and Clydesdale Bank, which provides for a committed facility of £200 million (of which £159.3 million was drawn at the balance sheet date), with an uncommitted accordion facility of up to £30 million and an uncommitted option to extend for a further year. The margin can vary between 205 bps and 215 bps over SONIA (Sterling Overnight Index Average) for sterling drawings and Euribor (Euro Interbank Offered Rate) for euro drawings, depending on the Company's performance against predefined ESG targets.

 

 

ALTERNATIVE PERFORMANCE MEASURES ("APMs")

 

APM	Purpose	Calculation	APM value	Reconciliation to IFRS
Total shareholder return (since IPO and annualised)	Measure of financial performance, indicating the amount an investor reaps from investing since IPO and expressed as a percentage (annualised or total since IPO of the Fund)	Since IPO: closing share price as at 31 March 2024 plus all dividends since IPO assumed reinvested, divided by the share price at IPO, expressed as a percentage	68.4%	Calculation for total shareholder return since IPO: closing share price as at 31 March 2024, as per key investments metrics on page 103 of the 2024 Annual Report plus all dividends since IPO assumed reinvested, divided by the share price at IPO, expressed as a percentage
		Annualised: closing share price as at 31 March 2024 plus all dividends since IPO assumed reinvested, divided by the share price at IPO, to the power of one over the number of years since IPO, expressed as a percentage	5.4% annualised	Calculation for annualised total shareholder return: closing share price as at 31 March 2024 as per key investment metrics on page 103 of the 2024 Annual Report plus all dividends since IPO assumed reinvested, divided by the share price at IPO, to the power of one over the number of years since IPO, expressed as a percentage
Net Asset Value per share	Allows investors to gauge whether shares are trading at a premium or a discount by comparing the Net Asset Value per share with the share price	The net assets divided by the number of ordinary shares in issuance	113.6 pence	The calculation divides the net assets as per the statement of financial position on page 146 of the 2024 Annual Report by the closing number of ordinary shares in issue as per note 13 on page 159 of the 2024 Annual Report.
Market capitalisation	Provides an indication of the size of the Company	Closing share price as at 31 March 2024 multiplied by closing number of ordinary shares in issuance	£619.9 million	The calculation uses the closing share price as at 31 March 2024 as per the key investment metric table on page 103 of the 2024 Annual Report and closing number of ordinary shares as per note 13 of the financial statements on page 159 of the 2024 Annual Report.
Gross Asset Value ("GAV")	A measure of the value of the Company's total assets   Gross Asset Value on investment basis including debt held at SPV level	The sum of total assets of the Company as shown on the statement of financial position and the total debt of the Group and underlying investments	£1,091.8 million	This is the total debt (RCF drawn: £159.3 million plus project-level debt: £181.3 million) plus the Net Asset Value as per the statement of financial position on page 146 of the 2024 Annual Report.
Gearing	Ascertain financial risk in the Group's balance sheet	Total debt of the Group and underlying investments as a percentage of GAV	31.2%	The calculation uses the total debt (RCF drawn: £159.3 million plus project-level debt: £181.3 million) and shows this as a percentage of the GAV
Distributions, repayments and fees from portfolio	A measure of performance from the underlying portfolio	Total cash received from investments in the period	£87.0 million	As per "Cash flows of the Group for the year", also titled "Cash distributions from environmental infrastructure investments" on page 106 of the 2024 Annual Report.
Cash flow from operations of the Group	Gauge operating revenues and expenses of the Group	As per the "Cash flows of the Group for the year" table on page 106 of the 2024 Annual Report, the calculation takes the cash distributions from environmental infrastructure investments and subtracts the following: administrative expenses, Directors' fees and expenses, Investment Manager's fees, financing costs (net of interest income)	£64.2 million	Detailed breakdown as per page 106 of the 2024 Annual Report in the "Cash flows of the Group for the year"
Cash dividend cover	Investors can gauge the ability of the Group to generate cash surplus after payment of dividend	Cash flow from operations of the Group divided by dividend paid within the reporting period	1.30x	The calculation uses the cash flows from operations as per "Cash flows of the Group for the year" on page 106 of the 2024 Annual Report and the dividends paid in cash to shareholders as per the cash flow statement on page 148 of the 2024 Annual Report
Ongoing charges ratio	A measure of the annual reduction in shareholder returns due to operational expenses, based on historical data	The ongoing charges have been calculated, in accordance with AIC guidance, as annualised ongoing charges (i.e. excluding acquisition costs and other non‑recurring items) divided by the average published undiluted Net Asset Value in the period. Total annualised ongoing charges include Investment Manager fees, legal and professional fees, administration fees, Directors' fees	1.24%	Annualised ongoing charges for the year ended 31 March 2024 have been calculated as £9.7 million. The ongoing charges ratio divides this by the published average Net Asset Value over the last four quarters (including 31 March 2024)
Annualised NAV total return since IPO	Measure of financial performance (annualised), which indicates the movement of the value of the Company since IPO	Closing NAV per ordinary share as at 31 March 2024 plus all dividends since IPO assumed reinvested, divided by the NAV at IPO, to the power of one, over the number of years since IPO	8.0%	Calculated using the closing NAV per ordinary share as per the statement of financial position on page 146 of the 2024 Annual Report.