Net Asset Value, Portfolio Update and Dividend
17 May 2022
JLEN ENVIRONMENTAL ASSETS GROUP LIMITED
("JLEN" or the "Company")
Net Asset Value, Portfolio Update and Dividend Declaration
Net Asset Value
JLEN, the listed environmental infrastructure fund, is pleased to announce an unaudited Net Asset Value as at 31 March 2022 of £762.9 million (115.3 pence per share), an increase of 14.6 pence per share since the last published NAV as at 31 December 2021. The key drivers for this uplift are as follows:
NAV at 31 December 2021 100.7
Dividends paid in the period (1.7p)
Power prices (excluding assets previously held at acquisition cost) 5.0p
Power prices (assets previously held at acquisition cost) 8.4p
Discount rate changes 1.0p
Other movements (0.7p)
NAV at 31 March 2022 115.3p
Short term wholesale electricty and gas prices have increased dramatically over the last 12 months. Electricity prices for the current Summer '22 season almost tripled from April 2021 to March 2022. Gas prices were even more volatile with an increase of more than five times from April 2021 to the peak during March 2022, before falling back in April 2022 to a level still more than three times higher than a year earlier. Increases in prices across the wind, solar and anaerobic digestion ("AD") assets, including from the effect of replacing expiring Power Purchase Agreements ("PPAs") with new fixed price arrangements, have increased the NAV by 5.0p.
In addition to this, a further 8.4p has been generated from changes in electricity price assumptions at two bio-energy projects that were previously held at acquisition cost in the 31 December 2021 valuation. These assets, ETA Energy-from-Waste in Italy and Cramlington biomass CHP ("Cramlington") in the UK, were acquired in the summer of 2021, prior to the subsequent significant increases in prices that have been seen in gas and electricity markets. Both are baseload generators and had limited fixed price contracts in place at the time of acquisition, making them well-placed to benefit from recent rises.
JLEN's policy is to reflect contractual fixed price arrangements, 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 for project-specific arrangements and price cannibalisation as required. At the valuation date, the extent of generation subject to fixes is as follows:
AD - electric
AD - gas
On an equivalent MWh basis across the electricity and gas generating assets, the portfolio is 76% fixed for Summer '22, 64% fixed for Winter '22 and 47% fixed for Summer '23. When considered together with the high proportion of revenues that are derived from subsidies and long term contracts, JLEN has a high degree of confidence over revenues, subject to operational performance.
The portfolio valuation includes actual inflation prior to the valuation date. RPI inflation (being the key index referenced in subsidy and contractual mechanisms in JLEN's portfolio) is then assumed to be 5% for the remainder of 2022, before reverting to JLEN's established assumption of 3% until 2030, dropping to 2.25% thereafter. The combination of higher actual and near term inflation has added 2.6p to the NAV.
Discount rates have been reduced for onshore wind projects in line with observed market benchmarks. The discount rate for JLEN's investment in low-carbon refuelling infrastructure has also been reduced as the rollout of new sites has continued satisfactorily. A risk premium has been added to the discount rate for Cramlington, as this asset is the most sensitive to changes in near term electricity prices. It is expected that the premium will be removed progressively as uncertainty around actual prices captured reduces. Cramlington currently has 50% of merchant revenues fixed for the current Summer '22 season.
The net effect of changes to discount rates is to increase the NAV by 1.0p.
During the financial year to 31 March 2022, the renewables portfolio of the Company was 6% below target in terms of energy generated. Low wind resource was a primary driver of this as the UK experienced its lowest wind speeds for 20 years over the summer months of 2021. Positive performances against target generation came from the AD and solar portfolios. The waste and bioenergy sub-sector, which is now the second largest contributor to generation on the portfolio, was also below target and the Investment Manager has been working on installing upgrades to improve resilience and value enhancements where identified, particularly on the newly acquired assets.
The waste and wastewater concession-based projects continue to deliver distributions in line with expectations and have performed well against contractual targets.
The portfolio of CNG refuelling stations acquired in December 2021 performed extremely well over the financial year and 16% more CNG was dispensed than was targeted for the year. Two further refuelling stations were successfully completed over the year, giving a total of eight stations with another station due to be completed later this year.
Over the course of the year, JLEN has continued to grow its portfolio by acquiring three new assets. This includes two assets which further diversify the Company's portfolio into biomass CHP and energy-from-waste and two investments into battery storage assets.
At the year end, the battery assets, one CNG refuelling station and certain investments in European renewables projects, held through JLEN's commitment to FEIP, are in construction and are valued at cost.
The Company also announces a quarterly interim dividend of 1.70 pence per share for the period from 1 January 2022 to 31 March 2022.
Together with the interim dividends paid during the financial year to date of 5.1 pence per share, the Company will have paid total dividends of 6.80 pence per share in respect of the year ended 31 March 2022, in line with the dividend target set out in the 2021 Annual Report.
The Company also announces an increase in the target dividend for the upcoming financial year of 5 per cent to 7.141 pence per share for the financial year to 31 March 2023.
2 June 2022
3 June 2022
24 June 2022
This announcement contains information that is inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014.
For further information, please visit www.jlen.com or contact:
+44(0)20 3667 8100
Winterflood Investment Trusts
+44(0)20 3100 0000
+44(0)20 3757 6882
Sanne Fund Services
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 2023 is 7.14 pence per share1. The dividend is payable quarterly.
Further details of the Company can be found on its website www.jlen.com
(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.