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Interim Results Presentation - JLEN€¦ · Interim Results Presentation November 2018. 2 Contents Contents JLEN Overview & Team Interim Results Highlights Portfolio Overview Portfolio

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  • Interim Results PresentationNovember 2018

  • 2

    Contents

    Contents

    JLEN Overview & Team

    Interim Results Highlights

    Portfolio Overview

    Portfolio Performance

    Portfolio Valuation

    Funding

    Financial Performance

    Environmental & Social Impact

    Pipeline

    Outlook

    Appendices

    Page

    3

    5

    7

    10

    13

    17

    18

    20

    21

    23

    25

  • 3

    Overview of JLEN

    Investment profile

    Diversified portfolio of environmental infrastructure projects –

    long-term, predictable, wholly or partially inflation linked cash flows

    • Invests in operational projects

    with well established

    technologies and demonstrable

    track record of operational

    performance

    • 27 wind, solar, waste and

    wastewater and anaerobic

    digestion projects in the UK and

    France

    Investment returns

    • Sustainable dividend, paid

    quarterly, targeted to increase

    progressively in line with

    inflation. 3.255p per share

    declared for the six months to 30

    September 2018 (year to 30

    September 2017: 3.16p)

    • Target net IRR of 7.5% to

    8.5% over longer term

    Future growth

    • First Offer Agreement over

    pipeline of existing assets from

    John Laing Group plc

    • Active secondary market for

    third party asset purchases

    Management

    • Independent Board of five non-

    executive directors

    • Experienced Investment Adviser:

    John Laing Capital Management

  • 4

    JLEN Senior Management Team

    Chris Tanner Director

    18 year experience in infrastructure (PPPS, economic infrastructure and renewables)

    Ben FieldInvestment Manager

    • Origination and transaction activities

    • Chartered Financial Analyst®

    • BSc in Mathematics from the University

    of Durham

    Joe HardyHead of Wind

    • Technical and operational management

    for the wind assets

    • Previous role Head of Asset Management at

    Temporis Capital

    • Juris Doctor, Southwester Law School;

    • BA Economics for Business Management

    Will MezzuloHead of Anaerobic Digestion

    • Technical and operational management

    for the AD assets

    • Previously AD Portfolio Manager at

    Oxford Capital

    • PhD in Mechanical Engineering from

    the University of Bath

    Joe MileticHead of Solar

    • Technical and operational management

    for the solar assets

    • Previously Head of Engineering at

    Armstrong Energy,

    • Adv. Masters Degree in Renewable Energy from

    MINES Paristech

    • Formerly Corporate Finance Director of John Laing’s renewable energy business and Principal in Henderson’s private

    equity infrastructure team

    • Chartered Accountant with MA from

    Oxford University

    Chris HolmesDirector

    20 year experience in infrastructure (PPPS, economic infrastructure and renewables)

    • Formerly Managing Director and Head of Waste & Bioenergy at the Green Investment Group (formerly UK Green

    Investment Bank plc)

    • BA from Durham University

    Jane TangInvestment Director

    • JLCM lead for bids and acquisitions

    • Chartered Financial Analyst®

    • BA in Business Administration from the National

    University of Singapore

    Joe LinneyHead of Portfolio

    • Responsible for major portfolio initiatives

    • Qualified Quantity Surveyor

    • Over 20 years in infrastructure

    construction and operations

    Muxin MaInvestment Director

    • JLCM lead for bids and acquisitions

    • Chartered Financial Analyst®

    • MSC Investment Management from

    Cass Business School

    • ESCP degree in Finance & BA from

    Peking University, China

    Christian CorpettiDirector of Finance

    • JLCM finance director

    • Chartered Certified Accountant

    • Previously portfolio financial controller

    • Extensive financial experience in the UK and

    continental Europe

  • 5

    Highlights

    • NAV per share 100.4p (March 2018: 99.6p)

    • Portfolio value of £488.9m (March 2018:

    £429.5m)

    • Dividend of 3.255p declared for the six

    month period

    • Dividend cover of 1.3x during the period

    (cash flow basis) and 1.2x on a dividend

    declared basis

    • Three acquisitions completed during the half

    year for a total consideration of £54.1m

    • Portfolio consists of 27 assets with 274.2MW

    capacity

    • All acquisitions completed in period in

    anaerobic digestion sector

    • Vulcan capital upgrade project underway

    expected to result in a doubling of capacity

    • Extension to £130m Revolving Credit Facility

    achieved, now expiring June 2021

    • Significantly over-subscribed fund-raising

    resulting in £105m of new equity capital

    occurred post-balance sheet

    • Share Issuance programme in place until

    February 2019

    Performance Portfolio Funding

  • 6

    Timeline – HY 2018

    July 18

    • Completed the acquisition of Egmere Energy AD plant for a total consideration of c.£18.2m

    August 18

    • Completed the acquisition of an anaerobic digestion (AD) asset, Merlin Renewables Limited for a total consideration, including working capital, of c. £18.1 million.

    October 18

    • Raised gross proceeds of £105 million through the issue of 102.9 million new ordinary shares.

    June 18

    • Committed to invest a further c. £8.5 million into the Vulcan Renewables AD plant to significantly expand the plants biomethane and generating capacity.

    • Paid a dividend of 1.5775 pence per share (relating to the three-month period ending 31 March 2018)

    • RCF extension granted until June 2021

    September 18

    • Paid a dividend of 1.5775 pence per share (relating to the three-month period ending 30 June 2018.

    30th Sep 18 – Balance Sheet

    July 18

    • Completed the acquisition of Grange Farm Energy AD plant for a total consideration of c.£18.4m

  • 7

    Portfolio overview as at 30 September 2018

    Wind Solar

    Anaerobic Digestion

    Waste & wastewater

    Bilsthorpe – 100%, 10.2MW, ROC

    Burton Wold – 100%, 14.4MW, ROC

    Carscreugh – 100%, 15.3MW, ROC

    Castle Pill – 100%, 3.2MW, ROC

    Dungavel – 100%, 26MW, ROC

    Ferndale – 100%, 6.4MW, ROC

    Hall Farm – 100%, 24.6MW, ROC

    Le Placis Vert – 100%, 4MW, FiT

    Llynfi – 100%, 24MW, ROC

    Moel Moelogan – 100%, 14.3MW, ROC/NFFO

    New Albion – 100%, 14.4MW, ROC

    Plouguernével – 100%, 4MW, FiT

    Wear Point – 100%, 8.2MW, ROC

    Amber – 100%, 9.8 MW, UK FiT

    Branden – 100%, 14.7MW, ROC

    CSGH Solar – 100%, 33.5MW, ROC

    Monksham – 100%, 10.7MW, ROC

    Pylle Southern – 100%, 5MW, FiT

    Panther Solar – 100%, 6.5MW, FiT

    Vulcan Renewables – 100%, RHI, FiT

    Icknield – 40%, RHI, FiT

    Egmere – 100%, RHI, FiT

    Grange Farm – 100%, RHI, FiT

    Merlin – 100%, RHI FiT

    D&G – 80%, PFI for Council

    ELWA – 80%, PFI for Waste Authority

    Tay – 33%, PFI for Scottish Water

  • 8

    Portfolio analysis at 30 September 2018

    Portfolio value split by sector

    Portfolio value split by inflation linkage* Portfolio value split by revenue type* Portfolio value split by operator exposure (% of total cost)

    Portfolio value split by geography Portfolio value split by asset life (years)

    *Based on project revenues from volumes/generation over the previous year and assumes project cash flow distributions reflect revenue split at each project.

  • 9

    Portfolio performance

    Anaerobic Digestion

    • Encouraging performance across portfolio with cumulative generation of 125 GWh in the reporting period

    • Generation performance 4% above budget

    • Minimal unplanned downtime

    • Good availability

    Anaerobic digestion

    Generation

    Q1 FY 2018 (GWh) 62

    Q2 FY 2018 (GWh) 63

    Total actual generation (GWh) 125

    Variation from budget

    30 September 2018 +4%

  • 10

    Portfolio performance

    Wind

    • No material outage or performance issues

    • Cumulative generation across all sites 151 GWh in the reporting period

    • Low wind speeds in summer led to wind assets performing below budget by -12%

    • Generation includes agreed curtailment at Carscreugh where project paid to switch off as requested by network operator

    Wind

    Generation

    Q1 FY 2018 (GWh) 77

    Q2 FY 2018 (GWh) 74

    Total actual generation (GWh) 151

    Variation from budget

    30 September 2018 -12%

  • 11

    Portfolio performance

    Solar

    • Improved generation due to high irradiation compared to previous period

    • Total generation across solar portfolio of 57 GWh in the reporting period ahead of budget by 2%

    • Switchgear repair and transformer replacement in May at Branden project

    • Temperature 1-2 degrees higher on average vs long-term expectations, impacting on performance

    Solar

    Generation

    Q1 FY 2018 (GWh) 30

    Q2 FY 2018 (GWh) 27

    Total actual generation (GWh) 57

    Variation from budget

    30 September 2018 +2%

  • 12

    Portfolio performance

    Waste and Wastewater

    • ELWA waste management continued to perform in line with expectations – key contractual targets met

    • Tay wastewater experiencing dry conditions, with flows below expectations

    • D&G concession agreement terminated during period with no further liability for JLEN as majority shareholder of ProjectCo

    Tay project

  • 13

    Portfolio valuation movement

  • 14

    Portfolio valuation methodology

    • Short term

    Approach remains unchanged – Price assumptions reflect Winter/Summer market forwards unless fixed price arrangements in place. 78% of the

    portfolio was subject to a fixed price for the winter 2018 season and 43% for the summer 2019 season.

    • Medium to Long term

    Change in valuation policy, switching to the use of a blended curve informed by two market consultants’ medium and long-term future power price

    assumptions – impact of 0.7 pence per share compared to the forecast used at the last year end

    • Implied real rate of growth from valuation date of 0.4% per annum

  • 15

    • Overall WADR increase by 10 basis points to

    8.2% (8.1% at 31 March 2018) due to

    anaerobic digestion acquisitions

    • Discount rate range 6.5% - 9.8%

    • Discount rate benchmarks for UK

    agricultural AD projects are reducing.

    We will continue to monitor this for future

    valuations.

    • Strong demand for income-producing

    infrastructure assets, including

    environmental infrastructure projects

    Portfolio Valuation – Key Assumptions

    Economic

    UK RPI Assumptions

    30 September 2018

    31 March 2018

    Valuation Reporting Date

    3.4% 3.5%

    2019 and 20203.1% and

    3.0%3.0% and

    2.75%

    2021 Onwards 2.75% 2.75%

    • Inflation, corporation tax and deposit

    interest rates have remained relatively

    constant over the period

    • RPI rates :

    Discount rate Value enhancements

    • Good progress with Vulcan AD plant’s

    capital expansion to double the plant’s

    capacity without interfering with ongoing

    operations and performance – completion

    expected late 2019

    • Wind portfolio MSA retender advanced to

    final stages of selection of new service

    providers at lower price – new providers

    expected to transfer in Q1 2019

  • 16

    NAV Sensitivity Analysis

    -20p -15p -10p -5p p 5p 10p 15p 20p

    Discount rate (+/- 0.5%)

    Energy prices (-/+ 10%)

    Inflation rate (-/+ 0.5%)

    £(17.1m) £18.1m

    £(23.2m)

    £(19.5m)

    £38.9m

    £22.6m

    Energy Yield (P90/P10) £(41.3m)

    £20.3m

  • 17

    Leverage use at 30 September 2018

    • Overall fund gearing = 48% including RCF drawn balance

    • RCF is for acquisitions and not long-term – intended to be refinanced by equity raises

    • All repayments of long-term debt included in project cashflows of existing portfolio assets and in dividend cover calculations

    • Project finance approach means portfolio resilient to future general debt market tightening

    Technology % Portfolio Revenue Sources Leverage of as % of GPV

    Solar 25% Merchant Power, Green Benefits 19%

    Wind 46%Merchant Power, Green Benefits

    41%

    Anaerobic digestion 18% Merchant Power, Green Benefits 0%

    Sub-Total 89% 29%

    PFI/PPP Waste and Water treatment

    11% Authority payments 54%

    Total 100% 36%

  • 18

    Financial performance – Summary

    30 September 2018 (£m) 30 March 2018 (£m)

    Portfolio valuation 488.9 429.5

    Cash 10.0 11.8

    Net Debtors 0.4 (0.5)

    Revolving credit facility (103.6) (48.4)

    Net assets 395.7 392.4

    Number of shares in issue 394.1 394.1

    Net asset value per share (penceper share)

    100.4p 99.6p

  • 19

    Financial performance – Group cash flow

    Six months ended

    30 Sep 2018(unaudited)

    £m

    Six months ended

    30 Sep 2017(unaudited)

    £mCash received from environmental infrastructure investments 20.7 15.4

    Administrative expenses (0.4) (0.6)

    Directors’ fees and expenses (0.1) (0.1)

    Investment advisory fee (2.2) (1.8)

    Financing costs (net of interest income) (1.3) (0.8)

    Cash flow from operations 16.7 12.1

    (Expenses) / net proceeds from share issues (0.3) 39.5

    Drawdown under the revolving credit facility 55.2 3.3

    Arrangement fee for revolving credit facility (0.4) (1.2)

    Acquisition of investment assets (58.7) (52.8)

    Acquisition costs (including stamp duty) (1.7) (1.4)

    Dividends paid in cash to shareholders (12.6) (11.2)

    Cash movement in the period (1.8) (11.7)

    Opening cash balance 11.8 26.1

    Group cash balance at 30 September 10.0 14.4

  • 20

    Environmental & Social Impact

    • The Vulcan Renewables Community Fund supports projects

    and community groups located within a mile from the biogas

    plant.

    • Locals can apply for funding through the selection criteria of

    social sustainability, environmental sustainability and

    education promotion.

    Community funding

    • Four places offered under apprenticeship programme for a 4

    year Engineering Maintenance Apprenticeship with Future

    Biogas.

    • Onsite experience, college tuition and different sites exposure

    with maintenance team

    Apprenticeships

    • Aardvark commissioned to conduct analysis of our

    environmental impact our projects deliver.

    • Aim - to measure the greenhouse gas emissions savings and

    other environmental benefits achieved through JLEN’s

    projects.

    • Metrics - forecast CO2, CH4 and N20 emissions avoided per

    year

    Green impact Green impact – Vulcan Case Study

  • 21

    0

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    2008 2009 2010 2011 2012 2013 2014 2015 2016

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    er o

    f o

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    nal

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    Other

    Municipal/ commercialwaste

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    Mixed agricultural/municipal/ commercial

    Agricultural

    Market Snapshot – Pipeline Context

    • UK renewable energy share of power generation hit a record of 31.7% in Q2 2018 due to increased renewable capacity boosted by record breaking solar generation over the period.

    • Shift in focus to bioenergy sector with the benefits of subsidies; diversification from intermittent assets and early mover advantage in growth market.

    • IEA named bioenergy the “overlooked giant within renewable energy” with the forecast of this technology to account for 30% of the global growth of renewable consumption over the period of 2018-2023.

    • Strong pipeline from third party sources and John Laing Group under the First Offer Agreement (FOA)

    • Continue to monitor attractive opportunities across several environmental asset classes in the UK and overseas.

    Cumulative growth of number of AD plants in UK

    Source: ADBA

    Bioenergy35%

    Onshore wind22%

    Offshore wind20%

    Solar19%

    Hydro4%

    Source: BEIS

    Q2 2018 Renewable Energy Share of UK power generation

  • 22

    Pipeline – First Offer Agreement with John Laing

    Type JLEN ROFO Project Country

    Speyside UK

    Cramlington UK

    Klettwitz Wind Farm Germany

    Horath Wind Farm Germany

    Somette Wind Farm France

    St Martin Wind Farm France

    Nordergründe Wind Farm Germany

    Rammeldalsberget Wind Farm Sweden

    Svart Windfarm Sweden

    Est. Value of ROFO Pipeline £205m

  • 23

    Outlook

    • JLEN in strong funding position following significantly over-subscribed equity fund-raise post-period end

    • Healthy pipeline with third party opportunities and through FOA with John Laing Group

    • Growing market presence in the UK anaerobic digestion sector

    • Dividend cover of 1.3 on dividends paid during period

    • Increasing portfolio diversification with new acquisitions

  • 24

    Q&A

    Thanks for listening

  • 25

    Appendices

  • 26

    Fund Governance and Terms

    The Fund• Domiciled in Guernsey• Independent Board of Directors• Premium listing on the LSE (Chapter 15)

    Investment Adviser• John Laing Capital Management • FCA authorised and regulated• Monitors and reviews projects

    Base Fee • Up to and including £0.5bn of Adjusted Portfolio Value* - 1.0% • Over £0.5 bn – 0.8%

    Performance Fee • No performance fee

    Asset Origination Fee • No origination fee

    Investment Adviser Term • Four year term followed by a rolling one year notice

    Discount Control• The Company can buy up to 14.99%p.a. of the ordinary shares in issue at prices below the estimated prevailing NAV per ordinary

    share where the Directors believe such purchases will result in an increase in the NAV per ordinary share

    Continuation Vote • Would take place if shares trade at a significant discount to Net Asset Value per share for a prolonged period of time

    * "Adjusted Portfolio Value" means the sum of the Fair Market Value of the Investment Portfolio, plus any cash owned by or held by or to the order of the Fund plus the aggregate amount of payments made to Shareholders by way of dividend in the quarterly period ending on the relevant Valuation Day, less any other liabilities (excluding any borrowings) and any Uninvested Cash (each to the extent that it has not already been deducted). Uninvested Cash refers to the net proceeds of any equity or debt capital raising by the Company that is held in cash or near cash instruments until such time as such net proceeds are invested by the Fund in Investment Interests.

  • 27

    Investment Policy

    Sector

    • Environmental Infrastructure projects that utilise natural or waste resources or support more environmentally-friendly approaches to economic activity, which could involve:

    ➢ Renewable energy generation (solar, wind, biomass and hydropower)➢ Supply and treatment of water➢ Treatment and processing of waste➢ Projects that promote energy efficiency

    • All projects to have the benefit of long-term, predictable, wholly or partially inflation-linked cash flows supported by long-term contracts or stable regulatory frameworks

    Geography• At least 50% of the portfolio by value will be based in the UK (current portfolio is over 99% UK based by value)• Investments in projects that are located only in OECD countries

    Operational

    • No more than 15% of the Net Asset Value (“NAV”) will be attributable to projects in construction and not yet fully operational

    • Intention to invest in projects underpinned by well-established technologies with significant track record of use n other projects with demonstrable operational performance

    Single Asset Limit • No more than 30% of NAV invested in a single asset post-acquisition

    Gearing

    • Asset level: no more than 65% of Gross Project Value** for Renewable Energy projects and no more than 85% of Gross Project Value for PFI/PPP projects

    • Fund level: no more than 30% of NAV immediately post-acquisition; any acquisition debt intended to be repaid periodically by equity raising

    ** “Gross Project Value" means in respect of each Project Entity, the Fair Market Value of the Investment Interests in such Project Entity acquired or to be acquired by the Fund as increased by the amount of any financing held within the relevant Project Entity.

  • 28

    DisclaimerThis document contains information provided solely as an update on the financial condition, results of operations and business of John Laing Environmental Assets Group Limited ("JLEN"). Nothing in this document or in any accompanying management discussion of this document constitutes, nor is it intended to constitute: (i) an invitation or inducement to engage in any investment activity, whether in the United Kingdom, the United States or in any other jurisdiction; (ii) any recommendation or advice in respect of the shares ("Shares") in JLEN; or (iii) any offer for the sale, purchase or subscription of any Shares. This document does not constitute an offer to sell to or solicitation of an offer to purchase from any investor or in any jurisdiction in which such an offer or solicitation is not permitted or would be unlawful. Each investor must comply with all legal requirements in each jurisdiction in which it purchases, offers or sells JLEN’s securities, and must obtain any consent, approval or permission required by it. The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction of the United States. The Shares may not be offered or sold, directly or indirectly, within the United States, or to, or for the account or benefit of, "US Persons" (as defined in Regulation S under the Securities Act). This document has not been approved by a person authorised under the Financial Services & Markets Act 2000 ("FSMA") for the purposes of section 21 FSMA. The contents of this document are not a financial promotion and none of the contents of this document constitute an invitation or inducement to engage in investment activity. If and to the extent that this document or any of its contents are deemed to be a financial promotion, JLEN is relying on the exemption provided by Article 69 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005/1529 in respect of section 21 FSMA. The recipients of this presentation should not engage in any behaviour in relation to financial instruments which would or might amount to an offence under the Market Abuse Regulation (EU) No. 596/2014. Although JLEN has attempted to ensure the contents of this document are accurate in all material respects, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information, or opinions contained herein. All data is sourced by JLEN unless identified as otherwise. Neither JLEN, its investment adviser John Laing Capital Management Limited ("JLCM"), nor any of JLEN's advisors or representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. Nothing in this paragraph shall exclude, however, liability for any representation or warranty made fraudulently. The information set out herein may be subject to updating, completion, revision, verification and amendment and such information may change materially. The information communicated in this document contains certain statements that are or may be forward looking. These statements typically contain words such as "expects" and "anticipates" and words of similar import. By their nature forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. JLEN and its advisors and representatives expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Where reference has been made to past performance, it is worth noting that past performance is not a guide to future performance and the value of any investment or the income derived from it may go down as well as up and you may not get back the full amount originally invested. Some assets within JLEN may be denominated in a foreign currency and will be exposed to movements in the rates of exchange. JLEN will also be exposed to changes in the rates of interest, these movements may have an adverse effect on the value of the investment or the income derived from it. There can be no assurance that JLEN will achieve comparable results to those contained in this document, that any targets will be met or that JLEN will be able to implement its investment strategy. JLCM is acting only for JLEN and is not acting for any other person (a "third party"). JLCM will not be responsible to a third party for providing the protections afforded to clients of JLCM and will not be advising a third party on investing in JLEN.