Annual Financial Report

RNS Number : 1675P

John Laing Environmental Assets Grp

04 June 2015

 



4 June 2015

John Laing Environmental Assets Group Limited

Announcement of final results for the period ended 31 March 2015

The Directors of John Laing Environmental Assets Group Limited (the "Company" or "JLEN") are pleased to announce the Company's final results for the period from incorporation on 12 December 2013 to 31 March 2015.

JLEN is an environmental infrastructure fund which aims to provide investors with an annual dividend per share, initially of 6.0 pence, that increases progressively in line with inflation from 1 April 2015. The Company has a stated aim of generating a net IRR of 7.5% to 8.5% on the original issue price of its ordinary shares issued at its IPO in March 2014, while seeking to preserve the capital value of its portfolio of assets over the long-term

Financial Highlights

·    Portfolio valuation as at 31 March 2015 of £197.7m (IPO: £156.4m)

·    Profit before tax of £9.4m

·    NAV per ordinary share of 101.2 pence as at 31 March 2015 (IPO: 98.0 pence)

·    Interim distribution of 3.0 pence per ordinary share for the six months to 31 March 2015 declared, taking total distributions for the period since IPO to 6.0 pence per ordinary share, in line with expectations

·    Quarterly dividends to be introduced from the end of 2015, with the first payment in March 2016 in respect of the three months to 31 December 2015

·    Total shareholder return for the period since IPO of 12.6%

Portfolio Highlights

·    IPO proceeds fully invested in seven environmental infrastructure assets comprising nine operational sites

·    Three further acquisitions in March 2015, bringing the total number of operational sites to 13 and the capacity of the renewable energy assets in the JLEN portfolio to 92.4MW

·    Robust operational and financial performance for the period to 31 March 2015 despite variable wind conditions and falling electricity prices

·    Strong pipeline of assets for further growth both under the First Offer Agreement with the John Laing group and from third parties

Financing Activity

·    Successful IPO in March 2014 raising gross proceeds of £160m

·    Revolving Credit Facility of £50m signed in October 2014; £43.7m drawn to finance recent acquisitions

·    Equity raise and placing programme announced to repay credit facility and provide for future acquisitions

Richard Morse, Chairman of JLEN, said:

"The Company has achieved its objectives in its first year since IPO. JLEN has delivered dividends in line with expectations, developed its portfolio through acquisitions and generated a strong total return for investors. We are pleased to announce the introduction of quarterly dividends from the end of 2015. The acquisition pipeline is healthy and we look forward to a further year of steady performance and growth."

Annual report

A copy of the annual report has been submitted to the National Storage Mechanism and will shortly be available at www.morningstar.co.uk/uk/NSM. The annual report will also be available on the Company's website at www.jlen.comwhere further information on JLEN can be found.

Details of the conference call for analysts and investors

There will be a call at 9.30am today for analysts and investors. To register for the call please contact Redleaf PR on [phone], or by email on [e-mail].

Presentation materials will be posted on the Company's website, www.jlen.com, from 9.00am.

For further information please contact:

John Laing Capital Management Limited David Hardy Chris Tanner	[phone]
Readleaf PR Rebecca Sanders-Hewett David Ison	[phone]

 

 

Chairman's statement

On behalf of the Board, I am delighted to present the Annual Report of the Company for the period ended 31 March 2015, which includes the Company's first year of trading since its successful initial public offering ("IPO") and listing on the Main Market of the London Stock Exchange on 31 March 2014.

I am pleased to report a strong performance for JLEN's first year of trading since the IPO in March 2014. Our diversified Portfolio of environmental infrastructure assets has proved robust in a challenging year of variable wind conditions and falling electricity prices.

 

Results

Good progress has been made in the formation, management and enlargement of JLEN's Portfolio of environmental infrastructure assets during the period.

Shortly after the IPO, JLEN completed the acquisition of an initial portfolio of assets from John Laing Group plc (together with its subsidiaries, "John Laing"). In March 2015, JLEN completed three further acquisitions under its First Offer Agreement with John Laing. As a result, JLEN has a diversified Portfolio of 10 operational UK‑based solar, onshore wind, waste and wastewater processing projects across 13 separate sites.

The Net Asset Value ("NAV") per share was 101.2 pence at 31 March 2015, an increase of 3.3% on the 98.0 pence NAV per share upon admission on 31 March 2014. After taking into account the interim dividend declared on 20 April 2015, to be paid on 12 June 2015, NAV per share at 31 March 2015 was 98.2 pence.

The Company has prepared financial statements for the period from 12 December 2013 (the date of incorporation) to 31 March 2015, although the initial Portfolio was not acquired until April 2014, shortly after the Company was listed.

Cash received from the Portfolio assets by way of distributions, which includes interest, loan repayments and dividends, was £13.8 million during the period. Cash flow from operations of the Company of £11.8 million covers the paid and declared interim dividends for the period of 6.0 pence per share 1.23 times.

 

Dividend policy

The Company's IPO Prospectus set out an expectation of dividends amounting to 6.0 pence per share for the first trading period to March 2015, rising with inflation over time thereafter⁽¹⁾. This expectation was stated to be subject to market conditions, the Company's performance, financial position and financial outlook.

The Company has met the initial target of 6.0 pence through:

·     a first interim dividend of 3.0 pence per Ordinary Share paid on 19 December 2014 to shareholders on the register as at 28 November 2014; and

·     a second interim dividend of 3.0 pence per Ordinary Share, which will be paid on 12 June 2015 to shareholders on the register as at 15 May 2015.

The Directors anticipate being able to increase the dividend in line with inflation commencing with the payment in respect of the six months to 30 September 2015, subject to the conditions noted above. The target dividend for the year to 31 March 2016 is 6.054 pence per Ordinary Share being the initial target of 6.0 pence per Ordinary Share adjusted for inflation⁽¹⁾. The Company expects to commence paying quarterly dividends from January 2016, with the first payment in March 2016 in respect of the three months to 31 December 2015.

 

Portfolio performance

In general, during the period the performance of the Portfolio has been in line with expectations with the exception of wind speeds during the summer of 2014, which were significantly lower than the long‑term average for that time of year. There are no material issues that are affecting the ongoing financial performance of the assets despite the fire at ELWA in August 2014.

The results from the renewable energy assets within the Portfolio are dependent in part on the weather, which can be predicted with some degree of confidence over the long term but may vary over the short term.

The Company's exposure to both solar and wind assets provides a degree of protection against variability and seasonality in resource as solar tends to be more productive at times when wind is less productive and vice versa. During the period since IPO, wind speeds have been variable from month to month and somewhat below expectations over the entire period, but this has been offset in part by solar irradiation being in line with expectations.

The results from our renewable energy assets are also dependent in part on the level of electricity prices, which have trended noticeably lower since the IPO. The impact on the Company has been mitigated by the fact that the Company has lower exposure to electricity prices in its ROC and FiT operating projects and the waste and wastewater processing assets are not affected by the level of electricity prices.

For the waste and wastewater processing assets, financial performance has been broadly in line with expectations and volumes have been at or above expected levels. Despite a fire at the Frog Island facility (part of the ELWA project) in August 2014, which affected a significant portion of the operating capacity for several months, the contract with East London Waste Authority continued to be fulfilled and the facility is on track for full reinstatement in January 2016.

Notwithstanding the challenges in the period, the Net Asset Value of the Company has moved forward during the reporting period after allowing for dividends declared or paid, which demonstrates the benefits of the Company's Portfolio diversification across a range of environmental infrastructure projects and its operational robustness.

 

Valuation

The Net Asset Value at 31 March 2015 is £161.9 million, comprising £197.7 million Portfolio Valuation, £8.6 million of cash held by the Group, less £43.7 million drawn on the Company's immediate subsidiary's credit facility, together with negative working capital balances of £0.7 million.

The Investment Adviser has prepared a fair market valuation of the Portfolio as at 31 March 2015. The Directors have satisfied themselves as to the methodology used and the assumptions adopted and have approved the valuation of £197.7 million for the Portfolio of 10 investments as at 31 March 2015.

 

Board

The Board comprises myself and four other experienced Directors, of whom three are based in Guernsey and one in the UK. I would like to express my thanks for their energy and application during the period leading up to the IPO and in the year that has followed, and particularly for their good work in Board and Committee meetings.

The Company has adopted the Association of Investment Companies (the "AIC") Code of Corporate Governance which has been endorsed by the Financial Reporting Council. In 2014, the Company became a member of the AIC so that the Company can benefit from the ongoing development of best practice in the industry.

 

Outlook

Following the successful IPO, the Board is encouraged by the progress JLEN has made during the first 12 months of trading.

The Board continues to work closely with the Investment Adviser in assessing the risks and opportunities in the environmental infrastructure market. The Board considers that the principal risks and uncertainties for JLEN have not materially altered from those set out in the IPO Prospectus issued in February 2014. The full Prospectus is available on JLEN's website, and a summary of the principal risks and uncertainties is included on pages 34 to 37 of the strategic report in the Annual report.

A key strength of the Company is its strategy of diversification across a range of sectors and revenue sources within the environmental infrastructure space. This strategy and JLEN's diversified Portfolio have demonstrated robustness in spite of seasonal weather volatility and a downward shift in electricity prices during the last 12 months.

The Board, through its Investment Adviser JLCM, actively continues to seek suitable projects to add to its Portfolio both from John Laing and third parties. JLEN has the benefit of a First Offer Agreement with John Laing over a significant pipeline of environmental infrastructure projects which supports its growth plans in the next few years. To support JLEN's acquisition activities John Laing Environmental Assets Group (UK) Limited, which is the vehicle through which JLEN makes acquisitions, entered into a three‑year £50 million Revolving Credit Facility with HSBC and NIBC to fund asset purchases and to provide working capital. The Company utilised this facility to complete the acquisition of three projects from John Laing under the First Offer Agreement on 31 March 2015 for a total consideration of £42.54 million.

On 20 May 2015, the Company announced its intention to launch an equity offering targeting the raising of £45 million; and also a placing programme of up to 150 million new shares. These measures will enable JLEN to free up its credit facility and to help fund the strong pipeline of opportunities available to the Company during the next phase of growth.

 

Conclusion

This initial set of results for the period from incorporation fulfils our aim of declaring a dividend in line with expectations, as well as progress in the Company's Net Asset Value. The acquisition pipeline looks healthy and the Company looks forward to a year of steady performance and growth.

Richard Morse

Chairman

3 June 2015

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

Strategic report

This strategic report has been prepared to clearly set out to shareholders the objectives, strategy, performance and principal risks of JLEN.

Investment objectives

To provide investors with an annual dividend per share, initially of 6.0 pence, that increases in line with inflation, and to preserve the capital value of its Portfolio over the long term.

The Company aims to provide its investors with an annual dividend per share, initially of 6.0 pence, that increases progressively in line with inflation, and to preserve and where possible enhance the capital value of its Portfolio on a real basis through the reinvestment of cash flows not required for the payment of dividends. The Company targets an IRR of 7.5% to 8.5% (net of fees and expenses) on the IPO issue price of 100 pence through investment in a diversified Portfolio of environmental infrastructure projects¹.

The Company seeks to maintain strong relationships with all its stakeholders and those of its investments, including investors, funders, key contractors and partners, national and local government and local communities.

1 This is a target only and not a profit forecast. There can be no assurance that this target will be met.

Strategy and investment policy

Investment in a diversified Portfolio of operational environmental infrastructure projects.

The Company seeks to achieve its objectives by investing in a diversified Portfolio of environmental infrastructure projects:

·     that have the benefit of long‑term, predictable, wholly or partially inflation‑linked cash flows;

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

·     that feature well‑established technologies, demonstrable operational performance and a track record of producing long‑term predictable revenues.

JLEN defines environmental infrastructure as infrastructure projects that utilise natural or waste resources or support more environmentally‑friendly approaches to economic activity. This could involve the generation of renewable energy (including solar, wind, hydropower and biomass technologies), the supply and treatment of water, the treatment and processing of waste, and projects that promote energy efficiency.

The Company will invest in environmental infrastructure projects either directly or through holding or other structures that give the Company an investment exposure to environmental infrastructure projects.

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) and across different types of environmental infrastructure in order to achieve a broad spread of risk in the Company's Portfolio.

The projects comprising the current Portfolio are underpinned by well‑established technologies, and it is intended that the equipment and systems used by the assets in the Portfolio will not rely substantially on new technology and that they will have a significant track record of use in other projects. On acquisition, the relevant equipment will also have demonstrated operational performance. However, as environmental infrastructure is a relatively new asset class and the technologies that underpin it may be subject to technological advancements in the future, the actual investment allocation will depend on the development of the environmental infrastructure market, underlying technologies and the judgement of the Directors (on the advice of the Investment Adviser) as to what is in the best interests of the Company at the time of investment.

Investment restrictions

With the object 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 projects in the Portfolio by value and number will be operational. The Fund will not acquire investment interests in any project if as a result of such investment, 15% or more of the NAV is attributable to projects that are in construction and are not yet fully operational;

·     at least 50% of the Portfolio (by value) will be based in the UK and the Fund will only invest in projects that are located in OECD countries;

·     it is intended that investment interests in any single project acquired will not have an acquisition price 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;

·     the Company will make use of short‑term debt financing to facilitate the acquisition of investments. 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, which shall be in addition to any borrowing at Fund level; and

·     the Fund may acquire investment interests in respect of projects that have non‑recourse project finance in place at the project entity level. The Company is limited to aggregate non‑recourse financing attributable to renewable energy generation and PPP projects not exceeding 65% and 85% respectively of the aggregate gross project value of such projects.

Hedging

Where investments are made in currencies other than GBP, the Fund will consider whether to hedge currency risk in accordance with the Fund's currency and hedging policy as determined from time to time by the Directors. Interest rate hedging may be carried out to seek to provide protection against increasing costs of servicing debt drawn down by the Fund to finance investments. This may involve the use of interest rate derivatives and similar derivative instruments. Hedging against inflation may also be carried out 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.

Cash balances

Until the Fund is fully invested and pending reinvestment or distribution of cash receipts, cash received by the Fund will be invested in cash, cash equivalents, near‑cash instruments, money market instruments and money market funds and cash funds. The Fund 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 complies with the Company's investment policy and further investments will only be acquired if they comply with the Company's investment policy.

The Company has the contractual right of first offer (in accordance with the First Offer Agreement) for environmental infrastructure projects in the UK, Ireland, Sweden and any other country in the European Union or the European Free Trade Association, which John Laing wishes to dispose of and that are consistent with the Company's investment policy. Subject to due diligence and agreement on price, the Fund will seek to acquire those projects that fit the investment objectives and investment policy of the Company.

The Fund will also seek out and review acquisition opportunities not connected with John Laing and will, where appropriate, carry out the necessary due diligence. If, in the opinion of the Directors the risk characteristics, valuation and price of the investment interests in the project or projects for sale is acceptable and is consistent with the Company's investment objective and investment policy, then (subject to the Fund having sufficient sources of capital) an offer will be made (without seeking the prior approval of shareholders) and, if successful, the investment interests in the relevant project or projects will be acquired by the Fund.

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) in accordance with the Listing Rules. Minor changes to the investment policy must be approved by the Directors.

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

Key performance measures

The key performance measures used by the Company to assess its performance over time against the objectives and strategy set out above are as follows:

·     market capitalisation;

·     share price;

·     dividend per share (declared);

·     total shareholder return for the period  (share price basis);

·     Net Asset Value;

·     Net Asset Value per share;

·     Net Asset Value growth (adjusting for dividends);

·     Portfolio Value;

·     number of investments/sites; and

·     largest single investment as % of Portfolio Value.

 

Business model

Guernsey‑registered investment company with a premium listing on the London Stock Exchange.

Introduction

The Company is a Guernsey‑registered investment company with a premium listing on the London Stock Exchange. The Company makes its investments via a group structure involving John Laing Environmental Assets Group (UK) Limited ("UK HoldCo"), an English limited company and wholly‑owned subsidiary of the Company and additional intermediate holding companies for certain projects (the Company and UK HoldCo, together with their wholly‑owned intermediate holding companies, the "Fund" or the "Group"). Through the Group structure, the Company currently owns a Portfolio of 10 environmental infrastructure investments across 13 sites in the UK. The Company has a 31 March year end, announces interim results in November and full year results in June and pays dividends twice a year. The Company will commence paying quarterly dividends from January 2016, with the first payment in March 2016 in respect of the three‑month period to 31 December 2015.

The Company is a self‑managed Alternative Investment Fund under the European Union's Alternative Investment Fund Managers Directive. The Company has a Board of five independent non‑executive Directors (details of whom can be found on pages 40 and 41 of the Annual Report) whose role is to manage the governance of the Company in the interests of shareholders and other stakeholders. In particular, the Board approves and monitors adherence to the investment policy, determines the risk appetite of the Group, and sets Group policies. The Board meets a minimum of four times per year for regular Board meetings and there are a number of ad hoc meetings dependent upon business need. In addition the Board has three committees covering Audit, Risk and Nominations. Investment decisions are delegated to an Investment Committee comprising all members of the Board.

The Board fulfils the responsibilities typically undertaken by a remuneration committee.

The Board as a whole also fulfils the functions of an investment advisory engagement committee. The Board will review and make recommendations on any proposed amendment to the Investment Advisory Agreement and keeps under review the performance of the Investment Adviser and manages the risks of the delegation of certain activities to the Investment Adviser. The Board also performs a review of the performance of the other key service providers to the Fund and meets to conduct these reviews at least once a year.

The Board takes advice from the Investment Adviser, John Laing Capital Management Limited ("JLCM"), on matters concerning the market, the Portfolio and new investment opportunities. Day‑to‑day management of the Group's Portfolio is delegated to the Investment Adviser. The Company has an Investment Advisory Agreement in place with JLCM which can be terminated at 12 months' notice from 31 March 2018.

The key roles of the Investment Adviser are as follows:

·     monitoring financial performance against Group targets and forecasts;

·     advising the Board on investment strategy and Portfolio composition to achieve the desired target returns within the agreed risk appetite;

·     sourcing, evaluating and implementing the pipeline of new investments for the Portfolio;

·     monitoring the operational management of, and managing the investment cash flows from, the Group's investments;

·     minimising cash drag (having uninvested cash on the balance sheet) and improving cash efficiency generally;

·     managing the process and analysis for semi‑annual valuations of the Group's Portfolio submitted to the Board for approval;

·     ensuring good financial management of the Group, having regard to accounting, tax, and debt covenants;

·     hedging non‑sterling investments; and

·     managing the Company's investor reporting and investor relations activities.

Further details on the Investment Adviser are set out on page 42 of the Annual Report and in note 13 to the financial statements on pages 76 and 77 of the Annual Report with respect to fees.

Praxis Fund Services Limited has been appointed as Company Secretary and Administrator. Other key service providers to the JLEN Group include Winterflood Securities and Barclays as joint brokers, Redleaf PR as financial public relations advisers, Mourant Ozannes as legal advisers as to Guernsey law, Hogan Lovells as legal advisers as to English law, Capita Registrars as registrars, Deloitte LLP as auditors, and NIBC and HSBC as lenders to the Group via the £50 million revolving credit facility.

The Board reviews the performance of all key service providers on an annual basis.

Acquisitions

As noted above it is expected that further investments will include investments that will be acquired from John Laing under the terms of the First Offer Agreement entered into at IPO as well as investments purchased from third parties.

The Company has established procedures to deal with any potential conflicts of interest that may arise from individuals at John Laing both advising the Directors on the "buy‑side" (for the Fund) and acting on the "sell‑side" (for John Laing and its subsidiaries) in relation to any acquisition of projects from John Laing. These procedures include:

·     the creation of a separate "buy‑side" committee (representing the interests of the Fund as purchaser) and a separate "sell‑side" committee (representing the interests of the relevant John Laing company as seller), with each member of the "buy‑side" committee having the benefit of a release from his or her duties as a John Laing employee to the extent that these duties conflict with their duties to act in the interests of the Fund as a member of the "buy‑side" committee;

·     a requirement for the "buy‑side" committee to conduct due diligence on the investment interests proposed to be purchased which is separate from and independent of any due diligence conducted for John Laing, and for a report on the fair market value of the investment interests to be obtained from an independent expert; and

·     the establishment of information barriers between members of the "buy‑side" and "sell‑side" committees to ensure confidentiality and integrity of commercially sensitive information, and for individuals with economic interests in the investment interests to abstain from participating in committee discussions and votes on the relevant projects.

The Fund will seek to acquire further investments going forward both from John Laing and from the wider market. In selecting the projects to acquire, the Investment Adviser and the Directors will be obliged to ensure that these projects meet the Company's investment policy.

The Investment Adviser will be subject to the overall supervision of the Board and all decisions on the acquisition of new investments and the disposal of existing investments will be subject to the approval of the Directors, all of whom are independent of John Laing. To the extent that any Director is appointed to the Board in the future who is not independent from John Laing, any such Director will not participate in any decision to acquire investments from or sell investments to John Laing.

In view of the procedures and protections set out above and the fact that it is a key part of the Company's investment policy to acquire assets from John Laing, the Company will not seek the approval of shareholders for acquisitions of assets from John Laing in the ordinary course of the Company's investment policy.

The RCIS Rules require that any arrangements between a relevant person (as defined in the RCIS Rules) and the Company are at least as favourable to the Company as would be any comparable arrangement effected on normal commercial terms negotiated at arm's length between the relevant person and an independent party.

Potential disposal of investments

Whilst the Directors may elect to retain investment interests in the Portfolio projects that the Fund acquires and any other further investments made by the Fund over the long term, the Investment Adviser will regularly monitor the valuations of such projects and any secondary market opportunities to dispose of investment interests and report to the Directors accordingly. The Directors only intend to dispose of investments where they consider that appropriate value can be realised for the Fund or where they otherwise believe that it is appropriate to do so. Proceeds from the disposal of investment interests may be reinvested or distributed at the discretion of the Directors.

Discount management

By special resolution of the shareholders of the Company, passed on 14 August 2014, the Company has been granted shareholder authority (subject to the Listing Rules and all other applicable legislation and regulations) to purchase in the market up to 14.99% per annum of the Ordinary Shares in issue immediately following the passing of the resolution. This authority will expire at the conclusion of the next annual general meeting of the Company in August 2015. The Directors intend to seek renewal of this authority from shareholders at each annual general meeting.

It is the Company's investment objective to return value to shareholders in the form of dividends and capital distributions. The Company intends to distribute net income in the form of dividends. Furthermore, in normal market circumstances the Directors intend to favour pro rata capital distributions ahead of Ordinary Share repurchases in the market. However, if the Ordinary Shares have traded at a significant discount to NAV for a prolonged period the Board will seek to prioritise the use of net income after the payment of dividends on market repurchases over other uses of capital.

As part of the Company's discount management policies, the Board intends to propose a continuation vote if the Ordinary Shares trade at a significant discount to Net Asset Value per share for a prolonged period of time. If, in any financial year, the Ordinary Shares have traded, on average, at a discount in excess of 10% to the Net Asset Value per share, the Board will propose a special resolution at the Company's next annual general meeting that the Company ceases to continue in its present form. If such a vote is passed, the Board will be required to formulate proposals to be put to shareholders within four months to wind up or otherwise reconstruct the Company, bearing in mind the illiquid nature of the Company's underlying assets.

The discount prevailing on each business day will be determined by reference to the closing market price of Ordinary Shares on that day and the most recently published Net Asset Value per share.

Operational and financial review

The financial performance of the Portfolio has been robust despite lower wind speeds and electricity prices during the period and there are no material issues affecting the ongoing performance of the assets.

Operational and financial review for the period

Key performance measures

The key performance measures for the period from incorporation on 12 December 2013 to 31 March 2015 (an effective trading period of 12 months from IPO on 31 March 2014) are summarised below:

	Period to	At 31 March
	31 March	2014
	2015	(IPO)
Market capitalisation	£175.2m	£160.0m
Dividend per share (declared)	6.0p	n/a
Share price/issue price	109.5p	100.0p
Total shareholder return for  the period (share price basis)	+12.6%	n/a
Net Asset Value	£161.9m¹	£156.7m
Net Asset Value per share	101.2p¹	98.00p
Net Asset Value growth  (adjusting for dividends)	+0.2%	n/a
Portfolio Value	£197.7m	£156.4m
Number of investments/sites	10/13	7/9
Largest single investment  as % of Portfolio Value	21.4%	26.1%

1 Prior to the payment of the dividend for the six month period to 31 March 2015 of 3.0 pence per share (£4.8 million).

Portfolio performance

In general, during the period ended 31 March 2015 the performance of the Portfolio has been in line with expectations with the exception of wind speeds during the summer of 2014, which were significantly lower than the long‑term average for that time of year. There are no material issues that are affecting the ongoing performance of the assets.

The wind farms and the solar parks have overall averaged availability ahead of forecast for the period, with the only significant operational disruption being at the Hall Farm wind farm where a fault in the electrical distribution system at the site required a shut‑down of operations for eight days whilst the fault was rectified.

The environmental processing plants have also achieved full availability, save for the ELWA fire which we reported in the interim accounts. The fire occurred at the Frog Island Mechanical Biological Treatment facility at the ELWA waste project. We are pleased to report that the Frog Island facility has continued to operate on an interim basis since early November and in conjunction with the project's other facilities, the contract with East London Waste Authority continues to be fulfilled and operated, and diversion from landfill targets met. Full reinstatement is expected to be completed in January 2016. The project has continued to make distributions in line with budgets and on the basis of insurance cover this incident has not had a material impact on the valuation of the Portfolio, highlighting the benefits of holding such investments.

The period under review has been categorised by variable weather patterns in the British Isles, with the wind projects experiencing good wind conditions over the winter of 2013‑14, leading to generation ahead of budget. However, during the summer and early autumn of 2014, this position reversed with June, September and November in particular being extremely low wind‑speed months, illustrating that wind conditions can vary significantly over individual months. Wind speeds during the winter of 2014‑15 have shown an improvement with generation for the six months to 31 March 2015 being in line with budget notwithstanding the Hall Farm outage described above. Overall generation across the initial Portfolio of wind assets acquired at IPO for the 18 months to 31 March 2015 was approximately 6% below budget which is well within the range of expectations. Solar irradiation was as expected for the 18 months to 31 March 2015 and generation from the solar asset was also in line with budget.

Overall the generation of the renewable energy assets in the Portfolio is summarised as follows:

	Winter	Summer	Winter
Portfolio generation	2013-14	2014	2014-15	Total
Actual generation  (GWh)	66.7	32.3	59.5	158.5
Variation  from budget	+13%	‑34%	‑2%	‑6%

Waste and wastewater flows have been in line with budget for the period. The environmental processing projects are relatively insensitive to volume changes due to the presence of banded payment arrangements that see the projects make little additional profit for a marginal unit of waste.

In January we auctioned the electricity for the solar project sites for summer 2015 and winter 2015‑16 and achieved an outcome in line with our expectations given market movements in the period. The wind farms remain under long‑term Power Purchase Agreements with a mixture of fixed and variable pricing arrangements.

Since the target cash flows set out in the IPO Prospectus were produced the UK has experienced a rapid and sustained reduction in both market prices and long‑term forecasts for electricity prices, with market spot rates since the start of 2015 being an average of 11% below the corresponding levels in 2014. The current long‑term electricity price forecasts provided by market consultants are some 13% below the IPO projections. In response to this, where no fixed price arrangements exist for a project, we reflect market forward pricing for the next two years before reverting to a current long-term forecast provided by a market consultant.

The impact on revenues and Portfolio Valuation are discussed in more detail in the analysis of financial results and Investment Portfolio and valuation sections below.

The effects of monthly variability and seasonality in production expected in a Portfolio of intermittent renewables projects are substantially reduced by the overall technology diversification in JLEN's Portfolio. In addition to the general offsetting of weak performances in one segment by better performance in another segment as a result of the different generating technologies of wind and solar, the environmental processing assets, apart from Tay, have revenues independent of weather and all have revenues that vary little with changes in volume of waste and wastewater processed.

Acquisitions

Following the IPO on 31 March 2014, the Company completed the acquisition of 100% of the Initial Portfolio as set out in the IPO Prospectus on 22 April 2014. As a result, the Group was at that time fully invested in a diversified Portfolio of seven operational UK‑based solar, onshore wind, waste processing and wastewater projects.

On 31 March 2015 the Company acquired three projects from John Laing for a cash consideration of £42.54 million. The assets were acquired under JLEN's First Offer Agreement with John Laing and were funded by a draw‑down under the Company's £50 million revolving credit facility. The assets were as follows:

Branden solar park - acquisition of 64% stake

Branden solar comprises two separate solar parks located near Bodmin in Cornwall, with a total generating capacity of 14.7MW and is accredited for 2 ROCs. The sites have been fully operational since June 2013.

Wear Point wind farm - acquisition of 100% stake

Wear Point wind farm is located near Milford Haven in South Wales and comprises four Senvion MM82 turbines with a total generating capacity of 8.2MW and is accredited for 0.9 ROCs. The site has been fully operational since June 2014.

Carscreugh wind farm - acquisition of 100% stake

Carscreugh wind farm is located near Glenluce in Dumfries & Galloway, Scotland and comprises 18 Gamesa G52 turbines with a total generating capacity of 15.3MW and is accredited for 0.9 ROCs. The site has been fully operational since June 2014.

These acquisitions brought the total capacity of the renewable energy assets in the JLEN Portfolio to 92.4MW.

Financing

At IPO on 31 March 2014 the Company issued 160,000,000 Ordinary Shares at an issue price of 100 pence with net issue proceeds of £157.3 million. No further shares have been issued since this date.

In October 2014, the Group entered into a three‑year £50 million revolving credit facility with HSBC and NIBC to fund new acquisitions. This type of short‑term financing is limited to 30% of the Company's Net Asset Value. It is intended that any facility used to finance acquisitions is to be repaid, in normal market conditions, within a year through equity fundraisings. £43.0 million of the acquired facility was drawn down to fund the acquisitions in March 2015 and a further £0.7 million in October 2014 to finance the credit facility cost.

In addition to the revolving credit facility, 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.

The project‑level gearing at 31 March 2015 across the Portfolio was 47.3%, being 25.0% for the renewable energy assets and 64.5% for the PFI processing assets. Including the drawdown of the revolving credit facility to fund acquisitions during the year the overall fund gearing at 31 March 2015 was 57.0%.

Long‑term project‑level debt in the Portfolio has generally been secured during the construction phase of the underlying investments and generally has minimal refinancing risk.

As at 31 March 2015, the Group, which comprises the Company and the intermediate holding companies, had cash balances of £8.6 million.

 

Analysis of financial results

The financial statements of the Company for the period from incorporation on 12 December 2013 to 31 March 2015 are set out on pages 62 to 83 of the Annual Report. Prior to IPO on 31 March 2014 the Company had not traded so the effective period covered by the accounts is for the year ended 31 March 2015.

The Company prepared the financial statements for the period ended 31 March 2015 in accordance with International Financial Reporting Standards ("IFRS") and in accordance with the recent clarification from the International Accounting Standard Board ("IASB"), Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28). 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 (John Laing Environmental Assets Group (UK) Limited) and one indirectly held wholly owned subsidiary HWT Limited (which holds the investment interest in the Tay project).

Basis of accounting

During the period, the Company has early adopted the narrow‑scope amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) which introduces clarifications to the requirements when accounting for investment entities. The IASB clarified in December 2014 that the requirement for an investment entity to consolidate a subsidiary providing services related to its investment entities (such as certain subsidiaries of the Company), applies only to subsidiaries that are not themselves investment entities.

Consequent to the early adoption of the amendments to IFRS 10, IFRS 12 and IAS 28, the Company accounts for its interest in its 100% owned immediate subsidiary John Laing Environmental Assets Group (UK) Limited as an investment at fair value through profit or loss.

The primary impact of this adoption is that the cash balances, the working capital balances and borrowings in the intermediate holding companies are presented as part of the fair value of the investments.

The Company's subsidiaries 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 the investments in the 10 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).

Result for the period ended 31 March 2015        

	Period from
	12 December 2013
All amounts presented  in £million (except as noted)	to 31 March 2015
Net assets1	161.9
Portfolio Value2	197.7
Intermediate holding companies net liabilities2	(38.6)
Operating income	12.0
Net assets per share (pence)	101.2p
Distributions, repayments and fees from Portfolio	13.8
Profit before tax	9.4

1 Also referred to as Net Asset Value or "NAV".

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

An initial interim dividend of 3.0 pence per share was declared in November 2014 and paid in December 2014 as targeted in the IPO.

A second interim dividend of 3.0 pence per share was declared post year end for payment in June 2015.

Net assets

Net assets increased from £156.8 million at IPO to £161.9 million at 31 March 2015 primarily driven by a gain in the Portfolio Value.

The net assets of £161.9 million comprise £197.7 million Portfolio Value of environmental infrastructure investments and cash balances of £3.6 million, offset by £38.6 million related to the fair value of the intermediate holding companies and by other net liabilities of £0.8 million.

The intermediate holding companies' negative fair value of £38.6 million comprises cash balances of £5.0 million, offset by other net liabilities of £43.6 million principally comprising the £43.7 million credit facility loan.

Analysis of the Group's net assets at 31 March 2015

All amounts presented in  £million (except as noted)
Portfolio Value	197.7
Intermediate holding companies cash	5.0
Intermediate holding companies credit facility debt	(43.7)
Intermediate holding companies other assets	0.1
Fair value of the Company's  investment in UK HoldCo	159.1
Company's cash	3.6
Company's other liabilities	(0.8)
Net Asset Value at 31 March 2015	161.9
Number of shares	160,000,000
Net Asset Value per share	101.2p

At 31 March 2015, the Group (Company plus intermediate holding companies) had a total cash balance of £8.6 million (IPO: £0.5 million), including £3.6 million in the Company's balance sheet and £5.0 million in the intermediate holding companies, which is included in the Company's balance sheet within "investment at fair value though profit or loss".

At 31 March 2015, UK HoldCo had drawn £43.7 million of credit facility debt, which is included in the Company's balance sheet within investment at fair value through profit or loss.

The movement in the Portfolio Value of environmental infrastructure assets since IPO to 31 March 2015 is summarised as follows:

	Period from
	12 December 2013
All amounts presented in £million (except as noted)	to 31 March 2015
Acquisitions	198.3
Growth in value of Portfolio	13.2
Distributions received from investments	(13.8)
Portfolio Value at 31 March 2015	197.7

Further details on the Portfolio valuation and the reasons for the variance are provided in the Investment Portfolio and valuation section on pages 25 to 31 of the Annual Report.

Income statement

The Company's profit before tax ("PBT") for the period ended 31 March 2015 is £9.4 million, generating an earnings per share of 5.9 pence.

	Period from
	12 December 2013
All amounts presented in  £million (except as noted)	to 31 March 2015
Interest received on UK HoldCo loan notes	8.1
Dividends received from UK HoldCo	1.7
Net gains on investments at fair value	2.2
Operating income	12.0
Operating cost	(2.6)
Profit before tax	9.4
Earnings per share	5.9p

In the period to 31 March 2015, the operating income was £12.0 million, including the receipt of £8.1 million interest on the UK HoldCo loan notes, £1.7 million of dividends also received from UK HoldCo and a net gain on investments at fair value of £2.2 million.

The operating costs included in the income statement for the period were £2.6 million, in line with expectations. These include £0.9 million of operating expenses and £1.7 million of Investment Adviser fees. Investment Adviser fees are charged at 1% of Adjusted Portfolio Value as set out in more detail in note 13 to the financial statements.

Ongoing charges

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

The ongoing charges percentage for the period to 31 March 2015 is 1.4%. 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's. JLCM believes this to be competitive for the market in which JLEN operates and the stage of development and size of the Fund, and demonstrates that management of the Fund is efficient with minimal expenses incurred in its ordinary operation.

Cash flow statement

The Company had a total cash balance at 31 March 2015 of £3.6 million. The breakdown of the movements in cash is shown below.

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

	Period from
	12 December 2013
	to 31 March 2015
Cash balance as at 12 December 2013	-
Net issue proceeds from IPO	157.3
Investment in UK HoldCo (equity and loan notes)	(156.9)
Interest on loan notes received from UK HoldCo	8.1
Dividends received from UK HoldCo	1.7
Directors' fees and expenses	(0.2)
Investment Adviser fee	(1.2)
Administrative expenses	(0.4)
Dividends paid in cash to shareholders	(4.8)
Company cash balance at 31 March 2015	3.6

The Group had a total cash balance at 31 March 2015 of £8.6 million, and borrowings under the credit facility of £43.7 million. The breakdown of the movements in cash is shown below.

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

	Period from
	12 December 2013
	to 31 March 2015
Cash received from environmental  infrastructure investments	13.8
Administrative expenses	(0.4)
Directors' fees and expenses	(0.2)
Investment Adviser fee	(1.2)
Financing costs (net of interest income)	(0.2)
Cash flow from operations	11.8
Net issue proceeds from IPO	157.3
Acquisition of investment assets	(198.9)
Reduction in acquisition price	0.6
Acquisition costs (including stamp duty)	(0.6)
Debt arrangement fee cost	(0.5)
Proceeds from borrowings under the credit facility	43.7
Dividends paid in cash to shareholders	(4.8)
Cash movement in the period	8.6
Opening cash balance as at 12 December 2013	-
Group cash balance at 31 March 2015	8.6

During the year, the Group received cash distributions of £13.8 million from its environmental infrastructure investments, below the distributions expected by the Group as forecast in the IPO of £15.3 million. £0.7 million of this shortfall is due simply to a delay in the receipt of a distribution for the Tay project which due to a processing error was received on 1 April 2015 and not 31 March 2015. The balance of £0.8 million is due to the impact, as discussed earlier, on the anticipated revenues from the wind farms due to lower generation during the summer and early autumn as a result of extremely low wind speeds and the impact of lower electricity prices on projects where price fixes are not in place.

Notwithstanding this shortfall in distributions, cash received from investments in the period more than covers the operating and administrative expenses and financing costs as well as the dividends paid to shareholders. Cash flow from operations of the Company of £11.8 million covers cash dividends paid and declared in the period of £9.6 million by 1.23 times. This coverage would have improved to 1.30 times had the distribution expected from Tay been received on 31 March 2015 and not 1 April 2015.

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

Dividends

During the period the Company paid its first interim dividend of 3.0 pence per Ordinary Share on 19 December 2014 to shareholders on the register as at 28 November 2014 and declared a second interim dividend of 3.0 pence per Ordinary Share, which will be paid on 12 June 2015 to shareholders on the register as at 15 May 2015.

The target dividend for the year to 31 March 2016 is 6.054 pence per Ordinary Share, being the amount declared for the period to 31 March 2015 of 6.0 pence per Ordinary Share adjusted for inflation. The Company expects to commence paying quarterly dividends from January 2016, with the first payment in March 2016 in respect of the three months to 31 December 2015.

Investment Portfolio and valuation

Portfolio Value increased to £197.7 million at 31 March 2015 from £156.4 million at IPO.

Investment Portfolio

At 31 March 2015 the Group's investment Portfolio comprised of interests in 10 project vehicles with 13 operational sites, all located in the UK:

						Commercial
		Number			Capacity	operations
Asset	Location	of sites	Type	Ownership	(MWs)	date
Amber	UK (Eng)	2	Solar	100%	9.8	Jul 2012
Branden	UK (Eng)	2	Solar	64%	14.7	Jun 2013
Bilsthorpe	UK (Eng)	1	Wind	100%	10.2	Mar 2013
Carscreugh	UK (Scot)	1	Wind	100%	15.3	Jun 2014
Castle Pill & Ferndale	UK (Wal)	2	Wind	100%	9.6	Oct 2009 and Sep 2011
Hall Farm	UK (Eng)	1	Wind	100%	24.6	Apr 2013
Wear Point	UK (Wal)	1	Wind	100%	8.2	Jun 2014
Dumfries & Galloway	UK (Scot)	1	Waste mgnt.	80%	n/a	2007
ELWA	UK (Eng)	1	Waste mgnt.	80%	n/a	2006
Tay	UK (Scot)	1	Wastewater	33%	n/a	Nov 2001

The JLEN Portfolio comprises a diversified range of assets across different sectors, technologies and revenue types, as illustrated in the analysis below as at 31 March 2015 (by Portfolio Value and distributions from projects):

Portfolio Value split by sector

Solar	28%
Wind	43%
Waste & wastewater	29%

Portfolio distributions split by revenue type⁽¹⁾

Electricity price	25%
Green benefits	45%
PFI	30%

Portfolio distributions split by inflation linkage⁽¹⁾

Inflation linked	75%
Non-inflation linked	25%

Portfolio Value split by remaining asset life (years)

11 to 20 years	29%
21 to 30 years	71%

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

 

Portfolio valuation

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

The Directors' valuation of the Portfolio at 31 March 2015 was £197.7 million, compared to £156.4 million at IPO on 31 March 2014. The increase of £41.3 million is the net impact of new acquisitions, of cash received from investments, changes in macroeconomic and electricity price assumptions and underlying growth in the Portfolio.

A reconciliation of the factors contributing to the growth in the Portfolio during the period is shown in the chart on page 27 of the Annual Report.

The total movement of investments during the period ended 31 March 2015 is shown in the table below:

	£m
Valuation of Portfolio at 12 December 2013	-
Acquisitions in the period	198.9
Reduction in acquisition price	(0.6)
Cash distributions from Portfolio	(13.8)
Rebased opening valuation of Portfolio	184.5
Changes in forecast electricity prices	(5.3)
Changes in economic assumptions	(0.7)
Change in discount rate	6.7
Portfolio return	12.5
Valuation of Portfolio at 31 March 2015	197.7
Fair value of intermediate holding companies	(38.6)
Investments at fair value through profit or loss	159.1

Allowing for investments of £198.9 million, cash receipts from investments of £13.8 million and reimbursements to the Company under the terms of acquisition agreements of £0.6 million, the rebased valuation is £184.5 million. The valuation at 31 March 2015 is £197.7 million, representing an increase over the rebased valuation of 7.2% over the period.

Each movement between the rebased valuation and the 31 March 2015 valuation is considered below:

Forecast electricity prices

The reduction of forecasts for future electricity prices compared to forecasts at IPO has impacted the valuation of the Portfolio by £5.3 million. The project cash flows used in the Portfolio valuation at 31 March 2015 reflect contractual fixed price arrangements under PPAs where they exist and short‑term market forward prices where they do not for the next two years. Thereafter the project cash flows assume future electricity prices in line with central forecasts from an established market consultant, adjusted by the Investment Adviser for project specific arrangements if required.

Economic assumptions

Macroeconomic assumptions in respect of inflation, corporation tax and deposit interest rates have remained relatively constant during the year and the movement in valuation is therefore not significant. Inflation rates assumed in the valuation at 31 March 2015 are 2.00% in 2015 with 2.75% for all subsequent years. The long‑term UK corporation tax rate assumed is 20% and reflects the rate enacted by legislation which is in line with market practice. Deposit rates assumed in the valuation reflect a range of deposit rates from 1.00% in 2015 with a gradual increase to a long‑term rate of 3.5% with effect from 2019 onwards.

Discount rates

The discount rate used for valuing each investment represents an assessment of the rate of return at which environmental infrastructure investments with similar risk profiles would trade on the open market. During the year, there has been strong demand for income‑producing infrastructure assets, including environmental infrastructure projects as the market matures. This has resulted in a reduction in the prevailing discount rates applied for operating projects which partially offsets the changes in electricity price forecasts noted above. Whilst an overall reduction in discount rates has not been applied across the Portfolio, the Investment Adviser, based on its experience of bidding in the secondary market for environmental infrastructure assets and the discount rates achieved on recent transactions, has realigned discount rates across common technologies and geared and ungeared assets to ensure consistency across the Portfolio.

In addition, during the period a further ungeared solar asset was acquired and the proportion of solar in the Portfolio increased from 26% to 28%. Lower valuation discount rates are applied to solar projects reflecting the lower generation variability, the higher subsidy element and the simpler operating characteristics of solar (versus wind).

Taking the above factors into account the overall Weighted Average Discount Rate ("WADR") of the Portfolio has reduced to 9.1% at 31 March 2015 (9.5% at IPO and 9.2% at 30 September 2014).

Portfolio return

This represents the impact on the rebased Portfolio Value, all other measures remaining constant, of the effect of discount rate unwinding and represents an uplift of £12.5 million.

Valuation assumptions and sensitivities

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

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

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

The key assumptions are as follows:

Discount rate

The WADR of the Portfolio at 31 March 2015 was 9.1%. A variance of plus or minus 0.5% is considered to be a reasonable range of alternative assumptions for discount rates.

Volumes

Base case forecasts for renewable energy projects assume a "P50" level of power output. 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 under achieved. 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 and solar irradiation and the uncertainty associated with the long‑term data source being representative of the long‑term mean.

For the waste and water processing projects forecasts are based on projections of future flows and are informed by both the client authorities' own business plans and forecasts and independent studies where appropriate.

Revenues in the PPP projects are generally not very sensitive to changes in volumes due to the nature of their payment mechanisms.

Electricity prices

Electricity price assumptions are based on the following: for the first two years' cash flows for each project use forward electricity 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 long‑term central case forecasts from an established market consultant and other relevant information is used, and adjusted by the Investment Adviser for project specific arrangements. The sensitivity assumes a 10% increase or decrease in electricity prices relative to the base case for each year of the asset life after the first two‑year period.

Inflation

The long‑term inflation assumption used in the valuation as at 31 March 2015 is 2.75%. Each project in the Portfolio receives a revenue stream which is either fully or partially inflation linked.

The chart on page 31 of the Annual Report shows the impact of the key sensitivities on Net Asset Value per share, with the £ labels indicating the impact of the sensitivities on Portfolio Value.

Market outlook

Based on the current outlook for the Portfolio and the markets in which it operates, the Board is confident that the current Portfolio will continue to deliver the target returns of the Company.

The global renewable energy market remains strong and climate change remains one of the most important areas of focus for governments and policymakers across the globe. Governments continue to promote policies and investment priorities to reduce greenhouse gas emissions in the near future. In October 2014, EU leaders agreed to set a target of at least a 40% reduction in domestic greenhouse gas by 2030 compared to 1990 levels, as part of the wider 2030 policy framework for climate and energy proposed by the European Commission in January 2014. In November 2014, China and the US who together produce about 45% of the world's carbon dioxide, unveiled new pledges on greenhouse gas emissions. In December 2015, the UN and governments will gather in Paris to secure a legally binding, global climate change agreement with emission reduction commitments from all countries and, for the first time ever, the EU hopes to leverage the recent American and Chinese pledges to forge a new agreement to reduce global climate pollution by 60% by 2050.

The UK renewable energy market continues to attract significant investments and for the EU the European Environmental Agency forecasts that production from renewable sources of electricity is expected to continue to experience rapid growth.

This increasing contribution from renewables is also mainly driven by a generally supportive policy framework and government's incentives for renewables, which reinforce investors' appetite for this type of assets. Following the election in May this year, the UK government is expected to continue to support renewables with no change in the support regime for existing operating assets whose revenues are protected under grandfathering arrangements. For future projects Contracts for Difference ("CfD") FiT arrangements are being phased in from 2015 to replace the ROC regime from 2017.

In October 2014, the UK government decided to introduce new measures to control spending on large‑scale solar PV within the Renewable Obligation ("RO"), while promoting the deployment of mid-scale building‑mounted solar PV in the small-scale Feed‑in Tariffs (FiT) scheme. Government's main decision has been to close the RO across UK to new solar PV capacity above 5MW from 1 April 2015. As a result, a large part of the future growth of the solar sector is now expected to come from the development of a market for sub‑5MW projects. Given that this decision applies only to individual developments over 5MW, it has no direct impact on JLEN and its existing operating projects.

In February 2015, the UK government through its first competitive auction awarded CfD subsidies to 27 renewable energy projects. The Department for Energy and Climate Change ("DECC") announced the successful bidders, which include two offshore wind parks, 15 onshore wind projects, five waste projects and five solar parks, which could deliver over 2GW of new renewable energy capacity across England, Scotland and Wales. The first allocation round attracted a high level of interest. The developers' bids were significantly below market expectations and administrative strike prices set by the government (£90/MWh for onshore wind, £120/MWh for solar PV, £140/MWh offshore wind).

The UK power market during the last 12 months has been characterised by low prices and a continued low spark spread environment, mainly driven by falling oil and gas prices at the end of 2014. This commodity environment has primarily impacted conventional power generation but also renewables companies most exposed to UK electricity prices. JLEN has been less affected by market conditions than its peers, thanks to its diversified Portfolio (including waste management and wastewater) and the extent of ROC and FiT revenues in its Portfolio which reduce its exposure to electricity prices. In 2015 and beyond, while the possibility of further falls in wholesale electricity prices cannot be dismissed, there may be more upside potential for the Portfolio if electricity prices recover over time. The timing and extent of changes to electricity prices will depend on a range of factors and the Board and the Investment Adviser will continue to monitor markets and forecasts quarterly and reflect in the reported NAV as appropriate.

Whilst in the UK the PFI programme for new waste and wastewater projects is now largely completed, there remain a large number of projects which continue to be held on corporate balance sheets which should provide an active secondary market for JLEN in the future.

Based on the current outlook for the Portfolio and the markets in which it operates, the Board is confident that the current Portfolio will continue to deliver the target returns of the Company. The Board and the Investment Adviser also seek opportunities to improve the performance ahead of target through the delivery of additional operational scale efficiencies and through prudent Portfolio and financial management.

Risk 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 Group'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 Prospectus details all the potential risks that the Directors consider are material that could occur in an environmental infrastructure project and in particular those in relation to renewable energy generation and PPP/PFI projects.

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 possible but not commercially advisable. Rather it is to reduce the likelihood of occurrence and to ensure that JLEN is adequately prepared to deal with risks so as to minimise their impact should they materialise.

Risk identification and monitoring

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

JLEN has a comprehensive risk management framework and risk register that assesses a) the probability of each identified risk materialising; and b) the impact it may have on JLEN. Mitigation controls and management factors 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 risk register is presented to the Risk Committee at each quarterly meeting and a report from the Committee is presented to the Board. Each of the underlying projects is overseen by an experienced general manager who reports to their individual project board. The general managers maintain strong relationships between clients, sub‑contractors and other stakeholders. This ensures effective management of potential risks.

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

·     strategic and economic;

·     operational, business, processes and resourcing;

·     financial;

·     compliance and legal; and

·     asset specific.

Each of these areas, together with the principal risks within that category, are summarised in the table below, followed by a detailed discussion of the mitigating factors.

Strategic and economic

Inflation and interest rates

Potential impact:

·     The underlying assets in the Portfolio and therefore the returns expected from them have some exposure to inflation.

·     The Company has some interest rate exposure, through its own cash deposits and bank funding and deposits and funding within the projects themselves.

Mitigation:

·     Returns from the assets in the Portfolio are highly correlated with inflation due to revenues from PFI assets, green benefits for RE assets and most operational costs being directly linked to an inflation index. This results in a 'natural hedge', removing the need for use of derivatives to mitigate inflation risk.

·     Through the use of interest rate swaps and fixed rate loans finance costs are fixed at the time of the contract being signed, substantially reducing interest rate risk.

Acquisitions and pipeline

Potential impact:

·     JLEN's intention is to grow the Portfolio by identifying value enhancement opportunities within our existing assets and by the acquisition of further assets. However, there is a risk that a pipeline of acquisitions does not materialise.

Mitigation:

·     JLEN benefits from a First Offer Agreement with John Laing giving it the right of first offer over a pipeline of environmental infrastructure projects, valued by John Laing at approximately £210 million over the next three years. In addition, JLEN continually receives and seeks opportunities from the wider secondary market and developers both in the UK and overseas.

Funding of acquisitions and future equity fundraising

Potential impact:

·     There is a risk that JLEN is unable to achieve its stated ambition of growing the Portfolio by acquiring new assets due to a lack of funding, both corporate debt and equity capital from investors.

Mitigation:

·     JLEN has a three year £50 million revolving credit facility providing short‑term finance to pursue acquisitions. This is used to finance acquisitions prior to raising capital, mitigating the risk of inadequate funding affecting growth.

·     Investors have been supportive of the infrastructure class in general and the environmental infrastructure/renewable energy class in particular and recent successful capital raises by other listed infrastructure funds confirms the appetite investors have for infrastructure as an asset class.

Competition

Potential impact:

·     JLEN, in pursuing investment opportunities and in seeking to raise further capital, competes against a number of other listed and private infrastructure funds.

Mitigation:

·     JLEN differentiates itself from its peer group in a number of ways including its investment policy of investing in a diversified range of environmental infrastructure and revenues streams, its aim to only raise capital against committed investments and having a right of First Offer Agreement with John Laing.

UK future of capital spending

Potential impact:

·     Under its investment policy, JLEN is required to hold at least 50% of its Portfolio by value in UK assets. JLEN therefore has a significant interest in the future of UK infrastructure spending. There is a risk that spending is either reduced or stopped altogether or that the model used to procure environmental infrastructure and/or renewable energy projects offers a risk profile that would not allow JLEN to invest under its investment policy.

Mitigation:

·     Should either of these risks materialise, the immediate impact on JLEN and the secondary PPP/renewable energy market would be small as there is sufficient deal flow in the UK market to sustain this space in the short to medium term, as primary participants seek to recycle equity to reinvest in new infrastructure projects.

 

Operational, business, processes and resourcing

Volume of resource

Potential impact:

·     By the very nature of environmental infrastructure projects, their financial performance is dependent on the volume of resource available, be it solar irradiation, wind, waste or water. 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:

·     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 uncorrelated.

·     In addition for waste and wastewater projects the contractual exclusivity over the available waste or water stream, in the case of waste the existence of minimum guaranteed volumes and the fact that the environmental processing projects are relatively insensitive to volume changes due to the presence of banded payment arrangements mitigate this risk.

·     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.

Electricity prices

Potential impact:

·     The revenues of the renewable energy solar and wind assets are dependent to some extent on the market price of electricity 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.

Mitigation:

·     The risk of exposure to variations in electricity prices from assumptions made is mitigated by JLEN in the following ways; (i) short-term PPAs are used to fix prices for between one and three years depending on market conditions (ii) quarterly reports from an independent established market consultant are used to inform the electricity prices over the longer term used in the financial models.

Financial

Valuation

Potential impact:

·     The discount rates used in the valuation exercise represent the Investment Adviser's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. Increased underlying gilt rates may lead to increased discount rates being applied by the market and a consequential decrease in the Portfolio Value.

·     Asset values may not run in parallel to evolving forecasts for future energy prices and investors should expect some variation in asset valuation from period to period, as and when a material movement from prior expectations is identified.

Mitigation:

·     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.

In general, independent forecasters expect UK wholesale electricity prices to continue to rise in real terms (in the short and long term), based on tighter UK capacity margins in the short term and global energy supply and demand in the long term.

Compliance and legal

Regulatory - general

Potential impact:

·     JLEN is required to comply with certain London Stock Exchange and Guernsey regulatory requirements, UK Listing Authority regulations under the Alternative Investment Fund Managers Directives ("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.

Mitigation:

·     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 Adviser and legal counsel and monitors ongoing compliance developments in the Channel Islands and with the LSE and FCA.

Regulatory - support for renewables

Potential impact:

·     A change in Government policy could lead to new renewable energy policies resulting in a change or abandonment of the Renewables Obligation. If these were applied retrospectively to current operating projects including those in the Group's Portfolio, this could adversely impact the market price for renewable energy or the value of the green benefits earned from generating renewable energy.

Mitigation:

·     The Government has evolved the regulatory framework for new projects being developed but has consistently stood behind the framework that supports operating projects as it understands the need to ensure investors can trust regulation. This principle of "grandfathering" was confirmed in the Energy Act 2013.

Asset specific

Operational risk

Potential impact:

·     JLEN invests in projects where the majority of operational risk is retained by the public sector counterparty (relevant to PFI projects) or passed down to sub‑contractors. However, in all cases, some risk is retained by the project as set out above and identified in the Prospectus.

·     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.

Mitigation:

·     The Portfolio is constantly monitored by the Investment Adviser to identify and 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 on the Portfolio as a whole.

·     This risk is mitigated in part by the diversification represented by JLEN's Portfolio of assets.

Corporate social responsibility

The business of the Company is to invest in environmental infrastructure projects. JLEN recognises the business imperative and moral obligation to carry out its activities in a socially responsible, safe and environmentally sustainable manner, with due consideration to human rights.

Corporate social responsibility

The Company's commitment to corporate social responsibility ("CSR") is supported by JLCM who adopt the extensive CSR policies of John Laing. Examples of how the assets have contributed to achieving JLEN's CSR ambitions are provided below:

Hall Farm wind farm

As well as contributing to national targets for renewable energy generation, Hall Farm also provides significant benefits to the local community while generating enough electricity to meet the needs of 15,750 homes. Hall Farm also provides contributions to the local community fund to provide economic, social and environmental benefits. This is distributed by the Routh Community Fund, a local community‑led group.

Bilsthorpe wind farm

Bilsthorpe wind farm generates enough electricity to meet the needs of over 6,000 homes, making a contribution to securing the nation's energy supply whilst reducing greenhouse gas emissions. The wind farm also supports local employment and suppliers. In addition, it provides an annual contribution to the parishes of Eakring and Bilsthorpe in the form of a local community fund.

 

Castle Pill & Ferndale wind farms

The Castle Pill & Ferndale wind farms generate enough electricity to supply to over 4,700 homes. The University of Wales holds educational visits to the Ferndale site every year and the wind farm supports other ad hoc educational visits from local schools seeking to raise children's awareness of how renewable energy is generated.

Amber solar park

The Amber solar parks generate enough electricity to meet the needs of over 1,700 homes. The project provides donations to support local causes on an ad hoc basis.

Wear Point wind farm

Wear Point wind farm has made a £4.5 million contribution to the Welsh economy by awarding contracts to Welsh businesses, including companies local to the site. The wind farm has also benefited the local community by the upgrading and refurbishing of Waterston's playing field. A further contribution has been made toward Pembrokeshire County Council's planned upgrading of the Pembrokeshire Coastal Path.

Carscreugh wind farm

Carscreugh wind farm was completed in June 2014 and employed local construction companies and suppliers during the development. Now that the wind farm is operational, Carscreugh has committed to providing funding to support local economic, social and environmental benefits in the community. To this end, Carscreugh is working with Foundation Scotland and Old Luce Community Council who have established a fund to bring together community funds from adjacent schemes for the benefit of the wider community.

Health and safety

The physical location, operation and maintenance of environmental infrastructure projects may, if inappropriately assessed and managed, pose health and safety risks to those involved. The operation and maintenance of facilities may result in bodily injury or industrial accidents. If an accident were to occur in relation to one or more of the Group's investments and if the Group were deemed to be at fault, the Group could be liable for damages or compensation to the extent such loss is not covered under insurance policies. In addition, adverse publicity or reputational damage could ensue.

The JLEN, UK HoldCo and individual project entity boards have health and safety policies and review health and safety at each of their respective scheduled Board meetings. The Group engages the Investment Adviser to carry out a rolling programme of independent audits of the health and safety policies and compliance of its projects and all major suppliers.

Environment

JLEN takes its environmental responsibilities very seriously and seeks to ensure effective environmental management, not only of its own direct activities but also the indirect aspects and impacts resulting from the occupation and use of our environmental infrastructure projects.

This strategic report is approved by the Board of Directors.

Richard Morse

Chairman

3 June 2015

 

Board of Directors

Members of JLEN's Board of Directors, all of whom are non‑executive and independent of the Investment Adviser, are listed below.

Richard Morse

Chairman

Richard has more than 30 years' experience in energy and infrastructure, including environmental energy. He is a partner at Opus Corporate Finance where he leads the environmental energy practice and his boardroom experience includes roles with Thames Tideway Tunnel, Private Infrastructure Development Group and Howard de Walden Estates Limited.

Past experience

Richard trained as an investment banker, becoming Deputy Head of Corporate Finance and head of the utilities and energy team at Dresdner Kleinwort Wasserstein, before taking up senior roles in the energy and utilities practices at Goldman Sachs and Greenhill International, and a Senior Adviser role at Matrix Corporate Capital.

Committee memberships

Nominations Committee

Christopher Legge

Director

Chris was head of Audit and Accountancy for eight out of the 20 years he worked for Ernst & Young in Guernsey. He was responsible for multiple audits of banking, insurance, investment fund, property fund and other financial clients before being appointed managing partner in 1998.

Past experience

Since retiring from Ernst & Young in 2003, Chris has held numerous non‑executive directorships in the UK listed financial services sector, including BH Macro Limited (FTSE 250), Third Point Offshore Investors Limited and Ashmore Global Opportunities Limited where he also chairs the Audit Committee. He is a Fellow of the Institute of Chartered Accountants in England and Wales.

Committee memberships

Audit Committee

Risk Committee

Denise Mileham

Director

Denise has acted in non‑executive director roles for the past six years and previously sat on the board of Resolution Limited, the FTSE 100 listed company. She was previously an executive director at Kleinwort Benson (Channel Islands) Fund Services, acting as Head of Fund Administration and Deputy Head of Fund Services.

Past experience

In Denise's early career she undertook numerous roles at Credit Suisse including Compliance Officer in the fund administration department. A Fellow of the Securities and Investment Institute since 2006, she is also a member of the Institute of Directors, the Guernsey NED Forum and Guernsey Investment Fund Association and previously sat on their Technical Committee.

Committee memberships

Nominations Committee

Risk Committee

Peter Neville

Director

Peter has more than 35 years' experience in the financial services and financial services regulatory sectors in the UK and overseas. He currently serves as a Chairman of Kleinwort Benson (Channel Islands) Limited and is a member of the group‑wide Kleinwort Benson Strategic Risk Committee.

Past experience

Peter was Director General of the Guernsey Financial Services Commission from 2001 until 2009. His boardroom experience has included acting as a non‑executive director of Mytrah Energy Limited and as a member of the Board and Chairman of the Audit and Risk Committee of the Channel Islands Competition and Regulatory Authorities ("CICRA"). He has worked in merchant banking and corporate finance in the UK and the Far East undertaking IPOs, corporate restructurings, mergers and acquisitions and project finance.

Committee memberships

Risk Committee

Audit Committee

Nominations Committee

Richard Ramsay

Senior Independent Director

Richard is a chartered accountant with considerable experience in the energy sector including: leading the Barclays de Zoete Wedd team that privatised the Scottish electricity industry; Managing Director Finance and Regulation for a period at Ofgem; and director of the Shareholder Executive, principally involved with government businesses in the nuclear sector. He is currently chairman of Seneca Global Income & Growth Trust plc. He also currently chairs a managing agency focused on the global nuclear insurance market.

Past experience

At Ivory & Sime, Barclays de Zoete Wedd and at Intelli Corporate Finance he worked in the closed end funds sector, completing over £2.5 billion of transactions.

Committee memberships

Audit Committee

The Investment Adviser

JLEN is advised by John Laing Capital Management Limited ("JLCM"). JLCM is a wholly‑owned subsidiary of John Laing Group plc.

David Hardy

Investment Adviser

David is a Director of John Laing Capital Management with over 18 years' corporate finance, M&A, fundraising and deal closure experience spanning infrastructure, PFI and renewables projects.

Joining John Laing in 2005, he led the equity investment of numerous UK  PFI/PPP projects across various sectors. From 2011 he was responsible for raising co‑investment funds from institutional investors on large infrastructure projects and leading the divestment of mature projects for the Group.

Prior to joining John Laing Capital Management, David was a Corporate Finance partner at KPMG. He has a BSc in Management Sciences from Manchester University and is a Member of the Institute of Chartered Accountants in England and Wales.

Chris Tanner

Investment Adviser

Chris is a Director of John Laing Capital Management, He has over 14 years' experience in infrastructure including PPPs, economic infrastructure and renewables. He has also been active as an investor throughout the project cycle, including origination, buying and selling on the secondary market.

Prior to joining John Laing, he was a Principal in Henderson's private equity infrastructure team, often working closely with John Laing on various special projects. In the 18 months prior to joining JLCM he was on secondment to John Laing as Corporate Finance Director. Preceding Henderson, Chris worked at PricewaterhouseCoopers for 11 years.

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.

Jane Tang

Senior Investment Manager

Jane is a Chartered Financial Analyst with over 14 years' experience in corporate finance, including working on numerous PFI and infrastructure deals.

Prior to joining John Laing in 2007, she was an Assistant Director at PricewaterhouseCoopers in London and, prior to that, in Singapore.

Jane is a member of the Institute of Chartered Financial Analysts and has a BA in Business Administration from the National University of Singapore.

Corporate governance statement

The Board recognises the importance of a strong corporate governance culture.

Introduction

The Listing Rules and the Disclosure and Transparency Rules ("Disclosure Rules") of the UK Listing Authority require listed companies to disclose how they have applied the principles and complied with the provisions of the Corporate Governance Code to which the issuer is subject. The provisions of the UK Corporate Governance Code ("UK Code") as issued by the Financial Reporting Council ("FRC") in September 2012 and recently updated in September 2014 are applicable to the period under review and can be viewed at www.frc.org.uk.

The related Code of Corporate Governance (the "AIC Code") issued by the Association of Investment Companies ("AIC") in February 2013 provides specific corporate governance guidelines to investment companies. The AIC issued their revised code in March 2015. The FRC has confirmed that AIC member companies who report against the AIC Code and who follow the AIC's Corporate Governance Guide for Investment Companies ("AIC Guide") will be meeting their obligations in relation to the UK code and the associated disclosure requirements of the Disclosure Rules. The AIC Code can be viewed at www.theaic.co.uk.

Statement of compliance with the AIC Code and Guide

The Board recognises the importance of a strong corporate governance culture that meets the Listing Rules of the United Kingdom Listing Authority ("UKLA"). The Board has put in place a framework for corporate governance which it believes is appropriate for the Company. All Directors contribute to Board discussions and debates. The Board believes in providing as much transparency for shareholders as is reasonably possible. It should be noted that most of the Company's day‑to‑day responsibilities are delegated to third parties and the Company has no employees.

The Company is a member of the AIC and has considered the principles and recommendations of the AIC Code and has decided to follow the AIC Guide. The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to the role of the chief executive, executive directors' remuneration and the need for an internal audit function. For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers these provisions are not relevant to the position of the Company, as it has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions.

AIFM Directive

The Company is categorised as an internally managed non‑EEA AIF for the purposes of the AIFM Directive and as such neither it nor the Investment Adviser is required to seek authorisation under the AIFM Directive. The Board retains responsibility for the majority of the Company's risk management and Portfolio management functions, and performs a number of its management functions through the various committees described below.

The Board delegates certain activities to the Investment Adviser, but actively and continuously supervises the Investment Adviser in the performance of its functions and reserves the right to take decisions in relation to the investment policies and strategies of the Company or to change the Investment Adviser (subject to the terms of the Investment Advisory Agreement). The Board retains the right to override any advice given by the Investment Adviser if acting on that advice would cause the Company not to be acting in the best interests of investors, and more generally to provide overriding instructions to the Investment Adviser on any matter within the scope of the Investment Adviser's mandate. The Board also has the right to request additional information or updates from the Investment Adviser in respect of all delegated matters, including in relation to the identity of any sub‑delegates and their sphere of operation.

The Board

The Board comprises five Directors, all of whom are non‑executive and independent of the Company's Investment Adviser. The Directors' details are contained on pages 40 and 41 of the Annual Report and set out the range of investment, financial and business skills and experience represented. Richard Morse has been appointed Chairman and Richard Ramsay has been appointed as Senior Independent Director. The Board meets at least four times a year and, should the nature of the activity of the Company require it, additional meetings may be scheduled, some at short notice. Between meetings there is regular contact with the Investment Adviser and the Administrator and the Board requires information to be supplied in a timely manner by the Investment Adviser, the Company Secretary and other advisers in a form and of a quality appropriate to enable it to discharge its duties.

The tenure of Directors is expected to not exceed nine years unless exceptional circumstance warrant such as to allow for phased Board appointments and retirements. The Company intends that each Director will stand for re‑election at the annual general meeting of the Company at intervals of no more than three years. The Board has adopted a policy for any long‑standing Directors who have held office for nine years or longer to stand for re‑election annually.

The Board regularly reviews the composition in terms of required skills, experience and diversity, and would consider these issues in relation to the appointment or replacement of any Directors.

The terms and conditions of appointment of the Directors are available for inspection from the Company's registered office.

Performance and evaluation

The JLEN Board has adopted a process to review its performance on a regular basis and such reviews are expected to be carried out internally on an annual basis and with external facilitation every three years. The Board plans to carry out its first evaluation in September 2015 following the completion of the first year's trading and the issue of this first Annual Report since IPO.

Any new Directors will receive an induction from the Investment Adviser and the Administrator as part of their induction process. All Directors will receive other relevant training as necessary including site visits.

Duties and responsibilities

The Board is responsible to shareholders for the overall management of the Company. The Board has adopted a set of reserved powers which set out the particular areas where the Board wishes to retain control. Such reserved powers include decisions relating to the determination of investment policy and approval of investments, strategy, capital raising, statutory obligations and public disclosure, financial reporting and entering into any material contracts by the Company.

The Directors have access to the advice and services of Praxis Fund Services Limited, the Company Secretary and Administrator, who is responsible to the Board for ensuring that Board procedures are followed and that it complies with Guernsey Law and applicable rules and regulations of the Guernsey Financial Services Commission and the London Stock Exchange.

An Investment Advisory Agreement between the Company and the Investment Adviser sets out the matters over which the Investment Adviser has delegated authority including monitoring and managing the existing Investment Portfolio, and also the limits on cost and expenditure above which Board approval must be sought. All other matters are reserved for the approval by the Board of Directors.

Where necessary, in carrying out their duties, the Directors may seek independent professional advice at the expense of the Company. The Company maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors on an ongoing basis.

The Board has responsibility for ensuring that the Company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and which enable it to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008 as amended. It is the Board's responsibility to present a fair, balanced and understandable assessment, which extends to interim and other price‑sensitive public reports.

Committees of the Board

The Board has not deemed it necessary to appoint a remuneration committee as, being comprised of five Directors, it considers that such matters may be considered by the whole Board. The remuneration of the Board has been fixed after consultation with independent external advisers.

The Company has established an Audit Committee, chaired by Christopher Legge, which operates within clearly‑defined terms of reference and comprises three non‑executive Directors: Christopher Legge, Peter Neville and Richard Ramsay whose qualifications and experience are noted on pages 40 and 41 of the Annual Report. The Audit Committee meets at least three times a year at times appropriate to the financial reporting calendar.

The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual Report and financial statements; the Interim Report and financial statements; the system of internal controls; and the terms of appointment of the auditor, together with their remuneration. It is also the forum through which the auditor reports to the Board. The Audit Committee also reviews the objectivity of the auditor along with the terms under which the external auditor is engaged to perform non‑audit services. The provisions in place to maintain the independence and objectivity of the auditor include the requirement to replace the lead audit partner every five years, and restrictions on the delivery of non‑audit services to the Company with such services and the terms under which these are to be provided, considered by the Audit Committee on a case by case basis. Notwithstanding such services the Audit Committee considers Deloitte LLP to be independent of the Company and that the provision of such non‑audit service is not a threat to the objectivity and independence of the conduct of the audit.

The Company has also established a Risk Committee, chaired by Peter Neville and comprises three non‑executive Directors: Peter Neville, Christopher Legge and Denise Mileham. The duties of the Risk Committee include the identification, measurement, management and monitoring appropriately and regularly of all risks relevant to the Company's investment strategy and to which the Company is or may be exposed. It will be the responsibility of the Risk Committee to ensure that the risk profile of the Fund corresponds to the size, Portfolio structure and investment strategies and objectives of the Fund. The Risk Committee will meet at least four times per year. The members of the Risk Committee consider that they collectively have the requisite skills and experience to fulfil the responsibilities of the Risk Committee.

The Company has also established a Nominations Committee, chaired by Denise Mileham and which comprises three non‑executive Directors: Denise Mileham, Richard Morse and Peter Neville. The Nominations Committee's main function is to regularly review the structure, size and composition of the Board and to consider succession planning for Directors. The Nominations Committee will meet at least twice per year.

Separate reports from the Audit, Risk and Nominations Committees on their activities for the period are set out on pages 51 to 56 of the Annual Report.

The Board as a whole performs the functions typically undertaken by an Investment Committee. The Board will ensure compliance with the terms of the investment policy of the Company and consider and decide on any changes to the investment policy (subject to obtaining the relevant shareholder approvals), including geographical and sectorial spread of investments, risk profile, investment restrictions and the approach to project selection. The Board will also make discretionary management decisions in respect of the investment Portfolio (with reference as necessary to advice provided by the Investment Adviser), but may appoint sub‑committees to meet on an ad hoc basis to consider potential acquisitions and disposals of particular investments.

The Board as a whole also fulfils the functions of an investment advisory engagement committee.

The Board will review and make recommendations on any proposed amendment to the Investment Advisory Agreement and keep under review the performance of the Investment Adviser. The investment advisory engagement committee will also perform a review of the performance of other key service providers to the Fund. The investment advisory engagement committee will meet at least once a year.

	Board	Audit	Risk	Nominations
Meeting attendance	Meeting	Committee	Committee	Committee
Number of  meetings held	5	3	4	1
Richard Morse	5	n/a	n/a	1
Christopher Legge	5	3	4	n/a
Denise Mileham	5	n/a	4	1
Peter Neville	5	3	4	1
Richard Ramsay	4	2	n/a	n/a

A total of two other unscheduled Board meetings were held during the year for specific purposes which were attended by some but not all of the Directors.

Relations with shareholders

The Company welcomes the views of shareholders and places great importance on communication with its shareholders. The Investment Adviser produces a regular factsheet which is available on the Company's website. Senior members of the Investment Adviser make themselves available, as practicable, to meet with principal shareholders and key sector analysts. Feedback from these meetings is provided to the Board on a regular basis. The Board is also kept fully informed of all relevant market commentary on the Company by the Company's financial PR agency, as well as receiving relevant updates from the Investment Adviser and the Company's brokers.

All shareholders can address their individual concerns to the Company in writing at its registered address. The annual general meeting of the Company provides a forum for shareholders to meet and discuss issues with the Directors and the Investment Adviser.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Directors' report and financial statements in accordance with applicable laws and regulations. Company law (the Companies (Guernsey) Law 2008) requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and IFRS as issued by the International Accounting Standards Board ("IASB"). Under Company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, International Accounting Standard 1 requires that Directors:

·     properly select and apply accounting policies;

·     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·     provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance;

·     make an assessment of the Company's ability to continue as a going concern; and

·     make judgements and estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with these requirements in preparing the financial statements.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

·     the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

·     the strategic report includes a fair review of the development and performance of the Company and the undertakings taken as a whole, together with a description of the principal risks and uncertainties that we face; and

·     the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

By order of the Board

Richard Morse

Chairman

3 June 2015

Report of the Directors

The Directors are pleased to submit their report and the audited financial statements of the Company for the period from incorporation on 12 December 2013 to 31 March 2015.

Principal activities

John Laing Environmental Assets Group Limited is a company incorporated and registered in Guernsey under the Companies (Guernsey) Law, 2008. The Company was incorporated on 12 December 2013 with the Company register number 57682.

As at 31 March 2015 the total number of Ordinary Shares of the Company in issue was 160 million.

The Company is a registered fund under the Registered Collective Investment Scheme Rules 2008 and is regulated by the Guernsey Financial Services Commission and, during the period, its principal activity was as an investor in environmental infrastructure projects that utilise natural or waste resources or support more environmentally‑friendly approaches to economic activity.

Business review

The Company is required to present a fair review of its business during the period ended 31 March 2015, its position at the period end and a description of the principal risks and uncertainties it faces.

This information is contained within the strategic report on pages 9 to 39 of the Annual Report.

Disclosure of information under Listing Rule 9.8.4

Information on any contract of significance subsisting during the period under review:

a)   to which the Company, or one of its subsidiary undertakings, is a party and in which a Director of the Company is or was materially interested; and

b)   between the Company, or one of its subsidiary undertakings, and a controlling shareholder.

This can be found in note 13.

The Directors note that no shareholder has waived or agreed to waive any dividends.

Results and dividends

The results for the period are set out in the financial statements on pages 62 to 83 of the Annual Report. On 20 April 2015 the Directors declared a dividend in respect of the period 1 October 2014 to 31 March 2015 of 3.0 pence per Ordinary Share to shareholders on the register as at the close of business on 15 May 2015.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the strategic report. The financial position of the Company, its cash flows and its liquidity position are described in the strategic report. In particular, the current economic conditions have created a number of risks and uncertainties for the Company and these are set out in the risks and risk management section on pages 34 to 37 of the Annual Report. The financial risk management objectives and policies of the Company and the exposure of the Company to credit risk, market risk and liquidity risk are discussed in note 14 of the financial statements.

The Company continues to meet its requirements and day‑to‑day liquidity needs through both its own cash resources and those of its investment entities, to which it has full recourse.

In October 2014, JLEN secured a three‑year £50 million multi‑currency revolving credit facility with NIBC and HSBC. The facility will be used primarily to fund acquisitions, and will be repaid through raising equity in the market. The facility is intended to be additional resource and not structural financing.

As at 31 March 2015 the Company had net current assets of £2.9 million, including a cash balance of £3.6 million. At the UK HoldCo level the £50 million revolving credit facility was drawn to a level of £43.7 million, with the balance available for future acquisitions and working capital. JLEN has sufficient cash balances to meet other current obligations as they fall due while all key financial covenants are forecast to continue to be complied with.

The Directors have reviewed Company forecasts and projections which cover a period of not less than 12 months from the date of the report, taking into account reasonably likely changes in investment and trading performance, which show that the Company has sufficient financial resources.

On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Share capital

The Company has one class of Ordinary Shares which carries no rights to fixed income. On a show of hands, each member present in person or by proxy has the right to one vote at our general meetings. On a poll, each member is entitled to one vote for every share held.

The issued nominal value of the Ordinary Shares represents 100% of the total issued nominal value of all share capital. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Incorporation and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

The Company's Memorandum and Articles of Incorporation contain details relating to the rules that the Company has about the appointment and removal of Directors or amendment to the Company's Articles of Incorporation which are incorporated into this report by reference.

Authority to purchase own shares

A resolution to provide the Company with authority to purchase its own shares will be tabled at the AGM on 13 August 2015. This shareholder authority was renewed at the 2014 AGM.

Major interests in shares and voting rights

As at 31 March 2015, the Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency Rules, of the following voting rights as a shareholder in the Company.

	Percentage
	of voting rights	Number of
	and issued	Ordinary
Shareholder	share capital	Shares
John Laing Pension Trust Limited	29.90%	47,840,000
John Laing Investments Limited	9.79%	15,656,731
Baillie Gifford & Co Limited	9.94%	15,900,000
Architas Multi‑Manager Limited	6.27%	10,030,000

 

Board of Directors

The Board members that served during the year and up until the date of this report, all of whom are non‑executive Directors and independent of the Investment Adviser, are listed below. Their biographical details are shown on pages 40 and 41 of the Annual Report.

Name	Function
Richard Morse	Chairman
Christopher Legge	Director
Denise Mileham	Director
Peter Neville	Director
Richard Ramsay	Director

 

Re‑election of Directors

At the first annual general meeting of the Company on 14 August 2014 all of the Directors offered themselves for re‑election and were duly re‑elected. In subsequent years one third of the Board will stand for re‑election and at the annual general meeting to be held on 13 August 2015 Richard Morse and Denise Mileham will put themselves forward for re‑election. Each of the Directors has a letter of appointment rather than a service contract.

Directors' interests

Directors who held office during the period and had interests in the shares of the Company as at 31 March 2015 were:

	Ordinary Shares
	of no par value
	each held at
Name	31 March 2015
Richard Morse	50,000
Christopher Legge	25,000
Denise Mileham	20,000
Peter Neville	25,000
Richard Ramsay	45,000

There have been no changes in the Directors' interests from 31 March 2015 to the date of this report.

Directors' remuneration

During the period the Directors earned the following emoluments in the form of Directors' fees from the Company:

	Period ended
	31 March 2015
	Directors' fee
Name	In £
Richard Morse	62,500
Christopher Legge	43,750
Denise Mileham	43,750
Peter Neville	43,750
Richard Ramsay	56,250

 

Annual general meeting

The Company AGM will be held at 10.00am on 13 August 2015 at Sarnia House, Le Truchot, St Peter Port, Guernsey, Channel Islands. Details of the business to be conducted will be contained in the notice of AGM.

Appointment of the Investment Adviser

John Laing Capital Management acts as the Investment Adviser to the Company. A summary of the contract between the Company, its subsidiaries and joint ventures and JLCM in respect of services provided is set out in note 13 to the financial statements. It is in the Directors' opinion, based upon the performance in the period to 31 March 2015 that the continuing appointment of JLCM on the agreed terms is in the best interests of the shareholders as a whole.

Auditor

The Audit Committee reviews the appointment of the external auditor, its effectiveness and its relationship with the Company and its subsidiaries and joint ventures, which includes monitoring our use of the auditor for non‑audit services and the balance of audit and non‑audit fees paid. Following a review of the independence and effectiveness of the auditor, a resolution will be proposed at the 2015 AGM to reappoint Deloitte LLP.

Each Director believes that there is no relevant information of which our auditor is unaware. Each has taken all steps necessary, as a Director, to be aware of any relevant audit information and to establish that Deloitte LLP is made aware of any pertinent information. This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of the Companies (Guernsey) Law 2008.

By order of the Board

Richard Morse

Chairman

3 June 2015

Audit Committee report

Summary of the role and responsibilities of the Audit Committee

The Audit Committee is appointed by the Board from the non‑executive Directors of the Company. The Audit Committee, chaired by Christopher Legge, operates within clearly defined terms of reference and includes all matters indicated by Disclosure and Transparency Rule 7.1 and the UK Corporate Governance Code. The terms of reference are considered annually by the Audit Committee and are then referred to the Board for approval. A copy of the terms of reference is available upon request from the Company Secretary.

The main roles and responsibilities of the Audit Committee are:

·     monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance and reporting to the Board on significant financial reporting issues and judgements contained therein;

·     reviewing the content of the Annual Report and accounts and advising the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy;

·     reviewing the adequacy and effectiveness of the Company's internal financial controls and internal control and risk management systems;

·     reviewing the adequacy and security of the Company's arrangements for regulatory compliance, whistleblowing and fraud;

·     making recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re‑appointment and removal of the Company's external auditor; and

·     assessing annually the external auditor's independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non‑audit services and the effectiveness of the audit process.

The Audit Committee shall report formally to the Board on its proceedings on all matters within its duties and responsibilities and how it has discharged its responsibilities.

Composition of the committee

The members of the Audit Committee are:

·     Christopher Legge (Chairman)

·     Peter Neville

·     Richard Ramsay

Meetings

The Audit Committee shall meet at least three times a year and at such other times as the Audit Committee chairman shall require.

Other Directors and third parties may be invited by the Audit Committee to attend meetings as and when appropriate.

AGM

The Audit Committee chairman shall attend the annual general meeting to answer shareholder questions on the Committee's activities.

Significant issues

The Audit Committee considered the following significant issues in relation to the financial statements:

a) Adoption of the Investment Entity Standards

The Company has early adopted the Investment Entities: amendments to IFRS 10, IFRS 12 and IAS 27.

The Investment Entities standard introduced an exception to the principle that all subsidiaries shall be consolidated. The amendments require an investment entity to measure its investments at fair value through profit or loss, in accordance with IAS 39 Financial Instruments: Recognition and Measurement instead of consolidating its subsidiaries.

To determine that the Company meets the definition of an investment entity, further consideration is given to the following characteristics of an investment entity that are demonstrated by the Company:

a)   it has more than one investment;

b)   it has more than one investor;

c)   it has investors that are not related parties;

d)   it has ownership interests in the form of equity or similar interests; and

e)   it holds its investments for a limited period only, i.e. it has an exit strategy for its investments.

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

In December 2014, the IASB issued amendments to IFRS 10, IFRS 12 and IAS 28 related to the application of the investment entities exceptions. As an investment entity, the Company will not be able to consolidate the intermediate holding companies which are themselves, investment entities but should hold its 100% owned subsidiary John Laing Environmental Assets Group (UK) Limited at fair value. As a result of adopting these amendments, the Company recognises its investment in its wholly owned subsidiary John Laing Environmental Assets Group (UK) Limited at fair value through profit or loss. The fair value estimate of John Laing Environmental Assets Group (UK) Limited includes the fair value of both this Company and all of its subsidiaries and joint ventures.

The Audit Committee is satisfied that:

·     the Administrator and Investment Adviser has assessed the appropriateness of the adoption of the amendments to IFRS 10, IFRS 12 and IAS 27;

·     the Administrator and Investment Adviser has assessed the appropriateness of the adoption of the clarifications set out in the IASB Exposure Draft, 'Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)';

·     the disclosures in the financial statements have been assessed for compliance with IFRS 10 and the Exposure Draft Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28);

·     the disclosures in the financial statements have been assessed for compliance with the new standards; and

·     the Administrator and Investment Adviser has prepared and submitted in the year a comprehensive review to the Audit Committee on the adoption and application of the amended standards.

The Audit Committee considers that the accounting treatment adopted in these accounts is the most appropriate to the Group's circumstances as the transactions of both the Company and the Group are relevant to investors.

b) Valuation of investments

The Company is required to calculate the fair value of its investments. Whilst there is a relatively active market for investments of this nature there is not a suitable listed, or other public market in these investments against which their value can benchmarked. As a result a valuation is performed based on a discounted cash flow methodology in line with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement.

The calculation of the fair value of the investments carries elements of risks, mainly in relation to the assumptions and factors such as:

·     the determination of the appropriate macroeconomic assumptions underlying the forecast investment cash flows;

·     the determination of the appropriate assumptions regarding future electricity prices, energy generation and volumes underlying the forecast investment cash flows;

·     the impact of project specific matters on the forecast cash flows for each investment;

·     the determination of the appropriate discount rate for each investment that is reflective of current market conditions;

·     the underlying project financial models may not reflect the underlying performance of the investment;

·     the cash flows from the underlying financial models may not take into account current known issues; and

·     the updates performed on the underlying financial models result in errors in forecasting.

The Audit Committee is satisfied that the Administrator and Investment Adviser's assumptions have been reviewed and challenged for:

·     the macroeconomic assumptions, including the comparison of these assumptions to observable market data and actual results;

·     the electricity price, energy generation and volume assumptions, including the comparison of these assumptions to observable market data and actual results; and

·     the build‑up of the discount rates for consistency and reasonableness, benchmarking against market data and peers.

The Audit Committee is also satisfied that the Portfolio Valuation and associated disclosures has been audited for mechanical accuracy, ensuring that the investments are brought on balance sheet at fair value and that the independent valuation carried out by an independent firm has been reviewed and challenged by the auditor.

Internal control

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness, and the Board has therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed.

The process is based on a risk‑based approach to internal control through a matrix which identifies the key functions carried out by the Investment Adviser, Administrator and other key service providers, the various activities undertaken within those functions, the risks associated with each activity and the controls employed to minimise and mitigate those risks. The Audit Committee works in close co‑operation with the Risk Committee, with the prime responsibility of the Audit Committee being the review of internal controls and processes and of the Risk Committee being the principal risks and uncertainties facing the Company. A separate report on the activities of the Risk Committee is set out on page 55 of the Annual Report.

Internal audit

The Audit Committee considers at least once a year whether or not there is a need for an internal audit function. Currently, the Audit Committee does not consider there to be a need for an internal audit function specific to the Company, given that there are no employees in the Company and the systems and procedures employed by the Administrator and Investment Adviser, including their own internal controls and procedures in place in relation to the Company, provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. In addition, internal audits of the projects are performed periodically by the Investment Adviser who will report findings to the Audit Committee.

External audit

Deloitte LLP has been the Company's auditor since incorporation on 12 December 2013 and these are the first set of financial statements on which it has expressed an audit opinion.

As a result of its work during the year, the Audit Committee has concluded that it has acted in accordance with its terms of reference.

The Audit Committee has assessed the quality and the effectiveness of the audit process. To draw its conclusions, the Audit Committee reviewed:

·     the scope of the audit, the audit fee and the external auditor's fulfilment of the agreed audit plan;

·     the degree of diligence demonstrated by them in the course of their interaction with the Board, the Audit Committee and the Administrator and Investment Adviser;

·     the auditor assessment of the Group's main risks; and

·     the report highlighting the matters that arose during the course of the audit and the recommendations made by the external auditor.

The Audit Committee has noted the revisions to the UK Corporate Governance Code introduced by the Financial Reporting Council in September 2012 and updated in September 2014, and the AIC Code of Corporate Governance issued in February 2013 and revised in March 2015, and in particular the recommendation, in each, to put the external audit out to tender every five to ten years. The Audit Committee continues to monitor the proposed changes by the European Union in respect of auditor services and retendering, which remain a work in progress.

The Committee intends to conduct a full review of Deloitte LLP following the issue of these financial statements to ensure that the Committee considers all aspects of the auditor's service and performance.

The Audit Committee is satisfied with the effectiveness and independence of the audit process and as such recommended to the Board that Deloitte LLP be re‑appointed as external auditor for the year ending 31 March 2016. The Audit Committee also recommended the Audit appointment is retendered every 10 years, with the Audit partner changing every five years.

Non‑audit services

The Audit Committee considered the extent of non‑audit services provided by the external auditor. The external auditor's objectivity and independence is safeguarded through limiting non‑audit services such as work pertaining to their role as reporting accountants for capital raising services.

Activities of the Audit Committee

The Audit Committee met on three occasions during the period 12 December 2013 to 31 March 2015.

Approval

On behalf of the Audit Committee:

Christopher Legge

Chairman of the Audit Committee

3 June 2015

Risk Committee report

The Board of Directors have established a Risk Committee from the non‑executive Directors of the Company. The Risk Committee, chaired by Peter Neville, operates within clearly defined terms of reference and works closely with the Audit Committee in monitoring the internal controls and risk management of the Company. The terms of reference are considered annually by the Risk Committee and are then referred to the Board for approval. A copy of the terms of reference is available upon request from the Company Secretary.

The main roles and responsibilities of the Risk Committee are:

·     when requested to do so, advise the Board on the overall risk appetite, tolerance and strategy of the Fund, taking account of the current and prospective macroeconomic, financial and regulatory environment, including relevant stakeholder issues;

·     oversee and advise the Board on the current risk exposures of the Fund with particular focus on the Fund's principal risks, being those which could influence shareholders' economic decisions, and the controls in place to mitigate those risks;

·     keep under review the Fund's overall risk assessment processes and, in conjunction with the Audit Committee, review the adequacy and effectiveness of the risk management systems;

·     in conjunction with the Audit Committee, ensure that a framework of strong corporate governance and best practice is in place, which enables the Company to comply with the main requirements of the Guernsey Code, UK Corporate Governance Code or the AIC Code where considered appropriate;

·     when requested to do so, advise the Board on proposed strategic transactions including acquisitions or disposals, ensuring that a due diligence appraisal of the proposition is undertaken, focusing in particular on risk aspects and implications for the risk appetite and tolerance of the Fund, and taking independent external advice where appropriate and available; and

·     oversee the remit of the risk management function, its resources, access to information and independence.

The members of the Risk Committee are:

·     Peter Neville (Chairman)

·     Christopher Legge

·     Denise Mileham

The Risk Committee shall report formally to the Board on its proceedings on all matters within its duties and responsibilities and how it has discharged its responsibilities. The Committee shall meet at least four times a year and at such other times as the Risk Committee chairman shall require. Other Directors and third parties may be invited by the Risk Committee to attend meetings as and when appropriate.

In order to assist it in fulfilling its role on behalf of the Board, the Committee has established in conjunction with the Investment Adviser an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed. This is a risk‑based approach through the maintenance of a register which identifies the key risk areas faced by the Company and the controls employed to minimise and mitigate those risks. Scoring based on a traffic light system for likelihood and impact is used to assess the significance to the Fund of each individual risk. The register is updated quarterly and the Committee considers all material changes to the risk ratings and the action which has been, or is being, taken. By their nature, these procedures will provide a reasonable, but not absolute, assurance against material misstatement or loss.

Nominations Committee report

The Board of Directors have established a Nominations Committee from the non‑executive Directors of the Company. The Nominations Committee, chaired by Denise Mileham, operates within clearly defined terms of reference which are considered and are then referred to the Board for approval. A copy of the terms of reference is available upon request from the Company Secretary.

The main terms of reference of the Committee are:

·     regularly review the structure, size and composition required of the Board and make recommendations to the Board with regard to any changes (including skills, knowledge and experience in accordance with Principle 6 of the AIC Code);

·     give full consideration to succession planning for Directors taking into account the challenges and opportunities facing the Company; and

·     be responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise.

The members of the Nominations Committee are:

·     Denise Mileham (Chairman)

·     Richard Morse

·     Peter Neville

The Nominations Committee shall report formally to the Board on its proceedings on all matters within its duties and responsibilities and how it has discharged its responsibilities. The Committee shall meet at least twice a year and at such other times as the Nominations Committee chairman shall require. Other Directors and third parties may be invited by the Nominations Committee to attend meetings as and when appropriate.

All members of the Board were recruited in the summer of 2013 and appointed to the Board on incorporation of the Company on 12 December 2013. The chairman Richard Morse was appointed by the subscriber John Laing plc and in conjunction with the Investment Adviser undertook a comprehensive recruitment process for the remaining members of the Board with the aim of establishing a Board with the skills, knowledge and experience necessary for the proposed listing of the Company and its subsequent management and operation.

The Nominations Committee met once during the period in November 2014. At that meeting the Committee considered the composition of the Board and concluded that the current mix of skills, knowledge and experience was appropriate for its current activities. This will be kept under review as the Company develops, particularly when considering Director succession. A further meeting was held on 3 June 2015 and discussed the timing and form of the Board review to be carried out in September 2015.

 

Independent Auditor's report to the members of John Laing Environmental Assets Group

Opinion on financial statements of John Laing Environmental Assets Group Limited

In our opinion the financial statements:

·     give a true and fair view of the state of the Company's affairs as at 31 March 2015 and of its profit for the period then ended;

·     have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union; and

·     have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

The financial statements comprise the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of financial position, the cash flow statement and the related notes 1 to 17. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

Separate opinion in relation to IFRSs as issued by the IASB

As explained in note 2 to the financial statements, in addition to applying IFRSs as adopted by the European Union, the Company has also applied IFRSs as issued by the International Accounting Standards Board ("IASB").

In our opinion the financial statements comply with IFRSs as issued by the IASB.

Going concern

We have reviewed the Directors' statement contained within the report of the Directors on pages 48 to 50 of the Annual Report that the Company is a going concern. We confirm that:

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

·     we have not identified any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company's ability to continue as a going concern.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.

Risk: Application of the Investment Entities Standards ("IES")

John Laing Environmental Assets Group Limited (the "Company") accounts for all subsidiaries at fair value, consistent with the exception set out in IFRS 10 Consolidated Financial Statements for Investment Entities and the subsequent Amendments to IFRS 10 and other associated standards finalised by the IASB in late 2014.

In order to apply these standards the Company must meet the definition of an Investment Entity. The key judgements in making this determination are whether the Company invests solely for the purpose of capital appreciation, investment income, or both; does not plan to hold its investments indefinitely; holds them for a limited period i.e. there is an exit strategy; and measures and evaluates the performance of substantially all of its investments on a fair value basis.

In accounting for all its subsidiaries at fair value, the Company also asserts that the UK holding company, John Laing Environmental Assets Group (UK) Limited ("UK HoldCo") also meets the definition of an Investment Entity.

The details of the accounting policies adopted can be found in note 2 on pages 65 to 69 of the financial statements in the Annual Report and the details of the accounting for the investments can be found in note 8 on pages 72 to 75 to the financial statements in the Annual Report.

 

How the scope of our audit responded to the risk

·     We challenged the Directors' assessment and judgement that both the Company and UK HoldCo meet the definition of an investment entity, by assessing the nature and activities of the entities against the requirements of the IES.

·     We considered the basis on which the companies are intended to operate with reference to the IPO Prospectus and evaluated the day-to-day activities of the business, including those of the Investment Adviser, John Laing Capital Management Limited, through review of Board and other subcommittee minutes.

·     Particular focus was given to the companies' operating policies and procedures, and specifically the exit strategies for investments.

Risk: Fair value of investments

In applying the IES, the Company is required to calculate the fair value of its equity and Eurobond investments in UK HoldCo, which in turn owns investments in environmental infrastructure assets. As shown on the balance sheet, the total fair value of the Company's investments in UK HoldCo as at 31 March 2015 was £159 million.

The fair value of the investments in environmental infrastructure assets must be determined in accordance with IFRS 13 Fair Value Measurement. However, there is no liquid market for these projects, and therefore there are significant judgements required concerning the cash flow forecasts, including, electricity prices, macroeconomic assumptions and discount rates used within the valuation models.

The details of the critical accounting estimates and the key judgements can be found in note 3 on page 70 and note 8 on pages 72 to 75 to the financial statements in the Annual Report respectively.

 

How the scope of our audit responded to the risk

We reviewed the underlying cash flow models for Portfolio assets and in order to challenge the valuations we performed the following procedures:

·     challenged the macroeconomic assumptions such as inflation, tax rates and forward electricity prices against observable market data and forecasts;

·     reviewed the Directors' cash flow forecasts, focusing on movements since acquisition, value enhancements, and actual results compared to historic forecasts;

·     assessed project specific matters with respect to supporting documentation; and

·     challenged the discount rates applied, comparing to market data and peers and, involving internal valuation specialists to benchmark cost of equity assumptions. We also met with and challenged the Company's external valuation specialists in the course of our work.

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed on pages 51 to 53 of the Annual Report.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

We determined materiality for the Company to be £3.2 million, which is below 2% of total investments. This has been determined using a benchmark of the fair value of the investments which we believe is the key benchmark used by members of the Company in assessing financial performance.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £60,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the entity and its environment, including internal controls and the use of service organisations, including the Investment Adviser, John Laing Capital Management Limited, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records

Under the Companies (Guernsey) Law 2008, we are required to report to you if, in our opinion:

·     we have not received all the information and explanations we require for our audit; or

·     proper accounting records have not been kept; or

·     the financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Corporate governance statement

Under the Listing Rules we are also 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. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:

·     materially inconsistent with the information in the audited financial statements; or

·     apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or

·     otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors' statement that they consider the Annual Report is fair, balanced and understandable and whether the Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of Directors and auditor

As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.

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.

 

Scope of the audit of the financial statements    

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

John Clacy, FCA

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

3 June 2015

Income statement

period from incorporation on 12 December 2013 to 31 March 2015

		2015
	Notes	£'000s
Operating income	8	11,973
Operating expenses	4	(2,617)
Operating profit		9,356
Bank interest income		1
Profit before tax		9,357
Tax	5	-
Profit for the period		9,357
Earnings per share
Basic and diluted (pence)	7	5.85

All results are derived from continuing operations.

Statement of comprehensive income

period from incorporation on 12 December 2013 to 31 March 2015

	2015
	£'000s
Profit for the period	9,357
Total recognised income and expenditure attributable to equity shareholders	9,357

 

Statement of financial position

as at 31 March 2015

		2015
	Notes	£'000s
Non‑current assets
Investments at fair value through profit or loss	8	159,043
Total non‑current assets		159,043
Current assets
Trade and other receivables	9	14
Cash and cash equivalents		3,622
Total current assets		3,636
Total assets		162,679
Current liabilities
Trade and other payables	10	(770)
Total current liabilities		(770)
Total liabilities		(770)
Net assets		161,909
Equity
Share capital account	12	157,352
Retained earnings		4,557
Equity attributable to owners of the Company		161,909
Net assets per share (pence per share)		101.2

The financial statements were approved by the Board of Directors and authorised for issue on 3 June 2015.  They were signed on its behalf by:

R Morse                                  C Legge

Chairman                                Director

Statement of changes in equity

period from incorporation on 12 December 2013 to 31 March 2015                                         

		Period ended 31 March 2015
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at incorporation		-	-	-
Profit for the period		-	9,357	9,357
Total comprehensive income for the period		-	9,357	9,357
Share capital	12	160,000	-	160,000
Expenses of issue of equity shares	12	(2,648)	-	(2,648)
Dividends paid		-	(4,800)	(4,800)
Balance at 31 March 2015		157,352	4,557	161,909

 

Cash flow statement

period from incorporation on 12 December 2013 to 31 March 2015

	2015
	£'000s
Operating profit	9,356
Adjustments for:
Investment interest	(8,100)
Dividend received	(1,700)
Net gain on investments at fair value through profit or loss	(2,173)
Operating cash flows before movements in working capital	(2,617)
Increase in receivables	(14)
Increase in payables	770
Net cash outflow from operating activities	(1,861)
Investing activities
Investments in subsidiary	(66,870)
Loan to subsidiaries	(90,000)
Investment interest	8,100
Dividends received	1,700
Bank interest income	1
Net cash used from investing activities	(147,069)
Financing activities
Proceeds on issue of share capital	160,000
Expenses relating to issue of shares	(2,648)
Dividends paid	(4,800)
Net cash from financing activities	152,552
Net increase in cash and cash equivalents	3,622
Cash and cash equivalents at beginning of the period	-
Cash and cash equivalents at end of period	3,622

Notes to the financial statements

1. General information

John Laing Environmental Assets Group Limited is a closed‑ended investment company domiciled and incorporated in Guernsey, Channel Islands, under Section 20 of the Companies (Guernsey) Law. The shares are publicly traded on the London Stock Exchange under a Premium Listing. The financial statements of the Company are for the period from incorporation on 12 December 2013 to 31 March 2015 and have been prepared on the basis of the accounting policies set out below. The financial statements comprise only the result of the Company as its investment in John Laing 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 projects that utilise natural or waste resources or support more environmentally‑friendly approaches to economic activity.

2. Significant accounting policies

(a) Basis of preparation

The financial statements were approved and authorised for issue by the Board of Directors on 3 June 2015. The set of financial statements included in this financial report has been prepared in compliance with the Companies (Guernsey) Law, 2008 and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and IFRS as issued by the International Accounting Standard Board ("IASB") using the historical cost basis, except that the financial instruments classified at fair value through profit or loss are stated at their fair value.

During the period, the Company has adopted the Investment Entities amendments to IFRS 10, IFRS 12 and IAS 27 which become mandatory for annual periods beginning on or after 1 January 2014. The Company has also early adopted the narrow‑scope amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures. On 18 December 2014, the IASB clarified that the requirement for an investment entity to consolidate a subsidiary providing services related to its investment activities such as certain subsidiaries of the Company, applies only to subsidiaries that are not themselves investment entities. The amendments have been applied in these financial statements and become mandatory for annual periods beginning on or after 1 January 2016.

As a result of adopting the amendments to IFRS 10, IFRS 12 and IAS 28, the Company is required to hold its subsidiaries that provide investment services, who themselves are investment entities, at fair value, in accordance with IAS 39 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 2015 principally comprise working capital balances, the bank loan and investments in projects, are required to be included at fair value in the carrying value of investments.

The following standards have been issued but not yet adopted by the Company:

·     Amendments to IAS 1 (December 2014): Disclosure Initiative

·     Annual Improvements to IFRS: 2012-2014 Cycle (September 2014) Annual Improvements to IFRS: 2012-2014 Cycle

·     Amendments to IFRS 10 and IAS 28 (September 2014) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

·     Amendments to IAS 27 (August 2014) Equity Method in Separate Financial Statements

·     IFRS 9 Financial Instruments

·     IFRS 15 Revenue from Contracts with Customers

·     Amendments to IAS 16 and IAS 38 (May 2014) Clarification of Acceptable Methods of Depreciation and Amortisation

·     Amendments to IFRS 11 (May 2014) Accounting for Acquisitions of Interests in Joint Operations

·     Annual Improvements to IFRS: 2011-13 Cycle (December 2013) Annual Improvements to IFRS: 2011-13 Cycle

·     Annual Improvements to IFRS: 2010-12 Cycle (December 2013) Annual Improvements to IFRS: 2010-12 Cycle

·     Amendments to IAS 19 (November 2013) Defined Benefit Plans: Employee Contributions

None of these standards are expected to have a material impact to the financial statements when they become applicable in future periods.

(b) Applicability of the guidance concerning Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27)

To determine that the Company meets the definition of an investment entity, further consideration is given to the following characteristics of an investment entity that are demonstrated by the Company:

a)   it has more than one investment;

b)   it has more than one investor;

c)   it has investors that are not related parties;

d)   it has ownership interests in the form of equity or similar interests; and

e)   it holds its investments for a limited period only, i.e. it has an exit strategy for its investments.

The Directors have considered that the Company demonstrates these characteristics and meets the requirement to be considered as an investment entity.

 

The Company

a)   Obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;

b)   Commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

c)   Measures and evaluates the performance of substantially all of its investments on a fair value basis.

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

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 (subordinated debt together with equity) has a finite life. For the PPP assets in the Portfolio, the subordinated 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/or the land lease term, after which the investment will also be liquidated. The exit strategy is that investments will normally be held to the liquidation of the project company unless the Company sees an opportunity in the market to dispose of investments. John Laing Capital Management Limited (the Investment Adviser) and the Company's Board regularly consider whether any disposals should be made.

(c) Going concern

The Directors, in their consideration of going concern have reviewed comprehensive cash flow forecasts prepared by the Company's Investment Adviser which are based on prudent market data 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 that the Company has adequate financial resources, the Directors were mindful that the Group had unrestricted cash of £8.6 million as at 31 March 2015 and a banking facility signed on 9 October 2014 (available for investment in new or existing projects and working capital) of £50 million, which expires in October 2017.

As at 31 March 2015, the Company's wholly‑owned subsidiary UK HoldCo had borrowed £43.7 million under the facility to finance the facility cost and the acquisition of three environmental infrastructure projects, leaving a headroom on the facility of £6.3 million.

On 20 May 2015, the Company announced its intention to launch an equity offering in order to free up the Company's subsidiary credit facility and also provide additional funds for acquisitions.

All key financial covenants are forecast to continue to be complied with for 12 months from the date of signing these financial statements.

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

(d) Revenue recognition - operating income

Operating income 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 received from UK HoldCo and interest income accrued in accordance with the loan note agreement. Refer to note 8 for details.

(e) 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.

(f) 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.

(g) Financial instruments

Financial assets and financial liabilities are recognised on the Company's balance sheet 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 IAS 39 Financial Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement.

 

a) Financial assets

The Company classifies its financial assets as either fair value through profit or loss or loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

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, investment 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, HWT Limited and the environmental and infrastructure Investments.

The intermediate holding companies' net assets (UK HoldCo and HWT Limited) are mainly composed of cash and working capital balances and are recognised at fair value which is equivalent to their net assets.

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 have measured fair value using assumptions that market participants would use when pricing the asset including assumptions regarding risk. The loan note 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) Loans and receivables

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 is 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.

b) 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 or associated with the establishment of the Company that would otherwise have been avoided are written off against the balance of the share capital account as permitted by Companies (Guernsey) Law.

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, are measured at amortised cost using the effective interest method less any impairment losses.

c) Effective interest method

The effective interest rate is that 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.

d) 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), subordinated and intercompany loans (interest and repayments). The discount rates used in the valuation exercise represent the Investment Adviser'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 2015 were in the range 7.0% to 11.0%. Refer to note 8 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.

(h) 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.

During the reported period, all revenues were generated in the UK.

(i) Statement of compliance           

Pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987 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

Fair value of intermediate holding companies

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

Fair value of environmental and infrastructure investments

Fair values for those investments for which a market quote is not available are determined using the income approach which discounts the expected cash flows at the appropriate rate. In determining the discount rate, regard is had to risk free rates, specific risks and the evidence of recent transactions. Underlying assumptions and discount rates are disclosed in note 8.

Critical accounting judgements

Equity and debt investment in UK HoldCo

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. Operating expenses

	Period ended
	31 March
	2015
	£'000s
Investment advisory fees	1,735
Directors' fees and expenses	254
Administration fee	85
Other expenses	543
	2,617

The Company had no employees during the period. There was no Directors' remuneration for the period other than Directors' fees as detailed in note 13.

An amount of £104,000 was paid to Deloitte LLP for the review of the Company's half year financial information and for the audit of the Company for the period ended 31 March 2015.

The Company paid £409,000 to Deloitte LLP in respect of non‑audit services related to the Company's IPO on 31 March 2014.

5. Tax

Income tax expense

The Company has obtained exempt status from income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989.

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 and infrastructure assets, which are held as investments at fair value through profit and loss, are included in the estimate of the fair value of these investments.

6. Dividends

	Period ended
	31 March
	2015
	£'000s
Amounts recognised as distributions to equity holders during the period:
Interim dividend for the period ended 30 September 2014 of 3.0 pence per share	4,800

A dividend for the period ended 31 March 2015 of 3.0 pence per share, amounting to £4.8 million, was approved by the Board and announced on 20 April 2015 and is payable on 12 June 2015. The dividend has not been included as a liability at 31 March 2015.

7. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	Period ended
	31 March
	2015
	£'000s
Earnings
Earnings for the purposes of basic and diluted earnings per share  being net profit attributable to owners of the Company	9,357
Number of shares
Weighted average number of Ordinary Shares for the purposes of  basic and diluted earnings per share	160,000,000

The denominator for the purposes of calculating both basic and diluted earnings per share is the same as the Company had not issued any share options or other

instruments that would cause dilution.

	Pence
Basic and diluted earnings per share	5.85

 

8. Investments at fair value through profit or loss

As set out in note 1, the Company accounts for its interest in its 100% 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 and infrastructure projects as detailed below.

The table below shows the movement in the Company's investment in UK HoldCo as recorded on the Company balance sheet:

	31 March
	2015
	£'000s
Fair value of environmental and infrastructure investments	197,717
Fair value of intermediate holding companies	(38,674)
Fair value at 31 March 2015	159,043

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 and infrastructure assets. These assets are held through other intermediate holding companies. The table below also presents a reconciliation of the fair value of the asset Portfolio to the Company balance sheet as at 31 March 2015, by incorporating the fair value of these intermediate holding companies.

		Cash, working
		capital and debt
		in intermediate
	Portfolio Value	holdings	Total
	31 March	31 March	31 March
	2015	2015	2015
	£'000s	£'000s	£'000s
At incorporation	-	-	-
Acquisitions
Portfolio of assets acquired	198,905	-	198,905
Reduction in acquisition price	(611)	-	(611)
	198,294	-	198,294
Growth in Portfolio
Growth from discount rate changes	6,741	-	6,741*
Growth from discount rate unwind	12,524	-	12,524*
Changes in economic assumptions	(769)	-	(769)*
Changes in forecast electricity prices	(5,300)	-	(5,300)*
	13,196	-	13,196
Yields from Portfolio to intermediate holding companies
Dividends received from Portfolio assets	(688)	688	-
Interest received from Portfolio assets	(6,619)	6,619	-
Loans and equity repayments received from Portfolio assets	(6,466)	6,466	-
	(13,773)	13,773	-
Yields from intermediate holding companies
Interest on loan notes	-	(8,100)	(8,100)*
Dividend payment from UK HoldCo to the Company	-	(1,700)	(1,700)*
	-	(9,800)	(9,800)
Administrative expenses borne by intermediate holding companies	-	(1,223)	(1,223)*
Investment in working capital in UK HoldCo	-	2,256	2,256
External borrowings	-	(43,680)	(43,680)
Fair value of the Company's investment in UK HoldCo at 31 March	197,717	(38,674)	159,043

* The net gain on investments at fair value through profit or loss for the period ended 31 March 2015 is £2,173,000. This, together with interest on loan notes of £8.1 million and dividend income of £1.7 million comprises operating income in the income statement.

The above balances 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 movement in working capital and are not value generating.

Fair value of Portfolio of assets

The Investment Adviser has carried out fair market valuations of the investments as at 31 March 2015. 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. The Company's holding of an investment represents its interest in both the equity and debt instruments of the investment. 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 valuation performed for the purposes of the Prospectus for the IPO.

Discount rates applied to the Portfolio of assets range from 7.0% to 11.0% (weighted average 9.1%) (at IPO on 31 March 2014: from 7.7% to 12.2% - weighted average 9.5%).

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

	31 March 2015
UK - inflation rates	2% for 2015 and 2.75% from 2016
UK - deposit interest rates	1% for 2015, gradually rising to 3.5% from 2019

The long‑term UK corporation tax rate assumed in the 31 March 2015 Portfolio valuation is 20%, in line with the rate enacted by legislation and with market practice.

Fair value of intermediate holding companies    

The assets in the intermediate holding companies substantially comprise working capital and cash balances, therefore the Directors consider the fair value to be equal to the book values.

Details of environmental and infrastructure investments were as follows:

	% holding at 31 March 2015
		Subordinated
Project name	Equity	loan stock
Amber	100%	100%
Bilsthorpe	100%	100%
Branden	64%	64%
Carscreugh	100%	100%
Castle Pill & Ferndale	100%	100%
Dumfries & Galloway	80%	100%
ELWA	80%	100%
Hall Farm	100%	100%
Tay	33%	33%
Wear Point	100%	100%

On 31 March 2015, the Group completed the acquisition of a 64% stake in the Branden solar park project, 100% stake in Wear Point wind farm and 100% stake in Carscreugh wind farm from John Laing Group for a total consideration of £42.5 million.

9. Trade and other receivables

	31 March
	2015
	£'000s
Prepayments	14
Balance at 31 March	14

10. Trade and other payables

	31 March
	2015
	£'000s
Accruals	770
Balance at 31 March	770

11. Loans and borrowings

The Company had no outstanding loans or borrowings at 31 March 2015, as shown in the Company's statement of financial position.

The Company's immediate subsidiary, UK HoldCo as Borrower and the Company as Guarantor entered into a three‑year revolving credit facility of £50 million with HSBC and NIBC on 9 October 2014. This facility will be used to make acquisitions of environmental infrastructure projects and to cover working capital requirements. The loan bears interest at a rate of LIBOR + 2.5% and will be repaid by proceeds from future capital raises.

As at 31 March 2015 UK HoldCo had drawn £43.7 million on the facility to finance the facility cost and three acquisitions completed in March 2015, as detailed in note 8. This amount is included in the "Investment at fair value through profit or loss" in the Company's statement of financial position.

There were no other outstanding loans and borrowings in either the Company, UK HoldCo or HWT Limited.

12. Share capital account

	31 March
	2015
	£'000s
Opening balance on incorporation	-
Shares issued in the period (160,000,000 shares @ £1 per share)	160,000
Expenses of issue of equity shares	(2,648)
At 31 March	157,352

At 31 March 2015, the Company's share capital is composed of 160,000,000 Ordinary Shares of no par value.

All new shares issued rank pari passu and include the right to receive all future dividends and distributions declared, made or paid.

13. Transactions with Investment Adviser and other related parties

Transactions between the Company and its subsidiaries, which are related parties of the Company, are fair valued and are disclosed within note 8. Details of transactions between the Company and other related parties are disclosed below. This note also details the terms of engagement by the Company with John Laing Capital Management Limited ("JLCM") as Investment Adviser together with the details of investment acquisitions from John Laing Group plc, of which JLCM is a wholly‑owned subsidiary.

Transaction with the Investment Adviser

JLCM is the Company's Investment Adviser. JLCM's appointment as Investment Adviser is governed by an Investment Advisory Agreement which may be terminated after an initial four‑year term, starting 31 March 2014, by either party giving one year's written notice.

JLCM is entitled to a base fee equal to a) 1.0% per annum of the Adjusted Portfolio Value* of the Fund** 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 Adviser fee charged to the income statement for the period to 31 March 2015 was £1,735,000 of which £511,000 remained payable at the period end.

* Adjusted Portfolio Value is defined in the Investment Advisory Agreement as:

a) the fair value of the Investment Portfolio; plus

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

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

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

ii) any uninvested cash.

** Fund means the Company and John Laing 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.

Other transactions with related parties

As part of the IPO in March 2014, John Laing Investments Limited, 100% subsidiary of John Laing plc subscribed for 63,496,731 shares (39.69% of the Company's total shares issued). On 17 February 2015, John Laing Investments Limited transferred 47,840,000 shares to reduce its holding to 15,656,731 shares (9.79% of the Company's total shares issued) to the John Laing Pension Fund which now holds 29.90% of the Company's total shares issued.

Of the initial Portfolio of assets acquired shortly after the IPO, six assets were acquired from John Laing Investments Limited, wholly‑owned subsidiary of John Laing Limited (previously John Laing plc). A further three assets were purchased from John Laing Investments Limited on 31 March 2015, as detailed in note 8.

Prior to the Company's listing, Laing Investments Management Services Limited, 100% subsidiary of John Laing plc, funded £0.4 million of issue costs which were subsequently reimbursed by the Company to Laing Investments Management Services Limited.

The Directors of the Company, who are considered to be key management, received fees for their services during the period of £250,000 and were paid £3,969 of expenses.

As part of the Initial Public Offering in March 2014, the Directors subscribed for and were issued with the following number of Ordinary Shares.

	Number
	of shares	Consideration
Richard Morse	50,000	£50,000
Richard Ramsay	45,000	£45,000
Christopher Legge	25,000	£25,000
Denise Mileham	20,000	£20,000
Peter Neville	25,000	£25,000

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

14. Financial instruments

Financial instruments by category

The Company held the following financial instruments at fair value at 31 March 2015. There have been no transfers of financial instruments between levels of the fair value hierarchy. There are no non‑recurring fair value measurements.

	31 March 2015
			Financial assets
			at fair value	Financial
	Cash and	Loans and	through profit	liabilities at
	bank balances	receivables	or loss	amortised cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Non‑current assets
Investments at fair value through profit or loss (Level 3)	-	-	159,043	-	159,043
Current assets
Trade and other receivables	-	14	-	-	14
Cash and cash equivalents	3,622	-	-	-	3,622
Total financial assets	3,622	14	159,043	-	162,679
Current liabilities
Trade and other payables	-	-	-	(770)	(770)
Total financial liabilities	-	-	-	(770)	(770)
Net financial instruments	3,622	14	159,043	(770)	161,909

The above table provides an analysis of financial instruments that are measured subsequent to their initial recognition at fair value as follows:

- Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

- Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

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

There were no Level 1 assets or liabilities during the period. There were no transfers between Level 1 and 2, Level 1 and 3 or Level 2 and 3 during the period.

In the table 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 to closing balances of the investments at fair value through profit or loss is given in note 8.

The fair value of the investments at fair value through profit or loss includes the use of Level 3 inputs. Please refer to note 8 for details on the valuation methodology.

The discount rate is considered the most significant unobservable input through which an increase or decrease would have a material impact on the fair value of the investments at fair value through profit or loss.

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

Discount rate	Minus 0.5%	Base 9.1%	Plus 0.5%
Change in Portfolio Valuation	Increases £8.1m	£197.7m	Decreases £7.6m
Change in NAV per share	Increases 5.1p	101.2p	Decreases 4.8p
The sensitivity of the Portfolio to movements in inflation rates is as follows:
Inflation rates	Minus 0.5%	Base	Plus 0.5%
Change in Portfolio Valuation	Decreases £8.4m	£197.7m	Increases £8.6m
Change in NAV per share	Decreases 5.4p	101.2p	Increases 5.3p

Wind and solar assets are subject to electricity price and electricity generation risks. The sensitivities of the investments to movement in level of electricity output and electricity price are as follows:

The fair value of the investments is based on a "P50" level of electricity output for the renewable energy assets, being the expected level of generation over the long term. The sensitivity of the Portfolio to movements in energy yields based on an assumed "P90" level of electricity output (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 output (i.e. a level of generation that is above the "P50", with a 10% probability of being achieved) is as follows:

Energy yield	P90 (10 year)	Base P50	P10 (10 year)
Change in Portfolio Valuation	Decreases £19.4m	£197.7m	Increases £18.8m
Change in NAV per share	Decreases 12.1p	101.2p	Increases 11.8p
The sensitivity of the Portfolio to movements in electricity prices is as follows:
Electricity prices	Minus 10%	Base	Plus 10%
Change in Portfolio Valuation	Decreases £7.8m	£197.7m	Increases £7.7m
Change in NAV per share	Decreases 4.9p	101.2p	Increases 4.8p

Waste and wastewater assets do not have significant volume and price risks.

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

Capital risk management

Capital management

The Group, which comprises the Company and its non‑consolidated subsidiaries manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances. The capital structure of the Group principally consists of equity reserves and retained earnings as detailed in note 12, debt as detailed in note 11 and cash and cash equivalents. 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 Adviser reviews the capital structure of the Company and the Group on a semi‑annual basis. The Company and its subsidiaries intend to make prudent use of leverage for financing acquisitions of investments and working capital purposes. Under the Company's articles, and in accordance with the Company's Investment Policy, the Company's outstanding borrowings, excluding the debts of underlying assets will be limited to 30% of the Company's Net Asset Value.

As at 31 March 2015, the Company had no outstanding debt. However as set out in note 11, the Company's subsidiary UK HoldCo raised a revolving credit facility in October 2014 and borrowed £43.7 million to finance acquisitions and as at 31 March 2015, there was a loan outstanding in UK HoldCo of £43.7 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 electricity 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 Adviser who operates within the Board approved policies. For the environmental and 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 Adviser. The various types of financial risk are managed as follows:

Financial risk management - Company only

The Company accounts for its investments in it 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 2015 the Company had no recourse debt, although as set out in note 11 the Company is a Guarantor for the revolving credit facility of UK HoldCo.

Liquidity risk

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

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

The Company was in a net cash position and had no outstanding debt at the balance sheet date. At the balance sheet date the Group had net debt of £43.7 million, being the amount drawn on the revolving credit facility to purchase three assets on 31 March 2015.

Market risk - foreign currency exchange rate risk

As at 31 March 2015 the Company has only invested in UK projects denominated in pound sterling.

Where investments are made in currencies other than pound 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 pound sterling. However, any dividends or distributions in respect of the Ordinary Shares will be made in pound sterling and the market prices and Net Asset Value of the Ordinary Shares will be reported in pound sterling. Currency hedging may be carried out to seek to provide some protection to the level of pound 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 credit facility borrowings and floating rate deposits. Borrowings issued at variable rates expose those entities to variability of interest payment cash flows. Interest rate hedging may be carried out to seek to provide protection against increasing costs of servicing debt drawn down by the Company's subsidiary UK HoldCo, as part of its credit facility. This may involve the use of interest rate derivatives and similar derivative instruments. During the period, the Group has not entered into an interest rate hedging instrument due to the low materiality of the interest rate risk.

Each asset 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.

The sensitivity of the Portfolio to movements in interest rates is marginal and has not been disclosed.

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 - electricity price risk

The wholesale market price of electricity is volatile and is affected by a variety of factors, including market demand for electricity, 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 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 in the market. Short term and seasonal fluctuations in electricity demand will also impact the price at which the investments can sell electricity. The supply of electricity also impacts the wholesale electricity price. Supply of electricity 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 asset investments receive regular, long‑term, partly or wholly index‑linked revenue from government departments, public sector, local authority or clients under the Renewables Obligation and Feed‑in Tariff regimes. The Directors believe that the Group is not significantly exposed to the risk that the customers of its investments do not fulfil their regular payment obligations because of the Company's policy to invest in jurisdictions with satisfactory credit ratings.

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

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 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 Group.

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

15. Guarantees and other commitments

As at 31 March 2015 the Company had no commitments or guarantees, other than those disclosed in note 11.

16. Subsidiaries

The following subsidiaries have not been consolidated in these financial statements as a result of applying Investment Entities: Applying the Consolidation Exemption (Amendments to IFRS 10, IFRS 12 and IAS 28):

		Place	Ownership	Voting
Name	Category	of business	interest	rights
John Laing Environmental Assets Group  (UK) Limited	Intermediate holding	UK	100%	100%
HWT Limited	Intermediate holding	UK	100%	100%
ELWA Holdings Limited	Project holding company	UK	80%	80%
ELWA Limited*	Operating subsidiary	UK	80%	81%
Amber Solar Parks (Holdings) Limited	Project holding company	UK	100%	100%
Amber Solar Park Limited	Operating subsidiary	UK	100%	100%
Bilsthorpe Wind Farm Holdings Limited	Project holding company	UK	100%	100%
Bilsthorpe Wind Farm Limited	Operating subsidiary	UK	100%	100%
Ferndale Wind Limited	Project holding company	UK	100%	100%
Castle Pill Wind Limited	Project holding company	UK	100%	100%
Wind Assets LLP	Operating subsidiary	UK	100%	100%
Shanks Dumfries & Galloway  Holdings Limited	Project holding company	UK	80%	80%
Shanks Dumfries & Galloway Limited	Operating subsidiary	UK	80%	80%
JL Hall Farm Holdings Limited	Project holding company	UK	100%	100%
Hall Farm Wind Farm Limited	Operating subsidiary	UK	100%	100%
Branden Solar Parks (Holdings) Limited	Project holding company	UK	64%	64%
Branden Solar Parks Limited	Operating subsidiary	UK	64%	64%
Carscreugh (Holdings) Limited	Project holding company	UK	100%	100%
Carscreugh Renewable Energy  Park Limited	Operating subsidiary	UK	100%	100%
Wear Point Wind HoldCo Limited	Project holding company	UK	100%	100%
Wear Point Wind Limited	Operating subsidiary	UK	100%	100%

*ELWA Holdings Limited holds 81% of the voting rights and 100% share of the economic benefits in ELWA Limited.

17. Events after the balance sheet date

There are no events after the balance sheet date which are required to be disclosed.

 

END

 

 

FR UOAKRVRANRAR