Half Yearly Report

RNS Number : 3618G

John Laing Environmental Assets Grp

19 November 2015

 

19 November 2015

John Laing Environmental Assets Group Limited

Announcement of half-year results to 30 September 2015

The Directors of John Laing Environmental Assets Group Limited (the "Company" or "JLEN") are pleased to announce the Company's half-year results to 30 September 2015.

JLEN is an environmental infrastructure fund which aims to provide investors with an annual dividend income, initially of 6.0 pence per share, increasing progressively in line with inflation. 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 30 September 2015 of £217.6m (31 March 2015: £197.7m)

·    Profit before tax for the six month period of £6.2m

·    NAV per ordinary share of 101.2 pence as at 30 September 2015, unchanged from 31 March 2015 after adjusting for dividends paid during the period

·    Interim dividend of 3.027 pence per ordinary share for the six months to 30 September 2015 declared, in line with our stated dividend policy, and reflecting inflation uplift from 1 April 2015

Portfolio Highlights

·    Two acquisitions in July 2015 totalling £20.4m, bringing the total number of operational sites to 14 and the capacity of the renewable energy assets in the JLEN portfolio to 103.1MW

·    Overall satisfactory operational and financial performance for the period to 30 September 2015, with variable wind conditions and continued lower wholesale UK electricity prices impacting wind assets

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

Financing Activity

·    Successful issue of shares in July 2015 raising gross proceeds of £65m in an oversubscribed placing and offer for subscription

·    Net proceeds used to pay down £43.7m drawn on Revolving Credit facility and to fund the two acquisitions in July 2015

·    Revolving credit facility utilised again post period end for the acquisition of two solar PV roof top portfolios for a total of £28.5m

Richard Morse, Chairman of JLEN, said:

"The Board is encouraged by the progress JLEN has continued to make during the first half of the year. The operational performance and underlying strength of our diversified portfolio, coupled with a strong pipeline of available opportunities, helped us to attract new investors to our oversubscribed equity fund raise. We were able to use the funds raised to pay down debt and maintain a healthy level of acquisitions. We continue to deliver on our commitments made at the time of our IPO and to that end we have declared an interim dividend that has increased in line with inflation".

Dividend Timetable

Ex-dividend date 26 November 2015

Record date 27 November 2015

Payment date 18 December 2015

Half-year report

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

Details of the conference call for analysts and investors

There will be a call at 9.30am on Friday 20 November 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 Charlie Geller Harriet Lynch	[phone]

Chairman's statement

On behalf of the Board, I am pleased to present the half-year report of John Laing Environmental Assets Group Limited for the six months ended 30 September 2015.

 

Results

Progress has continued to be made in the performance and enlargement of JLEN's portfolio of environmental infrastructure assets during the period.

The Net Asset Value ("NAV") per share at 30 September 2015 was 101.2 pence, unchanged from 31 March 2015 after allowing for the dividend per share of 3.0 pence paid in the period.

Cash received from the portfolio by way of distributions, which includes interest, loan repayments and dividends, was £9.1 million. Net cash inflows from the investment portfolio (after operating and finance costs) of £7.1 million cover the declared interim dividend of 3.027 pence per share by approximately 1.05 times.

 

Dividend policy

For the year to 31 March 2015, the Company met the target set out in its dividend policy by the payment of two interim dividends of 3.0 pence per share in December 2014 and June 2015. I am pleased to announce that the Board has declared an inflation adjusted interim dividend of 3.027 pence per share for the six months to 30 September 2015, payable on 18 December 2015 to shareholders on the register as at 27 November 2015, again in line with our dividend policy. The ex‑dividend date will be 26 November 2015. As noted in our 2015 Annual Report, the Company will commence paying quarterly dividends from January 2016 with the first being in respect of the three-month period to 31 December 2015. Based on current performance of the portfolio, the Board is targeting interim dividends for the six months ending 31 March 2016 totalling 3.027 pence per share.

 

Portfolio performance

In general, during the period under review the performance of the portfolio has been in line with expectations with the exception of wind speeds during the summer, which were significantly lower than the long‑term average for that time of year. In terms of operational availability, the assets have performed at or above expectations and operational efficiencies are beginning to be realised as the portfolio expands.

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.

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 continues to be mitigated by the fact that the Company has a relatively low exposure to electricity prices in its ROC and FiT operating projects compared to other portfolios held by peer funds and the waste and wastewater processing assets are not affected by the level of electricity prices. The announcements contained in the July 2015 Budget had a small net negative impact on the Company's NAV of approximately 0.4 pence per share, with the loss of revenue from Levy Exemption Certificates being partially offset by a reduction in the corporation tax rate. The limited impact on JLEN from the Budget reflected the benefits of diversification in the Company's portfolio with a number of assets being net beneficiaries of the corporation tax changes announced in the Budget.

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 return to full operations in February 2016.

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

 

Investment performance

Over the 12 month period to 30 September 2015 shareholders have seen a share price total return of 8.6%, against an average of 4.5% for the market peer group.

 

Acquisitions

During the period under review, the Company announced the following acquisitions:

 

Monksham Solar

Monksham Solar is a 10.7MW solar park located near Frome in Somerset. JLEN acquired a significant economic interest in Monksham, which represented our first third party acquisition.

 

Branden Solar

In March 2015, JLEN acquired a 64% stake in Branden Solar. The Company acquired the remaining 36% stake during the period. This was purchased from John Laing under the First Offer Agreement, underlining its continuing importance to the Company's acquisition pipeline.

These acquisitions brought the total capacity of the renewable energy assets in the JLEN portfolio to 103.1MW.

Post the period end JLEN acquired a fully operational 6.4MW portfolio of residential rooftop, commercial rooftop and commercial ground mounted solar PV installations, distributed across England, Wales and Scotland from a consortium of investors and developers for a total consideration of £28.5 million, including working capital.

 

Capital raising

In July 2015, we were delighted by the response from investors to our equity fund raise, with JLEN successfully raising gross proceeds of £60 million through the issue of 59,405,940 ordinary shares at 101 pence per share, pursuant to a Placing and Offer for Subscription. At the same time the Company launched a placing programme of up to 150 million new shares and in light of investor demand the Company elected to undertake a first close under its Placing Programme for £5 million through the issue of 4,950,495 ordinary shares at 101 pence per share. The net proceeds of the issues were used to repay amounts drawn down on the Company's revolving credit facility and to fund the acquisitions of the remaining 36% stake in Branden Solar from John Laing and the Monksham Solar Park from its developers as noted above.

The Company's revolving credit facility gives it the flexibility to acquire further assets on a timely basis, reducing the performance drag associated with holding excess cash. Since the period end the facility has been used to finance the purchase of a roof top solar portfolio as described above.

The Company is investigating the possible refinancing of the project debt in its wind asset portfolio, which we hope to complete with beneficial impact in the next six month period.

 

Valuation

The Net Asset Value at 30 September 2015 is £227.1 million, comprising £217.6 million portfolio valuation, £10 million of cash held by the Group, together with negative working capital balances of £0.5 million.

The Investment Adviser has prepared a fair market valuation of the portfolio as at 30 September 2015. This valuation is based on a discounted cash flow analysis of the future expected equity and loan note cash flows accruing to the Group from each portfolio investment. This valuation uses key assumptions which are recommended by the Investment Adviser using its experience and judgement, having taken into account available comparable market transactions and financial market data in order to arrive at a fair market value. The Directors have satisfied themselves as to the methodology used and the assumptions adopted and have approved the valuation of £217.6 million for the portfolio of 11 investments as at 30 September 2015.

 

Outlook

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 Prospectus issued in June 2015. 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 for the year ended 31 March 2015.

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. Despite an increasingly competitive market‑place, the Company has acquired three assets from third parties, one in the period and the other two in the period since the reporting date.

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 has demonstrated resilience since launch in the light of seasonal weather volatility and a downward shift in electricity prices during the last 18 months. The Board is confident that the availability of the placing programme and the credit facility will enable the Company to fund the strong pipeline of environmental infrastructure opportunities available as we continue to build the portfolio.

 

 

Richard Morse

Chairman

19 November 2015

Investment Adviser's report

JLEN's Net Asset Value as at 30 September 2015 increased to £227.1 million from £161.9 million at 31 March 2015. On a per share basis it remained constant at 101.2 pence after allowing for dividends paid during the period.

 

About the Investment Adviser

JLEN is advised by John Laing Capital Management Limited ("JLCM"). JLCM, a wholly‑owned subsidiary of John Laing Group plc, acts as Investment Adviser to the Company. JLCM was incorporated in England and Wales on 19 May 2004 under the Companies Act 1985 (registered number 5132286) and has been authorised and regulated in the UK by the FCA (previously FSA) since December 2004.

The portfolio

At 30 September 2015, the Group's investment portfolio comprised of interests in 11 project vehicles with 14 operational sites, all located in the UK:

		Number			Capacity	Commercial
Asset	Location	of sites	Type	Ownership	(MWs)	operations date
Amber	UK (Eng)	2	Solar	100%	9.8	Jul 2012
Branden	UK (Eng)	2	Solar	100%	14.7	Jun 2013
Monksham	UK (Eng)	1	Solar	*	10.7	March 2014
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

*100% of "B" shares plus 100% of loans to the project. The "A" shareholders, investors under the Enterprise Investment Scheme, remain invested in the project. Including the loans, JLEN held an effective economic interest over 87% of the value of the project's cash flow (as calculated at acquisition).

 

 

Investment performance

This uplift in Net Asset Value has been primarily driven by acquisition of investments and equity funds raised while also reflecting the generation of cash from the portfolio, updates for recent operational performance and changes in forecast electricity prices. The Directors have considered continued weakness in electricity and gas markets as well the changes in discount rates seen in the secondary markets for environmental infrastructure assets in arriving at the forecasts used in the valuation.

JLEN has announced an interim dividend of 3.027 pence per share for the period ended 30 September 2015, payable on 18 December 2015, in line with the target set out in the Prospectus issued by the Company in June 2015 and the expectations in the Annual Report at 31 March 2015.

 

 

Portfolio performance

In general, during the period ended 30 September 2015, the performance of the portfolio has been in line with expectations with the exception of wind speeds during the summer which are significantly lower than the long‑term average for that time of year. There are no material issues that are affecting performance of the assets.

The wind farms and the solar parks have achieved high levels of technical and operational availability during the period, with no significant operational disruption being experienced.

The environmental processing plants have also achieved full availability during the period, save for the ELWA fire which we reported in the 2015 Annual Report. 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 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 operations are expected to be restarted in February 2016. The project has continued to make distributions in line with budgets.

The period under review has again been categorised by variable weather patterns in the British Isles, with the wind projects experiencing good wind conditions over the winter of 2014‑15, leading to generation in line with budget. However, during the summer of 2015, this position reversed with several low wind‑speed months, illustrating that wind conditions can vary significantly over individual months. Taking account of this and the technical faults at Hall Farm leading to eight days outage in March 2015, overall generation across the portfolio of wind assets for the 12 months to 30 September 2015 was 6.8% below budget, which is well within the range of expectations for assets of this type. Solar irradiation was as expected for the 12 months to 30 September 2015 and generation from the solar assets was also in line with budget. Waste and wastewater flows have been broadly 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 little movement in profit for a marginal unit of waste.

 

 

Acquisitions

At the end of July 2015 the Company acquired two projects for a cash consideration of £20.4 million, including working capital. The acquisitions were funded by a draw‑down under the Company's £50 million revolving credit facility. The assets were as follows:

 

Monksham Solar

Monksham Solar is located near Frome in Somerset, with a total generating capacity of 10.7MW and is accredited for 1.6 ROCs. JLEN purchased the entirety of 'B' shares plus other economic interests from the founding shareholders and Green Nation, the developers of the park, and has also provided a loan to the project to repay construction finance. The 'A' shareholders, investors under the Enterprise Investment Scheme, remain invested in the project.

 

Branden Solar

In March 2015, JLEN acquired a 64% stake in Branden Solar which comprises two separate solar parks located near St Austell in Cornwall, with a total generating capacity of 14.7MW and is accredited for 2 ROCs. The Company acquired the remaining 36% stake during the period under its First Offer Agreement with John Laing.

These acquisitions brought the total capacity of the renewable energy assets in the JLEN portfolio to 103.1MW.

After the end of the period, in two separate transactions on 30 October 2015 and 13 November 2015, JLEN acquired a fully operational 6.4MW portfolio of residential rooftop, commercial rooftop and commercial ground mounted solar PV installations, distributed across England, Wales and Scotland. The portfolio benefits from the UK feed‑in tariff for 25 years from the date of installation of individual systems which is linked to an annual increase in the UK Retail Price Index. The portfolio comprises a number of special purpose companies financed and owned by Venture Capital Trusts, Enterprise Investment Schemes and the founding shareholders and developers of the portfolio.

The acquisition was funded by a drawdown under the Company's revolving credit facility.

 

 

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 30 September 2015 was £217.6 million, compared to £197.7 million at 31 March 2015. The increase of £19.9 million is the net impact of acquisitions, 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 of page 12 of the half-year report).

The total movement of investments during the period ended 30 September 2015 is shown in the table below:

		Period from
		incorporation on
Six month period		12 Dec 2013
ended 30 Sep 2015		to 30 Sep 2014
(unaudited)		(unaudited)
£m		£m
Valuation of portfolio at beginning of the period	197.7	-
Acquisitions in the period	20.5	198.3
Cash distributions from portfolio	(9.1)	(13.8)
Rebased opening valuation of portfolio	209.1	184.5
Changes in LECs and forecast electricity prices	(4.0)	(5.3)
Changes in economic assumptions	0.7	(0.7)
Changes in discount rates	3.6	6.7
Portfolio return	8.2	12.5
Valuation of portfolio at end of the period	217.6	197.7
Fair value of intermediate holding companies	6.2	(38.6)
Investments at fair value through profit or loss	223.8	159.1

 

Valuation assumptions

The assets in JLEN's portfolio are valued by discounting the future cash flows forecast by the underlying asset financial models.

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

 

Forecast electricity prices

The project cash flows used in the portfolio valuation at 30 September 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.

The reduction of forecasts for future electricity prices compared to forecasts at 31 March 2015 has reduced the valuation of the portfolio by £0.8 million. The balance represents the update to forecast revenues from the renewable energy assets to reflect the announcement of the loss of the Climate Change levy exemption for renewable electricity in the July 2015 budget and the consequent loss of revenue from LECs.

 

Economic assumptions

Macroeconomic assumptions in respect of inflation, corporation tax and deposit interest rates have remained relatively constant during the period and the movement in valuation is therefore not significant. Inflation rates assumed in the valuation at 30 September 2015 are 1.2% in 2015 with 2.75% for all subsequent years. The long‑term UK corporation tax rate assumed is 20%, stepping down to 19% in April 2017 and 18% from April 2020 onwards, reflecting 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 1.0% in 2015 with a gradual increase to a long‑term rate of 3.5% with effect from 2019 onwards.

It also reflects the impact of value enhancements. In the period, JLEN has approached the market for new pricing for operations and maintenance services for its solar portfolio and the prices obtained reflect the competition in the market and the benefits of critical mass in procurement. The total impact on portfolio value over the remaining life of the projects concerned is calculated to be £0.9 million and is included in the total movement of £0.7 million.

 

Discount rates

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.

During the period, there has continued to be 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 previously. Whilst an overall reduction in discount rates has not been applied across the entire portfolio, the Investment Adviser, based on its recent experience of bidding in the secondary market for solar projects and the discount rates achieved on recent transactions in that sector, has reduced the discount rates applied to the solar assets to reflect current market rates.

 

Portfolio return

This represents the impact on the rebased portfolio value, all other measures remaining constant, of the effect of the discount rate unwinding and represents an uplift of £8.2 million.

Taking the above factors into account, and the change in mix of the portfolio during the period, the overall Weighted Average Discount Rate ("WADR") of the portfolio has reduced to 8.7% at 30 September 2015 (9.1% at 31 March 2015).

 

Valuation sensitivities

The Net Asset Value of the Company is the sum of the discounted value of the future cash flows of the underlying asset financial models, the cash balances of the Company and UK HoldCo, 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 30 September 2015 was 8.7%. 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 next 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 are 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 30 September 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 15 (of the half-year 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.

 

Financing

In July 2015, JLEN successfully raised gross proceeds of £60 million through the issue of 59,405,940 ordinary shares at 101 pence per share pursuant to a Placing and Offer for Subscription. At the same time the Company launched a placing programme of up to 150 million new shares and in light of investor demand the Company elected to undertake a first close under its Placing Programme for £5 million through the issue of 4,950,495 ordinary shares at 101 pence per share. The net proceeds of the issues were used to repay amounts drawn down on the Company's revolving credit facility and to fund the acquisitions of the remaining 36% stake in Branden Solar from John Laing Group plc and the Monksham Solar Park from its developers.

In October 2014, John Laing Environmental Assets Group (UK) Limited entered into a three‑year £50 million Revolving Credit Facility with HSBC and NIBC to fund new acquisitions and to provide working capital. This type of short term financing is limited to 30% of the Net Asset Value. The intention is that borrowings under the facility will be repaid through cash received from the Company's investment assets and future equity raisings, as was the case following the equity fund raise in July 2015 noted above. £28.5 million of the facility was utilised for the acquisition, after the period end, of a roof top solar portfolio as described earlier.

In addition to the revolving credit facility, several of the projects have underlying project level debt which is not reflected in these financial statements. There is an additional gearing limit in respect of such debt of 85% of the aggregate gross project value (being the fair market value of such portfolio companies increased by the amount of any financing held within the projects) for PFI/PPP projects and 65% for renewable energy generation projects.

The project‑level gearing at 30 September 2015 across the portfolio was 45.3% (31 March 2015: 47.3%) being 23.1% (31 March 2015: 25.0%) for the renewable energy assets and 63.8% (31 March 2015: 64.5%) for the PFI processing assets. As there is no drawdown of the revolving credit facility the overall fund gearing at 30 September 2015 was 45.3% (31 March 2015: 57.0%).

Given the current favourable banking market for renewable energy assets and the improvement in terms which may be possible at the current time, the Investment Adviser is reviewing the funding options for the portfolio with a view to JLEN implementing a refinancing of, in particular, the debt in its wind portfolio. This should lead to a reduction in associated financing costs for these projects.

As at 30 September 2015, the Group, which comprises the Company and the intermediate holding companies, had cash balances of £10.0 million (31 March 2015: £8.6 million).

 

Profit before tax

Profit before tax for the period was £6.2 million (period from incorporation on 12 December 2013 to 30 September 2014*: £4.6 million). Earnings per share for the period were 3.34 pence per share (period from incorporation on 12 December 2013 to 30 September 2014: 2.85 pence per share).

 

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 Association of Investment Companies ("AIC") recommended methodology for calculating this ratio, which is an annual figure. The annualised ratio for the six months to 30 September 2015 was 1.4% (Year ended 31 March 2015: 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.

Net assets

Net assets increased from £161.9 million at 31 March 2015 to £227.1 million at 30 September 2015, primarily driven by acquisitions and equity funds raised.

The net assets of £227.1 million comprise £217.6 million portfolio value of environmental infrastructure investments, cash balances of £4.1 million and fair value of the intermediate holding companies of £6.1 million, offset by other net liabilities of £0.7 million.

The intermediate holding companies' fair value of £6.1 million comprises cash balances of £5.9 million and other net assets of £0.2 million.

Analysis of the Group's net assets

	30 Sep 2015	31 Mar 2015
All amounts presented in £million (except as noted)	(unaudited)	(audited)
Portfolio value	217.6	197.7
Intermediate holding companies cash	5.9	5.0
Intermediate holding companies credit facility debt	-	(43.7)
Intermediate holding companies other assets	0.2	0.1
Fair value of the Company's investment in UK HoldCo	223.7	159.1
Company's cash	4.1	3.6
Company's other liabilities	(0.7)	(0.8)
Net Asset Value	227.1	161.9
Number of shares	224,356,435	160,000,000
Net Asset Value per share	101.2p	101.2p

The movement in the portfolio value of environmental infrastructure assets during the period is summarised as follows:

All amounts presented in £million
Value at 31 March 2015 (audited)	197.7
Acquisitions	20.5
Growth in value of portfolio	8.5
Distributions received from investments	(9.1)
Portfolio value at 30 September (unaudited)	217.6

 

Cash flow

At 30 September 2015, the Group (Company plus intermediate holding companies) had a total cash balance of £10.0 million (31 March 2015: £8.6 million), including £4.1 million (31 March 2015: £3.6 million) in the Company's balance sheet and £5.9 million (31 March 2015: £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 30 September 2015, UK HoldCo had no drawings (31 March 2015: £43.7 million) under its revolving credit facility.

Cash flows of the Company and intermediate holding companies are summarised as follows:

	Six month	Period from incorporation
	period ended	on 12 Dec 2013
	30 Sep 2015	to 30 Sep 2014*
	(unaudited)	(unaudited)
	£m	£m
Cash received from environmental infrastructure investments	9.1	7.5
Administrative expenses	(0.3)	(0.2)
Directors' fees and expenses	(0.2)	(0.1)
Investment advisory fees	(1.0)	(0.4)
Financing cost (net of interest income)	(0.5)	-
Cash flow from operations	7.1	6.8
Net share issue proceeds	63.8	157.3
Repayment of the credit facility	(43.7)	-
Acquisition of investment assets	(20.5)	(156.4)
Acquisition cost (including stamp duty)	(0.5)	(0.3)
Dividend paid in cash to shareholders	(4.8)	-
Cash movement in the period	1.4	7.4
Opening cash balance as at 31 March 2015/at incorporation	8.6	-
Total cash balances at 30 September	10.0	7.4

During the period, the Group received cash distributions of £9.1 million from its environmental infrastructure investments, approximately £0.9 million below the distributions expected by the Group after adjusting for acquisitions during the period and timing differences around the period end. This is due primarily to the impact, as discussed earlier, on the anticipated revenues from the wind farms due to lower generation during the summer as a result of low wind speeds, the impact of lower electricity prices on projects where price fixes are not in place and the technical faults at Hall Farm leading to eight days outage in March 2015, which led to reduced revenues in April.

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 £7.1 million covers the dividend declared in the period of £6.8 million by 1.05 times.

The Company has declared an interim dividend of £6.8 million (3.027 pence per share), which is payable on 18 December 2015.

*Comparative data stated for the period from incorporation on 12 December 2013 and only comprise six months of trading activity starting 31 March 2014.

 

Outlook

The secondary market for environmental infrastructure projects remains both active and significant. The Investment Adviser continues to investigate potential markets and investments and has seen a steady flow of opportunities across all JLEN's asset classes during the period.

UK solar has been a particularly active sector during the period, and the Fund has been delighted to complete two acquisitions of new assets in this sector during the last few months. As for wind, the recent changes in policy announced by the new Government do not directly impact JLEN as they relate to projects not yet in operation. It is not anticipated to have a significant impact on the level of acquisition opportunities available in the secondary market in the short to medium term, given the volume of projects currently in operation and expected to be constructed under the current support regimes.

Although smaller in number, the Investment Adviser has been pleased with the level of environmental infrastructure opportu-nities outside of wind and solar that it has seen. The Investment Adviser believes that the Company is an attractive counterparty for developers and early‑stage investors seeking to recycle capital from environmental infrastructure projects.

The Investment Adviser continues to monitor European markets with stable regulatory frameworks as permitted under the Fund's investment policy. We have seen a number of opportunities in onshore wind, both in the UK and Europe, which we will continue to evaluate.

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. The Company expects that pursuant to the First Offer Agreement, Environmental Infrastructure projects that are in accordance with its Investment Policy with a combined investment value for the Fund of approximately £250 million (as estimated by John Laing) will become available for acquisition by the Fund within the period to 31 December 2018.

JLEN invests in environmental infrastructure assets which are long term in nature. Whilst the Investment Adviser expects to see the sort of short term variability in performance witnessed in recent months, the outlook for the portfolio remains satisfactory and, other than the changes in valuation assumptions noted above, there are no changes to our long‑term assumptions underlying the cash flow projections and valuation of the portfolio. A key feature of JLEN is its diversified portfolio and the spread of risks across a variety of technologies.

Based on the current outlook for the portfolio and the markets in which it operates, the Board believes 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 cash flow profile of the portfolio through the delivery of additional operational scale efficiencies and through prudent portfolio and financial management.

Responsibility statement

We confirm that to the best of our knowledge:

·     the condensed set of unaudited financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" and in accordance with the accounting policies set out in the audited Annual Report to 31 March 2015; and

·     the Chairman's statement and Investment Adviser's report meet the requirements of an interim management report and include a fair review of the information required by:

o  DTR 4.2.7R, being an indication of important events during the first six months of the financial year and a description of principal risks and uncertainties for the remaining six months of the year; and

o  DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.

This responsibility statement was approved by the Board of Directors on 19 November 2015 and is signed on its behalf by:

Richard Morse
Chairman
19 November 2015

Independent review report
to John Laing Environmental Assets Group Limited

Opinion on the condensed interim financial statements of John Laing Environmental Assets Group Limited

We have been engaged by the Company to review the condensed set of financial statements in the half‑yearly financial report for the six months ended 30 September 2015 which comprises the condensed income statement, the condensed statement of financial position, the condensed statement of changes in equity, the condensed cash flow statement and related notes 1 to 19. We have read the other information contained in the half‑yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed unaudited financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half‑yearly financial report is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the half‑yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRS as adopted by the European Union. The condensed unaudited financial statements included in this half‑yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed unaudited financial statements in the half‑yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed unaudited financial statements in the half‑yearly financial report for the six months ended 30 September 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP
Chartered Accountant
Guernsey, Channel Islands
19 November 2015

Condensed unaudited income statement

			Period from
			incorporation
		Six months	on 12 Dec 2013
		ended 30 Sep 2015	to 30 Sep 2014*
		(unaudited)	(unaudited)
	Notes	£'000s	£'000s
Operating income		7,649	5,902
Operating expenses	5	(1,421)	(1,337)
Operating profit		6,228	4,565
Profit before tax		6,228	4,565
Tax	6	-	-
Profit for the period		6,228	4,565
Earnings per share
From continuing operations
Basic and diluted (pence)	8	3.34	2.85

*Comparative information only comprises six months of trading activity starting 31 March 2014.

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

All results are derived from continuing operations.

There are no items of other comprehensive income in either the current or preceding period, other than the profit for the period and therefore no separate statement of comprehensive income has been presented.

 

Condensed unaudited statement of financial position

		30 Sep 2015	31 Mar 2015
		(unaudited)	(audited)
	Notes	£'000s	£'000s
Non‑current assets
Investments at fair value through profit or loss	9	223,754	159,043
Total non‑current assets		223,754	159,043
Current assets
Trade and other receivables	10	19	14
Cash and cash equivalents		4,055	3,622
Total current assets		4,074	3,636
Total assets		227,828	162,679
Current liabilities
Trade and other payables	11	(721)	(770)
Total current liabilities		(721)	(770)
Total liabilities		(721)	(770)
Net assets		227,107	161,909
Equity
Share capital account	13	221,122	157,352
Retained earnings	14	5,985	4,557
Equity attributable to owners of the Company		227,107	161,909
Net assets per share (pence per share)		101.2	101.2

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

The condensed unaudited financial statements were approved by the Board of Directors and authorised for issue on 19 November 2015. They were signed on its behalf by:

Richard Morse                      Christopher Legge
Chairman                                Director

 

 

Condensed unaudited statement of changes in equity

		Six months ended 30 Sep 2015 (unaudited)
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at 1 April 2015		157,352	4,557	161,909
Profit and total comprehensive income for the period		-	6,228	6,228
Issue of share capital	13	65,000	-	65,000
Expenses of issue of equity shares	13	(1,230)	-	(1,230)
Dividend paid	14	-	(4,800)	(4,800)
Balance at 30 September 2015		221,122	5,985	227,107

		Period from incorporation on 12 Dec 2013 to 30 Sep 2014* (unaudited)
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at incorporation		-	-	-
Profit and total comprehensive income for the period		-	4,565	4,565
Issue of share capital	13	160,000	-	160,000
Expenses of issue of equity shares	13	(2,648)	-	(2,648)
Balance at 30 September 2014		157,352	4,565	161,917

*Comparative information only comprises six months of trading activity starting 31 March 2014.

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

 

 

Condensed unaudited cash flow statement

		Period from
	Six months	incorporation
	ended	on 12 Dec 2013
	30 Sep 2015	to 30 Sep 2014*
	(unaudited)	(unaudited)
	£'000s	£'000s
Profit from operations	6,228	4,565
Adjustments for:
Investment interest	(4,688)	(4,061)
Dividend received	(2,000)	-
Net gain on investments at fair value through profit or loss	(961)	(1,841)
Operating cash flows before movements in working capital	(421)	(1,337)
Increase in receivables	(5)	(8)
(Decrease)/increase in payables	(49)	616
Net cash outflow from operating activities	(1,475)	(729)
Investing activities
Investments in subsidiaries	(30,750)	(66,870)
Loan to subsidiaries	(33,000)	(90,000)
Investment interest	4,688	4,061
Dividend received	2,000	-
Net cash used in investing activities	(57,062)	(152,809)
Financing activities
Proceeds on issue of share capital	65,000	160,000
Expenses relating to issue of shares	(1,230)	(2,648)
Dividends paid	(4,800)	-
Net cash from financing activities	58,970	157,352
Net increase in cash and cash equivalents	433	3,814
Cash and cash equivalents at beginning of period	3,622	-
Cash and cash equivalents at end of period	4,055	3,814

*Comparative information only comprises six months of trading activity starting 31 March 2014.

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

 

Notes to the condensed unaudited financial statements
for the six months ended 30 September 2015

1. General information

John Laing Environmental Assets Group Limited (the "Company" or "JLEN") is a closed‑ended investment company domiciled and incorporated in Guernsey, Channel Islands, under Section 20 of the Companies (Guernsey) Law. The shares are publicly traded on the London Stock Exchange under a Premium Listing. The condensed unaudited financial statements of the Company are for the six months period ended 30 September 2015 and have been prepared on the basis of the accounting policies set out in the Company's latest annual audited financial statements. The condensed unaudited financial statements comprise the Company and its investment in John Laing Environmental Assets Group (UK) Limited ("UK HoldCo"). 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.

During the six month period ended 30 September 2015, the Company successfully raised gross proceeds of £65 million through the issue of ordinary shares and continued to manage its investment in UK HoldCo, adding two stakes in solar projects to its portfolio of environmental infrastructure assets.

2. Significant accounting policies

(a) Basis of preparation

The condensed unaudited financial statements were approved and authorised for issue by the Board of Directors on 19 November 2015. The condensed unaudited financial statements included in this half‑year report have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The accounting policies are consistent with those used in the latest audited financial statements to 31 March 2015 and should be read in conjunction with the Company's annual audited financial statements for the period ended 31 March 2015.

The comparatives in these financial statements include the first period of accounting from incorporation on 12 December 2013 to 30 September 2014. The Company did not have any transactions up until the Initial Public Offer dated 31 March 2014. Comparative information therefore only comprises six months trading activity starting 31 March 2014.

In the Company's last annual audited financial statements for 31 March 2015, the Company 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. The amendments have been applied in these condensed unaudited 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 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 30 September 2015 principally comprise working capital balances, any revolving credit facility loan balance and investments in projects, are required to be included at fair value in the carrying value of investments.

(b) 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 £10 million as at 30 September 2015 and a banking facility available for investment in new or existing projects and for working capital of £50 million, which expires in October 2017.

As at 30 September 2015, the Company's wholly-owned subsidiary UK HoldCo had no outstanding borrowing under the facility.

Since period end, as detailed in note 19, UK HoldCo used the facility to finance the purchase of a roof top solar portfolio. At the date of this report, the undrawn credit facility is £21 million.

All key financial covenants are forecast to continue to be complied with throughout the next 12 months.

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.

(c) 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 reporting period, all revenues were generated in the UK.

(d) 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 of the latest annual financial statements, 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 holdings 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 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 9.

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 to the annual financial statements 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 to the annual financial statements for further detail.

4. Seasonality

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

5. Operating expenses

	Six months	Period from incorporation
	ended  30 Sep 2015	on 12 Dec 2013 to 30 Sep 2014*
	(unaudited)	(unaudited)
	£'000s	£'000s
Investment advisory fees	1,083	815
Directors' fees and expenses	102	153
Administration fee	34	42
Other expenses	202	327
	1,421	1,337

*Comparative information only comprises six months of trading activity starting 31 March 2014.

6. Tax

Income tax expense

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

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 jurisdictions in which they operate. The underlying tax within the subsidiaries and environmental infrastructure assets, which are held as investments at fair value through profit or loss, are included in the estimate of the fair value of these investments.

7. Dividends

	Six months	Period from incorporation
	ended 30 Sep 2015	on 12 Dec 2013 to 30 Sep 2014
	(unaudited)	(unaudited)
	£'000s	£'000s
Amounts recognised as distributions to equity holders during the period:
Dividend for the period ended 31 March 2015 of 3.0 pence per share (for the period ended 30 September 2014: 3.0 pence per share)	4,800	4,800

A dividend for the period ended 30 September 2015 of 3.027 pence per share, amounting to £6.8 million, was approved by the Board and announced on 19 November 2015 and is payable on 18 December 2015. The dividend has not been included as a liability at 30 September 2015.

8. Earnings per share

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

	Six months	Period from incorporation
	ended 30 Sep 2015	on 12 Dec 2013 to 30 Sep 2014
	(unaudited)	(unaudited)
	£'000s	£'000s
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to owners of the Company	6,228	4,565
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share	186,727,263	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	Pence
Basic and diluted earnings per share	3.34	2.85

9. Investments at fair value through profit or loss

As set out in note 1, the Company accounts for its interest in its 100% owned subsidiary UK HoldCo as an investment at fair value through profit or loss. UK HoldCo in turn owns investments in intermediate holding companies and environmental infrastructure projects.

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

	30 Sep 2015 (unaudited)	31 Mar 2015 (audited)
	£'000s	£'000s
Fair value of environmental infrastructure investments	217,612	197,717
Fair value of intermediate holding companies	6,142	(38,674)
Fair value	223,754	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 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's condensed unaudited statement of financial position as at 30 September 2015, by incorporating the fair value of these intermediate holding companies.

		Cash,			Cash,
		working capital and debt in			working capital and debt in
	Portfolio	intermediate holding		Portfolio	intermediate holding
	value 30 Sep 2015	companies 30 Sep 2015	Total 30 Sep 2015	value 31 Mar 2015	companies 31 Mar 2015	Total 31 Mar 2015
	(unaudited)	(unaudited)	(unaudited)	(audited)	(audited)	(audited)
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Opening balance/at incorporation	197,717	(38,674)	159,043	-	-	-
Acquisitions
Portfolio of assets acquired	20,374	-	20,374	198,905	-	198,905
Post acquisition price adjustment	150	-	150	(611)	-	(611)
	218,241	(38,674)	179,567	198,294	-	198,294
Growth in portfolio
Growth from discount rate movements*	3,595	-	3,595	6,741	-	6,741
Growth from discount rate unwind*	8,173	-	8,173	12,524	-	12,524
Changes in economic assumptions*	717	-	717	(769)	-	(769)
Changes in LECs and forecast electricity prices*	(3,988)	-	(3,988)	(5,300)	-	(5,300)
	8,497	-	8,497	13,196	-	13,196
Yields from portfolio to intermediate holding companies
Dividends received from portfolio assets	(800)	800	-	(688)	688	-
Interest received from portfolio assets	(5,843)	5,843	-	(6,619)	6,619	-
Loans and equity repayments received from portfolio assets	(2,483)	2,483	-	(6,466)	6,466	-
	(9,126)	9,126	-	(13,773)	13,773	-
Yields from intermediate holding companies
Interest on loan notes*	-	(4,688)	(4,688)	-	(8,100)	(8,100)
Dividend payment from UK HoldCo to the Company*	-	(2,000)	(2,000)	-	(1,700)	(1,700)
	-	(6,688)	(6,688)	-	(9,800)	(9,800)
Other movements
Investment in working capital in UK HoldCo	-	(454)	(454)	-	2,256	2,256
Administrative expenses borne by intermediate holding companies*	-	(848)	(848)	-	(1,223)	(1,223)
Repayment/(drawdown) of UK HoldCo credit facility borrowings	-	43,680	43,680	-	(43,680)	(43,680)
Fair value of the Company's investment in UK HoldCo	217,612	6,142	223,754	197,717	(38,674)	159,043

*    The net gain on investments at fair value through profit or loss for the period ended 30 September 2015 is £961,000 (31 March 2015: £2,173,000 - period from incorporation on 12 December 2013 to 30 September 2014: £1,841,000). This, together with interest received on loan notes of £4,688,000 (31 March 2015: £8,100,000) and dividend income of £2,000,000 (31 March 2015: £1,700,000) comprises operating income in the condensed income statement.

The previous balances represent the total net movement in the fair value of the Company's investment. The "cash, working capital and debt in intermediate holding companies" balances reflect investment in, distributions from or 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 30 September 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, being the most relevant and most commonly used method in the market to value similar assets to the Company's. The Company's holding of its investment in UK HoldCo represents its interest in both the equity and debt instruments. The equity and debt instruments are valued as a whole using a blended discount rate and the value attributed to the equity instruments represents the fair value of future dividends and equity redemptions in addition to any value enhancements arising from the timing of loan principal and interest receipts from the debt instruments, while the value attributed to the debt instruments represents the principal outstanding and interest due on the loan at the valuation date.

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

Discount rates applied to the portfolio of assets range from 6.5% to 11.0% (weighted average 8.7%) (at 31 March 2015: from 7.0% to 11.0% - weighted average 9.1%).

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

	30 Sep 2015	31 Mar 2015
UK - inflation rates	1.2% for 2015 and	2.0% for 2015 and
	2.75% from 2016	2.75% from 2016
UK - deposit interest rates	1% for 2015, gradually	1% for 2015, gradually
	rising to 3.5% from 2019	rising to 3.5% from 2019

The long term UK corporation tax rate assumed in the 30 September 2015 portfolio valuation is 20% stepping down to 19% in April 2017 and 18% from April 2020 (31 March 2015: 20%), reflecting the Summer budget announcement in July 2015 and in line with market practice.

 

Fair value of intermediate holding companies

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

 

Details of investments made during the period

On 30 July 2015, the Group acquired the remaining 36% interest in the Branden solar park project from John Laing Group plc and the entirety of 'B' shares plus other economic interests in the Monksham solar park project for a total cash consideration of £20.4 million, including working capital.

 

10. Trade and other receivables

	30 Sep 2015	31 Mar 2015
	(unaudited)	(audited)
	£'000s	£'000s
Prepayments	19	14
Closing balance	19	14

11. Trade and other payables

	30 Sep 2015	31 Mar 2015
	(unaudited)	(audited)
	£'000s	£'000s
Trade creditors	571	-
Accruals	150	770
Closing balance	721	770

 

12. Loans and borrowings

The Company had no outstanding loans or borrowings at 30 September 2015 (31 March 2015: none), as shown in the Company's condensed unaudited statement of financial position.

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

As at 30 September 2015, UK HoldCo had no amount outstanding under the facility (31 March 2015: £43.7 million).

As at 30 September 2015, the Company held loan notes of £123 million which were issued by UK HoldCo (31 March 2015: outstanding amount of £90 million).

There were no other outstanding loans and borrowings in either the Company, UK HoldCo or HWT Limited at 30 September 2015.

 

 

13. Share capital account

	30 Sep 2015	31 Mar 2015
	(unaudited)	(audited)
	£'000s	£'000s
Opening balance/balance on incorporation	157,352	-
Shares issued in the period	65,000	160,000
Expenses of issue of equity shares	(1,230)	(2,648)
Closing balance	221,122	157,352

On 15 July 2015, 64,356,435 new ordinary shares of no par value were issued and fully paid at a price of 101.00 pence.

At 30 September 2015, the Company's share capital is composed of 224,356,435 ordinary shares of no par value.

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

 

 

14. Retained earnings

	30 Sep 2015	31 Mar 2015
	(unaudited)	(audited)
	£'000s	£'000s
Opening balance/balance on incorporation	4,557	-
Profit for the period	6,228	9,357
Dividend paid	(4,800)	(4,800)
Closing balance	5,985	4,557

 

 

15. 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 9. Details of transactions between the Company and other related parties are disclosed below. This note also details the terms of the Company's engagement with John Laing Capital Management Limited 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 six month period to 30 September 2015 was £1,083,000 (period from incorporation on 12 December 2013 to 30 September 2014: £815,000) of which £571,000 remained payable as at 30 September 2015 (31 March 2015: £511,000).

*           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

During the period, the Company's wholly‑owned subsidiary UK HoldCo acquired the remaining 36% stake in the Branden solar park project from John Laing Group plc as detailed in note 9.

The Directors of the Company, who are considered to be key management, received fees for their services. Total fees for the six month period were £100,000 (period from incorporation on 12 December 2013 to 30 September 2014: £150,000) of which £12,500 remained payable as at 30 September 2015 (31 March 2015: £50,000). The Directors were paid £2,267 of expenses in the six month period (period from incorporation on 12 December 2013 to 30 September 2014: £2,546) of which £250 remained payable as at 30 September 2015 (31 March 2015: £1,000).

As part of the issue of 64,356,435 new ordinary shares on 15 July 2015, the Directors subscribed for and were issued with the following number of ordinary shares:

	Subscribed and issued		Total number of shares held
	during the period	Consideration	at 30 Sep 2015
Richard Morse	9,792	£9,890	59,792
Richard Ramsay	8,813	£8,901	53,813
Christopher Legge	4,896	£4,945	29,896
Denise Mileham	8,160	£8,242	28,160
Peter Neville	4,896	£4,945	29,896

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

The Directors were paid dividends in the period of £4,950.

16. Financial instruments

Financial instruments by category

The Company held the following financial instruments at fair value at 30 September 2015. There have been no transfers of financial instruments between levels of the fair value hierarchy. There are no non‑recurring fair value measurements.

	30 Sep 2015 (unaudited)
			Financial assets at	Financial
	Cash and	Loans	fair value through	liabilities at
	bank balances	and receivables	profit or loss	amortised cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Levels	1	1	3	1
Non‑current assets
Investments at fair value through profit or loss (Level 3)	-	-	223,754	-	223,754
Current assets
Trade and other receivables	-	19	-	-	19
Cash and cash equivalents	4,055	-	-	-	4,055
Total financial assets	4,055	19	223,754	-	227,828
Current liabilities
Trade and other payables	-	-	-	(721)	(721)
Total financial liabilities	-	-	-	(721)	(721)
Net financial instruments	4,055	19	223,754	(721)	227,107

	31 Mar 2015 (audited)
			Financial assets at	Financial
	Cash and	Loans and	fair value through	liabilities at
	bank balances	receivables	profit or loss	amortised cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Levels	1	1	3	1
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 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 9.

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

Sensitivity analysis of the portfolio

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

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

30 Sep 2015 (unaudited)
Discount rate	Minus 0.5%	Base 8.7%	Plus 0.5%
Change in portfolio valuation	Increases £8.9m	£217.6m	Decreases £8.8m
Change in NAV per share	Increases 3.9p	101.2p	Decreases 3.9p
31 Mar 2015 (audited)
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 long term inflation rates is as follows:

30 Sep 2015 (unaudited)
Inflation rates	Minus 0.5%		Base 2.75%	Plus 0.5%
Change in portfolio valuation	Decreases £9.0m		£217.6m	Increases £9.5m
Change in NAV per share	Decreases 4.0p		101.2p	Increases 4.2p
31 Mar 2015 (audited)
Inflation rates	Minus 0.5%		Base 2.75%	Plus 0.5%
Change in portfolio valuation	Decreases £8.4m		£197.7m	Increases £8.6m
Change in NAV per share	Decreases 5.3p		101.2p	Increases 5.4p

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:

30 Sep 2015 (unaudited)
Energy yield	P90 (10 year)		Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £20.4m		£217.6m	Increases £20.5m
Change in NAV per share	Decreases 9.0p		101.2p	Increases 9.0p
31 Mar 2015 (audited)
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:

30 Sep 2015 (unaudited)
Electricity prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Decreases £9.0m	£217.6m	Increases £9.1m
Change in NAV per share	Decreases 4.0p	101.2p	Increases 4.0p
31 Mar 2015 (audited)
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.

17. Guarantees and other commitments

As at 30 September 2015, the Company has provided a guarantee under the Company's wholly‑owned subsidiary UK HoldCo's £50 million revolving credit facility due to expire on 9 October 2017.

The Company had no other commitments or guarantees.

18. Subsidiaries

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

		Place of	Ownership	Voting
Name	Category	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%
Fryingdown Solar Park Limited	Operating subsidiary (dormant)	UK	100%	100%
Five Oaks Solar Parks Limited	Operating subsidiary (dormant)	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 and Galloway Holdings Limited	Project holding company	UK	80%	80%
Shanks Dumfries and 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	100%	100%
Branden Solar Parks Limited	Operating subsidiary	UK	100%	100%
KS SPV 3 Limited	Operating subsidiary	UK	100%	100%
KS SPV 4 Limited	Operating subsidiary	UK	100%	100%
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%
Monksham Power Ltd	Project holding company	UK	**	**
Frome Solar Limited	Operating subsidiary	UK	**	**

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

**         100% of "B" shares plus 100% of loans to the project. The "A" shareholders, investors under the Enterprise Investment Scheme, remain invested in the project. Including the loans, JLEN held an effective economic interest over 87% of the value of the project's cash flow (as calculated at acquisition).

19. Events after the reporting period

A dividend for the period ended 30 September 2015 of 3.027 pence per share, amounting to £6.8 million, was approved by the Board on 19 November 2015. Please refer to note 7 for further details.

Under two separate transactions on 30 October 2015 and 13 November 2015, UK HoldCo acquired a solar photovoltaic portfolio owned under Venture Capital Trusts and Enterprise Investment Schemes for a cash consideration of £28.5 million, including working capital, fully funded by the Group's revolving credit facility.

There are no other significant events since the period end which would require to be disclosed.

This information is provided by RNS

The company news service from the London Stock Exchange

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