John Laing Environmental Assets has published results for the year ended 31 March 2016. Over the 12 month period to 31 March 2016 shareholders have seen a share price total return of –2.5% whilst over the same period the NAV total return per share was +3.1%. The discrepancy is largely due to the reduction in the premium of share price to NAV from 8.2% at 31 March 2015 to 2.6% at 31 March 2016.
The Net Asset Value per share at 31 March 2016 was 96.7 pence, compared with 101.2 pence at 31 March 2015. After taking into account the quarterly dividend declared on 12 May 2016, to be paid on 24 June 2016, the ex–dividend NAV per share at 31 March 2016 was 95.2 pence, a decrease of 3.1% on the ex–dividend NAV per share of 98.2 pence at 31 March 2015. The reduction in NAV per share was due primarily to the Government’s removal of the Climate Change Levy exemption for electricity from renewable sources from August 2015, announced in the July 2015 UK budget, together with the continued fall in the outlook for UK electricity prices, both of which have affected all renewable energy funds.
Profit after tax for the year was GBP6.2 million resulting in earnings per share of 3.0 pence. The Directors have recommended and declared a total dividend in respect of the year ended 31 March 2016 of 6.054 pence per share, above the earnings per share level of 3.0 pence for the year. The level of earnings per share of the company in the current year is the result of the impact on the portfolio valuation of the lower electricity prices and the removal of LECs during the year as described above. However, taking account of the cash generation of the portfolio, the Board continues to believe that the portfolio is well positioned to deliver the target returns to shareholders. The company is targeting a full year dividend for the year ending 31 March 2017 of 6.14 pence per share.
John Laing Environmental’s wind assets generated electricity 2% above budget, due to strong wind speeds during the winter after previously reported poor wind speed months during the summer. The solar assets were 2% below budget due to lower than expected irradiation during the winter period.
Weaker power prices impacted the NAV throughout the year. During the final quarter of the financial year, further falls in electricity price forecasts have been experienced, producing a small reduction in NAV, although this has been offset by a beneficial impact on NAV of the project debt refinancing.
In March 2016, the Company completed a refinancing of the external debt in its portfolio of seven wind farms. The new arrangement with The Bank of Tokyo–Mitsubishi UFJ Ltd is for a GBP76.5 million loan, fully amortising over 16 years with a refinancing at year five, and for a GBP3.3 million standby debt service facility. Interest rate hedging has been taken out for the full term to cover the long–term amortisation profile. No additional debt was raised apart from as required to cover transaction costs and the breaking of existing hedging arrangements.
The refinancing has lowered the finance costs of the wind portfolio. It has also improved other terms, in particular removing cash sweeps which were a feature of the original project finance arrangements that have now been terminated.
The project–level gearing at 31 March 2016 across the portfolio was 43.6% (31 March 2015: 47.3%) being 27.1% (31 March 2015: 25.0%) for the renewable energy assets and 62.2% (31 March 2015: 64.5%) for the PFI processing assets. Taking into account the amount drawn down under the revolving credit facility, the overall fund gearing at 31 March 2016 was 53.9% (31 March 2015: 57.0%).
All of the projects have achieved the budgeted level of availability with the exception of the Carscreugh wind farm, which has experienced higher than expected downtime due to turbine set–up issues. They are working with the turbine supplier to resolve these and they continue to benefit from availability warranties where faults are not rectified.
The environmental processing plants have also achieved full availability during the period, save for the ELWA fire which was reported in the 2015 Annual Report. The fire occurred at the Frog Island Mechanical Biological Treatment facility at the ELWA waste project. They 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 continued to be fulfilled and operated, diversion from landfill targets met and distributions made in line with budgets during the year. The facilities affected have now been reinstated and full operations are anticipated to recommence in late June 2016.
During the year ended 31 March 2016, the Company made five acquisitions with a total investment value of GBP75.5 million. These acquisitions bring the total capacity of the renewable energy assets in the JLEN portfolio to 129MW.
JLEN : John Laing Environmental impacted by lower power prices