JLEN Environmental Assets launches placing to pay off loan and fund new pipeline

JLEN Environmental Assets launches placing to pay off loan and fund new pipeline – JLEN Environmental Assets Group is proposing to undertake a placing and offer for subscription for up to 60,139,202 new ordinary shares in the company of no par value at 101 pence per new ordinary share. The company is currently £109.8m drawn on its revolving credit facility and the net proceeds will be used to repay the facility and fund a pipeline of environmental infrastructure opportunities.

The issue price represents a premium of 2.6% to the last published NAV as at 30 September 2021 of 98.4 pence per share and a discount of 2.7% to the closing share price of 103.8 pence per share as at 11 January 2022. The company has a target dividend of 6.80 pence per share for the year ending 31 March 2022 which represents a yield on the issue price of 6.73%. The new shares are being offered on a non-pre-emptive basis pursuant to the authority granted by shareholders at the company’s annual general meeting held on 2 September 2021.

Applications will be made to the Financial Conduct Authority for admission which is expected to become effective at 8.00 a.m. on or around 1 February 2022. The new ordinary shares will, when issued, be credited as fully paid and rank pari passu with the existing ordinary shares in the capital of JLEN, including the right to receive all future dividends and distributions declared, made or paid, including the dividend payable by the company for the quarter to 31 December 2021, expected to be announced in due course.

To participate in the placing, which is expected to close at 2.00 p.m. on 27 January 2022, qualified investors should communicate their interest to Winterflood.

Retail investors can take part in the placing via the offer for subscription form at the company’s website, with a minimum subscription amount of 1,000 new ordinary shares. Investors that wish to subscribe via their broker or platform may do so.

Investment Opportunity

JLEN has seen the market for core wind and solar infrastructure assets mature, and increased competition has driven down return expectations and discount rates.  JLEN’s more recent investments across anaerobic digestion assets, battery storage investments, biomethane refuelling stations for compressed natural gas vehicles and energy-from-waste plants have been typically acquired with higher return expectations and the company expects to continue to focus on those assets targeting higher returns.

As we reported this week, JLEN has undertaken its first disposal since launch, being the sale of its French wind assets for €5.9m, representing an uplift of 25% on the valuation of the relevant assets as at 30 June 2021, being the valuation prior to the receipt of firm bids.

Anaerobic Digestion

Anaerobic digestion (“AD”) is now the Company’s second largest sector exposure, and the AD portfolio has consistently out-performed, driving strong returns for shareholders. The Company first entered the sector in 2017, and has built the AD portfolio to nine agricultural-fed assets and 2 food waste-fed assets and is seeking to expand this exposure, while being mindful of the overall balance of the Company’s portfolio.

The Investment Manager has identified an AD portfolio with an aggregate investment sum of approximately £50 million which it considers may be suitable for investment by the Company. This portfolio is located in the EU and has been presented to the Investment Manager as part of a competitive process. Additional opportunities to invest into European biogas production facilities are also being considered, although these are at an early stage.  The Investment Manager is of the view that production of biomethane for either heat or transport can play an important role in transitioning economies to a low carbon environment with further value enhancement possible from capturing carbon from the process.

Controlled Environment 

The Board and the Investment Manager believe there is a potentially significant opportunity within the controlled environment agriculture (“CEAg”) and aquaculture (“CEAq”) sectors. The growing global population will increase food demand and using the current agricultural practices is a challenge.

Controlled environment sectors provide a greater level of efficiency with CEAg using up to 95% less water per kilo of crop and onshore CEAq being able to recycle 99% of water. It also avoids erratic weather conditions, pollution, pests and use of antibiotics. The reduction in transportation distance decreases the loss of produce and carbon dioxide emissions, and increases the quality in transit.

The operations of CEAg/CAEq facilities can be highly automated and benefit from the reducing cost of and/or co-location with renewable energy. In that regard, one of the two near-term controlled environment opportunities is the construction of a 3-hectare glasshouse on land adjacent to the Codford AD plant held by JLEN. The Company is exploring the possibility of providing energy to the glasshouse, by diverting to the glasshouse electricity normally destined for direct export to the grid to be sold at a premium price. Waste heat from the existing CHP engines will be captured and delivered by pipe and a heat exchanger to the glasshouse. Wastage from the glasshouse produce may also be returned to the digester providing a truly circular ecosystem.

Low Carbon and Energy Efficiency

The performance of the CNG refuelling assets in the Company’s portfolio has been encouraging, with 31% more biomethane dispensed to customers than budgeted. The project company is regularly setting new weekly dispensing records and the take-up of vehicles by fleet operators has significantly exceeded the first year investment case.  Funding the roll-out of further refuelling stations is expected during the next 12 months.

The construction stage battery storage assets held by the Company are both on track to commence operations at the end of 2022. The Investment Manager has identified two further and similar investment opportunities in this sector with an aggregate investment sum of approximately £40 million.

The Investment Manager is reviewing opportunities in the EV Charging Infrastructure sector for those that offer good growth potential for its targeted market segment.  It has identified one opportunity that it is pursuing for an investment sum of approximately £15 million.

Biomass 

JLEN acquired its first biomass asset early this year in the Cramlington facility.  As a base load generator of sustainably sourced renewable energy that also provides low carbon heat and power to nearby industrial customers, it is regarded as an attractive asset with strong credentials.  Within the investment case for the first 18 months of ownership it is the intention to enhance key operational aspects of the plant to increase resilience and maintain consistency of production.  These are all progressing well to date and once achieved the asset will be in a strong position to pursue value enhancing heat and power offtake arrangements with additional nearby industrial customers.

The Investment Manager is pursuing acquisition opportunities in a number of other operational biomass plants across the UK and Europe, as it sees this source of renewable energy production, with subsidy-backed revenue streams, as very attractive.

JLEN : JLEN Environmental Assets launches placing to pay off loan and fund new pipeline