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JLEN Environmental Assets half-year results

JLEN Environmental Asset (JLEN) has reported its half year results, for the six-month period ending 30 September 2022.

JLEN reported a NAV of £890.2m, equal to 125.4p per share, an increase from the £795.4m it reported on 31 March 2022. JLEN has generated a share price total return of 92.4% since its IPO, equal to 8.0% annualised. We note that because of the impact of the government’s newly announced levy on energy wholesalers, JLEN’s board has re-evaluated its NAV, reducing it to 124.4p per share. The rationale and methodology for which is outlined later.

A second interim dividend of 1.79 pence per share declared for the financial year to 31 March 2023 taking total dividends declared for the six months to 30 September 2022 to 3.57 pence, in line with the target set out in the 2022 Annual Report. Cash dividend cover was 1.64 times on dividends paid during the period.

Overall gearing was 25.5% as of the half-year end, with £98.6m remaining undrawn.

Four acquisitions were completed over the half-year period, increasing JLEN’s total holdings to 41, with two of its new investments being made in a new sector – controlled environment.

Ed Warner has been appointed to chair of JLEN, as of 2 August 2022.

As of its half year end, JLEN’s portfolio is positioned as follows:  28% wind, 28% waste & bioenergy, 21% anaerobic digestion, 15% solar, 5% low carbon & sustainable solutions, 2% controlled environment and 1% hydro.

An important development for JLEN has been a key post balance sheet event – the UK government’s ‘Electricity Generator Levy’, which is designed to capture what it believes are excess profits being made by the whole electricity market. This levy sees in-scope generators pay 45% of revenues earned on prices in excess of £75/MWh.  A £10m per year allowance will apply, such that revenues below this threshold will be exempt. This constitutes a non-adjusting post-balance sheet event as details of the levy were not known at the balance sheet date.

In the face of such uncertainty, the directors used their judgement to reduce price forecast curves used in the valuation by 50% across the portfolio for the next 12 months, with this percentage stepping down by 10% per annum to zero over the next five years. Using this approach, the directors valued the portfolio at £890.2m as at the 30 September 2022, which results in a NAV per share of 125.4p.

The directors have now assessed the impact of the levy and have also considered the latest available price forecast curves and actual inflation, as well as removing the discounts that were applied to forecast curves for the valuation at the balance sheet date. This has led to a reduction in the NAV as calculated for the 30 September 2022 of £7.0m to £822.6m and equates to a NAV per share of 124.4p.

[QD comment: “The positive NAV increase reported by the trust is both expected and encouraging, given the clear tailwinds behind JLEN’s style of investing. The introduction of the government’s new levy is painful for all energy producers, JLEN included, though it is nonetheless impressive that JLEN has been able to increase its NAV in the face of said levy as well as the wider global downturn. We wish the new chair of JLEN, Ed Warner, all the best in his new role.”]

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