JLEN Environmental Assets Group Ltd (LON: JLEN) offers investors exposure to renewable energy infrastructure assets. The focus is operational projects that use proven technologies
The current portfolio includes wind, solar and anaerobic digestion, plus waste water infrastructure assets.
Formerly known as John Laing Environmental Assets, prior to Foresight taking on the management of the investment company in July, it has been trading since the end of March 2014. Foresight has £3.1bn of energy infrastructure assets under management, including JLEN.
Foresight has taken on the management team and that will stay the same, as do the main terms and fees. The first offer agreement with John Laing will continue.
There is a pipeline of potential assets with an estimated value of £200m. Most of these are outside of the UK and they are predominantly wind farms.
There will be additional opportunities available via Foresight. Management is assessing new areas, such as hydro, flexible generation and battery storage, and new countries for existing asset types.
At least 50% of the portfolio has to be in the UK – currently it is 90%. No more than 15% of the portfolio can be in assets under construction.
The base fee is 1% up to £500m of adjected portfolio value. Above that level the fee is 0.8%. There is no performance fee of asset origination fee.
The first interim dividend paid was 3p a share. Last year’s dividend was 6.51p a share, up from 6.31p a share. The dividend is expected to grow with inflation and the cover is currently 1.2 times.
The target dividend for 2019-20 is 6.66p a share.
JLEN raised £160m at 100p a share when it floated in 2014, although the NAV was 98p a share after expenses. More cash has been raised since then, including £105m last October. The NAV was £520.3m at the end of March 2019. That is equivalent to 104.7p a share.
That is after paying a total of nearly 30p a share in dividends. The most recent quarterly dividend of 1.6275p a share was paid after the balance sheet date
There was £11.4m in the bank at the end of March 2019. Overall fund gearing is 36%. A waste management infrastructure project has been terminated and there will be a distribution on winding up.
Gearing can be no more than 65% of gross project value for renewable energy projects.
There are good opportunities to acquire wind and anaerobic digestion assets. There are other opportunities in additional generation and storage assets. Management will have to decide how to finance the opportunities that it has.
The shares are currently trading at 118p, which is a premium to the NAV. This reflects the quality of the assets and the level of dividend. The forecast yield is 5.6%.
The shares are attractive due to the level of income on offer.