JLEN, the listed environmental infrastructure fund, is pleased to announce that it has signed an agreement for the sale of 51% of a portfolio of six gas-to-grid anaerobic digestion (“AD”) facilities (the “AD Portfolio”) to Future Biogas (“Partial Disposal”), for a total consideration of £68.1 million, in line with the valuation as at 30 June 2024. Completion of the Partial Disposal is subject only to a customary condition precedent.

JLEN will continue to own 49% of the AD Portfolio, which has a combined generating capacity of 38MW, as well as its interests in three further AD assets which are not part of the agreement.

Future Biogas is a specialist developer and has been the operator of the assets comprising the AD Portfolio since they were acquired by the Company between 2017 to 2019. The Partial Disposal provides a greater alignment of interests between JLEN and Future Biogas, creating the potential for further asset enhancements and life extensions beyond the current Renewable Heat Incentive (“RHI”) subsidy. These initiatives are expected to deliver uplifts to the valuation of the Company’s remaining holding in the AD Portfolio over time.

The AD Portfolio is located in the East of England and the AD assets have been operational since 2013 – 2016. All of the projects in the AD Portfolio benefit from a RHI and Feed-in Tariff subsidy.

Capital allocation update

JLEN has previously announced that proceeds from sales will be used to pay down debt and consider share buybacks, subject to the Board ensuring that the Company maintains a robust balance sheet and can meet its existing commitments.

In that regard, the proceeds of the Partial Disposal will be used to repay amounts outstanding under the RCF which is available to meet existing commitments within the portfolio. In addition, the Company will allocate £20 million of the proceeds of the Partial Disposal to a share repurchase programme.

The Board and the Investment Manager continue to believe that the discount to net asset value (“NAV”) at which JLEN’s shares are currently trading materially undervalues the Company, and so represents an attractive investment opportunity delivering NAV accretion for shareholders.

The Board and the Investment Manager continue to progress further targeted asset sales to recycle capital within the portfolio.

Ed Warner, Chair of JLEN, said:

“This deal is a great outcome for JLEN, enabling us to recycle capital within the portfolio, while continuing to benefit from the future growth and income generated by this attractive AD Portfolio. This is the Company’s second divestment, following the sale of our French wind assets in January 2022, and provides funds for JLEN to commence buybacks in accordance with our stated approach to capital allocation.

We are pleased to continue our partnership with Future Biogas who we have worked with since 2017. Having them as co-owners will help to deliver further value from the business model they have developed and put into practice on other projects for post-subsidy operations. Anaerobic digestion projects such as these have a valuable role to play in the decarbonisation of heat as part of the UK’s net zero goals.”

Below is a short interview with Foresight, the investment managers for JLEN