JLEN Environmental Assets Trust has sold off half of its anaerobic digestion portfolio to Future Biogas for £68.1m.
The trust, which invests in environmental infrastructure assets, sold the facilities at their June valuation. After the deal, it will continue to own the other 49 per cent of its anaerobic digestion portfolio.
Future Biogas is a specialist developer backed by 3i Infrastructure and has been the operator of the assets being sold off since JLEN purchased them between 2017 and 2019. £30m of the sale is funded by 3i.
Located in the east of England, the anaerobic digestion facilities have been in operation since 2013-2016 and benefit from the Renewable Heat Initiative and Feed-in Tariff subsidies.
JLEN said the sale created the potential for further asset enhancements and life extensions beyond the current RHI subsidy. Further enhancements are expected to boost the trust’s valuations in the remaining anaerobic digestion portfolio.
“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,” said JLEN chair Ed Warner.
The trust said it would use the £68.1m from the sale to pay down debt and consider share buybacks, subject to board approval.
JLEN’s revolving credit facility would be paid back, and £20m would be used for a share repurchase programme.
The trust’s share price has fallen nine per cent since the start of the year. It currently sits at an 18.7 per cent discount to its underlying assets, leaving it eager to close the gap.
“We are definitely in favour of recycling capital into new projects but wish wholeheartedly that share buybacks were not needed,” said head of investment company research at Quoteddata James Carthew.
“JLEN’s discount at 18 per cent is better than many of its peers but is still unjustified. The cost disclosure issue that was one of the principal causes of these discounts emerging.”
“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,” added Warner.
“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.”