The board of JLEN Environmental Assets Group, a listed infrastructure trust, has unanimously recommended shareholders vote against a discontinuation of the company at its annual general meeting on 13 September.
JLEN, which was launched in 2014, is trading at a 17% discount to its net asset value as of 19 August, according to the Association of Investment Companies. Yet the share price total return for the company has outperformed the sector on a one-year and three-year basis, returning 6% in the past three years compared to an average decrease of 4.2% for the sector.
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On 15 August, JLEN announced a share buyback programme which could return up to £20m to shareholders. It was granted authority to acquire a maximum of 14.99% of issued share capital at last year’s general meeting, but this right will need to be renewed at this year’s meeting. The company also sold 51% of its portfolio of anaerobic digestion facilities to Future Biogas for a total of £68.1m, which allowed them to begin share buybacks.
The company also introduced a fee restructure to calculate on NAV, dropped fee charges from 1% to 0.95% for assets up to £500m, and created a third tier for assets over £1bn at 0.75%.
Andrius Makin, senior portfolio manager at Killik, believes the discontinuation vote should pass.
“This package of measures is clearly designed to sweeten the deal for shareholders voting against discontinuation. This is the first year in the trust’s history that the discount has breached the required 10% average so it is not surprising to see the board taking active measures,” he said.
“We have seen several continuation and discontinuation votes this year as discounts in the renewable energy continue to stay wide. Greencoat UK Wind, US Solar, Foresight Solar and NextEnergy Solar have held votes this year, with some seeing large votes against the strategy continuing. It is important to note that a vote against continuation does not require immediate liquidation of the portfolio. Typically, the board will engage with top shareholders and come back with several proposals on the future of the company to vote on.”
An annual review by QuotedData on 25 July also called against the discontinuation, referencing the long-term success of the company.
“JLEN and the wider renewable energy infrastructure sector have traded at a persistently wide discount to net asset value (NAV) with investor sentiment continuing to wane. This has triggered the activation of a discontinuation vote at JLEN’s annual general meeting (AGM) in September,” the review stated.
“We strongly believe shareholders should vote against discontinuation, taking into account the strong long-term track record of the company, which has produced NAV total returns of 119.5% since its launch just over 10 years ago to the end of June and delivered dividend growth every year. The fundamental growth story for the sector remains as strong as ever, with investment in the energy sector continuing to swell – the majority of which is going to clean energy technology such as renewables, low carbon fuels, nuclear, grids and battery storage.”
