John Laing Group plc (LON: JLG), the international originator, active investor and manager of infrastructure projects, today issued a pre-close update for the six months ending 30 June 2019 ahead of the Group’s interim results on 22 August 2019.
Realisations on track to reach c.£1 billion between 2019-2021, in line with three-year guidance
· £131 million of proceeds from realisations completed to date in 2019 including:
o Sale of our 50% shareholding in Optus Stadium, completed in March 2019. This sale represents our first realisation of an operational asset in Australia.
o Sale of our 95.3% shareholding in Rocksprings wind farm in Texas and our 92.5% shareholding in Sterling wind farm in New Mexico. Proceeds are subject to customary post completion adjustments. These sales represent our first disposals in the US.
· Aggregate prices achieved are in line with portfolio valuation.
Investment activity in line with three-year guidance underpinned by strong pipeline
· £7 million of investment commitments completed to date and advanced negotiations on two investments for more than £130 million, expected to complete in Q3 2019.
· Additionally, the pipeline includes other exclusive and shortlisted positions with an investment opportunity of approximately £340 million due to close within the next 18 months.
John Laing Group plc Investment portfolio performance
Mixed operational performance of certain renewable energy assets.
· In Europe, we faced operational performance issues, mainly driven by low level of wind, on some legacy assets in Germany and Ireland, which together represented 7.5% of the investment portfolio at 31 December 2018.
· In Australia, in line with industry peers, we experienced transmission issues relating to marginal loss factors. MLFs are defined as the portion of energy that is lost when electricity is transmitted across the transmission and distribution networks, due to resistance. MLFs for operational assets are published annually by the Australian Energy Market Operator. In May 2019, AEMO published MLFs for the 2019 – 2020 financial year. Based on these and draft MLFs for assets still under construction, there were unfavourable results for three of our assets, which together represented 11.0% of the investment portfolio at 31 December 2018.
We are currently assessing the full impact of these issues on our portfolio value and this will be reflected in our interim results. Furthermore, we have already identified a number of opportunities to mitigate any impact.
Positive developments on several PPP projects:
Denver Eagle P3
· The A line and the B line have been operating successfully since 2016 and have achieved above 97% on-time performance.
· Substantial completion for the third line, the G line, achieved in March 2019.
· Full revenue service of the overall project was achieved on 26 April 2019.
Sydney Light Rail
· On 7 June 2019 a settlement was agreed by all parties. As part of this, we invested an additional AUD $12 million (£6.5 million) equity capital. The settlement also includes a revised project completion timetable.
· As stated in our 2018 full year results announcement, while the programme is running behind schedule, it remains within the overall long stop date.
· All track work has been completed and daytime testing of the light rail vehicles is now underway, with operation on a certain segment of the line expected by December 2019.
New Generation Rollingstock
· The number of accepted trains is now 57 out of a total of 75 and the project recently achieved Partial Fleet Acceptance.
· The final train is due for delivery in Q4 2019, in line with the re-baselined train delivery schedule agreed with the State of Queensland.
· The programme for undertaking various retrofitting and rectification issues is progressing well.
Full Year outlook unchanged
· Net asset value at 31 December 2019 is projected to be broadly in line with management expectations on a constant currency basis.
· The pipeline of new investment opportunities remains strong in both PPP and renewable energy, especially in the US and Australia.
· As previously stated, we continue to assess (i) other infrastructure asset classes that might fit our business model (ii) new geographies where we see opportunities to invest alongside established partners at appropriate returns.
· The market for secondary assets remains strong.