3i Infrastructure investee buys majority stake in JLEN AD portfolio

3i Infrastructure portfolio company Future Biogas has acquired a 51% stake in a portfolio of six anaerobic digestion facilities from JLEN Environmental Assets Group, it was announced on Thursday, for £68.1m.

The transaction, funded by £30m from 3i Infrastructure and the remainder from Future Biogas through committed debt facilities, positioned Future as the majority owner of the gas-to-grid facilities, which collectively produce 333GWh of gas annually.

Future Biogas, which originally developed five of the six plants and had operated them for an average of eight years, would now lead investment-driven enhancements to the portfolio.

The acquisition aligned with Future Biogas's growth strategy, transitioning from a third-party operator to an asset owner and developer with a significant pipeline of 1.3TWh of new projects.

“We are very pleased to be acquiring a stake in this portfolio of anaerobic digestion plants from JLEN, who we will continue to work with constructively,” said Future Biogas chief executive officer Philipp Lukas.

“We know the assets well having developed them and managed them for an average of eight years.”

Lukas said the transaction was a “key step” in building a scalable AD platform under Future Biogas, enabling it to upgrade the plant portfolio and extend their lives beyond the current RHI subsidy.

“Critically, it provides a means to continue to deliver under our Project Carbon Harvest mission to generate and supply green gas, helping decarbonise UK farms and industry.”

JLEN said it would retain a 49% stake in the anaerobic digestion portfolio, which had been operational from 2013 to 2016 and benefited from Renewable Heat Incentive (RHI) and Feed-in Tariff subsidies.

The sale proceeds would be used by JLEN to pay down debt and fund a £20m share repurchase programme, aiming to capitalise on the current discount to net asset value of its shares.

“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.

“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.”

Warner said that having Future as co-owners would help to deliver further value from the business model.

“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.”

At 1033 BST, shares in JLEN Environmental Assets Group were up 1.38% at 94.29p, while those in 3i Infrastructure were ahead 0.06% at 344.19p.

Reporting by Josh White for Sharecast.com.