Acquisition of a portfolio of biomethane refuelling stations for Compressed Natural Gas vehicles

JLEN, the listed environmental infrastructure fund, is pleased to announce that it has acquired a minority stake in a portfolio of five Compressed Natural Gas (“CNG”) refuelling stations for heavy goods vehicles (“HGVs”), located in the UK. The investment has been made alongside other Foresight funds and the developer and operator of the stations, CNG Fuels Limited (“CNG Fuels”). JLEN will also contribute to a funding line to fund the construction of a further pipeline of CNG refuelling stations as part of a national network. JLEN’s total investment, including the initial acquisition, is expected to be up to approximately £20m over the next two to five years.

The transport sector is the largest source of carbon dioxide emissions in the UK, accounting for 34 per cent in 2019[1]. Within the transport sector HGVs produce 17% of road transport emissions and 4.5% of total UK greenhouse gases (“GHGs”).

Therefore, HGVs fuelled by biomethane (as generated by anaerobic digestion plants) are the only commercially available, at-scale solution to substantially reduce these emissions. HGVs fuelled with 100% biomethane offer a saving in GHG emissions of over 80% on a “well-to-wheel” basis when compared to a similar diesel vehicle. They also offer further environmental benefits such as lower noise and lower particulate emissions[2].

The take-up of CNG HGVs fuelled by biomethane, therefore offers fleet operators the opportunity to lower their emissions substantially. CNG HGVs are also cheaper to run over a typical 5-7 year duty cycle, due in part to a favourable fuel duty position compared to comparable diesel vehicles. The government has committed to maintaining a clear advantage for gas powered vehicles until 2032, as part of measures supporting the UK’s target of net zero emissions by 2050.

Revenues are earned from sales of biomethane fuel to customers under contract, which include several of the largest fleet operators in the UK. The commodity price of gas is passed through to the customer, meaning that JLEN has no exposure to underlying merchant gas prices.

The initial acquisition was funded by a draw-down under the Company’s revolving credit facility.

Richard Morse, Chairman of JLEN, said:

“We are pleased to make this investment into biomethane refuelling infrastructure, helping to decarbonise one of the most emission-intensive parts of the transport sector. We consider that this investment combines the two pillars of delivering better environmental performance and lower cost operations for customers, thereby supporting our investment case and we look forward to supporting the growth of a national biomethane refuelling network.”

Below is an interview with the investment team, Chris Tanner & Chris Holmes who talk us through the highlights from the recnt interim results