Acquisition of 10MW Power Response Site

RNS Number : 3871Z

Alkane Energy PLC

05 February 2014

 



5 February 2014

Alkane Energy plc

("Alkane", "the Company" or "the Group")

Acquisition of 10MW Power Response Site

Alkane is pleased to announce the acquisition today of the Wheldale, West Yorkshire power response facilities from SSE plc, for a total consideration of £1.5million ("Acquisition").

The initial consideration for the Acquisition is £1.1million payable in cash, with a £0.4million deferred cash payment to be paid on 31 October 2014.  The Acquisition brings a 10MW site with a current installed engine capacity of 7.5MW. Following the Acquisition Alkane's engine capacity allocated to power response has increased from 30MW to 37.5MW, and overall Group capacity has reached 90MW.

As part of the financial arrangements to fund the Acquisition Alkane has increased its Group banking facilities with Lloyds Bank PLC by £1million.  The balance of the consideration will be funded from Group cash flow.

Power response comprises peak load running and participation in National Grid's Short Term Operating Reserve Programme ("STOR"), and builds on Alkane's core gas to power skills using excess capacity at coal mine methane ("CMM") sites.  Power response uses identical engine types to CMM and these are operated by the same Alkane team ensuring both capital and operational flexibility.  As power response uses bought in mains gas to run the engines, Alkane gains its margin by operating at periods of peak pricing.  This includes the winter evening periods and contracting into the STOR programme.  Alkane offers fast response, flexible and reliable capacity to this market.

STOR market output has been growing over recent years and the Company announced in its trading update of 20 January 2014 that there had been a doubling of power response revenue in 2013 over the previous year.  This growth has been achieved by improvements in our service performance combined with stronger demand.  The Company would expect to add further power response capacity in the coming months with a target of reaching 50MW of installed capacity within 12 months.

Commenting on the acquisition, Chief Executive Officer, Neil O'Brien, said:

"Alkane continues to invest in new facilities as the UK electricity market faces increased risk of an energy gap over the coming years. We continue to seek growth opportunities such as the acquisition of SSE's 7.5MW power response facilities at Wheldale, West Yorkshire."

For more information please contact:

Alkane Energy plc Neil O'Brien, Chief Executive Officer Steve Goalby, Finance Director	01623 827927
Liberum Clayton Bush Tim Graham	020 3100 2000
VSA Capital Limited Andrew Raca	020 3005 5004
Hudson Sandler Nick Lyon Alex Brennan	020 7796 4133

Background information

Alkane is one of the UK's fastest growing independent power generators. The Company operates mid-sized "gas to power" electricity plants providing both predictable and fast response capacity to the grid. Following the acquisition of the Wheldale power response assets, Alkane now has a total of 90MW of installed generating capacity and an electricity grid capacity of 110MW.

Alkane's main operations are based on a portfolio of coal mine methane ("CMM") sites. Alkane has the UK's leading portfolio of CMM licences, enabling the Company to extract gas from abandoned coal mines.

As CMM declines at any one site Alkane retains valuable generating capacity and a grid connection which can be redeployed to power response. Power response sites are connected to mains gas and produce electricity at times of high electrical demand or in order to balance the electricity grid. Alkane now operates 37.5MW of power response on mains gas.

The Group operates from 24 mid-size (up to 10MW) power plants across the UK, 16 CMM only, 6 mains gas only, and 2 using both fuel sources. Alkane uses standard modular reciprocating engines to generate the electricity and sells this power through the electricity network. The engine units and other plant are designed to be flexible and transportable allowing additional capacity to be brought onto growing sites and underutilised plant to be moved to new sites to maximise efficiency.

Alkane has a range of core skills encompassing the entire project development cycle including planning and permitting, sourcing plant and managing the build and commissioning stage. This has enabled Alkane to establish a design, build & operate ("DBO") business for third party clients in the biogas and oil & gas industries.

The Group has more than 800km² of acreage under various onshore Petroleum Exploration and Development Licences ("PEDLs"). Alkane retains a 100% interest in the majority of these PEDLs, which extend to all of the hydrocarbons recoverable from these licence areas. This includes any CMM, natural gas, coal bed methane ("CBM") or shale gas.

More information is available on our website www.alkane.co.uk 

 

END

 

 

ACQBSGDDSDGBGSU