AGM Statement and Trading Update

RNS Number : 8572F

Alkane Energy PLC

04 May 2011

 



 4 May 2011

Alkane Energy plc

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

AGM Statement and Trading Update

The Board of Alkane provides the following update on trading in conjunction with the Group's Annual General Meeting to be held at Edwinstowe at 11.00am today.

Alkane can report that revenues for the three months to 31 March 2011 have increased by 51% against the same period last year, driven by a year on year 54% increase in electricity output to 37GWh.  This output increase is a function of:

·    The on-going implementation of Alkane's growth strategy with new sites coming on line throughout 2010;

·    A successful winter running campaign with major services being scheduled for the spring period when pricing is traditionally lower;

·    A relatively low comparator period as Quarter 1 2010 output was adversely impacted by particularly poor weather;

·    A revised running regime for our conventional gas demand response engines which are now operating during regular peak demand periods whereas they were operating only on standby contracts last year.

In addition pricing has continued to strengthen over recent months as global concerns over the situation in the Middle East and Japan have influenced sentiment in the energy market.  Alkane now has 88% of Group 2011 production forward contracted at an average base load selling price of £49/MWh.  We have also taken the opportunity to forward contract into 2012 with an average price of £55/MWh on approximately 15% of our expected 2012 output.

Our Coal Mine Methane ("CMM") project pipeline has progressed with the start of the build phase at Calverton and we have also started the drilling programme at Clipstone.  We believe that our experience from more than 20 CMM projects gives us the best researched CMM programme in the UK but there is always some risk.  Historically we have successfully identified commercial reserves in approximately three out of four drill projects, with one unsuccessful drill programme included in the budget each year as a precaution.  We remain on track to open three new sites during this year, but at a further site, Golborne, we have yet to conclude if there are sufficient reserves for a commercial project.

Other operational highlights include the delivery of our first biogas CHP engine in April 2011, with the engine acceptance tests completed on time and on budget. This project is expected to be commissioned later in the year.  We continue to work with TEG on potential anaerobic digestion projects and we are appraising a number of biogas projects with other third parties. We also continue to assess additional opportunities to increase shareholder value which utilise our core gas to power and project developments skills in CMM, CBM and onshore gas ahead of the Department of Energy and Climate Change ("DECC") 14^th On-Shore Licensing Round which is expected to take place in 2011 and where we will be applying for a number of new licences.

Neil O'Brien, CEO, commented on the trading update:

"We set out on the current CMM expansion phase some two years ago when selling prices were falling and investment funding limited due to the financial crisis. We are now seeing the result of our growth strategy as we benefit from increased output and rising market selling prices. I am pleased to report that progress is also being made by both Alkane Biogas and our demand response facilities.

The Board is confident that 2011 will be another year of progress and we remain in line with market expectations."

For more information please contact:

Alkane Energy plc Neil O'Brien, Chief Executive Officer Steve Goalby, Finance Director	01623 827927 01623 827927
Altium Capital Limited Adrian Reed, Financial Advisory Chloe Ponsonby, Corporate Broking	0845 505 4343 020 7484 4040
Hudson Sandler Nick Lyon Kate Hough Alex Brennan	020 7796 4133
www.alkane.co.uk

Background Information

Alkane Energy has the UK's leading portfolio of coal mine methane ("CMM") licences, enabling the Company to extract gas from abandoned coal mines.  Alkane started extracting CMM in 1999 with sites at Shirebrook, Steetley and Markham.  Shirebrook and Markham are still operational today, a decade after they were opened.  Shirebrook is still producing CMM and surplus capacity has been deployed to conventional peak load along with capacity at Markham.  

The Group now generates power from 12 mid size (less than 10MW) plants across the UK and sells this power through the electricity distribution network.  The electricity is generated using standard modular reciprocating engines, and these units and other ancillary plant are designed to be flexible and transportable.  This allows additional capacity to be brought onto growing sites and underutilised plant to be moved to new sites to maximise efficiency. 

Alkane's skills and ambitions are not limited to CMM.  The operating model has already been transferred to demand response running at peak periods using conventional gas.  Alkane currently operates 10MW across two sites on conventional gas with our trading partners GDF SUEZ Energy UK. 

The Biogas market also provides a potential new business stream which will require the same power assets and core gas and electricity skills as CMM.

Coal Bed Methane ("CBM") and Shale Gas are potential longer term opportunities where Alkane has 500km² of DECC petroleum licences and contingent CBM resource estimates of circa 350 billion cubic feet. 

 

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