Completion of Acquisition

RNS Number : 7906M

Alkane Energy PLC

21 July 2014

 



                                                                                                                                 21 July 2014

Alkane Energy plc

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

Completion of Acquisition of 49MW of Power Response Sites

The Board of Alkane Energy plc, the independent gas to power company, is pleased to announce that following the Admission of the 22,222,222 Placing Shares on 21 July 2014 the Acquisition of three power response companies, Darent Power Limited, Leven Power Limited and Rhymney Power Limited (together the "Power Response Sites") has now completed.

The total consideration for the acquisition of the Power Response Sites is £11.75 million, comprising approximately £10.68 million payable in cash, along with the adoption of approximately £1.07 million term loan facility with Lombard North Central plc ("Lombard") at Rhymney Power Limited. An additional £0.17 million will be payable in relation to a debt service reserve account in place and £0.15 million payable in relation to working capital taking the total transaction value to approximately £12.06 million.

The Acquisition will add 49MW of power response generating capacity to Alkane's portfolio of generating assets, placing the Company in a strong position in the Short Term Operating Reserve ("STOR") market where participants are paid premium rates during the year when called upon by the National Grid to meet temporary supply shortages. Leven Power Limited in particular benefits from a long term STOR contract running to 2025.

The Acquisition will also provide additional revenues from peak winter pricing at a time when the UK faces growing challenges relating to declining generating capacity and the inherent risk of power shortages.

The Acquisition:

·    Enhances Alkane's current strong position in the power response market, with STOR currently estimated to be worth c.£100 million per annum in the UK

·    Increases the Company's potential to benefit from new National Grid initiatives, such as payments under the Capacity Market, as standby power becomes more important to the grid in low capacity margin scenarios

·    Is expected to deliver an immediate EBITDA contribution and be EPS accretive in its first full financial year

Neil O'Brien, Chief Executive Officer, commented on the Acquisition:

"Alkane continues to invest in strategic assets as the UK electricity market faces an increased risk of an energy gap over the coming years. These three companies are important additions to our nine existing power response sites offering attractive rates of return and with some significant long term contracted revenues."

For more information please contact:

Alkane Energy plc Neil O'Brien, Chief Executive Officer Steve Goalby, Finance Director	01623 827 927
Altium Capital Limited Adrian Reed Adam Sivner Tom Battersby	0845 505 4343
Liberum Clayton Bush Tim Graham Joshua Hughes	020 3100 2222
VSA Capital Limited Andrew Raca Hudson Sandler Nick Lyon Alex Brennan	020 3005 5004 020 7796 4133
www.alkane.co.uk

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 base load and fast response capacity to the grid. Following the Acquisition, Alkane will have a total installed generating capacity of approximately 140MW and an electricity grid capacity of 160MW.

Alkane's base load operations, where power is generated 24/7, are centred 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 through peak running, or in order to balance the electricity grid through participation in the National Grid's short term operating reserve programme ("STOR"). Participants in STOR are paid premium rates when called upon by the Grid to meet temporary supply shortages. Alkane now operates 93MW of power response on mains gas.

The Group operates from 27 mid-size (up to 25MW) power plants across the UK, 15 CMM only, 8 mains gas only, 3 using both fuel sources and 1 using kerosene only. 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 and operate ("DBO") business for third party clients in the biogas and oil & gas industries.

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

 

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