Interim Results

Alkane Energy PLC
12 September 2002


12 September 2002



                 Alkane Energy plc ('Alkane' or 'the company')
                   Unaudited Interim Results to 30 June 2002


Alkane Energy plc is the UK's leading commercial producer of Coal Mine Methane
(CMM) from abandoned coal mines.


Highlights

  • Turnover remained unchanged at £552,000 (First Half 2001: £552,000)

  • Loss before taxation of £113,000 (First Half 2001: profit of £330,000)

  • Cash reserves of £17.3m (First Half 2001: £24m)

  • Four CMM producing sites operational (2001: three sites)

  • Focus on fewer sites with better economics due to low electricity prices

  • Target of six new sites by end of 2003

  • Recent Government actions supportive of the CMM industry


Commenting on the results, Executive Chairman, Dr Cameron Davies, said:

'The company continues to have a bright future.  Recent action by the UK
Government shows that CMM is being accepted as a form of alternative energy and
a way of eliminating a highly toxic greenhouse gas.  In response to the fall in
electricity prices resulting from the New Electricity Trading Arrangements, we
have re-evaluated our plans to be more selective in our site development
programme.  I believe that this prompt action positions the company better to
achieve rapid growth in the future.'


Enquiries:


Alkane Energy plc                                    Tel: [phone]
Dr Cameron Davies
Executive Chairman

David Cross
Chief Executive

Binns & Co PR Ltd                                    Tel: [phone] (Today)
Judith Parry/Sophie Morton                           Thereafter: 0113 242 1171


Chairman's Statement

The six months to 30 June 2002 have been a period of mixed fortunes for the
company, however recent government initiatives augur well for our long-term
success.  Full exemption from the Climate Change Levy, which was announced in
the Budget in April 2002, has been incorporated in the Finance Act 2002 and EU
state aid clearance is expected early in 2003.  This will enable Alkane's
customers to obtain a premium price for the electricity generated from Coal Mine
Methane (CMM), a proportion of which will be passed back to Alkane, potentially
increasing turnover at the relevant sites by around 15%.

However, this positive development has been eclipsed by the impact of the New
Electricity Trading Arrangements (NETA), which has driven down the wholesale
price of electricity to a level well below that which had been widely
anticipated.  This has made many of the proposed generation sites uneconomic at
the present time.  We believe it is prudent to regard this as a medium-term
situation and have revised our development plans accordingly.  Whilst this has
resulted in a slowing of the site-opening programme, we believe that it is in
the long-term interests of the company to implement this revision to our
strategy now.  In this way our financial resources will be allocated in the most
efficient manner, to the attractive sites that are still to be opened within the
existing Alkane portfolio.

The Government has also indicated that methane from abandoned mines is to be
treated as a priority for inclusion in the 'Projects' section of the Emissions
Trading Scheme (ETS). Inclusion in the ETS would enable the company to sell the
carbon emissions reductions achieved at its sites into the emerging market for
carbon emissions.  This could represent a significant additional income stream
for the company in future years.


Financial Highlights

As anticipated, the company made a loss on ordinary activities before taxation
of £113,000 in the period, compared to a profit of £330,000 in the corresponding
period in 2001.  The previous year's profit was largely derived from interest
earned on the high cash balance, part of which has since been utilised.  In
addition, bank deposit rates have fallen.

Turnover was unchanged at £552,000.  This figure has been impacted by the
operational situation which is detailed below resulting in no sales for the
period from our Steetley site and a significant reduction in sales from our
Markham site.

Operating costs rose as the company increased the number of operational sites
and additional expenditure was incurred on engineering solutions to the problems
we have encountered at some of these sites.  This led to a fall in the gross
profit achieved in the period.


Financial Outlook

The delay in the number of new site openings announced in our preliminary
results statement for the year ended 31 December 2001 has resulted in the
company having a cash balance of £17.3 million, which is higher than
anticipated. Consequently, the loan facility that the directors were in the
process of establishing at that time is not expected to be required until 2004.

We previously indicated that we did not expect to see the financial benefits
from our roll out programme until 2003.  Following the changes to our strategy
as set out in this Statement, we now expect these to start to come through
during 2004.


Green Energy Parks

During the period, we began delivering gas to customers from two new sites in
Yorkshire.

Wheldale, which is our largest project, is operating efficiently.  We began
delivering gas to Scottish & Southern Energy in February 2002, and the
customer's gas take has progressively increased. The plant was developed using
the existing mine shafts which were sealed but not filled on closure of the
mine.

At the Barnsley site, which began delivery of gas to Rexam Glass in February
2002, a restricted connection to the void space in the mine has reduced the flow
of gas.  We are therefore investigating the feasibility of drilling another
borehole in a different location and other means to increase output.

Production at Steetley, the smallest plant, has become uneconomic due to a
combination of reliability problems with the customer's generating engines, the
fall in the electricity price and the high cost of gas extraction at this site.
The company and the customer have therefore mutually agreed to terminate this
contract, and production has been suspended.

At Shirebrook, sales for the period were at a similar level to the previous
year.  However, water leaking into the gas extraction pipe installed at the time
of closure of the colliery and changing conditions in the mine have reduced the
gas flow.  Engineering solutions are being sought but it is unlikely that it
will be possible to restore full production again.

Markham continues to encounter operational difficulties caused by air leaks.
The customer's burners have been modified to use lower methane concentrations
but sales will continue below original expectations until the air leaks are
sealed.  We do not anticipate this to happen before 2004, when remedial work by
third parties at Arkwright is expected to be completed.


Site Development Programme

Since flotation, a significant amount of pre-development work has been completed
on proposed sites.  At current electricity prices many of these sites do not
show a sufficient return on investment to justify development. Consequently, we
do not plan to commission construction of those sites until economic viability
has been restored through either Government support or a rise in electricity
prices.  In addition, we are continuing to optimise our containerised equipment
system with the aim of achieving significant reductions in project development
costs.

Earlier in the year we had anticipated that six new sites would be opened by the
end of 2002, but we now expect these to be brought onstream during 2003.

There have been two other sources of delay.  Firstly, the site development
programme is dependent on a number of factors outside the direct control of the
company such as planning permission, land acquisition and the cost of the
connection to the electricity distribution network.  Secondly, some boreholes
have encountered water or have had poor connections to the underground void. In
the light of this we have modified our strategy so as to target modern tunnels
in the mine which provide good connections to the gas reservoir, as at Warsop
and Whitwell.

At the Prince of Wales Colliery in Pontefract, Yorkshire, we have had our first
opportunity to connect directly into an underground roadway and integrate an
Alkane gas extraction system into a mine closure plan.  The mine ceased coal
production on 30 August 2002 and our team is currently installing a gas pipeline
from deep in the mine workings to the surface. We anticipate that our plant will 
commence extraction operations during 2003.

At Warsop in Nottinghamshire, which is also under development, we have completed
the borehole and have a good connection to the gas reserve.  However, first
production has been rescheduled to 2003 due to delays in obtaining the necessary
permits and the electricity export connection.

Similar issues have delayed the start of drilling at Bevercotes in 
Nottinghamshire and consequently opening is now scheduled for 2003.

We have a broad range of sites currently under evaluation, including
Pontycymmer, our first in South Wales, where a borehole drilled into the mine
workings has found gas with a high methane content.


Prospects

Given the low electricity prices under NETA, we are pleased that the Government
has begun to give the industry the support it requires for its further
development.  Through our membership of the Association of Coal Mine Methane
Operators, the company continues to lobby the Government for the level of
benefits afforded to other forms of green energy technology.

Alkane, with its substantial licensed area to exploit, has a large number of
potential projects under consideration but will be more selective in its site
development programme.  The knowledge and experience gained in recent years has
enabled us to identify the more attractive sites in our portfolio and
exploitation of these will lead to a better use of our financial resources.

The company and the CMM industry continue to have a bright future, and we are
not deterred by the initial difficulties we have encountered in exploiting this
new energy source.  We believe that our prompt action in modifying our strategy
to address these challenges leaves us well placed to take advantage of our
unique position as leaders of the CMM industry.


Dr Cameron Davies
Executive Chairman

12 September 2002


GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2002

                                  six months         six months           year
                                       ended              ended          ended
                                30 June 2002       30 June 2001     31December
                                 (Unaudited)        (Unaudited)           2001
                                       £'000              £'000          £'000

TURNOVER                                 552                552          1,017
Cost of sales                           (349)              (246)          (534)
                                      -------           -------        -------
GROSS PROFIT                             203                306            483

Administrative expenses                 (696)              (675)        (1,323)

Other operating income                     5                  6             23
                                      -------           -------        -------

OPERATING LOSS                          (488)              (363)          (817)

Bank interest receivable                 375                693          1,224

                                      -------           -------        -------

(LOSS)/PROFIT ON ORDINARY ACTIVITIES 
BEFORE TAXATION                         (113)               330            407

Taxation                                   -                  -              -
                                     -------            -------        -------

(LOSS)/PROFIT ATTRIBUTABLE TO 
SHAREHOLDERS                            (113)               330            407

ACCUMULATED LOSSES BROUGHT FORWARD    (1,818)            (2,225)        (2,225)
                                     -------            -------        -------
ACCUMULATED LOSSES CARRIED FORWARD    (1,931)            (1,895)        (1,818)
                                     -------            -------        -------

(Loss)/Earnings per ordinary share 
- basic                               (0.13p)              0.37p          0.45p
(Loss)/Earnings per ordinary share 
- fully diluted                       (0.13p)              0.36p          0.44p



STATEMENT OF RECOGNISED GAINS AND LOSSES

There are no recognised gains or losses for the six months other than the loss
of £113,000 (six months ended 30 June 2001: profit of £330,000; year ended 31
December 2001: profit of £407,000).


GROUP BALANCE SHEET
at 30 June 2002


                                        as at           as at            as at
                                 30 June 2002    30 June 2001     31  December
                                  (Unaudited)     (Unaudited)             2001                                          
                                        £'000           £'000            £'000
FIXED ASSETS

Intangible assets                          28              46               31
Tangible fixed assets - gas properties 14,769           8,009           11,165
Tangible fixed assets - other             259             227              237
                                      -------         -------          -------
                                       15,056           8,282           11,433
                                      -------         -------          -------
CURRENT ASSETS

Stock                                      17              16               19
Debtors                                   638             600              652
Cash at bank and in hand               17,280          24,026           20,930
                                      -------         -------          -------
                                       17,935          24,642           21,601

CREDITORS:  amounts falling due 
within one year                        (1,419)         (1,267)          (1,279)
                                      -------         -------          -------
NET CURRENT ASSETS                     16,516          23,375           20,322
                                      -------         -------          -------

TOTAL ASSETS LESS CURRENT LIABILITIES  31,572          31,657           31,755

PROVISIONS FOR LIABILITIES AND CHARGES   (109)           (188)            (179)
                                      -------         -------          -------

NET ASSETS                             31,463          31,469           31,576
                                      -------         -------          -------
CAPITAL AND RESERVES

Called up share capital                   448             448              448
Share premium account                  32,946          32,916           32,946
Profit and loss account                (1,931)         (1,895)          (1,818)
                                       -------         -------         -------
TOTAL EQUITY SHAREHOLDERS' FUNDS       31,463          31,469           31,576
                                       -------         -------         -------



GROUP STATEMENT OF CASH FLOWS
for the six months ended 30 June 2002


                                                 six months      six months              year
                                                      ended           ended             ended
                                               30 June 2002    30 June 2001       31 December
                                                (Unaudited)     (Unaudited)              2001
      
                                                      £'000           £'000             £'000
     
NET CASH OUTFLOW FROM OPERATING ACTIVITIES            (442)           (305)             (764)
                                                      -----           -----             -----
     
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
 Interest received                                      404             606             1,226
 Interest paid                                            -           (185)             (185)
                                                      -----           -----              -----
                                                        404             421             1,041
     
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT          
 Payments to acquire intangible assets                 (12)               -                 -
 Payments to acquire tangible fixed
  assets - gas properties                           (3,560)          (1,988)          (5,118)
 Payments to acquire tangible fixed
  assets - other                                       (40)             (88)            (218)
                                                      -----            -----            -----
                                                    (3,612)          (2,076)          (5,336)
                                                      -----            -----            -----
     
NET CASH OUTFLOW BEFORE FINANCING                   (3,650)          (1,960)          (5,059)
     
FINANCING:  issue of ordinary share capital              -               28               31
                                                      -----            -----            -----
DECREASE IN CASH                                    (3,650)          (1,932)          (5,028)
                                                      -----            -----            -----
      

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

                                                 six months       six months             year
                                                      ended            ended            ended
                                               30 June 2002     30 June 2001      31 December
                                                (Unaudited)      (Unaudited)             2001
                                                      £'000            £'000            £'000
     
CHANGE IN NET FUNDS ARISING FROM CASH FLOWS         (3,650)          (1,932)          (5,028)
     
NET FUNDS AT START OF PERIOD                        20,930           25,958           25,958
                                                     -----            -----            -----
NET FUNDS AT END OF PERIOD                          17,280           24,026           20,930
                                                     -----            -----            -----


NOTES TO THE ACCOUNTS
at 30 June 2002

1.       BASIS OF PREPARATION

These unaudited interim financial statements, which are for the six months ended
30 June 2002, do not constitute Statutory Accounts within the meaning of Section
240 of the Companies Act 1985.  They have been prepared using the accounting
policies set out in the group's 2001 statutory accounts.

The statutory accounts for the year ended 31 December 2001 received an
unqualified auditor's report and have been delivered to the Registrar of
Companies.

2.        TURNOVER

Turnover is attributable to one continuing activity, the extraction and sale of
gas from coal measures for power generation and burner tip use.  All turnover is
derived from within the United Kingdom.

3.        EARNINGS PER SHARE

The loss per ordinary share is based on a loss of £113,000 (six months ended 30
June 2001 - profit of £330,000; year ended 31 December 2001 - profit of
£407,000) on a weighted average of 89,659,399 ordinary shares (six months ended
30 June 2001 - 89,503,601; year ended 31 December 2001 - 89,571,612).

The loss attributable to ordinary shareholders and the number of shares for the
purpose of calculating the diluted loss per ordinary share for the six months
ended 30 June 2002 are identical to those used for the basic earnings per share.
  This is because the exercise of share options held by directors and employees
would have the effect of reducing the loss per ordinary share and is therefore
not dilutive under the terms of FRS14 'Earnings per Share'.

Diluted earnings per share for the six months ended 30 June 2001 are based on a
dilution by 3,170,413 ordinary shares in respect of share options held by
directors and employees (year ended 31 December 2001 - dilution by 3,149,334
ordinary shares).

4.       RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES 
     

                                                       six months     six months           year
                                                            ended          ended          ended
                                                     30 June 2002    30 June 2001   31 December
                                                      (Unaudited)     (Unaudited)          2001
      
                                                            £'000          £'000          £'000
      
Operating loss                                              (488)           (363)         (817)
Depreciation                                                   95             83           147
Amortisation                                                   15             16            31
Decrease/(increase) in stock                                    2              1            (2)
(Increase)/decrease in debtors                                (15)            22          (119)
Decrease in creditors                                         (51)           (64)           (4)
                                                              ----          ----          ----
Net cash outflow from operating activities                   (442)          (305)         (764)
                                                              ----          ----          ----
 
 
5.      ANALYSIS OF NET FUNDS 
                                                             as at         as at         as at
                                                      30 June 2002  30 June 2001   31 December
                                                       (Unaudited)   (Unaudited)          2001
                                                             £'000         £'000         £'000
      
Cash at bank and in hand                                    17,280        24,026        20,930
                                                             -----         -----         -----
 

6.      GENERAL NOTE

The profit and loss account for the year ended 31 December 2001 and the balance
sheet at that date are derived from the Company's full accounts which have been
filed with the Registrar of Companies and on which the Companies auditors gave
an unqualified report. Copies of the unaudited interim accounts will be sent to
shareholders shortly.



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