Trading Statement

RNS Number : 9370O

Alkane Energy PLC

07 July 2010

 



7 July 2010

Alkane Energy plc

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

Trading Update & New Three Year Banking Facility

Alkane Energy plc (AIM:ALK) the owner and operator of "Gas to Power" plants in the UK today announces a trading update for the six months ended 30 June 2010 and a new banking facility with Lloyds TSB Bank PLC ("Lloyds") which will be used to fund the delivery of Alkane's organic coal mine methane ("CMM") development programme.

During the first half of 2010 Alkane's electricity generation output has increased by 30% from the first six months of 2009. This progress has been achieved through the introduction of new electricity generating sites over the last 12 months, with our newest site at Florence, Staffordshire, now fully commissioned bringing the total installed capacity to 33MW.  Alkane continues to progress its pipeline of new projects and two further sites will be commissioned during the second half of this year. 

As previously reported, electricity sales pricing has been weaker this year than in 2009. Expectations for 2010 are unchanged and in line with market forecasts, as contracts are largely in place for the year with the average selling price in 2010 expected to be just over £40/MWh, compared to £56/MWh in the previous year.  However the market has improved over recent months and since the final results announcement in March wholesale electricity prices have moved around 20% higher, with the forward price curve currently indicating increases for each of the next three years.  Due to the Group's increasing portfolio of CMM sites and the staggered nature of the forward contracts, Alkane has been able to take advantage of the rise in prices over the last month and has started to forward contract production into 2011. So far the Group has placed contracts for around 25% of the expected output in 2011 at an average price of approximately £46/MWh.

Alkane continues to seek to develop new electricity generating sites with attractive rates of return and strong cash flows.  Progress on the project pipeline for 2011 has been good and a drill and test programme to confirm potential new reserves is expected to occur on at least three sites before the end of the year.  In order to fund the development of new sites Alkane has secured additional finance by entering into a three year £5.5 million Revolving Credit Facility with Lloyds. 

The three year committed facility extends to July 2013 and is specifically for the expansion of the Group's core CMM business. The interest charge is 2.5% above LIBOR and covenants are in place in respect of growth of net worth, EBITDA levels relative to outstanding debt, interest cover, minimum electricity pricing levels, and proportion of output under contract. Lloyds will also become Alkane's clearing bank for daily banking operations.

The Company will update the market further in its Interim Results that are scheduled to be released on 8 September 2010.

Commenting on trading and the new bank facility, Neil O'Brien, Alkane's Chief Executive Officer said:

"Trading in the first half of 2010 has been encouraging.  We are pleased with the delivery of the new projects for this year, and we expect to see further increases in output as new sites come online.

"The new banking facilities are an important step for the Group and we are delighted to be working with Lloyds.  The new facility will allow us to drive the project development plan to reach our target for CMM of 300GWh p.a. The ability to negotiate new, improved facilities is a reflection of the strength of our balance sheet and our existing cash generating production capacity.

"In summary, we are satisfied with the performance of the Group during the period and we remain in line with expectations for the year as a whole."

For further information please contact:

Alkane Energy plc Neil O'Brien, CEO Steve Goalby, Finance Director	Tel: [phone]
Altium Adrian Reed Chloe Ponsonby	Tel: [phone] Tel: [phone]
Hudson Sandler Kate Hough Alex Brennan	Tel: [phone]

 

END

 

 

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