Trading Statement

RNS Number : 2665E

Alkane Energy PLC

29 May 2012

 



Alkane Energy plc

("Alkane" or the "Group")

AGM statement and Trading Update

29 May 2012

The Board of Alkane will make the following statement on current trading at the Group's AGM to be held later today.

Corporate Activity

As part of the Group's strategy for growth, two significant acquisitions have been made since the last AGM.

In May 2011, Alkane acquired Seven Star Natural Gas Limited, which holds two onshore gas exploration licences in the Midlands.  Progress is ahead of our acquisition plan and we have started to prepare a drill site at Nooks Farm, Staffordshire, where we will re-enter a previously discovered gas reservoir.

In April 2012 we completed the acquisition of Greenpark Energy Limited ("Greenpark"). This acquisition has brought with it seven new Coal Mine Methane ("CMM") and Power Response sites.  These sites are currently being integrated within Alkane's operations.  We remain in the early days of this acquisition but the Board is pleased with progress to date.  The acquired CMM sites are performing in line with our expectations and we now have more projects to develop in the medium term. In respect of power response, Greenpark has achieved significantly higher margins than Alkane, and the potential at the combined sites is of particular significance.  Plans are being put in place to expand this side of the business.

The Group also has significant exploration opportunities within the combined licence portfolio.  For instance, in February of this year we announced a farm in deal with Aberdeen Drilling Management to potentially exploit our non-core Coal Bed Methane licences.

Trading

Following the Greenpark acquisition we have re-appraised our own project roll out and engine maintenance programme in pursuit of greater operational efficiencies.  We have completed the refurbishment of our Shirebrook site and have commenced our Greenpark integration plan by moving certain CMM engines to optimise their use with additional focus being placed on the power response activities.

Output from the original Alkane sites for the first four months to 30 April 2012 reached 40GWh. As the Greenpark acquisition was completed only on 26 April 2012 it has been excluded from the above figures.  The reduction from 48GWh in the same period last yearresults from the early initiatives to prepare for the integration of the Greenpark assets with the installation of new plant and a planned number of engine moves.  It is accordingly is in line with expectations.  Our power response business, providing short term operating reserve and peak load capacity to the grid, has been significantly boosted by the acquisition of Greenpark and we now have 22MW of contracted capacity. This part of our business has recently moved into the National Grid's spring contract period and we are seeing encouraging demand with call levels currently ahead of budget.  

Alkane continues to invest in its organic CMM roll out programme and this week we are due to open a new 3MW facility at Gedling, Nottinghamshire.  Our other planned new site for 2012 at Pontycymmer, South Wales is in the build phase and is due to be opened in the coming months.

Average electricity pricing across 2012 is expected to be circa £53/MWh (2011: £51/MWh).  Following on from the Greenpark acquisition we have 80% of the Group's 2012 output already contracted and 18% of 2013 output has been contracted at £52/MWh.  Prices remain relatively low due to global factors but remain in line with our expansionary business plan.  Market indications are for significantly higher energy prices in the future.

Neil O'Brien, Chief Executive Officer, commented:

"I am delighted with the acquisition of Greenpark Energy.  We are now fully engaged on the delivery of new sites and enhancing the facilities acquired.  Power plants are being refurbished and moved with the intention that all major installation work scheduled will be completed ahead of the peak winter period.  Progress to date is encouraging and we remain in line with management expectations."

For more information please contact:

Alkane Energy plc Neil O'Brien, Chief Executive Officer Steve Goalby, Finance Director	01623 827927
Altium Capital Limited Adrian Reed Andy Clarke	0845 505 4343
VSA Capital Limited Andrew Raca	020 3005 5000
Hudson Sandler Nick Lyon Alex Brennan	020 7796 4133
www.alkane.co.uk

About Alkane:

Alkane Energy 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 Greenpark Energy Limited ("Greenpark"), Alkane has a total of 70MW of installed generating capacity and an electrical grid capacity of 92MW.

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. Alkane started extracting CMM for direct sales of gas in 1999 with sites at Shirebrook, Steetley and Markham.

As CMM declines at any one site Alkane retains valuable generating capacity and a grid connection which we move 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 24MW on conventional gas post the Greenpark acquisition.

The Group operates from 19 mid-size (up to 10MW) power plants across the UK, 12 CMM, 4 conventional gas and 3 using both fuel sources, and sells this power through the electricity network, using standard modular reciprocating engines to generate the electricity. The engine units and other plant are designed to be flexible and transportable and this allows additional capacity to be brought onto growing sites and underutilised plant to be moved to new sites to maximise efficiency.

The biogas market also provides a potential new business stream. Running on gas generated from the processing of organic waste will require exactly the same power assets and core gas and electricity skills as CMM.

Coal bed methane ("CBM") is a longer term opportunity where Alkane has 605km² under licence and contingent resource estimates of circa 385 billion cubic feet. In February 2012 the Company signed a partnership agreement with Aberdeen Drilling Management Limited to explore two of our licences with CBM potential.

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

 

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