News
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.”
Page last updated: 7 July 2010
