Our Vision and values

We have a clear strategy in place to exploit the opportunities in a power generation market where 25% of industry capacity will be retired in the next decade. As part of the Company’s growth strategy we are continuing to develop self-funded organic growth. However, we are aware of the need to increase the overall scale of the Group and reach critical mass from a financial and operating perspective. Accordingly, over the last year we have looked at a number of potential consolidation and expansion opportunities in CMM, stranded on-shore gas and biogas. We will continue to look for appropriate opportunities in these sectors, and others including CBM, where we have the in-house expertise to increase scale and add value for our shareholders.

 

We acquired Seven Star in May 2011 which has brought in two on-shore conventional gas licences with the potential to build our standard model power plants. We will also look at adding to our licence acreage in the 14th Onshore Licensing Round.

 

On 1 February 2012, Alkane announced the acquisition of Greenpark for a maximum consideration of £5.725m. When completed the acquisition will bring 29MW of installed engine capacity, which with associated plant and equipment has an estimated book value of approximately £9m, and access to seven CMM gas exploitation licences. It will boost our CMM output, the CMM project pipeline and our power response operations. We have consistently grown over recent years and on the current run rate the enlarged Group sites are generating an annualised output of 180GWh which is enough to power around 60,000 homes.

 

Post the acquisition of Greenpark we will operate from 14 CMM sites which will be by far the largest UK CMM portfolio. Once a site is established we would expect high EBITDA margins and payback periods of circa 3-4 years for a typical site. Like any resource the CMM gas will decline over time, and consequently we match generating capacity on site to run for around a decade. Therefore to maintain and grow output Alkane needs to have a development pipeline of future projects.

 

As more renewable energy sources come on stream, the grid is finding that decentralised and variable generators such as wind power are raising new challenges to provide security of supply. As such National Grid and Department of Energy and Climate Change (”DECC”) see the need for an expansion in standby facilities with estimates that for every 8MW installed of intermittent wind power the grid will need 1MW of standby capacity. As CMM sites decline in output we have a ready-made power plant with planning, generators and grid capacity. We are therefore increasing our presence in power response which is aimed at running our fast response engines at peak winter pricing and acting as standby generators for National Grid. Immediately post the acquisition of Greenpark we expect to have 20MW across seven sites allocated to power response and we intend to increase this to 24MW by the end of 2012.

 

In terms of the broader renewable energy market we will remain focussed on our core gas to power skills and our operational heritage.