Welsh Power Sells Its 50MW Portfolio to Akane Energy
July 16, 2014
Alkane Energy plc, the independent gas to power producer, is pleased to announce that it has agreed to acquire the three power response businesses, Darent Power Limited, Leven Power Limited and Rhymney Power Limited (together the “Power Response Sites” or the “Acquisition”) from Carron Energy Limited and Dragon Generation Limited (together “Carron Energy”).
The total consideration for the acquisition of the Power Response Sites is £11.75 million, comprising of approximately £10.68 million payable in cash, along with the adoption of approximately £1.07 million term loan facility with Lombard North Central plc (“Lombard”) at Rhymney Power Limited (the “Acquisition”). An additional £0.17 million will be payable in relation to a debt service reserve account in place and £0.18 million payable in relation to working capital taking the total transaction value to £12.1 million.
The Acquisition will add 49MW of power response generating capacity to Alkane’s portfolio of generating assets, placing the Company in a strong position in the Short Term Operating Reserve (“STOR”) market where participants are paid premium rates during the year when called upon by the National Grid to meet temporary supply shortages. In addition, the Acquisition will provide additional revenues from peak winter pricing at a time when the UK faces growing challenges relating to declining generating capacity and the inherent risk of power shortages. Leven Power Limited in particular benefits from a long term STOR contract running to 2025.
Alkane is also pleased to announce a successful placing of 22,222,222 new ordinary shares of 0.5 pence each in the capital of the Company (“Placing Shares”) at a price of 36 pence per share (the “Placing Price”) to raise gross proceeds of £8.0 million (the “Placing”) through the issue.
The consideration for the Acquisition will be funded through an extension of existing bank facilities along with the net proceeds of the Placing. Excess financing will be used to provide additional working capital to support the continued investment by the Group in its core gas to power activities.
- Acquisition of the Power Response Sites for total consideration of £11.75 million payable in cash and the adoption of approximately £1.07 million Lombard term loan facility at Rhymney Power Limited
- The Acquisition provides Alkane with 49MW additional capacity (93MW of total power response capacity and 140MW installed generating capacity in total) and broadens the Company’s geographical presence in the South of England and Wales
- Enhances Alkane’s existing strong position in the power response market, with STOR currently estimated to be worth c.£100 million per annum in the UK
- Enhances the Company’s potential to benefit from new National Grid initiatives, such as payments under the Capacity Market, as standby power becomes more important to the grid in low capacity margin scenarios
- The Acquisition is expected to deliver an immediate EBITDA contribution and be EPS accretive in its first full financial year
- The Acquisition brings:
- total power response capacity to 93MW;
- a STOR contract at Leven Power Limited (25MW of capacity) with a long term, attractive availability rate and contracted revenues until 2025;
- Darent Power Limited and Rhymney Power Limited (combined 24MW of capacity) will be able to target winter peak and Triad (the three highest half hour peaks between November and February which attract premium payments) periods in addition to operating under STOR contract fixed running to October 2015;
- Carron Energy management estimates of audited revenue and EBITDA related to the businesses being acquired of c.£2.3 million and c.£1.0 million, respectively, for the year ended 31 March 2014 although it should be noted that the Darent site was only operational for 5 months during the year
- As part of the financial arrangements at the time of, and conditional upon the completion of, the Acquisition, Alkane has extended its Group banking facilities by £6.6 million, as set out below:
- o a £5.5 million fixed rate five year term loan with a mortgage against the Leven Power Limited and Darent Power Limited assets from Lloyds Bank PLC (“Lloyds”). The interest rate for the term loan is approximately 4.6%
- in addition Alkane has rolled over £1.1 million term loan facility with Lombard on Rhymney Power Limited
- Alkane has today announced a successful equity fundraising. Details of the Placing, which is conditional, inter alia, upon the admission of the Placing Shares to trading on the AIM market of the London Stock Exchange (“Admission”), include:
- the issue of 22,222,222 Placing Shares with a Placing Price of 36 pence per share to raise proceeds of £8.0 million gross; and
- Significant commitment of existing and new institutional shareholders, extending the breadth of Alkane’s shareholder register
Neil O’Brien, Chief Executive Officer, commented on the Acquisition:
“Alkane continues to invest in strategic assets as the UK electricity market faces an increased risk of an energy gap over the coming years. These Power Response sites are important additions to our business offering attractive rates of return and with some significant long term contracted revenues.”
For More Information Please Contact:
Alkane Energy plc
Neil O’Brien, Chief Executive Officer
Steve Goalby, Finance Director
01623 827 927
Altium Capital Limited
0845 505 4343
020 3100 2222
VSA Capital Limited
020 3005 5004
020 7796 4133
Alkane is one of the UK's fastest growing independent power generators. The Company operates mid-sized “gas to power” electricity plants providing both base load and fast response capacity to the grid. Following the Acquisition, Alkane will have a total installed generating capacity of approximately 140MW of installed generating capacity and an electricity grid capacity of 160MW.
Alkane's base load operations, where power is generated 24/7, are centred 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.
As CMM declines at any one site, Alkane retains valuable generating capacity and a grid connection which can be redeployed to power response. Power response sites are connected to mains gas and produce electricity at times of high electrical demand through peak running, or in order to balance the electricity grid through participation in the National Grid's short term operating reserve programme (“STOR”). Participants in STOR are paid premium rates when called upon by the Grid to meet temporary supply shortages. Alkane now operates 93MW of power response on mains gas.
The Group operates from 27 mid-size (up to 25MW) power plants across the UK, 15 CMM only, 8 mains gas only, 3 using both fuel sources and 1 using kerosene only. Alkane uses standard modular reciprocating engines to generate the electricity and sells this power through the electricity network. The engine units and other plant are designed to be flexible and transportable allowing additional capacity to be brought onto growing sites and underutilised plant to be moved to new sites to maximise efficiency.
Alkane has a range of core skills encompassing the entire project development cycle including planning and permitting, sourcing plant and managing the build and commissioning stage. This has enabled Alkane to establish a design, build and operate (“DBO”) business for third party clients in the biogas and oil & gas industries.
More information is available on our website www.alkane.co.uk.