Alkane Energy ups output

July, 2010
Alkane Energy, which generates electricity from coal mine methane, has increased its electricity generation output by 30% in the first half of 2010: the first quarter increase was 20%. New generating sites have been added over the past year, the latest being at Florence, Staffordshire. Two more sites will be added in the second half and three more will be tested. 

Although prices have fallen over the past year, they have started to rise again in recent months. Alkane expects a reduction in average selling price from £56/MWh in 2009 to just over £40/MWh this year. The company has already secured forward contracts over one-quarter of its expected output in 2011 at an average price of £46/MWh.

House broker Altium forecasts a fall in profit from £2.08 million to £1.4 million in 2010.

Alkane is financing new sites through a three year £5.5 million revolving credit facility with Lloyds, with an interest charge of 2.5 percentage points above LIBOR. This facility has the normal types of financial covenants as well as minimum electricity pricing levels and the proportion of output under contract. The cash should help Alkane move towards its target production of 300GWh a year.

Net debt was £1.81 million at the end of 2009, but that was made up of finance lease obligations. Interim figures will be published on 8 September.

At 16.5p a share, Alkane is valued at £15.4 million.
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