Deals



Alkane Energy plc Acquires 49MW of Power Response Sites


Posted: 21st July 2014 08:57

The Board of Alkane Energy plc, the independent gas to power company, is pleased to announce that following the Admission of the 22,222,222 Placing Shares on 21 July 2014 the Acquisition of three power response companies, Darent Power Limited, Leven Power Limited and Rhymney Power Limited (together the "Power Response Sites") has now completed.
 
The total consideration for the acquisition of the Power Response Sites is £11.75 million, comprising 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. An additional £0.17 million will be payable in relation to a debt service reserve account in place and £0.15 million payable in relation to working capital taking the total transaction value to approximately £12.06 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. Leven Power Limited in particular benefits from a long term STOR contract running to 2025.
 
The Acquisition will also 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.
 
The Acquisition:
 
 - Enhances Alkane's current strong position in the power response market, with STOR currently estimated to be worth c.£100 million per annum in the UK
 - Increases 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
 - Is expected to deliver an immediate EBITDA contribution and be EPS accretive in its first full financial year
 
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 three companies are important additions to our nine existing power response sites offering attractive rates of return and with some significant long term contracted revenues."

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