Agreed sale of interest in Pr

RNS Number : 0856O

Alkane Energy PLC

02 March 2009

 



For immediate release

2 March 2009

Alkane Energy plc

('Alkane' or 'the Company')

Agreed sale of interest in Pro 2

Alkane agrees to sell its equity interest in Pro2 for a consideration of €3.6 million and receives early repayment of €1.96 million shareholder loan

Cash will be invested in the growth of Alkane's UK gas to power generation business

Alkane Energy plc (AIM: ALK) the profitable energy company that operates environmentally friendly power generation plants using coal mine methane ('CMM') today announces an agreement for the sale of its 38% equity interest in Pro2 Anlagentechnik GmbH ('Pro2') and provides a trading update ahead of its preliminary results for the year ended 31 December 2008 due to be announced on 18 March 2009.  

Deutsche KWK GmbH ('Deutsche KWK'), a German cogeneration and biogas to power company, has agreed to acquire Alkane's shares in Pro2 for a cash consideration of €3.6 million. In addition, terms have been agreed for the early repayment of a long-term shareholder loan which was due for repayment in 2013.  Accordingly, €1.0 million will be repaid now and the remaining €0.96 million in instalments of €460,000 on 31 December 2009 and €500,000 on 31 December 2010.  Alkane will place €720,000 from the consideration into an escrow account to act as collateral against any warranties or other claims. Subject to no claims, the sum in escrow will be released to Alkane in 2010.  Following the exchange of agreements for the sale of Pro2, completion of the transaction is anticipated within two weeks.

Pro2 manufactures, services and operates equipment for the processing and utilisation of methane.  Alkane's share of Pro2's profits in the year ended 31 December 2007 (the last year for which audited accounts are available) was £299,000 and Pro2 paid interest of £172,000 to Alkane in the year ended 31 December 2007.  At 31 December 2007 the carrying cost of the Company's investment in Pro2 was £3.7 million (comprising the equity stake and shareholder loan referred to above and goodwill).

In late 2005 Alkane provided a working capital loan to Pro2 and the final repayment of €2.0 million was repaid on 30 January 2009. The total receipts from the sale together with the final tranche of the working capital loan are €7.56 million.  This figure is expected to be around book value.

Deutsche KWK already has a significant presence in the cogeneration and biogas market, in which it is looking to further invest. The combination with Pro2 fulfils this strategy in part and eliminates Alkane as a minority shareholder in the business as Pro2 grows in the future.  Alkane has a range of CMM projects under development which offer potentially higher returns to our shareholders.  Following the receipt of the cash from Deutsche KWK, Alkane will employ a proportion of this additional capital to accelerate its strategy of developing additional power generation capacity in the UK. 

Alkane and Pro2 intend to continue their excellent working relationship in the future, and Pro2 will be Alkane's preferred supplier of generation plant for the next two years.

Trading update

The Group is pleased to confirm that the performance of its continuing operations remain in line with market expectations for the year ended 31 December 2008. Profit before tax for the year is expected to be ahead of market expectations as a result of certain non-recurring, non-operating cash and non-cash items.  The non-recurring items relate to foreign translation gains, sales of surplus leases, impairment provisions and other non-recurring costs and remain subject to final audit confirmation.  

Commenting on the transaction Neil O'Brien, Chief Executive of Alkane said:

'We are delighted to have concluded this transaction with Deutsche KWK, which has been interested in investing in Pro2 for a number of years. Also we look forward to continue working with Pro2 to capitalise on the exciting clean-tech energy opportunities available in the UK and European gas to power markets.

'With these additional funds Alkane is now well positioned to increase investment in its core CMM business. We have set ourselves the target of reaching 50MW of installed capacity in the next few years and the capital provided by this transaction is a critical stepping stone in achieving this strategic aim.'

For further information please contact:

Alkane Energy plc	01623 827927
Neil O'Brien, Chief Executive
Steve Goalby, Finance Director
Brewin Dolphin	0845 270 8610
Andrew Emmott
Buchanan Communications	020 7466 5000
Ben Willey
Miranda Higham

Notes to the Editors

Alkane Energy plc is a clean-tech energy company based in the UK. The strategy of the business is to develop gas to power generation assets utilising damaging greenhouse gas emissions from abandoned coal mines and in doing so reduce their climate change impact.

Alkane currently operates seven plants in the UK, with an additional one in Germany.  The Company has a total output capacity equivalent to about 20MW.

 

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