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Alkane Energy wins new agreements

Posted onPosted on 19th Dec
Alkane Energy wins new agreements

Edwinstowe-based Alkane Energy, which operates ‘gas to power’ electricity plants utilising methane at abandoned coal mines, has provisionally been awarded 101MW of Capacity Mechanism Agreements starting from October 2018.

Alkane will receive £19,400/MW per annum for making capacity available to support the DECC Capacity Programme, with
46MW being secured on 15-year Agreements and 55MW on one-year Agreements. Alkane would earn
a combined additional revenue of £14.4m under the provisional Agreements over the period to
September 2033.

The award of the Agreements has been published by DECC but is subject to the outcome of a review
by the Secretary of State. The final results are due to be published on 2 January 2015.

The Capacity Mechanism is designed to ensure that the UK retains a sufficiently large generating fleet
to meet peak demand periods and to help support more intermittent forms of “green energy” such as
wind and solar. Auctions are to be held annually, on a four year ahead and one year ahead basis.

The Agreements were provisionally awarded to the Company in the first auction which took place this
week and are for delivery in 2018/2019.

Alkane would fulfil these Agreements from existing and new build sites, based on its standard
operating model of medium-sized, remotely-managed, embedded, fast-response, gas-powered power
plants with no change to its running regime.

Sites powered by coal mine methane would be run base load 24/7 whilst our power response sites using bought in gas would continue to run winter peak load and bid into the National Grid’s STOR and Demand Side Balancing Reserve programmes. The Agreements would secure and expand our generation capacity in the East Midlands, Yorkshire and the
West Midlands.

55MW of existing facilities have been provisionally awarded one year Agreements and would provide
£1.1m revenue in the year commencing October 2018. We would expect to bid these assets into
future capacity auctions on an annual rolling basis.

Alkane has also been provisionally awarded 46MW of new build capacity for sites which would be built
over the period to the start of the 15 year Agreements in October 2018. These new build sites would
provide Alkane with additional secure income of £0.9m p.a. and provide long term visibility of income
stretching out until 2033.

Alkane would expect to bid into future Capacity Mechanism auctions as they occur over the coming years, with the next auction expected in December 2015.

Neil O’Brien, CEO of Alkane Energy plc commented on the provisional award of the Agreements:
“We are delighted by this news. Once confirmed by the Secretary of State this will be the largest ever contract award in Alkane’s 20 year history and will be further affirmation that our cost effective fast response engines are a much valued asset by the UK Energy Market. These Agreements, with a combined additional revenue of £14.4m, would provide us with long term income visibility stretching over a 15 year period.”