Deals
Alkane Energy plc Completes Acquisition of CMM assets from Hargreaves Services plc
Highlights
Alkane Energy plc, the independent gas to power company, has conditionally agreed to acquire certain of the coal mine methane assets of Maltby Colliery (the "Maltby CMM Asset") from Maltby Colliery Ltd, a wholly owned subsidiary of Hargreaves Services plc ("Hargreaves").
The initial consideration for the acquisition of the Maltby CMM Asset (the "Acquisition") is £5.5 million, payable in cash, with an additional payment of £2.0 million payable, inter alia, upon completion of the full closure of the mine, expected to be during the first half of 2014.
The Acquisition will significantly increase the Group's installed electricity generating capacity from CMM, bringing immediately operational assets and cash flow, thus avoiding the development lag of organically developed sites.
Alkane is also pleased to announce that the Company has, via a cash box placing (the "Placing"), conditionally raised £6.0 million (gross) (the "Fundraising") and agreed to issue and allot 22,222,223 ordinary shares of 0.5 pence each in the capital of the Company ("Placing Shares"). The Placing Shares were placed at a price of 27 pence per share (the "Placing Price").
The initial consideration of the Acquisition will be funded through an extension of existing bank facilities provided at the time of the Acquisition 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.
The Acquisition
- Strategic acquisition of the Maltby CMM Asset for total consideration of £7.5 million
- Acquisition consideration to be paid in two stages:
- a final payment of £2.0 million, payable six months after the Maltby Colliery mines shafts are satisfactorily sealed as part of the planned closure of Maltby Colliery.
- The Acquisition brings:
- significant additional CMM capacity at a single site in South Yorkshire; methane reserves are estimated at 11.6 bcf (Source: TESLA Exploration International Limited);
- eight modular reciprocating engines totalling 11.2MW and associated plant and equipment;
- existing methane pumping plant, fans, and other pumping-related equipment and grid connection; and
- ability to redeploy excess engine capacity into Alkane's Power Response programme.
Financing arrangements
- As part of the financial arrangements at the time of, and conditional upon the completion of, the Acquisition, Alkane has extended by £3.5 million its Group banking facilities with Lloyds TSB Bank PLC ("Lloyds TSB"), as set out below:
- new £3.0 million term loan to be repaid over three years, with the first year interest only;
- interest rate and bank covenants will remain consistent with the existing facilities; and
- all other bank facilities and hire purchase arrangements remain unchanged.
- Alkane has today announced a successful equity fundraising via a cash box placing. Details of the Placing, which is conditional, inter alia, upon the admission of the Placing Shares, include:
- Fundraising proceeds of £6.0 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:
"This latest acquisition consolidates Alkane's market leading position in CMM and it adds significantly to the Group's core CMM operating capacity and provides an opportunity to further develop our Power Response business. Investor support for the Placing demonstrates commitment to Alkane's growth strategy. We are committed to continue to develop the Group as the UK is beginning to see a tighter generating market and rising electricity prices."
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