Transaction Details

July 17, 2014
Manchester

Sector

Energy

Deal Type

M&A

Deal Value

£12.1m

Deal Team

Adrian Reed, Adam Sivner, Tom Battersby

Acquisition of three power response companies

GCA Altium has advised Alkane Energy plc (AIM: ALK) on its acquisition of a series of Power Response Sites from Carron Energy, marking GCA Altium’s fourth transaction for the power generation business over the last three years.

The latest deal represents GCA Altium’s 17th in the energy waste and renewables sector, bringing the value of transactions to £1.2bn.

This follows a series of other acquisitions led by GCA Altium for the Edwinstowe-based gas to power company, including its acquisition of Coal Mine Methane assets of Maltby Colliery in 2013; the acquisition of Greenpark Energy Ltd in 2012; and the acquisition of Seven Star Natural Gas Ltd in 2011.

In its latest transaction, Alkane Energy has agreed to acquire the entire share capitals of Darent Power Ltd (Kent), Leven Power Ltd (West Midlands) and Rhymney Power Ltd (Cardiff) from Cardiff-based Carron Energy.

The acquisition of three of Carron’s businesses will add 49MW of power response generating capacity to Alkane’s portfolio of generating assets and is expected to deliver an immediate EBITDA contribution and be EPS accretive in its first full financial year. This strengthens the company’s position in the Short Term Operating Reserve (STOR) market, which is estimated to be worth around £100m per annum in the UK. STOR market participants are paid premium rates during the year when called upon by the National Grid to meet temporary supply shortages.

Alongside the acquisitions, Alkane Energy has placed 22,222,222 shares at a value of 36p per share, which is expected to raise £8.0m. In addition, the company will be raising £5.5m of debt finance from Lloyds Bank; the additional funding will be used to provide working capital to support the continued investment by the company in its core gas to power activities.

Alkane Energy has a market capitalisation of c.£50m and recorded turnover of c.£21m in the year to 31 December 2013. The deal will help broaden the company’s geographical presence across the South of England and Wales.

The team at GCA Altium was led by Adrian Reed, managing director and head of energy, waste and renewables, with support from assistant director Adam Sivner and analyst Tom Battersby.

Adrian Reed said: “We’re pleased to have acted on behalf of Alkane once again and are delighted to have developed a long standing relationship with the management team over the years. The latest power generation assets will further boost the scale of the group by an additional 49MW of power response. This is crucial at a time when the UK faces growing challenges in relation to declining generating capacity along with the inherent risk of power shortages.”

Neil O’Brien, Chief Executive Officer at Alkane Energy, 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 Power Response sites are important additions to our business offering attractive rates of return and with some significant long term contracted revenues.”

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