Alkane given go-ahead for biggest contract in its 20-year history

Alkane Energy​, which mines methane gas from redundant Yorkshire coal mines, has received Government approval for the largest ever contract award in the group’s 20-year history.

The award of 101 megawatt of capacity mechanism agreements will start in October 2018 and will earn combined additional revenue of £14.4m under the deal which will last until September 2033.

Neil O’Brien, CEO of Alkane Energy, said: “We are delighted by the confirmation of the award of these agreements, the largest ever contract award in Alkane’s 20-year history.

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“With a combined additional revenue of £14.4m, they provide us with long-term income visibility stretching over a 15-year period.”

The group will receive £19,400/MW per annum for making capacity available to support the DECC capacity programme, with 46MW new sites being secured on 15-year agreements and 55MW existing sites on one-year agreements.

Alkane said it will fulfil these agreements with no change to its current running regime.

The new-build sites will provide Alkane with additional secure income of £900,000 a year and the group said they will provide long-term visibility of income stretching out from 2018 until 2033.

The existing facilities will provide £1.1m revenue in the year starting in October 2018.

Analysts at Liberum said in a note: “This will benefit 2018 earnings, providing additional income for 55MW of existing capacity (equivalent to 26 per cent of current year profit) and providing a 15-year index linked contract for 46MW of new capa- city.”

Last year Alkane won a contract with National Grid to supply ​56​MW of standby power for this winter​.

Alkane​ said the contract will help “keep the lights on this winter” as the UK faces a power shortfall. ​

The firm said that Yorkshire mines​ will supply half the methane for the contract​.