Companies: ALK   

Coal mine methane producer Alkane Energy has seen its shares crash for the second day in a row, falling 45 per cent today to 23.5p after an interim results statement warning that low wholesale electricity prices are likely to last for a while, adding to a catalogue of problems at its own production sites. Ben Cobley reports.

Fully-listed Alkane lost £113,000 in the six months to June, despite receiving interest of £375,000. Last year it made £330,000 pre-tax, after interest receipts of £693,000.

Turnover from the company's four methane-recovery operations in Yorkshire and Derbyshire was stable at £552,000. Cash reserves fell from £24 million to £17.3 million, while the company stalled its development programme because of the difficult wholesale electricity market.

Alkane has decided to scale back the programme further, delaying the opening of six new production sites until 2003. Chief executive David Cross pleads: 'We are in the same boat as [troubled nuclear power generator] British Energy, not in terms of operations, but because we sell to the wholesale electricity market', where prices are well below what consumers pay.

Alkane does not generate electricity itself, but passes on methane from abandoned coal mines to generators, notably Scottish & Southern Energy, which, it says, wants to open more on-site plants like the one at Wheldale, Yorkshire. Cross says the market is so tight that it is important to have a customer near its facilities to cut generation costs – as with Alkane's Barnsley facility supplying methane to bottle producer Rexam next door.

This site and two facilities in Derbyshire have suffered production difficulties and delays, as a range of factors have restricted the flow of methane from previously-existing mine ventilation pipes.

Hopes remain that coal mine methane production will obtain Government subsidies under 'green energy' legislation. It should receive 1.5p per therm under Climate Change Levy legislation from 2003 onwards, if Brussels approves. Alkane also claims ministerial suppport for its campaign to obtain larger-scale Emissions Trading Scheme subsidies.

Profits are being targeted for 2004. Changes in the wholesale electricity market and government legislation could affect its prospects.

After today's share price fall to 23.5p, Alkane's market capitalisation is £21.1 million.