Companies: ALK   

Bombed-out 'green' fuel specialist Alkane Energy has reduced its first-half operating loss from £1.1 million to £952,000 on turnover boosted from £387,000 to £6.6 million after the acquisition of German methane processor Pro2. Robert Tyerman reports.

AIM-quoted Alkane, which lost a pre-tax £20 million in the first half of last year after asset write-downs of £19.3 million, recorded an £864,000 pre-tax deficit in the six months to June, closing with cash down from £12.5 million to £4.9 million. Chief executive Dr Cameron Davies, who has been replaced as chairman by John Lander, formerly of Tullow Oil, says Nottinghamshire-based Alkane wants to become a 'one-stop shop' in methane management, but has switched its prime focus from the UK to Germany following the British government's decision to withdraw support from mine coal-to-methane projects.

The company has UK projects on hold and is marketing containerised plants to India, China and Iran, which has already bought one for £700,000, as well as selling equipment to Russia and Portugal. Although Davies says UK domestic power prices remain too low, their recent upturn has improved the viability of projects on the Continent.

It is a different story in Germany, whose new Renewable Energy Law provides incentives for coal-mine methane. Alkane bought 51 per cent of Pro2 a year ago and it is already providing the bulk of group revenues.

Davies expects Pro2's full-year profits to exceed £400,000 on revenues of around £20 million, which some analysts suggest could cut Alkane' own 2004 loss to near £800,000. Alkane is involved in biogas projects in Germany and Northern Ireland, which could take up some of the slack left by the UK's coal-methane policy.

A Full List refugee, Alkane Energy's shares traded at more than 140p three years ago. After bottoming at 8.75p in the last 12 months, they are up 1p at 11p today and have essentially speculative appeal.