Alkane Energy

Clean-tech counter Alkane Energy, the owner and operator of ‘gas-to-power’ plants, is growing fast and has honed its strategic focus.

Alkane gains onshore gas licences and exploits its gas reserves by selling directly to customers or, more significantly, generating electricity which it then sells via the electricity distribution network.

In 2008, the group, whose gas source, coal mine methane, is extracted from abandoned collieries, grew revenue 22% to £5.2m and adjusted PBT on ongoing business by 59% to more than £1.4m.

CEO Neil O’Brien flagged up a strong year of production from Alkane’s UK power assets, with electricity generated increasing 13% to a record 90,111 MWh and the average selling price advancing by 15% – additionally, 3.7 million therms of gas were sold direct to customers at higher average prices.

With a large spread of projects, O’Brien’s medium-term target is to grow power generation capacity from 20 MW to 50 MW, with select acquisitions in the gas-to-power sector also to be considered.

He says the post year-end sale of a 38% stake in German joint venture Pro2, which makes equipment for the processing and utilisation of methane, to a German power concern for €3.6m in cash (total receipts will be €7.56m), has simplified the story for investors and left Alkane ungeared.

Based on current trading, likely growth in capacity and higher contracted electricity prices in 2009, good growth is now on the cards at this real business with cash-generating assets. Occupying a stable industry (demand for electricity doesn’t falter during recession) and offering resilient growth, the shares are a buy.

Save 50% off your first year’s subscription to Growth Company Investor magazine, and gain immediate access to all the recommendations online. Click here.