Alkemy Capital. Regulatory News (ALK)

12 Jul 2007 11:23

Alkane Energy PLC12 July 2007 For immediate release 12th July 2007 Alkane Energy plc ("Alkane") ALKANE ENERGY ANNOUNCES PLATFORM FOR GROWTH AT PRO2 Alkane Energy plc (AIM:ALK) the international renewable energy company todayannounces the re-financing of Pro2 Anlagentechnik GmbH ("Pro2"). An agreementhas been completed for new funding from German investors and banks, includingUmweltBank AG (Environment Bank) of Bavaria, which have a strong background infinancing renewable energy companies and projects in Europe. Their investmenthas considerably strengthened the company's financial base and environmentalcredibility. The new investors have contributed €1.4 million in return for new equity in Pro2which represents 25.5% of the enlarged issued share capital. The effective dateof this transaction is 1 January 2007. The existing shareholders are dilutedproportionately with Alkane's holding reducing from 51% to 38% and the Pro2directors' holding from 49% to 36.5%. An advisory board, on which Alkane willhave one third of the representation, has been established to oversee managementof the company. In addition to the equity investment, the new investors are helping Pro2 tosource new facilities for working capital and project finance. Negotiationsregarding the first tranche of this debt funding, totalling €3.9 million, are atan advanced stage and are expected to be completed soon. It has been agreed thatupon completion of this first tranche of debt funding Alkane will be repaid €1million of the €3 million working capital loan made to Pro2 in late 2005. Thebalance of this loan will be repaid as soon as cash permits. In the UK, theseloan repayments will be utilised to drill new prospects in Alkane's licenceportfolio, and to invest in its mine gas development pipeline. As a result of this transaction, Pro2 will be treated for reporting purposes asan associated company of Alkane Energy plc rather than as a subsidiary. Witheffect from 1 January 2007, Alkane will report its share of Pro2's results asone line in the profit and loss account, rather than consolidating turnover andcosts by individual category. In the year to 31 December 2006, Pro2 contributed£144,000 to group profits compared with a loss of £70,000 in 2005. Pro2's netassets at the end of 2006 were £2,566,000. Alkane and Pro2 have been considering for some time how best to fund the cleargrowth opportunities available to Pro2 in the international climate change andrenewable energy markets. The Group's recent results have demonstrated theseopportunities but have also highlighted the working capital constraints thatPro2 has been operating under. It has also become clear that with Alkane as thecontrolling shareholder, Pro2 was not able to raise suitable debt and projectfinance. The Boards of Alkane and Pro2 believe that as a result of the equity fundingannounced today, together with the debt funding expected to follow on, theprospects for existing investors in both Alkane and Pro2 should be improved. Inaddition, a well funded Pro2 will be in a position to better manage its cashflow, increase its growth rate, and improve its margins and profits. Dr. Cameron Davies, Chief Executive of Alkane, commented: "The new equity funding announced today and the further finance in the pipelinegives Pro2 a strong platform from which to deliver higher profits and bettervalue for Alkane's shareholders. Today's strong endorsement from the newinvestors, with their background in European renewables, will be of greatbenefit as Pro2 continues to exploit the rapidly growing international climatechange and renewable energy markets. Alkane's profits will benefit from thisgrowth even at the lower equity level and from the return of cash which we willuse to continue our active UK drilling programme and the roll-out of additionalmine gas power generation plants." For further information, please contact: Alkane Energy plc 01623 827 927Dr Cameron Davies, Chief Executive Buchanan Communications 020 7466 5000Ben WilleyNick Melson This information is provided by RNS The company news service from the London Stock Exchange