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Balfour Beatty bids $93m for UK Alkane

A subsidiary of Balfour Beatty, Barbican Bidco, has made a £61.37mn ($93m) bid for AIM-listed UK gas and power producer Alkane

The offer represents a premium of 44% to the closing price on 15 September and Alkane said it has accepted it as fair and reasonable. Last year it reported a pre-tax profit of £3.2m on revenues of £16.0m.

The offer is conditional on the UK energy ministry confirming in writing that it does not intend to revoke any of Alkane’s exploration and development licenses. Alkane swapped its shale exploration licenses for 18% of Egdon Resources last year, leaving Egdon responsible for all the operational costs while Alkane receives the benefit of any upside from Egdon’s shale production.

Balfour Beatty Infrastructure Partners (BBIP) managing partner Rob Gregor says the attraction lay in Alkane’s independent power platform. BBIP says that Alkane will be better able to realise its future growth potential, organic and inorganic. No changes are expected to affect the workforce but the non-executive directors will resign when the offer becomes unconditional.

Alkane’s chairman says that the offer represented a significant premium to the recent historical share price, “which in the board’s view has been impacted by negative sentiment towards the energy industry and continued regulatory scrutiny.” He said that BBIP would be able to support Alkane’s longer-term growth ambitions, building on its portfolio of baseload coalmine methane generation and power response sites. Its generating capacity now stands at 145MW.

Shale gas remains a divisive issue in most of Europe, including the UK, where facts are thin on the ground. Opinion regarding the desirability of production ranges from the “yes, immediately” to the “not at any cost even after thorough analysis of the risks.”

Shale and renewables can co-exist

The UK Task force on shale gas has found that in the US, the use of shale gas has not curtailed the development of renewables which in 2013 grew to almost 15% of installed capacity and accounted for 13% of generation.

It has produced two previous reports and this, its third, investigates the impact of shale gas production on climate change. It found that “any reasonable assessment of the medium-term energy mix for the UK will have to include a proportion of gas use and shale gas has some benefits over some forms of imported gas, in terms of its climate change impact.” But it recommends that the government should commit to using revenues from shale industry to invest in low carbon energy generation, storage and distribution.

The taskforce was set up to provide reasoned and evidence-based conclusions and recommendations to industry and government about the potential of shale gas extraction in the UK to inform the public and promote reasonable discussion about the findings. Its fourth report will consider the economics of a shale gas industry in the UK.

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