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Infinis is the largest generator of electricity from landfill gas (“LFG”) in the UK, with a portfolio of 121 landfill sites and total installed capacity of over 300MW.
Alkane Energy acquisition
In March 2018, the Company announced its intention to increase its investment in Infinis by £125 million to fund Infinis’s acquisition of Alkane Energy (‘Alkane’), an independent power generator from both coal mine methane (‘CMM’) and reserve power (‘Peaking’) operations and the largest generator of electricity from CMM in the UK.
As at December 2017, Alkane had 160MW of installed generating capacity operating from 32 sites across the UK.
The merger of Alkane with Infinis will create a business with significant scale, offer operational improvement opportunities and the potential to further elevate Alkane’s generation performance and growth potential.
Developments in the year
Infinis continues to be a strong contributor to the Company’s yield, as anticipated in our investment case.
Its core business, generating electricity from landfill gas and coal mine methane, performed well in the year, on the back of strong baseload power prices. The integration of Alkane Energy, acquired in early 2018, is complete and management is focused on delivering synergies and improving engine availability at the former Alkane Energy sites.
The combined business was refinanced during the year, extending debt maturities, securing attractive terms and providing flexibility for further growth. The refinancing funded an additional £40 million distribution to the Company.
Infinis has continued to exploit spare engine and grid connection capacity to develop power response (‘PR’) generation activities. As at 31 March 2019, it had 30 operational PR sites with an installed capacity of 180MW, and a pipeline of further projects in construction or at the planning stage of over 100MW.
The outlook for the ‘embedded benefits’ that Infinis presently receives is uncertain pending an industry-wide regulatory review of these being undertaken by Ofgem and, separately, all payments under capacity market contracts, including those to Infinis, are currently suspended in response to a European Court of Justice ruling.
The investment in Infinis is foremost a yield play. Its front-ended cashflows balance other recent investments by the Company in more growth-oriented businesses. Revenues are underpinned by the inflation-linked UK Renewables Obligation Certificate (“ROC”) regime until 2027. Infinis could also become a platform to make new investments in activities such as distributed power generation from other gas sources, distributed energy storage by exploiting the business’s spare engine and grid connection capacity, and additional landfill gas sites.
Infinis is the largest generator of electricity from LFG in the UK, with a portfolio of 121 landfill sites and total installed capacity of over 300MW. LFG is produced by decomposing organic matter in landfill sites. If released into the atmosphere unchecked, LFG contributes to pollution and is a potent greenhouse gas. By extracting LFG from landfill sites, Infinis fulfils an essential role in helping landfill operators meet their environmental compliance obligations. By using the collected LFG to generate electricity, Infinis supplies distribution networks with a consistent source of baseload power.