A memorandum of understanding (MOU) with German utilities giant E.ON represents a significant breakthrough in the development of Wildhorse Energy's (WHE:AIM) Mecsek Hills underground coal gasification (UGC) project in Hungary. Its shares have risen 5.9% to 6.75p in response to the news.


The non-binding MOU with E.ON Hungária may see the latter become a partner on Mecsek Hills and Wildhorse managing director Matt Swinney explains the tie-up could eventually be extended to other projects.


UGC is a process where underground coal seams are converted into synthetic gas by injecting oxidants through custom-designed wells. This process, which recovers around 70% to 95% of the coal’s energy, is controlled remotely and does not require human access or costly infrastructure.


Getting a company of E.ON's size on board is a significant endorsement of the project and if the agreement is confirmed could considerably de-risk the funding of its future development. Initially the plan is for a 50 megawatt commercial demonstration power plant fed by the UGC-derived synthetic gas.


WHE - Comparison Line Chart (Rebased to first)


A multi-disciplinary joint working team has been put in place with an assessment due in the second quarter of this year and for its part Wildhorse continues to talk with other interested parties as part of a selection process for partners on the project. In a wider operations update, the group reported a joint study with the Hungarian authorities to formalise the legislative and regulatory framework for UCG in Hungary had yielded 'positive findings'.


In addition, the firm has completed studies – covering environmental, water protection, health and safety, resource definition, mining design, public support and regulatory issues – relating to the possible restart of uranium mining at Mecsek Hills. An historic estimate from broker Liberum Capital puts the value of the uranium assets alone at €40 million compared to a current market cap in euros of €32.8 million.

Issue Date: 05 Mar 2013