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Atlantis Resources Ltd: THE INVESTMENT CASE

Tide could be turning for Atlantis Resources as MeyGen comes fully on stream

Phase 1A has already set a number of records, with over 2GWh of generation having been dispatched to grid.
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INVESTMENT OVERVIEW: ARL The Big Picture
After making a good start to the year, Atlantis shares eased back

Like the tide itself, shares in Atlantis Resources Ltd. (LON:ARL) have ebbed and flowed so far this year.

After making a good start to the year, Atlantis shares are back to 32.2p.

The wobble has come even though MeyGen, a tidal stream power project in the Pentland Firth, Scotland, is now back on stream and operating well.

WATCH: 'Strong interest' in Atlantis Resources' bond offer from new and existing investors

The first phase (1A) of MeyGen should be complete in October, when all four of its seabed turbines will be in operation.

READ: Atlantis Resources' MeyGen project not awarded 2017 renewable energy CfD by UK government, in dialogue about future allocations

Phase 1A has already set a number of records, with over 2GWh of generation having been dispatched to grid.

In August, MeyGen generated 700MWh of electricity, a new monthly high for a tidal stream project.

Once completed and in operation, Atlantis will look to re-finance the project to improve returns and free-up capital, said Tim Cornelius, chief executive.

READ: Atlantis Resources closes fully subscribed £5mln green bond

Phase 1A at MeyGen will establish 6Mw of generating capacity. The next phase, 1B, will double that while phase 1C will add a further 73Mw. Eventually MeyGen might have as much as much as 400Mw of capacity, enough for 270,000 houses.

Results for the six months to end June showed a loss of £3.2mln (£4.4mln) while cash at the period end was £6.7mln since when a retail bond issue has raised a further 5mln.

Plenty of potential at MeyGen

Atlantis indirectly holds a 92% shareholding in in Mygen via Tidal Power Scotland Limited, which in turn owns 83.5% of MeyGen Limited alongside Scottish Enterprise.

Estimates indicate that some 29 terawatt hours of untapped power generation lie within the tidal systems in the waters surrounding the United Kingdom, and about a third of that, so-far theoretical power can be harnessed from the Pentland Firth.

The tidal flows through the region in the far north of Scotland can, according to Atlantis, amount to 11 terawatt hours.

French expansion

Aside from Mygen, Atlantis has already revealed plans to bid in commercial seabed leasing rounds in France.

Cornelius also noted the French government’s decision to launch commercial tenders for tidal power development in Normandy and Brittany, while it has dipped its toe in the floating wind power market.

Also in Asia

Elsewhere the company is working on a 150Mw tidal-stream array in Lombok, Indonesia, and has formed a strategic partnership with Hyundai Engineering & Construction that will see them work together on projects in South Korea and elsewhere.

Wyre Valley continues diversification strategy

Atlantis has also started negotiations about the Wyre Valley tidal barrage project, where it will partner with Natural Energy Wire for a tidal power scheme with 160 Mw of generating capacity located on land owned by The Duchy of Lancaster.

The negotiations concern a long term lease for the site, with permitting for the £340mln scheme expected to take approximately three years.

Tim Cornelius said Wyre Valley “will be a major project for our Atlantis Energy division as we continue our diversification strategy”.

READ: Atlantis Resources Ltd starts talks over site for Wyre Tidal project

Macquarie has 71p target price

“The value of the full of MeyGen is 154p per share once Phase 1 (86MW) is operational in 2021,” Australian broker Macquarie wrote earlier this year

The analyst said: ”The key driver to this uplift is a reduction in our average discount rate to 6.8% to reflect meeting ‘de-risking’ milestones such as securing financing, and commissioning and operating each stage of the tidal project.”

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