In our 2017 Annual Report, I outlined our ambition to build a diversified portfolio of development and operational assets that could allow SIMEC Atlantis to quickly grow into one of the largest generators of sustainable energy in the UK. Since then, we have made a significant step towards that goal with the addition of the world leading Uskmouth waste-to-energy conversion project. Waste-to-energy complements our marine energy division and its operation of the flagship Meygen project, which has recently surpassed a world record 17GWh of predictable electricity generation exported to the grid in Scotland.
We are passionate about what we do at Atlantis. The ocean is the final frontier and offers a virtually limitless source of abundant energy. However, plastic waste threatens fragile marine ecosystems and energy mixes are changing faster than anyone could have previously anticipated, away from hydrocarbons in favour of renewable energy.
When it was designed and built in the 1950s in the Welsh city of Newport, the Uskmouth power station was intended to be run on the area’s abundant local coal supply. Now, under an ambitious scheme for conversion, the plant is being repurposed to run on another abundant resource: waste. A successful conversion at Uskmouth could form the blueprint for other power stations destined to be decommissioned, providing instead an extended period of valuable service in compliance with up-to-date emissions regulations and with materially lower levels of CO2 emissions. This project is expected to help the transition of the local economy and workforce in Newport from a historic reliance on coal to anew, sustainable future, while at the same time providing an economically viable alternative to landfill of waste and addressing the issue of non-recyclable plastics. The converted Uskmouth plant is intended to enter commercial operations in 2021 and will use pellets made from equal proportions of waste biogenic material, such as paper and cardboard, and other forms of waste, such as plastic. These pellets will be supplied by a joint venture set up between the GFG Alliance and N+P Group BV, a Dutch recycling group.
Unlike traditional waste incinerators, the primary purpose of the Uskmouth power station is the generation and sale of electricity, rather than the disposal of waste and the receipt of the associated fees from the producers of that waste. Rather than charging fees for waste disposal, the Uskmouth power station will buy fuel pellets, which are created from waste streams that are carefully processed to ensure strict adherence to an agreed specification and high calorific value relative to raw waste. This is economically viable because of the high fuel quality and high efficiency of power station conversion, coupled with a low fuel price.
The project is governed by Best available techniques Reference documents (“BREFs”) developed under the Industrial Emissions Directive and will adhere to all the applicable criteria set out within this legislation. As approximately 50 per cent of the energy pellets will be made up of biogenic derived waste, this component is treated as carbon dioxide neutral because of its net-zero lifecycle emissions. Overall, we consider the conversion to be a sustainable approach, allowing an extension of the useful life of an otherwise redundant power station asset and the recovery of useful and high-quality energy from materials that could otherwise end up either in landfill or being incinerated in less efficient facilities. The conversion is a function of the circular economy, kicking into action to address the twin issues of waste repurposing and the need for dispatchable power, and is a great contribution towards the diversification of the Group’s renewable energy portfolio.
These strides towards our goal have been made alongside continued development of our tidal energy business, in particular the record-breaking achievements at MeyGen and the future plans for Project Stroma, which will result in the deployment of two new turbines at the site.
None of this would have been possible without our people. What started over a decade ago as a small team of talented engineers has now grown to nearly 100 innovative, tenacious and dedicated experts with a passion for what we are doing. As we continue to seek new opportunities to be pioneers in the field of sustainable energy, I do not underestimate the importance and value of our people. Their commitment and dedication are unwavering, creating value for the business on a daily basis. They are a source of inspiration for our executive management team. I would also be unable to deliver this positive outlook for the year aheadwithout the loyalty, belief and support of our shareholders, investors, government stakeholders and technology and construction partners. Thank you to everyone who has been part of the Atlantis journey so far and welcome to the next exciting chapter!
The Group recorded a loss after tax of £24.0 million for the year ended 31 December 2018, compared with a £10.6 million loss in the prior year. This year on year movement is attributable to the MeyGen Phase 1A project entering its operational phase at the end of Q1 2018, and the acquisition of SUP in June 2018. These reflect the Group’s continued investment in the development of energy projects.
Revenue of £2.2 million for the year (2017: £0.3 million), includes an increase of £1.8 million from power sales from the Meygen Phase 1A project.
Other income of £0.9 million (2017: £3.0 million) includes liquidated damages of £0.9 million awarded in 2018 (2017: £1.8 million). The prior year also included £1.1 million of grant income.
Total expenses for the year were £24.3 million (2017: £12.8 million). The increase of £11.5 million relates to power generation operating costs at MeyGen, the current running costs at SUP, depreciation of £5.4 million on these projects assets and one off acquisition costs of £3.6 million for SUP.
The Group’s closing net asset balance was £119.6 million (2017: £60.2 million), the increase is mainly in relation to the acquisition of SUP, consolidating £53.4 million of net assets on the date of acquisition.
In May 2018, Atlantis raised £5.0 million, before expenses, through a five year bond with a coupon of 8 per cent, maturing in 2023. In June 2018, Atlantis raised a further £20.0 million beforeexpenses from new and existing shareholders. Funds raised continue to be used for incremental project development activities across the Atlantis portfolio and to secure opportunities for portfolio growth as well as working capital funding for the enlarged Group.
Post year-end, the Company raised £5 million, before expenses, through an equity fundraising to secure funding for the acquisition of GHR. As a result of the revised transaction the net proceeds will be used for the Company’s general corporate purposes.
Timothy James Cornelius
Chief Executive Officer
27 June 2019