6th August 2020
SIMEC ATLANTIS ENERGY LIMITED
(“Atlantis”, the “Company” or the “Group”)
Preliminary Results Announcement
SIMEC Atlantis Energy Limited, the global developer, owner and operator of sustainable energy projects with a diversified portfolio of more than 1,000 megawatts in various stages of development, is pleased to announce its preliminary results for the year ended 31 December 2019.
- The consolidated Group cash position at 31 December 2019 was £4.5 million (2018: £9.3 million), including £1.8 million held in MeyGen Limited (2018: £2.4 million).
- The MeyGen project generated revenues of £4.1 million.
- GHR hydro division O&M and project management contributed £0.5m revenue from the date of acquisition.
- Overall Group losses for the year were £35.4 million (2018: £24.1 million). The increase in this loss is primarily attributable to a £16.1 million non-cash disposal of seabed options for five development sites.
Additionally, the increased loss in the year reflects the full year results of significant changes to the Group during 2018, being the acquisition of SIMEC Uskmouth Power Ltd (“SUP”) in June 2018 and the results of MeyGen becoming operational in April 2018. Included in the 2019 results is a £2.9 million non-cash gain on bargain purchase as a results of fair value calculation on the acquisition of Green Highland Renewables.
- Group total equity at 31 December 2019 of £94.0 million (2018: £119.6 million).
- In March 2019, Atlantis raised over £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 were used for the Company’s general corporate purposes.
- 2019 saw the flagship MeyGen Phase 1A tidal energy project of our marine energy division, deliver the longest ever period of uninterrupted generation from a multi-megawatt tidal turbine installation. The array, which is located in Scotland, continues to break world records and has now exported over 30 GWh of electricity to the grid.
- In March 2019, the Group established a joint venture Normandie Hydroliennes (“NH”) between Atlantis, the Development Agency for Normandy, the regional agency for economic development in Normandy, the regional investment fund Normandie Participations and local industrial group EFINORS in France for the purpose of developing a phased large-scale tidal power project in the Raz Blanchard, Normandy, France.
- In July 2019, the Group successfully decommissioned SeaGen tidal support structure in Strangford Narrows, Northern Ireland. This marks the completion of the 1.2MW SeaGen tidal stream energy project lifecycle and is the first commercial scale tidal turbine development to be fully decommissioned.
- In October 2019, Atlantis acquired the entire issued share capital of SIMEC GHR Ltd from SIMEC GHR Acquisitions Topco Limited a subsidiary of SIMEC Energy, a member of the GFG Alliance. The acquisition was undertaken to further diversify the Atlantis energy platform and combine the project management and delivery expertise of the two companies whilst bringing positive revenue streams to the Group. Consideration for the purchase was £1.
- Also in October 2019, Atlantis announced that it had been awarded the contract for combustion system design for SUP to Mitsubishi Hitachi Power Systems Europe GmbH (“MHPS Europe”). The contract included completion of industrial scale milling tests on the fuel pellets; completion of industrial scale combustion tests on the fuel; and completion of Uskmouth furnace burner system designs.
- And again in October 2019, Atlantis announced that it had signed a contract to supply tidal generation equipment and offshore construction services to Japan’s Kyuden Mirai Energy (“KME”) for a demonstration project in Japan. The project, located in the straits of Naru Island within the southern Japanese Goto island chain, has a total budget of 1,800m¥.
POST YEAR END HIGHLIGHTS
Tidal Stream Highlights
- In February 2020 Atlantis announced it had opened an office in Nagasaki Japan as a base for the Groups newest entity Atlantis Operations Japan (“AOJ”) that will manage the construction works being carried out under the Atlantis EPC contract with KME.
- In March 2020, the MeyGen project was awarded £1.5 million in grant funding from the Scottish Government’s Saltire Tidal Energy Challenge Fund to develop a subsea tidal turbine connection hub for the next phase of development of the MeyGen tidal power array.
- In June 2020 Atlantis announced that the prefecture de la Manche approved the transfer of the lease to develop the 12MW tidal power project in Raz Blanchard from ENGIE to NH.
SIMEC Uskmouth Power
- In February 2020, Atlantis completed the raise of over £3.8 million, before expenses, through a future energy bond subscription to further the successful delivery of the SUP conversion.
- In March 2020, Atlantis announced the successful production of 100 tonnes of fuel pellets for large scale combustion testing and successful completion of large scale milling tests on the 100% waste derived fuel pellets to be used at the Uskmouth power station post conversion.
- In June 2020, Atlantis announced the successful completion of the combustion testing as a significant milestone for the project. The test conclusively proves that a pulverised fuel burner based on MHPS’s DS® Ultra Low NOx burner can be used to stably combust the waste derived fuel unsupported (i.e. without any oil or gas support firing). The burner was able to operate continuously at 25MW thermal power using the fuel and is comparable in rating to the burners required for the Uskmouth Conversion Project.
Today, the Company also announced a proposed placing of the Company’s ordinary shares to conditionally raise gross proceeds (before expenses) of approximately £6 million to be conducted by way of an accelerated bookbuild process. In addition to the placing, the Company has made arrangements with PrimaryBid Limited for retail and other investors to conditionally subscribe for the Company’s ordinary shares through the PrimaryBid platform. It is intended that the net proceeds of the fundraising will be used to fund the Group’s working capital as well as for investment in a new fuel supply joint venture as also announced today.
The full Annual Report and Group financial statements will shortly be available to download from the Company’s website www.simecatlantis.com and the Annual Report will be distributed to shareholders.
This announcement contains inside information
SIMEC Atlantis Energy Limited
|Via FTI Consulting|
Tim Cornelius, Chief Executive Officer
|Investec Bank Plc
(Nominated Adviser and Broker)
|+44 (0)20 7597 5714|
|FTI Consulting||+44 (0)20 3727 1000|
Coronavirus has provided a stark reminder of what happens when humanity’s relationship with nature breaks down. As we recover economically, we have an opportunity to protect and restore nature, reducing our exposure to the impact of climate change. We note that Governments around the world are prioritising investment into green and digital technologies and that is positive news for Atlantis given our knowledge and experience built up over many years.
During 2019, we took great strides towards consolidating our position as a leader in the renewable and sustainable energy generation sector. We delivered clean electricity to the grid at Meygen, continued our important development work on the Uskmouth conversion project and diversified our portfolio through the acquisition of Green Highland Renewables.
MeyGen delivered the longest ever period of uninterrupted generation from a multi-megawatt tidal turbine installation in the world. MeyGen has now produced over 30 GWh of electricity, equivalent to the annual consumption of some 12,000 UK households. At the other end of the life-cycle, the Group demonstrated its commitment to corporate responsibility and sustainability by successfully decommissioning the SeaGen tidal turbine support structure in Strangford Narrows, Northern Ireland. This was the first full scale decommissioning of a tidal generator ever successfully undertaken. This globally significant installation which delivered more than 10GWhrs of generation into the grid over its lifetime provided lessons which have underpinned development of tidal turbine development worldwide.
The Uskmouth power station conversion project, commenced in 2018, has continued to complete significant milestones in its development. The Front End Engineering and Design (“FEED”) contract awarded in November 2018 was successfully completed in July 2019. The contract tender issued to Mitsubishi Hitachi Power Systems Europe GmbH (“MHPS Europe”) in October 2019 delivered successful industrial-scale combustion testing of the waste derived fuel pellets.
To put this in context, successfully operating a converted coal-fired power plant on 100% refuse-derived pellets requires a bespoke pellet with specific combustion capabilities and emissions profile that conforms with the strictest regulatory requirements. Delivering such a pellet has required a significant amount of development and engineering work from our team and our dedicated group of world leading consultants, advisors and strategic partners.
In early 2019, the Uskmouth fuel pellet development team carried out a series of ‘medium-scale’ combustion tests, at 300kW (generating the level of energy that would be required to boil 150 kettles) combusting 0.5MT milled Subcoal pellets per hour at IFK Stuttgart (Stuttgart University, Institute of Combustion and Power Plant Technology). These tests demonstrated that a self-sustaining, stable flame could be achieved.
On 23 June 2020, Atlantis announced that it had successfully completed ‘large-scale’ combustion testing, running on its bespoke Subcoal waste-derived fuel pellets at Mitsubishi Heavy Industries’ Research & Innovation Centre in Nagasaki, Japan. This is a positive and significant milestone for the Uskmouth Power Station Conversion Project and the culmination of more than two years of bespoke fuel pellet work.
These tests conclusively proved the principle and the practical operating rationale underpinning the Uskmouth project and also demonstrate the efficacy of the technology behind the waste procurement and fuel pelleting process. In parallel with the development of the technology behind this project, the planning and permitting required for the change of use from coal fired to pellet fired power generation has also continued apace. The Pre Application Consultation (PAC) completed on 29th June 2020 and the process now continues through to full planning application. The statutory timescale for this type of planning application determination is 16 weeks and therefore the Group expects a determination from Newport City Council in Q4 2020.
In continuing to pursue the objective of geographic and asset class diversity, the Group saw the continued development of the Normandie Hydrolienne (“NH”) joint venture which was established in 2019 between Atlantis, the Development Agency for Normandy, the regional agency for economic development in Normandy, the regional investment fund Normandie Participations and local industrial group EFINORS in France. This year NH have announced a decarbonisation agreement between NH and Alderney Electricity Limited and the launch of the Tidal Stream Industry Energiser Project, known as TIGER, an ambitious €46.8m project, which aims to drive the growth of the tidal energy industry by installing up to 8MW of new tidal capacity at sites in and around the Channel region. Most recently, NH announced that the Prefecture de la Manche has approved the transfer of the lease to develop a 12MW tidal power project in Raz Blanchard, in France, from ENGIE to NH. This finalised the relevant approvals for the transfer for what will be the first stage of a potential multi-hundred-megawatt marine energy project in Raz Blanchard.
The Group has continued to seek out export sales opportunities for our marine energy products and services. It was heartening to see one of these opportunities come to fruition with the announcement in October 2019 of a contract to supply tidal generation equipment and offshore construction services (with a total project budget of 1,800m JPY) to Japan’s Kyuden Mirai Energy for a demonstration project in Japan. Atlantis expects to deliver and install the tidal generator by late Q3 2020, with completion of the demonstration in Q1 the following year. The possibility to upgrade the project to full output post successful completion remains, subject to approval.
During 2019, we were delighted to welcome Green Highland Renewables (“GHR”) into the Group when we completed the acquisition of this experienced development team in November. This acquisition brought with it a stable stream of long-term income from Operations and Maintenance Contracts for a portfolio of hydroelectric assets throughout Scotland as well as an experienced project and business development team with highly transferrable skills.
The 2019 results reflect the continued expenditure and investment we have made in the core project development activities of the Group – particularly the flagship Uskmouth project which is making excellent progress towards financial close. Once these development assets are built and commissioned, they will become significant revenue generating assets like MeyGen Phase 1 for the Group. Whilst I am pleased to report an increase in annual revenues, in line with prudent accounting treatment, the Group has written off the carrying values of tidal development leases that are no longer considered to have long term benefit when compared to other development opportunities across our existing portfolio, and whilst these are non-cash items, this has significantly increased the underlying loss reported for 2019.
The challenge of Coronavirus was met with a measured and calm response; the whole team took voluntary pay reductions whilst maintaining momentum on all our key projects. Our strong internal technology infrastructure allied with robust and resilient supply chains and a flexible and agile business framework stands us in good stead should the virus see further peaks.
We recognise and thank all our stakeholders for their contribution, commitment and support which has been instrumental in enabling Atlantis to successfully overcome the many challenges that we have faced this year.
5 August 2020
The continued focus on the transition to a carbon neutral economy has received fresh impetus as a result of the impact of COVID-19 and countries around the world are looking at the opportunities presented by a move to a carbon free economy as a way to grow our economies, create jobs and generate sustainable prosperity. Atlantis is a true pioneer in the field of renewable energy and our flagship projects have the potential to have a profound impact on the way we approach renewable and sustainable power generation globally.
MeyGen, the flagship of our marine energy division, delivered the longest ever period of uninterrupted generation from a multi-megawatt tidal turbine installation during 2019. The array, which is located in Scotland, continues to break world records and has now exported over 30 GWh of electricity to the grid. To put that in context, that is enough electricity to fully charge more than 750,000 electric vehicles.
The Uskmouth Power Station Conversion Project is a pioneering, flagship project to re-purpose a decommissioned coal-fired power station located in Newport, Wales. The station which once operated 100% on coal, will operate 100% on bespoke waste-derived fuel pellets – pellets made 50% from non-recyclable, non-reusable plastic and 50% from paper and card.
Following full conversion, Uskmouth Power station is expected to generate 220MW of baseload, sustainable electricity – enough power for 220,000 homes. The conversion process is expected to take approximately 18 months following financial close. Once operating, the power station is designed to have a 20 years lifespan. Initially there will be 110MW of power generation output from one unit in the power station. Subsequently a second 110MW unit is expected to be converted, enabling the power station to deliver 220MW of net electricity generating output.
The Uskmouth Conversion project shows that power stations can be reused. The aim is to continue to use these assets to generate electricity – but to do it in a way that is fit for purpose in a world where global warming needs solutions to mitigate emissions of large amounts of carbon into the atmosphere and where generation of baseload electricity must be done in a sustainable manner. To demolish and build new power stations would be enormously expensive and value destructive. To continue to burn coal is not sustainable.
The power station conversion aims to use the physical buildings of the power station and much of the other infrastructure and equipment, where feasible. Equipment and infrastructure will be replaced or upgraded where necessary to facilitate combustion of the new pellet fuel and for control of emissions to uphold and maintain the most up to date environmental permit limits.
Uskmouth is a project that has the potential to demonstrate a pathway to a solution to help pressing challenges faced by countries around the world. These include weaning ourselves off coal as a source of electricity generation – thereby reducing carbon emissions, in order to help slow an increase in global warming; maintaining a level of baseload electricity generation, as increasing amounts of intermittent renewable energy capacity (wind/solar) come into the energy mix; and funding a solution to deal with an ever-increasing amount of non-recyclable plastic waste that does not involve landfilling it and ensuring it does not end up in the world’s oceans.
During 2019, we acquired Green Highland Renewables (“GHR”), a market leading developer of mini-hydro projects in the UK. The completion of this transaction secured a best-in-class development team which added a stable stream of annual income generated by a growing Operations and Maintenance (“O&M”) business providing 24 hour monitoring as well as reactive and planned maintenance to almost 50 hydroelectric schemes in Scotland. In addition, this acquisition brought to Atlantis a strong and experienced business development and project management team with highly transferable skills – this team is already bringing added value to the pipeline of projects within the Atlantis Group.
The developments and achievements of 2019, in a challenging environment, were only possible with the blend of amazingly supportive and dedicated stakeholders that Atlantis is fortunate enough to be able to draw on. This includes our great team of dedicated engineers, project managers, operations and administrative support staff. Our ability to quickly adapt in the face of new challenges and remain resilient and productive has never been more evident than during the unprecedented events of early 2020. I am proud to lead this team and relish the next high growth phase of our journey. I look ahead with genuine excitement. Atlantis has become a world leader in energy, with tidal stream, energy pellets and hydro. We have the team, the projects and the ambition to continue to drive forward and I have no doubt that we will continue to lead the way and help regrow a greener and brighter economy.
Chief Executive Officer
5 August 2020
|Consolidated statement of profit or loss and other comprehensive income
Year ended 31 December 2019
|Other gains and losses||1,856||949|
|Employee benefits expense||(6,347)||(5,562)|
|Depreciation and amortisation||(10,479)||(7,299)|
|Other operating expenses||(3,862)||(2,902)|
|Total operating expenses before non-recurring items *||(26,093)||(24,332)|
|Loss on disposal of intangible seabed options||(16,085)||–|
|Gain on bargain purchase||2,928||–|
|Loss from operating activities||(32,535)||(21,166)|
|Share of loss of equity-accounted investees||(23)||–|
Loss before tax
Loss for the year
|Other comprehensive income|
|Items that are or may be reclassified subsequently to profit or loss|
|Exchange differences on translation of foreign operations||6||–|
|Total comprehensive income for the year||(35,413)||(24,044)|
|Loss attributable to:|
|Owners of the Group||(34,872)||(22,579)|
|Total comprehensive income attributable to:|
|Owners of the Group||(34,872)||(22,579)|
|Loss per share|
|Basic and diluted loss per share||(0.09)||(0.09)|
No dividends were proposed or declared in respect of either of the years presented above.
* Non-recurring items – Items which individually or, if of a similar type, in aggregate need to be separately disclosed by virtue of their nature, size or incidence in order to allow a proper understanding of the underlying financial performance of the Group.
|Statements of financial position
As at 31 December 2019
|Property, plant and equipment||136,315||142,247|
|Right of use assets||1,436|
|Investments in subsidiaries||–||–|
|Investment in joint venture||47||–|
|Trade and other receivables||–||–|
|Trade and other receivables||7,830||4,156|
|Cash and cash equivalents||4,521||9,267|
|Trade and other payables||9,449||8,523|
|Loans and borrowings||4,559||2,765|
|Loans and borrowings||40,662||38,855|
|Deferred tax liabilities||3,344||3,802|
|Share option reserve||740||3,224|
|Total equity attributable to owners of the Company||87,716||112,701|
Statements of changes in equity
Year ended 31 December 2019
|Attributable to owners of the Company|
|At 1 January 2018||95,030||12,665||7,161||–||3,477||(66,425)||51,908||8,327||60,235|
|Total comprehensive income for the year|
|Loss for the year||–||–||–||–||–||(22,579)||(22,579)||(1,465)||(24,044)|
|Other comprehensive expense||–||–||–||–||–||–||–||–||–|
|Total comprehensive income for the year||–||–||–||–||–||(22,579)||(22,579)||(1,465)||(24,044)|
|Transactions with owners, recognised directly in equity|
|Issue of ordinary shares||83,188||–||–||–||–||–||83,188||–||83,188|
|Recognition of share-based payments||–||–||–||–||184||–||184||–||184|
|Transfer between reserves||–||–||(88)||–||(437)||525||–||–||–|
|Total transactions with owners||83,188||–||(88)||–||(253)||525||83,372||–||83,372|
|At 31 December 2018||178,218||12,665||7,073||–||3,224||(88,479)||112,701||6,862||119,563|
|Total comprehensive income for the year|
|Loss for the year||–||–||–||–||–||(34,872)||(34,872)||(547)||(35,419)|
|Other comprehensive income||–||–||6||–||–||–||6||–||6|
|Total comprehensive income for the year||–||–||–||–||–||(34,872)||(34,866)||(547)||(35,413)|
|Transactions with owners, recognised directly
|Issue of ordinary shares||9,800||–||–||–||–||–||9,800||–||9,800|
|Recognition of share-based payments||–||–||–||–||81||–||81||–||81|
|Transfer between reserves||–||–||–||–||(2,565)||2,565||–||–||–|
|Total transactions with owners||9,800||–||–||–||(2,484)||2,565||9,881||–||9,881|
|At 31 December 2019||188,018||12,665||7,079||–||740||(120,786)||87,716||6,315||94,031|
|Consolidated statement of cash flows
Year ended 31 December 2019
|Cash flows from operating activities|
|Loss before tax||(36,206)||(24,164)|
|Bargain purchase arising from business combinations||(2,928)||–|
|Depreciation of property, plant and equipment||8,948||5,782|
|Amortisation of intangible asset||1,531||1,517|
|Movement in provisions||(1,499)||(607)|
|Disposal of intangible assets||16,085||–|
|Share of loss of JV, net of tax||23||–|
|Net foreign exchange||35||96|
|Operating cash flows before movements in working capital||(11,611)||(14,204)|
|Movements in trade and other receivables||1,907||1,044|
|Movements in trade and other payables||539||(778)|
|Net cash used in operating activities||(9,165)||(13,938)|
|Cash flows from investing activities|
|Purchase of property, plant and equipment||(1,789)||(802)|
|Investment in joint venture||(70)||–|
|Cash from disposal of joint venture||–||168|
|Acquisition of subsidiary, net of cash acquired1||423||57|
|Net cash used in investing activities||(1,436)||(577)|
|Cash flows from financing activities|
|Proceeds from grants received||–||16|
|Proceeds from issue of shares||6,030||20,000|
|Share issuance cost||(260)||(897)|
|Proceeds from borrowings||2,730||4,970|
|Repayment of borrowings||(1,376)||(5,192)|
|Payment of lease liabilities||(420)||–|
|Net cash from financing activities||5,852||19,065|
|Net (decrease)/increase in cash and cash equivalents||(4,749)||4,550|
|Cash and cash equivalents at 1 January||8,351||3,801|
|Cash and cash equivalents at 31 December||3,602||8,351|
1 In 2018, the acquisition of SIMEC Uskmouth Power Limited was settled via the issue of ordinary shares of the Company.
Further detail may be read and downloaded from the company website at www.simecatlantis.com.
Annual General Meeting
Atlantis also announces that a Notice will be sent to shareholders to convene the Annual General Meeting (“AGM”) of the Company.
The AGM will be held at 11.00 a.m. (London time) on 28 August 2020. In light of the continued UK and Singapore Government guidance in relation to the Covid-19 outbreak this year’s meeting will take place as a closed meeting by electronic means and shareholders will not be able to attend in person. Shareholders are encouraged to vote using the methods set out in the Notice. The AGM Notice will also be made available on the Company’s website at www.simecatlantis.com.
Basis of preparation
The unaudited summary accounts set out above do not constitute statutory accounts of the Group within the meaning in the provisions of the Singapore Companies Act, Chapter 50.
The unaudited consolidated balance sheet as at 31 December 2019 and the consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group’s unaudited financial statements.
The Directors have identified a material uncertainty in relation to going concern relating to their ability to raise a minimum of £3m by way of a placing of new shares. If these minimum funds are not raised, the Company will not be able to operate within available cash and debt facilities throughout the going concern period.
The Company has commenced this fundraising and based on expressions of interest from investors to date, the directors are confident that this will be successful. The Company cannot formally raise the funds until the placing is completed and the new shares are admitted to AIM which is targeted for 11th August 2020. Whilst the directors are confident that proceeds in excess of £3million will be raised, this represents a material uncertainty that casts significant doubt upon the company’s ability to continue as a going concern. The Directors have concluded that should the fundraising complete for an amount of at least £3m, this material uncertainty will be removed. The Directors anticipate this happening prior to the approval of the statutory financial statements within the next 10 days.
The audited financial statements of the Group for 2019 will be finalised on the basis of the financial information presented in this preliminary announcement updated for the completion of the fundraise and will be presented to the shareholders at the Company’s Annual General Meeting and thereafter filed with the Accounting and Corporate Regulatory Authority (“ACRA”) of Singapore. The auditor’s opinion in respect of the statutory accounts for 2019 will include a material uncertainty in relation to going concern if an amount of at least £3m is not raised prior to the approval of the statutory financial statements.
The comparative consolidated financial information for the year ended 31 December 2018 is based on an abridged version of the Group’s published financial statements for that year, which contained an unqualified audit report. A copy of the 2018 financial statements has been filed with ACRA.
The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (International) (SFRS(I)) and International Financial Reporting Standards (IFRS). SFRS(I)s are issued by the Accounting Standards Council Singapore, which comprise standards and interpretations that are equivalent to IFRS issued by the International Accounting Standards Board. All references to SFRS(I)s and IFRSs are subsequently referred to as IFRS unless otherwise specified.
The financial statements have been prepared on the historical cost basis except as otherwise disclosed in the accounting policies included in the 2018 accounts available on the Company website. The accounting policies have been applied consistently to all periods presented in these financial statements, other than new standards applied for the first time in 2019.
Adoption of New and Revised Standards
A number of amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019. Except from the introduction of IFRS 16, amendments to standards and interpretations had no impact on the consolidated financial statements of the Group.
Impact of initial application of IFRS 16 Lease
In the current year, the Group has applied IFRS 16 (as issued by the IASB in January 2016) that is effective for annual periods that begin on or after 1 January 2019. The Group has applied IFRS 16 from 1 January 2019 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS17. The Group has land, office premises and office equipment leases. The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those contracts entered or modified before 1 January 2019. The group applied the available practical expedient to rely on its assessment of where leases are onerous immediately before the date of initial application. Following application of IFRS 16 as at 1 January 2019, the Group recognised ROU assets and lease liabilities totalling £1.7 million, the impact to on profit and loss opening retained earnings is immaterial. Full details of the treatment will be provided in the 2019 Annual Report and audited financial statements.
These unaudited summary financial statements have been prepared on a going concern basis. The Board of Directors have undertaken a rigorous assessment of the going concern assumptions using committed case financial forecasts and considering a wide range of downside scenarios. The projections prepared for the going concern assessment are based on a cautious approach with only committed income and expenditure included. For the going concern assessment, the Board of Directors have considered the committed case for the period to 31 December 2021.
As set out above, the Company have commenced a fundraising via a placing of new shares to raise approximately £6 million. Whilst the directors are confident that the placing will be completed, until such time as the placing is completed and for an amount of at least £3m, this represents a material uncertainty that will cast significant doubt on the Group’s ability to continue as a going concern.
The forecasts indicate that if the fundraise of at least £3m is successful, the Group is projected to operate within its cash balances and available facilities for the forecast period.
Going concern assessment and reverse stress testing
The broader political and economic uncertainty coupled with the potential future impact on the Group of the recent COVID-19 outbreak has been factored into the scenarios considered as part of the Group’s adoption of the going concern assumption.
In reaching its conclusion on the going concern assessment, the Board of Directors also assessed forecasts of severe but plausible downside scenarios related to our principal risks, including:
- A review of the timing and risks included in the delivery of major existing and potential contracts. In particular, the directors considered the impact that extended restrictions as a result of COVID-19 may have on the deployment of a turbine in Nagasaki, Japan. Whilst a delay is not anticipated, a downside scenario considered the impact of a 3 month delay to the installation of the turbine. The Board of Directors are satisfied that this is not expected to materialise due to mitigating actions that have been taken to minimise risk in any slippage of delivery date.
- The directors considered the certainty of various sources of funding and other income streams. In particular, the directors assessed the conditions precedent to obtaining access to the £2m funding from SIMEC and whilst satisfied that this funding will be available in the going concern period, a downside scenario considered the impact of a 2 month delay to this funding. The Board of Directors are satisfied that this is not expected to materialise as the formal test report is expected to be ready for submission in August and evidence has been considered which indicate that the conditions have been met.
- The ability to manage and mitigate any material delay in the financial close of the Uskmouth Power Station project. As funding from the financial close is not within the control of management, this has not been included in the going concern forecasts. However, a downside scenario considered the impact of a delay to financial close by way of increased running costs through the going concern period.
In the event that cashflows are limited due to delays in the Japanese contract milestone or delays in the receipt of the SIMEC funds, the key mitigation available would be to further reduce the Group’s cost base, in particular the ability to delay key freight and insurance costs associated with the Japanese project (to match any delay caused by COVID-19), matching of expenditure on the Uskmouth Power Station Project to projected financial close, suspension of directors fees, and taking the full benefit of payment terms with suppliers.
- The refinancing of certain corporate debt which would allow for the release of additional restricted funds back into the group
- The successful application of Central and Local Government grants available
- Access to additional funding
In line with previous practice, the Company funds its short and medium term funding requirements through a combination of equity and debt. As noted above, the Company have commenced a fundraising via a placing of new shares to raise approximately £6 million. Details of the Group’s loans and borrowings at year end can be found in the statutory financial statements. As at the 31 December 2019, the only undrawn loan was the £2.0 million SIMEC convertible loan which will be repayable in May 2022 and its availability is subject to the satisfaction of defined targets relating to the Uskmouth project. The only covenant is in respect of the Group’s long term debentures and relate to balance sheet coverage which require the entity to have a total debt to asset ratio of at least 1:2.8. Under all of the modelled scenarios, positive liquidity headroom exists throughout the going concern period and the Group remains in compliance with this covenant. In the downside scenarios modelled as set out above, liquidity headroom exists throughout the going concern period after taking account of controllable, plausible mitigating actions.
Going concern conclusion
The Directors have identified a material uncertainty in relation to going concern relating to the requirement to raise a minimum of £3m by way of a placing of new shares. Whilst the directors are confident that proceeds in excess of £3m will be raised, if these minimum funds are not raised, the Company will not be able to operate within available cash and debt facilities throughout the going concern period. The Directors have concluded that should the fundraising complete for an amount of at least £3m, this material uncertainty will be removed. The Directors anticipate this happening prior to the approval of the statutory financial statements within the next 10 days. Having taken account of all the factors above, the Directors have concluded that it remains appropriate to prepare the financial statements on a going concern basis. Accordingly, these financial statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group were unable to continue as a going concern.
Acquisition of SIMEC GHR Limited (“GHR”) and bargain purchase gain
On 31 October 2019, the Company successfully completed the acquisition of the whole of the issued share capital of GHR, a company incorporated in the United Kingdom, from SIMEC GHR Acquisitions Topco Limited a subsidiary of SIMEC Energy (“SIMEC”), a member of the GFG Alliance. The acquisition was undertaken to further diversify the Atlantis energy platform and combine the project management and delivery expertise of the two companies whilst bringing positive revenue streams to the Group.
Consideration for the purchase of the share capital was £1. The acquired business contributed losses and revenue amounting to £0.2 million and £0.5 million respectively to the Group’s results for the period from 31 October 2019 to 31 December 2019. Had GHR been consolidated from 1 January 2019 then the Group’s consolidated loss before tax and consolidated revenue for the year to 31 December 2019 would have been £39.2 million and £7.2 million respectively.
A purchase price allocation was conducted to determine the valuation of the acquisition resulting in a fair value adjustment to intangible assets. The bargain purchase was recognised as a result of the business combination as follows:
|Total consideration transferred (£1)||–|
|Fair value of identifiable net assets||2,928|
COVID-19 and events since the balance sheet date
On 30th January 2020 the spread of the Coronavirus (COVID 19) was declared a public health emergency by the World Health Organisation. The impact of COVID 19 did not materially impact the Group in the year ended 31 December 2019 and in line with IAS 10 has been considered a non-adjusting post balance sheet event. We have considered the impact of COVID-19 on the carrying value of the Group’s property, plant and equipment and intangible assets and concluded there to be sufficient headroom in impairment assessments. We have also considered the impact on the recoverability of receivables. Furthermore, the impact of COVID 19 on the Group’s ability to raise finance and potential delays to the supply chain have been considered within the forecast scenarios prepared by management to support the going concern assessment.
On 6th August 2020, we announced a proposed placing of the Company’s ordinary shares to raise net proceeds of approximately £6 million to be conducted by way of an accelerated bookbuild process. In addition to the placing, the Company has made arrangements with PrimaryBid Limited for retail and other investors to conditionally subscribe for the Company’s ordinary shares through the PrimaryBid platform. It is intended that the net proceeds of the fundraising will be used to fund the Group’s working capital as well as to fund the investment in a new fuel supply joint venture.
Certain statements in this announcement are forward-looking statements which are based on the Company’s expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which may use words such as “aim”, “anticipate”, “believe”, “could”, “intend”, “estimate”, “expect” and words of similar meaning, include all matters that are not historical facts. These forward-looking statements involve risks, assumptions and uncertainties that could cause the actual results of operations, financial condition, liquidity and dividend policy and the development of the industries in which the Group will operate to differ materially from the impression created by the forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given those risks and uncertainties, undue reliance should not be placed on such forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by the Financial Conduct Authority, the London Stock Exchange or applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.