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 31 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 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 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 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% waste-derived fuel pellets requires a bespoke pellet with specific combustion capabilities and an emissions profile that conforms with strict 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, SAE 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 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 also demonstrating 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) was completed on 29 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 Hydroliennes (“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 Efinor in France.  This year NH has 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 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.  A successful first phase could lead to a subsequent phase with an increase in installed capacity.

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 are expected to be significant revenue generating assets 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 COVID-19 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 have been instrumental in enabling Atlantis to successfully overcome the many challenges that we have faced this year.

ANNUAL GENERAL MEETING

Our Annual General Meeting will be held on Friday 28 August 2020.  Details of the resolutions to be proposed are set out in a separate Notice of Annual General Meeting, which accompanies this report for shareholders receiving hard copy documents, and which is available at www.simecatlantis.com for those who elected to receive documents electronically.

John Neill
Chairman
11 August 2020