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 31 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 conversion project is a pioneering, flagship project to re-purpose a 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 made entirely from waste which is unsuitable for recycling. Half of the constituent waste comes from biomass sources, like paper and card, and half comes from high energy wastes like plastics.
Following full conversion, the 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 finding 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 over 45 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.
In our final full year of project development activities at Uskmouth pre financial close, the Group recorded a loss after tax of £35.4 million for the year ended 31 December 2019, compared with a £24.0 million loss in the prior year. The increase in this loss is primarily attributable to a £16.1 million non-cash disposal of seabed options for five development sites (Sound of Islay, Ness of Duncansby, Mull of Galloway, Strangford Lough (Scotland), and Portland Bill (England)). This was partially offset by increased revenue from MeyGen (£2.0 million) as well as the non-cash adjustment of £2.9 million arising from the acquisition of GHR late in 2019.
Group revenue increased by 120% to £4.9 million for the year (2018 – £ 2.2 million) with an increase of £2 million from power sales from the MeyGen tidal power project and £0.5 million (2018 Nil) from GHR hydro division O&M and project management contract revenue. Contract revenues from our Atlantis Turbines and Engineering Services Division (“ATES”) for works completed in Japan on the KME contract will not be recognised until next fiscal year.
The loss on disposal of intangible seabed options of £16.1 million is as previously described while the £2.9 million non-cash purchase gain relates to fair value calculations on the acquisition of GHR in November 2019.
Total operating expense before non-recurring items for the year were £26.1 million (2018: £24.3 million). The increase of £1.8 million relates to a full year’s depreciation for SUP (2018 only depreciated from June onwards) offset by reductions in acquisitions costs (2018 received the SUP acquisitions cost whilst 2019 saw much smaller GHR acquisition costs).
The Group’s closing net asset balance was £94.0 million (2018: £119.6 million). The decrease is mainly in relation to the £16.1 million seabed options value write-off.
In March 2019, Atlantis raised £5.0 million, before expenses, from new and existing shareholders. In January 2020, Atlantis raised £3.8m via a bond issued on the Abundance ethical investment platform. The bond has a coupon of 8%, payable semi-annually and matures in 2024. The proceeds continue to be deployed to further the successful delivery of our world leading portfolio of renewable and sustainable energy projects.
Chief Executive Officer
11 August 2020