Final Results
31 May 2017
ATLANTIS RESOURCES LIMITED (“Atlantis”, the “Company” or the “Group”)
Final Results
Atlantis Resources Limited, a vertically integrated turbine supplier and project owner in the tidal power industry, is pleased to announce its final results for the year ended 31 December 2016.
The full Annual Report and Group financial statements can be read and downloaded from the Company’s website: https://saerenewables.com and the Annual Report will be distributed to shareholders.
Financial highlights
- This is the first set of full year results presented in pounds sterling rather than Singapore dollars as a result of the change in functional currency from 1st January 2016.
- Group loss for the year was £7.3 million, a decrease of £9.3m on the previous year’s profit. The previous year included one off gains arising from the acquisition of Marine Current Turbines of £9.2m and the disposal of 50% of our stake in Atlantis Operations Canada Limited of £0.9m.
- The consolidated group cash position at 31 December 2016 was £10.2 million, including £8.6 million held at MeyGen Limited.
- Net assets increased to £66.6 million over the year from £57.7 million.
- In April 2016 Atlantis raised £6.5 million before expenses from new and existing shareholders to fund project development activities across the Atlantis portfolio and to secure opportunities for portfolio growth.
Operational highlights
- In April 2016 the Group announced a partnership agreement with Equitix, a market leading developer, investor and fund manager of infrastructure assets. Under this agreement, Atlantis and Equitix agreed to work together to advance Atlantis’s portfolio of tidal power projects in Scotland, which represent a combined potential capacity of over 600MW.
- In May 2016 Atlantis completed the acquisition of Scottish tidal project assets from ScottishPower Renewables (UK) Limited (“SPR”). As a result of the transaction, Tidal Power Scotland Limited (“TPSL”) acquired development rights for an additional 110MW of projects in Scotland, and SPR became a 6% shareholder in TPSL. One of the projects, the Sound of Islay, has previously been awarded NER300 funding of €21 million.
- In June 2016 the MeyGen site was connected to the 33kV Ness of Quoys distribution network in readiness for export of first power.
- In August 2016 DEME Concessions NV, a member of the DEME Group, (“DEME”) completed its purchase of shares in “TPSL”. DEME paid £2 million in cash consideration to a wholly owned subsidiary of Atlantis for a 2% stake in TPSL.
- In November 2016 Meygen exported its first power to the grid following successful installation of all four foundations in October.
Post period end highlights
- In January 2017, the European Commission awarded £17.3 million (€20.3 million) in Horizon 2020 grant funding for the next phase of the MeyGen project, Phase 1B, or Project Stroma. This funding is in addition to the previously awarded NER300 funding of €17 million. Atlantis also announced the formation of a new division, Atlantis Energy, to apply its skills and experience in complementary sectors in marine renewable energy. This was supported by memoranda of understanding with floating wind developer Ideol and with Natural Energy Wyre, a key player in the proposed Wyre Valley tidal barrage and flood protection scheme.
- In February 2017 the fourth and final turbine, the Company’s AR1500, was installed in Phase 1A of the MeyGen project. The turbine reached full power output shortly afterwards and demonstrated levels of performance above the contractual baseline required.
- In March 2017 Atlantis signed a preferred supplier agreement with SBS INTL LTD (“SBS”), a privately-owned international marine, subsea and renewable energy project developer, for the supply of turbines, engineering services and equipment for a 150MW (megawatt) tidal-stream array located in Lombok, Indonesia. Atlantis also announced its intentions to pursue projects in France, where commercial seabed leasing rounds are planned.
- In May 2017, the Group signed a strategic partnership agreement with Hyundai Engineering and Construction Co. Ltd for collaboration on the development of ocean power renewable projects globally, and in particular the development of tidal stream projects in South Korea.
- On 24 May 2017 Atlantis announced that it had raised £4.05 million from new and existing shareholders through the issue of new equity.
Tim Cornelius, Chief Executive of Atlantis Resources Limited commented:
“2016 was a very significant year for the Group as we saw the realisation of over 10 years of hard work in the energisation of MeyGen Phase 1A. At the start of 2017 we were delighted to get confirmation from Ofgem that MeyGen Phase 1A has received full accreditation as a tidal generation plant, ensuring it receives five Renewables Obligation Certificates for each megawatt hour of generation.
“2016 was of course also significant for the UK as a whole, but we were reassured by confirmation that our existing sources of European public funding for UK projects would be unaffected by the decision to leave the EU. In particular, we will continue to benefit from the €37 million of capital and revenue support awarded to the next phase of the MeyGen project, known as Project Stroma. This preserves our opportunity to use this project to demonstrate the cost reducing innovations which are essential to allow tidal power to compete against longer established technologies. We were also buoyed by the recent announcement of the intention of the French government to launch commercial tenders for tidal power development in Normandy and Brittany, providing us with the opportunity to further geographically diversify our development pipeline in the near future.
“Whilst tidal stream remains our primary focus, we recently announced the creation of a new division, Atlantis Energy, as part of our diversification strategy. This division has had a busy start, signing agreements with partners on offshore floating wind, and tidal barrage projects. 2017 promises to be a year of technological and geographical diversity and advancement as we continue to build this part of the business alongside our latest tidal stream opportunities in France and Asia.”
This announcement contains inside information
Enquiries:
Atlantis Resources |
+44 (0)20 3727 1000 |
Tim Cornelius, Chief Executive Officer |
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Simon Counsell, Chief Financial Officer |
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Peel Hunt LLP (Nominated Adviser and Broker) | +44 (0)20 7418 8900 |
Adrian Trimmings Jock Maxwell Macdonald George Sellar |
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FTI Consulting | +44 (0)20 3727 1000 |
Ben Brewerton Alex Beagley James Styles |
CHAIRMAN’S STATEMENT
This year has been another year of world firsts for the Group and tidal power, during which we have cemented our reputation as the driving force behind a growing sector. Above all our other achievements, I am delighted to be able to report the generation of first power from Phase 1A of the MeyGen project and full Ofgem accreditation, the culmination of many years of hard work and perseverance.
In June 2016, we connected to the 33kV Ness of Quoys distribution network, whichpaved the way for us to export our first power to the grid in November 2016. The connection was closely followed by our deal with Lochend Wind Energy Limited to deliver electricity to the grid whenever the MeyGen tidal project is not making full use of the available export capacity. This unprecedented arrangement further demonstrates our pioneering role in the renewables industry, combining wind energy with tidal energy to make more efficient use of existing grid assets.
The second half of 2016 was dominated by the installation of subsea equipment and the commencement of generation, with the fourth and final turbine, supplied by the Atlantis turbine and engineering services division, being installed in February 2017 and reaching full power soon afterwards. I was particularly pleased to welcome the First Minister of Scotland, Nicola Sturgeon, to formally unveil the MeyGen project at Nigg Energy Park in Scotland in September 2016, just before the start of the foundation installation campaign.
As the year drew to a close we formalised our decision to proceed with the development for the next stage of the MeyGen project, known as Project Stroma, or Phase 1B. We have been working diligently to further refine the design of the turbines and balance of plant based on the lessons learned from Phase 1A, thus demonstrating progress to lower the cost of energy for tidal stream. This phase of the project will benefit from both €20.3 million of capital grant funding from Europe’s Horizon 2020 programme, as well as €16.8 million in revenue support under the NER300 scheme.
MeyGen’s success has attracted infrastructure and private finance partners from across Europe, with whom we are working to strengthen our portfolio. In April, we announced our new partnership with Equitix Limited for investment in our UK pipeline, and this was closely followed by an investment by DEME Concessions NV who acquired a 2% shareholding in Tidal Power Scotland Limited, our Scottish portfolio holding company. We also completed the sale of a 6% share in Tidal Power Scotland Limited to ScottishPower Renewables (UK) Limited, in exchange for the transfer of development rights for 110MW of further Scottish projects. Meanwhile, we were heartened by robust support from our shareholders in a £6.5 million capital raise in April 2016, and a further £4.05 million in May 2017.
We are striving harder than ever to drive down costs to ensure that our power is an attractive economic choice in the short term as well as providing a host of social and environmental benefits. We continue to make excellent progress in our ambition to provide sustainable and predictable green energy on a commercial scale, and to do so wherever there is available tidal resource. In April 2017 we signed an agreement with SBS Intl Ltd to develop a 150MW project in Indonesia, and since the end of the reporting period we have reported our active pursuit of opportunities in France and South Korea.
We are also branching out into related energy project opportunities through our new Atlantis Energy division, which allows us to make the most of our experience in developing uniquely complex projects. I would like to take this opportunity to thank all of those who have partnered with and supported Atlantis through a very challenging year, including our shareholders and many key stakeholders, and to thank our people and my fellow directors for their continued dedication as we move into the next exciting period of delivery.
ANNUAL GENERAL MEETING
Our Annual General Meeting will be held on 29 June 2017 and the notice of the meeting accompanies this Annual Report.
I look forward to this opportunity to meet our shareholders.
John Mitchell Neill
Chairman
30 May 2017
CHIEF EXECUTIVE OFFICER’S STATEMENT
PROFILE
The Group focuses on three core activities: power generation, project development and technology delivery. Our power generation activities are currently focused on MeyGen Phase 1A. Our project development capability has been honed through the origination, development and delivery of the MeyGen tidal stream project, and we continue to apply these skills to new opportunities in house as well as offering our specialist services to third party project owners. By targeting the early part of the project lifecycle we can maximise our opportunity to create value both for our customers and for ourselves as project owners. Our turbine and engineering services division, meanwhile, ensures we have the means to deliver our projected reductions in the cost of energy. This allows our projects and those of third party developers to remain economically viable and financially attractive to infrastructure investors and governments in the long term, against competition from other sources of renewable power production in a range of global markets.
UPDATE
2016 was a very significant year for the group as we saw the realisation of over 10 years of hard work in the energisation of MeyGen Phase 1A. It was a challenging yet rewarding journey, and through tenacity, innovation and entrepreneurship we have continued to lead the tidal power sector on the road to commercial maturity. Initial indications are that the performance of our own turbine generator, the AR1500, will exceed our expectations in terms of power curve performance and we look forward to validating these claims over the coming months. All the Phase 1A turbines are currently undergoing upgrades proposed by the turbine suppliers following an initial period of operation, and are scheduled for reinstallation in mid-2017 when they will undergo their final performance and reliability guarantee tests.
The UK’s decision to leave the European Union in July 2016 was followed by the reassuring confirmation that our existing sources of European public funding for UK projects would be unaffected. In particular, we will continue to benefit from the €37 million of capital and revenue support awarded to the next phase of the MeyGen project, known as Project Stroma. This preserves our opportunity to use this project to demonstrate the cost reducing innovations which are essential to the future viability of tidal power as it competes against longer established technologies.
The necessity of rapid cost reduction was highlighted by the UK government’s decision to withdraw ring-fenced support for marine energy, but we are nonetheless pleased to have the opportunity to compete in the 2017 allocation round for contracts for difference. This regime replaces the outgoing Renewables Obligation, under which MeyGen Phase 1A has now received full accreditation, ensuring it receives five Renewables Obligation Certificates for each megawatt hour of generation.
Whilst tidal stream remains our primary focus, we’ve also announced the creation of a new division, Atlantis Energy, through which we can apply our origination and development expertise to energy projects in related areas. We offer these skills to third party project owners as well as putting them to work to identify opportunities for broadening our own portfolio. We’ve already signed up an agreement with Ideol, a leading developer of offshore floating foundation solutions, and we’re working with Natural Energy Wyre to progress the Wyre tidal barrage project on the Lancashire coast in England. 2017 promises to be a year of technological and geographical diversity as we continue to build this part of the business alongside our latest tidal stream opportunities in France and Asia.
SUMMARY OF RESULTS
As a result of the relocation of the Group’s corporate headquarters from Singapore to Edinburgh, the Group’s presentational currency changed from Singapore dollar to Great British pounds (“GBP”), effective 1 January 2016. All comparative figures have been restated and are also presented in GBP.
For the year ended 31 December 2016, the Group recorded a post tax loss of £7.3m, a decrease of £9.3m on the prior year profit. The prior year included one off gains arising from the acquisition of Marine Current Turbines (“MCT”) of £9.2m and the disposal of 50% of our stake in Atlantis Operations Canada Limited (“AOC”) of £0.9m.
Revenue from consulting services was £0.2m, down from £1.4m in the previous year as a result of the completion of the final design phase of our contract with Energy Technologies Institute (“ETI”). The completion of this phase of the ETI project also contributed towards lower costs during the year.
Total expenses for the year were £9.1m, a reduction on the prior year of £2.9m. Prior year expenses included an impairment charge of £1.9m, primarily on the AR1000 turbine, which was considered to be obsolete. Further cost reductions were realised in Research and Development costs and subcontractor costs, as noted above.
Other gains were £2.8m which, when excluding the one off items noted above relating to MCT and AOC, were down £0.4m on the prior year. The MCT acquisition in 2015 resulted in a bargain purchase gain, mainly in respect of the fair value of turbine technology and seabed options, while the AOC disposal resulted in a re-measurement gain on the remaining 50% held by the Group.
The Group’s net assets increased during the year by £8.9m to £66.6m. In April 2016, the Group raised approximately £6.5m through a successful share issue. In return for a 6% stake in the Group’s project development company, Tidal Power Scotland Limited (“TPSL”), we acquired additional seabed options from Scottish Power Renewables worth £6.6m. Further, DEME Group took an additional 2% stake in TPSL in consideration for £2m cash. The Group retains a 92% interest in TPSL. Finally, Scottish Enterprise made a further £1.3m equity injection to MeyGen Holdings Limited (“MGHL”), increasing their shareholding to 16.55%. The Group retains the remaining 83.45% interest in MGHL.
Timothy James Cornelius
Chief Executive Officer
30 May 2017
FINANCIALS CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended 31 December 2016 |
|||
2016 | 2015 | ||
£’000 | £’000 | ||
Revenue | 235 | 1,375 | |
Other gains | 2,824 | 13,288 | |
Employee benefits expenses | (4,782) | (4,634) | |
Other operating expenses | (2,326) | (2,652) | |
Subcontractor costs | (249) | (615) | |
Depreciation and amortisation | (1,611) | (1,572) | |
Impairment loss on property, plant and equipment | – | (1,881) | |
Research and development costs | (140) | (618) | |
Total expenses | (9,108) | (11,972) | |
Results from operating activities | (6,049) | 2,691 | |
Finance costs | (1,004) | (614) | |
(7,053) | 2,077 | ||
Share of results of equity-accounted investees | (211) | (49) | |
(Loss)/profit before tax | (7,264) | 2,028 | |
Tax expense | – | – | |
(Loss)/profit for the year | (7,264) | 2,028 | |
Other comprehensive income | |||
Items that are or may be reclassified subsequently to profit or loss | |||
Exchange differences on translation of foreign operations | (148) | 263 | |
Other comprehensive income for the year, net of tax | (148) | 263 | |
Total comprehensive income for the year | (7,412) | 2,291 | |
(Loss)/profit attributable to: | |||
Owners of the Group | (7,716) | 2,102 | |
Non-controlling interests | 452 | (74) | |
Total comprehensive income attributable to: | |||
Owners of the Group | (7,864) | 2,185 | |
Non-controlling interests | 452 | 106 | |
(Loss)/earnings per share | |||
Basic and diluted (loss)/earnings per share | (0.06) | 0.02 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 2016 |
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2016 | 2015 | ||
£’000 | £’000 | ||
Assets | |||
Property, plant and equipment | 62,694 | 41,114 | |
Intangible assets | 36,324 | 30,960 | |
Investments in subsidiaries | – | – | |
Loans to subsidiaries | – | – | |
Investment in joint venture | – | 211 | |
Loan to joint venture | 1,236 | 910 | |
Trade and other receivables | – | – | |
Non-current assets | 100,254 | 73,195 | |
Trade and other receivables | 4,868 | 6,207 | |
Cash and cash equivalents | 10,232 | 12,268 | |
Current assets | 15,100 | 18,475 | |
Total assets | 115,354 | 91,670 | |
Liabilities | |||
Trade and other payables | 10,172 | 8,477 | |
Provisions | 2,339 | 2,036 | |
Loans and borrowings | 2,790 | 2,128 | |
Current liabilities | 15,301 | 12,641 | |
Loans and borrowings | 29,592 | 17,451 | |
Deferred tax liabilities | 3,830 | 3,830 | |
Non-current liabilities | 33,422 | 21,281 | |
Total liabilities | 48,723 | 33,922 | |
Net assets | 66,631 | 57,748 | |
Equity | |||
Share capital | 91,220 | 84,918 | |
Capital reserve | 12,665 | 5,709 | |
Translation reserve | 7,167 | 7,315 | |
Option fee | 6 | 6 | |
Share option reserve | 3,191 | 3,078 | |
Accumulated losses | (55,666) | (47,950) | |
Total equity attributable to owners of the Company | 58,583 | 53,076 | |
Non-controlling interests | 8,048 | 4,672 | |
Total equity | 66,631 | 57,748 |
STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Company | ||||||||||
Share
capital |
Capital reserve | Translation reserve | Option
fee |
Share
option reserve |
Accumulated losses | Total | Non- controlling interest | Total | ||
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
Group | ||||||||||
At 1 January 2015 | 78,483 | 5,486 | 7,232 | 6 | 2,206 | (50,052) | 43,361 | 4,135 | 47,496 | |
Total comprehensive income for the year | ||||||||||
Profit for the year | – | – | – | – | – | 2,102 | 2,102 | (74) | 2,028 | |
Other comprehensive income | – | – | 83 | – | – | – | 83 | 180 | 263 | |
Total comprehensive income for the year | – | – | 83 | – | – | 2,102 | 2,185 | 106 | 2,291 | |
Transactions with owners, recognised directly
in equity |
||||||||||
Contributions by and distributions to owners | ||||||||||
Issue of ordinary shares | 6,435 | – | – | – | – | – | 6,435 | – | 6,435 | |
Recognition of share-based payments | – | – | – | – | 872 | – | 872 | – | 872 | |
Changes in ownership interest in subsidiary | ||||||||||
Dilution of interest in a subsidiary without change in control | – | 223 | – | – | – | – | 223 | 431 | 654 | |
Total transactions with owners | 6,435 | 223 | – | – | 872 | – | 7,530 | 431 | 7,961 | |
At 31 December 2015 | 84,918 | 5,709 | 7,315 | 6 | 3,078 | (47,950) | 53,076 | 4,672 | 57,748 |
STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Company | ||||||||||
Share
capital |
Capital reserve | Translation reserve | Option
fee |
Share
option reserve |
Accumulated losses | Total | Non- controlling interest | Total | ||
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
Group | ||||||||||
At 1 January 2016 | 84,918 | 5,709 | 7,315 | 6 | 3,078 | (47,950) | 53,076 | 4,672 | 57,748 | |
Total comprehensive income for the year | ||||||||||
(Loss)/Profit for the year | – | – | – | – | – | (7,716) | (7,716) | 452 | (7,264) | |
Other comprehensive income | – | – | (148) | – | – | – | (148) | – | (148) | |
Total comprehensive income for the year | – | – | (148) | – | – | (7,716) | (7,864) | 452 | (7,412) | |
Transactions with owners, recognised directly
in equity |
||||||||||
Contributions by and distributions to owners | ||||||||||
Issue of ordinary shares | 6,302 | – | – | – | – | – | 6,302 | – | 6,302 | |
Recognition of share-based payments | – | – | – | – | 113 | – | 113 | – | 113 | |
Changes in ownership interest in subsidiary | ||||||||||
Dilution of interest in a subsidiary without change in control | – | 6,956 | – | – | – | – | 6,956 | 2,924 | 9,880 | |
Total transactions with owners | 6,302 | 6,956 | – | – | 113 | – | 13,371 | 2,924 | 16,295 | |
At 31 December 2016 | 91,220 | 12,665 | 7,167 | 6 | 3,191 | (55,666) | 58,583 | 8,048 | 66,631 |
CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 December 2016
|
|||
2016 | 2015 | ||
£’000 | £’000 | ||
Cash flows from operating activities | |||
(Loss)/profit for the year | (7,264) | 2,028 | |
Adjustments for: | |||
Bargain purchase arising from business combination | – | (9,174) | |
Gain on disposal of subsidiary | – | (451) | |
Re-measurement gain on investment retained in the former subsidiary | – | (451) | |
Grant income | (1,958) | (2,834) | |
Interest income | (127) | (26) | |
Impairment loss on property, plant and equipment | – | 1,881 | |
Depreciation of property, plant and equipment | 61 | 36 | |
Amortisation of intangible asset | 1,550 | 1,536 | |
Interest expense | 1,004 | 614 | |
Share-based payments | 113 | 872 | |
Provisions made/written back during the year | 432 | 150 | |
Share of loss of joint venture, net of tax | 211 | 49 | |
Net foreign exchange | (467) | (261) | |
Operating cash flows before movements in working capital | (6,445) | (6,031) | |
Movements in trade and other receivables | (1,077) | 113 | |
Movements in trade and other payables | (5,775) | (996) | |
Net cash used in operating activities | (13,297) | (6,914) | |
Cash flows from investing activities | |||
Purchase of property, plant and equipment | (14,150) | (18,252) | |
Expenditure on project development | – | (1,194) | |
Cash received from disposal of subsidiary | – | 250 | |
Acquisition of subsidiary, net of cash acquired | – | 56 | |
Net cash used in investing activities | (14,150) | (19,140) | |
Cash flows from financing activities | |||
Proceeds from grants received | 5,577 | 13,281 | |
Proceeds from issue of shares | 6,539 | 2,500 | |
Share issuance cost | (237) | (277) | |
Proceeds from borrowings | 10,232 | 7,755 | |
Deposits released | 440 | 856 | |
Non-controlling interest | 3,300 | 896 | |
Net cash from financing activities | 25,851 | 25,011 | |
Net decrease in cash and cash equivalents | (1,596) | (1,043) | |
Cash and cash equivalents at 1 January | 10,182 | 10,992 | |
Effect of foreign exchange rate changes on the balance of cash held in foreign currencies | – | 233 | |
Cash and cash equivalents at 31 December | 8,586 | 10,182 |
Further detail may be read and downloaded from the company website: https://saerenewables.com/company-documents.html
Annual General Meeting
Atlantis also announces that a Notice will be sent to shareholders today to convene the Annual General Meeting (“AGM”) of the company.
The AGM will be held at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA at 10:00 a.m. (London time) on Thursday, 29 June 2017. The AGM Notice is also available on the company’s website: https://saerenewables.com/company-documents/notices.html.