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SIMEC Atlantis Energy: tidal power project award sees stock rally, but is it enough?


Shares in SIMEC Atlantis Energy [LSE:SAE] are on the move this week after the company said it had a contract from the UK government to deliver tidal power. The project being outlined here has the scope to be one of the largest tidal power projects in the world. Does this have the scope to turn around the struggling stock price though?

The Contract for Difference award from the British government to SIMEC’s MeyGen site guarantees the price of electricity generated from the site for 15 years. SAE said it would be able to deliver 28MW of clean, home-sourced, predictable power from the site in Scotland.

Shares in SAE jumped on the news from 1.23p to 2.4p. At time of writing they had slipped slightly and were trading at 2p. Last July the stock was trading at over 7p.

“The significance of today’s announcement cannot be downplayed,” said Graham Reid, CEO of SAE. “We are going to be delivering the world’s first commercial scale tidal array and we now have a clear runaway, with future CfD rounds, to deliver the full c400MW of tidal power generation at MeyGen.”

SIMEC Atlantis engages in the design, construction, installation, testing, operation, and maintenance of power projects in the United Kingdom and Japan. The company operates through three segments: power generation, turbine and engineering service, and project development. It is involved in the tidal power generation; designs, supply, and maintenance of tidal turbines and subsea connection equipment; hydro development; and provision of offshore and onshore construction services.

Investors should be aware that SIMEC Atlantis’ financial reports for Q2 showed some underwhelming results. Their growth, value, and income factors indicate a poor execution and strategy, which isn’t generating exciting growth. These troubling results make a strong case for underperformance and for anticipating a significant downside.

For the full year, the company reported sales were GBP 7.51 million compared to GBP 12.23 million a year ago. Revenue was GBP 9.3 million compared to GBP 13.51 million a year ago. SIMEC Atlantis published discouraging results related to book value factors in this report. As of the current filing, price to book ratio (P/B) was reported as 0.4, representing a -57.2% change from the previous report.

SIMEC Atlantis Energy
Source: Deshe Analytics

The MeyGen tidal project is located on the Pentland Firth and is situated between the Scottish mainland and the deserted island of Stroma. The 3.5km site covers some of the fastest flowing waters in the UK, using the natural channel created by the island. The first phase of the MayGen project comprises four 1.5MW turbines that have been installed on gravity turbine support structures. The array is a precursor to the development of the remaining consented 86MW project and will demonstrate that the development of tidal arrays is both commercially viable and technically feasible.

SAE has full consent, all necessary permissions and grid capacity to install an additional 80MW of tidal stream capacity on the MeyGen site. The project has the potential to be transformational for the tidal energy industry, providing the scale to justify the establishment of turbine manufacturing facilities at Global Energy’s facility in Nigg Energy Park.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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