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Atlantis Resources Ltd: THE INVESTMENT CASE

Catch the wave: Atlantis Resources becoming an important player in tidal power generation

That progress as a leading tidal power developer was underlined again today as broker Macquarie today issued a very bullish initiation note on the group.
Big tidal wave
Atlantis shares have gained over 60% over the past year, and are up about 10% so far in 2016

King Canute may not have been able to hold back the tide, but a millennia on tidal power generation projects are certainly making headway, with AIM-listed Atlantis Resources Ltd. (LON:ARL) becoming an important player in the sector.

That progress as a leading tidal power developer was underlined again this week as the company announced that the latest turbine at its flagship MeyGen project was deployed in record time, and broker Macquarie today issued a very bullish initiation note on the group.

In a note to clients, the Australian broker’s analysts commenced coverage on the AIM-listed firm’s shares with an ‘outperform’ rating and a 71p target price.

READ: Macquarie bullish on Atlantis …

However they said they believe “the value of the full of MeyGen is 154p per share once Phase 1 (86MW) is operational in 2021.”

The analysts said: ”The key driver to this uplift is a reduction in our average discount rate to 6.8% to reflect meeting ‘de-risking’ milestones such as securing financing, and commissioning and operating each stage of the tidal project.”

Atlantis shares have gained over 60% over the past year, and are up about 10% in to date in 2016 to around 52p.

Record deployment …

On Monday, Atlantis revealed that its AR1500 tidal stream turbine – designed by Lockheed Martin – was deployed in less than an half an hour at the MeyGen tidal project, in Scotland’s Pentland Firth.

The turbine – the first of its type at the project – marks the fourth and final turbine in MeyGen’s first stage. It is connected to the grid, via an onshore control building.

In an interview with Proactive’s Andrew Scott, Atlantis Resources chief executive Tim Cornelius credited 'meticulous planning and preparation' for the record deployment, which clocked in at 25 minutes against 2-1/2 hours for previous turbines.

WATCH: Atlantis Resources chief credits 'meticulous planning’ …

Atlantis has a majority stake in MeyGen, held indirectly via a 92% shareholding in Tidal Power Scotland Limited which in turn owns 83.5% of MeyGen Limited alongside Scottish Enterprise.

Last November,  Atlantis marked a key milestone on the flagship project having achieved its first power generation after installing its first Andritz Hydro Hammerfest turbine earlier that month.

By early December that turbine was running at full pelt, generating 1.5 MW (megawatts) as the water speed reached just over 3 meters per second, or around six knots.

The group said that this was another “significant de-risking event for the industry."

The completed first stage of the project will generate 6MW, and Cornelius said the group would “look to build on that capacity in the near future.”

Eventually, Meygen is expected to produce around 380MW  of electricity, enough capacity to power about 175,000 homes.

Next phase green lighted …

Later in December, Atlantis also green lighted the next phase of development at the MeyGen project, announcing that the investment decision had been made for the second phase project.

Project Stroma, as MeyGen’s phase 1b is known, commenced construction in 2017 with first power scheduled for 2018.

In January, Atlantis Resources and its consortium partners were awarded a €20.3m grant from the European Commission for the next phase of the Meygen project.

Estimates outline some 29 terawatt hours of untapped power generation within the tidal systems in the waters surrounding the United Kingdom, and about a third of that so-far theoretical power can be harnessed from the Pentland Firth.

The tidal flows through the region in the far north of Scotland can, according to Atlantis, amount to 11 terawatt hours.

Other projects …

The same month also saw Atlantis establish a new internal division that will look at other new projects based on what the company learned at the breakthrough tidal power project.

That new Atlantis Energy division was the vehicle earlier this month for the firm to become a partner in a new tidal project on the Lancashire coast.

The group will work with Natural Energy Wire (NEW) to develop a 160-megawatt tidal barrage across the mouth of the river Wyre between Fleetwood and Knott's End, which will also provide flood protection for the area.

Cornelius said: "The geography of the Wyre means that only a relatively small impoundment is required for the power output produced.

“This makes Wyre a very cost effective way to test the concepts of tidal range power; its location also offers the chance to offer multiple benefits to the local community and surrounding area through economic stimulus and habitat preservation.”

Wind too …

Aside from the tide, Atlantis has also seen things written in the wind.

In late January, the UK firm signed a memorandum of understanding with French firm Ideol, a specialist in floating wind power technology.

WATCH: “No rest for the wicked,” says Atlantis boss …

The group will work with Ideol on the development of a floating wind project off the UK coast with capacity of up to 1.5Gw. A pre-commercial phase of up to 100Mw should be commissioned by 2021.

Ideol will provide the technical know-how while Atlantis will be responsible for the funding and site selection.

The two companies said they hope this will be a pathfinder project that will spark a boom in future floating offshore wind development in the UK.

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