ATOME Energy PLC (AIM:ATOM) has seen its price target raised slightly to 200p by house broker SP Angel following the introduction of a carbon tax by the European Union.
Green imports into the EU will be taxed under the carbon border adjustment mechanism (CBAM) that came into effect on 1 October.
“In its transitional phase, EU imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen will have to report on the greenhouse gas (GHG) emissions embedded during their production, but without paying any financial adjustment at this stage,” said SP Angel.
“However, from 2026 a tariff will apply to carbon-intensive products that are not produced as part of the EU’s emissions trading system (ETS) on carbon allowances.”
ATOME has a 120MW agreement with Paraguay’s power company ANDE for the supply of renewable power to produce green hydrogen from water.
This will be combined with air-sourced nitrogen and ground limestone to produce c.250,000tpa of the premium fertiliser calcium ammonium nitrate (CAN).
ATOME’s CAN fertiliser will have the lowest carbon footprint (90% reduction) available today, adds SP Angel, enabling it to trade with a lower CBAM tariff than existing fertilisers, as well being a very high-grade product.
Phase 1 of its Viletta project is expected to receive a final investment decision this quarter, notes the broker, with the first fertiliser production expected in late 2025.
SP Angel expects Phase 1 to generate US$63 million in underlying profits (EBITDA) per annum.
The upgrade to the share price target reflects a change in tax status of Phase 1 estimated by ATOME to be worth up to US$7 million per annum, it added.
'Buy' is the broker’s investment rating.