ATOME PLC (AIM:ATOM) has started 2025 in a "strong position" to begin construction and make the final investment decision (FID) on its flagship 145MW Villeta green fertiliser project in Paraguay in the first half of the year, says broker SP Angel.
The developer of green fertiliser projects had a 'buy' rating reiterated by the company's house broker, along with a 200p per share target price, which compares to the last close price of 35p.
The broker updated its financial projections, too, now forecasting that Villeta's Phase 1 should generate circa US$70 million EBITDA per annum from 2028.
This followed an update two weeks ago from ATOME, which revealed that detailed work on project finance for the 145MW Villeta Phase 1 green fertiliser project has gathered pace so far in 2025, with significant progress made on multiple workstreams.
The company, which aims to use existing attractively priced hydroelectricity, air-sourced nitrogen and ground limestone to produce circa 260,000tpa of premium green calcium ammonium nitrate (CAN) fertiliser, recently joined up with offtake partner Yara to meet government and international funding institutions in Paraguay.
SP Angel highlighted recent news flow in the global hydrogen sector that has been "mixed", with both Equinor and Yara highlighting declining economics associated with 'blue' ammonia projects, while several proposed low carbon fertiliser projects have failed to gain sanction and existing loss-making facilities in Europe under increased pressure to close operations, which would reduce production capacity permanently.
Meanwhile, leading global fertiliser companies, the broker also noted, expect growth in the low carbon ammonia market to 24 mtpa by 2032, from close to zero now, owing to the implementation of stringent Carbon Border Adjustment Mechanism (CBAM) regulations and carbon taxes in Europe from next year.
Yara is also planning a transition to low-carbon footprint fertilisers produced with renewable electricity through a portfolio of projects in Norway, the Netherlands, Australia and Paraguay, the broker said.
"Yara’s pivot to a more capex-light strategy should means that focus will be on securing low carbon fertiliser offtake agreements with third parties to supply their international customer base, which is supportive of ATOME’s business model."
So while rising interest rates, cost inflation and regulatory ambiguity have challenged green and blue hydrogen developers globally over the last 12 month, SP Angel said, "we expect that visibility on long-term energy costs and a supportive offtake agreement presents Villeta Phase 1 as an advantaged green fertiliser project from a global perspective.
"We expect the company to deliver several near-term valuation catalysts that will de-risk the Villeta development and its forecast stable cashflows, which should ease the market’s uncertainty and drive the share towards our 200p/share 12-month target price."