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Ambrian Capital says ‘buy’ SeaEnergy PLC, puts 70 percent upside on the stock

Ambrian Capital has issued a note on SeaEnergy PLC following the name change from Ramco Energy and the strategic shift to pure-play offshore wind energy play, with a 'buy' rating and 81p/share valuation.


Ambrian Capital has issued a note on SeaEnergy PLC (AIM: SEA), a week after the name change from Ramco Energy and the strategic shift from oil services company to pure-play offshore wind energy play came into effect. The broker has a ‘buy’ rating on the stock and places an 81 pence valuation on SeaEnergy, based on a sum-of-the-parts of the portfolio of assets it holds.

This represents an upside of near 70 percent compared to the current share price. Sea Energy was trading at 46.75p in early afternoon deals today. 

When Ramco announced the re-positioning at the beginning of September, it said the offshore wind opportunity was “truly enormous”, with over £130 billion of investment envisaged over the next 11 years through the Scottish and UK Offshore Rounds.

Ramco subsidiary SeaEnergy Renewables Ltd (SERL) has secured a net 456 MegaWatts of offshore wind farm acreage alongside large utility partners. By early September, SERL had secured a 25 percent interest in two joint ventures to develop offshore wind farms with a total capacity of over 1800MW with partners Scottish & Southern Energy PLC (LSE: SSE) unit Airtricity and RWE AG unit npower. Together with EDP Renewables (EDPR) it had also made applications for sites to be awarded through the UK Offshore Round 3 process.

The new entity will draw its strength from the SERL team which conceived, developed and delivered the world’s first deep water wind farm which remains the deepest development to date - the Beatrice Project. It involved the installation of the two largest wind turbines, with 5 MW capacity each, ever deployed offshore, at water depths of 45 metres. This, combined with the Ramco team's expertise in delivering deep water offshore developments in the oil and gas industry, puts SeaEnergy in an unrivalled position at the vanguard of the emerging offshore renewables industry, it stated.

Ambrian Capital said in its note that, while bids in the UK Offshore Round 3 are not expected to be announced before the end of 2009, it believes the EDPR/SeaEnergy consortium is ideally placed to be allocated one or more of the nine zones in the programme.

After a £7.5 million placing with UK investment group Lanstead Capital LP which will become a 22 percent shareholder in the new entity, SeaEnergy’s model is de-risked in the near term, with funds to meet corporate overheads and development investment until mid-2010, the broker said, adding that the development business model aims to achieve a 10 times return at the pre-construction stage.

“SeaEnergy is an example of a stock with an asymmetric risk profile - minimal capital at risk for a large potential payoff.”

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