Tidal power project price sees stock market 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 UK government contract to supply tidal power. The project described here has the scope to be one of the largest tidal energy projects in the world. Does this have the potential to reverse the troubled stock price?

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

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

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

SIMEC Atlantis undertakes the design, construction, installation, testing, operation and maintenance of energy projects in the UK and Japan. The Company operates through three segments: power generation, turbine and engineering services, and project development. It is involved in the production of tidal energy; design, supply and maintenance of underwater turbines and connection equipment; hydroelectric development; and provision of offshore and onshore construction services.

Investors should be aware that SIMEC Atlantis’ financial reports for the second quarter showed disappointing results. Their growth, value, and revenue factors point to poor execution and strategy, which aren’t driving exciting growth. These disturbing results plead in favor of an underperformance and make it possible to anticipate a significant decline.

For the full year, the company achieved revenue of £7.51m compared to £12.23m a year ago. Turnover was £9.3m compared to £13.51m a year ago. SIMEC Atlantis published in this report discouraging results related to book value factors. At the time of the current filing, the price-to-pound (P/B) ratio was 0.4, representing a change of -57.2% from the previous report.

Source: Deshe Analytics

The MeyGen tidal project is located on the Pentland Firth and sits between the Scottish mainland and the desert 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 includes four 1.5 MW turbines that have been installed on gravity turbine support structures. The network is a precursor to the development of the remaining 86 MW project and will demonstrate that the development of tidal networks is both commercially viable and technically feasible.

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SAE has full consent, all necessary authorizations and grid capacity to install an additional 80 MW of tidal current capacity at the MeyGen site. The project has the potential to be transformational for the tidal energy industry, providing the scale needed to justify the establishment of turbine manufacturing facilities at world energy installation in the Nigg Energy Park.