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As I see it the company has about £20m of secured rather than unsecured liabilities including the Abundance bonds, although the exact terms of those bonds would need to be seen. They also have Meygen phase 1 which cost them £60m+ and is now generating more successfully than it has for some years with perhaps another ten years of guaranteed income, the remaining possibilities at Uskmouth, and the commitment to the next phase of Meygen, which no doubt could be retained if the company went bang and was bought out by a financially sound company.

In those circumstances there has to be a possibility that the bondholders will think they have a better chance of recovering their investment by refusing to accept the SAE request. So this may be a close run decision.

But the thing that doesn't get a mention, and imo should, is that the times when tides turn, ie, the slack period for the turbines varies as you go round the UK coastline. That should make the proposition of having lots of tidal turbines in different locations around the coast would dilute the effects of "slack periods".

Well I'm not sure if that CFD is a life saver for SAE, but it's certainly a step in the right direction, I believe. I do wonder whether separating off their engineering company might put SAE into a better position in terms of the new turbine provision, ie. they might be able to push Proteus into a junior position in a JV with Andritz to produce the next two sets of turbines. With the right arrangements it would not be a sweat to ANDR to provide the turbines as they have a long successful history in turbine production, £1.5 Billion in the bank, and an innovative history. (confession - I know quite a bit about Andritz because I'm a shareholder)

Jmidland,

It was exactly the failure of government to continue backing tidal (meygen) after the first small phase, that set the company off looking for an "exciting" alternative, and in desperation, I believe, they went for the Uskmouth conversion story.

Interesting views all round. My view of what's needed was formed by consideration of a few difficulties that SAE have, imo.

Firstly they have perhaps unsustainable debt. If you look at the Auditors reports in the annual reports going back for years, the various audit companies they have employed (KPMG, E&Y, Moore Stephens in that chronological order), have always indicated some doubts about their "going concern" basis, with finally, to me, a record three consecutive years of "qualified" audits for the last three years.

Secondly, in whatever way they structure the next phase of Meygen, they will need lots of cash, and credibility. No one is going to build 14 expensive turbines, on whatever basis, without a big chunk of cash up front for a safeguard, or for a company which doesn't look solvent. Nor will the turbine bases and cabling get installed without cash.

In terms of that credibility, only once in five operational years has the income from phase one exceeded (but not by much, about £0.3m iirc) the interest cost and operating expense for that year, without even considering depreciation which has run at 2 - 2.5 million annually. Actual losses have been probably close to £20m over that first five years, excluding extensive asset write downs. So a fantastic performance this year is desperately needed for any measure of credibility.

Thirdly, Uskmouth, in terms of rents for battery storage etc is insufficient to support the company imo, and the suggestion that they will actually own all or part of a storage scheme sounds on the face of it an improvement, but is long term and requires plenty of cash in the short term. The Uskmouth conversion project was, from the start, imo, a BS scheme built on layers of BS, with the final piece of BS being the agreement with some BS specialist company to provide carbon capture by algae for the carbon dioxide and other emissions from the plant. This wondrous deal was trumpeted not long after the Welsh government "called in" the planning decisions related to the project. Nothing related to that project increased the company's credibility imo, in fact I think the reverse is true, and I'm please to see the whole conversion concept being gradually eased out of the intentions stated in the Annual Reports.

If you look then at the financing deals over the last few years they have all been small, inadequate, and very high cost. The sale of Green Highland Resources, which was, imo, the division with the best profitable potential in both the short and medium term, for £3.5m, was further indication of desperation to me. A continuation of that sort of financing would not, imo, allow the company to thrive, or perhaps survive, hence my opinion that SAE need a big long term investor committed to "green" causes like Bill Gates or Michael Bloomberg.

Unless, of course, the main purpose of the company has always been to provide comfortable, interesting well paid jobs!

Laura,

SAE is up to its chin in debt, with currently almost no realistic way to repay that debt, in my opinion of course. So, it desperately needs a huge money transfusion (imo). I cannot see any chance of a successful normal "placing", because of the way these are usually structured, which is through lots of high net worth individuals who do well out of the placing without ending up with any shares. These HNWI are only interested in as many regular small incremental placings as you care to provide, which allows them to avoid ownership of the shares, and is not enough to save SAE, imo. Normal investing institutions would take a hell of a lot of convincing to take the necessary huge stake imo and I see that as a non starter in the current situation.

So the way I see as the most likely saviour is something like the original deal with Simec, but a good deal with a beneficial cash rich committed long term partner, instead of the useless deal they got with Simec giving away 50% of the company in exchange for a hair brained scheme at Uskmouth. The pre-emption condition, if I've interpreted it correctly, would mean that shares would have to be offered to existing shareholders so I don't know how that would work as it exists, but I'm sure that SAE could convince existing shareholders to enable such a scheme with the right to participate in a financial transformation of the company.

All just my opinion of course, but all opinions are worth considering.

You would have to go to the companies website and read its float documentation to be certain, but it means, I believe, that shareholders witheld the company's right to place up to what looks like a further 33% increase in shares, to who ever they wish on whatever terms they decide, without having to offer the shares to existing shareholders.

Sorry, meant to say that the large debt owed to crown estate might be a positive in this situation, or a negative if TCE think SAE cannot fund phase 2.

Interesting read Tidal lover, but with Meygen having failed to achieve most of the terms under which the sea bed lease was to be let about ten years ago, and certainly they are in a situation where the lease could be terminated on several different grounds if the crown estate wished to, this is perhaps not as positive a survey as many here would like to think. Can't remember if or when the 25 year lease was actually granted as opposed to the several times extended intended date of 2014, but if it was 2014, does the 25 years from then also apply to phase 2, as by the time that phase might be operational there wouldn't be many years left. No doubt someone on here can update what I remember from the float.

I would still expect the going concern item in the auditor's report to be qualified unless a big chunk of debt went with the hived off turbine producer.

How long is a piece of string? (similar question) A popular small cap that I always thought was crap went into suspension over eight years ago, with lots of bulletin board enthusiasts and gurus saying it was a short term technical suspension which would probably end in a few days, or a week or so, at most, but it's still suspended. So, who knows? I do think that SAE are absolutely on the edge financially, so we will see.

Thanks for the explanation ohs. I think it would have been more easily understandable if the scheme had been rated as 460/230, ie. the battery holding capacity has to be 460MWH, with maximum output of 230MW for 2 hours.

Don't know much about the finances of such schemes, although there seem to be lots of them springing up all over the place. My guess would be that Hydro and nuclear which run 24hrs / day more or less cater for night usage as well as part of day provision, with gas fired generation currently the major supplier during the day. Presumably the battery storage systems mostly cater for smoothing out the wind generators contribution to the grid, ideally positioned close to the source of generation which now seems to be offshore. I've noticed a big change in the size of the offshore wind schemes and a change in the ownership of such major schemes and wonder if those major owners of multiple schemes will find it easier to balance their output with their committed input to the grid in the future making the storage schemes less imperative, but that is in the distant future imo.

Sorry, my mistake, the ownership percentage for the BESS projects income is 15% Simec and 85% SAE.

Quite a bit of "double dipping" there ohs, imo. The £6m + £4m are part of the £40m not additional to it, and until we see the next annual report it remains, afaics, uncertain whether the £40m is before or after Simec's 10% take, and who pays the original lease charge that Simec originally paid on the whole power station site, applicable to that piece of land after the BESS scheme takes possession. The existing BESS lease agreement appears to cover the currently approved scheme for 230MW and an extension to 460MW, so that scheme and the more recently proposed one account for more than half the 1GW plan.

Again nothing is clear until we see the AR, but my understanding of the expected sale of the lease for "in the region of £11.8m" is that this is a desperate measure to get enough to pay off the bonds by selling the future £1m/year over 30 years for immediate cash. Hope I'm wrong about that, but that's what it appears to me to say in the RNS.

Looking at the picture someone kindly put on the thread of the newly retrieved turbine, it certainly looked like a machine which had been working under the sea for a long time - which makes me believe it was the only turbine yet to receive out of water maintenance after five years. That means it is an Andritz machine, as was the turbine reinstalled in the sea during the recent work. I also reckon that the improvements made to that one probably include the pitch modifications, which would be a first on an Andritz and presumably involved working with Andritz on the installation. Presumably they will make the same modifications to the one they just took out provided the replaced turbine works well. Just hope that the clean up, maintenance, and modifications, don't take as long this time, as SAE need a lot of luck and better news to survive and finance phase 2, imo.

PS. I'm an Andritz shareholder so will see if they mention anything about involvement on their website.

Unfortunately I suspect that the auditors will qualify the results in terms of going concern declaration, which doesn't help in terms of financing the next phase of Meygen.

PS. A test of the new retrieval mechanism under operating conditions might even have been something required by an insurer to renew an insurance policy.

If the turbine taken out was the AR1500 as munin suggests, it would be the first time that the new connection system had been tested in terms of lifting a turbine out in operating conditions after a year of operation, so perhaps it was just a test of that improved installation system carried out while they had the equipment on site and were doing maintenance inspections. If that was the case it would make sense that they replaced it after a brief inspection, and might explain the mysterious absence of mention of removing a turbine from the press reports.

The turbine which was taken out must have been the Andritz one, which had the best record of any of the turbines having been in for nearly five years - which probably explained barnacles etc. The turbine which has been out of the water most since generation began would almost certainly be the SAE built AR 1500, although some of that long down time was presumably because of modifications.

The alternative to granting the extension was, I believe, to bankrupt the company. But I doubt if the bondholders would have got their money back that way. Either way, the 2017 bonds and the 2018 bonds plus interest eat up almost the complete value of the anticipated securitisation of the income from the Uskmouth battery storage scheme, leaving what, I wonder to pay off the 2019 bonds and interest which come due next year?