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The vessel Involver is on it's way to site.

https://www.marinetraffic.com/en/ais/details/ships/shipid:5204135/mmsi:219721000/imo:9753923/vessel:MAERSK_INVOLVER

Its quite windy at the moment and very gusty at the weekend but there's a window of lighter winds tomorrow.

Output in October was 1034MWh, almost exactly the same as September. Suggests all three Andritz turbines are still working well.

Deployment of the Proteus device is now scheduled for 21-24 November.

https://kingfisherbulletin.org/notice-map?noticeId=4631

The vessel "Involver" is anchored off Nigg.

https://www.marinetraffic.com/en/ais/details/ships/shipid:5204135/mmsi:219721000/imo:9753923/vessel:MAERSK_INVOLVER

Short answer: no

I agree Pask, it’s hard to figure out what’s going on.

My understanding from what I’ve read is that all that has been signed at this stage is an MOU between Proteus, SKF and GE. SAE say they are “working with” this alliance to deliver the Meygen project. Proteus say they were “formally awarded” the 59MW Meygen project and describe this as a “working contract”, but if this were a contractual agreement I would expect SAE to refer to it as such. Proteus also say they will “take the lead in contracting”, which again implies that a full contract is not yet in place.

This might well turn into a contract in future but until I see something more definitive from SAE I’m going to assume at this stage it’s just an agreement to discuss.

Yeah, they reduced the target from 500,000 to 466,580.

Following the same logic I just exceeded my weight loss goal.

There's been some good SAE chat recently on the ADVFN board. Hopefully LSE will let me post a link:

https://uk.advfn.com/stock-market/london/simec-atlantis-energy-SAE/share-chat?page=140

The Crowdcube raise has been extended by a further ten days having already been extended by a week. At the current rate they'd be luck to hit 50% of their target. Hopefully some imminent good news will see this pick up, but if turbine deployment is delayed it won't do them any favours.

I wonder why SAE haven't announced Proteus as the turbine supplier for Meygen. Perhaps this means Andritz are still in the running. In my view Andritz would be the more obvious choice given turbine performance at Meygen to date.

Meygen output in September was 1035 MWh which suggests all three Andritz turbines are working well.

The Maersk Involver (the vessel named in the notice to mariners) has just left Aberdeen, hopefully en route to Nigg to pick up the Proteus turbine. However, the vessel appears to be heading south, and curiously the Kingfisher works notice appears to have been cancelled - possibly in error, but it's worth keeping an eye on the vessel.

https://www.marinetraffic.com/en/ais/details/ships/shipid:5204135

https://kingfisherbulletin.org/notice-map?noticeId=4581

You might be right oldtramp. Scottish enterprise made a £7.5 million loan to finance the project and added another £2.5 million in 2022. Including interest the outstanding balance must be over £13 million. There have been no repayments on this debt for the past 3 years. There is zero chance of those debts getting repaid from Meygen 1a revenue. The interest in the battery project could be a way for scot ent to recoup some of their investment in Meygen.

I expect a restructuring of that debt to be announced very soon. Good luck all!

There are plenty of interesting nuggets in the interim report but my focus here is on the going concern question. The previous interim report highlighted two going concern issues: Abundance bond repayment and historic grant repayment. The Abundance bonds have been rescheduled but the historic grant repayment issue remains.

In the 2023 interim report the amount to be repaid was £3.4 million and the line was: "The Board are of the view that there are grounds for disputing *any* clawback of this grant and the Company has evidence to support this position." This line was echoed in the 2023 annual report and auditor's report, which added the following note: "Further, there are no parent company guarantees attached to the grant and the companies that received the grants are inactive and insolvent."

In the 2024 interim report the amount to be repaid has risen to £3.8 million and the statement disputing the potential clawback of this grant has disappeared - the only question raised is the timing of any repayment. I assume the amount to be repaid has increased with inflation. It would be good to have this issue resolved since it's been hanging over the company for years.

I was surprised another issue didn't appear in the going concern assessment. Senior debt repayments for Meygen have been postponed until 1 November 2024, as has the repayment of an additional £2.5 million loan from Scottish Enterprise. The company is clearly very confident these loans are going to be restructured. If so, we should learn more about that soon.

August was a good month for Meygen. Output was 1044 MWh which is the highest it's been since September last year. Suggests all three deployed Andritz turbines are working well.

Meygen output has picked up in July. Looks like all three turbines are up and running.

Feb 24 - 873 MWh

Mar 24 - 972 MWh

Apr 24 - 975 MWh

May 24 - 664 MWh

Jun 24 - 675 MWh

Jul 24 - 948 MWh

Yes, this is all available at the Renewables and CHP register: https://renewablesandchp.ofgem.gov.uk/

675 MWh: similar to May, and down about a third from previous months. Consistent with one of the three deployed turbines being out of commission. If so could be an issue with the turbine, the cable or onshore equipment.

The second research notes published by SAE on their website confirms my earlier suspicions. This note makes it clear that SAE is focused on the battery opportunity. Tidal is described as an "option", which is a good analogy - a call option with big upside if it works out but a downside limited to £2 million if it doesn't. Revenue from existing turbines has been included in the valuation but I don't think they have included anything at all for the future CFD projects. The non-recourse nature of the majority of Meygen debt is stressed again.

These research notes, commissioned and shared by SAE, reinforce the messages weaved through this and recent annual reports that the company is preparing investors for a move away from tidal power. I'm not saying that they've made a final decision (the call option has yet to expire), but that is clearly the direction of travel.

As a tidal enthusiast I'm disappointed, but as an investor I can't argue with the logic. Meygen phase 1 has been unable to cover its operating costs at a power price of £300+/MWh, never mind repay capital or make a profit, so the current cost of energy must be far north of that. Their chosen technology partner's turbine has been out of the water for more time than its been generating, including for the last year. The idea that the next phase can be delivered at £198/MWh and below requires a huge leap of faith in the face of the evidence.

There are risks related to battery revenue, grid costs, capital dilution and difficulty extricating themselves from the tidal business, but the company holds valuable assets and overall the battery strategy appears sound. I've increased my stake. I plan to leave this in a drawer for a few years and see how it works out.

Good luck all and many thanks for the valuable insights and discussion.

I've read the Zeus report. I highly recommend this to anyone interested in this company.

Zeus state up-front they are paid by SAE so this is not an independent report, nor is it a direct statement from the company. But SAE paid for the report and published it on their website so I therefore assume it has their approval.

Firstly, the focus is clearly on BESS, in the headline "Simply the BESS(t)", in the presentation of the report, and in the company valuation. The tidal business comprises less than 20% of the total SAE valuation, and the 50MW project is valued less than the existing 6MW project (presumably because SAE expects to have a smaller stake in the 50MW project).

Secondly, the assumptions around the existing 6MW Meygen project are very optimistic. A 40% load factor is assumed when the average over the past few years has been about 20%. There is also *zero risk* attributed the value of the 6MW project (the report says "100% risk" but this means they multiply the "unrisked" value by 1).

Thirdly, even with these optimistic assumptions Meygen phase 1 continues to lose money year on year. The standalone forecast on page 26 shows the project has negative EBITDA in every year of operation with debt continuing to accumulate. I've no idea how Zeus derives a positive NAV from this cash flow. I'm also unsure how Meygen generates a negative EBITDA with £7.5 million a year in revenue and £3.5 million a year in operating costs - can anyone enlighten me?  Perhaps the footnote on ">£10M of remaining tax losses" comes into play here. 

Fourthly, the Meygen project only starts generating money if the 50MW CFD projects are delivered. Even then the tidal business is still heavily in debt in 2038.

Finally, I think I now understand SAE's plan for the Meygen debt. The Zeus report stresses (twice) that:"the MeyGen debt is non-recourse to SAE plc, with SAE’s only exposure here the £2.0m parent company guarantee." This also echoes a line that I'd overlooked in the annual report. Based on what I've read, it's clear to me that SAE are not planning to repay the Meygen debt any time soon (how could they?). They will either renegotiate this debt as part of the promise to deliver the next phase of Meygen or they will take a £2 million hit and cut Meygen loose. The secured lenders are Crown Estate Scotland and Scottish Enterprise - both Scottish Government agencies. This explains the mention of a "partnership" with the Scottish Government in the final report. Either the government agrees to renegotiate the Meygen debt and support phase 2 or they will be left to clear up the mess when Meygen goes bust. The government won't want to take ownership of Meygen (and responsibility for decommissioning it), nor will they want to undermine the wider tidal energy industry, which gives SAE leverage.

I've had all the pieces before but this is the first time I've seen the big picture. Still processing what I think about this. Keen to know people's thoughts.

Thanks Mr Tidal and sorry for the slow response - life intervenes. 

I agree that one possible plan is for SAE to take BESS profits and use these to repay the Meygen debt. It's frustrating that we need to read between the lines of the annual report to work out what the plan is to manage this debt. This report was an opportunity for SAE to clarify their plans but instead they curiously ignored the Meygen debt altogether in the headline figures. So, reading between the lines ...

The CFO report states "Revenues from these [BESS] projects will in turn provide recurring revenue streams which the Group will be able to recycle into new project opportunities and meet its obligations *to bondholders*."

Note that he specifically earmarks BESS revenue for *bondholders*, not debt holders. 

On the next page he states: "Revenues available to the Group, which *excludes ring-fenced revenue earned by the MeyGen tidal array*, rose to £10.7 million from £nil in 2022."

Happy to be corrected, but I think this is the first mention we've seen of Meygen revenue being ring-fenced. We're not told what it is ring-fenced for but I expect this is to cover Meygen operating costs and debt repayments. 

So in this report SAE has: separated Meygen debt from group debt; carved out Meygen revenue from group revenue; and separated BESS revenue from Meygen debt repayments. They have also quietly disposed of half their stake in Proteus, and there is mention of "partnering" with the Scottish Government to deliver the Meygen CFD projects.

Pieces of a strategy are emerging here but I've not yet managed to put them together.

Second, an oddity that I’m puzzling over. The report states that group debt has fallen by 30% to £13.7 million *excluding Meygen debt*. What is the justification for excluding Meygen debt, which at £41 million comprises 75% of group debt?

Obviously it’s nice to focus on the smaller number, which suggests that the group is doing well - other than Meygen. But you can’t ignore the elephant in the room.

The Meygen debt is massive, a large portion of it is secured on group assets, and it comes due over the next few years (in 2026 and 2027 for the secured loans and 2028 for the long term loans - see note 29).

Where is the plan to tackle this debt?

First some hopeful news. In the report the CFO states that “three of the four turbines … are performing well”.

Assuming this was true at the point of publication, this means that whatever caused the recent drop in output at Meygen wasn’t a turbine issue. Hopefully the problem is with an onshore component that’s relatively cheap and easy to fix, such as a transformer or power converter (though long lead times could still mean a lengthy outage).

@mister_tidal see page 64 of the annual report: "In the reporting period the Group disposed of 10% equity interest in Proteus Marine Renewables Limited."

It's not clear to me how much they received for this disposal, or under which line any income arising from the disposal would be reported in the accounts.