Member Info for Timaeus

Seriously, if the name is changed as proposed won’t the company become known as Rampspeak and just make itself a laughing stock?

CFO Simon Hirst blithely says the £16.2m impairment of the tidal business was required due to lower revenues and higher costs during 2024 than forecast and significant increases in the cost forecasts for future operations of the tidal business. Sounds like a potentially lethal combination: to whom in the company should shareholders look for a grown-up analysis of how all these forecasts came to be so badly off the mark? Did this happen while “everyone at SAE” was “focused on achieving financial close for our flagship AW1 project” as Graham Reid put it in the 16 April RNS? Hasn’t anyone at SAE been focused throughout on financial close for the potentially rather more valuable MeyGen II? And oh, isn’t that the same flagship AW1 project on land which is being sold on completion of financial close? How does that square with retaining ownership of projects? Or is it selling off the family silver to fund executive pay increases?

Who at SAE now exhibits a sustained level of insight and understanding that the future affordability of tidal energy could depend on economies of scale in the supply chain? The TIGER report several years ago identified the economies of volume from larger farms, relying on research suggesting LCOE reductions of up to 40% possibly being available through SAE’s scaling up to 86MW at Meygen. Where’d that vision go?

Mr Hirst’s final conclusion is the valuations ascribed to the projects that will deliver nearer term returns to the Group, the battery project portfolio, remain strong. This seems to imply that in contrast, the valuation ascribed to MeyGen has significantly weakened. Indeed, it appears the Group has loaded the bulk of its considerable debts into MeyGen subsidiaries rather than at Uskmouth where the major loss of value arguably originated. And Graham Reid claims the business "has met or exceeded all of its objectives". Well. Not if “everyone at SAE” has been quietly positioning the company to dump MeyGen Phase II and all those hard-won CfD’s - and blame lack of support from the Scottish Government when the key public funding component of blended finance doesn’t magically appear. On one reading of this report, the team might no longer have the stomach for MeyGen, are losing interest in delivering Phase II and seem distracted by the easy option of carving up and selling off bits of Uskmouth. But, of course, Timaeus could just be plain wrong.

Well. Only a year ago, on the back of upward revaluation of parcels of the Uskmouth site, SAE was proclaiming its ambition to become an Independent Power Producer. At the start of 2024 the Board set “very clear” objectives for the business including progressing development of the Company’s next battery storage project in the UK with the ability to retain majority ownership into operation. Now, having underestimated future costs, tax liabilities and various impairments, SAE is reduced to a “goal of maintaining a significant equity ownership” in projects, to use the Chairman’s phrase. That’s not the same as majority ownership.

2025 - Q2 had long been the target for financial close for MeyGen II. The silence of the Annual Report on what has happened to that target speaks volumes. Not even a whiff of progress eg on what “blended finance” for MeyGen might comprise; or a memorandum of understanding with anyone about setting up a joint venture SPV to own the turbines. And in the rationale for MeyBess the emphasis now seems to have shifted from MeyGen to the “large number of new wind projects in North Scotland.”

In June 2023 SAE’s website said 2027 was the target commissioning date for 28MW at MeyGen. Not any more it ain’t. Explanation from the company? None. The CEO Statement in the 2023 Annual Report, said 2029 was the schedule for MeyGen II to achieve commercial operation. 2 years of slippage. Still unexplained. In yesterday’s report CEO Graham Reid says 2029 is when SAE is due to bring online an additional 59MW of tidal stream generation at MeyGen, “however this will be dependent on the continued significant support of the Scottish Government”.

Despite still owning 11% of Proteus, SAE is “not exercising significant influence” over Proteus or participating in policy-making processes or in decisions. Are they even talking? Has anyone told SAE that Proteus posted news on their website only a month ago stating the AR3000 is scheduled for deployment in 2028? Perhaps that is indeed a reference to a French turbine. So, why is Mr Black talking in terms of SAE “demonstrating the next generation of tidal turbines that would be deployed…”? If Proteus and the French put an AR3000 in the water in 2028 there won’t be a whole lot of demonstrating the next generation left for SAE to do in 2029.

Has anyone picked up that Proteus posted news on their website on 2 June that included reference to their timetable for deploying the AR3000?

"As a Series 2 turbine, the AR1100 represents the next stage in Proteus’s roadmap for scaling tidal power and serves as the forerunner to the AR3000—the company’s most powerful turbine to date, scheduled for deployment in 2028."

Perhaps it’s worth breaking down a bit what needs funding - as well as asking just who the recipients of blended finance might be.

The CfD funding announced would add 59MW to MeyGen’s current capacity. That suggests 19 or 20 x 3MW turbines. Remember you can only get 8 turbines on a hub with a single export cable. Which suggests funding will be needed for more than 2 hubs. And for all the other things the Alliance is going to be supplying to MeyGen.

So, finance is needed to meet the cost of building the turbines. And the cost of delivering a facility to manufacture the 3MW turbines in Scotland – which was announced by SAE on 5 Nov 24 as part of the next phase.

Who do you think is going to own that facility? Probably not SAE. So why was it announced by SAE rather than, say Proteus? Interestingly, it was Proteus who announced the letter of intent and the MoU. It looks like Proteus rather than SAE has put together the Alliance, probably with an eye to selling Tidal Energy Systems globally to other customers after MeyGen.

SAE say they are transitioning to become an IPP. And they intend to retain ownership of the completed MeyGen and MeyBESS projects (among others). SAE is the majority shareholder in MeyGen to whom the CfD’s will eventually be payable.

One approach might be for SAE and MeyGen to raise blended finance for, and to own, the hubs; the export cables and the convertors. Hubs and cables are seabed installations on Crown Estate Scotland territory.

Maybe there will after all be a plan for the turbines to be owned by, and paid for through, some kind of Joint Venture Company or Special Vehicle Entity that will lease them to MeyGen. Perhaps that’s a bit more NWF/Great British Energy/Scottish European Green Energy Centre/Private Equity blended funding territory. Not having to build, buy or own the turbines might mean the SAE Group could afford to retain ownership of the MeyGen project without share dilution or surrendering the farm to private equity.

With the opening of the International Investment Summit on 14 Oct it was announced that UKIB would operate as a National Wealth Fund (NWF) and “explore blended finance solutions which combine its suite of financial products with grants and other policy instruments from government departments to use public capital most effectively to crowd in private investment.” So, that’s what blended finance means: not just grants and loans from both public and private sources but including other financial products (eg CfD’s?) and policy instruments. Presumably SAE’s Nominated Adviser Srand Hanson are busy getting their heads round the implications of all this for an AIM listed company.

The website for Crown Estate Scotland (the organisation responsible for managing the use of seabed for renewable energy projects off the Scottish coast) welcomes the signing of a new agreement to enable Great British Energy to develop partnerships with Scottish public bodies. Crown Estate Scotland also welcomed (on 4 Nov 24) the GB Energy agreement between the Scottish and UK Governments.

All these developments should augur well for MeyGen – but is it really likely the necessary processes will be up and running soon enough to meet the target timetable for MeyGen II financial closure in Q2 of 2025?

Arguably the two really big SAE news stories of 2024 will prove to have been first, that the Group’s financial position changed significantly enough for it to move on from aiming to be just a pure play project developer and become an Independent Power Provider. CEO John Reid’s Statement in the 2023 Annual Report said, “we are transitioning to becoming an IPP in BESS and Tidal stream generation.” That’s the strategy to 2035.

Second big news item: Reid’s statement that SAE will not only be constructing these projects but “we… expect to retain ownership of the completed projects.” Absolutely not planning to give away the MeyGen farm to raise the money to make the projects happen.

So, how could MeyGen Phase II be funded without SAE surrendering its majority shareholding (against which existing loans are already secured) to private finance? Timaeus has a philosophical bent not a city background in high finance, but the answer seems likely to be “blended finance”.

Funding for MeyGen Phase I included a £9.8m investment from the Crown Estate Commissioners and a £7.5m loan from Scottish Enterprise in 2014, the latter providing an additional 2-year loan facility of £2.5 million in 2022. Both agencies are not only still around: recent events suggest they could soon be able to offer a project like MeyGen much more enhanced support than they could in 2014.

Scottish Enterprise is the gateway for Scottish Companies (like MeyGen) engaged in international or cross-border collaboration to access Horizon European funding eg through the Scottish European Green Energy Centre. Horizon Europe is a €95b research and innovation programme!

The Great British Energy Founding statement (published on 25 Jul 24) announced a major partnership between Great British Energy and The Crown Estate establishing a new division ‘Great British Energy: The Crown Estate’. Among other things this partnership will

• Stimulate new technology in areas such as floating wind, hydrogen, carbon capture and tidal energy, to keep Britain at the cutting edge of the energy transition

• Invest in ports and clean energy supply chains, unlocking strategic bottlenecks to speed up the delivery of existing projects.

Anyone think MeyGen’s an existing project for these purposes? Handy that Great British Energy will be headquartered in Aberdeen, with sites in Edinburgh and Glasgow.

Perhaps there will be some minor up-ticks in the shorter term driven by BESS news and revenue from 4 on-stream 1.5MW turbines. As to the bigger future milestones: financial close for MeyGen II has long been targeted for Q2 2025. 2027 is the target commissioning date for 28MW; 2028 is the target commissioning date for 22MW; and 2029 is the target commissioning date for the additional 9MW, Sep 24 CfD awarded, capacity. Commissioning sounds like a long process embracing design; team building; manufacture, fabrication and assembly; systems integration; checking for damage in transit; verifying correct installation; testing performance against specification; fault investigation and correction - all before final handover. So, it seems, you can’t just stick a few AR3000’s in the water and expect to be able to announce a few days later that everything’s tickety-boo. According to the CEO Statement in the 2023 Annual Report, the schedule for MeyGen II to achieve commercial operation is 2029. Even Timaeus recognises that might mean it’ll be 4 to 5 years before the CfD revenue stream for MeyGen Phase II really gets flowing. Long time to hold on. Meanwhile, everyone is waiting to hear how the build out of MeyGen is going to be funded until then.

A post on Proteus’ website in about Feb 2024 said they were “now working under a letter of intent with MeyGen to supply AR3000 turbine systems to Phase 2 via an Alliance contracting model.” If you’re unsure about the significance of the Memorandum of Understanding (MoU) announced on 4 Nov 24 then maybe have another look at what an Alliance contracting model actually is.

It is probably better not to dismiss the MoU as just an agreement to discuss. The Proteus website is clear: “The MoU sets out a framework for a potential alliance to supply tidal turbine generation systems (TTGS) to developers of tidal arrays for commercial, multi-megawatt tidal stream projects. An initial focus will be the supply of a minimum 59MW to MeyGen…. The agreement illustrates the intent to collaborate on development, delivery, operations and maintenance.”

The MoU identifies SKF Marine as the intended supplier of the rotating equipment for the tidal generation system, comprising the main powertrain, its integration and assembly; GE Vernova’s Power Conversion business as the intended supplier of the electrical systems, from generator to grid; and Proteus is the intended provider of system design, final assembly, installation, commissioning, tidal turbine generation speciality components, other offshore services and delivery. Proteus CEO Drew Blaxland referred to a commitment from MeyGen to work towards execution of a £200m+ engineering, procurement, and construction (EPC) contract with the signatories to the MoU.

Reaching the stage of publicly identifying for the first time these main supply chain participants represents huge progress and reflects an enormous amount of development work and relationship building. But the MoU does not simply identify who is in the supply chain and what they will supply. This effectively welcomes the parties to the MoU into the pre-existing Alliance contracting model joint venture. Under an Alliance contracting model the parties agree that rather than vying with each other for commercial advantage they will share responsibility for making the project happen in their common interest. It’s all about collaboration and no accident that on 5 Nov 24, the day after the MoU was signed, SAE announced that it is working with “the Alliance” towards bringing about the next phase of MeyGen.

As anyone who read this BB on 21 June 24 knows, Normandie Hydrolennes has for months now had on their website a timetable for commissioning 4 x AR3000’s in 2027 following turbine fabrication and assembly in Cherbourg. Yes, that’s correct: they will be assembled in France, even if the parts come from all over Europe. And now that some funding’s in place, those turbines look even more likely to be deployed before any AR3000’s get turning at MeyGen.

It is sometimes said we live in a rapidly changing world but for some people the output from 4 x 3MW turbines will still only be twice the output from 4 x 1.5MW turbines. Even so, consider the effect on the MeyGen owners’ SP of the markets seeing 4 x AR3000’s turning in the English Channel for a significant period of time without serious mishap.

Also rather interesting is the size of the grant, which amounts to almost $1.9m per MW or, at current exchange rates, about £1.5m per MW. It is unclear what proportion of project costs the EU Innovation Fund grant is intended to meet. The cost of 4 x 3MW turbines is not exactly in the public domain any more than the costs associated with sub-sea hub works; cabling; convertors; and other onshore works including grid connection. What are the chances one of Great British Energy’s first acts will be to better the EU Innovation Fund and contribute to the commissioning costs of MeyGen Phases II & III more than £1.5m per MW?

In recent weeks evidence has been accumulating of growing demands for electricity supply over and above the air-source heat pump and EV charging markets. According to Louisa Clarence-Smith (in the Times on 19.10.24) “Technology companies are in a race to get their hands on as much electricity as they can to power their huge bets on the transformative power of generative AI. A ChatGPT query needs nearly ten times as much electricity to process on average as a Google search. Goldman Sachs estimates the AI revolution will drive 160 per cent growth in data centre power demand by 2030. Such centres worldwide presently consume between I per cent and 2 per cent of power; that will probably rise to 3 per cent to 4 per cent by the end of the decade, the bank forecasts.” Who knew, eh?

Time for SAE to dust off those plans it once had and quietly dropped for a data centre at MeyGen? Perhaps a data centre could sit comfortably beside MeyBess and even be powered from it?

When asked whether there was a wiser man in all Athens than Socrates, the famously equivocal Oracle at Delphi simply replied, “No.” Is there a poster on this BB who shows more insight than Mehmet66? No.

Read again his brilliant post of 9 Aug 2024. Then maybe have a look at the views of Acting Energy Editor at the Times, Emma Powell about lower interest rates reviving green investment - see

https://www.thetimes.com/business-money/markets/article/lower-interest-rates-signal-a-revival-in-green-energy-investment-25zxn6xl5

Back in 2020 it was common for clean energy funds to trade at a 20% premium above NAV. Now it’s a 20% discount. Powell quotes analysis suggesting share prices will not return to previous premium levels without interest rates returning to sub-1 per cent lows.

She also reports the UK’s battery storage sector labouring under questions about cashflow possibly due to the volatile nature of the revenues. And investors are no longer viewing renewables as a bond proxy.

With a cost of living crisis and sluggish economic growth there’s a shift away from ESG funds. “While share prices languish below asset values, renewable investment trusts are prevented from raising capital on the equity market, choking off a critical source of financing for new clean power assets.”

Today’s BoE interest rate decision (arguably over-cautious compared to the Fed) presumably leaves deep in the long grass any prospect of a share issue for an outfit like SAE.

Hopefully interest rates will decline and share prices will begin to reflect NAV more closely. Would a wise man spend much time analysing SAE’s finances over first 6 months of 2024 and predicting the impact on SP of the forthcoming Interim Report or of an RNS announcing the return of the 4th turbine? No.

Thanks Munin - reassuring to stand corrected about the AR1500 and to have confirmation it isn’t broken.

Thanks also to Downdraft for the pointer to the impressive Proteus website and the excellent news about the new Yaw system. It is tempting to imagine the AR1500 as having been retrofitted with new Pitch and Yaw systems in addition to wetmate!

Another gem on the Proteus website is the description of pulling 2 of the 1.5MW turbines up in a single day, servicing one on deck and returning it to operation within 36 hours, while other subsea work continued concurrently and before re-shoring the 2nd turbine for service.

Part 3

The overall picture could be moving in the right direction if revenues and asset values are up and outgoings and liabilities are down. But on a back-of-the-envelope analysis the value of net assets as stated at 30 June 2023 (about £10.25m) might show relatively little change as at the end of 2023. With just under 723m shares in issue that would suggest a NAV per share still around 0.014GBX which hardly foreshadows a dramatic impact on SP.

In the longer term, the company will eventually devour itself if it goes on disposing of assets for cash to fund it activities. If it is to thrive as a pure play project developer, SAE needs to re-build income streams from development premiums and consulting fees (in the accounts for 2022 no Consulting fee income was included compared to £3.5m in 2021 (earned on the Japan tidal turbine contract delivered by the Company’s subsidiary, Atlantis Operations (UK) Ltd) and £6.5m in 2020). Put another way, the company will need to monetise its experience and expertise in the valuable lessons learned from developing MeyGen Phase I, the world’s first tidal stream array. SAE is in a unique position in that respect. There seem to be other outfits around with more experience of BESS development but no-one can hold a candle to SAE when it comes to pioneering a Mey BESS combined with a MeyGen.

Part 2

What about outgoings? If SAE spent £19.5m in 2022 and £8.5m in the first half of 2023, Group expenditure for 2023 will hopefully be closer to £17m than to £19.5m (given one major offshore operation fewer than in 2022). But it will be interesting to see how the auditors treat accrued liabilities. We know the timetable for repayment of about £13.7m worth of Abundance bonds has been renegotiated and extended to June 2029. The effect of the extension will be to increase potential liabilities for higher interest payments over longer periods.

On one view then, it seems possible the accounts will show revenues for 2023 at around £24.8m and outgoings of around £17m. The effect might be to increase slightly the level of surplus reported for the first half of the year and create an opportunity for some loan repayment, further reducing liabilities.

It will also be interesting to see how the auditors reflect the results in the consolidated statement of financial position. The accounts for 2022 reported liabilities of around £79m against total assets of about £84.7m. Half-way through 2023 liabilities had decreased to about £74.9m against assets of £85.14m. The BESS land sale has probably not itself altered the overall value of the company’s assets, if the transaction effectively just changed the form of the asset from land to receivable cash. But it will be interesting to see whether the sale has prompted any re-valuation of the Uskmouth site, given the further BESS projects in the pipeline, the ready availability of the existing grid connection and the possibility of further projects there. Perhaps there are identifiable parcels of especially valuable land at Uskmouth that in earlier years were undervalued in company accounts. Or maybe not.

Part 1

Early confirmation would be welcome that May’s drop in MeyGen output was not due to the AR1500 turbine (which has only been back in the water since 21 March 2022) becoming u/s. Hard to reckon, if it is the AR1500, what the implications might be for Phase II and for Normandie Hydrolennes (on whose website can now be seen their timetable for commissioning 4 x AR3000’s in 2027 following turbine fabrication and assembly in Cherbourg).

In layman’s terms, SAE’s accounts for 2022 reported that the Group spent on one thing or another about £19.5m and brought in less than £8.5m (including £3.9m from power sales) making a “loss” of around £11.1m for the year.

The September 2023 Interim Financial Statement for the six months to 30 June 2023 reported SAE spent around £8.5m and brought in about £12.95m (including a £10m BESS development premium) – hence the reported “profit” of about £4.5m for the period. As at 30 June 2023, net assets were almost £10.25m (total assets of about £85.14m over liabilities of about £74.9m) according to the September 2023 Interim Financial statement.

What were the main financial events for SAE in 2023 and how pretty a picture will the numbers for the full year to 31 December 2023 paint?

On 20 June 2023 the 30-year land lease for the 230MW BESS project at the Group's Uskmouth site completed. At that point, the £6m loan received in 2022 as an advance on the £10m development premium payable in relation to the BESS, ceased to be a loan and was recognised by SAE as income. But the whole £10m was treated as revenue in SAE’s (unaudited) Interim Financial Statement for the six months to 30 June 2023 (including the accrued £4m, though it was not until July 2023 that SAE received the final £4m installment).

So, a very timely 10 days before the end of the 6-month period, liabilities reduced by £6m and revenues increased by £10m. Those numbers will doubtless also be reflected in the annual accounts for 2023.

Revenue from power sales should indeed be up and could be in the region of £5m or more (from 3 x 1.5MW turbines running throughout 2023). In addition, on 5 December 2023 SAE agreed to sell for £9.8m the freehold of the plot of land at Uskmouth on which the first BESS is under construction, with the £9.8m receivable in a series of milestone payments, linked to the BESS construction progress, throughout 2024 and 2025. The first £5m payment in respect of the sale was not received until 28 March 2024 and receipt of a further £2m payment was announced on 28 May 2024. But it will be interesting to see how the new auditors treat the £9.8m for the purposes of the 2023 accounts: the amount should presumably be included as accrued revenue. So, the accounts could conceivably show revenue as including £5m of power sales; the £10m development premium; and the £9.8m proceeds of land sale. £24.8m of revenue would look quite pretty and ought to be helping the company manage cash-flow.

And where is the evidence for the supply chain development that is known to be absolutely critical to the MeyGen project and the whole tidal sector? If you are eg a generator manufacturer, how excited are you going to get about bidding to supply 9 generators for 3MW turbines deliverable over the course of 2026/27? Less excited maybe than bidding to supply 16 of them for Phases II & III combined. But not as excited as you might be about supplying 130 of them to take MeyGen to 398MW over the next decade. And maybe hundreds more if the rest of the world follows suit. Perhaps that’s what really excites the private backers of Proteus. But what happens if a single link in the supply chain snaps, bearing in mind the delays in servicing re-shored 1.5MW turbines caused by long lead times for replacement parts?

The case has been stated for SAE/MeyGen leasing turbines rather than owning them but no-one else posting on this BB seems interested in discussing who might own the turbines. Why not? Isn’t it just pure wishful thinking to sit there imagining SAE or MeyGen is going to be able to afford to buy the turbines given what Mr Black says about the Group’s “financial position”?

Grounds for optimism? The AR1500 TSE turbine not only demonstrably works: with wet mate it can be re-shored rapidly for service and easily redeployed; the variable pitch system improves start-up, control and output; subsea hubs enable connection of multiple turbines to a single power export cable reducing the costs associated with grid connection; cable monitoring systems are reducing unplanned outage risks and lowering insurance costs; the AR3000 design increases blade and rotor size simultaneously raising output and offering significant reductions in LCOE; scaling up to 28MW and 50MW arrays brings further economies; and the successive CfD awards underpin financial viability.

So, what could possibly go wrong? Anything - hence the caution. Imagine for a moment the first AR3000 in the water doesn’t work or soon breaks down – risks which SAE and finance must assess fully. There’s a decade of litigation potentially just waiting to happen between designers and manufacturers. Maybe that’s why Mr Black was so crystal clear about requiring warranties from turbine suppliers. And maybe why it could prove such a smart move that neither the AR3000 turbine design nor its manufacture is located within the Group. And perhaps another reason for leasing turbines rather than owning them.

But once the first 3MW turbines have been successfully deployed and run without significant mishap for a decent period, what happens to the value of the majority shareholding in MeyGen should dwarf any conceivable enhancement between now and then.

So, another planning application. Fine. 2 hours? Nice statement of confidence that MeyGen will one day be a source of constant power, even through slack tide.

What’s next? Come the end of this month publication is due of SAE’s annual report and accounts for the period to 31 Dec 23, and the 4th turbine should be back in the water. SAE described the re-deployment as being on track, as at Dec 2023 - when they also said the delivery of the next 50MW at MeyGen “remains hugely challenging”.

SAE likes milestones. They must by now have at least in draft a minutely detailed business plan that sets out month by month, if not week by week, the precise sequence of events required to achieve the 2027 target for 28MW at MeyGen. And then the 2028 target for a further 22MW.

Financial closure for Phase II is scheduled for Q2 2025 ie within a year (give or take), and arguably already the greatest milestone on SAE’s near horizon. So, how is any big potential backer to assess, over the coming months, whether investing will generate worthwhile returns? They might start by looking at the detailed costings and revenue projections SAE and their financial advisers must be getting well-polished and ready to present. In all probability private equity backed the Proteus management buyout in the belief their investment would make returns within about 5 years. SAE might these days see themselves as a pure play project developer, but they should not – nay, must not – allow themselves to be talked into giving away the MeyGen farm just to ensure 28MW or even 50MW actually happens.

Then there are some small matters like identifying who is going to build and own the 3MW turbines. Yes, it would be fitting if they could be built in Scotland by Proteus, even if that just means final assembly of parts manufactured all over the place. But where are the heads of agreement about that beyond the adoption of an alliance contracting model for MeyGen? Has anyone seen any signs of Proteus expanding its operations at Nigg or tooling up to deliver 9 x 3MW turbines to MeyGen in 2027 while continuing to service the 4 existing 1.5MW turbines? Remember, Mr Black said almost a year ago that the sector “needs well capitalised tidal turbine suppliers that can provide large turbine orders backed by the required warranties, which the Group is not able to provide given its financial position.”

Nice topic raised about how to avoid during MeyGen Phases 2 & 3 the kind of issues identified as limiting turbine power output during Phase 1. Is scaling up just going to mean more issues instead of solutions or are there likely to be advantageous opportunities to raise performance; improve supply chains; reduce costs; keep turbines deployed and turning for longer; and approach break-even point?

Several publications suggest that the sector is evolving an ethos of searching self-appraisal to capture lessons learned:

1. Lessons Learnt from MeyGen Phase 1A - Final Summary Report 2020

https://webassets.bv.com/2020-06/MeyGen%20Lessons%20Learnt%20Full%20Report_0.pdf

2. October 2022 TIGER Report on Cost reduction pathway of tidal stream energy in UK and France

https://interregtiger.com/download/tiger-report-cost-reduction-pathway/

3. Review of Technical Assumptions and Generation Costs Levelised Cost of Electricity from Tidal Stream Energy May 2023

https://assets.publishing.service.gov.uk/media/655372484ac0e1001277d819/tidal-lcoe-report.pdf/preview

4. June 2023 Policy Report Seizing Sustainable Growth Opportunities from Tidal Stream Energy in the UK

https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2023/06/Sustainable-Growth-Opportunities-from-Tidal-Stream-Energy-in-the-UK-.pdf

The 2020 report identified many useful lessons from Phase 1A. The TIGER report found 8 drivers that could reduce TSE LCOE by 67.5%. Almost 40% of that reduction “comes from increasing the rotor diameter and rated power which have a compounded effect greater than the sum of the individual innovations.” The May 2023 Review notes that the rate of deployment of low-carbon generation, such as TSE, can… be adversely impacted by focussing too much on driving down LCOE. The June 2023 report repeatedly stresses the need for inter-departmental policy co-ordination on deployment and supply chain development.

A major factor behind delays in servicing re-shored turbines is long lead times for replacement parts. Lead times should shorten as data accumulates about the replacement parts most commonly needed for 3MW turbines being serviced. Perhaps even a lean-production Proteus will hold a few popular spares in stock.

Proteus should already be planning how they could tool up not only to build 100+ 3MW turbines over the next decade but also to service each of them every 5 years or so on a rolling programme. Every ship that sails to recover a turbine to re-shore for servicing should carry one to deploy in its place and, ideally, at least one more intended for first deployment.

But Mr Black was already cheerfully thinking about all that when he wrote last summer about the need for well capitalised turbine suppliers.

According to the company’s website today, 88% of the Company’s ordinary shares are not in public hands – see under Investor Relations Shareholder Information & FAQ’s

https://saerenewables.com/investor-relations/shareholder-information-faqs/

“SIGNIFICANT SHAREHOLDERS

As at 28th March 2024, SAE is aware of the following shareholders holding 3% or more of the issued share capital in the company:

Shareholder Shareholding (%)

SIMEC UK Energy Holding 29.68

Hargreaves Lansdown PLC 15.16

abrdn plc 10.47

Lloyds Banking Group 5.54

Morgan Stanley 4.57

Interactive Brokers Group 4.35

Janus Henderson Group plc 4.07

A J Bell Group 4.03

Barclays Bank 3.28

While the Company has implemented requirements within its articles to comply with the provisions of AIM Rule 17, the statutory disclosure of significant shareholdings is not identical to the requirements of the Disclosure and Transparency Guidance Rules for companies incorporated in Singapore and may not always ensure compliance with the requirements of AIM Rule 17.29. 88% of the Company’s ordinary shares are not in public hands.”

(3 of 3)

Well, what about the debt – the loans and borrowings? The Abundance bonds are secured against the shareholding in MeyGen. So, if private equity want a proportion of SAE’s shares in MeyGen in exchange for supporting the roll out, someone is going to have to procure the release of those shares, presumably by discharging the loans and borrowings secured against them. Some SAE shareholders might welcome a deal that effectively writes off all of SAE’s £58m debts in exchange for the bulk of SAE’s shareholding in MeyGen. On the other hand, some (including Timaeus) would argue that carrying some debt can help keep takeover predators at bay, and that preserving a majority shareholding in MeyGen until the entire 398MW array is completed might ultimately be the only way SAE can ensure the MeyGen array gets built to full capacity.

Maybe a couple of decades after SAE’s IPO some economic historian will write about the intrepid investors who had the vision to hold their shares long-term and top-up at a penny a share giving them a slice of an income stream worth more than 7bn over 15 years. Perhaps some LTH’s and Abundance investors really just want to save the planet, whatever it costs. Or maybe 20 years from now it will all just be an obscure question in the general knowledge section of a Tuesday night pub quiz.