Simec Atlantis Regulatory News (SAE)

The information contained in this announcement is inside information under the Market Abuse Regulation (EU) No 596 / 2014. The person responsible for arranging the release of this announcement on behalf of Atlantis is Tim Cornelius, Chief Executive Officer of SIMEC Atlantis Energy.

24 September 2018

SIMEC ATLANTIS ENERGY LIMITED

("Atlantis", the "Company" or the "Group")

Interim Results (unaudited)

and Audited Full Year Results for SIMEC Uskmouth Power Limited

SIMEC Atlantis Energy Limited, the global developer, owner and operator of sustainable energy projects with a diversified portfolio of more than 1,000 megawatts in various stages of development, is pleased to announce its unaudited Interim Results for the six months ended 30 June 2018. These results incorporate SIMEC Atlantis Energy Limited and SIMEC Uskmouth Power Limited ("SUP") which was acquired on 15 June 2018.

Separately, SUP's pre-merger audited results for the year ended 31 March 2018 are set out in the Appendix. These results only contain a limited period of operation as SUP ceased operating as a coal-fired plant in April 2017.

OPERATIONAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

Tim Cornelius, Chief Executive of Atlantis, commented:

"Our flagship 220MW conversion project at Uskmouth, Wales is helping the UK tackle the big issues of non-recyclable plastic waste management and baseload energy generation and will form the blueprint for further conversion of similar plants worldwide. The conversion process is progressing well and we are on track to have first power generation from the converted plant in 2020 which will immediately deliver meaningful operational cashflows.

The MeyGen project has now exported more than 8GWh of predictable, clean energy to the grid and the recent unveiling of our new 2MW tidal power turbine, the largest single rotor system in the world, will open up new project development opportunities in the UK, France, Channel Islands, South Korea, Japan and China as costs reduce and reliability continues to improve. We will be returning the two Andritz turbines to service in Q4 2018 on MeyGen Phase 1A post their inspection, repair and maintenance period and we look forward to a very productive winter.

We continue to work with our new strategic shareholder, SIMEC, to look for further acquisition and investment opportunities as we seek to expand the generation base of our group. The possibility of future acquisitions of SIMEC hydro, storage, onshore wind and bio-fuel projects puts us on a trajectory of rapid growth, with the ambition of transitioning swiftly into a cash generative, growth company of scale."

The full Interim Report and SUP Annual Report and Accounts will both be available to download from the Company's website www.simecatlantis.com today. 

CHAIRMAN'S STATEMENT

This autumn, as I reflect on the first six months of 2018, it is a story of growth and transformation for the Group. Our change of name to SIMEC Atlantis Energy Limited exemplifies this transformation and our new relationship with the SIMEC group as our largest shareholder. In this regard, SIMEC now has two representatives on the Atlantis Board of Directors and I welcome Jay Hambro and Mark Elborne and look forward to their contributions ensuring a successful future. I would also like to take this opportunity to give my sincere thanks to our outgoing Directors, Ian Cobban, Mike Lloyd and Duncan Black for their service to the Board. Each has played his part in shaping the Company - from Mike's stewardship of the technical committee, Ian's offshore experience to Duncan's wide-ranging expertise in both executive and non-executive roles.

The most significant immediate effect of the SIMEC transaction is our diversification into a new form of sustainable baseload energy using combustible pellets made from compressed waste materials which would otherwise go to landfills. As of 15 June 2018, the Atlantis Group now includes SIMEC Uskmouth Power Limited, the owner of a large power station in South Wales. It is our intent to convert this power station to produce 220MW of net output using waste derived pellets as its fuel instead of coal. As the pellets are created from waste, this results in a much lower fuel price than either the original coal or other conversion options such as traditional biomass, and should enable the plant to continue to operate economically for another 20 years. By carrying out this conversion we believe we can create value for our shareholders whilst meeting a demand for secure baseload power, as other fossil fuel generators face closure. Furthermore, the plant's consumption of the waste derived pellets ensures that materials that are unsuitable for recycling can be repurposed as a useful fuel product. A successful conversion at Uskmouth can form the blueprint for other power stations that otherwise face obsolescence, providing instead an extended period of valuable service in compliance with up-to-date emissions regulations.

As well as initiating our first pellet conversion project, the SIMEC transaction grants Atlantis a right of first offer over other renewable energy assets in the SIMEC pipeline. These assets include operational hydropower projects and development schemes for pumped hydro storage. We are working with SIMEC to identify assets that may be suitable for transfer to the Atlantis portfolio.

Tidal power still forms the bedrock of that portfolio, and our operational project at MeyGen continues to generate power and export to the grid. In April we chalked up our fastest gigawatt hour of generation yet, speeding from 5GWh of total generation to 6GWh in less than three weeks. This was equivalent to a total load factor of over 36%, and our data tells us that we can improve on this as we continue to work with the turbine suppliers to implement improvements in reliability and efficiency. Our rate of learning has been just as impressive, and we are using that to refine our plans for further build-out at the MeyGen site and for new projects globally. We can plot a trajectory to significant reductions in the cost of tidal energy which will allow us to compete with more established renewables for a fraction of the previous subsidy support.

The overall loss for the six-month period reflects the significant investment that we have made to reposition Atlantis for growth as well as the transition of MeyGen Phase 1A into its 25-year commercial operating phase. At times of growth and development we value more than ever the support of our shareholders and investors, and in this period we were delighted to see another £5 million bond placement fully subscribed and a further £20 million of new equity raised from new and existing shareholders. With the benefit of this support, we are committed to building a diversified and cash generative project portfolio to supplement turbine sales and consultancy revenues for a sustainable business for the future.

Summary of Financial Results

As a result of both the capital raise and SUP acquisition the net assets of the Atlantis Group increased during the period from 31 December 2017 by over £74 million.

Revenue recognised in the period of £1.3 million relates to sales of power generated by the MeyGen 1A project in its operating phase. Total expenses for the period of £9.1 million includes both SUP acquisition costs and MeyGen costs associated with power sales being recognised.

Together with the capital raise from the market and bond issue, total cash from financing activities for the period, net of loan repayments was £23.4 million.

The unaudited consolidated cash position of the Atlantis Group at 30 June 2018 was £22.8 million.

The significant progress in the first half of 2018 has only been possible due to the support of all of our stakeholders, alongside the efforts of our employees during the period, who, as always, are critical to our continuing success.

John Neill

Chairman

23 September 2018

Included in cash and cash equivalents in the statement of financial position is £928k of encumbered deposits.

Notes to the Consolidated Interim Financial Statements

The condensed consolidated statement of financial position of SIMEC Atlantis Energy Limited (the "Company") and its subsidiaries (the "Group") as at 30 June 2018, the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the Group for the six-month period then ended and certain explanatory notes (the "Consolidated Interim Financial Statements"), were approved by the Board of Directors for issue on 20 September 2018.

These notes form an integral part of the Consolidated Interim Financial Statements.

The Consolidated Interim Financial Statements do not comprise statutory accounts of the Group within the meaning in the provisions of the Singapore Companies Act, Chapter 50. The Group's statutory accounts for the year ended 31 December 2017 were prepared in accordance with the provisions of the Singapore Companies Act and International Financial Reporting Standards ("IFRS"). The Group's statutory accounts were approved by the Board of Directors on 16 June 2018 and have been reported by the Group's auditors.

1 Domicile and activities

SIMEC Atlantis Energy Limited is incorporated in Singapore with its registered office at 80 Raffles Place, Level 36, Singapore 048624. The principal place of business is Edinburgh Quay 2, 139 Fountainbridge, Edinburgh, EH3 9QG, United Kingdom.

The principal activity of the Group is that of pioneering the development of tidal current power as the most reliable, economic and secure form of renewable energy. The Company is an inventor, developer, owner, marketer and licensor of technology, intellectual property, trademarks, products and services, and is an investment holding company.

2 Significant accounting policies

Basis of preparation

The Consolidated Interim Financial Statements have been prepared in accordance with the AIM Rules for Companies and are therefore not required to comply with International Accounting Standard 34 Interim Financial Reporting to maintain compliance with IFRS. In all other respects, the financial statements are drawn up in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and adopted by the European Union.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2017.

The Consolidated Interim Financial Statements, which do not include the full disclosures of the type normally included in a complete set of financial statements, are to be read in conjunction with the last issued consolidated financial statements of the Group as at and for the year ended 31 December 2017.

Accounting policies

The accounting policies and method of computation used in the Consolidated Interim Financial Statements are consistent with those applied in the last issued consolidated financial statements of the Group for the year ended 31 December 2017, except as detailed below.

As a result of the business combination detailed in note 5, the following accounting policies have been adopted:

Property, plant and equipment

The Group has acquired a new class of assets, Power Plant, as a result of business combinations.

Any revaluation increase is recognised in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such power plant, land and buildings, and plant and machinery is recognised in profit or loss to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

Depreciation is charged to the statement of profit or loss using the straight-line method over the estimated useful life of the asset on the following basis:

Power Plant - 4-6%

Freehold Buildings - 2-10%

Motor Vehicles - 25%

Inventory

Inventories are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises all direct expenditure and those attributable costs overheads that have been incurred in bringing the inventories to their present location and condition.

3 Critical accounting judgements and key sources of estimation uncertainty

In preparing this set of Consolidated Interim Financial Statements, except as detailed below the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017.

Acquisition accounting

In reviewing whether the transaction is a business combination management have determined that control of SUP has been taken through the purchase of its entire share capital. Whilst SIMEC have acquired 49.9% of the Company's share capital through the issue of consideration and other shares, management do not believe SIMEC have control over the Group due to contractual arrangements in place to maintain the independence of the Company. On this basis, the business combination has been accounted for using the acquisition method.

When the Group completes a business combination, the fair values of the identifiable assets and liabilities acquired, including intangible assets, are recognised at their fair value. The determination of the fair value of acquired assets and liabilities is based, to a considerable extent, on management's judgement.

Management's review of the carrying value of the identifiable assets and liabilities acquired, including separately identifiable intangible assets, resulted in no fair value adjustments and subsequently no goodwill or bargain purchase price (see note 5).

It is the view of management that the market price consideration for SUP is currently the most appropriate reflection of the fair value of the net assets acquired.

At each reporting date and as the SUP conversion project moves through the FEED process towards financial close, during which it is anticipated that the risk profile of the project will reduce, management will review the valuation of the Power Plant.

4 Going concern basis of preparation

The Group has prepared financial forecasts for a period beyond 30 September 2019, including sensitivity analysis. These forecasts, which take into account the ongoing committed costs of the Group, demonstrate that the Company is able to operate within its available cash and funding balances for a period beyond 30 September 2019. The forecasts indicate that the Group is projected to operate within its available cash facilities for the forecast period although mitigating action may be required to be taken in advance of periods when cash and cash equivalents available for use are forecast to be limited.

While the Directors cannot envisage all possible circumstances that may impact the Group in the future, the Directors believe that, taking account of the forecasts, future plans and available cash resources, the Group will have sufficient resources to support the Company to meet all ongoing working capital and committed capital expenditure requirements as they fall due.

5 Acquisition of SIMEC Uskmouth Power Limited

On 15 June 2018, pursuant to a sale and purchase agreement dated 14 December 2017, the Company successfully completed the acquisition of the whole of the issued share capital of SUP, a company incorporated in the United Kingdom, from SIMEC, a member of the GFG Alliance. The acquisition was undertaken to create a diversified renewable energy platform and it is proposed that the 220MW of capacity at the power station in Wales will be converted to use a waste derived energy pellet as fuel.

Consideration for the purchase was the issuance by the Company of new shares to SIMEC, such that immediately following the issuance of such shares, SIMEC became a 49.99% shareholder of the Company and Group. On the basis of the Company's share placing price of 35 pence per share, which completed concurrently with the share issue, the fair value of the shares issued was £53.4 million.

The acquisition-related costs amounting to £4.2 million excluded from the consideration transferred were included in the cost of investment. £3.6 million of expenses were recognised as administrative expenses in the consolidated statement of comprehensive income in 2018. The balance of £0.6 million was incurred during 2017.

The acquired business contributed losses and revenue amounting to £0.4 million and £nil respectively to the Group's results for the period from 15 June 2018 to 30 June 2018.

Had SUP been consolidated from 1 January 2018, then the Group's consolidated revenue and consolidated loss before tax for the period to 30 June 2018 would have been £1.4 million and £12.6 million respectively.

A purchase price allocation was conducted to determine the valuation of the acquisition. No fair value adjustments were identified and no goodwill or bargain purchase price arose during the business combination.

The following summarises the identifiable assets acquired and liabilities at the acquisition date at their provisional fair value:

Fair values are described as provisional due to the proximity of the acquisition to the period end.

6 Other notes

(i) In the period from April to June 2018, the Group, via a newly incorporated, wholly owned, subsidiary company Atlantis Future Energy plc, raised £5.0 million through a bond issuance.

(ii) On 21 May 2018, the Company raised £20 million, before expenses, through the placing of 57.1 million new ordinary shares at a placing price of 35 pence per share.

On 15 June 2018, the Company issued 183 million new ordinary shares at a placing price of 35 pence per share, of which 152.6 million were consideration shares and 30.4 million were loan completion shares, both of which are linked to the acquisition of SUP.

During the period, £897k of expenses were incurred incidental to the issuance of shares.

(iii) In respect of the six months to 30 June 2018, the diluted earnings per share is calculated on a loss of £9,081k on the basic weighted average of 147,193,508 ordinary shares. In respect of the six months to 30 June 2017, the diluted earnings per share is calculated on the loss of £3,542k on the basic weighted average of 118,547,160 shares. Share options were excluded from the diluted weighted average number of ordinary share calculations as their effect would have been anti-dilutive. No dividends have been declared (2017: nil).

7 Events after the reporting period

On 3 July 2018, one of the subsidiary companies, Atlantis Resources (Scotland) Limited, repaid £3.8 million of secured long term loans using proceeds from the bond issuance mentioned above.

APPENDIX - SIMEC USKMOUTH POWER LIMITED SUBSIDIARY RESULTS FOR THE YEAR ENDED 31 MARCH 2018

SIMEC Atlantis Energy Limited, the global developer, owner and operator of sustainable energy projects with a diversified portfolio of more than 1,000 megawatts in various stages of development, is pleased to announce the annual results of its recently acquired subsidiary, SUP, for the year ended 31 March 2018.

FAIR REVIEW OF THE BUSINESS OF SIMEC USKMOUTH POWER LIMITED IN THE YEAR ENDED 31 MARCH 2018

The principal activity of SUP is power generation and trade of coal and oil commodities.

SUP is a 393 MW Coal Fired power plant. SUP was acquired by the SIMEC group on 28 February 2015 with a view to bringing the plant to its full generating capacity. The plant started generating electricity at the beginning of April 2015. On 3 April 2017, the plant suffered fire damage to its switch room and as a result, power generation was suspended until the conversion work from coal to waste generation is completed.

On 15 June 2018, prior to the date of approval of these financial statements, SUP was acquired by Atlantis, which intends to convert the existing coal plant to a waste derived fuel generating facility.

SUP made a pre-tax loss of £13,479,000 (2017: £6,568,000) for the year on an overall turnover of £1,864,000 (2017: £72,376,000).

At 31 March 2018, SUP had net assets of £51,786,000 (2017: £47,973,000).

FUTURE DEVELOPMENT OF THE BUSINESS

The objective of SUP is to significantly expand power production using renewable energy generation processes and technology. The directors plan to convert the existing coal plant to a waste derived generation plant.

POST BALANCE SHEET EVENTS

On 15 June 2018, SIMEC UK Energy Holdings Limited, the former parent company of SUP, sold SUP to Atlantis, in consideration for a 49.99% shareholding in Atlantis.

Timothy Cornelius

CEO

20 September 2018

The full Annual Report and financial statements of SIMEC Uskmouth Power Limited will be available to download from Atlantis's website www.simecatlantis.com later today.