Atlantis Resources: Pure Play Ocean Power

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by Debra Fiakas CFA

Atlantis Resources Ltd. (ARL:  LN) is among the most recent additions to the Ocean Group in Crystal Equity Research’s Earth, Wind and Fire Index of companies using the dynamic forces of the planet to generate energy.  Atlantis is a developer of tidal power generation technologies.  Atlantis has been working diligently for over a decade to developer underwater turbine technologies.  A project in San Remo, Australia using the company’s Aquanator tidal current turbine was among the first in the world to deliver ‘ocean’ power to an established electric power grid.  The Aquanator has since been replaced by a larger turbine.

Tidal and waver power is an attractive alternative to wind power generation.  Water is over 800 times denser than wind.  Consequently, underwater turbines can be substantially smaller than wind turbines yet generate comparable or greater power.  The moon cycle is also highly predictable, a characteristic that grid operators appreciate from a power source.  Even with some deviations due to weather conditions, consistent power generation from waves and tides can be counted upon day-by-day and year round.

Atlantis is ready to move ahead with its tidal turbine product line. The company is providing the tidal turbines for a demonstration project near Daishan, Zhehiang, China.  Atlantis is also involved in pilot projects in India and Canada.

MeyGen, the world’s largest tidal stream energy project has been under development off the coast of Scotand.  It is a distinctive location where tidal action reaches up to five meters per second.  Atlantis is will supply the underwater turbines for the 400-megawatt project, which has received regulatory consent.  Total estimated project cost is near £51 million (US$75 million).

The United Kingdom has been particularly supportive of tidal power development because of the particularly dynamic ocean around the island nation.  The UK Department of Energy & Climate Change calculated that wave and tidal energy could supply as much as 20% of UK electricity needs if efficient tidal turbines were in place.  The UK government has provided £10 million (US$14.5 million) in the form of a grant to support the MeyGen project.

In 2014, Atlantis completed an initial public offering of its common stock and listed on the London Exchange.  Since then the group has successfully raised project financing.  At the end of June 2015, Atlantis reported £85.1 million in equity (US$123.4 million) and £35.2 million in long-term debt (US$50.7 million).

While Atlantis is still a developmental stage company in many respects, it has picked up some revenue.  In the year 2014, Atlantis reported £5.3 million in total sales (US$7.7 million).  Losses have been significant with a net loss of £16.2 million (US$23.5 million).  Things have not changed much in recent months.  In the first six months of 2015, Atlantis recorded another £$951,000 in total sales (US$1.4 million).

Cash usage was significant and is increasing as the company moves forward with the MeyGen project.  Atlantis burned up £4.3 million of its cash resources (US$6.2 million) in the year 2014 to support operations and another £7.2 million in the first six months of 2015 (US$10.4 million).  The group had £29.2 million in the bank at the end of June 2015, providing support for operations for about another year at Atlantis’ recent spending rate.

Atlantis shares trade on the London Exchange under the symbol ARL, making them accessible to most investors.  The stock is currently trading near its 52-week high even after the rout of U.S. and European equity markets.  Investors keen on getting a stake in tidal power, will need to sharpen their trading skills.  ARL trades at low volumes near 6,700 share per day.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


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