ATOME Energy PLC (AIM:ATOM) is at an inflection point that could see a re-rating of the shares in the green hydrogen and ammonia specialist, according to Liberum.
In a 10-page research note, the boutique investment bank took a closer look at ATOME’s flagship project, Villeta, in Paraguay, alongside Thursday’s interim results statement.
Post-development, the operation will produce green hydrogen and ammonia, targeting Paraguay and the broader South American agricultural and fertiliser markets.
Liberum points out that the fourth quarter of 2023 is a crucial period for ATOME, as it plans to make a final investment decision (FID) on this first-phase, 120-megawatt plant.
The upfront capital expenditure requirement for Villeta is estimated at US$365 million, and it promises a “market-leading” internal rate of return (IRR) of 29%.
The company’s unique geographical positioning is another feather in its cap. ATOME benefits from Paraguay’s excess of competitively priced, low-cost green eletricity.
Since its stock market listing in December 2021, the company has made significant strides, including signing a power purchase agreement (PPA) with ANDE, Paraguay’s state energy company.
This agreement is for the production of green ammonia, which will be converted into industrial-scale premium-value green fertiliser by 2025.
According to Liberum, Villeta has the potential to displace around 500,000 tonnes of carbon dioxide equivalent per annum.
With carbon pricing under the European Union Emissions Trading System regularly trading between €80 and €100 per tonne, this could generate a carbon credit value of €80-€100 million per annum.
Turning to the company’s interims, published earlier on Thursday, ATOME reported a loss of US$2.9 million, although this was slightly better than Liberum’s estimate of a US$3.1 million shortfall.
It also capitalised US$2.1 million of costs related to Villeta’s front-end engineering design (FEED) studies.
ATOME’s financials appear stable. Itended the period with a debt-free cash balance of US$3.6 million and has access to a £3 million standby equity facility.
In the note, Liberum maintained its ‘buy’ on the shares, which it values at 220p each – that’s a more than 100% premium to the current price of 99p.
