SIMEC Atlantis Energy : Annual report 2022

ANNUAL REPORT 31 DECEMBER 2022

CONTENTS

	PAGE
Chairman's Statement	3
Chief Executive Officer's Statement	6
Board of Directors	9
Directors' Report	10
Corporate Governance Report	11
Audit Committee Report	17
Directors' Remuneration Report	20
Directors' Responsibility Statement	24
Independent Auditor's Report	25
Consolidated Statement of Comprehensive Income	29
Consolidated Statement of Financial Position	30
Consolidated Statement of Changes in Equity	31
Consolidated Statement of Cash Flows	32
Notes to the Financial Statements	33
Company Information	IBC

Uskmouth power station

Vessel Control Room

Shop 1 Nigg Energy Park

TTG2 Deployment 2023

Chairman's Statement

Introduction

Following the significant restructuring of the business in the first part of 2022, I am pleased to report that the last 12 months has seen the Group make solid progress on its key projects. Key highlights have been the execution of the lease agreement and receipt of the £10 million upfront premium on our first battery energy storage system ("BESS") project at Uskmouth, strong operating performance at MeyGen Phase 1A, and the award of a 28 MW Contract for Difference for MeyGen Phase 2.

Uskmouth

Following the difficult decision in 2022 to halt the development of the Uskmouth Power Station conversion from coal to waste-derived fuel pellets, we have made excellent progress on the redevelopment of the site into a Sustainable Energy Park.

The Group made significant progress over the last 12 months on the 230 MW BESS with Energy Optimisation Solutions and Quinbrook Infrastructure Partners, including securing the necessary grid variations in August 2022, the grant of planning consent by Newport City Council in December 2022 and culminating in the execution of the lease agreement in June 2023 and receipt of the final instalment of the £10 million upfront premium in July 2023. Energy Optimisation Solutions and Quinbrook Infrastructure Partners are expected to commence construction of the project later this year.

The Group is also in advanced stage discussions with another developer in relation to co-developing a further 120 MW battery energy storage system project on the Uskmouth site which we look forward to providing further details of in the coming months.

We continue to work on the development of a comprehensive plan for the redevelopment of the Uskmouth site into a Sustainable Energy Park and continue to believe that there is the potential to unlock significant value from the site from both further battery energy storage systems as well as other sustainable energy initiatives.

As well as delivering value to shareholders, the successful development of our first BESS project at Uskmouth is allowing the Group to develop and demonstrate our capabilities in developing BESS projects. We see a significant market opportunity in the UK for BESS projects and we are exploring further opportunities at Uskmouth as well as elsewhere.

Tidal engineering and services division

In October 2022, we announced new investment into, and the purchase of a 79% shareholding in, the Group's tidal engineering and services division by Proteus Marine Renewables Limited ("Proteus"). Whilst the vertical integration between tidal turbine supplier and tidal project developer has served the Group well to date in the development of the tidal industry, there was always a recognition that these were very different businesses and as the tidal power industry has matured, we considered that this was the right time to separate the two businesses to allow each to focus on its own very different objectives.

This was another difficult decision but ultimately one that the Board considered essential in the interests of each business. If the tidal power sector is to be viable, it 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.

The spin-out of the Group's tidal engineering and services division was the last stage in our restructuring that has significantly reduced the Group's operating costs and created a pure play sustainable energy and battery storage project developer. I am pleased to report that the Group is working well with Proteus on MeyGen 1A as well as with regard to the potential tidal turbine supply for MeyGen 2.

Annual Report and Accounts 2022 3

Chairman's Statement

continued

MeyGen phase 1A

We have continued to make good progress in stabilising operations at MeyGen Phase 1A. In September 2022, we returned the third of the four MeyGen 1A tidal turbines to service, with all three turbines operating well over the course of much of the last 12-months. The fourth turbine was successfully returned to operation in July 2023 following a significant upgrade and refurbishment programme of works, however, at the same time, we took the difficult decision to bring forward the reshoring of the Atlantis-supplied "Turbine 4" to allow for preventative maintenance and upgrade works.

In February 2023, MeyGen Phase 1A achieved a significant milestone in generating 50 GWh of clean and predictable electricity since the project's inception. Whilst the Phase 1A project has historically had a significant number of technical challenges associated with it being a "first of kind" project, it is now in a situation where it is in stable operations with significant learnings which are being applied to ongoing operations as well as to MeyGen 2.

MeyGen phase 2

We were delighted to announce in July 2022 that we had secured a Contract for Difference (CfD) from the UK government in the AR4 allocation round for a further 28 MW of tidal power at the MeyGen site. Following the announcement, we have progressed development of the project including initial design and engineering work, negotiations with potential tidal turbine suppliers, and the appointment of a financial advisor to advise on securing debt and equity funding for the project. Financial close of the project is targeted for Q2 2025 and we will provide further updates as development progresses.

Securing this CfD is a very significant development for MeyGen and for the tidal power sector as a whole, allowing an expansion of MeyGen's existing 6 MW array to a total of 34 MW. It allows the Group to build upon the success and learnings of the MeyGen Phase 1A project to deliver a project at commercial scale that will be able to demonstrate the commercial viability of tidal power as a key source of clean and predictable power.

New conversion opportunities

The Group continues to seek opportunities internationally to apply the expertise that it developed in the Uskmouth Power Station conversion project to other coal to waste-derived fuel pellet conversion projects. Our efforts remain focused in Eastern Europe where we see a number of potential opportunities given continued high gas prices, security of supply concerns, and the availability of waste feedstocks.

We continue to be of the view that simply closing coal-fired power stations in many countries around the world is not an option, so conversions of existing coal-fired power plant to waste derived fuel pellets that bring down carbon emissions significantly, akin to those of a new gas-fired power station, and which in addition address the huge issue of plastic waste, are compelling. Our focus over the last 12 months has been on development activities at Uskmouth and MeyGen, but we will continue to seek to identify potential opportunities and will update shareholders accordingly.

Strategy

With the spin-off of the tidal turbine engineering and services business, we are a pure play developer of innovative sustainable alternative energy projects. We are not seeking to compete with large utilities and oil companies in delivering "commoditised" renewable energy projects such as wind and solar, but rather seek to identify innovative solutions to help aid the energy transition. In particular, we recognise the challenges posed by the growing dominance of weather-dependent renewable generation and that the transition to renewables and net zero cannot be immediate.

Our BESS projects will serve to provide grid stability given the dominance of weather dependent, intermittent renewables and our tidal projects provide a predictable source of generation that is uncorrelated to weather dependent renewables. Our coal project conversions provide a predictable, diversified source of sustainable power generation, provides for a larger reduction in carbon emissions than the same capacity of weather-dependent renewables, and delivers the added benefit of addressing the plastic pollution problem.

4 Simec Atlantis Energy Limited and its subsidiaries

Chairman's Statement

continued

Our priorities in the near term remain focused on the development of the Uskmouth Sustainable Energy Park, and the stabilisation of existing operations at, and expansion of, the MeyGen tidal project.

Thank you

The transition to net zero continues to be a key global priority and as a Group we remain committed to making a tangible contribution to the transition to net zero. We look forward to the next 12 months and to keeping you apprised of our progress.

I would like to sincerely thank all the members of our fantastic management team for their hard work throughout the last 12 months and all of our stakeholders - shareholders, local communities, governments, and business partners - for their ongoing support to the Group and our projects.

Annual general meeting

Our Annual General Meeting will be held on Friday 11 August 2023. Details of the resolutions to be proposed are set out in a separate Notice of Annual General Meeting, which accompanies this report for shareholders receiving hard copy documents, and which is available at www.saerenewables.com for those who elected to receive documents electronically.

Duncan Black

Chairman

25 July 2023

Annual Report and Accounts 2022 5