MIDAS SHARE TIPS: Atome Energy dam could open flood gates to profit

Eco-warriors frequently fret about the environmental damage caused by flying. Some refuse to step on to a plane. 

But it’s not just aviation, many sectors cause pollution, not least the £160 billion a year fertiliser industry, responsible for 5 per cent of global greenhouse gas emissions – more than aviation and shipping combined.

Atome Energy has developed a way of making zero-carbon fertiliser at scale, using hydro-electric power, water, air and limestone. The company listed on AIM at 80p in December 2021, the shares are 82.5p today and should move rapidly higher as the business moves closer to commercial production.

Atome is chaired by Peter Levine, best known for floating oil and gas group Imperial Energy for little more than £2 million in 2004 and selling it four years later for £1.4 billion.

At his side is Olivier Mussat, who spent almost a decade at the World Bank, as head of financing for energy projects.

Recognising that the farming industry is under real pressure to go green, the duo have turned their attention to eco-friendly fertiliser, which can dramatically reduce harmful emissions while fostering efficient food production.

Atome’s main project is in Paraguay, close to the border with Brazil. The location makes sense on several levels.

Paraguay is run by a business-friendly government, it is rated by investors and growing at a decent clip.

Importantly, too, the country is behind the world’s largest hydroelectric plant, which it shares with Brazil. The plant produces more electricity than Paraguay knows what to do with and ministers are anxious to exploit that.

Atome intends to use some of that electricity to power a plant that will source hydrogen from water, mix it with nitrogen from the air and add nearby limestone to create premium fertiliser for local and international use. Brazil is an obvious port of call, as the world’s largest importer of fertiliser. But Atome’s product will be in granular form so can easily be shipped further afield, and talks are already under way with UK crop producers and Irish potato farmers.

Atome has come a long way since listing on the stock market. The Paraguay project has been meticulously designed and top contractors appointed to bring it to fruition. Funding now needs to be found – stretching to more than £250 million – but Levine and Mussat are confident that they can secure the cash, supported by the Inter-American Development Bank, which finances select projects in Latin America.

Discussions are in progress with local potential customers and energy giant Baker Hughes recently became a key investor. The US multinational spent £2.4 million on a 6.6 per cent stake in Atome, a glowing sign of confidence in Levine and Mussat’s strategy.

The group intends to move into commercial production by 2026, making around 250,000 tons of fertiliser a year, worth well in excess of £80 million, at today’s prices.

Plans are already in place to increase production in Paraguay from 2027 and longer term, two other projects are in the pipeline –one in Costa Rica, which uses copious amounts of fertiliser to grow pineapples, melon and other fruit, the second in Iceland, using geothermal energy to make green fuel for the local shipping industry.

Atome may be a small company with projects in far-flung locations but the firm is based in Leeds and run by an experienced and ambitious management team. The technology is proven and has been deployed in other spheres for decades and there is strong demand for the fertiliser it intends to produce.

Many of the largest food businesses in the world are under pressure from governments and regulators to reduce their carbon footprint, while consumers are also increasingly keen on produce that does not pollute the planet. The war in Ukraine highlighted another key issue – global reliance on Russia and Belarus for fertiliser.

Green fertiliser, sourced from other parts of the world, can help on both counts, cutting agriculture’s carbon footprint and making food production more secure.

Midas verdict: Atome is at the forefront of the green fertiliser sector and supporters believe the shares should soar to more than £2 in the next year or two. At 82.5p, the stock is a buy.

Traded on: AIM Ticker: ATOM Contact: atomeplc.com or 0113 337 2210