Atome Plc (ATOM) Earnings Call Transcript & Summary

Good morning, and welcome to the ATOME Plc investor presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. I would now like to hand you over to Chairman, Peter Levine. Good morning.

Good morning, and thank you for everyone who's just joined us, and we appreciate your interest in ATOME and what is the latest news from ATOME. I hope you can hear me well. And what I'd like to do first is introduce my colleagues who are joining me today. There's Oliviar Mussat and Nikita Levine and both directors, obviously, of ATOME PLC. I'd like to welcome them and thank them for all the hard work that they are doing in relation to ATOME. Now we've sort of titled this to do with the hanging it on the accounts being issued last week, end of last week. That's the full year accounts, the delayed full year accounts and the half year accounts, which we announced on Friday as well, which has enabled us to start trading. Now we've pitched it on the back of those 2 accounts. But in reality, those accounts are there to be read. Those accounts are there in terms of factual information. And some of the things that are said in the narrative, of course, relate to the present position, which I'm sure and we are sure at ATOME that shareholders would want to learn from us what is the present position in terms of that on ATOME PLC and this business with a principal focus on Villeta. And that's why we are very grateful for the opportunity and grateful for you joining us in order for us to give you that latest information firsthand. This is the first time that we've been able to do this. I'm sorry to all shareholders that the accounts were delayed. They were delayed for the obvious reasons in terms of Villeta, and we wanted to wait to let some dust settle and to identify what is really happening out there before we issue the accounts, and we're now pleased to do so, and we move forward. So let's go first to the first slide, if we can, please. Slide 3. And that's the executive summary. And let me be very brief on this and a bit of the point. As you all know, we declared FID, and we declared FID for a very good reason. We were days away from starting work on site in Villeta. Everything was in play and ready. We had what we considered to be an agreement on the PPA. We had all the committed -- legally committed financing signed and done and closed. We had, of course, our EPC and we had, of course, our offtake. And we had a contract which we've actually signed for the [indiscernible] contractor to move in and start the work. We were all ready. And then in June of 2026, we had, as we've said in the slide, a disruption. We had a disruption because of a revocation of the decrees. Now let me take you all back to what the circumstances were. When we were structuring this deal and Olivier was leading the charge in relation to the actual project finance aspect of it. When we were dealing with this, there were certain requirements of our lenders and our funders in order to make this transaction proceed. We, at all stages, discussed this with the Government of Paraguay. They were fully aware, and I'm talking about the presidential level. They were fully aware of the need to fit into certain basic requirements of DFIs, Development Funding Institutions. in terms of what is required for the principle of the power purchase agreement. The power purchase agreement, as you all know, was very important for our transaction, for our project. It was very important because we need power in order to split water into hydrogen oxygen, which then ultimately feeds its way to ammonia and then ultimately feeds its way to our end product, which is calcium ammonium nitrate. So we need the power. It is power which is fundamental to our project. And therefore, right the way from 2021, power has been at the forefront of our minds. And so has negotiations and relations with the government and with ANDE, which is the national power company, which doesn't generate power, it buys power. It buys power from the generators, principal generator, which is the Itaipu Binational Dam, which is jointly owned between the Governments of Paraguay and Brazil. So we got to a point in 2025 when we recognize after discussions with all the finance parties that we needed a long-term power agreement, stable prices, recognized prices, and we needed certain prices, which were made the project viable. And that's really important. So in those discussions with the government, and the government itself spoke to some of our lenders as well, some finances, they were tremendous. They went to see them. The President even went to see Yara in Norway in my presence and talked about it and absolutely gave support. And then in the back end of 2025, negotiations happened with the government. And in January 2026, this resulted in the government itself agreeing or deciding to actually grant us a decree, which actually fitted in and conformed with our project. It wasn't just a decree. It was a resolution, so-called Power-to-X, which was welcomed. And this was also done after discussions with ANDE itself. And things moved on swimmingly in terms of that. In April -- and I'm just giving you certain key highlights and glossing quite a lot of the detail, but we continue to work very comfortably with the government. In April 2026, we entered into binding financial commitments with the major funders, the DFIs at the IDB Investor Conference in Asunción. It was welcomed by the government. The government were congratulated. And of course, those parties, namely the funders, and were reliant on the government decree just like we were and the promises and guarantees made separately by the government. We had already agreed during that time a form of PPA, Power Purchase Agreement with ANDE who cooperated with us. And in fact, in April 2026, a decree was issued again by the government, but with the approval of not only ANDE, but its unions in terms of what the limits of the type of industry that could get a certain amount of power. So it's 250 megawatts of power for the sort of industries that we were involved in. And of course, we were taking 125 of that at least. And then also reaffirmed the January 2026 decree, which itself was justified on a multipage public document by the government itself as to why they determined the value, why they determined the price and the value to the country of the project. And what happened was in June of 2026, we were taking it back, and I was in Paraguay at the time. And I was in our office, and we were contacted by someone who said switch on the TV, and we switched on the TV and was shocked without notice to see that the government was actually live revoking the decrees. The rest they say is history. Since that time, as what we consider to be disgraceful, as that action was and the fact that we had relied on the representations and promises of the government, we've been in discussions and remain in good faith discussions with trying to sort the thing out, trying to come to a resolution of that. There's been lots of discussions, lots of talk in Paraguay, but we're still there and still in good faith discussing matters with now the new President of ANDE, who replaced the old President and of course, the governments and certain ministers themselves. And we are in touch with them, and it is good faith. In the intervening period, of course, it was very important to ensure that all our stakeholders, our funding partners, our EPC partner, Casale, and I'm actually speaking from Casale's offices in Switzerland and Yara, of course, were all kept on side and understand. And I'm pleased to tell you that they are kept on side and they do understand and they are being very supportive. That is some good news that everyone is with us. I, at this moment in time, cannot tell you and can't guarantee the outcome of those discussions. But what I can tell you is that in the intervening period, and this is where we'll come on to, but we are seeking a resolution. In the intervening period, we haven't stopped developing our businesses. As you will see and as we've announced, ATOME Power is now proceeding. And indeed, in Paraguay, we have received the very helpful assistance of IDB and IFC in terms of feasibility studies for a very large solar plants of 300 megawatts also in Villeta. We're starting that feasibility study as a support to the Villeta project, but not -- but through a different company within our group. And we're quite excited about that if we can resolve the problem of the power purchase agreement, the PPA. In any event, we've got other proposals from -- in terms of ATOME Power as well as other areas of business for our fertilizer business. And one of those is Brazil. And we've already said that we're in discussions with several parties and executing NDAs in relation to this. And that is very prospective. But let's come on. Let's come back after the introduction. Let's go back to what happened under the PPA. And that's on the next slide, which is here. As I told you, we agreed the regime. It was revoked without notice. There was continued stakeholder engagement, both with the government, with ANDE and also with our own stakeholders, which are continuing. But in the last few days, there was the original power purchase agreement from 2022. Now that was -- and it was made clear at the time, for example, when we raised money earlier this year that, that would be superseded by this new PPA, the form of PPA, which, as I have said, was actually agreed with ANDE at the relevant time. But that notice of -- the notice of termination of the 2022 PPA was necessary in order to limit the liability of ATOME on an ongoing basis under that, let's just say, unacceptable form of PPA to our lenders and ultimately to ourselves. It wasn't the right PPA. We had agreed, as I've said, to amend it and to supersede it with the government, that's where the decree comes in. But we needed to complete the formalities. We did request to stand still, but time ran out between discussions with ANDE and ourselves, which at that stage were relatively constructive, and that was the last week. But we are here, and it doesn't prejudice our new PPA and indeed, ANDE have confirmed that, so the government. Now in the intervening period, whilst we've been trying to achieve a meeting of mind through for a new PPA, it has taken time. It's got rather political. But in the meantime, we were approached by certain international law firms, well-known international law firms, including magic circle firms, who said, actually, you know you've got a claim under the U.K. Paraguay bilateral investment treaty. And our own lawyers who happen to be one of the world's experts on bilateral treaty agreements called White & Case. We put it to them to their arbitration department. And they have given us strong advice that we have a very good case, which is what we thought we had a good legal case anyway against the government for doing what they've done, and that's confirmed to us. So this is a case of default because with legal -- strong legal advice that we've got a very good case to take action against the government for compensation if we can't resolve the position amicably with independent advice from a renowned international firm of damage assessors that the claim by ATOME against Paraguay will extend to 9 figures. We're talking about hundreds of millions of dollars and that the case is good and solid on its merits and on its irrefutable facts that we have got a very strong default position. We have also received advice and White & Case are preparing now to speak to funders of the litigation itself, should we get to that stage in order to lessen the liability of ATOME to costs. That we see is important. We're going to pick and choose. White & Case has said to us that they feel there's a very good chance of getting this litigation funded, which is good because it lessens the liability to fund the costs on the shareholders of ATOME. But we've got such a strong case that in any event, if we can't get a resolution, we will proceed. What type of arbitration is this? This is not an arbitration or a dispute over a contract. This has nothing to do with that. A claim under a bid, a bilateral investment treaty relates to obligations, promises, guarantees, assurances by a government to an investor of that particular country, i.e., the country on the other side of the bit. And that is precisely what we have. We have demonstrative, unquestionable, unqualified unconditional assurances, documents in relation to this. And we will, as a company, in the interest of shareholders, not hesitate to pursue that bit if we cannot achieve what we would like to achieve an amicable solution because it's in the interest of everyone that we do everything possible, leaving no stone reasonably unturned to actually get a viable amicable resolution and build this facility, this world-leading facility, which we all want to build. So in a way, you can call it a default mechanism. It's preserving the rights of the company. And one shareholder turned around to me actually just recently and said, "Well, actually, it sounds better that you should sue." And the response was, "Yes, one could say that." But at the end of the day, we're here to build a facility if we can viably. But we're not here to let our legitimate rights be trounced on, whether it's by individuals or by governments. And that's where we're coming from. So to use an expression, iron fist, velvet glove. We prefer the velvet glove approach, but we will not hesitate in the other direction. So here we are, we're not a litigious company. We are here to continue in the game to do a deal, and we are getting some good traction, but the acid test is the viability of this. But what this effect has done, and perhaps you can turn to the next slide, Nikita, is that this has surprisingly brought out so much interest in what ATOME is doing. ATOME, its management, its experience, its partners have got something which is extremely valuable, which not many people, if anyone has got. Not only is Villeta a world-leading project, which we want to proceed with as quickly as possible, but also we can deliver to other projects something which is cut, paste, done, a front-end engineering design, so-called FEED, which can be dealt quickly because we base it on what we've already got. We've got significant partnerships with world-leading experts like Casale, with world-leading engineering companies like Baker Hughes, Baker Hughes being a shareholder in us as well and with one of the world's largest and most significant fertilizer companies as in Yara. And combine that with our platform, financial platform with all the DFIs and other financial institutions that we're dealing with who recognize that what has happened in Villeta is no fault of ATOMEs. When a government renege on this, then we've got something which is very valuable. And that's why this title here is leveraging ATOME's platform. We're talking with Brazil, as I've said. On ATOME Power, we're talking with other people. And then we bring all our experience together with, of course, all the legal framework and the legal documentation that we've prepared, and we capitalize it and we use it. ATOME is not as in the narrative in one of the accounts, a one-trick pony. What we have achieved and what we are achieving in Villeta is very significant and continues to place us in the forefront of where we're at. Now that's why this -- we welcome this opportunity of speaking to you all so that we can, should we say, dispel a few misapprehensions, demonstrate that one way or other, we have a preferred alternative, but we also have a default alternative, which actually is a very valuable alternative and a really practical one in terms of merits on a case. And that is why we entered into this with Villeta. That is why we're proceeding with the government. We proceeded originally with the government. And that is why we are trying to affect a compromise. We've got 3 months notice period under the bid we've given it. We've given it in September. That runs out in December. Let's see how it goes. The clock is ticking, but it's ticking in favor of us, not the other way around. We need to resolve this deal, and we need to resolve it within a reasonable period of time. But we're resolving it with all our stakeholders. And in the parallel, without losing focus, we're not dropping the ball at all to exploit the opportunities that we have in the world and the credibility that ATOME PLC has got. In terms of the money side, and we'll talk -- we've got to talk about the money side. In terms of the money side, you can see in our half year, the balance, and we will be using that properly. We're not losing any time, by the way, in terms of the project, not at the moment at least, because we're working with Casale to try and shorten the period of build time, which is really, really important. So we're not dropping the ball there either. So we're not just letting Villeta sleep and then we have to wake it up later. No, Villeta project is very much live, and we're keeping all the appropriate supplier -- key suppliers, such as with the electrolyzers. Of course, Baker Hughes is one of the suppliers as well and others completely informed. It is really important for us to be transparent with everyone. And that's why, once again, I say we welcome this opportunity of being transparent with you today. I'd rather hog the presentation as it were because that's a really important message that we wanted to convey. And we hope now that we will continue, and we'll keep you regularly informed. But we hope now that you understand why we have a balanced approach here, but at the same time, not dropping the ball on ATOME's business. I will now invite questions. And obviously, some of those questions can be -- will be answered by either one of my colleagues or myself.

That's great. [Operator Instructions] I would like to remind you recording of this presentation along with a copy of the slides and the published Q&A can be accessed by investor dashboard. And Peter Levine and Nikita, we have received a number of questions for today's meeting. And I want to start off the Q&A session with the first one here, which has a few parts to it and as follows. In layman's terms, what's actually going on with the power? Did we have an agreement then the government changed their minds? What are they proposing?

I think I've explained the first 2 branches of that question. And the final branch is what is they proposing? This is part of the discussions that we're having, and it's relatively confidential at the moment, commercially sensitive. So we can't say exactly what is being proposed. We know what we want and we must have, which is a period of years, which cover not only the build period, but to know that we have a fixed price for at least 10 years or 10 years after commencement of production, so-called COD. So we need to know where the prices are. It could be a stepped price. It could be X for the first 5 years and Y for the second 5 years. And there has been press comments as to that. But the bottom line is it's still in debate. But we do know that we need some certainty during the period of 10 years, which happens to be the maturity period of the loans from the DFIs.

Thank you, Peter. Another one here asks, what happened to the project in Iceland?

Olivier, can I ask you to comment on that, please?

Thank you, Peter. No, I think we have commented on it actually at the last turnaround. So what we do when we develop projects is obviously, we look at what is the techno-economic feasibility, the business plan out of it and the outcome. And what appeared clear about 2 years ago was that the prospects for ATOME were much better in Latin America and that the opportunity in Iceland itself became smaller than expected, less interesting than expected as well as we really obviously focused on the markets where you could have -- you could produce commercially feasible projects and be profitable without the need for any green premium, which were obviously focus in Europe at the time. So clearly, at the moment and at the time when the decision was made, it was very clear that Iceland wasn't going to be yielding as much return for us as shareholders as investing time and resources in Paraguay and in other countries like Brazil or Costa Rica.

Thank you, Olivier. Moving on, given you have established much of the work programs needed to bring a project to FID, how long could the Brazil project take to reach that stage?

Very good question. But certainly, we would be shortcutting the FEED process very, very significantly. Typically, a FEED process for this could take 18 months. We could halve that easily in terms of what we've got. Obviously, it's got to look at the land where it is situated and a number of other features. But certainly, we're looking for the halving the amount of time for the FEED process and then also procuring EPC, legal documentation and actual work and value engineering, which is very important when it comes down to construction. We could -- there will be significant benefits. At this moment in time, we can't identify exactly how much. But certainly out of the gate, the FEED would approximately be half the time that if you came to it fresh at half the cost.

And sticking with Brazil, is the power price in Brazil likely to be higher or lower than the Villeta's PPA?

To be advised. Nikita, would you like to say something here?

Yes. Thank you. Yes, I think just to prelude that on the whole BD strategy is that what's really important to us as a developer and to shareholders is speed to delivery, speed to execution and, of course, the competitiveness. So we do have a lot of incoming and where we do look at different countries and jurisdictions and working with different partners, we do prioritize the competitiveness and the speed of delivery of that project. And of course, Brazil is naturally identified as one of those locations. And whilst the PPA competitiveness and the dynamics of the power markets are to be commented on as to the specific project that we are looking at or the projects that we're looking at, we have to ensure that this is competitive, both for the production profile of the product that we're making and to be able to supply it at the best possible prices and garner offtake strength for that particular market.

And perhaps I can also say that on a macro basis, many of you will have seen that there was an election for President yesterday. The results were that the son of Bolsonaro actually came out with a lead and is widely recognized now as being the front runner to be President. It's also widely recognized that he is more closer to America than he is elsewhere, although the China connection is very important. Brazil imports 85% of its fertilizer from places such as China and Russia, and it desperately needs for local production, which gives us a commercial opportunity.

Next question is a bit of a long one, but how does pursuing BIT arbitration against Paraguay affect the Board's ability to simultaneously negotiate a new commercial PPA and ANDE? And what is the realistic time line to final investment decision execution, construction resuming if a new agreement isn't reached before the mid-December arbitration deadline?

There's no reason why it can't happen in parallel at all. At this moment in time, the government is totally aware of the timescale. And in relation to if we get a new PPA, then what happens then is during the time that we're finalizing the negotiations of that, we'll be going back to all our stakeholders and considering the documentation or the revised projections that are needed. Olivier, do you want to add something there?

No. I will add that, obviously, since things happened in June, we haven't lost -- basically, we didn't take a pause, as Peter mentioned earlier, right? So whether it's making sure that the financier side will be ready to go and obviously, on the technical side and the offtake side. So from a resources point of view, as you heard from Peter, we also hired and are working with a best-in-class legal firm when it takes -- when it comes into taking care of such arbitration proceedings. So resources have been properly allocated and one isn't taking from the other, which obviously is very key for us because as Peter said, time to market is absolutely key and delay also will be key in our decision as part of BIT arbitration.