Utilities Big Book

Q4 / 2012 Edition

Credit Suisse European Utilities Team

October 2012

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. 1 Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™ Client-Driven Solutions, Insights, and Access Content EQUITY RESEARCH

1. Q4 2012 Strategy & Preferred Stocks – Slide 5 2. Key Charts – Slide 17 3. Introduction to the Utilities Sector – Slide 28 4. Regulatory Framework – Slide 41 5. Industry Data and Statistics – Slide 58 6. Company Financials – Slide 92 7. Market-related Data – Slide 110 8. Relative Sector Performance – Slide 135 9. Macro Data – Slide 152 10. Credit View – Slide 162 11. Company Pages – Slide 176 12. Appendix – Slide 226 13. Disclosures – Slide 240

2 Credit Suisse European Utilities Team Acknowledgments . A number of datasets and slides used in this book are based on Credit Suisse HOLT ® data – please turn to page 218 for a detailed description. For more information on HOLT ®, please contact Michel Lerner at [email protected] . A number of datasets and slides in this book are based on the research findings of the Credit Suisse Global Oil & Gas Team. For more information on their views, please contact Alex Brooks at [email protected] . A number of datasets and slides in this book are based on the research findings of the Credit Suisse Global Commodities Research Team. For more information on CS views, please contact Ric Deverell at [email protected] . A number of datasets and slides in this book are based on the research findings of the Credit Suisse European Economics Research Team. For more information on CS views, please contact Neville Hill at [email protected] . A number of datasets and slides in this book represent the views of Franck Bataille, European Credit Strategist for Utilities & Energy Sectors. For more information on his views, please contact Franck Bataille at [email protected] . The authors of this report wish to acknowledge the contribution made by Neerav Gala and Sanit Visaria, employees of CRISIL Global Research and Analytics, a business division of CRISIL Limited, a third-party provider of research services to Credit Suisse

3 Credit Suisse European Utilities Team Credit Suisse European Utilities Team

Mark Freshney Vincent Gilles Sector Head +44 (0)20 7888 0887 [email protected] Pan-European Sector Strategy +44 (0)20 7888 1926 • Centrica [email protected] • Drax • National Grid • E.ON • SSE • RWE • Vestas • Suez Environnement • Gamesa • Veolia Environnement • Verbund Guy MacKenzie +44 (0)20 7883 9534 Piotr Dzieciolowski [email protected] +48 22 526 5638 [email protected] • Pennon • Severn Trent • CEZ • United Utilities • PGE • Tauron Michel Debs • Enea +44 (0)20 7883 9952 • PGNIG [email protected]

• EDF Mulu Sun • GDF +44 (0)20 7888 0269 [email protected] Stefano Bezzato +44 (0)20 7883 8062 • Verbund [email protected]

• Iberdrola Zoltan Fekete • Enel +44 (0)20 7888 0285 • Snam Specialist Sales: [email protected] • Terna Mark Whitfeld +44 (0)20 7888 8038 [email protected]

4 Credit Suisse European Utilities Team EQUITY RESEARCH

1.) Q4 2012 Strategy & Preferred Stocks

5 Credit Suisse European Utilities Team 2012 Q4 Outlook – Strategy Sector’s performance: where are we at the end of Q3? . Sector underperformed in Q3 (MSCI Europe Utils up 5.5%, MSCI Europe up 10%) . We believe that a majority of PMs are still underweight . Volumes remain weak . Volatility (close to extremes in Q2 and Q3) has started to abate

6 Credit Suisse European Utilities Team Key charts Trading patterns and changes in consensus

European utilities - Average daily trading volume (m shares/day) 1-yr realized volatility of the STOXX European Utilities Index

20 40% Ave volume traded (million shares/day) 30% 15 20%

10 10%

2004A 2003A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2009A 2010A 2011A 2012A 2002A Source: Thomson Reuters Source: Locus, BLOOMBERG PROFESSIONAL, Credit Suisse Research Liquidity of the STOXX European Utilities Index (in €bn) Changes in consensus 13E EPS of European utilities in LTM

4,000 0% -2% 3,000 -4%

2,000 -6% -8% 1,000 -10% -12% - -14%

12M 9M 6M 3M 2M 1M

2005A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2011A 2012A Source: BLOOMBERG PROFESSIONAL, Credit Suisse Research Source: Credit Suisse Research

7 Credit Suisse European Utilities Team 2012 Q4 Outlook – Strategy Sector’s earnings: trends and drivers

. Weak top line growth: Weak GDP + demand destruction turning into a permanent feature while pricing power remains limited (ex-UK) . Cost cutting becomes main driver of earnings growth (more a Continent issue) -> source of uncertainty . Earnings forecast cuts seemingly at an end, BUT how long before we see upgrades . Continental Euro EPS and DPS growth remains below UK’s . Balance sheet: further credit downgrades possible despite recent cuts in capex asset disposals?

8 Credit Suisse European Utilities Team 2012 Q4 Outlook – Themes Too early to drop UK overweight (1/2)

. UK overweight to stay despite premium because – Politically driven re-regulation on the Continent a source of concern and earnings pressure – Sovereign risk (including FX) . Key earnings drivers remain better in the UK – Updated price outlook for CE flat to 2016 while UK expected to grow – UK still offers better regulatory visibility – Carbon: lower and probably very volatile on continent vs. carbon floor in the UK

CS EPS CAGR ‘12-15E CS DPS CAGR ‘12-15E PE 13E DY 13E European Utils o/w 2.6% 1.2% 10.8x 6.2%

Integrated 3.8% -0.3% 11.3x 5.9%

Regulated 6.0% 3.1% 13.1x 5.7%

Energy 0.9% 1.1% 9.9x 6.4% UK Utils 4.0% 4.2% 13.0x 5.6% Eurozone Utils 2.0% 0.2% 10.1x 6.4% MSCI Europe 3.8%* 4.4%* 10.7x 4.2% * ’11-14E CAGR Source: Thomson Reuters, Credit Suisse Research

9 Credit Suisse European Utilities Team 2012 Q4 Outlook – Themes Too early to drop UK overweight (2/2)

14x 1y forward P/E – UK utils vs. Europe ex-UK utils Dividend yield – UK utils vs. Europe ex-UK utils

13x

8% 12x

11x 7%

10x

5% 8x MSCI Europe ex. UK Utilities MSCI UK Utilities MSCI Europe ex. UK Utilities MSCI UK Utilities

7x 4% Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

Source: Thomson Reuters, Credit Suisse Research

10 Credit Suisse European Utilities Team

SSE (TP 1,450p, Outperform) . Leverage into higher commodity prices and tightening reserve margins (only UK utility that can benefit whichever one increases) . Wind assets start to bring EBITDA growth (FYmar12 – FYmar14) . CO2 floor a major positive for SSE (will have c.9TWh of clean, fixed cost generation) . No CO2 cliff edge in 2013 according to Credit Suisse estimates . Improving credit metrics – we think SSE can retain an A-/A3 rating and avoid issuing debt

11 Credit Suisse European Utilities Team

Iberdrola (TP €4.7, Outperform) . We upgrade our TP by c7% to €4.7 post positive Capital Market Day . We highlight three key positives: 1. Less debt: Only €2bn non-EPS dilutive disposal necessary; tariff deficit securitisation restarted 2. Realistic cost-cutting: Achievable by cutting workforce by 4% 3. Attractive dividend: DPS target €0.3 for 2012-14E implying 7.6% DY . Completion of securitisation could add c4% to our 2014E EPS . Management mentioned possibility of share buyback if debt targets are beaten

12 Credit Suisse European Utilities Team

Suez Environnement (TP €11.5, Outperform) . Fundamentally under-valued despite recent profit adjustment and offers exposure to GDP recovery: Stock trading close to a ‘worst-case- scenario’ value of €6.6ps . Post- earnings cut, EPS Updated EPS CAGR 11-16E at 7.4% above sector average . Coming changes to French water contracts unlikely to result in a collapse in the company's margins . BUT (1) new French tax rules could cut up to 9% of EPS, (2) is GDF Suez a seller? . TP of €11.5 based upon a conservative 8.4% WACC and doesn't include the full benefit of cost cutting (additional upside of €0.5ps)

13 Credit Suisse European Utilities Team

Pennon (TP 690p, Underperform) . Recycling under pressure – recyclate prices have deteriorated, competition is amplifying pressure on margins . Viridor part-way through a downgrade cycle, no near-term positive catalysts for the waste business . Capital intensity in ‘core’ Viridor has risen; but EBITDA has deteriorated . UK Water valuations are stretched (2013E RAB premia of c17%-21%) . Risks around UK regulatory changes from 2014 overlooked by the market

14 Credit Suisse European Utilities Team

Verbund (TP €14.5, Underperform) . The company is a price taker in a lower power price environment . Depressed spreads on gas fleet, further write-downs possible . Low-Return investment (grid, diversification) – Potential €1.8ps value destruction . Debt remains an issue – disposals required

15 Credit Suisse European Utilities Team

GDF Suez (TP €15.5, Underperform) . Geographically diversified, but too heavily focused on a strategy revolving around gas . Fiscal and regulatory pressure, mostly in France and Belgium . GDF Suez is a price taker on both merchant and regulated power markets . While emerging market growth abates, GDF Suez investment is accelerating . Vertical integration with questionable benefits

16 Credit Suisse European Utilities Team EQUITY RESEARCH

Key Charts

17 Credit Suisse European Utilities Team

Key charts EQUITY RESEARCH . De-gearing to continue in the near future – DY is attractive but how much is secure? . Market multiples are optically attractive but may be a reflection of a longer downtrend for the sector . CoC adjustment not finished yet? . EV/IC of the sector at lowest for 10 years – clear BUY signal?

18 Credit Suisse European Utilities Team Price-earnings ratio European utilities sub-sectors

Weighted average by market capitalisation 30x

25x

20x

15x

10x

2009A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2010A 2011A 2012E

PE - Energy Utils PE - Integrated PE - Regulated 6-month mov. avg. (PE - EU Utilities)

Source: HOLT

19 Credit Suisse European Utilities Team NFD / EBITDA European utilities sub-sectors

Weighted average by market capitalization

2000A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

NFD/EBITDA Energy Utils NFD/EBITDA Integrated NFD/EBITDA Regulated NFD/EBITDA Renewable

Source: HOLT

20 Credit Suisse European Utilities Team EV/EBITDA ratio European utilities sub-sectors

Weighted average by market capitalization

15x

10x

2003A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

EV EBITDA - Energy Utils EV EBITDA - Integrated EV EBITDA - Regulated 6-month mov. avg. (EV EBITDA - EU Utilities)

Source: HOLT

21 Credit Suisse European Utilities Team Dividend yield Utilities vs. Gov’t bonds in Europe and the US

Sector vs. Sovereign Bond Yields

6% US utils yield - US 10y treasury yield EU utils yield - German bund yield 5%

-1%

-2%

-3% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: HOLT, Datastream

22 Credit Suisse European Utilities Team Sovereign yields Government bond yield comparison

German, UK and US real bond yields

6% UK Germany* US 5%

-1%

-2%

1994A 2001A 2006A 1995A 1996A 1997A 1998A 1999A 2000A 2002A 2003A 2004A 2005A 2007A 2008A 2009A 2010A 2011A 2012A * German yield = Nominal yield - Inflation Source: Bloomberg PROFESSIONAL, Datastream, LOCUS

23 Credit Suisse European Utilities Team Dividend yield European utilities sub-sectors

Weighted average by market capitalization

2003A 2004A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Div Yield - Energy Utils Div Yield - Integrated Div Yield - Regulated 6-month mov. avg. (Div Yield - EU Utilities)

Source: HOLT

24 Credit Suisse European Utilities Team Selected financial metrics European utilities

CFROI vs. discount rate (in %) 8% 7% CFROI (LHS) Discount rate 6% 5% 4% 3% 2% 1%

2012E

1989A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A Source: HOLT

Cash flows, asset base, cost of capital, free cash flow

150,000

100,000 50,000 - (50,000)

(100,000)

2012E

1989A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A (150,000)

(200,000) HOLT Cash Flows Cost of asset base Cost of capital R&D HOLT FCF = Cash Flow - Fixed Charges

Source: HOLT

25 Credit Suisse European Utilities Team Selected financial metrics European utilities

Market capitalisation weighted

8% 2.5x Div. Yield Market-implied Discount rate EV / IC (RHS) 7% 2.0x 6%

5% 1.5x

1.0x 3%

2% 0.5x 1%

0% 0.0x 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Source: HOLT

Credit Suisse European Utilities Team 26 Selected financial metrics European utilities

EV / Inflation-adjusted net assets

2.5x Europe - Utilities Europe - All Sectors

2.0x

1.5x

1.0x

0.5x

0.0x 2000A 2002A 2004A 2006A 2008A 2010A 2012A

Source: HOLT

Credit Suisse European Utilities Team 27 EQUITY RESEARCH

Introduction to the Utilities Sector

28 Credit Suisse European Utilities Team Power generation The basics of centralized power generation

GENERATION [ Mostly Liberalized ] TRANSMISSION [ Regulated ]

Substation Step Down Transformer DISTRIBUTION [ Regulated ] Subtransmission Customer 26 KV

SUPPLY [ Mostly Liberalized ] Industrial customers Residential customers 40% 60% Primary customer 13 KV

Source: Credit Suisse Research Secondary Customer 120V

29 Credit Suisse European Utilities Team Power generation Necessary capacity and reserve margin

Remaining Margin

System Service

Reserve Outages Overhauls Unavailable Net Capacity Generating Non Usable Capacity Capacity

Remaining Margin Remaining Margin Against Reliable Available Capacity (Monthly) Peak Load Capacity

Load

Remaining margin accesses the tightness of the market. When remaining margin is positive and higher than 5% of Net Generating Capacity, it means that the ENTSO-E system as such did not rely on imports of electricity from third countries and had enough generating capacity to cover its demand at any time during the year. Remaining margin in % = RM compared to NGC Reserve margin in % = RM compared to peak load

Source: RWE, Credit Suisse Research

30 Credit Suisse European Utilities Team Power generation A cyclical commodity without benefit of storage

Under-capacity in market New capacity fights for Older, less efficient Here we go again… so prices rise and new market share leading to plants shut down… entrants build plant… a price war…

Wholesale electricity prices

New entrant cost

5-10 Clean years Spread*

Marginal Cost = fuel cost + CO2 certificate + variable generating costs Wholesale Determined by the balance of demand and supply for electricity power prices Gross profit Depends on the so-called spreads; clean spreads take into account the cost of CO2 as well margin *Spreads Clean Dark Spreads refer to coal-fired plant margins and Clean Spark Spreads to gas-fired plant margins

Source: Credit Suisse Research

31 Credit Suisse European Utilities Team Regulatory background Liberalisation timeline in European electricity

Netherlands (APX), Belgium (Belpex) & 2006 France (Powernext) Germany (Epex), Denmark (NP 2009 Spot), Baltic Cable included Germany, in 2010 France, Benelux, continued 2010 coupling with NP Spot; Poland - NP

NorNed Cable, 2011 BritNed Cable

Western European 2012 market coupling

Integration of 2013 the Baltic States into NP Spot

EU-wide market coupling (set by 2014 European Target Model for cross- border power trading) Source: Fortum, Credit Suisse Research

32 Credit Suisse European Utilities Team Power generation Generation technologies - Coal

Traditional coal Clean coal*

Source: University of Chicago Source: saferenvironment.com; * The illustration shows the IGCC clean coal technology

Traditional coal plants burn coal to generate heat, which pushes the Clean coal technologies (including “Carbon Capture Schemes”(CCS) turbines to generate power. designed to help reduce CO2 emissions.

33 Credit Suisse European Utilities Team Power generation Generation technologies - Gas

Combined Cycle Gas Turbine - CCGT Open Cycle Gas Turbine - OCGT

Source: www.climateandfuel.com Source: Bord Gais

.CCGT plants convert the heat produced by the gas turbine during the .OCGT relies on the compression and combustion of filtered air to generation of electricity into steam. This then drives the steam turbine provide the energy from which to power the turbine rotor. and generates additional electricity.

34 Credit Suisse European Utilities Team Power generation Generation technologies – CHP and Biomass

Combined Heat and Power – CHP Biomass

Source: NHS Trust Source: Gasification Guide

.Biomass technologies use a combustion process to produce .CHP plants are designed to increase efficiency by recovering and electricity, burning biomass fuels in the boilers that supply steam for reusing the excess heat produced in the generation of electricity. the same kind of steam-electric generators used to burn fossil fuels.

35 Credit Suisse European Utilities Team Power generation Generation technologies – Nuclear

Nuclear

Source: NHS Trust

Pressurized water reactor is the most widely used type of nuclear technology. It has a primary cooling circuit flowing through the reactor core under very high pressure to prevent water from boiling and thus keeping the speed of fission reaction, and a secondary circuit in which steam is generated to drive the turbine.

36 Credit Suisse European Utilities Team Power generation Generation technologies – Hydro

Run-of-the-river Pumped-storage

Source: Renewabl Source: Renewabll

Run-of-the-river hydro plants use the natural flow and elevation drop of Pumped-storage plants use electricity (when demand and price are a river to generate electricity. low) to pump the water uphill to the “upper reservoir”, so that it can be released and thus generate power when the demand (and price) is higher.

37 Credit Suisse European Utilities Team Power generation Generation technologies – Wind

Wind

Source: ESN, US Department of Energy

A wind turbine is a device that converts kinetic energy from the wind into mechanical energy. Electricity generated from wind is one of the key renewable energy types. The key limitations of wind energy are high capital costs, low availability compared to traditional sources and lack of predictability (noone knows for sure when the wind is or is not going to blow).

38 Credit Suisse European Utilities Team Power generation Generation technologies – Wind

Onshore Offshore

Source: Bright Hub Source: US Department of Energy Advantages: Advantages: Cost: 2 times to generate electricity from offshore wind turbines than Output: Strength and predictability of wind is considerably better vs. the wind farms built on land. onshore. Proximity of existing grids: reducing the environmental impacts Environmental considerations: Less disturbing in terms of noise, associated with building new electrical grids. birds, radio transmissions, etc.

39 Credit Suisse European Utilities Team Power generation Generation technologies – Solar

Photovoltaic CSP

Source: GammaSolar Source: Energy Information Administration

PV devices transform the photon energy in solar radiation directly into CSP devices transform solar heat into steam and electricity (see electrical energy. above).

40 Credit Suisse European Utilities Team EQUITY RESEARCH

Regulatory Framework

41 Credit Suisse European Utilities Team

Regulatory framework EQUITY RESEARCH

. The EU has been deregulating its power and gas sector for two decades . Pendulum is swinging back to more regulation . UK and Italy remain in our eyes the best regulatory frameworks based on visibility and predictability

42 Credit Suisse European Utilities Team Regulatory background Liberalization of electricity business

Electricity Act: Restructuring & 1996/92/EC: Start of electricity privatisation of the industry, licensing and gas market liberalisation of companies to supply or transmit 1989 and gradual introduction of electricity, establishing a new competition regulator German Energy Act: 1996 Liberalisation of electricity and Law 54/1997: Electricity generation gas supply and generation; liberalized, wholesale market created separation of generation, through which all generation had to transmission be channelled; reinforced the 1997 and distribution independence of transport companies. Law 2000-108: Opening electricity supply up to competition, regulated tariffs of Competition Act: Further 1998 distribution networks liberalisation of electricity supply & generation (cap on market shares and resale prices) 2003/54/EC: Electricity and gas 1999 supply to be liberalized by July Bersani Decree: Unbundling of 2004 (non-household transmission networks, breaking up customers) and by July 2007 Enel’s monopoly in electricity (households) generation 2000

Law 2004-803: Separating electricity transmission and Royal Decree 1955/2000: 2003 distribution Completion target for electricity supply liberalisation: 1st January 2003 2009/72/EC: Obligation for 2004 member countries to have an independent electricity and gas Utilities Act: Integration of gas and regulators to ensure electricity markets regulation, competition and sustainability separation of electricity distribution and supply 2009 NOME Law 2011: AREHN tariff enables competition in electricity generation Source: Credit Suisse Research 2011

43 Credit Suisse European Utilities Team Regulatory background Liberalization of gas business

1996/92/EC: Start of electricity and gas market liberalisation and 1996 gradual introduction of competition

Hydrocarbons Law German Energy Act: Liberalisation of electricity and gas supply and 34/1998: Led to the 1997 unbundling of gas networks, generation; separation of and provided consumers with generation, transmission and the freedom to choose their distribution gas supplier 1998 2003/54/EC: Electricity and gas supply to be liberalized by July 2004 Competition Act: Further (non-household customers) and by liberalisation of gas supply & July 2007 (households) generation (cap on market 2000 shares and resale prices) Law 2004-803: Separating gas transmission and distribution, opened up the gas market to all 2003 customers 2003/54/EC: Ownership unbundling Utilities Act: Integration of of transmission from PGNIG to gas and electricity markets other companies regulation, separation of 2004 electricity distribution and 2003/54/EC: Legal unbundling of supply distribution from PGNIG to other companies 2005 2003/54/EC: Ownership unbundling of storage from PGNIG to other companies Letta Decree: Full competition on gas markets; 2007 cap on market shares: 50% 2009/72/EC: Obligation for member (both in supply and countries to have an independent generation) electricity and gas regulators to ensure competition and 2009 sustainability

Source: Credit Suisse Research

44 Credit Suisse European Utilities Team Regulation in electricity transmission Country overview

Regulatory Regulatory Asset Inflation Regulator Country Allowed Return Capex recognition Comment period length period Base component y body

4.8% WACC  Largely self-funded (post-tax real RPI-X% 6 yrs 2007-2013  Remunerated through RAB return 4.4%) (‘X’ varies by  Starting RAB + Capex – company  System operator – separate allowance UK RAB Deprec. = Closing RAB OFGEM depending on and incentives  Incentives set to be 4.4-4.6% (debt capex and real 8 yrs 2013-2021 increased indexed to bond returns)  Reduced uncertainty yields)

 EDF Investment 7.25% nominal CPI-X%+0.4% France 5 yrs 2009-2013 RAB  Assets brought in by CRE pre-tax +adjustments concession owner

 Capex spent is  Regulator will review risk free rate in Deflator for 7.4-9.4% real pre- remunerated through RAB 2013 on the basis of a 12-month RAB, Inflation tax transmission  Development capex average yield on 10-yr Italian for costs with interim receives a 1.5-2% premium Autorita’ government bond up to Oct 12 Italy 4yrs 2012-2015 RAB X=3.0% review in 2013 + for 12yrs depending on the Energia  Mitigation mechanism confirmed for transmission 1% for regulatory type of the asset 2012 (+/- 0.5%), from 2013 only 20% X=0.6% lag  Starting RAB + Capex – of allowed opex exposed to volumes dispatching Deprec. = Closing RAB

 Initial level of revenues was assigned Net RAB * (10y to those assets commissioned 1998- Governme bond yield + 2007 nt RAB for 375bps) + Update index= . Net RAB updated yearly at  Assets commissioned from January CNE non Spain 4 yrs 2009-2012 post 2008 standard opex (1 0.2*(IPI- 2.5% [at audited 2008 onwards: Net RAB-based model binding assets + update index) + x)+0.8*(CPI-y) cost+50%(standard cost with post-tax nominal rate of return set consultatio depreciation at 7.7%, assuming a 10-year bond audited cost) ] n role yield of 4.24%. Cost standards and efficiency incentives also relevant.

 Both returns are pre-corporation tax and post trade tax 7.56% real pre-  Both are on allowed returns on equity tax return for only (for debt historic cost of debt is assets  ROE allowed on maximum Bundesnet used) Germany 5 yrs 2009-2013 RAB capitalized prior to CPI-X% 40% of RAB, debt costs z-agentur  7.56% rate applied on an equity base 2006 and 9.29% allowed as incurred. indexed to asset-specific inflation rate, nominal for post- not the CPI 2006 assets  9.29% rate applied on an equity base derived from historic cost accounting

Source: Credit Suisse Research

45 Credit Suisse European Utilities Team Regulation in electricity distribution Country overview

Regulatory Regulatory Asset Inflation Regulatory Country Allowed Return Capex recognition Comment period length period Base component body

RPI-X (‘X’ varies by  Largely self-funded 4.7% vanilla 5 yrs company  Remunerated through RAB  Package of Incentives available UK 2010-2015 RAB WACC (post tax OFGEM (then 8 yrs) depending on  Starting RAB + Capex –  Low Carbon Networks fund return 4.0%) capex and real Deprec. = Closing RAB returns)

 EDF Investment 7.25% nominal CPI + 1.3% +  One main grid, others exist but France 5 yrs 2009-2013 RAB  Assets brought in by CRE pre-tax real adjustments are negligible concession owner

 Capex spent is remunerated  Distribution: Old X-factor 1.9% through RAB, based on lasting 4y, new X-factor 0.9% Base WACC 7.6% company-specific values lasting 8y for all investment  +1% WACC for new  Metering: Old X-factor 5.0% Deflator for RAB Autorita’ Italy 4yrs 2012-2015 RAB categories, total investments lasting 4y, new X-factor 2.1% Energia WACC between  ROnewI: RAB gross of lasting 8y 8.6% and 10.6% appreciation  Weighted avg X-factor = 2.9%  Starting RAB + Capex –  Mid-tern WACC revision in Deprec. = Closing RAB 2013

Governmen t  Annual allowed revenues Allowance for 7.7% pre-tax on CNE non updated each year to consider Spain 4yrs 2009-2012 costs of new new investments binding service quality and losses, investments consultation inflation, growth in perimeter role

 Both returns are pre- corporation tax and post trade tax  Both are on allowed returns on 7.56% real pre-tax equity only (for debt historic for assets  ROE allowed on maximum cost of debt is used) capitalized prior 40% of RAB, debt costs Bundesnetz Germany 4 yrs 2009-2012 RAB CPI-X  7.56% rate applied on an 2006, 9.29% allowed as incurred -agentur equity base indexed to asset- nominal for assets specific inflation rate, not the since 2006 CPI  9.29% rate applied on an equity base derived from historic cost accounting

Source: Credit Suisse Research

46 Credit Suisse European Utilities Team Regulation in gas transmission Country overview

Regulatory Regulatory Asset Inflation Regulatory Country Allowed Return Capex recognition Comment period length period Base component body

 Largely self-funded RPI-X% 6 yrs 2007-2013 4.36% vanilla return  Remunerated through RAB (‘X’ varies by  Starting RAB + Capex –  System operator – separate company UK RAB Deprec. = Closing RAB OFGEM allowance depending on 4.4% (debt indexed  Incentives set to be  Transmission operator –incentives capex and real 8 yrs 2013-2021 to bond yields) increased returns)  Reduced uncertainty

France 5 yrs 2009-2013 RAB 7.25% pre-tax real CPI + 1.1% CRE

 Capes spent is remunerated through RAB  Development capex Deflator for receives a 1-3% premium RAB; inflation Autorita Italy 4 yrs 2010-2013 RAB 6.4% pre-tax real 5-15yrs depending on the for costs X = Energia type of asset 2.1%  Starting RAB + Capex +WIP+Working Capital – Deprec. = Closing RAB

Net RAB * (10y bond Governmen  Assets commissioned from 2008 yield + 375bps) + Net RAB updated yearly at Update index = t CNE non receive a financial return calculated standard (1 + update 2.5% (at audited costs + 50% Spain 4 yrs 2008-2011 RAB 0.2*(IPI- binding using the 10yr Spanish bond + index) opex + * (standard cost – audited consultatio 375bps, depreciation + opex depreciation x)+0.8*(CPI-y); cost)) n role allowances

 Both returns are pre-corporation tax and post trade tax  Both are on allowed returns on 7.56% real pre-tax equity only (for debt historic cost of return for assets  ROE allowed on maximum debt is used) capitalized prior to Bundesnetz Germany 4 yrs 2009-2012 RAB CPI-X% 40% of RAB, debt costs  7.56% rate applied on an equity 2006 and 9.29% -agentur allowed as incurred base indexed to asset-specific nominal for post- inflation rate, not the CPI 2006 assets  9.29% rate applied on an equity base derived from historic cost accounting

Source: Credit Suisse Research

47 Credit Suisse European Utilities Team Regulation in gas distribution Country overview

Regulatory Regulatory Asset Inflation Regulatory Country Allowed Return Capex recognition Comment period length period Base component body

RPI-X 4.3% vanilla WACC (‘X’ varies by  Largely self-funded (post tax return 4.4%) company  Remunerated through RAB UK 5 yrs 2007-2013 RAB OFGEM Debt indexed to bond depending on  Starting RAB + Capex – yields capex and real Deprec. = Closing RAB returns)

RAB (econ.  Allowed return cut in Q1 France 5 yrs 2009-2013 6.0% pre-tax real CPI – 1.3% CRE Value = 2012 from 6.75% €14bn)

 Capex spent Is remunerated through RAB Deflator for RAB  Development capex Inflation for costs receives a 2% premium for 7.6% pre-tax real x = 3.2% Autorita Italy 4 yrs 2010-2013 RAB 8yrs, depending on the type (8.0% on metering) distribution Energia of the asset x = 3.6%  Starting RAB + Capex metering +WIP+Working Capital – Deprec. = Closing RAB

 Allowed revenues are Government updated annually in relation CNE to growth in consumption Spain 4 yrs consultation (number of consumers and role volumes) and efficiency factors

 Both returns are pre- corporation tax and post trade tax  Both are on allowed returns 7.56% real pre-tax for on equity only (for debt  ROE allowed on maximum assets capitalized historic cost of debt is used) 40% of RAB, debt costs Bundesnetz- Germany 4 yrs 2009-2012 RAB prior 2006, 9.29% CPI-X  7.56% rate applied on an allowed as incurred agentur nominal for assets equity base indexed to

since 2006 asset-specific inflation rate, not the CPI  9.29% rate applied on an equity base derived from historic cost accounting

Source: Credit Suisse Research

48 Credit Suisse European Utilities Team Regulation in water Key milestones in regulation in Europe

European Urban Wastewater Treatment Directive

. Towns >2000 population equivalent: water collection and secondary treatment obligation 1991 . May 2010: Italy & Spain taken to European Court (cities not compliant: Italy 178, Spain 38) . France: ambitious programme to become 100% compliant

European Drinkable Water Quality Directive 1998 . Increased requirements on the quality of water intended for consumption

EU Regulation

Water Framework Directive 2000 . Restoring the quality of underground and surface water by 2015

2006 Bathing Water Quality Directive

Source: Suez Environnement

49 Credit Suisse European Utilities Team Regulation in water Country overview

Inflation Asset base Allowed return Capex recognition Asset ownership Comments component

WACC: 5.1% vanilla Recognized in RAB in year in Mainly private . Allowed return set for 5 years UK RAB RPI-X% real which incurred ownership . Current price period: 2010-2015

Concession-based, . No central regulator, although public Contract by Funded by municipalities, France Not used Not used state ownership of responsibility for assets contract basis recovered through tariffs assets . Contractual concession model instead of RAB . Hybrid structure . Water companies managed by local municipalities with varying levels of private sector Net asset value Concession-based, involvement used for Varies, capped at 7% Tariffs not Italy Recovered through tariffs municipal ownership . Energy authority to take over regulatory role remuneration of pre-tax real inflation linked of assets . Cost plus pricing method, reviewed every 3 capital investment years .Regulatory framework currently under review following 2011 public referendum . Hybrid structure Concession-based, . Water companies managed by local Contract by Spain Not used Not used Contract by contract basis municipal ownership municipalities with varying levels of private sector contract basis of assets involvement. . Predominantly private sector management Concession-based, . No central regulator, although public Contract by Germany Not used Not used Contract by contract basis state ownership of responsibility for assets contract basis assets . Contractual model instead of RAB

Source: Credit Suisse Research

50 Credit Suisse European Utilities Team Regulation in waste Key milestones

Waste Framework Directive (2006, 2008) . 2020 recycling targets: 50% of municipal waste, 70% of non-hazardous construction & demolition waste, in weight . Efficient EfW installations recognized as valorization (“R1 status”) General . Enlarged producer responsibility Framework . Integration of the Hazardous Waste Directive

Environmental liability (2004) . Legal framework for the “polluter-payer” principle

Targeted Landfill Directive (1999) . Targeted volumes of biodegradable waste to be landfilled by 2016: 35% of the total amount generated, based on 1995 volumes

Waste Landfill Trading Allowance Scheme (2004) Treatment . Targets allocated annually to each waste disposal authority, fixed penalty of £150/tonne if an authority breaches its Operations landfill allowance

Industrial Emission (2010) . Widens the scope of the previous directives to include waste valorization activities (biological treatment, slag and ashes treatment, etc. subject to permit procedures above capacity of 75t/d)

Packaging (1994 and 2004) . 60% minimum of packaging waste recovered (material or energy valorization) in weight . 55% to 80% packaging waste recycled in weight Main Waste . Material in packaging waste (in weight): 60% for glass, paper and cardboard; 50% for metal; 22.5% for plastic, 15% for Flows wood . Deadline: 2008 for all Members that joined EC before 2003 and 2012 to 2015 for the others WEEE (Waste from Electrical and Electronic Equipment's) (2002) . Selective collection: 4kgs/inhab/year of household WEE collected . Valorization rate: 80% (in average weight per device) for big appliances, 70% for small ones and 75% for IT equipment

Other National Renewable Energy Action Plans (2009) Regulation . National targets for the share of energy from renewable sources in gross final consumption for 2020 in line with the 20% overall gross of the EU Source: Suez Environnement

51 Credit Suisse European Utilities Team Renewable incentives in the EU Feed-in tariffs and additional support mechanisms (2011)

Feed-in tariffs Additional incentive methods

Tax On-Shore Off-Shore Solar PV Quota Tradable Biomass Hydro exemption/ Member State Wind Wind Obligation green Tender Tariff Duration (€/kWh ) (€/kWh ) Fiscal (€/kWh) (€/kWh ) certificates (€/kWh ) (years) incentives

Czech R. 0.108 0.108 0.455 20 0.07 -0.10 0.081

Denmark 0.035 0.030 0.06 n/a 0.039 n/a ✓

For power France 0.082 0.13 0.12-0.46 20 0.077-0.125 0.06-0.15 plants > 12 MW

Germany 0.05 - 0.09 0.13 - 0.15 0.29 - 0.55 20 0.08 - 0.12 0.04 - 0.13 ✓

Ireland 0.059 0.059 0.19 n/a 0.072 0.072

Italy 0.3 0.3 0.15 - 0.27 20 0.2 - 0.3 0.22 ✓ ✓

Netherlands 0.118 0.186 0.46- 0.58 15 0.12 - 0.18 0.07-0.13 ✓ ✓

Poland n/a n/a 0.12 n/a 0.038 n/a ✓ ✓ ✓

Portugal 0.074 0.074 0.31 - 0.45 15 0.1 - 0.11 0.075

Spain 0.073 0.073 0.32 - 0.34 25 0.107 - 0.158 0.077 ✓

UK 0.31* n/a 0.51 20 0.12 0.23 ✓ ✓ ✓

* Only applies to units under than 1.5KW ** For projects approved in 2012

Source: Credit Suisse Research, ECOFYS, www.energy.eu, www.solarfeedintariffs.net, PLATTS, European Commission, EDF

52 Credit Suisse European Utilities Team Renewable targets in the EU by 2020 Objective: doubling the use of renewable sources in energy consumption

Energy consumption from renewable sources – 2020 targets vs. 2008 levels in the EU

50% 2008 level 2020 target

45%

40%

35%

30%

25% EU 27 2020 Target 20% EU 27 15% 2008 level

10%

Italy

Spain

Ireland

France

Poland

Finland

Belgium

Sweden

Denmark

Germany

Netherlands CzechRepublic Source: European Commission, Credit Suisse Research

53 Credit Suisse European Utilities Team Renewable Obligations (ROCs) in the UK An incentive system to source electricity from renewable sources

ROC mechanisms Worth of ROC to suppliers (£/MWh)

. UK energy suppliers must source a set % of their 60 energy from renewable sources. The target goes 50 from 9.7% in 2010 up to 15.4% in 2015 40 . To prove they have sourced the energy, they must 30 purchase renewable certificates that are produced 20

by accredited renewable generators. The price of 10 these certificates was £48.06/MWh in the year- 0

ended March 2011, for example

2006A 2011A 2020E 2004A 2005A 2007A 2008A 2009A 2010A 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2021E . Any shortfall (as there are not enough certificates Source: OFGEM, Credit Suisse research produced) means that the value of the certificates How the system works they could not source is paid by suppliers to OFGEM who “smear it back” to those renewable generators who did produce . The % targets rise each year (e.g. the 9.7% in 2010 and 15.4% in 2015) to create a 10% deficit to ensure that the system is kept structurally short and that there will always be a shortfall

Source: OFGEM, Credit Suisse Research Source: british-hydro.org

54 Credit Suisse European Utilities Team CO2 Emissions (1/2) Overview of EU ETS Phase 2 and Phase 3

Replacing National Allocation Plans with an EU ETS-wide auctioning platform and cap . The cap of the EU ETS for 2013 was set at 2,039m t CO2 permits, including allocation for sectors joining the system in 2013, but excluding aviation Centralization . The total quantity of allowances from 2013 onwards is to decrease by a linear factor of 1.74% per year . However, since recently the EU has been discussing the idea of setting aside a certain number of allowances. The intention with this would be to tighten the system which is currently oversupplied

Carrying forward credits from Phase 2 into Phase 3 . Phase 2 EUAs are bankable in unlimited amount into Phase 3 Bankability . CERs/ERUs will no longer be de facto compliance instruments in Phase 3, but swappable into EUAs until 31 March 2015 . However, the Commission will impose qualitative restrictions on the type of CERs/ERUs that can be exchanged into EUAs over Phase 3

Transition from free allocation to auction Goal: . Power sector: Power sector installations would be obliged to buy 100% of their EUAs at auctions from 2013, except for 8 member states − 8 member states (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Romania) would be allowed to allocate their power sector up to 70% of allowances for free in 2013, falling to 0% in 2020 Auctions − Non-power sector: 20% from auction in 2013, rising to 70% in 2020 . The current version of the regulation for the auctioning of EUAs over phase 3 includes − Modalities that should govern the auctioning, the frequency of auctions, the maturity of the allowances to be offer − No guidance on the volume of phase-3 EUAs that might be offered to the market before 2013 . The first auctions expected to happen this year, although it leaves open possibilities for earlier auctions

EU ETS extended to aviation industry from 2012 . Include all flights arriving and departing EU 27 (plus Norway, Iceland and Lichtenstein)(2) Aviation . 2012 cap for CO2 is 217 million tons (97% of average 2004-2006 emissions) . 2013 cap to be reduced to 95% of average 2004-2006 emissions

(1) Excluding aviation. (2) Except for: i) Example aircraft operators with less than 243 flights for three consecutive four months periods in the reporting year; ii) Aircraft operators that produce less than 10,000 tons of CO2; iii) Flights by aircraft with a certified Maximum Takeoff Weight of less than 5.7 tons. Source: European Commission, Credit Suisse Research

55 Credit Suisse European Utilities Team CO2 Emissions (2/2) Issues and implications

Issues Implications

. Qualitative restrictions on certain types of CERs/ERUs in Phase 3 . For companies that use their CER/ERU quota exclusively in the form of . Influx of CERs/ERUs (mainly from Russia and the Ukraine) into the EU secondary CER/ERU ETS before these restrictions will have become effective – Use up as much of their Phase 2 CER/ERU quota as possible in . Generators have the right to swap the newly restricted CERs/EURs for Phase 2, and to bank any credits left over into Phase 3 in the form of Transfer of EUAs, as long as the EUA price is above the CER/ERU price CER/ERUs EUAs with member states for a period of 6 months to 3 years after which the qualitative restrictions will take effect . For companies with their own CDM/JI projects

. Precise length to be decided case by case – Maximize the allowed use of CER/ERU in the form of primary credits from their own projects, which are expected to remain the cheapest credits available

. From the start of the Phase 3 trading period, at least 50% of total . In the meantime, Germany, Poland and the UK have decided to launch allowances are expected to be auctioned their own auction platform

Auctions in . The EU Commission plans to introduce a common auction platform to . The auctioning of Phase 3 certificates has started already: between Dec Phase 3 make the process transparent, efficient and easily accessible to 2011 and Oct 2012, The European Investment Bank will have sold 200m smaller participants of New Entrant Reserves (NER). This is to be followed by the sale of another 100m of NERs in late 2012-early 2013

. Due to falling CO2 emissions and a large number of CERs/ERUs . Low CO2 prices have had a negative impact on the profitability of some coming in the system, the EU ETS will face an oversupply permits in of the “clean” power generators (e.g. Fortum or Verbund), while made Phase 3 running dirty generation capacities lucrative due to high clean spreads on coal and lignite-fired capacities (beneficial for RWE, CEZ, PGE) Pricing . That could keep EUA prices – currently around €8/t – depressed and put pressure on the European Commission to resolve the situation . If CO2 prices AND energy commodity prices remained around current with tightening the supply side of the EU ETS. Currently, a set-aside levels on the medium term, there would be no incentive for utilities to type of interventions appears to be the most likely, but no details are apply fuel switching when trying to abate their CO2 emission available yet

. 15% of the allocation of the cap for the aviation industry (c 217 m t in . Airline operators will be net buyers of EUAs, which could potentially 2012) will be auctioned from 2012 onwards, while 82% will be further drive up the prices Impact of new allocated freely industry in . The part of the free allocation could bring airline operators ‘windfall’ . Measures such as engine upgrades or early retirement of aircraft are profits schemes just not economic at a carbon price of less than €200/tonne

Source: European Commission, Credit Suisse Research

56 Credit Suisse European Utilities Team Environmental requirements on coal plants Legislative basis: Industrial Emission Directive

Growth, inflation and polic rates (in %)

Legislation LCPD 1 Industrial Emissions Directive ‘LCPD 2’ Date Jan 2008 – Dec 2015 Jan 2016 – onwards Coverage SO2, NOx, Particulates SO2, NOx, Particulates Options for coal 1 Opt-in through complying: Opt-in through complying: plant owners <400mg/m3 for SO2 <200mg/m3 for SO2 <500mg/m3 for NOx <200mg/m3 for NOx <50mg/m3 for particulates <20mg/m3 for particulates Derogations were available Decision by 2013 2 < cumulative plant-by-plant limits for — NOx and SO2 (‘NERP’) 3 Opt out: 20,000hr operation (=> c29% Opt out: 17,500hr operation (=> c25% ave. load factor), close before 2016 ave. load factor); close on or before December 2024 4 Derogations available: Restricting Transitional Arrangements: Opt-in by running to 2,000 hours when fitting FGD July 2020, subject to interim constraints on overall emissions. Similar to NERP

Source: DEFRA, Credit Suisse research

57 Credit Suisse European Utilities Team EQUITY RESEARCH

Industry Data and Statistics

58 Credit Suisse European Utilities Team

Industry Data and Statistics EQUITY RESEARCH . Capacity: UK heading towards under-capacity before 2015 – same but less strong trend on the Continent . Demand to remain subdued – now probably de-correlated from GDP growth due to better efficiency . Prices: UK best pricing environment in next 5 years. Continental prices largely dependent upon carbon pricing post-2012

59 Credit Suisse European Utilities Team Power generation in Europe Breakdown by fuel type

Generation in EU 27 in 2011 (GWh) Generation in selected EU countries in 2011 (GWh and %)

3,500,000 Denmark Portugal Austria Finland 3,000,000 Czech R Belgium Holland Norway 2,500,000 Poland Spain Italy UK 2,000,000 Germany France 0 100,000 200,000 300,000 400,000 500,000 600,000 1,500,000 Source: Eurostat

Norway Nuclear UK 1,000,000 Sweden Hydro Finland Portugal Coal Poland Gas 500,000 Austria Holland Oil Italy a France Wind 0 Spain 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A Solar Germany Nuclear Hydro Coal Gas Denmark Geothermal Oil Wind Solar Geothermal Czech R Belgium Pumped Other renew Pumped storage Other 0% 20% 40% 60% 80% 100% Other Source: Eurostat Source: Eurostat

60 Credit Suisse European Utilities Team Power generation in Europe Renewable sources

Generation from renewable in EU 27 (GWh) Renewable vs. non-renewable split in EU countries, 2010

1,400,000 forecast 100%

1,200,000 80% 1,000,000 60% 800,000 600,000 40%

400,000 20% 200,000 0%

Italy

Spain

Ireland

France

Austria Poland

Greece

Finland

Norway

Sweden

Portugal

Czech R

Denmark Germany

2007 2007 A 2001 A 2002 A 2003 A 2004 A 2005 A 2006 A 2008 A 2009 A 2010 A 2015 E 2020 E Switzerland Hydro Wind Biofuels Solar Biogas Wood and Waste Netherlands Renewable Non-Renewable Source: Eurostat, European Environment Agency Source: Eurostat

Generation from renewable in selected EU countries, 2010 Renewable generation in selected EU countries, 2010 (GWh)

100% Ireland 90% Czech R. 80% Poland 70% Denmark Holland 60% Portugal 50% Finland 40% UK 30% Switz 20% Austria 10% Italy France 0% Spain

UK Sweden

Italy Spain

Switz. German

France Austria

Poland

Finland

Holland

Sweden Portugal

Denmark Norway

Germany Czech R. Czech Hydro Wind Biofuels Solar Biogas Geothermal 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Source: Eurostat Source: Eurostat

61 Credit Suisse European Utilities Team Installed capacity in Europe EU level and country level overview

Installed capacity by country in 2010 (MW) Installed capacity in EU27 in 2010 (MW)

Other 160,000 Renewables 0.5% EU27 13% Other Total capacity 840,019 MW 140,000 Renewables Hydro 17% 120,000 Hydro Fossil 54% Nuclear 100,000 Fossil Nuclear 80,000 16% Source: Eurostat, ENTSO-E, Credit Suisse Research Historical evolution of installed capacity in EU27 (MW) 60,000 Fossil Nuclear Hydro Renewables Other

2010A 40,000 2009A 2008A 2007A 20,000 2006A 2005A 2004A 0 2003A

UK 2002A

Italy Spain

Switz. 2001A

France Austria

Poland

Greece

Finland

Holland

Sweden Belgium

Portugal

Denmark Czech R. Czech Germany 0 300,000 600,000 900,000 Source: Eurostat Source: Eurostat, ENTSO-E, Credit Suisse Research

62 Credit Suisse European Utilities Team Variable costs and new built costs of generation Central Europe in 2012

Variable cost (€/MWh) New build cost (€/MWh)

80 100 Fuel cost CO2 cost Other 71.9 90 86.7 70 81.2 79.0 80 75.4

60 70 55.3 63.7 60 55.8 50 50

40 40 36.4 30

30 20 24.9 10 20 0 Lignite Hard coal CCGT Wind Nuclear Hydro 10 Fuel cost CO2 Other variable Fixed O&M (cash) 0 Capital cost System marginal price Lignite Hard Coal CCGT OCGT Source: Credit Suisse Research Source: Credit Suisse Research

63 Credit Suisse European Utilities Team Power generation in Europe CO2 in the EU ETS – system oversupplied, permanent cancellation needed

EUA price (€/t) scenario EU ETS emissions (t) by sector vs. total free allocation

Source: Bloomberg PROFESSIONAL, Credit Suisse Research Source: EU Commission data, Credit Suisse Research Emissions and components of the total cap (m t) EU ETS emission (m t) – 3 different price scenarii

Source: EU Commission data, Credit Suisse Research Source: EU Commission, Credit Suisse Research

64 Credit Suisse European Utilities Team Power generation in Europe Merit order – Germany and the UK

Germany UK

Source: RWE

65 Credit Suisse European Utilities Team Power generation in Europe Load curves in Spain and UK (Credit Suisse view)

Load duration curve in Spain (MW) Load duration curve in UK (MW) 50,000 60,000

40,000 50,000

40,000 30,000

30,000

20,000 20,000

10,000 10,000

0 0 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Hours Hours Wind Nuclear Must run Coal - Ultra High eff Coal - High eff Coal - Medium eff Other Renewables Special Non Renew Wind Coal - Low eff CCGT - High eff Coal - Small eff Hydro Nuclear CCGT CCGT - Medium eff Interconnectors CCGT - Low eff Hydro CCGT - Small Pumped Storage Domestic Coal Imported Coal OCGT Oil Source: Credit Suisse Research Source: Credit Suisse Research

66 Credit Suisse European Utilities Team Power generation in Europe Remaining margins in Central Europe and the UK (Credit Suisse view)

Remaining margin in Central Europe Remaining margin in the UK

Reliably available capacity Reliably available capacity 280 Peak load (GW) (LHS) 15% 80 Peak load (GW) (LHS) 40% Remaining margin (%) (RHS) Remaining margin (%) (RHS) 270 35% 75 260 30% 10% 250 70 25%

240 65 20%

230 15% 5% 60

220 10%

55 210 5%

200 0% 50 0%

2014E 2020E 2011A 2012E 2013E 2015E 2016E 2017E 2018E 2019E

2013E 2014E 2011A 2012E 2015E 2016E 2017E 2018E 2019E 2020E Source: Credit Suisse Research Source: Credit Suisse Research

67 Credit Suisse European Utilities Team Installed capacity Capacity and load in Germany post-Fukushima

Power balance in January 2011, at 7pm (based on System Adequacy Forecast 2011-2025, ENTSO-E)

Available capacity 160.2 GW

51.1 50.8 Capacity not reliably available Other renewable

Capacity under revision 9.7 6.4 Hydro 4.8 Capacity breakdowns Other 6.3 5.1 Reserves for the DL System Secured (reliable) 4.8 Remaining 12.5 22.1 capacity 93.1 GW 7.2 capacity*** Natural gas 3.5 Base** 16.0

29.5 Hard coal 25.4 80.6

Brown coal 21.2 19.3

Nuclear* 20.3 16.9

Availableverfügbare capacity Leistung Reliablegesicherte capacityLeistung Last * The offline nuclear capacities of Brunsbuttel und Krummel are reflected in the reliable nuclear capacity ** The yearly peak is around 2-3 GW higher than the seasonal value showed for 2011 *** The value reflects a safety buffer of 7 GW (adequacy reference margin), recommended by ENTSO-E

Source: ENTSO-E, BDEW

68 Credit Suisse European Utilities Team Power generation in Europe Year+1 forward spreads (1/2)

German Spreads (€/MWh) UK Spreads (£/MWh)

30 40

20 30 10 20 0

10 (10)

0 (20)

(30) (10) 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E

Germany CDS Germany CDS est. Germany CSS Germany CSS est. UK CDS UK CDS est. UK CSS UK CSS est. Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL Spanish Spreads (€/MWh) French Spreads (€/MWh)

30 40

20 30

20 10 10 0 0 (10) (10)

(20) (20)

(30) (30) 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E

Spain CDS Spain CDS est. Spain CSS Spain CSS est. France CDS France CDS est. France CSS France CSS est. Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

69 Credit Suisse European Utilities Team Power generation in Europe Year+1 forward spreads (2/2)

Italian Spreads (€/MWh) Czech Spreads (€/MWh)

50 40

40 30 20 30 10

20 0

(10) 10 (20) 0 (30)

(10) (40) 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E

Italy CDS Italy CDS est. Italy CSS Italy CSS est. Czech CDS Czech CDS est. Czech CSS Czech CSS est. Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL Nordpool Spreads (€/MWh) Polish Spreads (€/MWh)

20 40

10 30

20 0 10 (10) 0 (20) (10)

(30) (20)

(40) (30) 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E

Nordpool CDS Nordpool CDS est. Nordpool CSS Nordpool CSS est. Poland CDS Poland CDS est. Poland CSS Poland CSS est. Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

70 Credit Suisse European Utilities Team Power generation in Europe Power prices (1/2)

German (EEX) Power Price (€/MWh) UK Power Price (£/MWh)

100 100 1 Year Forward Prices 1 Year Forward Prices 90 CS Estimates 90 CS Estimates 80 80 70

70 60 50 60 40 50 30

40 20 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Source: Bloomberg PROFESSIONAL, Credit Suisse Research Source: Bloomberg PROFESSIONAL, Credit Suisse Research Italian Power Price (€/MWh) Spanish Power Price (€/MWh)

110 80 1 Year Forward Prices 1 Year Forward Prices 75 CS Estimates CS Estimates 100 70 65 90 60 55 80 50

70 45 40 60 35 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Source: Bloomberg PROFESSIONAL, Credit Suisse Research Source: Bloomberg PROFESSIONAL, Credit Suisse Research

71 Credit Suisse European Utilities Team Power generation in Europe Power prices (2/2)

Nordpool Power Price (€/MWh) Polish Power Price (€/MWh)

80 70 1 Year Forward Prices 1 Year Forward Prices 65 70 Market Forwards CS Estimates 60 60 55 50 50 40 45

30 40

20 35 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Source: Bloomberg PROFESSIONAL, Credit Suisse Research, PLATTS Source: Bloomberg PROFESSIONAL, Credit Suisse Research French Power Price (€/MWh) Czech Power Price (€/MWh)

100 100 1 Year Forward Prices 1 Year Forward Prices 90 CS Estimates 90 CS Estimates 80 80 70 70 60 60 50

50 40

40 30 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Source: Bloomberg PROFESSIONAL, Credit Suisse Research Source: Bloomberg PROFESSIONAL, Credit Suisse Research

72 Credit Suisse European Utilities Team Power generation in Europe Central European power price analysis (Credit Suisse view)

System marginal price – CS historical forecasts (€/MWh) System marginal price (€/MWh)

55 70

53 60 51

50 49

47 40

45 30

2012E 2013E 2014E 2015E

2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E Base case YTD market forward (EEX) 18/09/2012 2012E Source: Credit Suisse Research Source: Credit Suisse Research Clean dark spread and clean spark spread (€/MWh) Clean brown spread (€/MWh)

15 24 Clean Spark Spread Clean Dark Spread 10

5 23

0 2012E 2013E 2014E 2015E 2016E 22 -5

-10 21 2012E 2013E 2014E 2015E 2016E -15 Source: Credit Suisse Research Source: Credit Suisse Research

73 Credit Suisse European Utilities Team Power generation in Europe Commodities

Crude Brent Price ($/barrels) TTF Price (€/MWh)

150 Spot 1 Year Forward Prices 45 CS Estimates Spot 40 1 Year Forward Prices Market Estimates 120 35

90 25

60 15

30 5 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E Source: Bloomberg PROFESSIONAL, Credit Suisse Research Source: Bloomberg PROFESSIONAL, Credit Suisse Research NBP Price (€/MWh) ARA API2 Coal Price ($/tonnes)

50 230 Spot 45 Spot 210 1 Year Forward Prices 1 Year Forward Prices 40 Market Forwards 190 CS Estimates 35 170 30 150 25 130 20 15 110 10 90 5 70 0 50 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E Source: Bloomberg PROFESSIONAL , Credit Suisse Research Source: Bloomberg PROFESSIONAL, Credit Suisse Research

74 Credit Suisse European Utilities Team Power generation in Europe CO2 (1/2)

EU ETS CO2 prices and CS estimates (€/t) CO2 intensity and total emission by company (2010)

25 900 175 EUETS 2012 750 150 Market Estimates 20 125 600 100 450 15 75 300 50 8.84 9.41 10 150 25 0 0

EDF

Enel SSE

EDP

Drax

GDF

E.On

RWE Fortum 0 Centrica CO2 intensity (kg/MWh) (LHS) Total CO2 emission (m t) (RHS) 2010A 2011A 2012A 2013E 2014E Source: Bloomberg PROFESSIONAL Source: Company data, PwC, Credit Suisse Research Pre-transformation CO2 intensity of fuel types (t/MWh) CO2 emission in the EU ETS in 2011 (m tonnes)

500 Actuals Free Allocation Lignite 0.41 450 400 350 Hard Coal 0.40 300 250 Efficient Coal 0.33 200 150 Oil 0.27 100 50

Gas 0.20 0 UK

0.0 0.1 0.2 0.3 0.4 0.5 Italy

Spain

Ireland

Austria France

Poland

Finland Greece

Norway

Holland

Sweden Belgium

Portugal

Hungary

CzechR

Denmark Germany Source: Credit Suisse Research Source: Bloomberg PROFESSIONAL

75 Credit Suisse European Utilities Team Power transmission Cross-border interconnection*

Interconnections

UK Ireland Nordic Baltic 80 MW 2000 MW 410 MW 2000 MW 600 MW 0 MW 3350 MW 2100 MW 150 MW

2000 MW 2400 MW 200 MW 500 MW 2650 MW 600 MW 1000 MW 3350 MW 4000 MW 2700 MW North Eastern North Western Block 4400 MW 3000 MW Block 4700 MW 3050 MW 5425 MW 1400 MW 1200 MW 1000 MW 200 MW 2600 MW 7100 MW 1000 MW 1200 MW 1420 MW 500 MW 3055 MW 600 MW 2000 MW

500 MW 3190 MW 400 MW 400 MW 0 MW 2400 MW 6485 MW 600 MW South Eastern 600 MW Belarus 1200 MW 1000 MW Block 2150 MW 350 MW Central South Western Block South Block

800 MW 1600 MW 1640 MW 480 MW 800 MW 600 MW 1400 MW 2200 MW 800 MW Turkey

January 2009 January 2010 800 MW January 2013 Simultaneous Regional Transmission Capacity DC links

650 MW January 2015 Values indicate export AC tie-lines North Africa January 2020 Capacity of the respective RB Existing NTC for SU 2009

Source: ENTSO-E (as of Dec. 2010); *See appendix for countries belonging into certain blocks

76 Credit Suisse European Utilities Team Power transmission Consolidated physical electricity import and export in Europe (2010)

GWh Import Export

GER 40,545 54,849

FRA 19,154 43,281

ESP 6,784 14,388

ITA 46,947 2,099

GB 5,903 5,350

CZ 8,586 22,230

PL 7,404 9,593

FIN 16,486 4,281

AUT 22,549 21,094 Source: ENTSO-E (as of Dec. 2010)

77 Credit Suisse European Utilities Team Power consumption End consumer prices

Residential prices in H2 2011 (€ cents/kWh)

50 Base price Taxes 40

Italy

Spain

Latvia

EU27

Turkey

Ireland

France Austria

Poland

Croatia

Greece Finland

Estonia

Czech

Norway

Belgium Sweden

Bulgaria

Portugal

Hungary

Slovakia

Slovenia

Republic

Romania

Denmark

Lithuania Germany Source: Eurostat Industrial prices in H2 2011 (€ cents/kWh)

20 Base price Taxes

Italy

Spain

Latvia

EU27

Turkey

Ireland

Austria France

Poland

Croatia

Finland Greece

Estonia

Norway

Sweden Belgium

Bulgaria

Portugal

Hungary

Slovakia

Slovenia

Romania

Denmark

Lithuania Germany

Source: Eurostat CzechRepublic

78 Credit Suisse European Utilities Team Power consumption Patterns in country and per capita consumption levels

Electricity consumption in EU27 Electricity consumption CAGR vs. GDP CAGR (1998-2008)

3,500,000 6% Ireland 5%

Poland 4% 3,000,000 Czech R. Greece Spain 3% UK Holland US Belgium Austria Switz.

GDP CAGR 2% 2,500,000 France EU 27 Portugal Germany Italy 1%

2,000,000 0% 0% 1% 2% 3% 4% Electricity consumption CAGR Source: Eurostat, WorldBank

1,500,000 Electricity consumption per capita vs. GDP per capita (2008)

60,000 Ireland Netherlands 50,000 Austria 1,000,000 Germany Belgium US UK France 40,000 Italy EU27 Spain 30,000 Greece 500,000 Portugal 20,000 Czech R. Poland 10,000

0 capita per GDP (in thousand $) China

0 India

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2000A 0 5,000 10,000 15,000 Industry Energy sector Residential Other Annual electricity consumption per capita (in kWh) Source: Eurostat, Credit Suisse Research Source: Eurostat, WorldBank

79 Credit Suisse European Utilities Team Power demand in Central Europe Scenario analysis (Credit Suisse view)

Demand evolution (MW) Demand growth (%)

235,000 8% Current base case CS July 12 Current base case CS Jul-12 base case 6% 230,000 4%

2% 225,000

2011A 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 220,000 -2% 2010A

-4%

215,000 -6%

-8% 210,000

-10%

2010A 2014E 2018E 2009A 2011E 2012E 2013E 2015E 2016E 2017E 2019E 2020E

Source: Credit Suisse Research Source: Credit Suisse Research

80 Credit Suisse European Utilities Team Power consumption Monthly consumption

Monthly consumption growth (y-o-y comparison, weather- and calendar-adjusted)

France Germany Italy Spain UK

20.0%

15.0%

10.0%

5.0%

0.0%

(5.0%)

(10.0%)

(15.0%)

(20.0%) 2008A 2009A 2010A 2011A 2012A

Source: ENTSO-E, Terna, RTE, REE, DECC, Credit Suisse Research

81 Credit Suisse European Utilities Team Waste Key data in Europe

Municipal waste treatment (kg/per capita) vs. GDP per capita Municipal waste generation in 2009 (thousands of tonnes)

1000 70,000 50,000 Municipal waste (thousand tonnes) (LHS) 3,500 802 733 60,000 GDP (bn $) (RHS) 3,000 800 40,000 50,000 575 581 524 548 561 565 2,500 600 477 515 522 40,000 30,000 2,000 400 306 320 30,000 20,000 20,000 1,500 200 10,000 1,000 0 0 10,000

500 UK

Italy 0 0

Spain

EU 27 EU

Ireland

Poland

France

Holland

Sweden

Portugal

CzechR. Denmark

Germany

Italy Spain

Landfill Incineration Switz.

Poland

Austria

France

Finland

Norway

Holland

Sweden Belgium

Recycled & composted GDP per capita ($) (RHS) Portugal

CzechR. Denmark Germany Source: Suez Environnement Investors Presentation, 9 February 2011, WorldBank Source: Eurostat, WorldBank Energy recovery from incineration (thousands of tonnes) Public-private market shares (by customer base)

60,000 Poland 93% 7% 50,000 Holland 68% 32% 40,000 France 9% 91% 30,000 Spain 25% 75% 20,000

10,000 England & Wales 17% 83%

0 Germany 35% 65% 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 0% 20% 40% 60% 80% 100% Without recovery With recovery Public Private

Source: Eurostat Source: Suez Environnement Investors Presentation, 9 February 2011

82 Credit Suisse European Utilities Team Water (1/2) Consumption and market landscape in Europe

Private presence in the clean drinking water business and key market players Water use and spending on water

Nether- Poland Germany Spain France England Daily use of water (liters per person) lands 400 Annual spending as % of GDP per capita (RHS) 1.4% 12% 1.2% 39% 61% 27% 300 50% 50% 1.0% 100% 88% 73% 100% 0.8% 200 0.6% Principal public Private leaders Leaders Leaders Leaders Principal 100 0.4% companies . SAUR . BWB . AGBAR . Veolia Water operators 0.2% . Brabant Water . Eurawasser . Aqualia France . Sevem Trent . Evides . Gelsenwasser . Aguas de . Lyonnaise des . Thames Water 0 0.0%

. Vitens . OEWA Valencia Equx . United Utilities UK

SAUR Italy

. India

Brazil EU27

Spain China

Public Private & semi-public companies France

Finland

Holland

Belgium Sweden

Denmark Germany Source: Suez Environnement, Source: Eurostat, WorldBank, UNDP, WSJ Private presence in the waste water business and key market players Freshwater absorption (2007)

800 Per capita (m3) 35,000 Nether- Poland Germany Spain France 700 (LHS) lands 4% 30,000 Total (million m3) 4% 13% 600 (RHS) 25,000 33% 500 67% 44% 56% 20,000 96% 87% 400 96% 15,000 300 10,000 Principal public Private leaders Leaders Leaders Leaders Principal 200 companies . SAUR . BWB . AGBAR . Veolia Water operators 5,000 . AGV . Eurawasser . Aqualia France . Sevem Trent 100 . Van Delfland . Gelsenwasser . Aguas de . Lyonnaise des . Thames Water 0 0 . Van Rijnland . OEWA Valencia Equx . United Utilities

. SAUR Spain

Public Private & semi-public companies Switz.

Poland

France

Holland

Sweden Belgium

England

Denmark

Czech R. Czech Germany Source: Suez Environnement Source: Eurostat, WorldBank

83 Credit Suisse European Utilities Team Water (2/2) Valuation of UK water companies – premium to RAB

40%

30%

20%

10%

(10%)

(20%)

(30%)

(40%) 1990 1995 2000 2005 2010

AMP1 AMP2 AMP3* AMP4 AMP5

Source: Credit Suisse Research

84 Credit Suisse European Utilities Team Gas in Europe (1/5) Gas consumption in Europe

Gas consumption in EU27 in 2010 by country (bcm) Gas supply and demand in Europe (bcm LHS, bcf/d RHS)

800 Norway UK UK NL Other domestic 700 N.Africa & other pipeline LNG 70 Russia pipeline + LNG Demand 60 Germany 600 500 50 Italy 400 40 300 30 France 200 20 Netherlands 100 10 0 0

Spain

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E Belgium 2000A Source: Company data, Credit Suisse Research Poland Consumption in EU27 by consumer type (bcm)

Czech R. 500 467 476 482 479 473 484 448 481 427 437 440 Norway 400 Denmark 300 Finland 200 Switzerland 100 Sweden 0

0 15 30 45 60 75 90

2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A Energy sector Industry Residential Other Energy Sector Industry Residental Other Source: Eurostat, Credit Suisse Research Source: Eurostat, Credit Suisse Research

85 Credit Suisse European Utilities Team Gas in Europe (2/5) LNG globally and in Europe

Global LNG supply and demand (bcm) LNG regasification capacities by country (bcm) 500 LNG (existing) LNG under construction Italy 93.2 450 LNG supply (bear) LNG supply (base) Spain 72.7 UK 60.9 400 Speculative LNG demand (base) LNG demand (China bull) France 54.5 350 Netherlands 23.4 Turkey 12.7 300 Germany 9.7 250 Belgium 8.9 200 Portugal 5.7 Greece 5.3 Operational/Nearly finished Proposed/Planned

150 Poland 5.0

2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2008A 0 10 20 30 40 50 60 70 80 90 100 Source: BP Statistical Review 2011, Global LNG Info, Credit Suisse Research Source: Global LNG Info, Credit Suisse Research LNG imports to Europe in 2010 (bcm) Regasification capacity growth in Europe (bcm)

60 Additional (LHS) Cumulated (RHS) 400 Belgium, 6.4 350 UK, 18.7 50 300 France, 13.9 40 250 30 200 Greece, 1.2 Turkey, 7.9 150 20 100 Italy, 9.1 10 50

Portugal, 3.0 0 0

Spain, 27.5

2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E 2016E <2000 A <2000 Source: BP Statistical Review 2011, Credit Suisse Research Source: BP Statistical Review 2011, Global LNG Info, Credit Suisse Research

86 Credit Suisse European Utilities Team Gas in Europe (3/5) Influencing factors and consumption forecasts

Gazprom’s export prices vs. TTF and NBP Gas consumption forecast in Europe

45 440 40 430 35 420 30 410 CERA: 25 10-15E CAGR 0.3% 20 bcm 400 15 390

10 UK NBP TTF Gazprom export price 380 5 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E Historical data CS bear case (13E = 08A) 0 CS bull case (10A = new base) CERA 2009A 2010A 2011A 2012A CS base case Source: Bloomberg PROFESSIONAL, Company data, Source: CERA, Credit Suisse Research Recoverable shale gas reserves in Europe (bcm) Gas consumption in European power generation

6 150 5.10 5.30 5 125

4 100

3 2.35 75 2 1.16 1.19 50 1 0.42 0.48 0.57 0.65 0.11 0.23 25 0 0

UK 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Turkey France

Poland Austria Belgium Germany France Netherlands

Norway

Ukraine

Sweden

Denmark Lithuania

Germany Switzerland Italy Spain UK Netherlands Source: IEA, Credit Suisse Research Source: ENTSO-E, Credit Suisse Research

87 Credit Suisse European Utilities Team Gas in Europe (4/5) End consumer prices

Residential prices in H2 2011 (€ cents/kWh)

16 Base price Taxes

Italy

Spain

Latvia

Turkey

Ireland

Austria France

Poland

Croatia

Estonia

Czech

Belgium Sweden

Bulgaria

Portugal

Hungary

Slovakia

Slovenia

Republic

Romania

Denmark

Lithuania Germany

Source: Eurostat, Credit Suisse Research

Netherlands Luxembourg Industrial prices in H2 2011 (€ cents/kWh)

8 Base price Taxes

Italy

Spain

Latvia

Turkey

Ireland

France

Poland

Croatia

Finland

Estonia

Czech

Belgium Sweden

Bulgaria

Portugal

Hungary

Slovakia

Republic

Romania

Denmark

Lithuania

Germany Netherlands Source: Eurostat, Credit Suisse Research Luxembourg

88 Credit Suisse European Utilities Team Commodity spread Gas price comparison

Brent crude (LHS, $ / bbl), NBP, US gas and Gazprom’s price (all RHS, $ / mcm)

150 600 Forecast 125 500

100 400

75 300

50 200

25 100

0 0

Jun-09 Jun-08 Jun-10 Jun-11 Jun-12

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Sep-08 Sep-09 Sep-10 Sep-11 Sep-12

Brent Crude (LHS) Gazprom's price NBP spot/future US spot/future

Source: Credit Suisse Research, Bloomberg PROFESSIONAL

89 Credit Suisse European Utilities Team Commodity spread TTF gas vs. Brent crude

Spread: Spot TTF – Spot Brent (€/MWh)

(5)

(10)

(15)

(20) 2009A 2010A 2011A 2012A

Source: Credit Suisse Research, Bloomberg PROFESSIONAL

90 Credit Suisse European Utilities Team Gas in Europe (5/5) LNG map – Liquefaction and regasification facilities in Europe

Leave this for later!!!

Source: California Energy Commission (as of 2009)

91 Credit Suisse European Utilities Team EQUITY RESEARCH

Company Financials

92 Credit Suisse European Utilities Team

Company Financials EQUITY RESEARCH

. Slow growth in revenues and earnings to be expected in the near future . Dividend pay out will continue to decline in the near future . Capex decline after a few years of ‘excess’ will bring relief to balance sheets but cuts long-term growth prospects

93 Credit Suisse European Utilities Team Sector dynamics Revenues

Revenues of European utilities (y-o-y growth and in €bn)

800 40% 690 700 651 658 30% 580 596 600 20% 500 475 436 10% 400 371 344 329 300 318 309 0% 300 231 188 200 -10% 200 140 154 158 114 100 -20%

0 -30%

1993 A 1993 A 1994 A 1995 A 1996 A 1997 A 1998 A 1999 A 2000 A 2001 A 2002 A 2003 A 2004 A 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012

Integrated Regulated Energy utils Renewable y-o-y growth (RHS)

Source: HOLT, Datastream, Bloomberg PROFESSIONAL

94 Credit Suisse European Utilities Team Sector dynamics EBITDA

EBITDA growth of European utilities (y-o-y growth and in €bn)

150 50% 135 135 128 130 40% 125 114 102 30% 100 91 20% 69 79 63 74 75 10% 55 57 50 0% 50 43 38 40 33 35 -10% 24 25 -20%

0 -30%

2012E 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A

Regulated Energy utils Renewable TOTAL ebitda_1 y-o-y growth (RHS)

Source: HOLT, Datastream, Bloomberg PROFESSIONAL

95 Credit Suisse European Utilities Team Sector dynamics EBITDA margin of the sector and of the sub-sectors

EBITDA margin

70%

60%

50%

40%

30%

20%

10%

2005A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Energy Utils Integrated Regulated Renewable EU Utilities

Source: HOLT, Datastream

96 Credit Suisse European Utilities Team Sector dynamics Corporate tax (CT)

Corporate tax of European utilities (€bn)

25 40% 23

35% 20 20 19 17 30% 15 15 15 14 14 25% 12

20% 10 9 8 8 7 7 6 6 6 15% 5 5 4 10% 2

0 5%

1995A 2006A 1993A 1994A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2007A 2008A 2009A 2010A 2011A 2012E

Regulated Energy utils Renewable TOTAL CT CT / EBIT (RHS)

Source: HOLT, Datastream

97 Credit Suisse European Utilities Team Sector dynamics Net income

Net income of European utilities (€bn)

60 80%

49 49 47 60% 48 41 39 40 36 40% 36 34

20% 24 24 17 16 0% 15 14 12 12 12 9 9 7 8 -20% 4

0 -40%

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Regulated Energy utils Renewable y-o-y growth (RHS)

Source: HOLT, Datastream

98 Credit Suisse European Utilities Team Sector dynamics Dividend paid

Total dividend paid of European utilities (€bn)

35 80%

30 30 27 25 24 25 70% 25 23 22

20 19 60% 15 12

9 10 10 8 7 50% 6 5 5 4 5 3 3 2

0 40%

2008A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2009A 2010A 2011A 2012E

Regulated Energy utils Renewable Div Pay out (RHS)

Source: HOLT, Datastream

99 Credit Suisse European Utilities Team Sector dynamics Net financial debt

Debt of European utilities (€bn)

500 476 40% 461 454 463 450 396 400 30%

350 311 300 20% 242 237 250 232 234 231 197 200 10% 154 135 150 99 81 82 81 90 100 62 0% 50

0 -10%

1995A 2002A 1993A 1994A 1996A 1997A 1998A 1999A 2000A 2001A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Regulated Energy utils Renewable y-o-y growth (RHS)

Source: HOLT, Datastream

100 Credit Suisse European Utilities Team Sector dynamics Capital expenditure

Total capital expenditure of European utilities (€bn)

100 60% 88 90 85 85 86 80 74 45%

70 62 60 30% 50 44 39 38 40 34 15% 30 34 33 30 26 29 23 24 24 23 20 15 0% 10

0 -15%

1995A 2003A 1993A 1994A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Regulated Integrated Renewable y-o-y growth (RHS)

Source: HOLT, Datastream

101 Credit Suisse European Utilities Team Return on capital employed (ROCE) European utilities vs. comparable sectors in Europe

Weighted average by market capitalization

20%

18%

16%

14%

12%

10%

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A

ROCE Infrastructure ROCE Oil & Gas ROCE EU Utilities

Source: HOLT

102 Credit Suisse European Utilities Team Return on capital employed (ROCE) European utilities vs. utilities in other regions

Weighted average by market capitalization

12%

10%

2003A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A

ROCE Americas ROCE Asia ROCE EU Utilities Source: HOLT

103 Credit Suisse European Utilities Team Return on capital employed (ROCE) European utilities sub-sectors

Weighted average by market capitalization

30%

25%

20%

15%

10%

2007A 2011A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2008A 2009A 2010A

ROCE Energy Utils ROCE Integrated ROCE Regulated ROCE Renewable

Source: HOLT

104 Credit Suisse European Utilities Team Return on capital employed (ROCE) ROCE and CFROI of European Utilities

Weighted average by market capitalization

12%

10%

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

ROCE EU Utilities CFROI EU Utilities Market Disc Rate EU Utilities

Source: HOLT, Datastream

105 Credit Suisse European Utilities Team Return on capital employed (ROCE) ROCE and CFROI of European Utilities sub-sectors

Integrated Energy Utilities

14% 10% 9% 12% 8% 10% 7%

8% 6% 5% 6% 4% 4% 3% 2% 2% 1%

0% 0%

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

ROCE Integrated CFROI Integrated Market Disc Rate Integrated ROCE Energy Utils CFROI Energy Utils Market Disc Rate Energy Utils

Renewable Regulated 18% 30% 16% 14% 25% 12% 20% 10% 15% 8% 6% 10% 4% 5% 2% 0%

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

ROCE Renewable CFROI Renewable Market Disc Rate Renewable ROCE Regulated CFROI Regulated Market Disc Rate Regulated Source: HOLT

106 Credit Suisse European Utilities Team Selected financial metrics (1/3) European utilities

CFROI vs. discount rate (in %)

8% 7% CFROI (LHS) Discount rate 6% 5% 4% 3% 2% 1%

2012E

1989A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A Source: HOLT

CFROI (in%) vs. ND / Cash flows (in%)

5% CFROI (LHS) Net Holt Debt / HOLT Cash Flows (RHS) 10x

4% 8x

3% 6x

2% 4x

1% 2x

0% 0x

1989A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Source: HOLT

107 Credit Suisse European Utilities Team Selected financial metrics (2/3) European utilities

Cash flows, asset base, cost of capital, free cash flow

150,000

100,000

50,000

(50,000)

(100,000)

2012E

1989A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A (150,000)

(200,000) HOLT Cash Flows Cost of asset base Cost of capital R&D HOLT FCF = Cash Flow - Fixed Charges

Source: HOLT

Price return, discount rate, consensus returns forecasts 7% 15%

6% 10% 5% 5% 4% 0% 3% -5% 2% 1% -10% 0% -15% 2006A 2007A 2008A 2009A 2010A 2011A PRICE RETURN, 4 weeks (RHS) MARKET IMPLIED DISCOUNT RATE (LHS) CONSENSUS RETURNS FORECASTS t+1 (LHS) Source: HOLT

108 Credit Suisse European Utilities Team Selected financial metrics (3/3) European utilities

EBITDA margins vs. Asset turns

Asset turns (LHS) Ebitda margins (RHS) 0.4 25%

0.3 20% 15% 0.2 10% 0.1 5%

0.0 0%

2011E 2012E

1989A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A Source: HOLT

Free cash flow

10,000

(10,000)

1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011E 2012E (20,000) 1989A

(30,000)

(40,000)

(50,000) HOLT FCF = Cash Flow - Fixed Charges Source: HOLT

109 Credit Suisse European Utilities Team EQUITY RESEARCH

Market-related Data

110 Credit Suisse European Utilities Team

Market-related data EQUITY RESEARCH

. Current levels of valuation metrics are below historical average. This is optically attractive BUT is this just a point in a long-term decline? . High dividend yields may suggest risk of dividend cut, not under- valuation

111 Credit Suisse European Utilities Team Market capitalization European utilities sub-sectors

Total market capitalization of European utilities (€bn)

800 764 60%

50% 700 617 40% 577 600 540 519 30% 500 441 450 20% 398 400 10%

291 0% 300 266 234 220 204 193 -10% 174 200 149 101 -20% 77 100 67 60 -30%

0 -40%

1995A 2003A 1993A 1994A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Regulated Integrated Renewable y-o-y growth (RHS)

Source: HOLT, Datastream

112 Credit Suisse European Utilities Team Price-earnings ratio European utilities vs. comparable sectors in Europe

Weighted average by market capitalization 40x

30x

20x

10x

2004A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

PE - Infrastructure PE - EU Utilities PE - Oil&Gas

Source: HOLT

113 Credit Suisse European Utilities Team Price-earnings ratio European utilities vs. utilities in other regions

Weighted average by market capitalization 40x

30x

20x

10x

2009A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2010A 2011A 2012E

PE - Americas PE - Asia PE - EU Utilities

Source: HOLT

114 Credit Suisse European Utilities Team Price-earnings ratio European utilities sub-sectors

Weighted average by market capitalization 30x

25x

20x

15x

10x

2009A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2010A 2011A 2012E

PE - Energy Utils PE - Integrated PE - Regulated 6-month mov. avg. (PE - EU Utilities)

Source: HOLT

115 Credit Suisse European Utilities Team Price-earnings ratio Selected European utilities

Price-earnings ratio

4 2007A 2008A 2009A 2010A 2011A 2012A

MSCI EU Utilities EDF Enel Iberdrola Centrica SSE MSCI EU RWE GDF

Source: Bloomberg

116 Credit Suisse European Utilities Team EV/EBITDA ratio European utilities vs. comparable sectors in Europe

Weighted average by market capitalization

15x

10x

2003A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

EV EBITDA - Infrastructure EV EBITDA - EU Utilities EV EBITDA - Oil&Gas Source: HOLT

117 Credit Suisse European Utilities Team EV/EBITDA ratio European utilities vs. utilities in other regions

Weighted average by market capitalization

20x

15x

10x

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

EV EBITDA - Americas EV EBITDA - Asia EV EBITDA - EU Utilities

Source: HOLT

118 Credit Suisse European Utilities Team EV/EBITDA ratio European utilities sub-sectors

Weighted average by market capitalization

15x

10x

2003A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

EV EBITDA - Energy Utils EV EBITDA - Integrated EV EBITDA - Regulated 6-month mov. avg. (EV EBITDA - EU Utilities)

Source: HOLT

119 Credit Suisse European Utilities Team Price-to-book ratio European utilities vs. comparable sectors in Europe

Weighted average by market capitalization

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

PB Infrastructure PB Oil & Gas PB EU Utilities

Source: HOLT

120 Credit Suisse European Utilities Team Price-to-book ratio European utilities vs. utilities in other regions

Weighted average by market capitalization

2001A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

PB Americas PB Asia PB EU Utilities

Source: HOLT

121 Credit Suisse European Utilities Team Price-to-book ratio European utilities sub-sectors

Weighted average by market capitalization

2006A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2007A 2008A 2009A 2010A 2011A 2012E

PB Energy Utils PB Integrated PB Regulated Source: HOLT

122 Credit Suisse European Utilities Team Dividend yield European utilities vs. comparable sectors in Europe

Weighted average by market capitalization

1993A 1999A 2005A 2011A 1994A 1995A 1996A 1997A 1998A 2000A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2012E

Div Yield - Infrastructure Div Yield - EU Utilities Div Yield - Oil&Gas

Source: HOLT

123 Credit Suisse European Utilities Team Dividend yield European utilities vs. utilities in other regions

Weighted average by market capitalization

1995A 1993A 1994A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Div Yield - Americas Div Yield - Asia Div Yield - EU Utilities

Source: HOLT

124 Credit Suisse European Utilities Team Dividend yield European utilities sub-sectors

Weighted average by market capitalization

2003A 2004A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

Div Yield - Energy Utils Div Yield - Integrated Div Yield - Regulated 6-month mov. avg. (Div Yield - EU Utilities)

Source: HOLT

125 Credit Suisse European Utilities Team Financial metrics European utilities

EV / IC vs. discount rate vs. dividend yield

8% 2.5x Div. Yield Market-implied Discount rate EV / IC (RHS) 7% 2.0x 6%

5% 1.5x

1.0x 3%

2% 0.5x 1%

0% E 0.0x 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Source: HOLT

126 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

Suez Environnement EDF

8% 2.5x 8% 2.0x

2.0x 6% 6% 1.5x 1.5x

4% 4% 1.0x 1.0x

2% 2% 0.5x 0.5x

0% 0.0x 0% 0.0x

2007A 2006A 2008A 2009A 2010A 2011A 2012A

2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

Veolia Environnement GDF Suez

10% 2.5x 10% 2.0x

8% 2.0x 8% 1.5x

6% 1.5x 6% 1.0x 4% 1.0x 4%

0.5x 2% 0.5x 2%

0% 0.0x 0% 0.0x

2005A 2010A 2006A 2007A 2008A 2009A 2011A 2012A

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

127 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

RWE CEZ

10% 1.5x 10% 2.5x

8% 8% 2.0x

1.0x 6% 6% 1.5x

4% 4% 1.0x 0.5x

2% 2% 0.5x

0% 0.0x 0% 0.0x

2002A 2001A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

EON Enel

10% 1.5x 12% 1.5x

8% 10%

1.0x 8% 1.0x 6% 6% 4% 0.5x 4% 0.5x

2% 2%

0% 0.0x 0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

128 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

Fortum

10% 2.0x

8% 1.5x

6% 1.0x 4%

0.5x 2%

0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

Verbund

10% 2.5x

8% 2.0x

6% 1.5x

4% 1.0x

2% 0.5x

0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

129 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

EDP Gas Natural

10% 1.5x 10% 1.5x

8% 8%

1.0x 1.0x 6% 6%

4% 4% 0.5x 0.5x

2% 2%

0% 0.0x 0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

Iberdrola Endesa

10% 1.5x 35% 1.5x

8% 28% 1.0x 1.0x 6% 21%

4% 14% 0.5x 0.5x

2% 7%

0% 0.0x 0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

130 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

Red Electrica Enagas

12% 2.0x 10% 2.5x

10% 8% 2.0x 1.5x 8% 6% 1.5x 6% 1.0x 4% 1.0x 4% 0.5x 2% 2% 0.5x

0% 0.0x 0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2002A 2007A 2012A 2003A 2004A 2005A 2006A 2008A 2009A 2010A 2011A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

Terna Snam 8% 2.0x 8% 2.0x

6% 1.5x 6% 1.5x

4% 1.0x 4% 1.0x

2% 0.5x 2% 0.5x

0% 0.0x 0% 0.0x

2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

131 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

PGE Enea

10% 7.0x 10% 1.5x 6.0x 8% 8% 5.0x 1.0x 6% 4.0x 6%

3.0x 4% 4% 0.5x 2.0x 2% 2% 1.0x

0% 0.0x 0% 0.0x

2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

Tauron PGNIG

10% 7.0x 10% 1.0x

6.0x 8% 8% 5.0x

6% 4.0x 6% 0.5x 3.0x 4% 4% 2.0x 2% 2% 1.0x

0% 0.0x 0% 0.0x

2010A 2011A 2012A

2006A 2011A 2007A 2008A 2009A 2010A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

132 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

Drax Centrica

10% 5.0x 10% 4.0x

3.5x 8% 4.0x 8% 3.0x

6% 3.0x 6% 2.5x 2.0x

4% 2.0x 4% 1.5x

1.0x 2% 1.0x 2% 0.5x

0% 0.0x 0% 0.0x

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2006A 2011A 2007A 2008A 2009A 2010A 2012A Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

SSE National Grid

8% 2.5x 8% 2.5x

2.0x 2.0x 6% 6%

1.5x 1.5x 4% 4% 1.0x 1.0x

2% 2% 0.5x 0.5x

0% 0.0x 0% 0.0x

2005A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Source: HOLT

133 Credit Suisse European Utilities Team Company comparisons Dividend yield, market-implied discount rate, EV/IC

United Utilities Pennon

15% 1.5x 8% 1.5x

12% 6% 1.0x 1.0x 9%

4% 6% 0.5x 0.5x 2% 3%

0% 0.0x 0% 0.0x

2005A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Div. yield Mkt-impl. disc. Rate EV/IC (RHS) Severn Trent

8% 1.5x

6% 1.0x

0.5x 2%

0% 0.0x

2005A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Source: HOLT Div. yield Mkt-impl. disc. Rate EV/IC (RHS)

134 Credit Suisse European Utilities Team EQUITY RESEARCH

Relative Sector Performance

135 Credit Suisse European Utilities Team

Relative sector performance EQUITY RESEARCH

. Sector market cap peaked with commodities in 2007 but de-correlated since then . Differentiated decline in MC and EV (respectively 48% and 13%) over the period suggest that the priority is debt reduction in the near future

136 Credit Suisse European Utilities Team Indices European utilities vs. utilities in other regions

DJ STOXX Indices

600

500

400

300

200

100

2010A 2012A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2011A

Global Utils Americas Utils Europe ex-UK Utils Europe Utils Asia Utils

Source: Datastream

137 Credit Suisse European Utilities Team Relative performance European utilities vs. comparable sectors and benchmark – 20-y view

DJ STOXX Indices

650

550

450

350

250

150

1994A 2007A 1992A 1993A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2008A 2009A 2010A 2011A 2012A

Europe Oil & Gas Europe Utils Europe Infrastructure Europe 600

Source: Datastream

138 Credit Suisse European Utilities Team Relative performance European utilities vs. comparable sectors and benchmark – 5y view

DJ STOXX Indices

140

125

110

35 2007A 2008A 2009A 2010A 2011A 2012A

Europe Oil & Gas Europe Utilities Europe Infrastructure Europe 600

Source: Datastream

139 Credit Suisse European Utilities Team Relative performance Sub-sector vs. sector benchmark index

Water Gas

750 900

600 750

600 450 450 300 300 150 150

0 0

1996A 1990A 1991A 1992A 1993A 1994A 1995A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2007A 1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2008A 2009A 2010A 2011A 2012A

Water - Europe Water - Global Global Utils Gas - Europe Gas - Global Global Utils

Electrical Multiutilities

1200 700 1000 600

800 500

600 400 300 400 200 200 100

0 0

1995A 1990A 1991A 1992A 1993A 1994A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

1990A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Electrical Europe Electrical Global Global Utils Multiutils Europe Multiutils - Global Global Utils Source: HOLT, Datastream

140 Credit Suisse European Utilities Team Indices Sub-sectors in Europe and the European sector index

DJ STOXX and Datastream Indices

500

450

400

350

300

250

200

150

100

2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Electrical - Europe Gas - Europe Multiutils - Europe Water - Europe Europe Utils

Source: HOLT, Datastream

141 Credit Suisse European Utilities Team Indices Sub-sectors in Europe vs. European sector index vs. commodities

DJ STOXX and Datastream Indices

600

500

400

300

200

100

2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Electrical - Europe Gas - Europe Multiutils - Europe Water - Europe Europe Utils Coal API ARA TTF Gas Brent Crude

Source: Bloomberg, Datastream

142 Credit Suisse European Utilities Team Indices Emerging markets utilities

MSCI and Datastream Indices vs. selected commodities

3,000

2,500

2,000

1,500

1,000

500

1999A 2005A 2011A 1994A 1995A 1996A 1997A 1998A 2000A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2012A

CEE Utils Global EM Utils CEE Benchmark Russian Utils MICEX Russia

Source: Datastream

143 Credit Suisse European Utilities Team Price vs. target price and ratings Centrica

# of Brokers 17 17 17 17 12 13 10 12 16 18 19 22 22 22 25 24 25 23 25 23 24 3.8 100

3.6 90

3.4 80

3.2 70

3 60

2.8 50

2.6 40

2.4 30

2.2 20

2 10

1.8 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

144 Credit Suisse European Utilities Team Price vs. target price and ratings EDF

# of Brokers 25 25 24 24 23 21 21 20 21 24 24 24 26 25 27 28 26 25 26 25 24 100 100

90 90

80 80

70 70

60 60 50

50 40

40 30

30 20

20 10

10 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

145 Credit Suisse European Utilities Team Price vs. target price and ratings Enel

# of Brokers 28 30 29 31 33 37 36 31 36 38 37 37 37 37 37 37 39 39 37 35 34 8 100

90 7

6 70

60 5

4 40

30 3

2 10

1 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

146 Credit Suisse European Utilities Team Price vs. target price and ratings E.ON

# of Brokers 31 32 34 35 36 38 36 35 34 37 34 35 38 40 40 41 42 40 38 39 37 55 100

50 90

80 45

70 40

60 35 50

30 40

25 30

20 20

15 10

10 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

147 Credit Suisse European Utilities Team Price vs. target price and ratings GDF Suez

# of Brokers 18 19 18 16 22 28 27 25 26 26 27 29 26 26 28 29 29 28 29 28 29 50 100

90 45

80 40 70

35 60

30 50

40 25

30 20 20

15 10

10 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

148 Credit Suisse European Utilities Team Price vs. target price and ratings Iberdrola

# of Brokers 31 30 31 33 33 36 36 35 36 38 34 32 32 31 29 30 32 33 33 34 32 12 100

11 90

10 80

9 70

8 60

7 50

6 40

5 30

4 20

3 10

2 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

149 Credit Suisse European Utilities Team Price vs. target price and ratings RWE

# of Brokers 33 33 35 35 34 36 35 35 34 36 35 35 37 39 40 41 39 39 37 38 36 110 100

100 90

90 80

80 70

70 60

60 50

50 40

40 30

30 20

20 10

10 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

150 Credit Suisse European Utilities Team Price vs. target price and ratings SSE

# of Brokers 16 15 16 16 14 15 13 14 15 17 18 17 17 18 20 21 22 20 21 20 22 18 100

17 90

80 16

70 15

60 14 50

13 40

12 30

11 20

10 10

9 0 '08 '09 '10 '11 '12 Strong Buy + Buy (Right) Hold (Right) Sell + Underperform (Right) Price (Left) Target Price (Left) Source: I/B/E/S Detail via FactSet

Source: Factset

151 Credit Suisse European Utilities Team EQUITY RESEARCH

Macro Data

152 Credit Suisse European Utilities Team Macro data Inflation (1/2)

Country overview (y-o-y, in %)

7% 9%

8% 6%

7% 5%

6% 4% 5% 3% 4% 2% 3%

1% 2%

0% 1%

(1%) 0%

(2%) (1%)

1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

1998A 2006A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2007A 2008A 2009A 2010A 2011A 2012A

Switzerland Germany Austria UK France

Source: Bloomberg PROFESSIONAL

153 Credit Suisse European Utilities Team Macro data Inflation (2/2)

Country overview (y-o-y, in %)

55% 140% 11%

10%

120% 9% 45%

8% 100% 7% 35% 6% 80% 5% 25% 4% 60% 3% 15% 40% 2%

1% 5% 20% 0%

(1%)

(5%) 0% (2%)

1998A 2005A 2010A 1991A 1992A 1993A 1994A 1995A 1996A 1997A 1999A 2000A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2011A 2012A

1991A 1992A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A Czech Poland Russia (RHS) Portugal Spain Italy Source: Bloomberg PROFESSIONAL

154 Credit Suisse European Utilities Team Sovereign yields Government bond yield comparison

German, UK and US real bond yields

6% UK Germany* US 5%

-1%

-2%

1994A 2001A 2006A 1995A 1996A 1997A 1998A 1999A 2000A 2002A 2003A 2004A 2005A 2007A 2008A 2009A 2010A 2011A 2012A

Source: Bloomberg PROFESSIONAL, Datastream, LOCUS

155 Credit Suisse European Utilities Team Macro data GDP (1/2)

Real GDP growth (y-o-y)

6% 6%

4% 4%

2% 2%

0% 0%

1993A 2004A 1992A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

1997A 1992A 1993A 1994A 1995A 1996A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A (2%) (2%)

(4%) (4%)

(6%) (6%)

(8%) Eurozone Germany Austria (8%) France UK

Source: Bloomberg PROFESSIONAL

156 Credit Suisse European Utilities Team Macro data GDP (2/2)

Real GDP growth (y-o-y)

15% 8%

6% 10%

5% 2%

0% 0%

1992A 2005A 1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

2007A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2008A 2009A 2010A 2011A 2012A (2%) (5%)

(4%)

(10%) (6%)

(15%) Russia Czech R. Poland (8%) Portugal Spain Italy

Source: Bloomberg PROFESSIONAL

157 Credit Suisse European Utilities Team Macro outlook – Credit Suisse view Economics Forecast Table – At a glance

Growth, inflation and policy rates (in %)

GDP Policy rates (Q4)

2011A 2012E 2013E 2011A 2012E 2013E 2012E 2013E

US 1.8 2.1 2.0 3.1 2.0 1.2 0-0.25 0-0.25

Japan -0.8 2.0 1.1 -0.3 0.0 -0.4 0-0.1 0-0.10

Euro area 1.5 -0.4 0.7 2.7 2.3 1.7 0.5 0.5

Germany 3.1 1.1 1.5

France 1.7 0.1 0.7

Italy 0.5 -2.4 0.0

Spain 0.4 -1.5 -1.0

UK 0.8 -0.3 1.5 4.5 2.6 2.3 0.5 0.5

Non-Japan Asia 7.3 6.2 6.6 5.8 3.5 3.1

China 9.2 7.5 7.5 5.4 2.3 1.8

Global 3.8 3.1 3.5 4.3 3.1 2.8

Source: Credit Suisse Economics Research

158 Credit Suisse European Utilities Team Macro outlook – Credit Suisse view Economics Forecast Table – UK

2011A 2012A 10A 11A 12E 13E

I II III IV I II III IV

Real GDP 2.0 0.3 2.1 -1.4 -1.9 -1.2 4.3 1.3 1.8 0.9 -0.1 1.9

Consumer spending -4.6 -1.2 -0.1 0.6 1.4 -0.6 2.0 0.8 1.3 -1.1 0.6 1.4

Government 0.9 1.3 0.3 1.2 13.1 -6.1 0.0 0.4 0.4 0.2 2.3 0.0

Investment -7.4 0.1 2.1 -2.7 13.6 -10.5 8.2 2.0 3.5 -2.4 2.0 3.1

Domestic demand -3.4 2.3 2.3 -3.0 -0.1 1.9 3.7 0.1 2.3 -0.4 0.6 1.7

Inventories (contr to GDP) -0.1 2.5 2.1 -3.3 -4.8 5.3 1.2 -0.8 0.9 0.3 -0.4 0.3

Net exports (contr to GDP) 5.3 -2.1 -0.3 1.6 -1.9 -3.1 0.6 1.2 -0.6 0.4 0.0 0.1

Export growth 6.4 -8.7 0.1 12.6 -6.3 -4.1 4.1 8.2 6.4 4.5 0.3 5.7

Import growth -9.5 -2.2 1.2 6.7 -0.5 5.6 2.0 4.1 8.0 0.5 2.7 4.9

Industrial production (y/y%) 1.9 -0.8 -1.4 -2.8 -2.8 -2.4 -1.5 -0.5 2.1 -0.8 -1.8 -0.5

Nominal GDP growth 6.4 1.7 2.2 2.2 0.0 4.2 6.8 2.9 4.6 3.6 2.6 3.9

CPI (y/y%) 4.1 4.4 4.7 4.6 3.5 2.8 2.3 2.1 3.3 4.5 2.7 2.1

Current account (% GDP) -3.3 -2.5 -1.7 -1.3

Govt balance (% GDP) -9.6 -7.8 -9.2 -6.8

Repo rate (end period) 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Source: Credit Suisse Economics Research, Datastream

159 Credit Suisse European Utilities Team Macro outlook – Credit Suisse view Economics Forecast Table – Euro Area

2012E 2013E Q4/Q4 Ann avg Annualised changes IE IIE IIIE IVE IE IIE IIIE IVE 10A 11A 12E 13E 10A 11A 12E 13E Real GDP growth Germany 2.0 1.1 1.5 0.2 1.7 1.8 2.6 2.5 4.2 1.9 1.2 2.1 4.0 3.1 1.1 1.5 France 0.1 -0.2 -0.1 -0.7 1.0 1.0 2.2 2.2 1.8 1.2 -0.2 1.6 1.6 1.7 0.1 0.7 Italy -3.3 -3.3 -2.1 -0.7 0.1 1.0 2.1 1.9 2.2 -0.5 -2.4 1.2 1.8 0.5 -2.4 0.0 Spain -1.3 -1.7 -2.0 -3.8 -1.2 0.1 1.7 1.8 0.4 0.0 -2.2 0.6 -0.3 0.4 -1.5 -1.0 Netherlands 0.9 0.9 0.9 -1.0 0.8 1.7 2.6 2.6 2.0 -0.4 0.4 1.9 1.6 1.1 -0.2 1.0 Euro area GDP q/q ann -0.1 -0.7 -0.1 -0.6 0.8 1.2 2.2 2.2 2.3 0.6 -0.4 1.6 2.0 1.5 -0.4 0.7 Consumer spending -0.7 -0.8 0.0 -0.4 0.6 0.8 1.2 1.2 1.2 -0.8 -0.5 1.0 1.0 0.1 -0.8 0.4 Government spending 0.7 0.5 0.0 -2.0 -1.2 0.0 0.0 0.0 0.0 -0.3 -0.2 -0.3 0.8 -0.1 0.1 -0.6 Investment -5.2 -3.3 -2.0 -1.2 1.2 1.2 3.0 3.0 1.4 0.8 -2.9 2.1 -0.3 1.6 -2.9 0.4 Final domestic demand -1.7 -1.6 -0.5 -1.1 0.2 0.7 1.3 1.3 1.8 -0.7 -1.2 0.9 1.3 0.5 -1.7 0.1 Net exports (con. To GDP) 0.2 0.2 0.4 0.5 0.4 0.2 0.1 0.1 0.5 1.3 0.8 0.8 0.7 1.0 1.3 0.6 Exports 2.8 5.5 1.9 2.0 3.0 3.0 4.9 4.9 11.6 3.4 3.0 4.0 10.9 6.3 2.8 3.2 Imports -0.9 3.6 1.2 1.2 2.0 2.0 3.0 3.0 10.7 0.4 1.3 2.5 9.3 4.1 -0.1 2.0 Inventories (con. To GDP) -0.1 -0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.8 -0.3 -0.3 0.0 0.6 0.2 -0.7 -0.1 CPI (y/y%) 2.7 2.5 2.6 2.7 2.3 2.1 1.9 1.6 2.2 2.7 2.7 1.6 1.6 2.7 2.6 2.0 Core CPI (y/y%) 1.5 1.6 1.7 1.9 1.9 1.7 1.6 1.4 1.0 1.6 1.8 1.4 1.0 1.4 1.7 1.6 Industrail production (y/y%) -1.7 -2.4 -2.6 -1.3 -0.7 0.3 0.9 2.8 8.0 -0.2 -1.3 2.8 7.3 3.5 -2.0 0.8 Government balance (% of GDP) ...... -5.9 -4.1 -3.2 -2.5 ECB repo rate (end period) 1.00 1.00 1.00 0.50 0.50 0.50 0.50 0.50 1.00 1.00 0.50 0.50 ......

Source: Credit Suisse Economics Research, Datastream

160 Credit Suisse European Utilities Team Macro outlook – Credit Suisse view Economics Forecast Table – Global

2012E 2013E Q4/Q4 Annual Avergae Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10A 11A 12E 13E 10A 11A 12E 13E Global Real GDP (y/y) 3.3 3.1 2.9 3.1 3.1 3.4 3.7 3.9 4.8 3.3 3.1 3.9 5.0 3.8 3.1 3.5 IP (y/y) 3.3 3.1 2.4 3.2 3.3 4.0 4.9 5.6 8.0 3.7 3.2 5.6 9.6 5.1 3.0 4.5 Inflation (y/y) 3.6 3.1 2.9 2.8 2.6 2.9 2.9 2.9 3.4 4.2 2.8 2.9 3.2 4.3 3.1 2.8 US Real GDP (q/q ann) 2.0 1.3 1.3 2.2 1.8 2.0 2.4 2.5 2.4 2.0 1.7 2.2 2.4 1.8 2.1 2.0 Inflation (y/y) 2.8 1.9 1.6 1.6 1.1 1.0 1.2 1.3 1.2 3.3 1.6 1.3 1.6 3.1 2.0 1.2 Policy rate (end of period) 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 ...... 10yr bond yield … … 1.25 1.35 1.45 1.55 1.65 1.75 … ...... Japan Real GDP (q/q ann) 5.3 0.7 -1.3 -0.9 1.7 2.6 2.8 2.8 3.4 -0.6 0.9 2.5 4.5 -0.8 2.0 1.1 Inflation ex. fresh food (y/y) 0.1 0.0 0.0 -0.2 -0.6 -0.5 -0.4 -0.2 0.0 -0.2 -0.2 -0.2 -1.0 -0.3 0.0 -0.4 Policy rate (end of period) 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 ...... 10yr bond yield … … 0.90 1.00 1.00 ...... … ...... USDJPY 80.5 79.8 77.2 77.7 78.7 79.67 ...... … ...... Euro Area Real GDP (q/q ann) -0.1 -0.7 -0.1 -0.6 0.8 1.2 2.2 2.2 2.3 0.6 -0.4 1.6 2.0 1.5 -0.4 0.7 Inflation (y/y) 2.7 2.5 2.6 2.7 2.3 2.1 1.9 1.6 2.2 2.7 2.7 1.6 1.6 2.7 2.6 2.0 Policy rate (end of period) 1.00 1.00 0.75 0.50 0.50 0.50 0.50 0.50 ...... 10yr bund yield … … 1.40 1.65 1.90 2.10 ...... … ...... EURUSD 1.28 1.27 1.25 1.22 1.21 1.19 ...... … ...... UK Real GDP (q/q ann) -1.5 -1.6 2.3 1.3 1.5 1.8 2.4 2.7 1.5 0.6 0.1 2.1 1.8 0.8 -0.3 1.5 Inflation (y/y) 3.5 2.7 2.3 2.0 2.0 2.2 2.6 2.5 3.3 4.5 2.0 2.5 3.3 4.5 2.6 2.3 Policy rate (end of period) 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 ...... 10yr bond yield … … 1.80 2.00 2.30 2.35 ...... … ...... GBPUSD 1.53 1.57 1.59 1.57 1.57 1.56 ...... … ...... Switzerland Real GDP (q/q ann) 2.1 -0.2 0.0 -2.0 3.3 2.5 3.8 3.8 3.8 0.8 -0.3 3.3 3.0 1.9 0.5 1.5 Inflation (y/y) -0.9 -1.0 -0.3 0.8 1.4 1.3 1.0 0.5 0.0 0.0 0.0 0.0 0.7 0.2 -0.3 1.0 Policy rate (end of period) 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 ...... … ...... USDCHF 0.93 0.95 0.97 0.99 1.01 1.02 ...... … ...... NJA Real GDP (y/y) 6.2 6.1 6.0 6.5 6.4 6.4 6.7 6.7 8.5 6.7 6.5 6.7 9.2 7.3 6.2 6.6 Inflation (y/y) 4.4 3.9 3.0 2.8 2.6 3.4 3.6 3.8 5.2 5.3 2.8 3.8 4.5 5.8 3.5 3.1 China Real GDP (y/y) 8.1 7.6 7.2 7.4 7.5 7.4 7.7 7.6 9.8 8.9 7.4 7.6 10.3 9.2 7.5 7.5 IP (y/y) 11.8 9.5 10.9 12.8 11.3 11.6 11.3 11.9 13.3 12.8 12.8 11.9 15.7 13.9 11.3 11.5 Inflation (y/y) 3.8 2.9 1.2 1.0 0.7 2.2 2.5 2.9 4.7 4.6 1.0 2.9 3.3 5.4 2.3 1.8 India* Real GDP (y/y) 5.2 5.5 6.0 6.1 6.3 6.8 7.2 7.3 8.5 6.2 6.1 7.3 8.4 6.5 6.0 7.2 EMEA Real GDP (y/y) 3.1 3.0 2.6 2.7 3.3 3.4 3.7 3.6 5.3 4.1 2.7 3.6 4.8 5.1 3.2 3.5 Inflation (y/y) 5.2 4.7 6.0 5.6 6.0 6.1 5.7 5.5 6.3 6.3 5.6 5.5 5.8 6.2 5.0 5.4 Lat. America Real GDP (y/y) 3.1 2.6 2.8 3.7 3.7 4.1 4.4 4.0 5.3 3.6 3.7 4.0 6.2 4.3 3.0 4.0 Inflation (y/y) 6.7 6.2 6.2 6.0 6.4 6.6 6.4 6.5 6.9 7.1 6.0 6.5 6.5 7.0 6.2 6.5 * Annual figures for India are on fiscal year basis. Source: Credit Suisse Economics Research, Datastream

161 Credit Suisse European Utilities Team EQUITY RESEARCH

Credit View

162 Credit Suisse European Utilities Team Credit view Capital expenditure and asset disposals – plans and achievements

Capex plans (€m) Asset disposals* (€m)

16,000 Tauron 15,000 Completed Remaining ENEA

PGE 13,000 CEZ Veolia Env. 12,000 Vattenfall Suez Env. RWE 8,500 Iberdrola 8,000 GDF SUEZ Gas Natural Fortum 5,000 4,200 Enel-Endesa 4,000 EnBW 3,000 EDP 1,800 1,500 1,500 EDF 540 E.ON 0

0 10,000 20,000 30,000 40,000 50,000

CEZ

RWE

ENEL E.ON

Announced/Updated in 2012 Announced in 2011 or 2010 EnBW

Iberdrola

GDF Suez GDF

Vattenfall

Veolia Veolia Env. Gas Gas Natural

Source: Company data, Credit Suisse Researc *as of May 2012

163 Credit Suisse European Utilities Team Credit view European utilities – Risk profile

Business Risk: EBITDA breakdown (Regulated vs. Unregulated) Financial Risk : Leverage (Net debt / EBITDA)

100% E.ON 90% RWE 80% CEZ 70% GDF Suez 60% Enel 50% EDF 40% Gas Nat. 30% Fortum 20% Iberdrola 10% Verbund 0%

EDP

CEZ

EDP

EON

EDF Enel

RWE 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x

Fortum

Verbund

Iberdrola

Vattenfall GDF-Suez

GasNatural 2013E 2012E 2011A Unregulated / Exposed to market prices Regulated / PPA

Source: Credit Suisse Research, Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

164 Credit Suisse European Utilities Team Credit view NFD / EBITDA of European utilities vs. comparable sectors in Europe

Weighted average by market capitalization

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E NFD/EBITDA Infrastructure NFD/EBITDA Oil & Gas NFD/EBITDA EU Utilities

Source: HOLT, Datastream

165 Credit Suisse European Utilities Team Credit view NFD / EBITDA of European utilities vs. utilities in other regions

Weighted average by market capitalization

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E NFD/EBITDA Americas NFD/EBITDA Asia NFD/EBITDA EU Utilities

Source: HOLT, Datastream

166 Credit Suisse European Utilities Team NFD / EBITDA European utilities sub-sectors

Weighted average by market capitalization

1993A 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E

NFD/EBITDA Energy Utils NFD/EBITDA Integrated NFD/EBITDA Regulated NFD/EBITDA Renewable

Source: HOLT, Datastream

167 Credit Suisse European Utilities Team Credit view European utilities – Credit ratings and their transition

Credit rating transition Credit ratings and outlook

Alliander . . EDF S&P . EDP . RTE EDF Transport SA BB+ . Gasunie A+ / A1 Moody's 6% A+ / A1 . Areva A+ A . GDF Suez . Severn Trent Lowest Rating BBB- 8% 5% . Enagas 8% . Centrica . CEZ . E.ON . Gas Natural . Elia BBB . EnBW A / A2 6% A- 36%. EVN A / A2 . Anglian Water . EWE . Endesa . Fortum . Enel . RWE . National Grid . SSE . Statkraft BBB+ . Suez Env. . Veolia Env. 28% . Tennet . Iberdrola . Terna . Terna . Vattenfall AA-/A3- / A3 . Snam Positive / CW . Verbund . RWE Positive 5% . Red Electrica

Stable BBB+ / Baa1 62%

Negative /

CW negative

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2000A 33%

Source: Credit Suisse Research, Bloomberg PROFESSIONAL Source: Credit Suisse Research, Bloomberg PROFESSIONAL

168 Credit Suisse European Utilities Team Credit view European utilities – Cash levels and bond redemption

5y CDS – current vs. max/min in LTM 5y CDS mapping

500 600 566 582 EDP EDP - 773 Max-Min (LHS) Current 530 450 500 400

350 400 349 Gas Natural 317 300 Iberdrola 300 233 250 Enel 191 195 200 159 163 169 157 136 120 126 200 112 111 Veolia Env 214 180 188 100 150 SSE Endesa 123 104 138 UU Plc 75 76 81 86 84 91 67 EDF E.ON 53 52 53 52 100 GDF Suez RWE Edison 0 EnBW Centrica NG Plc

50 Fortum Vattenfall

VIE IBE

EDF SSE

Enel

GDF

RWE E.ON

EnBW 0

Edison

Fortum

Endesa Gas Nat Gas Centrica A+ A A- BBB+ BBB BBB- BB+ BB BB- Source: Bloomberg Vattenfall PROFESSIONAL, Credit Suisse Research Source: LOCUS, Credit Suisse Research Bond issuance in the European utilities sector (€bn equivalents) European utilities bond redemptions (€m)

2010 2011 2012 35,000 Others USD SEK JPY GBP EUR 2010 ytd (RHS) 2011 ytd (RHS) 2012 ytd (RHS) 30,000 14 50 12 40 25,000 10 30 20,000 7 20 15,000 5 2 10 10,000

0 0 5,000

Mar Aug Jan Feb Apr May Jun Jul Sep Oct Nov Dec

0 2012 2013 2014 2015 2016 Source: Bloomberg PROFESSIONAL, Credit Suisse Research Source: DataStream, Credit Suisse Research

169 Credit Suisse European Utilities Team Credit view European utilities CDS vs. Sovereign CDS

5-year overview

250%

200%

150%

100%

50%

EDP UU Plc UU Kelda Vattenfall RWE EnBW E.ON Fortum Env Veolia Plc NG Centrica EDF Natural Gas Suez GDF Enel Iberdrola Endesa Edison

Source: Bloomberg PROFESSIONAL

170 Credit Suisse European Utilities Team Credit view CDS on selected European utilities

5-year overview

700

600

500

400

300

200

100

0 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Enel E.ON RWE IBE NG GDF EDF

Source: Bloomberg PROFESSIONAL

171 Credit Suisse European Utilities Team Credit view CDS on selected European utilities

1-year overview

600

500

400

300

200

100

0 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

Enel E.ON RWE IBE NG GDF EDF

Source: Bloomberg PROFESSIONAL

172 Credit Suisse European Utilities Team Credit view CDS on selected European sovereign debt

5-year overview

1,600

1,400

1,200

1,000

800

600

400

200

0 2006A 2007A 2008A 2009A 2010A 2011A 2012A

UK France Spain Italy Portugal Finland Austria Poland Russia

Source: Bloomberg PROFESSIONAL

173 Credit Suisse European Utilities Team Credit view CDS on selected European sovereign debt

1- year overview

700

600

500

400

300

200

100

0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12

UK France Spain Italy Finland Austria Poland Russia

Source: Bloomberg PROFESSIONAL

174 Credit Suisse European Utilities Team Credit view Indebtedness in Europe

Government debt as % of national GDP

180%

160%

140%

120%

100%

80%

60%

40%

20%

0% Spain UK France Germany Portugal Ireland Belgium Italy Greece

2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A

Source: Bloomberg PROFESSIONAL

175 Credit Suisse European Utilities Team EQUITY RESEARCH

Company Pages

176 Credit Suisse European Utilities Team Company Pages Content

Centrica Slide 178 PGE Slide 202 CEZ Slide 180 PGNIG Slide 204 Drax Slide 182 RWE Slide 206 EDF Slide 184 Snam Slide 208 Enea Slide 186 SSE Slide 210 Enel Slide 188 Severn Trent Slide 212 E.ON Slide 190 Suez Env. Slide 214 Gamesa Slide 192 Tauron Slide 216 GDF Slide 194 Terna Slide 218 Iberdrola Slide 196 United Utilities Slide 220 National Grid Slide 198 Verbund Slide 222 Pennon Slide 200 Vestas Slide 224

177 Credit Suisse European Utilities Team Centrica (TP 330p, Neutral) Regulatory risk unwinding

Description Relative share price performance Calenderised output - British Energy . Gas utility that operates in the UK and the US 190 70 . Activities: Upstream; gas production, power generation, gas storage and trading 60 . Downstream: gas and electricity supply and 160 50 services under the ‘British Gas’ brand . Has a US business; Direct Energy 130 40 30 100 ' Output TWh - 20

Investment case 70 10 . Centrica is mostly ‘ex-growth’: The biggest 2006 2007 2008 2009 2010 2011 2012 0 profit contributor to earnings is British Gas CNA

(c58%), but a weak economy and a commitment

2005A 2006A 2007A 2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E CNA relative to FTSE 100 2004A to £600m EBIT in Residential Energy supply CNA relative to S&P EU Utils Index keeps EBIT growth in this business to <4% Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research . Leverage into gas/CO2 upside smaller versus peers: Centrica’s focus upon European upstream Consensus forward P/E range Cost structure - upstream production business gas and oil, and the relatively small exposure to power generation means that it does not have 14x 80 the same extent of exposure to Carbon prices or 70 8 8 increases in the gas price as peers. This make 60 9 12x 13 the stock more defensive 50 9 6 17 20 18 15 . Development options limited: Centrica has 40 11 12 10 28 capacity for an extra c£1.5bn of acquisitions. 30 5 10x 19 11 41 43 However, we view the company’s growth options 20 5 19 36 33 39 as more limited versus big-cap UK peers, as 10 9 17 19 22 10 there are no large regulated asset bases. An 8x - 7

acquisition in N. America is a possibility

2005A 2006A 2007A 2008A 2009A 2010A 2011E 2012E 2013E 6x 2004A Production costs (p/therm) Tax (p/therm) Upcoming catalysts PAT (p/therm) Average front month . 15th Nov: Interim Management Statement 4x 2006 2007 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

178 Credit Suisse European Utilities Team Centrica (TP 330p, Neutral) Regulatory risk unwinding

INCOM E STATEM ENT (£m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 21,963 22,302 20,895 21,697 22,287 23,149 P / E 14.8 13.3 12.9 12.4 11.8 11.1 Operational Expenses 19,451 19,124 17,790 18,012 18,400 19,110 EV/ IC 3.0 2.5 2.5 2.2 2.2 2.1 EBITDA 2,512 3,178 3,104 3,685 3,888 4,039 Price-to-book 4.1 3.0 3.1 3.0 2.8 2.6 EBITDA growth 26.5% (2.3%) 18.7% 5.5% 3.9% EV / EBITDA 8.9 7.1 7.2 6.5 6.1 5.8 EBITDA margin 11.4% 14.3% 14.9% 17.0% 17.4% 17.4% Net debt (cash) 3,136 3,312 3,435 4,401 4,111 3,769 Depreciation & amort. 708 991 988 1,090 1,207 1,322 M arket cap. 14,426 17,091 14,966 17,345 17,411 17,478 EBIT 1,804 2,187 2,116 2,595 2,681 2,716 EV 19,476 22,169 20,063 23,882 23,708 23,483 EBIT margin 8.2% 9.8% 10.1% 12.0% 12.0% 11.7% Invested capital 7,391 9,131 9,035 10,096 10,327 10,540 Net financial expenses 179 248 132 192 203 186 NOPAT 1,218 1,384 1,285 1,408 1,443 1,519 Taxes 531 708 810 1,125 1,198 1,177 Capex (1,198) (1,208) (1,303) (1,170) (1,650) (1,608) M inority Interest 12 7 0 0 0 0 FCFE 2,019 1,984 1,747 1,479 1,367 1,467 Net Earnings 1,092 1,213 1,252 1,334 1,395 1,493 LEVERAGE Earnings growth 11.1% 3.2% 6.6% 4.6% 7.0% Net Debt / EBITDA 1.2 1.0 1.1 1.2 1.1 0.9 Net margin 5.0% 5.4% 6.0% 6.1% 6.3% 6.4% Net debt / Equity 0.7 0.6 0.6 0.8 0.7 0.6 EPS (p) 22.51 25.19 25.84 27.03 28.30 30.06 EBITDA interest cover 14.0 12.8 23.5 19.2 19.2 21.7 DPS (p) 12.80 14.30 15.40 16.48 17.63 18.87 RETURN / YIELD Dividend payout ratio 56.9% 56.8% 59.6% 61.0% 62.3% 62.8% WACC 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% BALANCE SHEET ITEM S ROIC 18.7% 16.9% 15.8% 15.2% 15.2% 15.8% PPE 6,059 6,398 6,412 7,929 8,371 8,654 ROE 26.0% 20.8% 22.4% 23.4% 22.4% 22.0% Working capital 3,755 3,663 3,824 3,935 4,042 4,198 FCF Yield 11.8% 11.5% 10.1% 8.5% 7.9% 8.4% Total assets 16,137 17,074 17,499 19,330 19,779 20,263 Div. Yield 3.8% 4.3% 4.6% 4.9% 5.3% 5.6%

SOTP DIVISION / COMPONENT £ m p / share % EV British Gas 9,489 183.4 42.8% Centrica Energy (ex-power) 5,529 106.9 25.0% UK Power generation 3,973 76.8 17.9% Other 3,163 61.1 14.3%

Enterprise value 22,153 428.2 100.0% Net Debt (4,401) Other Adjustments (753) Equity value 16,999 No. of shares 5,173 Equity value per share 329p Source: Thomson Reuters, Credit Suisse Research

179 Credit Suisse European Utilities Team CEZ (TP CZK743, Neutral) Outright play on German power prices and commodities

Description Relative share price performance CEZ net debt headroom level . CEZ is the Czech Republic's leading vertically 240 integrated power utility and one of the biggest utility companies in CEE region. Additionally, it 200 owns generation assets in Poland, Bulgaria and Romania 160 120 Investment case 80 . Generation exposure: major generation assets are fixed-base-cost nuclear and lignite plants, 40 insensitive to domestic electricity demand growth. 2006 2007 2008 2009 2010 2011 2012 Due to the fixed output and full convergence of the Czech and German power markets, CEZ’s CEZ profitability is entirely driven by the German power CEZ relative to PSE Index price. Our estimated CEZ TP sensitivity to German CEZ relative to S&P EU Utils Index power price is CZK 25 for 1 EUR/MWh change Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL, Credit Suisse Research . Lower CO2 is relatively helpful: Even though we recently cut our 2012-15E CE power price outlook by c9% that was owing primarily to lower carbon. Consensus forward P/E range CEZ profitability indicator* vs CEZ share price CEZ should benefit from this development though 14x its lignite exposure . Valuation looks fair: CEZ is currently trading on a 2013–14E EV/EBITDA of 7.3-.74, which is c.6-8% 12x premium vs. peers and in line with its 2 year history. Dividend yield, even assuming a cut to CZK45 DPS, should still yield more than 6% 10x based on a 55% payout ratio 8x Upcoming catalysts . Nuclear power: investment decision in 2013 6x . Power price development: stock performance highly correlated with German power price 4x . 8th Nov: Q3 results 2007 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

180 Credit Suisse European Utilities Team CEZ (TP CZK743, Neutral) Outright play on German power prices and commodities

INCOM E STATEM ENT (CZKm) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 196,352 198,848 209,761 211,923 219,839 218,541 P / E 7.2 7.8 9.5 9.6 9.2 9.6 Operational Expenses 105,277 109,759 122,449 125,614 131,609 131,881 EV/ IC 1.5 1.4 1.3 1.2 1.1 1.1 EBITDA 91,075 89,089 87,312 86,310 88,230 86,660 Price-to-book 1.9 1.8 1.7 1.6 1.5 1.4 EBITDA growth (2.2%) (2.0%) (1.1%) 2.2% (1.8%) EV / EBITDA 5.2 5.5 5.9 6.1 6.0 6.1 EBITDA margin 46.4% 44.8% 41.6% 40.7% 40.1% 39.7% Net debt (cash) 130,083 142,281 167,387 182,376 184,886 182,138 Depreciation & amort. 22,876 24,032 25,770 27,405 29,178 30,190 M arket cap. 460,706 417,515 419,766 388,791 388,791 388,791 EBIT 68,199 65,057 61,542 58,905 59,052 56,471 EV 544,324 522,893 543,605 527,395 529,488 526,147 EBIT margin 34.7% 32.7% 29.3% 27.8% 26.9% 25.8% Invested capital 336,758 369,332 399,465 431,090 452,036 466,488 Net financial expenses 804 1,462 3,119 3,843 4,114 4,110 NOPAT 54,987 52,517 48,276 46,723 47,242 45,176 Taxes 13,091 11,791 11,199 10,657 10,671 10,190 Capex (56,622) (61,715) (51,113) (58,904) (50,070) (43,989) M inority Interest 308 (74) (3) 204 213 204 FCFE 30,732 15,450 10,660 9,248 21,736 26,309 Net Earnings 54,176 49,455 40,756 40,668 42,469 40,558 LEVERAGE Earnings growth (8.7%) (17.6%) (0.2%) 4.4% (4.5%) Net Debt / EBITDA 1.4 1.6 1.9 2.1 2.1 2.1 Net margin 27.6% 24.9% 19.4% 19.2% 19.3% 18.6% Net debt / Equity 0.6 0.6 0.7 0.7 0.7 0.6 EPS (CZK) 101.60 92.75 76.31 76.15 79.52 75.94 EBITDA interest cover 113.3 60.9 28.0 22.5 21.4 21.1 DPS (CZK) 53.00 50.00 45.00 45.00 43.74 41.77 RETURN / YIELD Dividend payout ratio 52.2% 53.9% 59.0% 59.1% 55.0% 55.0% WACC 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% BALANCE SHEET ITEM S ROIC 16.3% 14.2% 12.1% 10.8% 10.5% 9.7% PPE 328,805 361,066 386,863 418,362 439,254 453,053 ROE 27.0% 22.3% 18.0% 16.7% 16.2% 14.5% Working capital (21,750) (8,353) (9,592) (9,691) (10,053) (9,993) FCF Yield 7.9% 4.0% 2.7% 2.4% 5.6% 6.8% Total assets 530,259 543,691 598,107 630,555 654,516 668,474 Div. Yield 7.3% 6.9% 6.2% 6.2% 6.0% 5.7%

SOTP DIVISION / COM PONENT C Z K m CZK / share % EV Power Production and Trading CE 328,359 614.8 62.4% Power Production and Trading SEE 25,088 47.0 4.8% Distribution and Sale CE 88,919 166.5 16.9% Distribution and Sale SEE 16,242 30.4 3.1% M ining 27,201 50.9 5.2% Others 40,117 75.1 7.6% Enterprise value 525,927 984.8 100.0% Net Debt (123,343) Other Adjustments (35,820) Equity value 366,764 No. of shares 534.1 Equity value per share C Z K687 Cost of equity 10% 12m target Price C Z K743 Source: Thomson Reuters, Credit Suisse Research

181 Credit Suisse European Utilities Team Drax (TP 475p, Neutral) Biomass priced-in, earnings momentum halted

Description Relative share price performance Two-winter ahead spread and price performance . Drax is a single 4,000MW coal power station in 220 80% 40% the UK, serving c6-7% of the UK’s power demand 60% 30% . It plans to develop biomass capability up to c50% 40% 20% of its capacities 175 20% 10% 130 0% 0% (20%) (10%) Investment case 85 (40%) (20%) . Investments only maintain EBITDA: The c£700m (60%) (30%) capex Drax will undertake to convert half its units 40

to biomass merely offset the negative impact 2006 2007 2008 2009 2010 2011 2012

Jul-08 Jul-09 Jul-10 Jul-11 Jul-12

Jan-09 Jan-10 Jan-11 Jan-12 from a loss of free CO2 emissions permits and Jan-08 3m avg. movement in two winter ahead CDS (LHS) the CO2 floor price, on our numbers. We do not Drax Drax relative to FTSE 100 see a near-term ‘step-up’; 3m avg. movement in Drax share price (RHS) Drax relative to S&P EU Utils Index . Changing dynamics: Going forwards, biomass Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL, Credit Suisse Research costs and net thermal efficiency will become the most important profit drivers (rather than fossil Consensus forward P/E range CDS and EV fuel prices). EBITDA will also become more 14x sensitive to the key variables. 35 2,750

30 12x 2,250 25

20 1,750 10x 15 1,250

10 EV ex. CO2 (£m)CO2 ex. EV 8x 750 DarkSpread £/MWh - 5 Upcoming catalysts 0 250

. 13th Nov: Interim Management Statement 6x

2007 2008 2009 2010 2011 2012 Two-winter-ahead clean dark spread (£/MWh - LHS) 4x Drax EV ex. value of free CO2 (p/share - RHS) 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL, Credit Suisse Research

182 Credit Suisse European Utilities Team Drax (TP 475p, Neutral) Biomass priced-in, earnings momentum halted

INCOM E STATEM ENT (£m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 1,476 1,648 1,836 1,893 1,750 1,939 P / E 16.5 10.0 7.1 10.7 20.3 16.1 Operational Expenses 1,121 1,257 1,502 1,600 1,547 1,697 EV/ IC 1.5 2.2 1.5 1.3 1.1 1.0 EBITDA 355 392 334 294 203 242 Price-to-book 1.8 2.0 1.4 1.3 1.3 1.3 EBITDA growth 10.5% (14.8%) (12.0%) (30.8%) 19.0% EV / EBITDA 5.5 4.3 5.0 6.1 9.8 8.3 EBITDA margin 24.0% 23.8% 18.2% 15.5% 11.6% 12.5% Net debt (cash) 54 (204) (225) (88) 111 111 Depreciation & amort. 181 113 (33) 60 81 83 M arket cap. 1,463 1,344 1,989 1,888 1,888 1,888 EBIT 173 279 366 234 122 159 EV 1,517 1,140 1,764 1,800 1,999 1,999 EBIT margin 11.7% 16.9% 19.9% 12.3% 7.0% 8.2% Invested capital 1,079 754 1,078 1,318 1,542 1,607 Net financial expenses 15 23 28 15 8 13 NOPAT 122 207 289 189 100 128 Taxes 47 67 71 41 21 28 Capex (105) (62) (44) (200) (326) (166) M inority Interest 0 0 0 0 0 0 FCFE 236 369 170 (48) (232) (202) Net Earnings 111 189 267 177 93 117 LEVERAGE Earnings growth 70.9% 40.8% (33.7%) (47.4%) 26.2% Net Debt / EBITDA 0.2 (0.5) (0.7) (0.3) 0.5 0.5 Net margin 7.5% 11.5% 14.5% 9.3% 5.3% 6.1% Net debt / Equity 0.1 (0.2) (0.2) (0.1) 0.1 0.1 EPS (p) 31.44 51.93 73.09 48.48 25.49 32.17 EBITDA interest cover 23.0 17.0 11.9 19.3 23.9 18.1 DPS (p) 13.70 32.00 27.80 26.52 12.75 16.09 RETURN / YIELD Dividend payout ratio 43.6% 61.6% 38.0% 54.7% 50.0% 50.0% WACC 8.9% 8.9% 8.9% 8.9% 8.9% 8.9% BALANCE SHEET ITEM S ROIC 11.3% 27.4% 26.8% 14.4% 6.5% 8.0% PPE 1,177 1,184 1,196 1,336 1,581 1,663 ROE 10.8% 19.8% 20.5% 12.6% 6.5% 7.8% Working capital 188 98 146 222 176 156 FCF Yield 12.9% 19.6% 9.0% (2.5%) (12.3%) (10.7%) Total assets 2,159 2,047 2,010 2,175 2,141 2,199 Div. Yield 2.6% 6.2% 5.4% 5.1% 2.5% 3.1%

Sum-of-the-Parts Valuation DIVISION / COM PONENT £ m p / share % EV EU ETS Phase II 2010-12 (44) (12.0) (2.9%) Value of biomass co-firing 161 44.1 10.7% Taxation benefit 33 9.2 2.2% Terminal value beyond 2012 1,352 370.6 90.0%

Enterprise value 1,503 411.9 100.0% Net Debt 225

Equity value 1,728 No. of shares 364.9 Equity value per share 474p NB: TP is based on a scenario under which Drax converts 50% of its plant to biomass co-firing and receives 1.1x ROC Source: Thomson Reuters, Credit Suisse Research

183 Credit Suisse European Utilities Team EDF (TP €17, Neutral) Radical changes in French energy policy create uncertainty

Description Relative share price performance 12E-16E funding analysis: dividend paid out of debt . EDF is the incumbent electricity producer and 100 distributor in France. EDF is the largest nuclear 280 and hydro operator in Europe 80 . In the past decade, EDF has expanded abroad, 220 60 most notably in the UK, Italy, the USA and China

160

€ 20

Investment case 100 –

. Policy changes – tariffs are being revamped so (20) as to give discounts and surcharges to customers 40 depending on income and consumption – more 2006 2007 2008 2009 2010 2011 2012 (40) generally the French power infrastructure is moving from being supply led to demand led EDF EDF relative to CAC 40 . Dwindling net export value push EDF to seek EDF relative to S&P EU Utils Index overseas earnings to cross subsidize its low Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research return French business . French replacement capex will put cash flows Consensus forward P/E range Wind > Nuclear > CCGT under pressure, dividend will have to be paid out 45 of debt between 2012E and 2016E 16x 40 . Diversification of the mix – EDF is investing in 35 renewable (+12 GW by 2020) and gas (Edison, 14x Dunkirk LNG, Southstream) 30 . New builds investment in renewables has a 25 quicker payback. Also, taking partners on the 12x 20 board helps keep NFD / EBTIDA below 2.5x 15

10x to payback Time 10 Upcoming catalysts 5 0 . 13th Nov: Q3 results 8x EPR new 10 years French French French . Q4 2012: Debate on future French energy policy build in life CCGT wind offshore . Q4 2012: Edison gas contract renegotiations France extension wind . Summer 2013: Renewable target law 6x 2007 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

184 Credit Suisse European Utilities Team EDF (TP €17, Neutral) Radical changes in French energy policy create uncertainty

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 66,284 65,165 65,307 60,662 63,083 65,300 P / E 7.8 7.7 8.8 8.2 7.8 7.2 Operational Expenses 49,192 49,110 50,815 44,957 46,315 47,139 EV/ IC 0.9 0.8 1.0 0.8 0.8 0.8 EBITDA 17,092 16,055 14,492 15,705 16,768 18,162 Price-to-book 1.1 1.0 1.0 0.8 0.9 0.9 EBITDA growth (6.1%) (9.7%) 8.4% 6.8% 8.3% EV / EBITDA 4.8 4.8 5.3 5.1 5.0 4.8 EBITDA margin 25.8% 24.6% 22.2% 25.9% 26.6% 27.8% Net debt (cash) 51,439 45,717 46,263 49,587 52,602 55,197 Depreciation & amort. 7,093 7,244 6,475 5,907 6,347 6,811 M arket cap. 75,729 55,932 34,759 31,098 31,098 31,098 EBIT 9,999 8,811 8,017 9,799 10,422 11,351 EV 127,168 101,649 81,022 80,685 83,700 86,295 EBIT margin 15.1% 13.5% 12.3% 16.2% 16.5% 17.4% Invested capital 84,575 95,494 81,170 91,972 92,695 94,982 Net financial expenses 1,494 1,518 970 851 992 1,103 NOPAT 7,130 4,178 5,272 6,460 6,833 7,419 Taxes 1,645 1,385 1,690 2,150 2,324 2,589 Capex (12,370) (12,241) (11,134) (11,412) (12,231) (13,481) M inority Interest 183 229 236 383 451 589 FCFE 1,271 103 (868) 3,167 627 589 Net Earnings 3,923 3,961 3,520 3,810 3,974 4,296 LEVERAGE Earnings growth 1.0% (11.1%) 8.2% 4.3% 8.1% Net Debt / EBITDA 3.0 2.8 3.2 3.2 3.1 3.0 Net margin 5.9% 6.1% 5.4% 6.3% 6.3% 6.6% Net debt / Equity 1.6 0.9 1.3 1.2 1.3 1.4 EPS (€) 2.15 2.17 1.90 2.06 2.15 2.32 EBITDA interest cover 11.4 10.6 14.9 18.5 16.9 16.5 DPS (€) 0.47 1.15 1.15 1.23 1.29 1.39 RETURN / YIELD Dividend payout ratio 21.8% 52.9% 60.4% 59.5% 60.0% 60.0% WACC 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% BALANCE SHEET ITEM S ROIC 8.3% 6.4% 6.0% 7.1% 7.4% 7.8% PPE 118,640 95,435 97,162 97,677 100,500 99,874 ROE 14.0% 12.6% 11.5% 10.3% 11.3% 12.3% Working capital 10,389 21,984 23,341 22,565 23,782 24,890 FCF Yield 4.1% 0.3% (2.8%) 10.2% 2.0% 1.9% Total assets 188,990 196,748 184,561 197,913 202,745 209,126 Div. Yield 2.8% 6.8% 6.8% 7.3% 7.7% 8.3%

SOTP DIVISION / COMPONENT € m € / share % EV France 12,441 6.7 39.6% United Kingdom 4,523 2.4 14.4% Italy 3,089 1.7 9.8% Other international 2,737 1.5 8.7% Other operations 8,641 4.7 27.5%

Total value 31,431 17.0 100.0% No. of shares 1,848.9 Total value per share €17

Source: Thomson Reuters, Credit Suisse Research

185 Credit Suisse European Utilities Team Enea (TP PLN19.6, Neutral) Waiting for a new owner

Description Relative share price performance Enea’s EV structure (CS est) . Enea SA is a Poland-based company primarily 200 engaged in the production and distribution of electricity. Enea SA also provides energy from renewable sources, including biomass co- 160 combustion and hydroelectric stations 120

Investment case 80 . Provatisation is needed to reveal stock value: To become more positive on the stock, we would 40 have to see a resumption of the privatisation 2008 2009 2010 2011 2012 process, which is unlikely to happen before the Kozienice project is at a more advanced stage ENEA ENEA relative to WIG 20 . Attractive valuation: Based on our SOTP we ENEA relative to S&P EU Utils Index derive a PLN17.8/share current fair value; we Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research assign PLN3.9/share to generation (3.2x 2013E EV/EBITDA), PLN10.1/share for distribution (19% Consensus forward P/E range Enea leverage ratio discount to RAB), PLN3.3/share for net cash including provisions, while the rest of the 13x business (supply, renewables and investment pipeline) comes for free. In terms of multiples Enea currently trades on a dividend-adjusted 11x 2013E EV/EBITDA of 4.9x and P/E of 10.9x, which we think is attractive for a company with 60% of its EV made of distribution asset 9x

Upcoming catalysts . M&A angle: Any news on privatization process 7x speeding up . Kozienice power plant: Start of construction . 24th Oct: Q3 results 5x 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

186 Credit Suisse European Utilities Team Enea (TP PLN19.6, Neutral) Waiting for a new owner

INCOM E STATEM ENT (PLNm) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 7,167 7,837 9,689 9,902 10,015 10,383 P / E 14.4 11.4 9.1 9.4 11.0 11.0 Operational Expenses 6,000 6,472 8,136 8,254 8,498 8,791 EV/ IC 0.8 0.8 0.7 0.7 0.6 0.5 EBITDA 1,167 1,365 1,553 1,649 1,517 1,592 Price-to-book 0.8 0.7 0.7 0.7 0.6 0.6 EBITDA growth 16.9% 13.8% 6.2% (8.0%) 4.9% EV / EBITDA 4.7 3.8 3.8 3.5 4.3 5.1 EBITDA margin 16.3% 17.4% 16.0% 16.6% 15.1% 15.3% Net debt (cash) (2,494) (2,890) (2,422) (2,568) (1,775) (160) Depreciation & amort. 661 653 708 788 781 790 M arket cap. 9,447 10,462 7,946 7,279 7,279 7,279 EBIT 506 712 844 861 736 802 EV 7,667 8,431 6,504 5,692 6,485 8,100 EBIT margin 7.1% 9.1% 8.7% 8.7% 7.4% 7.7% Invested capital 6,878 6,986 8,058 8,473 9,694 11,772 Net financial expenses (140) (99) (139) (94) (79) (14) NOPAT 396 559 684 697 596 650 Taxes 139 174 187 181 155 155 Capex (748) (843) (1,159) (1,221) (1,999) (2,861) M inority Interest 0 0 0 0 0 0 FCFE 102 432 251 357 (560) (1,417) Net Earnings 506 638 796 773 660 661 LEVERAGE Earnings growth 26.0% 24.9% (2.9%) (14.6%) 0.2% Net Debt / EBITDA (2.1) (2.1) (1.6) (1.6) (1.2) (0.1) Net margin 7.1% 8.1% 8.2% 7.8% 6.6% 6.4% Net debt / Equity (0.3) (0.3) (0.2) (0.2) (0.2) (0.0) EPS (PLN) 1.15 1.44 1.80 1.75 1.50 1.50 EBITDA interest cover (8.4) (13.7) (11.2) (17.6) (19.3) (111.3) DPS (PLN) 0.38 0.44 0.48 0.53 0.45 0.45 RETURN / YIELD Dividend payout ratio 33.2% 30.5% 26.6% 30.0% 30.0% 30.0% WACC 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% BALANCE SHEET ITEM S ROIC 5.8% 8.0% 8.5% 8.2% 6.2% 5.5% PPE 8,061 8,309 9,077 9,510 10,728 12,799 ROE 5.4% 6.5% 7.6% 7.0% 5.8% 5.6% Working capital 235 147 194 198 200 207 FCF Yield 1.4% 5.9% 3.4% 4.9% (7.7%) (19.5%) Total assets 12,225 12,837 13,678 14,264 14,706 16,243 Div. Yield 2.3% 2.7% 2.9% 3.2% 2.7% 2.7%

SOTP DIVISION / COM PONENT P LN m PLN / share % EV Conventional generation 1,729 3.9 27.0% New conventional projects (1,127) (2.6) (17.6%) Renewables 541 1.2 8.4% Distribution 4,461 10.1 69.6% Supply 1,701 3.9 26.5% Other (895) (2.0) (14.0%) Total enterprise value 6,410 14.5 100.0% Net Debt 2,422 Other Adjustments (980) Equity value 7,852 No. of shares 441.4 Equity value per share P LN 17.8 Cost of equity 10% 12m target Price P LN 19.6 Source: Thomson Reuters, Credit Suisse Research

187 Credit Suisse European Utilities Team Enel (TP €3, Neutral) Challenges remain

Description Relative share price performance 2012E EBITDA split by region . Enel is a fully integrated utility, with activities SE Europe 160 Central including power generation, transmission and Europe 2% distribution as well as gas supply. The company France 5% operates in a number of countries including Italy, 125 0.3% Spain, US, Brazil, Chile, Slovakia Russia 4% 90 Latin Italy America 48% 22% Investment case 55

. On the positive side: (i) The asset mix in the domestic market, with coal and hydro 20 representing over 70% of the output, and (ii) the 2006 2007 2008 2009 2010 2011 2012 recent action to reduce leverage has left Enel on Enel track to reach more prudent ratios (FFO/debt Enel relative FTSEMIB 18.6% by 2013E). On the negative side: (i) Iberia Enel relative to S&P EU Utils Index 19% Italian fundamentals show further downside risk, Source: Credit Suisse estimates (ii) the current 4.5% yield is below the sector Source: Bloomberg PROFESSIONAL average at 6% for 2013E, (iii) overhang risk could materialise, should the government be required Consensus forward P/E range DY v. sector to sell its 31% stake in exchange for EU/IMF help 15% on its public finances or new privatizations enter 12x the political agenda 11x 12% . Valuation: Our valuation is based on a mix of 10x SOTP (fair value at €3.4ps), DDM and market 9% multiples. Our target price (€3ps) is based on a 9x weighted average of these methodologies and 6% implies 6% potential upside & 11% total return 8x

3% Upcoming catalysts 7x

. 13th Nov: Q3 results 6x 0% . Mid-December: Enersis shareholder meeting re 5x

rights issue Jul-10

Oct-07

Jun-09 Jan-10

Feb-11 Mar-12

Dec-08 Sep-11 May-08 . Mar 2013: Business plan presentation 4x 2007 2008 2009 2010 2011 2012 Enel SX6P

Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

188 Credit Suisse European Utilities Team Enel (TP €3, Neutral) Challenges remain

INCOM E STATEM ENT (£m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 64,362 73,377 79,514 92,358 94,699 96,838 P / E 4.9 6.1 6.5 7.5 8.5 7.8 Operational Expenses 47,991 55,897 61,797 75,771 78,159 79,922 EV/ IC 0.8 0.7 0.7 0.7 0.7 0.7 EBITDA 16,371 17,480 17,717 16,587 16,540 16,916 Price-to-book 0.8 0.7 0.7 0.7 0.7 0.6 EBITDA growth 6.8% 1.4% (6.4%) (0.3%) 2.3% EV / EBITDA 4.8 4.1 4.0 5.6 5.6 5.4 EBITDA margin 25.4% 23.8% 22.3% 18.0% 17.5% 17.5% Net debt (cash) 50,870 44,924 44,629 42,678 41,236 38,842 Depreciation & amort. 5,616 6,222 6,351 5,944 6,075 6,207 M arket cap. 38,135 35,169 29,564 26,988 26,988 26,988 EBIT 10,755 11,258 11,366 10,644 10,465 10,710 EV 89,005 80,093 74,193 92,291 92,505 91,936 EBIT margin 16.7% 15.3% 14.3% 11.5% 11.1% 11.1% Invested capital 95,223 98,469 99,069 99,929 101,267 102,131 Net financial expenses 1,741 3,198 3,024 2,912 3,046 3,001 NOPAT 7,766 7,910 7,217 6,747 6,645 7,176 Taxes 2,520 2,401 3,080 2,867 2,744 2,578 Capex (6,904) (6,800) (6,957) (7,005) (6,969) (6,532) M inority Interest 995 1,283 1,210 1,385 1,591 1,753 FCFE 2,022 (921) 4,756 3,721 3,436 4,369 Net Earnings 5,553 4,390 4,148 3,578 3,183 3,480 LEVERAGE Earnings growth (20.9%) (5.5%) (13.8%) (11.0%) 9.3% Net Debt / EBITDA 3.1 2.6 2.5 2.6 2.5 2.3 Net margin 8.6% 6.0% 5.2% 3.9% 3.4% 3.6% Net debt / Equity 1.1 0.8 0.8 0.7 0.7 0.6 EPS (€) 0.59 0.47 0.44 0.38 0.34 0.37 EBITDA interest cover 9.4 5.5 5.9 5.7 5.4 5.6 DPS (€) 0.25 0.28 0.25 0.14 0.14 0.15 RETURN / YIELD Dividend payout ratio 42.3% 60.0% 57.0% 37.9% 40.0% 40.0% WACC 8.7% 8.7% 8.7% 8.7% 8.7% 8.7% BALANCE SHEET ITEM S ROIC 8.2% 8.0% 7.3% 6.8% 6.6% 7.0% PPE 79,395 78,393 80,837 82,321 84,038 85,203 ROE 17.1% 11.6% 10.7% 8.9% 7.7% 8.1% Working capital 4,336 2,935 1,787 1,968 2,412 2,951 FCF Yield 7.5% (3.4%) 17.6% 13.8% 12.7% 16.2% Total assets 160,457 168,052 169,805 173,378 175,242 176,494 Div. Yield 8.7% 9.8% 8.8% 5.0% 4.7% 5.2%

SOTP DIVISION / COMPONENT € m € / share % EV Italy (ex renewables) 39,831 4.2 36.3% Enel Green Power 12,498 1.3 11.3% Endesa 30,596 3.3 39.1% International (ex renewables) 13,512 1.4 13.3%

Enterprise value 96,437 10.3 100.0% Net Debt (51,384) Other Adjustments (13,258) Equity value 31,795 No. of shares 9,403.4 Equity value per share €3.4 Source: Thomson Reuters, Credit Suisse Research

189 Credit Suisse European Utilities Team E.ON (TP €18, Neutral) Gazprom deal – a final solution?

Description Relative share price performance Reported EPS vs. Recurrent EPS (€ps)

. E.ON, formed by the 2000 merger of Veba and 200 5 Viag, is an international utility group focused on 4.4 Reported EPS Recurrent EPS electricity and gas

160 4 3.1

3 2.8

120 2.6

2.1

2.0

2.0 2.0

1.8 1.8 1.8

2 1.8 1.3 Investment case 80 1 . Lower power price outlook a negative for the 40 company. 12E EPS benefits from one-offs in 2006 2007 2008 2009 2010 2011 2012 0 Gazprom deal but post-13E to be subdued 2009 2010 2011 2012 2013 2014 2015 2016 . There is some doubt that the agreement with E.ON -1

Gazprom provides a final solution to E.ON’s gas E.ON relative to DAX 30 1.2 issues. Our concern is that the group will have E.ON relative to S&P EU Utils Index -2 - through another round of re-negotiation in 2 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research years time . Capital redeployment: While we are confident Consensus forward P/E range Net debt and ND/EBITDA that E.ON will reach its €15bn disposals target at 16x 4.0x good valuation levels, we remain very cautious Old CS as regards the ability of the company to create New CS value in markets it has very little experience 14x post gas network disposal 3.5x . From a valuation point of view, we think the stock would be attractive at a sub-€15 price level 12x

10x 3.0x

8x Upcoming catalysts 2.5x . Clarification on gas agreement with Gazprom 6x . 13th Nov: 9M results . Evidence of value creating capital redeployment 2.0x 4x 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

190 Credit Suisse European Utilities Team E.ON (TP €18, Neutral) Gazprom deal – a final solution?

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 81,838 92,863 112,954 107,776 111,385 112,936 P / E 6.6 7.2 14.1 8.3 10.3 8.9 Operational Expenses 68,319 79,515 103,661 96,766 99,840 100,233 EV/ IC 0.8 0.9 0.9 1.0 0.9 0.9 EBITDA 13,519 13,348 9,293 11,010 11,545 12,703 Price-to-book 0.9 0.9 1.0 0.9 0.9 0.9 EBITDA growth (1.3%) (30.4%) 18.5% 4.9% 10.0% EV / EBITDA 5.9 5.5 7.7 6.1 5.9 5.3 EBITDA margin 16.5% 14.4% 8.2% 10.2% 10.4% 11.2% Net debt (cash) 44,634 37,701 35,485 31,911 32,344 31,857 Depreciation & amort. 3,875 3,892 6,859 3,578 3,839 4,148 M arket cap. 56,326 44,196 32,123 35,727 35,727 35,727 EBIT 9,644 9,456 2,434 7,432 7,706 8,555 EV 100,960 81,896 67,608 67,637 68,071 67,583 EBIT margin 11.8% 10.2% 2.2% 6.9% 6.9% 7.6% Invested capital 88,589 83,286 75,094 74,119 76,048 77,678 Net financial expenses 2,249 2,303 2,094 2,242 2,227 2,232 NOPAT 7,211 7,426 1,568 6,243 5,317 5,903 Taxes 2,976 1,946 (1,036) 891 1,729 1,976 Capex (8,065) (7,662) (6,524) (5,735) (5,320) (5,501) M inority Interest 249 428 358 531 380 440 FCFE 1,031 2,954 86 3,584 2,457 3,505 Net Earnings 5,328 4,884 2,501 4,252 3,435 3,958 LEVERAGE Earnings growth (8.3%) (48.8%) 70.0% (19.2%) 15.2% Net Debt / EBITDA 3.3 2.8 3.8 2.9 2.8 2.5 Net margin 6.5% 5.3% 2.2% 3.9% 3.1% 3.5% Net debt / Equity 1.0 0.8 0.9 0.8 0.7 0.7 EPS (€) 2.80 2.56 1.31 2.23 1.80 2.08 EBITDA interest cover 6.0 5.8 4.4 4.9 5.2 5.7 DPS (€) 1.50 1.50 1.00 1.10 1.10 1.14 RETURN / YIELD Dividend payout ratio 53.6% 58.5% 76.2% 49.3% 61.0% 55.0% WACC 7.3% 7.3% 7.3% 7.3% 7.3% 7.3% BALANCE SHEET ITEM S ROIC 6.5% 8.3% 8.3% 8.5% 6.9% 7.6% PPE 60,787 60,870 55,869 55,126 56,607 57,960 ROE 13.2% 11.7% 7.0% 11.2% 8.7% 9.6% Working capital 11,460 14,867 18,022 17,783 18,379 18,634 FCF Yield 2.9% 8.4% 0.2% 10.1% 7.0% 9.9% Total assets 152,660 152,881 152,872 152,408 154,665 156,351 Div. Yield 8.1% 8.1% 5.4% 5.9% 5.9% 6.2%

SOTP DIVISION / COM PONENT € m € / share % EV Conventional Generation 11,272 5.8 15.2% Renewables 14,928 7.7 20.1% Exploration and Production 8,215 4.3 11.1% Germany 16,928 8.8 22.8% Other EU countries 15,359 8.0 20.7% Others 8,031 4.2 10.8% Enterprise value 74,734 38.8 100.0% Net Debt (17,990) Other Adjustments (21,053) Equity value 35,692 No. of shares 1,927.0 Equity value per share €19 NB: TP is based on a blend of DCF, 2012E EV/EBITDA, 2012E P/E, and 2012E dividend yield Source: Thomson Reuters, Credit Suisse Research

191 Credit Suisse European Utilities Team Gamesa (TP €2.43, Neutral) Industry structure unappealing

Description Relative share price performance Earnings momentum vs stock price charts . Gamesa, through its subsidiaries and affiliates, is 350 40% 60% primarily engaged in the renewable energy 30% 45% sector. The Company’s activities include the 280 20% 30% promotion, construction and sale of wind parks, 10% 15% as well as the engineering, design, manufacture 210 & sale of wind turbines 0% 0% 140 -10% -15% -20% -30% Investment case 70 -30% -45% . Defensive repositioning has protected the -40% -60%

business: Through pioneering sales in India and 0

Mar-07 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 LatAm, Gamesa is still able to grow volumes y-o- 2006 2007 2008 2009 2010 2011 2012 Mar-01 y. New machines (the G10x—starting with the GAM Net EPS upgrades/downgrades (3M MA-LHS) 4.5MW) and G9x (a new 2.0MW range) with a GAM relative to IBEX 35 reduced time to market should ensure that GAM relative to S&P EU Utils Index Gamesa vs FTSE 100 return (3M MA-RHS) market share is sustainable Source: Bloomberg PROFESSIONAL Source: Company data, Datastream, Credit Suisse Research . But margin pressures remain: The wind market faces tough conditions (e.g. intense competition Consensus forward P/E range Gamesa Cost of Capital in growing markets, fiscal austerity, falling demand and scarce financing in developed 20x markets). The industry is not yet moving to self- 22% help by taking capacity out. Growing the services 18% business will not be enough, in our view. That 16x said, we prefer the Gamesa approach to that of 14% Vestas, where we still see negative FCF, execution issues and a lack of credible strategy 10% 12x 6% Upcoming catalysts 2% . 8th Nov: 3Q results 8x -2%

2010A 2013E 2009A 2011A 2012E 2014E 2015E -6% 2008A 4x Gamesa Group Gamesa Energía 2007 2008 2009 2010 2011 2012 Gamesa Eólica WTG WACC (CS spot estimate) Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

192 Credit Suisse European Utilities Team Gamesa (TP €2.43, Neutral) Industry structure unappealing

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 3,229 2,736 3,033 3,285 3,508 3,579 P / E 3.4 5.1 5.9 13.9 9.3 7.9 Operational Expenses 2,953 2,514 2,803 3,052 3,245 3,286 EV/ IC 0.6 0.8 0.5 0.5 0.5 0.5 EBITDA 276 222 230 233 263 293 Price-to-book 0.3 0.3 0.3 0.3 0.2 0.2 EBITDA growth (19.8%) 3.8% 1.4% 12.8% 11.5% EV / EBITDA 2.6 1.1 5.0 3.6 3.4 3.1 EBITDA margin 8.6% 8.1% 7.6% 7.1% 7.5% 8.2% Net debt (cash) 283 (199) 710 392 458 455 Depreciation & amort. 99 103 99 134 150 166 M arket cap. 2,793 1,372 771 436 438 441 EBIT 177 119 131 99 113 127 EV 3,076 1,173 1,481 828 896 896 EBIT margin 5.5% 4.4% 4.3% 3.0% 3.2% 3.5% Invested capital 1,859 1,430 2,408 2,115 2,227 2,276 Net financial expenses 47 50 39 57 51 53 NOPAT 166 171 97 75 86 96 Taxes 7 (15) 18 10 16 19 Capex (79) (92) (184) (175) (175) (175) M inority Interest (0) 0 1 1 1 1 FCFE 167 713 (856) 432 41 115 Net Earnings 125 86 74 32 47 56 LEVERAGE Earnings growth (30.8%) (14.1%) (57.3%) 49.8% 18.4% Net Debt / EBITDA 1.0 -0.9 3.1 1.7 1.7 1.6 Net margin 3.9% 3.2% 2.4% 1.0% 1.3% 1.6% Net debt / Equity 0.2 -0.1 0.4 0.2 0.3 0.2 EPS (€) 0.51 0.34 0.30 0.13 0.19 0.22 EBITDA interest cover 5.9 4.5 5.9 4.1 5.2 5.6 DPS (€) 0.11 0.04 0.09 0.04 0.06 0.07 RETURN / YIELD Dividend payout ratio 22.3% 12.4% 29.9% 29.9% 29.9% 29.9% WACC 9.9% 9.9% 9.9% 9.9% 9.9% 9.9% BALANCE SHEET ITEM S ROIC 7.4% (2.5%) 4.6% 3.9% 4.2% 4.5% PPE 417 428 452 530 596 648 ROE 7.9% 5.3% 4.4% 1.8% 2.7% 3.1% Working capital 921 393 1,283 919 986 1,011 FCF Yield 38.9% 163.2% (196.1%) 98.4% 9.2% 25.9% Total assets 3,787 3,754 4,546 4,522 4,802 4,922 Div. Yield 6.5% 2.5% 5.1% 2.2% 3.2% 3.8%

Consensus EPS estimates (€) Consensus P/E estimates

2.5 2011 2012 2013 2014 50x 2011 2012 2013 2014 40x 2.0 30x 1.5 20x 10x 1.0 0x 0.5 (10x) (20x) 0.0 (30x) (0.5) (40x)

Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

193 Credit Suisse European Utilities Team GDF Suez (TP €15.5, Underperform) EPS under pressure from scrip, taxes, regulation and weak markets

Description Relative share price performance Change to generation EBITDA if selling at 09A spreads GDF-Suez is the result of the merger GDF, the . 280 Gas French state-owned incumbent gas company, Coal and Suez, a independent utility Lignite . From its core in France and Belgium, GDF-Suez 220 Change to group EBITDA has grown into a global conglomerate present in 2,000 electricity, gas, water, waste and services 160 1,500

Investment case 100 1,000

. The October 2012 scrip issue will dilute earnings € 500 by 2 to 5% (CS 3.8%) 40 . Merchant generation loses €1 bn in EBITDA p.a. 2006 2007 2008 2009 2010 2011 2012 0 compared to the commodity environment of 2009 12E 13E 14E 15E 16E GDF -500 . Politics in Belgium (nuclear levy, T&D cost GDF relative to CAC 40 increase, tariffs being frozen) and France (gas GDF relative to S&P EU Utils Index -1,000 tariff deficit, tax hikes) have cost recurring EPS Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research €0.18 and could cost an extra €0.12 . French tariffs are being revamped to expressly Consensus forward P/E range €2.2bn cumulative cost from politics by year end 2012E avoid gas bill increasing faster than inflation which could hurt GDF Suez’s earnings more 14x Belgian levy French tariff freeze . Cost cutting (€600m in 2012) simply offsets cost inflation, GDF Suez’s ability to retain savings is 2008 2009 2010 2011 2012E unclear as regulatory reviews mechanically claws 12x 0 them back and merchant power prices keep -100 falling -200 10x

-300

-400

Upcoming catalysts € 8x . 31st Oct: 3Qresutls -500 . Q4 2012: French energy policy review -600 . H2 2012: French Gas transmission rate review -700 . Q42012 - 2013: renegotiation of gas contracts 6x 2008 2009 2010 2011 2012 -800 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

194 Credit Suisse European Utilities Team GDF Suez (TP €15.5, Underperform) EPS under pressure from scrip, taxes, regulation and weak markets

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 79,908 84,478 90,673 96,937 95,113 98,536 P / E 8.9 11.0 10.5 12.4 11.6 11.2 Operational Expenses 66,136 70,125 73,808 80,368 78,660 81,575 EV/ IC 0.9 0.8 0.7 0.8 0.8 0.8 EBITDA 13,772 14,353 16,865 16,569 16,453 16,961 Price-to-book 0.7 0.6 0.6 0.9 0.9 0.9 EBITDA growth 4.2% 17.5% (1.8%) (0.7%) 3.1% EV / EBITDA 6.0 6.0 5.4 5.7 5.8 5.6 EBITDA margin 17.2% 17.0% 18.6% 17.1% 17.3% 17.2% Net debt (cash) 40,404 44,604 49,592 53,311 53,880 53,707 Depreciation & amort. 5,506 6,005 7,221 7,137 7,637 7,759 M arket cap. 68,474 60,420 47,576 43,310 43,310 43,310 EBIT 8,266 8,348 9,644 9,432 8,816 9,201 EV 108,878 105,024 97,168 96,622 97,190 97,017 EBIT margin 10.3% 9.9% 10.6% 9.7% 9.3% 9.3% Invested capital 105,931 115,322 129,862 114,051 116,227 117,543 Net financial expenses 1,275 1,976 2,388 2,085 2,149 2,210 NOPAT 6,354 6,352 7,069 6,748 6,662 6,804 Taxes 1,574 1,768 1,975 2,245 1,736 1,808 Capex (9,646) (9,292) (8,898) (12,820) (11,687) (11,405) M inority Interest 753 1,010 1,418 1,610 1,276 1,409 FCFE 3,988 3,705 4,637 3,683 3,139 3,571 Net Earnings 4,581 3,676 3,862 3,488 3,736 3,879 LEVERAGE Earnings growth (19.8%) 5.0% (9.7%) 7.1% 3.8% Net Debt / EBITDA 2.9 3.1 2.9 3.2 3.3 3.2 Net margin 5.7% 4.4% 4.3% 3.6% 3.9% 3.9% Net debt / Equity 0.6 0.6 0.6 0.9 0.9 0.8 EPS (€) 2.03 1.63 1.71 1.45 1.55 1.61 EBITDA interest cover 10.8 7.3 7.1 7.9 7.7 7.7 DPS (€) 1.47 1.50 1.50 0.35 1.53 1.57 RETURN / YIELD Dividend payout ratio 72.5% 91.8% 87.5% 23.9% 99.1% 97.6% WACC 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% BALANCE SHEET ITEM S ROIC 6.1% 5.2% 5.5% 5.8% 5.6% 5.8% PPE 60,065 68,222 78,976 66,077 66,354 67,090 ROE 7.6% 5.9% 6.1% 7.3% 7.6% 7.8% Working capital 11,671 10,035 9,212 7,799 8,093 8,362 FCF Yield 9.8% 9.2% 11.5% 8.5% 7.2% 8.2% Total assets 131,594 139,629 157,847 141,958 144,653 146,554 Div. Yield 8.2% 8.4% 8.4% 1.9% 8.5% 8.7%

SOTP DIVISION / COMPONENT € m € / share % EV Energy Europe 7,817 3.2 21.0% Energy International 12,736 5.3 34.1% Global Gas 6,126 2.5 16.4% Infrastructure 5,854 2.4 15.7% Suez E. 4,319 1.8 11.6% Others 448 0.2 1.2% Total value 37,299 15.5 100.0% No. of shares 2,406.4 Total value per share €16

Source: Thomson Reuters, Credit Suisse Research

195 Credit Suisse European Utilities Team Iberdrola (TP €4.7, Outperform) Defensive but not dilutive

Description Relative share price performance 2012E EBITDA split by geography . Iberdrola is a fully integrated utility, with activities 240 Mexico Other including power generation, transmission and 5% 4% distribution as well as gas supply. The company 200 operates in a number of countries including Brazil Spain 41% Spain, UK, Brazil, Mexico, US 160 13%

120 Investment case 80 . Investment case: After c25% underperformance US vs. the sector YTD, partly driven by macro events 40 16% outside the company’s control, we believe it is 2006 2007 2008 2009 2010 2011 2012 time to reconsider Iberdrola for three reasons: (i) IBE renewed clarity on Spanish generation with the IBE relative IBEX recently announced reform, (ii) non-Iberian UK IBE relative to S&P EU Utils Index businesses to continue growing, with five-year 21% Source: Credit Suisse estimates EBITDA CAGRs ranging between 3% for Brazil Source: Bloomberg PROFESSIONAL and 11% for the UK, (iii) attractive valuation (currently 10x 2014E P/E), before any potential Consensus forward P/E range UK stands out for 5-yr EBITDA growth upside from a possible pass-through of the recent 12% generation/green taxes to final customers and 12x 10.8% new securitization (up to 10% EPS upside on our 11x 10% 9.4% numbers) 10x . Valuation: Our €4.7 TP is based on a weighted 8% average of SOTP (€5.6, 50% weight), DDM and 9x 6.0% market multiples 6% 8x 3.7% 7x 4% Upcoming catalysts 2.8% 6x . Q4 2012: Possible announcement of new 2% securitisation tranches and disposals 5x 0% 4x UK Lib. UK Reg.Renewables US Brazil 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse estimates

196 Credit Suisse European Utilities Team Iberdrola (TP €4.7, Outperform) Defensive but not dilutive

INCOME STATEMENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 25,892 31,537 33,355 33,204 34,663 35,856 P / E 7.3 7.5 8.3 9.5 10.5 9.6 Operational Expenses 19,077 24,009 25,704 25,546 27,166 27,853 EV/ IC 0.9 0.9 0.9 0.9 0.8 0.8 EBITDA 6,815 7,528 7,651 7,658 7,497 8,003 Price-to-book 0.8 0.7 0.7 0.7 0.7 0.7 EBITDA growth 10.5% 1.6% 0.1% (2.1%) 6.7% EV / EBITDA 8.2 7.4 7.4 7.4 7.7 7.3 EBITDA margin 26.3% 23.9% 22.9% 23.1% 21.6% 22.3% Net debt (cash) 31,790 31,233 32,537 31,447 30,874 29,855 Depreciation & amort. 2,306 2,698 3,145 3,073 3,155 3,228 Market cap. 33,441 30,193 27,171 23,988 24,996 25,963 EBIT 4,509 4,829 4,505 4,585 4,342 4,775 EV 65,231 61,426 59,552 56,369 58,866 59,893 EBIT margin 17.4% 15.3% 13.5% 13.8% 12.5% 13.3% Invested capital 60,820 62,896 65,745 66,421 67,269 68,029 Net financial expenses 1,109 1,288 1,062 1,274 1,237 1,254 NOPAT 3,623 3,699 3,789 3,606 3,344 3,677 Taxes 719 899 549 768 721 816 Capex (4,307) (5,099) (4,002) (3,757) (3,478) (3,466) Minority Interest 114 71 101 35 35 35 FCFE (3,674) (4,856) (4,242) (4,000) (4,220) (3,963) Net Earnings 2,824 2,871 2,805 2,536 2,378 2,697 LEVERAGE Earnings growth 1.6% (2.3%) (9.6%) (6.2%) 13.4% Net Debt / EBITDA 4.7 4.1 4.3 4.1 4.1 3.7 Net margin 10.9% 9.1% 8.4% 7.6% 6.9% 7.5% Net debt / Equity 1.1 1.0 1.0 0.9 0.8 0.8 EPS (€) 0.54 0.52 0.48 0.42 0.37 0.41 EBITDA interest cover 6.1 5.8 7.2 6.0 6.1 6.4 DPS (€) 0.33 0.34 0.33 0.33 0.30 0.30 RETURN / YIELD Dividend payout ratio 61.7% 64.8% 68.4% 78.3% 80.1% 73.3% WACC 7.8% 7.8% 7.8% 7.8% 7.8% 7.8% BALANCE SHEET ITEMS ROIC 6.0% 5.9% 5.8% 5.3% 5.0% 5.4% PPE 45,795 50,621 52,930 53,314 53,637 53,875 ROE 10.6% 9.9% 8.5% 7.3% 6.6% 7.1% Working capital (1,116) (2,575) (1,643) (1,312) (770) (229) FCF Yield (17.8%) (22.5%) (18.3%) (16.7%) (16.9%) (15.3%) Total assets 87,013 93,701 96,905 97,516 98,562 99,524 Div. Yield 8.4% 8.6% 8.3% 8.3% 7.6% 7.6%

SOTP DIVISION / COMPONENT € m € / share % EV Regulated 28,915 4.8 44.3% Liberalized 16,788 2.8 25.7% Renovables 18,376 3.0 28.2% Others 1,145 0.2 1.8%

Enterprise value 65,224 10.7 100.0% Net Debt (31,447) Other Adjustments 77 Equity value 33,854 No. of shares 6,086.6 Equity value per share €5.6 NB: TP is based on a blend of DCF, 2012E EV/EBITDA, 2012E P/E, and 2012E dividend yield

Source: Thomson Reuters, Credit Suisse Research

197 Credit Suisse European Utilities Team National Grid (TP 730p, Outperform) RIIO presents a £2.5bn opportunity

Description Relative share price performance Consensus forward P/E range . NG owns and operates electricity and gas 180 13x networks in UK and US, and is active in transmission and distribution. c95% of company 150 EV is in regulated or contracted assets. The other 12x 5% is interconnectors, LNG import, metering and property. 120 11x Investment case 90 10x . Capex growth fundable: Totex came in at £25.5bn (CS est. c£23bn). This provides c7% UK 60 2006 2007 2008 2009 2010 2011 2012 RAB growth CAGR. Equity issue fears should 9x diminish (OFGEM’s numbers indicate NG needs just c£1.3bn new equity, vs. £3.4bn in NG’s NG business plan) NG relative to FTSE 100 8x NG relative to S&P EU Utils Index . Cash flows attractive: NG will go to 100% 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL Repex capitalisation and 45 year asset lives for new assets gradually over 8 years. It improves the credit metrics vs. our assumptions. Premium to “combined RAB and rate base” Capitalisation in Electricity transmission is 85% 80% NGC review period EUA/NEES acquisitions NiMo acquisition Keyspan acquisition . Returns: UK Elec Transmission (c42% of EV) 60% got returns in-line with our forecasts. Our concern is that implied returns in Gas Distribution (c21% 40% Lattice / NGC merger of EV) will be just c4.3% vanilla real in 2013/14 20% (CS est. 4.7%). That said, Gas Distribution is half the size of Transmission, and not growing, hence 0% the valuation impact is limited 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A -20%

Transmission review Transmission and -40% Upcoming catalysts gas distribution reivew Lattice review period . 15th Nov: H1 13 results -60% NGC review period . 28th Nov: Ex-div Gas dist'bn review -80% Tech boom: impact of Energis

NG Premium to combined RAB/Rate base Lattice Premium to RAB

Source: Bloomberg PROFESSIONAL, Company data, Credit Suisse Research

198 Credit Suisse European Utilities Team National Grid (TP 730p, Outperform) RIIO presents a £2.5bn opportunity

INCOM E STATEM ENT (£m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 15,678 14,007 14,343 13,832 14,919 14,762 P / E 13.8 12.2 13.6 13.7 12.4 12.2 Operational Expenses 11,636 9,692 9,492 9,070 9,743 9,472 EV/ IC 1.6 1.7 1.6 1.6 1.5 1.4 EBITDA 4,042 4,315 4,851 4,762 5,175 5,290 Price-to-book 4.3 4.1 2.6 2.7 2.5 2.3 EBITDA growth 6.8% 12.4% (1.8%) 8.7% 2.2% EV / EBITDA 12.2 11.2 9.4 9.6 9.0 9.1 EBITDA margin 25.8% 30.8% 33.8% 34.4% 34.7% 35.8% Net debt (cash) 23,859 23,007 19,875 20,302 21,312 22,701 Depreciation & amort. 1,127 1,194 1,252 1,267 1,300 1,364 M arket cap. 11,903 14,323 20,178 22,596 25,480 25,788 EBIT 2,915 3,121 3,600 3,495 3,875 3,926 EV 35,762 37,330 40,053 42,898 46,792 48,489 EBIT margin 18.6% 22.3% 25.1% 25.3% 26.0% 26.6% Invested capital 27,843 27,218 28,944 29,548 31,484 33,811 Net financial expenses 1,201 972 1,160 1,039 1,006 1,017 NOPAT 2,064 2,247 2,548 2,474 2,751 2,827 Taxes 517 553 722 755 834 819 Capex (3,185) (3,111) (3,134) (3,350) (3,616) (4,071) M inority Interest 3 3 4 2 2 2 FCFE (9) 1,178 1,518 823 936 795 Net Earnings 1,250 1,418 1,747 1,828 2,040 2,104 LEVERAGE Earnings growth 13.4% 23.2% 4.7% 11.6% 3.1% Net Debt / EBITDA 5.9 5.3 4.1 4.3 4.1 4.3 Net margin 8.0% 10.1% 12.2% 13.2% 13.7% 14.2% Net debt / Equity 6.0 5.5 2.2 2.2 2.1 2.0 EPS (p) 50.92 57.40 51.70 51.28 56.43 57.48 EBITDA interest cover 3.4 4.4 4.2 4.6 5.1 5.2 DPS (p) 35.64 38.49 36.37 39.28 40.85 41.80 RETURN / YIELD Dividend payout ratio 70.0% 67.1% 70.3% 76.6% 72.4% 72.7% WACC 5.9% 5.9% 5.9% 5.9% 5.9% 5.9% BALANCE SHEET ITEM S ROIC 9.7% 13.5% 12.2% 11.7% 11.3% 10.7% PPE 29,545 30,855 31,956 33,701 35,916 38,523 ROE 31.5% 33.8% 19.3% 19.8% 20.1% 18.9% Working capital 393 (147) (296) (338) (98) (53) FCF Yield (0.1%) 6.8% 6.4% 3.3% 3.7% 3.1% Total assets 40,187 40,562 42,373 43,094 45,714 48,382 Div. Yield 5.1% 5.5% 5.2% 5.6% 5.8% 6.0%

SOTP DIVISION / COMPONENT £ m p / share % EV UK Transmission 21,884 606.2 46.4% US Transmission (inc. deferrals) 1,653 45.8 3.5% UK Gas Distribution 9,700 268.7 20.6% US Gas Distribution (inc. deferrals) 5,168 143.2 11.0% US Electricity Distribution and Generation (inc. deferrals) 5,387 149.2 11.4% Others 3,335 91.1 7.0% Enterprise value 47,126 1,305.4 100.0% Net Debt (20,607) Other Adjustments (177) Equity value 26,343 No. of shares 3,610.1 Equity value per share 730p Source: Thomson Reuters, Credit Suisse Research

199 Credit Suisse European Utilities Team Pennon (TP 690p, Underperform) Deteriorating returns

Description Relative share price performance Viridor EBITDA trajectory

. Pennon has two businesses: the South West 230 180 60% Water and sewerage monopoly (c65% of EV) and 160 200 50% the Viridor Waste business (c35% of EV). Viridor 140 40% operates landfills; landfill gas generation; 170 120 recycling; energy from waste (incineration); I&C 100 30% 140 collection; and integrated municipal contracts 80 20% 60 110 10% Investment case 40 80 20 0% . Recycling was Viridor’s largest earnings contributor 50 - -10% in 2012A. Recyclate prices have declined since

2008. We believe the market has been slow to 2006 2007 2008 2009 2010 2011 2012

2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E respond; and that competitive pressures amplify the 2004A PNN impact of weaker prices PNN relative to FTSE 100 EBITDA Year-on-year EBITDA growth PNN relative to S&P EU Utils Index . UK energy from waste capacity could more than double by 2017, on our numbers. We model high Source: Bloomberg PROFESSIONAL Source: Company data, Datastream, Credit Suisse Research returns on large EfW investments (c12% project IRR) but highlight that these returns could come Consensus forward P/E range Viridor EBITDA split under pressure if capacity continues to increase at 100% 18x this rate 80% . Little upside from South West Water. SWW had the 16x lowest RAB growth in the sector over the current 60% regulatory period, and we expect this to continue. We believe regulatory uncertainty and the upcoming 14x 40% retail price limit have negative implications for equity 20% investors 12x Upcoming catalysts 0% 10x

. 29th Nov – H1 result for FYMar13

2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E . Methodology consultation for 2014 price review – Landfill Power generation Autumn 2012 (late November/early December) 8x Contracts Recycling Collection / transfer & recycling 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

Credit Suisse European Utilities Team Pennon (TP 690p, Underperform) Deteriorating returns

INCOM E STATEM ENT (£m) 2011A 2012A 2013E 2014E 2015E 2016E VALUATION 2011A 2012A 2013E 2014E 2015E 2016E Revenues 1,159 1,234 1,247 1,321 1,412 1,512 P / E 17.9 18.0 16.4 15.9 15.7 14.5 Operational Expenses 757 818 820 883 940 989 EV/ IC 1.8 1.6 1.5 1.3 1.2 1.1 EBITDA 403 416 426 438 472 522 Price-to-book 3.3 3.2 2.9 2.7 2.4 2.2 EBITDA growth 3.3% 2.5% 2.8% 7.7% 10.6% EV / EBITDA 11.4 11.4 11.7 12.0 11.5 10.7 EBITDA margin 34.7% 33.7% 34.2% 33.1% 33.4% 34.5% Net debt (cash) 1,934 2,105 2,363 2,622 2,781 2,937 Depreciation & amort. 142 147 152 156 171 191 M arket cap. 2,229 2,568 2,655 2,687 2,875 2,914 EBIT 261 269 274 282 301 331 EV 4,163 4,672 5,017 5,310 5,656 5,851 EBIT margin 22.5% 21.8% 22.0% 21.4% 21.3% 21.9% Invested capital 2,713 2,927 3,273 3,620 3,997 4,251 Net financial expenses 77 72 80 84 88 97 NOPAT 238 231 220 227 243 267 Taxes 17 28 40 41 44 48 Capex (288) (347) (460) (468) (505) (396) M inority Interest 0 0 0 0 0 0 FCFE 91 (37) (110) (100) (110) 41 Net Earnings 145 146 162 169 184 201 LEVERAGE Earnings growth 0.8% 11.0% 4.2% 8.7% 9.3% Net Debt / EBITDA 4.8 5.1 5.5 6.0 5.9 5.6 Net margin 12.5% 11.8% 13.0% 12.8% 13.0% 13.3% Net debt / Equity 2.5 2.6 2.6 2.6 2.3 2.2 EPS (p) 40.63 40.45 44.37 45.69 46.40 50.04 EBITDA interest cover 5.2 5.8 5.3 5.2 5.4 5.4 DPS (p) 24.88 26.77 28.41 30.37 32.46 34.70 RETURN / YIELD Dividend payout ratio 61.2% 66.2% 64.0% 66.5% 70.0% 69.3% WACC 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% BALANCE SHEET ITEM S ROIC 8.8% 7.9% 6.7% 6.3% 6.1% 6.3% PPE 2,923 3,083 3,392 3,705 4,040 4,246 ROE 18.6% 17.8% 17.8% 16.9% 15.1% 15.3% Working capital (27) 5 9 6 9 16 FCF Yield 3.5% (1.4%) (4.2%) (3.7%) (3.8%) 1.4% Total assets 4,137 4,271 4,616 4,947 5,304 5,535 Div. Yield 3.4% 3.7% 3.9% 4.2% 4.5% 4.8%

SOTP DIVISION / COMPONENT £ m p / share % EV EV of regulated business 3,115 853.0 64.9% Viridor waste (inc. JVs) 1,687 462.0 35.1%

Enterprise value 4,802 1,315.0 100.0% Net Debt (2,363) Other Adjustments 82 Equity value 2,522 No. of shares 365.1 Equity value per share 690p

Source: Company data, Credit Suisse estimates

Credit Suisse European Utilities Team PGE (TP PLN18.9, Underperform) Main play on Polish generation market

Description Relative share price performance Polish power price decomposition (PLN/MWh) . PGE is the largest Polish utility. The main areas 120 of the Company’s activity comprise five business lines: Conventional Power Generation, Wholesale, Distribution, Retail and Renewable 105 Power Generation 90

Investment case 75 . Play on generation: PGE is the main vehicle to play Polish generation market with c.70% of 60 EBITDA generated in generation division. It 2009 2010 2011 2012 generates c. 55 TWh of baseload electricity with the sensitivity of PLN 2.5/share for PLN 10 PGE PLN/MWh increase in power price. We don’t see PGE relative to WIG 20 PGE relative to S&P EU Utils Index major price hikes on the forward curve with 2013 Source: Bloomberg PROFESSIONAL Source: Datastream, Credit Suisse Research futures trading at 200PLN/MWh

. State owned vehicle: PGE may be forced to Consensus forward P/E range Merit order in Poland make conventional generation investments with 200 IRRs below the cost of capital. Additionally, PGE 300 plans to built a nuclear power plant with 170 estimated capacity of c. 2 GW which would be 250 most probably value destructive as well 140 200 Energa Tauron . Valuation: PGE is trading on a dividend-adjusted Enea 2013E P/E of 10.1x and EV/EBITDA of 5.6x PGE 110 150

80 100 Upcoming catalysts

50 SRMC (PLN/MWh) 50 . Nuclear investment: technical tender announcement 2006 2007 2008 2009 2010 2011 2012 0 th . 14 Nov: Q3 results PGN 0 10,000 20,000 30,000 40,000 PGN relative to WIG 20 PGN relative to S&P EU Utils Index Capacity (GW) Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

202 Credit Suisse European Utilities Team PGE (TP PLN18.9, Underperform) Main play on Polish generation market

INCOM E STATEM ENT (PLNm) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 21,623 20,476 28,111 29,033 28,432 29,503 P / E 9.4 10.8 6.9 8.3 11.7 11.4 Operational Expenses 13,636 13,642 21,256 20,900 21,450 22,183 EV/ IC 1.0 0.9 0.9 0.8 0.7 0.7 EBITDA 7,988 6,834 6,855 8,133 6,982 7,320 Price-to-book 1.0 0.9 0.8 0.8 0.8 0.8 EBITDA growth (14.4%) 0.3% 18.6% (14.1%) 4.8% EV / EBITDA 5.2 5.5 5.0 4.4 5.7 6.0 EBITDA margin 36.9% 33.4% 24.4% 28.0% 24.6% 24.8% Net debt (cash) (3,706) (166) (3,388) (1,610) 2,710 6,229 Depreciation & amort. 2,643 2,649 2,711 2,876 2,944 2,975 M arket cap. 42,387 43,360 38,705 34,124 34,124 34,124 EBIT 5,345 4,185 4,144 5,257 4,039 4,344 EV 49,583 46,980 38,568 35,796 40,138 43,679 EBIT margin 24.7% 20.4% 14.7% 18.1% 14.2% 14.7% Invested capital 35,144 37,517 37,785 40,277 45,893 51,259 Net financial expenses 208 136 (1,847) 152 411 623 NOPAT 4,310 3,530 3,342 4,258 3,271 3,519 Taxes 1,041 673 1,194 970 689 707 Capex (3,990) (4,466) (4,482) (5,309) (8,572) (8,277) M inority Interest 967 613 37 30 22 22 FCFE 3,309 2,145 2,460 2,112 (1,962) (1,420) Net Earnings 3,371 3,014 4,936 4,105 2,917 2,992 LEVERAGE Earnings growth (10.6%) 63.8% (16.8%) (28.9%) 2.6% Net Debt / EBITDA -0.5 0.0 -0.5 -0.2 0.4 0.9 Net margin 15.6% 14.7% 17.6% 14.1% 10.3% 10.1% Net debt / Equity -0.1 0.0 -0.1 0.0 0.1 0.1 EPS (PLN) 1.95 1.70 2.64 2.20 1.56 1.60 EBITDA interest cover 38.3 50.2 -3.7 53.5 17.0 11.7 DPS (PLN) 0.91 0.79 1.83 0.88 0.62 0.64 RETURN / YIELD Dividend payout ratio 46.9% 46.8% 69.3% 40.0% 40.0% 40.0% WACC 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% BALANCE SHEET ITEM S ROIC 12.3% 9.4% 8.8% 10.6% 7.1% 6.9% PPE 38,946 41,442 42,975 45,408 51,037 56,338 ROE 10.8% 8.1% 12.1% 9.9% 6.8% 6.7% Working capital 2,298 2,229 1,956 2,014 2,002 2,067 FCF Yield 10.5% 6.6% 7.2% 6.2% (5.7%) (4.2%) Total assets 54,448 51,474 58,763 59,959 65,551 71,043 Div. Yield 5.0% 4.4% 10.0% 4.8% 3.4% 3.5%

SOTP DIVISION / COM PONENT P LN m PLN / share % EV Conventional generation 21,062 11.3 60.4% Renewable 1,673 0.9 4.8% Distribution 10,195 5.5 29.3% Wholesale 1,109 0.6 3.2% Supply 1,315 0.7 3.8% Others (505) (0.3) (1.4%) Total enterprise value 34,848 18.6 100.0% Net Debt (33) Other Adjustments (3,252) Equity value 31,563 No. of shares 1,869.8 Equity value per share P LN 16.9 Cost of equity 12% 12m target Price P LN 18.9 Source: Thomson Reuters, Credit Suisse Research

203 Credit Suisse European Utilities Team PGNIG (TP PLN4.70, Outperform) Gas liberalisation should add 0.7PLN/share value

Description Relative share price performance PGNIG’s EV structure (CS est) . PGNIG SA is a Poland-based gas monopoly 200 engaged in the import, production and sale of natural gas. PGNIG SA is also a co-holder of 170 Skarv-Idun licence in Norway and acquired recently heat generation assets (Vattenfall Heat 140 Poland). PGNIG SA holds 15 shale gas search licences 110

Investment case 80 . Market liberalization: We think that the market in 50 currently underestimating the positive impact of Polish gas market liberalisation (which we 2006 2007 2008 2009 2010 2011 2012 estimate at +0.7PLN/share). Liberalisation should PGN result in higher achieved gas prices for PGNIG PGN relative to WIG 20 and the end of customer subsidies. PGN relative to S&P EU Utils Index . Skarv-Idun, VHP: Following significant investment Source: Bloomberg PROFESSIONAL Source: Company data, Datastream, Credit Suisse Research in Norway we expect first contribution from the Skarv-Idun field in 2012. Additionally in our view Consensus forward P/E range Expected gas supply curve in Poland in 2013 VHP acquisition has a strategic rationale allowing 17x PGNIG to build gas fired CHP plants which can create additional demand for gas while delivering sound IRRs 15x . Shale gas – we treat potential shale gas play as a ”free” option for PGNIG. However, we think that PGNIG is best positioned for a potential success 13x as it holds 15 out of total 122 licences 11x Upcoming catalysts

. Market liberalization: Launch of gas trading hub 9x in Poland in 2H12 . Shale gas: drilling results of Lubocino 2 well expected in 2H12 7x th 2007 2008 2009 2010 2011 2012 . 12 Nov: Q3 results Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

204 Credit Suisse European Utilities Team PGNIG (TP PLN4.70, Outperform) Gas liberalisation should add 0.7PLN/share value

INCOM E STATEM ENT (PLNm) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 19,291 21,281 23,004 28,530 32,064 35,279 P / E 19.8 9.7 14.7 19.5 8.5 7.7 Operational Expenses 16,461 16,870 19,744 24,685 25,483 27,576 EV/ IC 1.3 1.2 1.0 0.8 0.8 0.8 EBITDA 2,830 4,411 3,260 3,845 6,581 7,703 Price-to-book 1.1 1.0 1.0 0.9 0.9 0.8 EBITDA growth 55.9% (26.1%) 18.0% 71.2% 17.1% EV / EBITDA 8.9 5.8 8.8 8.8 5.2 4.2 EBITDA margin 14.7% 20.7% 14.2% 13.5% 20.5% 21.8% Net debt (cash) 428 597 3,399 8,814 8,804 7,170 Depreciation & amort. 1,496 1,525 1,574 1,965 2,235 2,424 M arket cap. 22,361 21,063 24,072 23,836 23,836 23,836 EBIT 1,334 2,887 1,686 1,880 4,346 5,279 EV 23,798 22,908 28,810 33,989 33,979 32,346 EBIT margin 6.9% 13.6% 7.3% 6.6% 13.6% 15.0% Invested capital 21,830 24,116 27,896 34,536 36,736 37,609 Net financial expenses (109) (50) 16 367 448 426 NOPAT 1,114 2,416 1,601 1,522 3,122 3,368 Taxes 238 479 86 287 1,097 1,756 Capex (3,817) (3,661) (4,277) (4,633) (4,088) (3,497) M inority Interest 2 3 (1) 0 0 0 FCFE (1,262) 182 (1,809) (1,915) 600 2,223 Net Earnings 1,203 2,454 1,627 1,225 2,800 3,097 LEVERAGE Earnings growth 103.9% (33.7%) (24.7%) 128.5% 10.6% Net Debt / EBITDA 0.2 0.1 1.0 2.3 1.3 0.9 Net margin 6.2% 11.5% 7.1% 4.3% 8.7% 8.8% Net debt / Equity 0.0 0.0 0.1 0.3 0.3 0.2 EPS (PLN) 0.20 0.42 0.28 0.21 0.47 0.52 EBITDA interest cover -26.0 -88.0 199.9 10.5 14.7 18.1 DPS (PLN) 0.08 0.12 0.00 0.10 0.10 0.10 RETURN / YIELD Dividend payout ratio 39.2% 28.9% 0.0% 48.2% 21.1% 19.1% WACC 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% BALANCE SHEET ITEM S ROIC 5.1% 10.0% 5.7% 4.4% 8.5% 9.0% PPE 22,889 25,662 28,427 33,095 34,949 36,021 ROE 5.6% 10.4% 6.6% 4.8% 10.0% 10.2% Working capital 2,206 1,819 2,106 2,578 3,281 3,689 FCF Yield (5.3%) 0.8% (7.6%) (8.0%) 2.5% 9.3% Total assets 31,083 34,316 37,964 45,681 48,204 49,605 Div. Yield 2.0% 3.0% 0.0% 2.5% 2.5% 2.5%

SOTP DIVISION / COM PONENT P LN m PLN / share % EV Exploration and Production 12,047 2.04 33.5% Skarv-Idun 3,721 0.63 10.3% Trading 3,341 0.57 9.3% Storage 3,256 0.55 9.0% Distribution 9,674 1.64 26.9% Others 3,955 0.67 11.0% Enterprise value 35,995 6.10 100.0% Net Debt (6,906) Other Adjustments (1,938) Equity value 27,151 No. of shares 5,900.0 Equity value per share P LN 4.6 Share price (CZK/share) 12% 12m target Price P LN 4.7

NB: TP is weighted avg of DCF and (EV/IC)/(ROIC/WACC) multiple, calculated as follows = PLN 4.8 * 70% + PLN 3.7 * 30% Source: Thomson Reuters, Credit Suisse Research

205 Credit Suisse European Utilities Team RWE (TP €36, Neutral) Too late or too soon – but not now

Description Relative share price performance Reported EPS vs. Recurrent EPS (€) . RWE is an international utility group focused on electricity, natural gas and water 180 8 7 Real EPS Real DPS 140 6 5 100 4 3 Investment case 60 2 . Carbon price collapse has driven lignite 1 generation margins to historically high levels. 20 RWE will benefit from this until at least 2014 but 2006 2007 2008 2009 2010 2011 2012 0 lower power price expectations will lead to lower RWE profitability afterwards

RWE relative to DAX 30

2016E 2011A 2012E 2013E 2014E 2015E . Capital structure: We increasingly believe that in RWE relative to S&P EU Utils Index 2010A order to get its NFD/EBITDA below 3x and save Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research its single A rating, RWE must complete its €7bn disposal programme in the near future Consensus forward P/E range Net debt (LHS in €bn) and ND/EBITDA (RHS) . What earnings basis post-full dilution? We believe that earnings dilution resulting from asset 12x 40 4.0x sale could be up to 16% 30 3.5x . New CEO (Peter Terium) seems to have created real goodwill with the investment community but 10x 20 3.0x some strategic thought may be requested at some stage 10 2.5x 8x 0 2.0x

Upcoming catalysts

2011A 2016A 2010A 2012A 2013A 2014A 2015A 6x 2009A . Disposals -CS view: inevitable, the sooner the NFD better NFD post-disposals NFD /EBITDA . Potentially new strategy under a new CEO 4x NFD / EBITDA post-disposals . 14th Nov: Q3 results 2007 2008 2009 2010 2011 2012 RWE target Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

206 Credit Suisse European Utilities Team RWE (TP €36, Neutral) Too late or too soon – but not now

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 46,191 50,722 49,153 51,208 53,821 55,039 P / E 5.3 5.0 7.7 8.7 8.8 8.2 Operational Expenses 37,026 40,466 40,693 42,440 44,817 45,742 EV/ IC 1.3 1.1 1.1 1.1 1.0 1.0 EBITDA 9,165 10,256 8,460 8,768 9,003 9,297 Price-to-book 1.5 1.2 1.2 1.4 1.3 1.2 EBITDA growth 11.9% (17.5%) 3.6% 2.7% 3.3% EV / EBITDA 5.2 4.9 6.1 6.0 5.9 5.7 EBITDA margin 19.8% 20.2% 17.2% 17.1% 16.7% 16.9% Net debt (cash) 26,019 28,964 29,948 30,833 31,341 30,811 Depreciation & amort. 2,075 2,575 2,647 3,017 3,348 3,275 M arket cap. 36,255 26,595 14,511 21,762 21,762 21,762 EBIT 7,090 7,681 5,814 5,751 5,655 6,022 EV 62,274 55,559 44,459 52,595 53,103 52,573 EBIT margin 15.4% 15.1% 11.8% 11.2% 10.5% 10.9% Invested capital 39,736 46,381 47,030 47,783 49,261 49,805 Net financial expenses 1,990 1,936 1,633 1,640 1,703 1,697 NOPAT 5,346 4,693 2,674 3,478 3,307 3,660 Taxes 1,377 1,936 1,633 1,640 1,703 1,697 Capex (14,714) (6,363) (6,978) (6,510) (4,725) (3,964) M inority Interest 260 294 305 200 217 231 FCFE (9,404) (1,629) (1,526) (873) 1,136 2,221 Net Earnings 3,532 3,752 2,479 2,503 2,479 2,665 LEVERAGE Earnings growth 6.2% (33.9%) 1.0% (0.9%) 7.5% Net Debt / EBITDA 2.8 2.8 3.5 3.5 3.5 3.3 Net margin 7.6% 7.4% 5.0% 4.9% 4.6% 4.8% Net debt / Equity 1.9 1.7 1.8 1.8 1.7 1.6 EPS (€) 6.63 7.03 4.60 4.07 4.03 4.34 EBITDA interest cover 4.6 5.3 5.2 5.3 5.3 5.5 DPS (€) 3.50 3.50 2.00 2.08 2.10 2.26 RETURN / YIELD Dividend payout ratio 52.8% 49.8% 43.5% 51.0% 52.0% 52.0% WACC 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% BALANCE SHEET ITEM S ROIC 13.0% 12.4% 8.9% 8.6% 8.0% 8.7% PPE 28,627 32,237 34,847 37,840 39,217 39,906 ROE 27.6% 23.0% 15.8% 15.9% 14.9% 15.0% Working capital 2,948 4,363 2,924 2,970 3,121 3,192 FCF Yield (49.8%) (8.6%) (8.0%) (4.0%) 5.2% 10.2% Total assets 93,438 93,077 92,656 94,233 96,129 96,868 Div. Yield 9.9% 9.9% 5.6% 5.9% 5.9% 6.4%

SOTP DIVISION / COM PONENT € m € / share % EV RWE Germany 36,910 60.0 63.7% Netherlands / Belgium 1,746 2.8 3.0% United Kingdom 4,494 7.3 7.8% Central & Eastern Europe 8,341 13.6 14.4% Upstream gas and oil 3,344 5.4 5.8% Others 3,139 5.1 5.4% Enterprise value 57,973 94.3 100.0% Net Debt (13,686) Other Adjustments (21,480) Equity value 22,806 No. of shares 614.7 Equity value per share €37 NB: TP is based on a blend of 50% weighting for DCF/ SOTP and 12.5% of the DDM , dividend yield, P/E and EV/EBITDA Source: Thomson Reuters, Credit Suisse Research

207 Credit Suisse European Utilities Team Snam (TP €3.8, Neutral) Prefer Terna on fundamentals. Overhang remains an issue.

Description Relative share price performance Average return on capex v. Terna . Snam is a fully regulated utility, that owns and manages Italy’s gas transportation network. The 350 8% 7.2% company is also active in gas distribution (through 300 7% 6.8% concessions) and storage. Snam is now controlled by CDP (government entity) with a 30% 250 6% stake, as a consequence of the ongoing sell- 200 5% down by ENI of its original 52% stake 150 4% Investment case 100 3% . Fundamentals: we believe the current regulatory 50 2% profile leaves Snam with less attractive 2006 2007 2008 2009 2010 2011 2012 fundamentals compared to Terna (capex as % of 1% RAB, avg return on capex) Snam 0% . Overhang risk: ENI has recently announced the Snam relative FTSEMIB Snam Terna sale of 30% to CDP and completed a 5% ABB. Snam relative to S&P EU Utils Index The company has still to dispose of its remaining Source: Bloomberg PROFESSIONAL Source: Company data,Credit Suisse estimates 20% stake, following a government decree earlier this year Consensus forward P/E range SOTP . Dividend policy: currently 4% annual growth, 18x 10.0 increasing dividend yields from 7.2% in 2012E to 0.3 (0.4) 8.0 0.5 7.5 8.2% in 2015E 7.1 (3.7) . Valuation: We value Snam using a RAB-based 16x 6.0 SOTP, assessing any outperformance through a DCF for the current and following regulatory 4.0€ps 3.8 period. This leads to a TP of €3.8 (10% upside potential, 17% total return, 5% discount to 2012E 14x 2.0 equity RAB) 0.0 12x EV TP RAB Net debt Upcoming catalysts Tax liability

. 22nd Oct: Ex-div 10x OutperformanceFinancial assets 2007 2008 2009 2010 2011 2012 . 25th Oct: Q3 results Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

208 Credit Suisse European Utilities Team Snam (TP €3.8, Neutral) Prefer Terna on fundamentals. Overhang remains an issue.

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 2,468 3,159 3,245 3,275 3,407 3,578 P / E 16.9 11.2 12.7 12.8 12.7 11.5 Operational Expenses 581 619 633 629 626 643 EV/ IC 1.5 1.4 1.3 1.3 1.2 1.1 EBITDA 1,887 2,540 2,612 2,645 2,782 2,935 Price-to-book 2.2 2.1 2.1 2.0 2.0 1.9 EBITDA growth 34.6% 2.8% 1.3% 5.2% 5.5% EV / EBITDA 11.5 8.7 8.8 9.1 9.0 8.9 EBITDA margin 76.5% 80.4% 80.5% 80.8% 81.6% 82.0% Net debt (cash) 9,949 10,341 11,197 12,291 13,351 14,250 Depreciation & amort. 613 678 654 708 734 765 M arket cap. 12,356 13,283 12,162 11,733 11,733 11,733 EBIT 1,274 1,862 1,958 1,938 2,048 2,170 EV 22,305 23,624 23,359 24,024 25,084 25,983 EBIT margin 51.6% 58.9% 60.3% 59.2% 60.1% 60.7% Invested capital 15,652 16,257 16,989 18,182 19,315 20,345 Net financial expenses 195 224 262 354 455 521 NOPAT 864 1,257 1,129 1,125 1,189 1,338 Taxes 347 532 718 664 668 633 Capex (1,225) (1,525) (1,675) (1,525) (1,758) (1,708) M inority Interest 0 0 0 0 0 0 FCFE (61) 258 324 (274) (208) (13) Net Earnings 732 1,106 978 919 925 1,017 LEVERAGE Earnings growth 51.1% (11.6%) (6.0%) 0.6% 10.0% Net Debt / EBITDA 5.3 4.1 4.3 4.6 4.8 4.9 Net margin 29.7% 35.0% 30.1% 28.1% 27.1% 28.4% Net debt / Equity 1.7 1.7 1.9 2.1 2.2 2.3 EPS (€) 0.20 0.31 0.27 0.27 0.27 0.30 EBITDA interest cover 9.7 11.3 10.0 7.5 6.1 5.6 DPS (€) 0.20 0.23 0.24 0.25 0.26 0.27 RETURN / YIELD Dividend payout ratio 97.6% 74.3% 87.6% 91.8% 94.9% 89.8% WACC 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% BALANCE SHEET ITEM S ROIC 5.5% 7.7% 6.6% 6.2% 6.2% 6.6% PPE 16,035 13,095 14,013 14,830 15,855 16,798 ROE 12.8% 18.7% 16.9% 15.6% 15.5% 16.7% Working capital 681 750 1,046 1,199 1,253 1,287 FCF Yield (0.5%) 2.1% 2.6% (2.3%) (1.8%) (0.1%) Total assets 18,960 18,938 20,445 21,412 22,487 23,480 Div. Yield 5.8% 6.6% 6.9% 7.2% 7.5% 7.8%

SOTP DIVISION / COMPONENT € m € / share % EV Transportation RAB 14,985 4.4 59.6% Distribution RAB 4,964 1.5 19.7% Storage RAB 3,781 1.1 15.0% Others 1,405 0.4 5.6%

Enterprise value 25,134 7.4 100.0% Net Debt (12,291) Other Adjustments 0 Equity value 12,844 No. of shares 3,381.2 Equity value per share €3.8 Source: Thomson Reuters, Credit Suisse Research

209 Credit Suisse European Utilities Team SSE (TP 1,450p, Outperform) Growth potential set to become clearer

Description Relative share price performance Year-ahead dark and spark spreads (£/MWh) . SSE is a vertically integrated utility principally 190 35 operating in Great Britain and Ireland . It owns transmission and distribution networks, 160 power generation (coal, gas, hydro, wind) and 25 gas storage assets, a supply business, and is active in contracting, connections and telecoms 130 15

Investment case 100 5 . Weak CO2 price a ‘one-off’: Low CO2 emission 70 permit prices for SSE’s c19m tonnes p.a. of free (5) permits the company receives has prevented 2006 2007 2008 2009 2010 2011 2012 2006A 2007A 2008A 2009A 2010A 2011A 2012A EBITDA in the SSE’s Generation and Supply business from growing. Free permits end in SSE CDS (Year ahead) CSS (Year ahead) seven months and SSE will have c5.5TWh p.a. of SSE relative to FTSE 100 wind generation to replace free CO2; SSE relative to S&P EU Utils Index . UK Power prices set to increase: We estimate Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL, Credit Suisse Research c5GW of coal-fired power plants in the UK will close before March 2013, causing a steady decrease in reserve margins. Combined with the Consensus forward P/E range Peakload power prices CO2 floor price, SSE will be in a prime position to 180 benefit from any upswing. We note that SSE’s 16x hydro is levered-in to tight power markets; 160 . Thermal assets close to trough: SSE’s gas- 140 14x fired fleet and tolling agreements with third 120 parties are loss-making, on our numbers, and offsets most of the positive contribution from 100 higher clean dark spreads. We argue the assets 12x 80 have an attractive risk-reward from here onwards 60 10x 40 Upcoming catalysts 20 0 . 14th Nov: Interim results (provisional) 8x 2007A 2008A 2009A 2010A 2011A 2012A Peak premium over baseload (absolute terms) 6x Avg of top 15 (of 48) periods (7-day MA) 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL, Credit Suisse Research

210 Credit Suisse European Utilities Team SSE (TP 1,450p, Outperform) Growth potential set to become clearer

INCOM E STATEM ENT (£m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 19,878 21,165 28,334 20,482 21,043 21,504 P / E 12.8 12.8 12.6 12.7 12.1 11.8 Operational Expenses 18,208 19,386 26,418 18,494 18,915 19,291 EV/ IC 2.3 2.1 1.8 1.6 1.6 1.5 EBITDA 1,670 1,779 1,916 1,988 2,128 2,213 Price-to-book 4.4 4.2 3.3 3.1 2.8 2.7 EBITDA growth 6.5% 7.7% 3.8% 7.1% 4.0% EV / EBITDA 11.2 10.9 9.8 9.8 9.2 9.0 EBITDA margin 8.4% 8.4% 6.8% 9.7% 10.1% 10.3% Net debt (cash) 5,100 5,785 5,130 5,861 6,067 6,243 Depreciation & amort. 331 363 497 568 620 660 M arket cap. 10,207 10,163 11,814 13,399 13,609 13,825 EBIT 1,340 1,416 1,419 1,419 1,508 1,553 EV 15,308 15,949 16,944 19,260 19,676 20,068 EBIT margin 6.7% 6.7% 5.0% 6.9% 7.2% 7.2% Invested capital 8,080 8,914 10,330 11,391 12,020 12,617 Net financial expenses 240 310 309 311 325 320 NOPAT 1,037 1,082 1,015 1,050 1,122 1,153 Taxes 275 292 356 333 346 362 Capex (1,204) (958) (1,077) (1,674) (1,355) (1,333) M inority Interest 0 0 0 0 0 0 FCFE (1,001) 1,045 1,052 44 663 790 Net Earnings 978 1,016 1,042 1,047 1,113 1,159 LEVERAGE Earnings growth 3.9% 2.5% 0.5% 6.2% 4.2% Net Debt / EBITDA 3.1 3.3 2.7 2.9 2.9 2.8 Net margin 4.9% 4.8% 3.7% 5.1% 5.3% 5.4% Net debt / Equity 1.7 1.8 1.0 1.1 1.0 1.0 EPS (p) 110.73 110.21 112.31 111.53 116.99 119.69 EBITDA interest cover 7.0 5.7 6.2 6.4 6.5 6.9 DPS (p) 66.00 70.00 75.01 80.11 85.48 88.77 RETURN / YIELD Dividend payout ratio 59.6% 63.5% 66.8% 71.8% 73.1% 74.2% WACC 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% BALANCE SHEET ITEM S ROIC 13.0% 12.6% 11.0% 10.5% 10.6% 10.4% PPE 7,232 8,209 8,518 9,447 10,122 10,795 ROE 32.8% 32.5% 25.8% 24.0% 23.2% 22.2% Working capital 1,235 902 (97) (54) (50) (72) FCF Yield (8.0%) 8.0% 8.0% 0.3% 4.9% 5.8% Total assets 15,386 15,774 17,735 18,493 19,595 20,639 Div. Yield 4.7% 4.9% 5.3% 5.7% 6.0% 6.3%

Sum-of-the-Parts Valuation DIVISION / COM PONENT £ m p / share % EV Generation inc contracts 6,181 643.2 27.2% Wind 4,597 478.3 20.2% Southern Electric Power Distribution 2,559 266.2 11.2% 50% stake in Scotia Gas Networks 2,855 297.0 12.5% Supply 1,963 204.2 8.6% Others 4,602 478.8 20.2% Enterprise value (including SGN) 22,756 2,367.8 100.0% Net Debt (8,672) Other Adjustments (204) Equity value 13,880 No. of shares 961.1 Equity value per share 1,444p Source: Thomson Reuters, Credit Suisse Research

211 Credit Suisse European Utilities Team Severn Trent (TP 1,630p, Neutral) Fully valued – but the best positioned

Description Relative share price performance Premium to RAB over four years

. Severn Trent's main business is the regulated water 180 20% monopoly in the midlands. After demerging its waste business (Biffa) in October 2006 it is left with small 150 15% complementary operations in laboratories (which is currently up for sale) and water purification / 120 10% operating services 90 5% Investment case 60 0% . Low retail cost base: We view SVT as best placed among listed UK water co.’s to benefit under the 30 (5%) proposed retail price limit from 2015, owing to its low 2006 2007 2008 2009 2010 2011 2012 cost base SVT (10%) SVT relative to FTSE 100 . New incentives: We expect OFWAT to introduce SVT relative to S&P EU Utils Index 2008A 2009A 2010A 2011A 2012A water trading incentives in PR14, with potential financial rewards. SVT is likely to benefit from water Source: Bloomberg PROFESSIONAL Source: Company data, Datastream, Credit Suisse Research trading, owing to the geographic coverage of its network, in our view Consensus forward P/E range Stock price versus bond yields . Most likely candidate in the event of a buyout, in our 18x 1800 5.5% view. Of the three listed players, we view SVT as 1700 5.0% the most likely buyout candidate, owing to its size 16x 1600 4.5% and low downside risk from the PR14 price control review, relative to UU. We do not attach a takeover 1500 4.0% premium in our valuation 14x 1400 3.5% . Valuation not enticing: We retain a Neutral rating on 1300 3.0% valuation grounds 12x 1200 2.5% Upcoming catalysts 1100 2.0% 10x 1000 1.5% . 27th Nov - Half year results 900 1.0% . Methodology consultation for 2014 price review – 2008A 2009A 2010A 2011A 2012A Autumn 2012 (late November/early December) 8x 2008 2009 2010 2011 2012 SVT stock (p/share) 10yr UK yield (%) Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

Credit Suisse European Utilities Team Severn Trent (TP 1,630p, Neutral) Fully valued – but the best positioned

INCOM E STATEM ENT (£m) 2011A 2012A 2013E 2014E 2015E 2016E VALUATION 2011A 2012A 2013E 2014E 2015E 2016E Revenues 1,711 1,771 1,853 1,894 1,932 2,003 P / E 14.5 18.6 17.4 16.7 15.9 15.5 Operational Expenses 916 982 1,018 1,046 1,064 1,117 EV/ IC 1.6 1.6 1.5 1.5 1.4 1.4 EBITDA 796 788 835 847 868 886 Price-to-book 3.6 4.1 4.5 4.3 4.0 3.8 EBITDA growth (0.9%) 6.0% 1.4% 2.4% 2.1% EV / EBITDA 10.1 10.2 10.0 10.0 9.9 9.9 EBITDA margin 46.5% 44.5% 45.1% 44.7% 44.9% 44.2% Net debt (cash) 4,029 4,104 4,377 4,513 4,611 4,793 Depreciation & amort. 298 318 295 297 305 314 M arket cap. 3,490 3,712 4,007 4,010 4,013 4,017 EBIT 498 470 540 550 563 572 EV 7,520 7,816 8,384 8,523 8,624 8,809 EBIT margin 29.1% 26.5% 29.2% 29.0% 29.1% 28.6% Invested capital 5,135 5,085 5,265 5,455 5,609 5,842 Net financial expenses 231 229 249 249 251 255 NOPAT 540 523 426 439 455 468 Taxes (22) (18) 62 61 60 58 Capex (392) (354) (422) (442) (406) (514) M inority Interest 2 3 3 3 3 3 FCFE 321 322 297 300 352 287 Net Earnings 275 174 230 240 252 260 LEVERAGE Earnings growth (36.5%) 31.8% 4.5% 5.1% 2.8% Net Debt / EBITDA 5.1 5.2 5.2 5.3 5.3 5.4 Net margin 16.0% 9.8% 12.4% 12.7% 13.1% 13.0% Net debt / Equity 3.6 4.2 4.9 4.8 4.6 4.6 EPS (p) 114.90 89.34 95.49 99.69 104.71 107.59 EBITDA interest cover 3.4 3.4 3.4 3.4 3.5 3.5 DPS (p) 65.09 70.11 75.83 79.79 84.54 89.48 RETURN / YIELD Dividend payout ratio 56.6% 78.5% 79.4% 80.0% 80.7% 83.2% WACC 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% BALANCE SHEET ITEM S ROIC 10.5% 10.3% 8.1% 8.0% 8.1% 8.0% PPE 6,427 6,578 6,721 6,879 6,991 7,201 ROE 25.0% 17.9% 26.1% 25.7% 25.5% 24.9% Working capital (253) (295) (295) (300) (297) (314) FCF Yield 8.1% 9.0% 7.4% 7.5% 8.8% 7.1% Total assets 7,649 7,715 7,867 8,029 8,147 8,373 Div. Yield 3.9% 4.2% 4.6% 4.8% 5.1% 5.4%

SOTP DIVISION / COMPONENT £ m p / share % EV Regulated water business 8,190 3,423.5 98.2% Non-regulated business 148 62.0 1.8%

Enterprise value 8,339 3,485.5 100.0% Net Debt (4,242) Other Adjustments (190) Equity value 3,907 No. of shares 239.2 Equity value per share 1,630p Source: Company data, Credit Suisse estimates

Credit Suisse European Utilities Team Suez Environnement (TP €11.5, Outperform) Life after profit warnings

Description Relative share price performance Operation prodit (LHS in €m) and margins (RHS) . Suez Environnement provides water and waste 140 Operating Profit management equipment and services globally. 1,600 New margin 12% This includes the production and distribution of 120 Old margin drinking water, collection and treatment of waste 1,400 11% water, and the removal and recovery of waste 100 1,200 1,000 10% 80 800 9% Investment case 60 600 8% 400 . Downgrade of earnings: SEVI issued a mild 40 7% profit warning in late June 2012 together another 200 2008 2009 2010 2011 2012 round of provisions in particular for its Melbourne 0 6% contract. While pointing towards the cyclicality of SEVI

the waste business was not an issue, further

2011E 2006A 2007A 2008A 2009A 2010A 2012E 2013E 2014E 2015E 2016E SEVI relative to CAC 40 2005A provisioning for Melbourne was negative. We re- SEVI relative to S&P EU Utils Index iterate our fundamental view but express Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research concerns on short-term stock performance . Quality of assets: We still expect the group to Consensus forward P/E range Net debt (LHS in €m) and ND/EBITDA (RHS) benefit from its relative caution in the last few 16x years as regards acquisition of new contracts NFD NFD/EBITDA 8,000 4.0x . French water contracts: we recently rebuilt our French water model and now envisage that 2/3 of 14x 7,900 3.5x the margin is given back to consumers at the 3.0x time fo renewal with 1/3 regained through cost 7,800 2.5x cutting and inflation. This is probably harsh but 12x safe 7,700 2.0x 1.5x 10x 7,600 1.0x Upcoming catalysts 7,500 0.5x 8x . 25th Oct - 9 months results 7,400 0.0x . Evidence of success in cost cutting and renewal

of French water contracts 6x

2015E 2016E 2011E 2012E 2013E 2014E . Improvement in the economy 2008 2009 2010 2011 2012 2010A Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

214 Credit Suisse European Utilities Team Suez Environnement (TP €11.5, Outperform) Life after profit warnings

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 12,296 13,869 14,830 14,826 15,523 16,281 P / E 10.4 11.4 14.4 15.0 13.5 11.6 Operational Expenses 10,237 11,531 12,317 12,359 12,945 13,601 EV/ IC 1.0 0.8 0.8 0.8 0.8 0.8 EBITDA 2,060 2,339 2,513 2,466 2,578 2,680 Price-to-book 1.1 0.9 0.9 1.0 0.9 0.9 EBITDA growth 13.5% 7.5% (1.9%) 4.5% 4.0% EV / EBITDA 5.7 5.2 4.8 4.9 4.8 4.6 EBITDA margin 16.8% 16.9% 16.9% 16.6% 16.6% 16.5% Net debt (cash) 7,369 7,814 7,577 7,776 7,875 7,927 Depreciation & amort. 1,134 1,314 1,473 1,370 1,391 1,431 M arket cap. 7,892 7,532 4,441 4,375 4,375 4,375 EBIT 926 1,025 1,040 1,096 1,187 1,250 EV 15,260 15,346 12,018 12,152 12,250 12,302 EBIT margin 7.5% 7.4% 7.0% 7.4% 7.6% 7.7% Invested capital 11,787 14,440 14,395 14,227 14,357 14,494 Net financial expenses 260 414 405 409 411 387 NOPAT 729 874 776 802 861 904 Taxes 129 119 174 168 213 239 Capex (1,414) (1,933) (1,672) (1,376) (1,391) (1,417) M inority Interest 113 155 227 238 250 258 FCFE (4) (411) (138) 187 319 378 Net Earnings 407 368 299 291 324 378 LEVERAGE Earnings growth (9.6%) (18.8%) (2.7%) 11.4% 16.6% Net Debt / EBITDA 3.6 3.3 3.0 3.2 3.1 3.0 Net margin 3.3% 2.7% 2.0% 2.0% 2.1% 2.3% Net debt / Equity 1.7 1.2 1.1 1.2 1.2 1.2 EPS (€) 0.83 0.76 0.60 0.57 0.64 0.75 EBITDA interest cover 7.9 5.7 6.2 6.0 6.3 6.9 DPS (€) 0.65 0.65 0.65 0.65 0.65 0.65 RETURN / YIELD Dividend payout ratio 78.1% 86.1% 108.5% 113.3% 101.7% 87.2% WACC 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% BALANCE SHEET ITEM S ROIC 5.7% 5.7% 5.2% 5.8% 6.0% 6.2% PPE 6,488 8,855 8,685 8,928 9,099 9,259 ROE 11.1% 7.7% 6.0% 6.3% 7.0% 8.0% Working capital (2,724) (4,121) (3,937) (4,130) (4,153) (4,171) FCF Yield (0.1%) (9.8%) (3.2%) 4.3% 7.3% 8.6% Total assets 22,548 25,930 26,931 27,076 27,350 27,614 Div. Yield 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%

SOTP DIVISION / COM PONENT € m € / share % EV Existing assets 16,121 31.6 88.9% New investment 217 0.4 1.2% Non current Financial assets 1,765 3.5 9.7% Treasury shares 29 0.1 0.2%

EV to tal 18,131 35.5 100.0% Net Debt (7,577) Other Adjustments (4,085) Equity value 6,469 No. of shares 510.2 Equity value per share €13 NB: TP is based on a blend of DCF, 2012E EV/EBITDA, 2012E P/E, 2010-15E DDM and 2012E dividend yield Source: Thomson Reuters, Credit Suisse Research

215 Credit Suisse European Utilities Team Tauron (TP PLN6, Outperform) Play on RAB revaluation process, risk of right issue to finance Jaworzno

Description Relative share price performance Tauron’s EV structure (CS est) . Tauron’s core business areas comprise: electricity 155 & heat generation, electricity distribution, heat distribution and sales, as well as hard coal mining. 140 It also operates two mining facilities & generates 125 electricity from renewable sources through the operation of 35 hydroelectric power plants 110 95 Investment case 80 . We think Tauron should focus on distribution: Tauron should benefit from RAB revaluation and 65 we expect realized ROCE on a revalued RAB to 2010 2011 2012 increase to around 7% in 2020E from 5.4% in 2011 TPE TPE relative to WIG 20 . Tauron may need a rights issue to finance its TPE relative to S&P EU Utils Index 900MW Jaworzno power plant: We calculate that Source: Bloomberg PROFESSIONAL Source: Datastream, Credit Suisse Research Tauron’s net debt/EBITDA will grow to c.3.5x in 2014E and is likely to breach the 3x covenant, in Consensus forward P/E range Tauron’s leverage ratio order to avoid which Tauron would require either a c.PLN1.5bn rights issue or c. 10% higher power 10x prices than our assumptions . De-rated valuation: We believe a loss of confidence in Tauron’s strategy resulted in the 9x stock de-rating to 0.5x P/BV. This assumes that Tauron will deliver c.5% ROE and no growth into perpetuity for an asset for which close to 70% of EV comes from distribution with a 9.3% regulated 8x pre-tax WACC

Upcoming catalysts 7x . Distribution: introduction of new OPEX model in the distribution segment 6x . 13th Nov: Q3 results 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

216 Credit Suisse European Utilities Team Tauron (TP PLN6, Outperform) Play on RAB revaluation process, risk of right issue to finance Jaworzno

INCOM E STATEM ENT (PLNm) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 13,634 15,429 20,755 25,848 22,545 23,588 P / E 10.0 9.3 7.0 7.1 12.0 12.8 Operational Expenses 11,030 12,677 17,732 22,347 19,462 20,292 EV/ IC 1.0 1.0 0.7 0.7 0.6 0.5 EBITDA 2,603 2,752 3,023 3,501 3,084 3,297 Price-to-book 0.6 0.6 0.5 0.5 0.5 0.5 EBITDA growth 5.7% 9.8% 15.8% (11.9%) 6.9% EV / EBITDA 4.2 4.9 4.6 6.4 6.9 EBITDA margin 19.1% 17.8% 14.6% 13.5% 13.7% 14.0% Net debt (cash) 529 (187) 3,726 5,038 8,437 11,486 Depreciation & amort. 1,320 1,368 1,412 1,605 1,657 1,730 M arket cap. 11,514 9,376 8,587 8,587 8,587 EBIT 1,283 1,384 1,611 1,896 1,427 1,567 EV 14,491 15,626 16,186 19,624 22,712 EBIT margin 9.4% 9.0% 7.8% 7.3% 6.3% 6.6% Invested capital 14,713 15,025 19,865 21,884 25,671 29,214 Net financial expenses 95 142 45 352 500 693 NOPAT 995 1,088 1,276 1,536 1,156 1,269 Taxes 266 266 327 293 176 166 Capex (1,424) (1,506) (2,262) (3,368) (5,573) (5,224) M inority Interest 166 133 19 38 38 39 FCFE 539 1,014 (49) (329) (2,413) (2,024) Net Earnings 756 844 1,221 1,213 713 669 LEVERAGE Earnings growth 11.7% 44.7% (0.6%) (41.3%) (6.1%) Net Debt / EBITDA 0.2 -0.1 1.2 1.4 2.7 3.5 Net margin 5.5% 5.5% 5.9% 4.7% 3.2% 2.8% Net debt / Equity 0.0 0.0 0.2 0.3 0.5 0.6 EPS (PLN) 0.49 0.53 0.70 0.69 0.41 0.38 EBITDA interest cover 27.5 19.4 67.9 10.0 6.2 4.8 DPS (PLN) 0.00 0.15 0.31 0.21 0.12 0.11 RETURN / YIELD Dividend payout ratio 0.0% 28.5% 44.5% 30.0% 30.0% 30.0% WACC 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% BALANCE SHEET ITEM S ROIC 6.8% 7.2% 6.4% 7.0% 4.5% 4.3% PPE 17,261 17,525 21,911 23,674 27,590 31,084 ROE 6.4% 5.7% 7.8% 7.4% 4.3% 3.9% Working capital 920 1,052 969 1,234 1,105 1,154 FCF Yield 7.2% 12.9% (0.6%) (3.8%) (28.1%) (23.6%) Total assets 22,160 23,430 28,414 32,660 35,907 39,655 Div. Yield 0.0% 3.1% 6.3% 4.2% 2.5% 2.3%

SOTP DIVISION / COM PONENT P LN m PLN / share % EV M ining 941 0.5 5.8% Conventional generation 1,081 0.6 6.6% Distribution 10,351 5.9 63.6% Supply 2,812 1.6 17.3% Heat 1,183 0.7 7.3% Others (85) (0.0) (0.5%) Total enterprise value 16,283 9.3 100.0% Net Debt (4,269) Other Adjustments (2,524) Equity value 9,490 No. of shares 1,752.5 Equity value per share P LN 5.4 Cost of equity 11% 12m target Price P LN 6.0 Source: Thomson Reuters, Credit Suisse Research

217 Credit Suisse European Utilities Team Terna (TP €3.2, Outperform) Better fundamentals than Snam, lower regulatory risk

Description Relative share price performance 5-yr capex as % of RAB v. Snam . Terna owns and manages Italy’s power 35% transmission network and acts as system 400 30% operator. It is also active in non-traditional 350 30% activities (batteries, third party connections) via its 300 24% subsidiary Terna Plus. 25% 250 200 20% Investment case 150 15% . Return on regulated capex: more sizeable 100 capex plan (30% of existing RAB in the next five 50 10% years) and higher average IRRs on new capex, 2006 2007 2008 2009 2010 2011 2012 at 7.2% compared to Snam 5% Terna . Financial structure: We expect cost of debt to Terna relative FTSEMIB remain well below 4% over the business plan 0% Terna relative to S&P EU Utils Index Snam Terna period with no significant refinancing before 2014 Source: Bloomberg PROFESSIONAL Source: Credit Suisse estimates . Performance to RAB: We believe it deserves a higher premium to RAB compared to Snam, Consensus forward P/E range SOTP reflecting higher allowed returns (7.4% real pre- tax), and a more favourable tax treatment of D&A 20x 7.0 0.5 0.1 (0.1) 6.1 (2.9) . Valuation: We value Terna using a RAB-based 6.0 5.6 SOTP, assessing any outperformance through a 18x 5.0 DCF for the current and following regulatory period. 4.0 This leads to a TP of €3.2 (9% upside potential, 3.2 15% total return, 16% premium to 2012E equity 16x 3.0€ps RAB) 2.0 14x 1.0 0.0

EV TP 12x RAB Upcoming catalysts Net debt Tax liability . 8th Nov: 9M results Outperformance 10x Other businesses 2007 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

218 Credit Suisse European Utilities Team Terna (TP €3.2, Outperform) Better fundamentals than Snam, lower regulatory risk

INCOM E STATEM ENT (£m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 1,361 1,588 1,635 1,749 1,849 1,945 P / E 16.8 12.7 18.2 14.4 13.5 11.8 Operational Expenses 358 414 405 415 418 420 EV/ IC 1.8 1.4 1.4 1.3 1.2 1.1 EBITDA 1,003 1,174 1,230 1,333 1,430 1,525 Price-to-book 2.2 2.0 2.0 2.0 2.0 1.9 EBITDA growth 17.0% 4.8% 8.4% 7.3% 6.6% EV / EBITDA 9.7 9.4 9.0 8.9 8.7 8.4 EBITDA margin 73.7% 73.9% 75.2% 76.2% 77.4% 78.4% Net debt (cash) 3,757 5,086 5,118 5,941 6,509 6,777 Depreciation & amort. 309 361 395 423 443 459 M arket cap. 5,988 6,322 5,210 5,938 5,938 5,938 EBIT 694 814 835 910 987 1,066 EV 9,745 11,408 10,328 11,879 12,447 12,715 EBIT margin 51.0% 51.2% 51.1% 52.0% 53.4% 54.8% Invested capital 6,259 7,847 7,869 8,686 9,292 9,683 Net financial expenses 148 103 121 154 182 207 NOPAT 556 581 444 496 538 623 Taxes 192 245 387 344 366 356 Capex (930) (1,510) (1,370) (1,040) (1,040) (840) M inority Interest 0 0 0 0 0 0 FCFE 36 (555) (130) 93 380 675 Net Earnings 354 466 327 412 439 502 LEVERAGE Earnings growth 31.6% (29.8%) 26.0% 6.4% 14.5% Net Debt / EBITDA 3.7 4.3 4.2 4.5 4.6 4.4 Net margin 26.0% 29.3% 20.0% 23.6% 23.7% 25.8% Net debt / Equity 1.5 1.8 1.9 2.2 2.3 2.3 EPS (€) 0.18 0.23 0.16 0.21 0.22 0.25 EBITDA interest cover 6.8 11.5 10.2 8.7 7.9 7.4 DPS (€) 0.19 0.21 0.21 0.19 0.19 0.19 RETURN / YIELD Dividend payout ratio 107.4% 90.2% 128.8% 92.2% 86.7% 75.7% WACC 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% BALANCE SHEET ITEM S ROIC 8.9% 7.4% 5.6% 5.7% 5.8% 6.4% PPE 6,990 7,803 8,618 9,235 9,831 10,212 ROE 13.4% 15.9% 11.2% 14.1% 14.9% 16.3% Working capital (301) (35) (323) (123) (113) (103) FCF Yield 0.6% (9.3%) (2.2%) 1.6% 6.4% 11.4% Total assets 9,320 10,775 12,687 13,265 13,965 14,445 Div. Yield 6.4% 7.1% 7.1% 6.4% 6.4% 6.4%

SOTP DIVISION / COMPONENT € m € / share % EV Italy Transmission & Dispatching 11,220 5.6 91.6% Extra return on Development Capex 697 0.3 5.7% 1% extra-WACC for regulatory lag 156 0.1 1.3% Extra allowed depreciation 116 0.1 0.9% Others 65 0.0 0.5%

Enterprise value 12,254 6.1 100.0% Net Debt (5,941) Other Adjustments 0 Equity value 6,313 No. of shares 2,000.6 Equity value per share €3.2 Source: Thomson Reuters, Credit Suisse Research

219 Credit Suisse European Utilities Team United Utilities (TP 610p, Underperform) Concerns on cost recovery

Description Relative share price performance Premium to RAB over two-three years

. United Utilities is the monopoly water and 130 25% wastewater provider in the North West of England. UU was previously an integrated utility, but 110 20% completed its disposal of non-UK water businesses 15% in 2010. It is now c99% comprised of United Utilities 90 Water (a regulated entity) 10% 70 Investment case 5% 50 . Risks in household retail: UU risks under-recovering 0% 30 its retail costs from 2015, as a result of the (5%) proposed cap on cost recovery at the industry 2006 2007 2008 2009 2010 2011 2012 average cost to serve. UU’s costs are c67% above UU (10%) the average, on our estimates. We are concerned UU relative to FTSE 100 UU relative to S&P EU Utils Index 2008A 2009A 2010A 2011A 2012A this could lead to a dividend cut in 2015 Source: Bloomberg PROFESSIONAL Source: Company data, Datastream, Credit Suisse Research . Risks on ‘serviceability’, which puts c£260m of its AMP5 capex at risk of shortfall from the RAB, on Consensus forward P/E range Stock price versus bond yields our numbers 800 5.5% . Improvement on the service incentive mechanism. 20x The company ranked lowest of all water and 750 5.0% 18x sewerage companies in 2011, but appears to have 700 4.5% th improved significantly in 2012 (to 7 of 10). Further 16x improvement would prevent a revenue penalty in 650 4.0% 2015, and could potentially put downward pressure 14x 600 3.5% on retail costs, in our view 550 3.0% 12x 500 2.5% Upcoming catalysts 10x 450 2.0% . 28th Nov – Half year result 8x 400 1.5% . Methodology consultation for 2014 price review – 2008A 2009A 2010A 2011A 2012A Autumn 2012 (late November/early December) 6x 2008 2009 2010 2011 2012 UU stock (p/share) 10yr UK yield (%) Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

Credit Suisse European Utilities Team United Utilities (TP 610p, Underperform) Concerns on cost recovery

INCOM E STATEM ENT (£m) 2011A 2012A 2013E 2014E 2015E 2016E VALUATION 2011A 2012A 2013E 2014E 2015E 2016E Revenues 1,513 1,565 1,652 1,706 1,777 1,715 P / E 20.7 20.6 18.8 17.5 17.3 21.6 Operational Expenses 643 676 723 736 779 770 EV/ IC 1.6 1.4 1.4 1.3 1.3 1.3 EBITDA 871 889 929 969 999 945 Price-to-book 3.0 2.8 2.7 2.7 2.6 2.7 EBITDA growth 2.1% 4.5% 4.3% 3.1% (5.4%) EV / EBITDA 11.5 11.8 11.5 11.4 11.2 12.0 EBITDA margin 57.5% 56.8% 56.2% 56.8% 56.2% 55.1% Net debt (cash) 5,058 5,534 5,764 6,049 6,222 6,379 Depreciation & amort. 291 298 312 322 339 353 M arket cap. 4,032 4,101 4,957 4,957 4,957 4,957 EBIT 580 592 617 648 660 592 EV 9,090 9,635 10,721 11,005 11,179 11,335 EBIT margin 38.3% 37.8% 37.3% 38.0% 37.2% 34.5% Invested capital 6,736 7,299 7,569 7,899 8,111 8,239 Net financial expenses 253 311 265 270 279 286 NOPAT 629 657 462 486 495 444 Taxes (27) (31) 88 94 95 77 Capex (563) (658) (605) (671) (606) (495) M inority Interest 0 0 0 0 0 0 FCFE 30 (129) 5 (35) 86 113 Net Earnings 239 241 264 283 286 230 LEVERAGE Earnings growth 0.7% 9.4% 7.4% 1.1% (19.8%) Net Debt / EBITDA 5.8 6.2 6.2 6.2 6.2 6.8 Net margin 15.8% 15.4% 16.0% 16.6% 16.1% 13.4% Net debt / Equity 3.0 3.1 3.2 3.3 3.3 3.4 EPS (p) 35.09 35.33 38.66 41.51 41.95 33.66 EBITDA interest cover 3.4 2.9 3.5 3.6 3.6 3.3 DPS (p) 30.00 32.01 34.30 35.75 37.52 38.59 RETURN / YIELD Dividend payout ratio 85.5% 90.6% 88.7% 86.1% 89.4% 114.7% WACC 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% BALANCE SHEET ITEM S ROIC 9.3% 9.0% 6.1% 6.1% 6.1% 5.4% PPE 8,275 8,645 8,947 9,306 9,583 9,734 ROE 14.3% 13.7% 14.6% 15.3% 15.1% 12.3% Working capital (338) (476) (517) (523) (560) (562) FCF Yield 0.6% (2.6%) 0.1% (0.7%) 1.7% 2.3% Total assets 9,341 10,031 10,352 10,724 11,016 11,157 Div. Yield 4.1% 4.4% 4.7% 4.9% 5.2% 5.3%

SOTP DIVISION / COMPONENT £ m p / share % EV Regulated water business 9,511 1,395.1 100.0%

Enterprise value 9,511 1,393.4 100.0% Net Debt (5,304) Other Adjustments (34) Equity value 4,174 No. of shares 681.8 Equity value per share 610p Source: Company data, Credit Suisse estimates

Credit Suisse European Utilities Team Verbund (TP €14.5, Underperform) Legacy issues not yet behind

Description Relative share price performance Debt remains an issue . Verbund is an electricity company which 270 generates, trades & sells electrical energy to 4,600 40% power exchange buyers, traders, energy supply 240 4,500 35% companies & industrial companies, as well as 210 4,400 30% households & commercial customers 4,300 180 25% 4,200 20%

150 m

4,100€ 15% Investment case 120 4,000 3,900 10% . Lower power price: Central European power 90 3,800 5% prices have remained weak and peak premium 60

is at a historical low 2006 2007 2008 2009 2010 2011 2012 3,700 0%

2012E 2013E 2011A 2014E 2015E 2016E . Spark spreads remain depressed for Mellach: Verbund 2010A Verbund hasn’t concluded its renegotiation on Verbund relative ATX Net debt FFO / debt the oil-linked gas contracts and still faces deeply Verbund relative to S&P EU Utils Index negative CSS Source: Bloomberg PROFESSIONAL . Balance sheet stretched further: with major disposal unlikely in 2012E and potential addition Consensus forward P/E range Opportunity cost of grid investment of c€350m liability related to POWEO in 2013E, 19x we believe debt can remain an issue until 2015E Value destruction: 17x c€4m (c€0.01ps)

15x Saving on financing cost: 13x c€0.4ps (c2.5% EV)

11x Upcoming catalysts Opportunity cost Pay back to shareholders: c€0.2 up to €1.8ps EPS (c16% EPS) . 24th Oct: Q3 results 9x

7x Invest in pumped storage: 2007 2008 2009 2010 2011 2012 c€1.8ps (c11% EV) Source: Bloomberg PROFESSIONAL

222 Credit Suisse European Utilities Team Verbund (TP €14.5, Underperform) Legacy issues not yet behind

INCOM E STATEM ENT (€m) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 3,483 3,308 3,865 3,439 3,450 3,623 P / E 7.9 10.8 17.8 13.5 13.8 10.8 Operational Expenses 2,232 2,249 2,825 2,235 2,263 2,272 EV/ IC 1.2 1.1 1.1 1.0 1.0 1.0 EBITDA 1,252 1,059 1,041 1,204 1,187 1,351 Price-to-book 1.6 1.3 1.3 1.3 1.2 1.2 EBITDA growth (15.4%) (1.7%) 15.7% (1.4%) 13.8% EV / EBITDA 8.1 9.0 9.1 8.3 8.6 7.4 EBITDA margin 35.9% 32.0% 26.9% 35.0% 34.4% 37.3% Net debt (cash) 4,479 3,928 3,874 4,389 4,546 4,430 Depreciation & amort. 209 231 39 351 323 343 M arket cap. 9,157 8,700 7,204 5,621 5,621 5,621 EBIT 1,042 828 1,002 853 864 1,008 EV 13,636 12,628 11,078 10,010 10,167 10,051 EBIT margin 29.9% 25.0% 25.9% 24.8% 25.1% 27.8% Invested capital 7,889 8,300 8,803 9,324 9,700 9,900 Net financial expenses 158 207 184 180 198 209 NOPAT 799 634 722 653 661 771 Taxes 229 148 179 150 159 193 Capex (1,996) (666) (595) (545) (464) (432) M inority Interest 108 84 110 111 109 108 FCFE (1,028) 113 438 186 427 574 Net Earnings 634 469 316 417 409 520 LEVERAGE Earnings growth (26.0%) (32.6%) 32.1% (2.1%) 27.3% Net Debt / EBITDA 3.6 3.7 3.7 3.6 3.8 3.3 Net margin 18.2% 14.2% 8.2% 12.1% 11.8% 14.4% Net debt / Equity 1.3 0.9 0.8 0.9 0.9 0.8 EPS (€) 2.06 1.50 0.91 1.20 1.18 1.50 EBITDA interest cover 7.9 5.1 5.7 6.7 6.0 6.5 DPS (€) 1.25 0.55 0.55 0.54 0.59 0.75 RETURN / YIELD Dividend payout ratio 60.8% 36.6% 60.5% 45.3% 50.0% 50.0% WACC 8.4% 8.4% 8.4% 8.4% 8.4% 8.4% BALANCE SHEET ITEM S ROIC 10.1% 7.6% 8.2% 7.0% 6.8% 7.8% PPE 5,554 5,959 6,579 6,648 7,023 7,207 ROE 20.3% 11.6% 7.3% 9.6% 8.9% 10.7% Working capital 259 628 617 726 727 743 FCF Yield (20.6%) 2.2% 7.8% 3.3% 7.6% 10.2% Total assets 10,345 11,291 11,859 11,931 12,308 12,515 Div. Yield 7.7% 3.4% 3.4% 3.4% 3.6% 4.6%

SOTP DIVISION / COMPONENT € m € / share % EV Generation & Sales 11,076 31.9 93.5% Grid 510 1.5 4.3% Sorgenia (44.9%) 391 1.1 3.3% EnerjiSA (50%) 720 2.1 6.1% Others (848) (2.4) (7.2%)

Enterprise value 11,849 34.1 100.0% Net Debt (4,287) Other Adjustments (1,651) Equity value 5,911 No. of shares 347.4 Equity value per share €17 Source: Thomson Reuters, Credit Suisse Research

223 Credit Suisse European Utilities Team Vestas (TP DKK30, Underperform) Structural issues still to be addressed

Description Relative share price performance Earnings momentum vs stock price charts . Vestas Wind Systems is a Danish company 800 60% 120% active within the wind power industry. It is 90% engaged primarily in the development, 40% 600 60% manufacture, sale, marketing and maintenance of 20% 30% wind power systems that use wind energy to generate electricity 400 0% 0% -30% -20% 200 -60% -40% Investment case -90% . Cost-cutting merely protects margins: Cuts in 0 -60% -120%

fixed costs merely offset the impact of lower 2006 2007 2008 2009 2010 2011 2012

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 volumes and less-favourable pricing. On our 2000 numbers, it will not enhance margins VWS Net EPS upgrades/downgrades (3M MA-LHS) . Little through-cycle value in turbine VWS relative to KFX VWS vs FTSE 100 return (3M MA-RHS) assembly: The business of making turbines is VWS relative to S&P EU Utils Index Source: Company data, Datastream, Credit Suisse destroying value in Vestas, on our numbers. The Research less capital-intensive services and spare parts Source: Bloomberg PROFESSIONAL activity is supporting the business. We would not be surprised to see large-scale impairments, Consensus forward P/E range Redemption yield and Z-spread on bond which could would be taken negatively 25% . Dilution from a potential equity issue: We 40x think new equity is needed, but it would need to 20% be a significant issuance in order to take debt to comfortable levels and possibly at a deep 30x discount owing to the volatility of the stock, 15% hence would reduce long-term potential upside in any eventual end market recovery 20x 10%

Upcoming catalysts 5% 10x . 7th Nov: Q3 results 0% Mar-10 Aug-10 Jan-11 May-11 Oct-11 Mar-12 Aug-12 0x Redemption yield (yield to Maturity) Z spread 2007 2008 2009 2010 2011 2012 Source: Bloomberg PROFESSIONAL Source: Company data, Credit Suisse Research

224 Credit Suisse European Utilities Team Vestas (TP DKK30, Underperform) Structural issues still to be addressed

INCOM E STATEM ENT (DKKm) 2009A 2010A 2011A 2012E 2013E 2014E VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Revenues 37,907 51,619 43,512 51,802 45,761 46,936 P / E 8.0 4.0 -7.2 n.m. n.m. n.m. Operational Expenses 34,406 46,069 41,238 48,083 41,943 42,775 EV/ IC 0.7 0.5 0.5 0.5 0.5 0.5 EBITDA 3,500 5,550 2,274 3,720 3,818 4,160 Price-to-book 0.4 0.4 0.4 0.4 0.4 0.4 EBITDA growth 58.6% (59.0%) 63.6% 2.6% 9.0% EV / EBITDA 1.9 2.2 5.2 3.4 3.4 3.0 EBITDA margin 9.2% 10.8% 5.2% 7.2% 8.3% 8.9% Net debt (cash) (1,019) 4,314 4,062 5,056 5,448 4,554 Depreciation & amort. 1,627 2,059 2,557 3,239 3,359 3,456 M arket cap. 64,097 35,880 12,589 7,696 7,696 7,696 EBIT 1,873 3,491 (283) 481 460 704 EV 63,078 40,195 16,651 12,751 13,144 12,250 EBIT margin 4.9% 6.8% (0.7%) 0.9% 1.0% 1.5% Invested capital 17,890 24,835 23,263 23,531 23,631 22,585 Net financial expenses 351 537 693 564 613 661 NOPAT 1,148 2,288 (307) 347 331 507 Taxes 590 612 97 (282) (148) (93) Capex (6,217) (5,863) (5,465) (3,331) (2,990) (2,629) M inority Interest 0 0 0 0 0 0 FCFE (6,471) (5,445) 798 (421) 245 1,580 Net Earnings 933 1,936 (1,060) (60) (111) 31 LEVERAGE Earnings growth 107.5% (154.7%) (94.4%) 85.8% (127.7%) Net Debt / EBITDA (0.3) 0.8 1.8 1.4 1.4 1.1 Net margin 2.5% 3.8% (2.4%) (0.1%) (0.2%) 0.1% Net debt / Equity (0.1) 0.2 0.2 0.3 0.3 0.3 EPS (DKK) 4.74 9.54 -5.23 -0.29 -0.54 0.15 EBITDA interest cover 10.0 10.3 3.3 6.6 6.2 6.3 DPS (DKK) 0.00 0.00 0.00 0.00 0.00 0.00 RETURN / YIELD Dividend payout ratio 0.0% 0.0% (0.0%) (0.0%) (0.0%) 0.0% WACC 13.1% 13.1% 13.1% 13.1% 13.1% 13.1% BALANCE SHEET ITEM S ROIC 1.8% 12.2% (2.1%) (4.9%) 0.1% 9.9% PPE 10,868 12,697 14,147 13,594 12,634 11,618 ROE 4.9% 9.4% (5.5%) (0.3%) (0.6%) 0.2% Working capital 25,232 16,683 12,269 10,611 8,588 8,738 FCF Yield (86.7%) (70.8%) 10.4% (5.5%) 3.2% 20.5% Total assets 53,261 47,569 51,468 49,358 45,463 45,118 Div. Yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Consensus EPS estimates (€) Consensus P/E estimates

7 2011 2012 2013 2014 140x 2011 2012 2013 2014 6 120x 5 100x 4 80x 3 60x 2 1 40x 0 20x (1) 0x 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012

Source: Bloomberg PROFESSIONAL Source: Bloomberg PROFESSIONAL

225 Credit Suisse European Utilities Team EQUITY RESEARCH

Appendix

226 Credit Suisse European Utilities Team HOLT Description and coverage

Who is HOLT? HOLT European Sector Coverage HOLT is a team that helps investors make better decisions by using an objective framework for comparing and Specialist valuing companies. Michel Lerner, CFA michel.lerner@credit- European Content Manager How HOLT Improves Investing? suisse.com The HOLT methodology goes beyond traditional accounting information to emphasize a company’s cash Jenny Lim, CFA [email protected] Energy and Utilities generating ability and overall potential for value creation. HOLT offers not only Ian Gray [email protected] Capital Goods, Construction Materials a thorough analysis of a company’s Michel Lerner, CFA michel.lerner@credit- Technology, Media, Telecoms performance in the past; but also suisse.com provides an objective view of the company’s valuation in the future. Hiten Patel, ACA, hiten.j.patel @credit- Financials CFA suisse.com Panos Seretis panos.seretis @credit- Financials and Consumer Staples suisse.com Geetu Sharma geetu.sharma @credit- Chemicals, Healthcare, Metals & Mining suisse.com Sushil Bhana sushil.bhana@credit- Emerging Markets suisse.com Steffen Spillecke steffen.spillecke@credit- Autos, Transport, Consumer suisse.com Discretionary and Commercial Services Generalist Simon Clark [email protected] Tech, Media, Telecoms

227 Credit Suisse European Utilities Team Appendix DJ STOXX Index constituents

Americas Utils Europe Utils AES A2A INTERNATIONAL POWER AMER.ELEC.PWR. ACEA IREN AMEREN ALPIQ HOLDING NATIONAL GRID CALPINE ATH.WT.SUPPLY & SEWAGE NORTHUMBRIAN WATER GP. CENTERPOINT EN. BKW FMB ENERGIE PENNON GROUP CONSOLIDATED EDISON CENTRICA PUBLIC POWER CONSTELLATION EN. DRAX GROUP RED ELECTRICA CORPN. DOMINION RES. E ON (XET) REN DTE ENERGY EDF RUBIS DUKE ENERGY EDISON RWE (XET) EDISON INTL. EDP ENERGIAS DE PORTUGAL RWE PREF. (XET) ENTERGY EDP RENOVAVEIS SCOT.& SOUTHERN ENERGY EXELON ELIA SYSTEM OPERATOR SECHILIENNE FIRSTENERGY ENAGAS SEVERN TRENT FORTIS ENDESA SNAM RETE GAS NATIONAL FUEL GAS ENEL SUEZ ENVIRONNEMENT NEXTERA ENERGY ENEL GREEN POWER TERNA NISOURCE EVN TERNA ENERGY NORTHEAST UTILITIES FORTUM THESSALONIKI WATER SUPP. NRG ENERGY GAS NATURAL SDG UNITED UTILITIES GROUP NSTAR GDF SUEZ VEOLIA ENVIRONNEMENT ONEOK HERA VERBUND PEPCO HOLDINGS IBERDROLA PG&E PINNACLE WEST CAP. PPL PROGRESS ENERGY PUB.SER.ENTER.GP. SCANA SEMPRA EN. SOUTHERN SPECTRA ENERGY TRANSALTA WISCONSIN ENERGY XCEL ENERGY

228 Credit Suisse European Utilities Team Appendix DJ STOXX Index constituents

Global Utils

A2A EDISON INTL. KANSAI ELECTRIC PWR. RED ELECTRICA CORPN.

AES EDP ENERGIAS DE PORTUGAL KYUSHU ELEC.POWER RWE (XET)

AGL ENERGY EDP RENOVAVEIS NATIONAL FUEL GAS SCANA

AMER.ELEC.PWR. ELEC.POWER DEV. NATIONAL GRID SCOT.& SOUTHERN ENERGY

AMEREN ENAGAS NEXTERA ENERGY SEMPRA EN.

CALPINE ENDESA NISOURCE SEVERN TRENT

CENTERPOINT EN. ENEL NORTHEAST UTILITIES SHIKOKU ELECTRIC POWER

CENTRICA ENEL GREEN POWER NORTHUMBRIAN WATER GP. SNAM RETE GAS

CHEUNG KONG INFR.HDG. ENN ENERGY HOLDINGS NRG ENERGY SOUTHERN

CHINA RES.POWER HDG. ENTERGY NSTAR SPECTRA ENERGY

CHUBU ELEC.POWER EXELON ONEOK SUEZ ENVIRONNEMENT

CHUGOKU ELEC.POWER FIRSTENERGY ORIGIN ENERGY (EX BORAL) TERNA

CLP HOLDINGS FORTIS OSAKA GAS TOHO GAS

CONSOLIDATED EDISON FORTUM PENNON GROUP TOHOKU ELECTRIC PWR.

CONSTELLATION EN. GAS NATURAL SDG PEPCO HOLDINGS TOKYO ELECTRIC POWER

CONTACT ENERGY GCL-POLY ENERGY HOLDINGS PG&E TOKYO GAS

DOMINION RES. GDF SUEZ PINNACLE WEST CAP. TRANSALTA

DRAX GROUP HOKKAIDO ELEC.POWER POWER ASSETS HOLDINGS UNITED UTILITIES GROUP

DTE ENERGY HOKURIKU ELEC.POWER PPL VEOLIA ENVIRONNEMENT

DUKE ENERGY HONG KONG AND CHINA GAS PROGRESS ENERGY VERBUND

E ON (XET) IBERDROLA PUB.SER.ENTER.GP. WISCONSIN ENERGY

EDF INTERNATIONAL POWER PUBLIC POWER XCEL ENERGY

229 Credit Suisse European Utilities Team Appendix DJ STOXX Index constituents

Asia Utils

ABOITIZ POWER HONG KONG AND CHINA GAS NEYVELI LIGNITE TOHOKU ELECTRIC PWR.

ADANI POWER HUANENG POWER INTL.'H' NIPPON GAS TOKAI HOLDINGS

CHEUNG KONG INFR.HDG. HUB POWER COMPANY NTPC TOKYO ELECTRIC POWER

CHINA RES.POWER HDG. HYFLUX OKINAWA ELEC.POWER TOKYO GAS

CHINA RESOURCES GAS GP. INDRAPRASTHA GAS OSAKA GAS TORRENT POWER

CHUBU ELEC.POWER IWATANI PERUSAHAAN GAS NEGARA YTL

CHUGOKU ELEC.POWER JAIPRAKASH PWR.VENTURES PETRONET L N G YTL POWER INTERNATIONAL

CLP HOLDINGS JSW ENERGY POWER ASSETS HOLDINGS

ELEC.POWER DEV. KANSAI ELECTRIC PWR. POWER GRID CORP.OF INDIA

ELECTRICITY GENERATING KARACHI ELECTRIC SUPP. RATCHABURI ELECTRICITY

ENERGY DEVELOPMENT KOREA ELECTRIC POWER RELIANCE INFRASTRUCTURE

ENN ENERGY HOLDINGS KOREA GAS RELIANCE POWER

FIRST GEN KOT ADDU POWER RURAL ELECFN.CORP.

FIRST PHILIPPINE HDG. KYUSHU ELEC.POWER SAIBU GAS

GALLANT VENTURE LANCO INFRATECH SATLUJ JAL VIDYUT NIGAM

GCL-POLY ENERGY HOLDINGS LAUGFS GAS SHIKOKU ELECTRIC POWER

GLOW ENERGY MANILA ELECTRIC SHIZUOKAGAS

GMR INFRASTRUCTURE MANILA WATER SUI NORTHERN GAS

GUANGDONG INVESTMENT METRO PACIFIC INVS. SUI SOUTHERN GAS

GUJARAT GAS MITSUUROKO TATA POWER

HOKKAIDO ELEC.POWER MMC TENAGA NASIONAL

HOKURIKU ELEC.POWER NATIONAL HYDROELECTRIC POWER TOHO GAS

230 Credit Suisse European Utilities Team Appendix Datastream index constituents

Electricals Utils Europe Multi Utils Europe

A2A ENBW ENGE.BADEN-WURTG. OJSC ENEL OGK-5 ACEGAS-APS

ACEA ENDESA PANNERGY E ON

AKENERJI ELEKTRIK URETIM ENEA PKA.GRUPA ENERGETYCZNA EDISON

ALERION CLEANPOWER ENEL PRAZSKA ENERGETIKA EVN

ALPIQ HOLDING ENEL GREEN POWER PUBLIC POWER GDF SUEZ

AREVA ENERGIEDIENST HOLDING RED ELECTRICA CORPN. HERA

BKW FMB ENERGIE ENERGOAQUA REN INTERNATIONAL POWER

BUDAPEST ELTY. FALCK RENEWABLES REPOWER IREN

BURGENLAND FED.GRID CO.OF UNG.SY. ROMANDE ENERGIE HOLDING NATIONAL GRID

C K W 'P' FERSA ENERGIAS RNVBL. RUSHYDRO RWE

CEZ FORTUM SCOT.& SOUTHERN ENERGY

CNTEE TRANSELECTRICA HAFSLUND 'A' SECHILIENNE

DRAX GROUP HAFSLUND 'B' SEO Gas Utils Europe

EDF HOLDING MRSK TAURON POLSKA ENERGIA ALTERGAZ

EDP ENERGIAS DE PORTUGAL IBERDROLA TERNA ASCOPIAVE

EGL INTER RAO UES TERNA ENERGY AYGAZ

ELECNOR IRKUTSKENERGO VERBUND CENTRICA

ELECTRICITE STRASBOURG KRASNOYARSK HYPW.STI. VORARLBERGER KRAFTWERKE ENAGAS

ELIA SYSTEM OPERATOR LECHWERKE WGC-3 GAS NATURAL SDG

EMASZ MOSCOW INTEG.ELTY.DS. ZEAG ENERGIE RUBIS

SEVEROMORAVSKA PLYNARENS

SNAM RETE GAS

VYCHODOCESKA PLYNARENSKA

231 Credit Suisse European Utilities Team Appendix Datastream Index constituents

Gas Utils Global Water Utils Europe Multi Utils Global AGL RES. MITSUUROKO ATH.WT.SUPPLY & SEWAGE ACEGAS-APS ALTERGAZ NATIONAL FUEL GAS GELSENWASSER AGL ENERGY AMERIGAS PTNS.L P UNT.L P INT. NICOR NORTHUMBRIAN WATER GP. AMEREN ASCOPIAVE NIPPON GAS PENNON GROUP ATCO CLASS 1 ATMOS ENERGY NISOURCE SEVERN TRENT CANADIAN UTILITIES 'A' AYGAZ ONEOK SUEZ ENVIRONNEMENT CANADIAN UTILITIES 'B' BRIO OSAKA GAS THESSALONIKI WATER SUPP. CENTERPOINT EN. CAMUZZI GAS PAMPEANA 'B' PEMBINA PIPELINE UNITED UTILITIES GROUP DUET GROUP CENTRICA PERUSAHAAN GAS NEGARA VEOLIA ENVIRONNEMENT DUKE ENERGY CHINA RESOURCES GAS GP. PETRONET L N G E ON DISB.DE GAS CUYANA 'B' QUESTAR Water Utils Global EDISON ENAGAS RUBIS AGUAS 'A' EVN ENN ENERGY HOLDINGS SAIBU GAS AMERICAN WATER WORKS GALLANT VENTURE ENVESTRA SEVEROMORAVSKA PLYNARENS AQUA AMERICA GDF SUEZ GASNATURAL SHIZUOKAGAS ATH.WT.SUPPLY & SEWAGE HERA GUJARAT GAS SNAM RETE GAS ESVAL 'C' INTEGRYS ENERGY GROUP HONG KONG AND CHINA GAS SPECTRA ENERGY GELSENWASSER INTERNATIONAL POWER INDRAPRASTHA GAS SUI NORTHERN GAS GUANGDONG INVESTMENT IREN INERGY TOHO GAS HYFLUX MMC IWATANI TOKAI HOLDINGS MANILA WATER NATIONAL GRID JUST ENERGY GROUP TOKYO GAS METRO PACIFIC INVS. ORIGIN ENERGY (EX BORAL) KOREA GAS UGI NORTHUMBRIAN WATER GP. RWE LAUGFS GAS ULTRAPAR PARTP.ON PENNON GROUP RWE PREF. METROGAS 'B' VYCHODOCESKA PLYNARENSKA SABESP ON SCANA SEVERN TRENT SEMPRA EN. SUEZ ENVIRONNEMENT VECTOR THESSALONIKI WATER SUPP. WISCONSIN ENERGY UNITED UTILITIES GROUP YTL VEOLIA ENVIRONNEMENT YTL POWER INTERNATIONAL 232 Credit Suisse European Utilities Team Appendix Companies used in the HOLT datasets

Regulated Integrated Energy utilities Renewable

ENAGAS SA CENTRICA PLC CEZ A.S ENEL GREEN POWER SPA

NATIONAL GRID PLC EDP - ENERGIAS DE PORTUGAL S.A. DRAX GROUP PLC EDP RENOVAVEIS

NORTHUMBRIAN WATER GROUP ENDESA SA ELECTRICITE DE FRANCE VESTAS WIND SYSTEMS AS

PENNON GROUP PLC EVN AKTIENGESELLSCHAFT ENEL SPA GAMESA CORPORACION TECNOLOGICA

RED ELECTRICA CORPORACI A. GAS NATURAL SDG, S.A. E.ON AG

SEVERN TRENT PLC IBERDROLA S.A. FORTUM OYJ

SCOTTISH AND SOUTHERN ENERGY UNITED UTILITIES GROUP PLC GDF SUEZ PLC

SNAM RETE GAS SPA SUEZ ENVIRONNEMENT COMPANY RWE AG

TERNA SPA VEOLIA ENVIRONNEMENT VERBUND AG

MRSK HOLDING BKW FMB ENERGIE AG RUSHYDRO JSC

FEDERAL GRID COMPANY POLSKA GRP ENERGETYCZNA SA

TAURON POLSKA ENERGIA SA

ENEA SA

ALPIQ HOLDING AKTIENGESELLSCHAFT

ELEKTRIZITATS-GESELLSCHAFT LAUFENBURG AG

233 Credit Suisse European Utilities Team Appendix Companies used in the HOLT datasets

Utilities Asia Utilities Americas AGL ENERGY LTD KANSAI ELECTRIC POWER COMPANY AES TIETE SA ENERSIS SA APA GROUP KEPCO FIRSTENERGY CORP ENTERGY CORP ABOITIZ POWER CORPORATION KOREA GAS AMERICAN ELECTRIC POWER CO EXELON CORP KEPCO ENGINEERING & ADANI ENTERPRISES LIMITED AMERICAN WATER WORKS CO INC FIRSTENERGY CORP CONSTRUCTION ADANI POWER LIMITED LANCO INFRATECH LIMITED BLACK HILLS CORP FORTIS INC BEIJING ENTERPRISES HOLDINGS MANILA ELECTRIC COMPANY CMS ENERGY CORP ITC HOLDINGS CORP CLP HOLDINGS LIMITED MANILA WATER COMPANY CPFL ENERGIA SA LIGHT S.A. CTEEP - COMPANHIA DE TRANSMISSAO CHINA DATANG CORP. RENEWABLE NTPC LIMITED MPX ENERGIA S.A. DE ENERGIA ELECTRICA PAULISTA CHINA GAS HOLDINGS LTD NHPC LIMITED CAPITAL POWER INCOME LP NRG ENERGY INC CHINA LONGYUAN POWER GROUP ORIGIN ENERGY LIMITED CEMIG NV ENERGY INC CHINA POWER INTERNATIONAL PERUSAHAAN GAS NEGARA PERSERO CENTERPOINT ENERGY INC NEXTERA ENERGY INC DEVELOPMENT TERBUKA CESP - COMPANHIA ENERGETICA DE CHINA RESOURCES GAS GROUP POWER ASSET HOLDINGS LTD. NISOURCE INC SAO PAULO RATCHABURI ELECTRICITY CHINA RESOURCES POWER HOLDINGS CONSOLIDATED EDISON INC PG&E CORP GENERATING CHINA YANGTZE POWER CO LTD RELIANCE POWER LIMITED CONSTELLATION ENERGY GRP INC PACIFIC NORTHERN GAS LTD COMPANHIA PARANAENSE DE ENERGIA CHUBU ELECTRIC POWER COMPANY SP AUSNET PEPCO HOLDINGS INC – COPEL DUET GROUP SPARK INFRASTRUCTURE GROUP DTE ENERGY CO PINNACLE WEST CAPITAL CORP DATANG INTERNATIONAL POWER TATA POWER COMPANY LIMITED DOMINION RESOURCES INC PROGRESS ENERGY INC ENN ENERGY HOLDINGS LIMITED TENAGA NASIONAL BERHAD DOVER CORP PUBLIC SERVICE ENTRP GRP INC SABESP - COMPANIA SANEAMENTO ELECTRIC POWER DEVELOPMENT CO. THAI TAP WATER SUPPLY PUBLIC DUKE ENERGY CORP BASICO ESTADO DE SAO PAULO ENERGY DEVELOPMENT CORPORATION TOKYO ELECTRIC POWER COMPANY DYNEGY INC SOUTHERN CO FIRST GEN CORPORATION YTL CORPORATION BERHAD EDISON INTERNATIONAL TECO ENERGY INC GLOW ENERGY PUBLIC COMPANY CENTRAIS ELETRICAS BRASILEIRAS SA TRACTEBEL ENERGIA SA ELETROPAULO METROPOLITANA HONG KONG AND CHINA GAS COMPANY UNISOURCE ENERGY CORP ELECTRICIDADE SAO PAULO HUANENG POWER INTERNATIONAL INC EMERA INC ENDESA - EMPRESA NACIONAL DE HYFLUX LTD ELECTRICIDAD S.A. INFIGEN ENERGY ENERNOC INC JAIPRAKASH POWER VENTURES ENERGIAS DO BRASIL SA KSK ENERGY VENTURES

234 Credit Suisse European Utilities Team Appendix Companies used in the HOLT datasets

Oil & Gas Europe Infrastructure Europe

SASOL LTD PETROLEUM GEO-SERVICES ASA ABERTIS INFRAESTRUCTURAS AFREN PLC SASOL LTD BRISA-AUTO ESTRADAS DE PORTUGAL, S.A.

AMEC P.L.C. PKN ORLEN EUROTUNNEL (GROUPE) S.A.

KOC HOLDING A.S. POLARCUS LIMITED AEROPORTS DE PARIS GAZPROM OAO PETROPLUS HOLDINGS AG FRAPORT AG BP PLC REPSOL-YPF SA FLUGHAFEN ZURICH AG CAIRN ENERGY PLC ROSNEFT OIL COMPANY ATLANTIA SPA DNO INTERNATIONAL ASA SBM OFFSHORE NV HAMBURGER HAFEN UND LOGISTIK AG EURASIA DRILLING CO LTD SEADRILL LTD ENI - ENTE NAZIONALE IDROCARBURI SOCO INTERNATIONAL PLC ESSAR ENERGY PUBLIC LIMITED COMPANY GAZPROM NEFT GALP ENERGIA SGPS, S.A. SURGUTNEFTEGAS OAO GAMESA CORPORACION TECNOLOGICA SA SAIPEM SPA CGG VERITAS SARAS HERITAGE OIL PLC STATOIL ASA

KAZMUNAIGAS EXPLORATION PRODUCTION TECHNIP LUKOIL TGS-NOPEC GEOPHYSICAL COMPANY ASA LUNDIN PETROLEUM AB TULLOW OIL PLC

MOL MAGYAR OLAJ ES GAZIPARI NYILVANOSAN TOTAL SA MUKODO RES

NESTE OIL OYJ TRANSNEFT NOVATEK OAO TUPRAS TURKIYE PETROL RAFINERILERI AS OMV AKTIENGESELLSCHAFT PETROFAC LIMITED

235 Credit Suisse European Utilities Team Appendix HOLT Definitions

Name Definition Calculation/Formula Book Debt + Book value operating leases + Stock options + HOLT debt Pension liabilities Dividend Yield Dividend amount / Most rcent price P / E Most recent price / Earnings per share in (Y+1) Dividend payout ratio Common dividends / Earnings cash flow Most recent price * Common Shares Outstanding (Split Market Capitalization (Billions) Adjusted) Earnings per Share FY1 Forecast Earnings per Share Year 1 Earnings per Share FY2 Forecast Earnings per Share Year 2 Inflation adjusted gross cash flow, inflation adjusted gross CFROI Gross cash flow / Gross investment Investment, asset life and non depreciating assets Nominal company-specific discount rate Real HOLT discount rate + Inflation Discount rate which takes into consideration leverage, Real HOLT discount rate company-specific as well as geography-specific factors The market implied discount rate for an individual company Market implied discount rate is the rate which equates the present value of future cash flows to today's market price Return on capital employed NOPAT / Net assets EBITDA margin EBITDA / Net sales Market value used in valuation + Total book debt - Cash & Enterprise value short term investments Net debt / EBITDA Total net debt / EBITDA P / B Current price / Current book equity NFD / EBITDA (Total book debt - Cash & cash equivalents) / EBITDA HOLT-adjusted proxy for EBITDA Cost of asset base Capex + Sale of PPE + Acquisitions Cost of capital Interest payments + Divident payments CAPEX + Acquisitions + Sale of PPE + Rent + R&D + Fixed charges Interest + Dividends

236 Credit Suisse European Utilities Team Appendix Glossary

Acronym/Abbreviation Long name AAU Assigned Amount Unit Bankability / banking / bank The carrying over of carbon credits from one phase to the next Carbon credit All credits other than EUAs (always referred to as ‘allowances’) CCGT Combined Cycle Gas Turbine CDM Clean Development Mechanism CDM Project Clean Development Mechanism Project CDS Clean Spark Spread CER Certified Emission Reductions CHP Combined Heat and Power CSP Concentrated Solar Power CSS Clean Dark Spread ERU Emission Reduction Unit EUA European Emission Allowance EU - ETS European Union Emissions Trading Schemes EU 27 + 3 EU 27 + Norway, Switzerland and Iceland GWH Gigawatt Hour IED Industrial Emissions Directive (in the UK) IGCC Integrated Gasification Combined Cycle (turns coal into gas) JI Joint Implementation JI Project Joint Implementation Project KWH Kilowatt Hour LCPD Large Combustion Plant Directive (in the UK) LNG Liquefied Natural Gas LRMC Long-run marginal cost LTM Last Twelve Months MMPTA Million Metric Tons Per Annum MWH Megawatt Hour NER New-entrants’ Reserve OCGT Open Cycle Gas Turbine OFGEM The Office of Gas and Electricity Markets ROC Renewable Obligation Certificate (in the UK) ROnewI Return on New Investments

237 Credit Suisse European Utilities Team Appendix Calculation and conversion cheatsheet

Calculation of CDS Note Power €/MWh - Coal Coal at 36% efficiency, with a post-eff. calorific value of 0.42 - CO2 At 36% gas efficiency, 900kg of CO2 emission per MWh = Clean Dark Spread

Calculation of CSS Note Power - Gas Gas at 50% efficiency - CO2 At 50% gas efficiency, 407kg of CO2 emission per MWh = Clean Spark Spread Conversion table M BTU Therm kWh c.m. GJ bbl t crude oil t SKE 1M BTU 10.0 293.1 27.2 1.055 0.183 0.025 0.036 1 Therm 0.100 29.3 2.720 0.106 0.018 0.003 0.004 1 kWh 0.003 0.034 0.093 0.004 0.001 0.000 0.000 1 c.m. 0.037 0.368 10.8 0.039 0.007 0.001 0.001 1 GJ 0.948 9.478 277.8 25.8 0.173 0.024 0.034 1 bbl 5.46 55 1,601 149 5.77 0.137 0.197 1 T crude oil 40.0 400 11,723 1,088 42.2 7.32 1.440 1 t SKE 27.8 278 8,141 756 29.3 5.08 0.694 Emissions table O&M (€/MWh) CO2 (ton/MWh) Hydro 0.5 - Nuclear 5 - Lignite 0.5 0.41 Hard Coal 0.5 0.40 Efficient Coal 0.33 CCGT 0.2 0.20 Gas 0.4 0.20 Oil 0.5 0.27 Other 5 - Wind 2 -

238 Credit Suisse European Utilities Team Appendix ENTSO-E

North-Western block North-Eastern Block South-Eastern Block Nordic Austria Czech Republic Bosnia-Herzegovina Denmark Belgium Hungary Bulgaria Norway France Poland Greece Sweden Germany Slovakia Macedonia Finland Luxemburg Montenegro Netherlands Romania Switzerland Serbia

Baltic Central-South Block South-Western Block Latvia Croatia Spain Lithuania Slovenia Portugal Estonia Italy

239 Credit Suisse European Utilities Team DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US Hub Power Company (HPWR.KA, PRs42.60) ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its Hyflux Ltd (HYFL.SI, S$1.47, OUTPERFORM, TP S$1.90, UNDERWEIGHT) research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could Iberdrola (IBE.MC, Eu3.34, OUTPERFORM, TP Eu4.20) affect the objectivity of this report. Investors should consider this report as only a single factor in making their International Power (IPR.L, 417.60 p) investment decision. ITC Holdings Corp (ITC, $71.30, NEUTRAL, TP $80.00) Jaiprakash Power Ventures Ltd (JAPR.BO, Rs35.15, NEUTRAL, TP Rs43.00) Kansai Electric Power (9503, ¥916, OUTPERFORM, TP ¥1,550, MARKET WEIGHT) Companies Mentioned (Price as of 07 Oct 12) KazMunaiGas EP (KMGq.L, $17.85, NEUTRAL, TP $23.91) Abertis (ABE.MC, Eu10.52, OUTPERFORM, TP Eu17.14) Korea Electric Power (015760.KS, W25,350, OUTPERFORM, TP W28,000) Aboitiz Power Corp (AP.PS, P34.45, OUTPERFORM, TP P38.00) Korea Gas Corp (036460.KS, W41,150, OUTPERFORM, TP W50,000) Adani Enterprises Ltd. (ADEL.BO, Rs229.95, OUTPERFORM, TP Rs800.00) KSK Energy Ventures Ltd (KSKE.BO, Rs59.45, OUTPERFORM [V], TP Rs116.00) Adani Power Ltd (ADAN.BO, Rs51.40, UNDERPERFORM [V], TP Rs51.00) Lanco Infratech Ltd. (LAIN.BO, Rs15.82, UNDERPERFORM [V], TP Rs12.00) Aeroports de Paris (ADP.PA, Eu61.52, OUTPERFORM, TP Eu90.00) Light (LIGT3, R$23.83, UNDERPERFORM, TP R$24.00) AES Corporation (AES, $12.75) LUKOIL (LKOH.RTS, $55.60) Afren Plc (AFRE.L, 112.80 p, OUTPERFORM, TP 185.00 p) Lundin Petroleum (LUPE.ST, SKr135.80, NEUTRAL, TP SKr164.00) AGL Energy (AGK.AX, A$14.81, NEUTRAL, TP A$15.90) Manila Electric (Meralco) (MER.PS, P258.00, NEUTRAL, TP P247.00) American Electric Power Co., Inc. (AEP, $41.11, OUTPERFORM, TP $44.00) Manila Water Company (MWC.PS, P25.55, OUTPERFORM, TP P23.00) American Water Works Co. (AWK, $34.90, NEUTRAL, TP $35.00) MMC Corporation Bhd (MMCB.KL, RM2.60, OUTPERFORM, TP RM3.50) Atlantia (ATL.MI, Eu10.21, RESTRICTED) MOL (MOLB.BU, HUF16790.00, OUTPERFORM, TP HUF21200.00) BG Group plc (BG.L, 1305.00 p, OUTPERFORM, TP 1660.00 p) MPX (MPXE3, R$29.63, OUTPERFORM, TP R$55.00) BP (BP.L, 432.55 p, OUTPERFORM, TP 500.00 p) National Grid (NG.L, 691.00 p, OUTPERFORM, TP 730.00 p) Brisa (BRIS.LS, Eu2.34, UNDERPERFORM, TP Eu2.60) National Hydroelectric Power Corporation Ltd (NHPC.NS, Rs18.60, NEUTRAL, TP Rs22.00) Calpine (CPN, $16.91) Neste (NES1V.HE, Eu8.88, NEUTRAL, TP Eu10.00) CenterPoint Energy, Inc. (CNP, $20.52, NEUTRAL, TP $21.00) NextEra Energy Inc. (NEE, $68.37, OUTPERFORM, TP $66.00) Centrica (CNA.L, 318.70 p, OUTPERFORM, TP 370.00 p) NiSource Inc (NI, $24.54, NEUTRAL, TP $26.00) CEZ (CEZP.PR, Kc723.00, NEUTRAL, TP Kc743.00) NOVATEK (NVTK.RTS, $11.00) Cheung Kong Holdings (0001.HK, HK$97.80, OUTPERFORM, TP HK$127.90) NRG Energy (NRG, $17.10, RESTRICTED) China Power International (2380.HK, HK$1.99, OUTPERFORM, TP HK$2.30) NTPC Ltd (NTPC.BO, Rs160.45, NEUTRAL, TP Rs157.00) China Resources Gas (1193.HK, HK$14.16, NEUTRAL, TP HK$14.70) NV Energy Inc (NVE, $17.61, NEUTRAL, TP $17.00) China Resources Power Holdings (0836.HK, HK$16.00, OUTPERFORM, TP HK$18.25) OMV (OMVV.VI, Eu24.25, UNDERPERFORM, TP Eu24.50) Chubu Electric Power (9502, ¥1,266, OUTPERFORM, TP ¥1,650, MARKET WEIGHT) ONEOK Partners, LP (OKS, $57.50, OUTPERFORM, TP $65.00) CLP Holdings Limited (0002.HK, HK$65.00, NEUTRAL, TP HK$69.20) Constellation Energy Group Inc. (CEG, $37.23) Ophir Energy plc (OPHR.L, 594.50 p, OUTPERFORM, TP 950.00 p) Det norske oljeselskap ASA (DETNOR.OL, NKr75.75, OUTPERFORM, TP NKr122.00) Origin Energy (ORG.AX, A$12.05, OUTPERFORM, TP A$16.65) DNO ASA (DNO.OL, NKr7.10, UNDERPERFORM, TP NKr9.40) Osaka Gas (9532, ¥340, NEUTRAL, TP ¥320, MARKET WEIGHT) Dominion Resources (D, $54.04, NEUTRAL, TP $53.00) Pennon Group (PNN.L, 777.00 p, OUTPERFORM, TP 800.00 p) Dover Corporation (DOV, $51.06, NEUTRAL, TP $67.00) Pepco Holdings Inc. (POM, $19.37, OUTPERFORM, TP $23.00) Drax (DRX.L, 562.50 p, UNDERPERFORM, TP 440.00 p) Perusahaan Gas Negara (PGAS.JK, Rp3650.00, OUTPERFORM, TP Rp5000.00) DTE Energy (DTE, $59.09, OUTPERFORM, TP $59.00) Petrofac (PFC.L, 1454.00 p, NEUTRAL, TP 1750.00 p) DUET Group (DUE.AX, A$1.87, NEUTRAL, TP A$1.87) Petroleum Geo Services (PGS.OL, NKr73.90, OUTPERFORM, TP NKr99.00) Duke Energy (DUK, $66.48, OUTPERFORM, TP $76.50) Petronet LNG Limited (PLNG.BO, Rs146.05, UNDERPERFORM, TP Rs128.00) E.ON (EONGn.DE, Eu17.52, NEUTRAL, TP Eu18.00) PG&E Corporation (PCG, $45.42, NEUTRAL, TP $45.00) Edison International (EIX, $46.39, OUTPERFORM, TP $47.00) PGE (PGEP.WA, PLN19.43, UNDERPERFORM, TP PLN21.00) Electricite de France (EDF.PA, Eu16.92, NEUTRAL, TP Eu17.00) PGNIG (PGNI.WA, PLN4.05, OUTPERFORM, TP PLN4.70) ENEA (ENAE.WA, PLN15.54, NEUTRAL, TP PLN19.60) Pinnacle West Capital Corp. (PNW, $52.13, NEUTRAL, TP $52.00) Enel (ENEI.MI, Eu2.44, NEUTRAL, TP Eu3.00) PKN Orlen (PKNA.WA, PLN37.90, NEUTRAL, TP PLN40.60) Energy Development Corporation (EDC.PS, P6.00, NEUTRAL, TP P6.50) Polarcus (PLCS.OL, NKr4.25, OUTPERFORM [V], TP NKr7.40) ENI (ENI.MI, Eu16.97, OUTPERFORM, TP Eu20.50) Power Assets Holdings Limited (0006.HK, HK$58.80, NEUTRAL, TP HK$61.50) ENN Energy Holdings Ltd (2688.HK, HK$28.00, UNDERPERFORM, TP HK$26.50) PPL Corporation (PPL, $28.22, NEUTRAL, TP $31.00) Entergy Corporation (ETR, $69.17, NEUTRAL, TP $71.00) Premier Oil (PMO.L, 358.80 p, OUTPERFORM, TP 518.00 p) Essar Energy Plc (ESSR.L, 114.30 p, NEUTRAL [V], TP 127.00 p) Progress Energy (PGN, $60.82, NEUTRAL, TP $52.00) Eurasia Drilling Co (EDCLq.L, $27.22, OUTPERFORM, TP $36.00) Public Svc Ent (PEG, $32.35, NEUTRAL, TP $30.00) Exelon Corporation (EXC, $37.59, RESTRICTED) Ratchaburi Electricity Generating Holding (RATC.BK, Bt44.25) First Gen Corporation (FGEN.PS, P17.50, OUTPERFORM, TP P23.00) Reliance Power Ltd (RPOL.BO, Rs107.80, UNDERPERFORM [V], TP Rs83.00) FirstEnergy (FE, $48.97, OUTPERFORM, TP $49.00) Repsol (REP.MC, Eu12.88, OUTPERFORM, TP Eu18.00) Flughafen Zuerich AG (FHZN.S, SFr344.00, NEUTRAL, TP SFr360.00) Rockhopper Exploration Plc (RKH.L, 274.00 p, OUTPERFORM [V], TP 531.00 p) Fortis Inc. (FTS.TO, C$32.93, NEUTRAL, TP C$34.00) Rosneft (ROSN.RTS, $6.93) Fraport (FRAG.DE, Eu44.28, UNDERPERFORM, TP Eu60.00) Rural Electrification Corporation (RURL.BO, Rs197.15, UNDERPERFORM [V], TP Rs167.50) Galp Energia (GALP.LS, Eu10.64, OUTPERFORM, TP Eu14.00) RWE (RWEG.F, Eu33.61, NEUTRAL, TP Eu36.00) Gamesa (GAM.MC, Eu1.39, NEUTRAL [V], TP Eu2.43) Sabesp (SBSP3, R$75.67, NEUTRAL, TP R$45.00) Gazprom (GAZP.RTS, $4.75) Saras (SRS.MI, Eu.88, UNDERPERFORM [V], TP Eu.95) Gazprom Neft (SIBN.RTS, $4.80, NEUTRAL, TP $5.71) Scania (SCVb.ST, SKr117.00, UNDERPERFORM, TP SKr115.00) GDF Suez (GSZ.PA, Eu17.98, UNDERPERFORM, TP Eu15.50) Severn Trent (SVT.L, 1701.00 p, NEUTRAL, TP 1550.00 p) Genel Energy plc (GENL.L, 615.00 p, OUTPERFORM, TP 1180.00 p) Snam (SRG.MI, Eu3.49, NEUTRAL, TP Eu3.80) Glow Energy PCL (GLOW.BK, Bt61.25) SOCO International (SIA.L, 328.20 p, UNDERPERFORM, TP 352.00 p) GMR Infrastructure Ltd (GMRI.BO, Rs25.05) Southern Company (SO, $47.19, NEUTRAL, TP $49.00) Hong Kong and China Gas (0003.HK, HK$17.42, UNDERPERFORM, TP HK$15.55) Spectra Energy Partners, LP (SEP, $30.97, NEUTRAL, TP $32.00) Huaneng Power International Inc (0902.HK, HK$5.58, OUTPERFORM, TP HK$5.70) SSE (SSE.L, 1429.00 p, OUTPERFORM, TP 1450.00 p)

240 Credit Suisse European Utilities Team Statoil (STL.OL, NKr143.30, UNDERPERFORM, TP NKr158.00) Neutral/Hold* 40% (49% banking clients) Suez Environnement (SEVI.PA, Eu8.32, OUTPERFORM, TP Eu11.50) Underperform/Sell* 14% (43% banking clients) Surgutneftegaz (SNGS.RTS, $.97) Restricted 2% Tata Power Company Ltd (TTPW.BO, Rs100.20, NEUTRAL, TP Rs101.00) *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Tauron (TPE.WA, PLN4.35, NEUTRAL, TP PLN6.00) Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An Tenaga Nasional (TENA.KL, RM6.65, NEUTRAL, TP RM6.00) investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Terna (TRN.MI, Eu2.80, OUTPERFORM, TP Eu3.20) Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the TGS-NOPEC Geophysical (TGS.OL, NKr161.30, UNDERPERFORM, TP NKr180.00) market that may have a material impact on the research views or opinions stated herein. Thai Tap Water (TTW.BK, Bt6.80) Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Toho Gas (9533, ¥501, NEUTRAL, TP ¥480, MARKET WEIGHT) Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: Tokyo Electric Power (9501, ¥150, SUSPENDED [V]) http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Tokyo Gas (9531, ¥414, NEUTRAL, TP ¥380, MARKET WEIGHT) Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and Total (TOTF.PA, Eu36.04, NEUTRAL, TP Eu44.50) cannot be used, by any taxpayer for the purposes of avoiding any penalties. TransAlta Corporation (TA.TO, C$17.44, NEUTRAL, TP C$18.00) Transneft (TRNFp.RTS) Important Regional Disclosures Tullow Oil (TLW.L, 1452.00 p, OUTPERFORM, TP 1841.00 p) Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. Tupras (TUPRS.IS, TRY39.00, OUTPERFORM, TP TRY49.90) Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting United Utilities (UU.L, 683.00 p, NEUTRAL, TP 660.00 p) Shares; SVS--Subordinate Voting Shares. Veolia Environnement (VIE.PA, Eu8.91, RESTRICTED) Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may Verbund (VERB.VI, Eu17.76, UNDERPERFORM, TP Eu15.00) not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. Vestas (VWS.CO, DKr25.28, UNDERPERFORM [V], TP DKr40.00) For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit YTL Corp (YTLS.KL, RM1.94, NEUTRAL, TP RM1.27) http://www.csfb.com/legal_terms/canada_research_policy.shtml. YTL Power (YTLP.KL, RM1.79, UNDERPERFORM, TP RM1.82) Credit Suisse Securities (Europe) Limited acts as broker to 0001.HK, GENL.L, KMGq.L, PNN.L, SSE.L.

The following disclosed European company/ies have estimates that comply with IFRS: ABE.MC, ADP.PA, ATL.MI, BG.L, BP.L, CNA.L, 0001.HK, DRX.L, EONGn.DE, EDF.PA, ENEI.MI, ENI.MI, FHZN.S, FRAG.DE, GAZP.RTS, SIBN.RTS, GSZ.PA, IBE.MC, IPR.L, KMGq.L, Disclosure Appendix LKOH.RTS, MOLB.BU, NG.L, NES1V.HE, NVTK.RTS, OMVV.VI, PNN.L, PFC.L, PKNA.WA, PMO.L, REP.MC, ROSN.RTS, RWEG.F, Important Global Disclosures SCVb.ST, SVT.L, SRG.MI, SSE.L, STL.OL, SNGS.RTS, TRN.MI, TLW.L, TUPRS.IS, UU.L, VIE.PA. 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242 Credit Suisse European Utilities Team