SECURITIES Industry: Energy % Price change since 31/12/2010: Volume Mov.Avrg. 200d (#): 43,821 Mov.Avrg.Price(€):200d 2.82 202.27 (€M): Capitalization # Shares: (Common 109,333,400 Registered) SHARE DATA biomass. overall small Sources Terna EATAM EBITDA SALES € M FINANCIAL DATA Effective Tax Rate 10: 10-Year ofSales: CAGR 20,95% after 2020: 1,5% Perpetuity 10-Year 26,8% ofEBIT CAGR WACC: 9.08% Rate (Rf): 5.75% Risk Free Interest VALUATION (Working Hypotheses) Free Float: 29.80% Shareholders:Major 70.20% low: 1.77(24/08/2011)52 wk high:52 wk 4.1(18/02/2011) MERIT Current Price TENERGY GA / Upside hydroelectric TERNA ENERGY SATERNAENERGY Energy Target Target Price: management The company SA 2010 A 2010 MERIT MERIT Securities S.A., Research & Analysis Department 3 21.4 9.6 59 produces plants potential:116% and constructs 40.67% TENERGY GA TERNA ENERGY SA and 2011 E 2011 energy (17/10
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2/18 SWOT ANALYSIS
Strengths FUTURE TARGETSWeaknesses o Experience in the market of RES since it has o Little potential of the construction sector.
been active for many years in the market. o Specialization in the market of RES. oLarge pipeline of projects. oRecent expansion abroad. oHigher Load Factors than the market average.
Opportunities Threats o Large growth in Renewable sources market o Slow licensing procedures in Greece. which is in its infancy in Greece. oLimits set by government in installed capacity. oEntry to new Energy Sources such as oAn unfavorable change in tariffs. Geothermal energy and Biomass. oLack of liquidity of Greek banks may cause oEntry to new markets such as the USA. affect the financing of local projects.
INVESTMENT RISKS
-LIQUIDITY RISK: Low due to the kind of the product. -INTEREST RATE RISK: Medium but it will increase in the following years due to new debt that will be received. The company is able to borrow at relatively low cost. -CREDIT RISK: Medium due to a relative small number of clients. -CURRENCY RISK: Low for the moment. The expansion of the company abroad may increase this risk. The first revenue from Poland have already received.
SHAREHOLDER’S STRUCTURE
SECURITIES
MAJOR SHAREHOLDERS FREE FLOAT
SHAREHOLDER'S STRUCTURE % GEK TERNA 47,64% PERISTERIS G. 22,54%
Source: ASE, The Company MERIT 3/18
ENERGY -SECTOR ANALYSIS
Greek Energy market’s liberalization began in 1999 but it is still an oligopoly with one major player, the Public Power
Company. The largest part of the produced energy comes from thermal power plants, mainly from coal (lignite) units which are not friendly to the environment while only a small part is produced through renewable sources plants. Greece currently covers around 4-5% of its gross electricity consumption by RES but these numbers will definitely increase substantially in the following years. Up to end 2010 Greece holds the 11th place among the European Union countries and 17th in the World. However, there will be soon radical changes in the market in favor of the use of Renewable Sources and of Natural Gas. According to a EU directive, RES must cover 20% of total energy consumption by 2014 and 40 % by 2020. 1736 MW of RES were installed in Greece up to the end of 2010 while it is estimated that €1,35B will be spent in 2011 for the installation of 518 MW of RES projects. This is an improvement in comparison to 2010 during which only 290 MW of RES were installed. Prices per MW/h are among the highest in EU although a recent change in the leadership of the relevant Ministry may lead to changes. Moreover, it is doubtful whether companies will continue to receive state subsidies while there is a provision for a higher price by 20%, if no subsidy is given. In H1:11 average System Marginal Price increased to 65,2€/MWh (+29% y-o-y due to increased natural gas prices) while energy demand decreased to 24,6 Twh (-1,9% Y-o-Y) due to the recession.
Greek Government set targets last year for the installment of Renewable Sources for the following years. The sector has seen little improvement since the announcement of government for rapid ‘’Green Development’’ two years ago. However, new decisions that refer to ‘’fast track procedures’’ in the license procedures have given new hopes to the companies of the sector. Government has also set upper limits per category of renewable sources which may be re-examined in 2012. The news are no positive for small hydroelectric projects whose proposed capacity has been already covered by licenses and applications. Some projects of a value of €2BN have already been unblocked as far as the production license is concerned, projects that had been waiting for a license for 3-4 years. Public Power Company has also been particularly interested in the recent past for RES due to cost reasons and it signed an agreement with EDF for co-operation in a series of projects while it cooperates with Terna Energy, too.
Wind projects are still the most popular projects in Greece with installed capacity in the interconnected system at 1211 MW in August 2011 while according to EWEA total installed wind power in Greece in the end of 2010 reached 1208 MW. According to Desmie 176MW of wind energy were installed in the first eight months of 2011. Moreover, 2010 was a significant year for P/V projects whose installed capacity increased from 53MW in the end of 2009 to 198MW in the end of 2010. Moreover, capacity in the inter-connected system increased from 153MW in December 2010 to 301 MW in August 2011. On the other hand, small hydroelectric projects and biomass projects showed little growth in 2010 and in the first eight months of 2011.
Parallely, the relevant ministry of Environment, Energy and Climate Change announced that installment licenses reached 1670 MW in the end of 2010 from 1360 MW in the end of 2009. Finally, production licenses increased from 8360MW in the end of 2009 to 18.819 MW in the end of 2010.
It seems that this sector will be attractive for many years and this is the reason why most of the big Greek groups have invested in RES (Ellaktor, GEK Terna, Michaniki, Mytilinaios, Kopelouzos, Elpe, FG Europe, Quest Holdings, Intrakat etc). Greek RES market is attractive not only for Greek companies but also for large foreign companies. Thus EDF, Acciona, Iberdrola, Sunpower, GDF Suez, Edison, Endesa, Veolia, Enel, Enercon, Jasper etc have invested and are going to invest further funds in projects in Greece. Financing of the projects has been recently an issue for the sector since Greek banks have been rather conservative due to liquidity problems, even as far as the high growth sector of RES is concerned. The first of the following tables depicts the limits set by the Ministry and the so far installed capacity while the second depicts the major companies of the sector and their capacity in operation.
CATEGORY TARGET FOR 2014 TARGET FOR 2020 INSTALLED MW* MW MW SMALL HYDROELECTRIC 300 350 205
SECURITIES P/V 800 1100 301 WIND PARKS 4000 7500 1211 BIO MASS 200 350 47 GEOTHERMAL 20 120 0 *These numbers refer to the latest (August 2011) DESMIE reports about the interconnected system. Adding to the above the capacity of non-interconnected system (Aegean islands, Crete) leads to a total RES capacity of around 2100MW.
Source : Desmie, Merit Research MERIT 4/18 SECTOR ANALYSIS
CAPACITY INSTALLED PER COMPANY IN GREECE (SEPTEMBER 2011)
COMPANY WIND PARKS (MW) SOLAR PARK (MW) HYDRO PARKS (MW) BIOMASS (MW) EDF ENER.NOUVELLES 278 6 0 0 ROKAS 257,5 2,2 0 0 TERNA ENERGY 182 0 15 0 ENEL 172 0 14 0 EL.TECHNODOMIKI-VIOSAR 131 2 0 0 PPC RENEWABLES 61,4 0,2 60,7 0 EUNICE 60 0 0 0 PROTERGIA 35,6 0 6,1 0 ACCIONA 35 0 0 0 ENERCON 27,5 0 5,05 0 FG EUROPE 25 0 3,6 0 IKTINOS 22 0 0 0 BCI PARTNERS 22 0 0 0 ENVITEC 16,4 0 0 0 POLYPOTAMOS 12 0 0 0 PLASTIKA KRITIS 11,9 0 0 0 QUEST SOLAR 0 7,5 0 0 HLEKTOR 0 0 0 28,5 EPILEKTOS 0 9 0 0 KLOUKINAS-LAPPAS 0 0 2,25 0 Source : Desmie, Merit Research
GEOGRAPHICAL DISTRIBUTION OF WIND PARKS (AUGUST 2011)
REGION MW REGION MW AEGEAN ISLANDS 2 EASTERN MACEDONIA THRACE 217 EVOIA 216 CENTRAL MACEDONIA 41 PELOPONNESE 213 WESTERN GREECE 113 VOIOTIA-FTIOTIDA 125 THESALIA 17 WESTERN GREECE 113 STEREA ELLADA 192 IONIAN 73 IONIAN ISLANDS 84 CENTRAL MACEDONIA 27 WESTERN MACEDONIA 216 THESALIA 17 EVOIA 24 ATTICA 3 PELOPONNESE 264 KYKLADES 2 EASTERN MACEDONIA THRACE 240 ATTICA 18
GEOGRAPHICAL DISTRIBUTION OF HYDROELECTRIC PARKS (AUGUST 2011) REGION MW CENTRAL MACEDONIA 47 IPEIROS 47 W ESTERN GREECE 34 THESALIA 32 REGION MW REGION STEREA ELLADAMW 22 EASTERN MACEDONIA THRACE W ESTERN217 MACEDONIA 6 IPEIROS 47 PELOPONNESE 4 EVOIA EASTERN 216MACEDONIA THRACE 2 CENTRAL MACEDONIA 49 ATTICA 1 PELOPONNESE 213 WESTERN GREECE 42 VOIOTIA-FTIOTIDA 125 THESALIA 32 SECURITIES WESTERN GREECE 113 STEREA ELLADA 22 IONIAN 73 WESTERN MACEDONIA 6 CENTRAL MACEDONIA 27 PELOPONNESE 4 THESALIA 17 EASTERN MACEDONIA THRACE 3 ATTICA 3 ATTICA 1 KYKLADES 2
Source : Desmie REGION MW CENTRAL MACEDONIA 47 IPEIROS 47 W ESTERN GREECE 34 THESALIA 32 STEREA ELLADA 22 W ESTERN MACEDONIA 6 PELOPONNESE 4
EASTERN MACEDONIA THRACE 2 MERIT ATTICA 1 SECURITIES Note: Note: Cap. to prices ofrefers Market
MERIT P/E peer Terna As
Source: Source: Bloomberg, Merit Research
peers
ratios
TERNI ENERGIATERNI GREENKO PLC COVANTA HOLDING EDP RENOVAVEIS ENEL GREEN companies,
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USA SECTORANALYSIS Moreover, is UK
13 companies THESALIA CENTRAL MACEDONIA IONIAN WESTERN GREECE VOIOTIA-FTIOTIDA PELOPONNESE EVOIA EASTERN MACEDONIA THRACE REGION KYKLADES ATTICA
in , 7
, comparison E C A R H T A I N O D E C A A A I M C I N E N T O S T R D E A E E N T C N S A O A M P E A O N D L R A E E L P T L S E E E A C E W E R E A E I R L T G A S A I S N E N R H O E T D T E S C E S A W O M R I L E A P R I T N E N C O I G E R
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RES IMPORTS GAS NATURAL HYDROELECTRIC 22 32 34 47 47 17 27 73 COAL 2 3 Renewable 1 2 4 6
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/18 high
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MERIT SECURITIES
ENERGY CONSTRUCTIONS
10 15 20 25 30 FINANCIAL DATAFINANCIAL 0 5 COMPANY’S COMPANY’S EBITDA EBITDA BREAKDOWN SECTOR PER SOURCE: EBITDA H1:11 REVENUE
12,33 0,93 EARNINGS BREAKDOWN H1:11
SALES SALES BREAKDOWN H1:11
EBITDA ENERGY CONSTRUCTIONS H1:11 VS H1:10
EATAM EBITDA REVENUE
EATAM EAT BREAKDOWN SECTOREAT PER CONSTRUCTIONS
ENERGY SALES H1:11 H1:11 13,27 27,91 6,98
ENERGY CONSTRUCTIONS 20,00 7,91 H1:10 H1:11 H1:10 28,79 2,93 9,72
in in M ENERGY CONSTRUCTIONS €
in in M in in M 6 € € /18
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MERIT SECURITIES Source Source GlobalWind : EnergyCouncil Source: Source: GWEC AUSTRIA POLAND GREECE TURKEY IRELAND AUSTRALIA SWEDEN NETHERLANDS JAPAN DENMARK PORTUGAL CANADA UK FRANCE ITALY INDIA SPAIN GERMANY USA CHINA COUNTRY
SALES SALES BREAKDOWN: WIND ENERGY WINDCOUNTRYPERPARKS INSTALLED MW 2009 INSTALLED MW WINDPERPARKS REGION 10925 19149 25777 35086 25104 1087 1260 1712 1560 2229 2056 3465 3535 3319 4070 4410 4850 995 725 801
INSTALLED MW 2010 INSTALLED MW 13065 20676 27214 40180 44733 1011 1107 1208 1329 1428 1880 2163 2237 2304 3752 3898 4009 5204 5660 5797
8 /18
MERIT SECURITIES Source: Source: Thecompany
SUM KOZANI ISLET) (ST.GEORGE ATTICA RHODES EVIA (2) ARGOLIDA THRACE VIOTIA VIOTIA VIOTIA PLACE SUM DRAMA AITOLOAKARNANIA (27) CRETE VEROIA (2) ATTICA-VIOTIA EVRITANIA (4) EVIA (17)SOUTH (2) THRACE PLACE SUM (POLAND) (POLAND) KRZYZANOW AITOLOAKARNANIA VIOTIA SKOPIA (AITOLOAKARNANIA) LOUZES (AITOLOAKARNANIA) PERDIKOKORFI (CRETE) (CRETE) CHONOS (EVROS) MITOULA (EVROS)DIDIMOS LOFOS PIRGARI (EVIA) ILIASPROFITIS (EVIA) (EVIA)TSOUKA TSILIKOKA (EVIA) PLACE
WIND PROJECTS UNDER CONSTRUCTION INGREECE UNDERCONSTRUCTION PROJECTS WIND WIND PROJECTS WITH LICENSE INGREECE WITH PROJECTS WIND SALES SALES BREAKDOWN: WIND ENERGY WIND PROJECTS IN OPERATION INOPERATION PROJECTS WIND TERNA’S PROJECTS
CAPACITY (MW) CAPACITY (MW) CAPACITY (MW) 106,8 14,45 11,22 1552 12,5 34,2 10,2 954 298 214 17,85 7,5 4,5 5,4 40 48 36 44 36 12 20 20 24 26 12 19,2 11,7 12,8 232 14 69 18 30 40
9 /18
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ACTIVITIES ABROAD in Greece
country . with
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of
market Greece . project
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other
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its to to of in in
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MERIT SECURITIES divided - During - recently - for on - - - relevant for the 87 - - - The As Average Under Bio Prices Tariffs Installed These
SOLAR PARKS PARKSHYDRO PARKSWIND ,
85
average
€ a higher tariff
mass 5
installed result, € 50
/
for are the
these MWh among
in K to
ministry
will
cost projects
on
capacity
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our
prices valuation € Greece (load
due 2
average . be
M assumptions,
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per basic the
parks per decreasing % ofTotal Sales % ofTotal Sales to % of Total Sales
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factor
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y-o-y Change. % Change. y-o-y % Change. y-o-y y-o-yChange.%
will
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per in
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parks
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at no . tariff
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VALUATION OFENERGY ACTIVITIES
future around
on MW 2010 subsidy 154 6,5
for
sources more a the each (numbers
in expenses, of wind for
every Photovoltaic
the ground
1 hydro
, 41.970 2011 E 2011 2011 E 2011 E 66,09% MW is scenarios 15 3.382 SALES SALES PERRES ACTIVITY 0,26% 5,33% the
HYDRO PARKSHYDRO
162 N/A N/A N/A analysis park as given
WIND PARKSWIND GW 6
P/VPARKS
system follows of months parks refer
years
of earnings
2011
190 till and wind . 0,3
11
the Decreases
about
until the
parks
to around
2011 : a is following
and
in
full
hydro end 99
margins
the
operation
the is - 73.179
, 106,36%
2012 F 2012 F 73,18% 483,33% F 2012 will 45 2015 74,36% 6.980 operation) 6,98%
0,95%
of € currently 945 first
400
MW in €
park 2015 2012 reach
/ hypotheses 400
MWh
15 tariffs
are Κ, license for 2
installed
while . is brings
higher 260
the .
at at
till
is
114.073
351 will
,
10.915
€ 2013 F 2013 F
77,41% 97 167,62% F 2013 each 56,39% 55,88% a 7,41%
wind the 2.529 1,72% 1 currently
:
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€ possibility for
3 , be 01 /
M 2013 MWh end
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wind available €
25 given and 6 while / MWh
of
of
in
revenue and
. the 2015
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78,20% 2014 F 2014 61,97% 35,85% while 8,92% 85,05%
4.680 2,36%
in hydro
small
parks
the
of will
the
2014
of
780 according 2014 P/V 12 40
Appendix
parks
reach
around is hydroelectric latest
currently parks .
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2015 F 2015
35,65% 29,17% 9,46%
1000 60,26% 7.500
2,96% report
€ to . has
210
is
the
2015 MW responsible
930 a K decreased 20 50
provision
from parks new per
and
year
law the
will 12 at
/18
be
MERIT SECURITIES % of Total% of Sales while rather Magnisia € at Terna construction company builds TERNA y-o-y Change. % Change. y-o-y EAT % of Total% of Sales Turnover y-o-y Change. % Change. y-o-y 20 % of Turnoverof%
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the
EAT
Energy
its M) profitable ENERGY
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The
backlog
in high
RES
most this has a €
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deep ,
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13.066 33.736 2009 A
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3.291
8,30% in
€ and awarded
third secures 8 - include house , 61
projects a
M
complementarily VALUATION OFENERGY ACTIVITIES
parties it project RENEWABLE SOURCES )
33.349 2010 A
-32,37% 56,47% also 26,50% technical 8.836
revenue -1,15% the and the CONSTRUCTION CONSTRUCTION ACTIVITIES 25.706 2010 A -65,72% -35,15% 43,53% 1.128 4,39%
construction that
CONSTRUCTIONS stands undertakes 6
the at th
Patras around grade
Terna construction knowledge
at
€ to
, 15.357 45.515
2011 E 71,67% construction
91 73,80% 33,74% 36,48%
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180 a
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as
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of
for of on will
construction
a the
3 hydroelectric
0
take part certificate activities /
6 next 25.334 81.104 2012 F 81,11% 64,97% 31,24% 78,19% /
20 specialized 18.894
372,50% 2012 F 18,89%
of over value 4,50% 5,00%
850 11 three
the .
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are Sales Besides
€
station road years 23 RES
127.518 36.882
the 2013 F 86,54% , 45,59% 28,92% 57,23%
public
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the 942
anti the for :
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human - Public fact flood
business
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89,49% in 35,26% 28,13% 39,06%
that recent
20.831 2014 F 10,51% Power
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: the 11
works projects unit
Company by company at 231.649
68.709
2015 F 91,37% 36 ( 37,73% 29,66% 30,63% Xirias is . value .
21.872
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8,63% not 1.094 5,00% 5,00% 5,00% 9
of 13 %
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MERIT SECURITIES term share tables WACC rate price Cash Thus, base installed concerned completed The We Less: Capex Less: Capital Working in Change Less: Depreciation Plus: Tax Adjusted Less: (Adjusted) EBIT Cash Flow to the Firm (FCFF) Firm the to Flow Cash NOPAT Turnover CASH FLOW STATEMENT
make
period of
scenario Flows
growth
levels under
and
present
of 5
,
75 9
and
explicit
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of sensitivity The the %
rate
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10 Growth employed
base long
and
estimates years expect under calculation . MW)
In
scenario term the
fully
analysis between
order
is LTWACC
the
was the long
three selected
growth
up
about base
10,00%
debt accepted of
-177.598 to
we term 188.295 9,50% 9,08% 8,50% 8,00% 63.509 18.348
2011 E 21.486 13.836 22.989 to 4.641 illustrating
the 2015 face
scenarios
4,00 2015 scenario update
portion rate the
Plus: Minorities Less: offirm Value Value ofResidual Value Present Cash Flows ofFuture Value Present % upside potential % upside of share Value of equity Value
WACC in FCFF
-
the
2020 . . order
revenue
(after The -125.135 Thus, 185.483 36.364 99.998 26.270 43.749 2012F Participations
Current Net Debt Debt Net Current
2.285 7.385
we the
fact
. for to derives how
is results The 1,00%
to discount
decline
2020 coverage
expected we the that
2,69 3,16 3,61 4,31 5,00 the that capture scenarios
VALUATION -111.575 formed group 147.356
201.290 54.126
a ) 39.719 10.055 64.180 2013F
4.129 of
there
target is
target
Terna
finally
SENSITIVITY ANALYSIS the estimated in
of
. to
PERPETUITY SALESPERPETUITY GROWTH
our all
other one is
Terna
1,25% vary price price
Energy
were 198.158 the -49.242 to 166.961 small 72.354 48.982 13.538 85.892 2014F model 3.616 2,83 3,33 3,80 4,53 5,27
optimistic,
only
from
two
period
changes Energy of
at
formed
visibility,
is
€
1
for 50 scenarios 4
,
5 expected 5 , 253.521 - 0 % 136.476 113.134 10.222 94.579 %
55.072 18.555 2015F 13 2.953 the
of with per
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according % We one according
rapid
4,00 next ,
total 2,98 3,50 4,77 5,55
share, as
although a
estimate are
base
BUY to far
100.841 286.479
100.268 126.051 46.410 ten
45.837 25.210 2016F growth capital
described generate
0 revealing as
and to recommendation,
years,
to
the declining
different 1,75% 116,02% beta 436.947 -138.295
535.478 673.773
4,00 structure one 99.957 different 110.925 315.127 of 138.656 4.483 3.057 92.017
63.025 44.118 27.731 2017F 3,14 3,68 4,21 5,02 5,85 extent
the
0
over the
at in an pessimistic
calculation Appendix 1
upside from assumptions sector ,
2 the of
in , expectations 109.589 119.799 340.337 2,00%
149.748 51.051 40.840 29.950 2018F assume
the
order
next 0 year
too, of which
scenario growth 3,30 3,88 4,43 5,30 6,18
A 116
of 10 to .
to
since
a
119.771 126.987 360.757 the
year 158.733 %
long 46.898 39.683 31.747 years 2019F regarding derive is
0 from
about of expected target our
. and -
term The
the (
2011
a Discounted the
finally
long
following
price
the sector the risk
123.184 133.336 378.795 current 166.670 - 48.031 37.880 33.334 2020F 14
2020 to
0 term
long MW
free
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the per be
is )
.
15/18
Major Numbers 000 €
Terna Energiaki SA EPS (€)
Current Price 0,80 1,85 2008 A 2009 A 2010 A 2011 E 2012F 2013F 2014F 2015 F 0,60 # of Shares (,000) 109.333 109.333 109.333 109.333 109.333 109.333 109.333 109.333 0,40 P/E (x) 17,59 43,56 21,13 13,73 7,97 5,46 4,05 2,95 0,20
P/Sales (x) 5,72 9,42 3,43 3,18 2,02 1,37 1,02 0,80 0,00
E
F F F A P/BV (x) 1,15 1,85 0,55 0,54 0,51 0,47 0,44 0,39 A
EPS (€) 0,22 0,15 0,09 0,13 0,23 0,34 0,46 0,63
2013 2012 2014
2011 2011
2010 2010 2009 2009 EPS growth (%) 64,8% -33,9% -39,7% 54,0% 72,3% 45,9% 34,9% 37,4% PEG (x) 0,27 -1,29 -0,53 0,25 0,11 0,12 0,12 0,08 Op.CF PS (€) 1,00 Operating CFPS (€) 0,19 0,16 0,46 0,08 0,46 0,67 0,88 1,12 0,80 FCFF / Share (€) -0,39 -0,82 -0,35 -1,62 -1,14 -1,02 -0,45 0,09 0,60 Dividend / Share (€) 0,07 0,07 0,04 0,05 0,08 0,12 0,16 0,22 0,40 Dividend Yield (%) 1,7% 1,1% 2,2% 2,6% 4,4% 6,4% 8,6% 11,9% 0,20
ROE (%) 6,7% 4,3% 2,6% 4,0% 6,5% 9,0% 11,2% 14,0% 0,00
E
F F F A
EV/Sales (x) 4,45 9,24 4,46 7,06 5,89 4,93 4,09 3,32 A
2012 2013 2014
2011 2011 2010 2010 EV/EBITDA (x) 12,19 25,81 12,29 12,18 8,41 6,99 6,00 5,01 2009 Net Debt / Equity (x) -0,40 -0,18 -0,01 0,43 0,79 1,09 1,21 1,20 DPS (€) Current Ratio (x) 2,63 2,01 1,29 0,66 0,57 0,51 0,53 0,53 0,15 INCOME STATEMENT (€ ,000) 2008 A 2009 A 2010 A 2011 E 2012F 2013F 2014F 2015 F 0,10 Total Τurnover 73.741 73.376 59.055 63.509 99.998 147.356 198.158 253.521 0,05
COGS 49.107 48.704 36.819 35.089 54.749 80.309 107.005 134.366 0,00
E
F F F A
Gross Profit 24.634 24.672 22.236 28.420 45.249 67.047 91.153 119.155 A
2014 2013
Other Operating Income 3.416 3.491 2.803 6.000 14.500 18.500 20.500 22.500 2012
2011 2011
2009 2009 2010 SG&A Expenses 6.118 8.373 10.242 11.432 16.000 21.367 25.761 28.521 ROE (%) EBIT 21.932 19.790 14.797 22.989 43.749 64.180 85.892 113.134 30,0% Depreciation 4.969 6.484 9.107 13.836 26.270 39.719 48.982 55.072 20,0% EBITDA 26.901 26.274 21.430 36.824 70.019 103.900 134.874 168.206 10,0% Interest Expense 10.256 4.131 1.998 (2.811) (10.180) (16.301) (21.424) (24.776) 0,0%
EBT 32.188 23.921 16.795 20.178 33.569 47.879 64.468 88.358
E
A A
F F F
Taxes 8.230 7.564 6.831 4.641 7.385 10.055 13.538 18.555
2012 2013 2014
2011 2011 2010 2010 Minorities 5.918 (8.489) 392 800 800 800 1.000 1.200 2009 EAT & Minorities 23.991 15.864 9.572 14.737 25.384 37.025 49.930 68.603 Gross Margin (%) CASH FLOW (€ ,000) 2008 A 2009 A 2010 A 2011 E 2012F 2013F 2014F 2015 F 50,0%
Cash flow from Operations 20.576 17.474 50.630 8.383 50.539 73.414 96.296 121.922 40,0%
Cash Flow from Investment -58.267 -82.189 -114.933 -188.295 -185.483 -201.290 -166.961 -136.476 30,0% 20,0% Net Cash Flow from Financing 33.401 18.666 11.547 65.442 145.062 127.336 71.261 29.675 10,0%
BALANCE SHEET (€ ,000) 2008 A 2009 A 2010 A 2011 E 2012F 2013F 2014F 2015 F 0,0%
E
F F F A
Total Non-Current Assets 262.348 345.021 440.136 615.280 774.173 935.424 1.052.884 1.133.639 A
2013 2014
Inventory 886 536 2.196 953 1.500 2.210 2.576 3.169 2012
2011 2011
2009 2009 2010 Other Current Assets for Sale EBITDA Margin (%) Total Cash 290.888 2.583 192.873 77.610 87.728 87.187 87.784 102.904 80,0%
Total Current Assets 327.419 295.434 240.483 139.379 144.027 153.561 168.441 196.873 60,0% SECURITIES Total Assets 589.766 640.455 680.619 754.659 918.200 1.088.986 1.221.325 1.330.512 40,0% Long Term Bank Loans 48.913 67.646 63.204 83.204 193.204 303.204 393.204 423.204 20,0%
Non Current Liabilities 99.358 120.597 127.118 167.071 267.571 364.071 438.571 446.071 0,0%
E
F F F A Short Term Banks 97.381 111.503 126.848 156.848 206.848 246.848 256.848 296.848 A
Current Liabilities 124.599 146.642 187.000 210.232 252.847 298.793 319.461 369.820
2014 2012 2013
2011 2011
2009 2009 2010 Equity 365.808 373.216 366.501 377.355 397.782 426.122 463.293 514.621 Total Equity & Liabilities 589.766 640.455 680.619 754.659 918.200 1.088.986 1.221.325 1.330.512 EATAM Margin (%) 25,0% MARGIN ANALYSIS % 2008 A 2009 A 2010 A 2011 E 2012F 2013F 2014F 2015 F 20,0% Gross Profit 33,4% 33,6% 37,7% 44,8% 45,3% 45,5% 46,0% 47,0% 15,0% 10,0% SG&A Expenses 8,3% 11,4% 17,3% 18,0% 16,0% 14,5% 13,0% 11,3% 5,0%
EBITDA 36,5% 35,8% 36,3% 58,0% 70,0% 70,5% 68,1% 66,3% 0,0%
F F F
E A EBT 43,7% 32,6% 28,4% 31,8% 33,6% 32,5% 32,5% 34,9% A
EAT&Minorites 32,5% 21,6% 16,2% 23,2% 25,4% 25,1% 25,2% 27,1%
2012 2013 2014
2011 2011 2010 2010 Effective Tax rate 25,6% 31,6% 40,7% 23,0% 22,0% 21,0% 21,0% 21,0% 2009
MERIT Source: MERIT SECURITIES, Company Financial Data 16/18 APPENDIX I
ALTERNATIVE SCENARIO I: OPTIMISTIC SCENARIO As optimistic scenario we consider the scenario under which the company will have installed and in full operation 1050 MW up to the end of 2015. Under this case and keeping revenue from the construction sector, WACC and long-term growth unchanged (growth after 2015 is expected to vary from 5-13%, although declining from year to year), new target price becomes €4,30 revealing a potential of 132,5% from current price levels. The installed and operating capacity (numbers refer to full operation) till the end of 2015 will be divided among the renewable energy sources as follows:
2010 2011 2012 2013 2014 2015
WIND PARKS 154 200 380 600 780 970
HYDRO PARKS 6,5 11 15 25 40 60
SOLAR PARKS 0,3 4 9 12 20
The valuation tables under this case are the following:
CASH FLOW STATEMENT 2007 A 2011 E 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Turnover 64.585 109.552 163.687 211.072 265.205 299.682 335.644 362.495 387.870 407.264
EBIT (Adjusted) 23.438 46.818 70.061 92.792 118.637 133.658 149.362 160.948 171.826 180.214
Less: Adjusted Tax 4.631 7.887 11.138 14.876 19.612 26.732 29.872 32.190 34.365 36.043 NOPAT 18.807 38.931 58.923 77.916 99.025 106.927 119.489 128.758 137.461 144.171
Plus: Depreciation 13.932 26.753 40.617 50.312 56.934 53.943 53.703 43.499 42.666 36.654
Less: Change in Working Capital 21.981 4.704 5.053 2.270 2.359 0 0 0 0 0
Less: Capex 192.268 195.871 209.080 175.715 148.035 98.895 60.416 54.374 48.484 43.984
Cash Flow to the Firm (FCFF) -181.511 -134.891 -114.593 -49.757 5.565 61.974 112.776 117.884 131.643 136.841 2010 2011 2012 2013 2014 2015 WIND PARKS 154 220 440 680 900 1040
HYDRO PARKS 6,5 11 18 45 80 100 Present Value of Future Cash Flows -123.524 Present Value of Residual Value 692.308SOLAR PARKS 0,3 2 6 12 20 Value of firm 568.785
Less: Current Net Debt 99.957 Minorities 3.057 Plus: Participations 4.483
SECURITIES Value of equity 470.254 Value of share 4,30
% upside potential 132,49% MERIT 17/18 APPENDIX I
ALTERNATIVE SCENARIO II : PESSIMISTIC SCENARIO As pessimistic scenario we consider the scenario under which the company will have installed and in full operation 950 MW up to the end of 2015. Under this case and keeping revenue from the construction sector, WACC, and long-term growth unchanged (growth after 2015 is expected to vary from 5-13%, although declining from year to year), target price becomes €3,70 revealing a potential of 100% from current price levels. The installed and operating capacity (numbers refer to full operation) till the end of 2015 will be divided among the renewable energy sources as follows:
2010 2011 2012 2013 2014 2015 WIND PARKS 154 190 330 500 660 885 HYDRO PARKS 6,5 11 15 25 40 45 SOLAR PARKS 0,3 2 9 12 20
The valuation tables under this case are the following:
CASH FLOW STATEMENT 2011 E 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F Turnover 63.509 97.845 142.164 185.244 242.299 273.797 301.177 325.271 344.787 362.027
EBIT (Adjusted) 23.084 40.386 61.860 80.704 104.881 116.364 128.000 138.728 147.052 154.404 Less: Adjusted Tax 4.909 6.654 9.615 12.542 16.968 23.273 25.600 27.746 29.410 30.881 NOPAT 18.175 33.731 52.245 68.163 87.914 93.091 102.400 110.983 117.641 123.524 Plus: Depreciation 13.234 26.073 39.105 48.219 54.064 43.808 42.165 39.033 37.927 36.203 Less: Change in Working Capital 21.486 1.629 3.566 2.344 3.621 0 0 0 0 0 Less: Capex 187.614 179.571 192.102 164.270 131.107 95.829 60.235 48.791 43.098 40.728
Cash Flow to the Firm (FCFF) -177.690 -121.395 -104.318 -50.231 7.249 41.070 84.330 101.224 112.470 118.998
Present Value of Future Cash Flows -148.778 Present Value of Residual Value 651.994 Value of firm 503.217
Less: Current Net Debt 99.957
Minorities 3.057 SECURITIES
Plus: Participations 4.483
Value of equity 404.686
Value of share 3,70
% upside potential 100,08% MERIT
18/18
Glossary
Abbreviatons
AGM: Annual General Meeting CAGR: Compound Annual Growth Rate CFPS: Cash Flow per Share COGS: Costs of Goods Sold DPS: Dividends per Share EAT: Earnings after Taxes EATAM: Earnings after Taxes and Minorities rights EBIT: Earnings before Interest and Taxes EBITDA: Earnings before Interest and Taxes, Depreciation, and Amortization EBT: Earnings before Taxes EPS: Earnings per Share EV: Enterprise Value FCFF: Free Cash Flows to the Firm fx: Foreign Exchange LT-WACC: Long-term Weighted Average Cost of Capital NOPAT: Net Operating Profits After Taxes P/BV: Price to Book Value P/E, PE: Price to Earnings ratio PEG: Price/Earnings to Growth ratio ROE: Return on Equity SG&A: Selling, General and Administrative ttm: Trailing Twelve Months WACC: Weighted Average Cost of Capital ΔNWC: Change in Net Working Capital
HISTORY OF RATINGS
Terna Energy 4.50 4.00 3.50 3 1 2 3.00 4 2.50 2.00 1.50
SECURITIES 1.00 0.50
0.00
15/10/2010 22/10/2010 12/11/2010 03/12/2010 10/12/2010 31/12/2010 07/01/2011 21/01/2011 28/01/2011 18/02/2011 25/02/2011 18/03/2011 08/04/2011 15/04/2011 06/05/2011 13/05/2011 27/05/2011 03/06/2011 24/06/2011 01/07/2011 22/07/2011 12/08/2011 19/08/2011 09/09/2011 16/09/2011 30/09/2011 07/10/2011 01/10/2010 08/10/2010 29/10/2010 05/11/2010 19/11/2010 26/11/2010 17/12/2010 24/12/2010 14/01/2011 04/02/2011 11/02/2011 04/03/2011 11/03/2011 25/03/2011 01/04/2011 22/04/2011 29/04/2011 20/05/2011 10/06/2011 17/06/2011 08/07/2011 15/07/2011 29/07/2011 05/08/2011 26/08/2011 02/09/2011 23/09/2011
DATE TARGET PRICE RATING CLOSING PRICE 1 19/10/2010 4.5 BUY 3.09 2 18/1/2011 4.5 BUY 2.95 3 4/5/2011 4.3 BUY 3.12
4 15/7/2011 4 BUY 2.51 MERIT
DATE TARGET PRICE RATING CLOSING PRICE 1 19/10/2010 4.50 € BUY 3.09 € 2 18/01/2011 4.50 € BUY 2.95 € 3 04/05/2011 4.30 € BUY 3.12 € Investment Ratings
BUY (5/5): The difference between the stock’s estimated target price and its current price is +30% ACCUMULATE (4/5): The difference between the stock’s estimated target price and its current price is between (+10% and +30%) HOLD (3/5): The difference between the stock’s estimated target price and its current price is between (-10% and +10%) REDUCE (2/5): The difference between the stock’s estimated target price and its current price is between (-10% and -30%) SELL (1/5): The difference between the stock’s estimated target price and its current price is -30%
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The analyst responsible for the content of this research report (in whole or in part), certifies that a) all the views about the companies and securities contained in this report accurately reflect the personal views of the respective author and b) no part of our compensation was or will be directly or indirectly related to the specific recommendations or view of this report. The author of this report may have held or hold in the future shares of the company covered in its research reports. The analyst or at least one of the analysts mentioned in this report are Certified as “Analyst of Equities and the Market” by the Hellenic Capital Market Commission.
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