If you missed getting in on Tesla early, don’t make the ...
Transcript of If you missed getting in on Tesla early, don’t make the ...
EQUITY
14 November 2017
Electricity 12m target upgrade France @ Go to SG website
Electro Power Systems If you missed getting in on Tesla early, don’t make the same mistake with EPS
Buy In our view, EPS is the only listed pure play that allows investors to position
themselves in the still-nascent but particularly promising market segment of
industrial-scale electricity storage. A pioneer in the field, EPS offers high-
tech solutions with proven performances, as evidenced by the recently
awarded Endesa contract to build the largest European storage plant.
Management, staff, production capacity and financing are all up and running.
The only (large) listed rival is Tesla…
Industrial-scale electricity storage: a fast-growing market One of the rare solutions to
the problem of how to integrate renewable energy, battery-based storage systems should
see a CAGR of 40% to 50% over the next decade (source: Naviguant Research). This robust
growth will be driven by the rising share of renewable energy in total electricity production
along with the expected sharp drop in the cost of these storage solutions.
A unique investment vehicle for entering the industrial-scale energy storage segment
After 12 years of R&D, EPS offers innovative, proven solutions that have been certified by
the main independent certification organisations (TÜW, Rina) and validated by orders from
the large global energy groups (Enel, Endesa, EDF-Edison, Terna, Engie, Samsung, etc.).
Electro Power Systems’ solutions already supply electricity to 165,000 people in 21
countries, around the clock, seven days a week.
An organisation adapted to the ramp-up of the business After investing heavily in
2016 and 2017, particularly in human resources and production capacity, EPS is now
ready to produce much higher volumes than it is currently turning out. Operating charges
should therefore not grow as quickly as sales, resulting in operating breakeven as of
end-2017/early 2018.
Target price upgraded from €13.0 to €18.5 We increase our TP, mostly on the back of a
lower WACC assumption (9.0% vs 10.0%) to integrate the rapid improvement in visibility on
the sales trend and on financing of future investments and the WCR. Given the lack of
comparable listed peers, our valuation is based solely on a DCF with a WACC of 9.0%,
normalised EBITDA margin of 26.0%, and perpetual growth of 3.0%.
Price 13/11/17 €13.6
12m target €18.5
Upside to TP 35.8%
12m f'cast div €0.00
12m TSR 35.8%
Main changes since last report Target (€) 18.5 (13.0)
EPS 17e (€) -0.352 nc
EPS 18e (€) 0.296 nc
EPS 19e (€) 0.687 nc new vs (old) nc: no change
Share price performance
Source: SG Cross Asset Research/Equity Perf. (%) 1m 3m 12m YTD
Share 1.0 77.3 138.1 123.3
Rel. index* -0.8 67.0 113.3 112.4
Rel. sector** -1.7 71.0 112.3 114.0
* MSCI World ($) ** MSCI World Utilities ($)
RIC EPS.PA, Bloom EPS FP
52-week range 15.9-5.48
EV 17 (€m) 107
Mkt cap. (€m) 115
Free float (%) 38.0
No. shares o/s (m) 8
Avg vol. 3m (No. shares) 29,620
Equity analyst
Jean Michel Belanger +33 1 56 37 35 07 [email protected]
Financial data 12/16 12/17e 12/18e 12/19e Ratios 12/16 12/17e 12/18e 12/19e
Revenues (€m) 7.30 16.0 29.0 38.0 P/E (x) NM NM 46.0 19.8
Rev. yoy growth (%) NM NM 81.3 31.0 FCF yield (/EV) (%) -20.1 -6.5 -1.0 2.1
EBIT margin (%) NM NM 11.0 17.1 Dividend yield (%) 0.0 0.0 0.0 7.3
Rep. net inc. (€m) -8.60 -4.90 1.50 4.80 Price/book value (x) 7.68 44.9 28.7 13.1
EPS (adj.) (€) -1.08 -0.35 0.30 0.69 EV/revenues (x) 5.73 6.68 3.62 2.82
EPS yoy growth (%) -10.7 67.4 184.1 132.0 EV/EBIT (x) NM NM 32.8 16.5
Dividend/share (€) 0.00 0.00 0.00 1.00 EV/IC (x) 5.8 8.8 6.4 5.6
Dividend yoy growth (%) NA NA NA NA ROIC/WACC (x) -11.9 -2.0 1.7 -1.2
Payout (%) 0 0 0 146 Net Debt/EBITDA (x) 0.80 9.00 NM NM
Societe Generale (“SG”) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware
that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S) CERTIFICATION(S),
IMPORTANT DISCLOSURES AND DISCLAIMERS. ALTERNATIVELY, VISIT OUR GLOBAL RESEARCH DISCLOSURE WEBSITE
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Contents
Positioned in the electricity storage solutions market ...................................................................... 4
Electricity storage – one of the few solutions to address the challenges of integrating renewables
into the grid ................................................................................................................................... 5
EPS: innovative and proven technological solutions, that have obtained certification....................... 9
Recent deployments of EPS’s solutions ....................................................................................... 12
The competitive landscape is still very fragmented ....................................................................... 13
A highly qualified and experienced management team and Board of Directors ............................. 15
Shareholders ............................................................................................................................... 16
Earnings, cash flow and financing forecasts ................................................................................. 17
Valuation ...................................................................................................................................... 19
Electro Power Systems
14 November 2017 4
Positioned in the electricity storage solutions market
Founded in 2005 and listed on the Paris stock exchange since 2015, EPS originally focused
on small-scale electricity storage based on fuel cells, aimed at powering the off-grid
transmission towers of telecom operators. Since 2016, EPS’s business model has evolved,
and the company now exclusively focuses on the development, manufacturing and
distribution of utility-scale storage systems, i.e. from 1MW. Developed by EPS since 2015, the
HyESS system (Hybrid Energy Storage System) has from the start been designed with an
open architecture, in order to be able to store electricity generated by, wind, PV, diesel, etc.
The storage systems developed by EPS target users and infrastructures for which an
uninterrupted electricity supply or energy storage capacity is essential. These solutions meet
the needs both of end-users and electricity market players – in particular grid operators, public
services, and commercial and industrial infrastructures.
- In developed markets, EPS develops and markets industrial-scale energy storage
solutions (i.e. over 1MW in capacity, see the HyESS system below) including complex
conversion and control systems, essentially used to stabilise electricity grids already
mainly supplied by renewable energies.
- In emerging markets, EPS develops and markets microgrid solutions to provide off-grid
power at a lower cost than fossil fuels, and particularly diesel. These solutions can be
smaller than HyESS, but are based on the same architecture. They are also offered in
developed markets to supply electricity to off-grid sites, notably islands not linked to the
national grid.
HyESS system electricity storage unites: 1MW per container
Source: Company data
Electro Power Systems
14 November 2017 5
Electricity storage – one of the few solutions to address the
challenges of integrating renewables into the grid
Renewables continue to grow at a fast pace
We highlight, in particular, the following points from the 11th annual report published by UNEP
(United Nations Environment Programme) and Bloomberg New Energy Finance in March 2017:
- Renewable energies’ share of world energy production increased to 11.3% in 2016 from
10.3% en 2015, following total investment of c.$1.500bn over the last five years. Asia-
Pacific accounts for a large proportion of this increase, with 50% of global annual
investment made in the region.
- 2016 was another record year for renewable energies, with 138.5 GW of new production
capacity installed for an investment of $242bn. Helped by a further decrease in
production costs per MWh, particularly in solar photovoltaic energy and onshore and
offshore wind, renewable energies accounted for 55% of the total new capacity installed,
the largest share ever. This is the second year running that new installed capacity for
renewables was higher than that added for conventional technologies, and this despite
the decrease in the prices of oil, gas and coal.
- In 2016, the renewables market was once again dominated by solar photovoltaic and
wind, which together accounted for 125 GW of additional production capacity, a level 6%
higher than the previous record of 118 GW in 2015. Wind added 54 GW and photovoltaic
75 GW. Biomass, geothermal, solar heating and small hydroelectric plants also accounted
for a small proportion of the additional capacity.
- 2016 was marked by a steeper drop in production costs, with the cost price down 10%
vs 2016 for photovoltaic and wind. Record lows were touched with the new tenders in
Chile ($29.1/MWh, solar) and Morocco ($30/MWh, onshore wind). These cost price levels,
unimaginable just several years ago, are much lower than those for conventional types of
energy: gas and coal power stations are at $60 to $80/MWh, new nuclear plants are at
$120/MWh (excluding dismantling costs). In this context, we should note the record level
of additional capacity installed in 2016 (see above), despite a decrease in investments in
absolute terms from $312bn to $242bn (-22%).
- 2016 also saw a mix of technologies being installed on the same sites, to optimise land
use and costs of maintenance and connection, while reducing intermittency of supply.
Around 6 GW of projects are in the process of being installed, some of which are hybrids
– solar-wind, hydro-solar and biomass-geothermal.
Global capacity added in 2016 (GW) Global investment in renewable energies ($bn)
Source: UNEP/BNEF Source: UNEP/BNEF
Renewable energies
(excl. high power),
138
High power
hydro, 15
Coal, 54
Gas, 37
Nuclear, 10
4772
112
159181 179
243
281256
234
278
312
242
0
50
100
150
200
250
300
350
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14 November 2017 6
Proportion of renewable energy vs total global capacity
Source: Bloomberg New Energy Finance
Renewables should account for the lion’s share of energy investments in the
next two decades
The main conclusions from Bloomberg New Energy Finance’s 2017 report on the medium- to
long-term outlook for renewable energy, in our view, were as follows:
- The report expects $10,200bn to be invested by 2040 in new electricity generation
capacity, of which 72% for renewable energy. Over this period, the annual investment
amount should average $400m, i.e. close to double what was invested in 2016.
- Wind and solar power should represent 48% of total installed capacity by 2040, vs 12%
in 2016. Installed solar capacity should be multiplied by 14, with installed wind power
quadrupling. By 2040, the penetration rate for renewable energy could reach 74% in
Germany, 38% in the US, 55% in China and 49% in India, thanks in particular to the rising
use of new, flexible solutions, such as battery-storage systems.
- The LCOE (levelised cost of energy) for solar should drop 66% by 2040, while onshore
wind power should see its LCOE fall 47% and offshore wind power’s LCOE should
plunge 71%.
Demand for electricity storage should grow quickly
The rise of renewable energy creates complicated and potentially costly issues. Integrating the
gigawatts produced by large wind or solar farms heightens grid instability and is especially
challenging to manage due to the structural time lag between when supply is generated and
when electricity is in demand.
Modernising existing electricity networks is one of the first solutions that should reduce grid
instability. Updating transport and distribution networks includes bolstering the grid in places
where there is the greatest potential to produce renewable energy, such as creating more
connections for offshore wind power.
In addition to modernising infrastructure, which could be particularly expensive for grid
operators, stabilising the networks and the rise of renewable energy also requires building up
electricity storage capacity on a large scale. Several solutions already exist – pumping/turbine
19.5%
27.3%
41.7%
31.6%
39.8%
48.6%
38.7%
45.3%
51.3%55.3%
7.5% 8.2% 9.2% 10.2% 11.4% 12.7% 12.4% 13.7% 15.2% 16.7%
5.2% 5.3% 5.9% 6.1% 6.9% 7.6% 8.2% 8.8% 10.3% 11.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Renewable Energy investments as % of total
Renewable Energies as % total installed capacity
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14 November 2017 7
stations, methanisation etc. – but are often complicated to implement, require appropriate
locations, and could potentially generate pollution.
Battery-based systems (notably lithium-ion) are currently considered the best storage solution
because they are easy to use and the cost of batteries has been rapidly declining.
The rise of battery-based storage solutions (MW)
Source: International Renewable Energy Agency
According to a 2017 report by Naviguant Research, annual deployments of large-capacity
electrical-storage solutions based on batteries should grow:
- from 1.2 GW in 2017 to 30.5 GW in 2026 for utility-scale systems, i.e. a CAGR of 44%;
- from 0.7 GW in 2017 to 19.7 GW in 2026 for systems to be used for microgrids and
distributed energy, i.e. a CAGR of 45%.
Battery-based storage systems for grids: annual deployment of new capacity (MW)
Source: Naviguant Research
245 246 290 312 345417
503620
786
1,147
1,719
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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Battery-based storage systems for microgrids and distributed energy: annual deployment of
new capacity (MW)
Source: Naviguant Research
This extremely fast growth should be driven by the growing share of renewable energy in total
electricity production as well as by the expected steep drop in the cost of these storage
solutions. In a report published in October 2017, Irena (the International Renewable Energy
Agency) expected the cost of these solutions to fall 50% to 60% by 2030 thanks to the
combined effect of: 1) the drop in components prices (economies of scale); 2) the increase in
the number of cycles and the lifespan of these batteries; and 3) a lower cost of installation.
Spread of cost cuts expected over 2016-30 (1) Spread of cost cuts expected over 2016-30 (2)
Source: International Renewable Energy Agency Source: International Renewable Energy Agency
Locations and potential applications for storage systems
Source: SG Cross Asset Research/Equity
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14 November 2017 9
EPS: innovative and proven technological solutions, that have
obtained certification
Innovative solutions
Founded by teams from the Polytechnic Universities of Turin and Milan, EPS has from the start
been a pioneer in energy storage based on hydrogen technology, and also now specialises in
the batteries segment (predominantly lithium-ion, but also NaCl, lead and lio-titanate).
The group brings added value: it provides clean, efficient and intelligent grid-support
solutions, and can generate electricity off-grid. It also:
- offers flexibility – ensuring grid reliability by supplying electricity for a limited time period
or when needed due to due to demand peaks;
- provides energy storage capacity, with only a small environmental impact, thus helping to
provide a reliable supply over a relatively long period of time.
EPS was initially positioned in self-recharging back-up systems based on hydrogen
technology, mainly for telecom operators. However, since 2015 it has repositioned into
vertically integrated energy storage solutions, with the development of HyESS, a hybrid
storage system.
HyESS primarily uses lithium-ion batteries – which can also be combined with fuel cell
technology – to increase storage capacity and power density. This system is aimed
specifically at high-power applications, responding to the needs of grid operators seeking to
stabilise frequency and voltage output without activating their coal or gas plants, or to stock
surplus power generated by wind and solar during peak generating hours. HyESS thus
transforms energy from intermittent renewable sources into a stable energy source.
The HyESS module can hooked up to the grid or can work off-grid (fuelled by solar and wind
energy, or by gas and diesel). It comprises various complex sub-systems, all developed by EPS:
- Power conversion systems, consisting of integrated bi-directional inverters, which serve as
interface between the renewable energy source, the energy storage system and the grid;
- Battery managements systems, which monitor and control all the battery technologies
integrated in HyESS;
- A master controller, which is the hardware and software that manages the energy storage
system;
- Microgrid controllers, to remotely control and manage hybrid power stations together with
the HyESS system;
- Energy Management Systems, which optimise power flow in all types of grids;
- A hydrogen module, which rounds out the battery storage to supply power capacity to
microgrids, and which completely replaces diesel generators.
Electro Power Systems
14 November 2017 10
The cost of this whole electronic and power control system (software and equipment), plus the
module assembly, is substantially higher than that of batteries used inside the HyESS units for
actual energy storage (see graph below).
Open architecture of the HyESS module
Source: Company data
A 1MW/0.5MWh HyESS unit – Breakdown of the cost price
Source: Company data
Proven, certified solutions
Since its creation, EPS has installed 36MW of microgrids and 19MW of grid-support systems
in 21 countries, representing 47MW/h in total energy storage. EPS’s systems have clocked up
20 million hours of on-site operation, providing power around the clock, seven days a week, to
165,000 people.
EPS’s systems have been approved by various global energy groups, including Enel, Endesa,
EDF-Edison, Terna, Engie, Toshiba, GE, etc., as well as by the main independent certification
bodies, including TÜV.
27%
4%
22%15%
32%
Local function & grid connection
Energy management systems
Assembly of modules
Electronic control units
Batteries
Electro Power Systems
14 November 2017 11
In July 2017, EPS successfully passed the certification audit held on its new integrated
management system by RINA, a leading global certification body, and is now compliant with
the ISO standards 9001:2015, ISO 14001:2015 and the OHSAS 18001:2007.
Patents and intellectual property
EPS’s open architecture, vertically integrated technology and knowhow in systems integration
are the fruit of over 12 years of R&D, initially conducted at the Polytechnic Universities of Turin
(hydrogen-based applications) and Milan (energy and energy conversion applications). EPS’s
knowhow would be very hard to replicate and we think this gives the company a real
competitive edge over new market entrants.
EPS has filed 125 patents and patent applications in 48 countries, and holds over 500
commercial and industrial secrets duly registered according to European rules. Recently,
following the official market launch of HyESS, the group has been:
- selected by McKinsey & Co as a major player in hybrid energy storage at the ‘Utility of the
Future Forum’ in Singapore in November 2016;
- marked out as a major player in the microgrid and minigrid markets by Bloomberg New
Energy Finance in 2017.
EPS’s intellectual property architecture
Source: company
Electro Power Systems
14 November 2017 12
Recent deployments of EPS’s solutions
While EPS’s revenues are still fairly small in absolute terms, the deployments of its solutions
described below, bear witness to the company’s technological and industrial reputation. EPS is
fast establishing itself as one of the few global companies able to offer multi-MW energy storage
solutions at grid and microgrid levels.
Most of its project wins are for EPC contracts (engineering, procurement and construction), and
mostly turnkey. This shows that EPS is capable of being the project supervisor in the delivery of
complex energy storage solutions.
In mid-September, EPS signed an EPC contract to build a storage system for Endesa’s
power station in Almeria, Spain. With installed capacity of 20MW, this energy storage system
will be by far the largest in Europe, and one of the 20 largest in the world. Only the US, Japan
and South Korea have systems as large. EPS’s HyESS system will make the power station more
flexible and more reactive to fluctuations generated by increased recourse to renewable energies
in this part of Spain. The project should be operational in June 2018.
Other deployments announced by EPS this year, include:
- A 12MW microgrid in Australia came on line in October. EPS has started operation of the
storage system related to Coober Pedy Renewable Hybrid Power Project’s microgrid in
Southern Australia. The hybrid power plant is connected to a microgrid composed of 1MW
solar panels, 4MW wind turbines and up to 6MVA generators combined with 1MW of
storage system. Over its 20-year life span, this plant will be able to cover up to 70% of the
demand, supplying the region’s inhabitants – about 1,600 people – with energy from
renewable sources.
- A 5.9MW microgrid in Somalia was commissioned in July. EPS has brought on stream a
microgrid awarded by NECSOM (National Electric Corporation of Somalia) composed of a
solar, wind and storage turnkey solution that allows diesel consumption to be reduced by
over 1 million litres per year, and reduces electricity bills by 17%.
- The world’s first 100% emission-free microgrid in the Atacama Desert (Chile) came
into operation in June 2017. Enel and EPS announced the coming on stream of the
world’s first 100% emission-free “plug-and-play” commercial-sized microgrid, powered by
solar PV as well as hydrogen-based and lithium-based storage.
- The 4.1MW microgrid in the Maldives is outperforming expectations. In February 2017,
EPS announced the performance results of its second microgrid in the Maldives. It
confirmed the reduction in CO2 and that renewables, coupled with the EPS storage system,
cover up to 63% of the resort’s power requirements. This allows diesel consumption to be
reduced by 423,000 litres per year, 50% more than expected at the time of commissioning.
- A 3MW microgrid in Tasmania was commissioned in February 2017. EPS announced
the commissioning of a hybrid storage system, in partnership with Toshiba, as part of the
Flinders Island microgrid operated by Hydro Tasmania, Australia’s largest producer of
renewable energy.
- A 1.5MW microgrid in Sardinia was commissioned in February 2017. EPS announced
the realisation of an energy-storage-system microgrid for ENAS in Sardinia. The system is
connected to the Ottana Experimental Solar Farm, which consists of a concentrated solar
power (CSP) farm, integrated with thermal storage of 14MWh in capacity and with a
concentrated photovoltaic plant (CPV).
Electro Power Systems
14 November 2017 13
The competitive landscape is still very fragmented
There are only a few companies on the relatively new market for battery-based storage
systems. As far as we know, EPS is the only listed group except of course for Tesla.
The following table first lists the main pure players on this market and then the companies that
operate almost exclusively on the North American market or for private individuals.
We would highlight the following:
- All of the pure players are small companies, none of which generate sales exceeding
€50m;
- A significant amount of M&A has taken place recently, with Total’s acquisition of Saft
(May 2016), Engie’s takeover of Green Charge Networks (May 2016), Enel’s purchase of
Demand Energy (January 2017), Wärtsilä’s acquisition of Greensmith (May 217),
Aggreko’s takeover of Younicos (July 2017), and the merger of the electricity storage
businesses of AES and Siemens (4Q17).
- The big electricity groups like ABB and Bosch also offer industrial-scale electricity storage
solutions, which up to now have not yet encountered much success;
- Fluence and Tesla’s storage systems might in the medium term emerge as serious
competitors for pure players such as EPS. We do not have many details on the potential
size and project portfolios of these two companies, but we note that:
for Tesla: developing industrial-scale storage systems does not appear to be one of their
strategic priorities, as the group is focusing mostly on electric vehicles and storage for
private individuals. However, Tesla continues to roll out its industrial storage solution,
Powerpack, on several islands and commercial sites, mostly in the US.
for Fluence: Naviguant Research currently ranks AES and Siemens Energy Management
among the global leaders for integrating energy storage. Together, these two companies
have worked on or won 48 projects totalling 463MW in storage in 13 countries, including
the largest project in the world for Lithium-ion batteries in San Diego.
Electro Power Systems
14 November 2017 14
Main companies operating exclusively in the battery-based energy storage segment
Company FY16 revenues
(€m)
FY16 EBIT (€m) Workforce Comments
Fluence (US) nc nc nc In July 2017, AES and Siemens
announced the creation of Fluence, a
50/50 held JV allowing them to operate
in the electricity storage sector
Gildemeister Energy Solutions
(Germany)
nc nc 145 Controlled by the DMG Mori group
(Germany, machine tools)
RES Group (UK) 244.0 nc 464 Renewable Energy Systems designs,
develops and operates wind farms and
solar plants. More recently it has
expanded into energy storage
RES is considered by EPS as its main
rival
Younicos (Germany) 7.8 -16.8 130 Based in Berlin and Austin (Texas)
Acquired in July 2017 by Aggreko (UK)
for $52m.
Aggreko is the world leader in temporary
power solutions: generator sets,
exchangers, etc.
Advanced Microgrid Solutions
(US)
nc nc nc Start-up specialised in the design of
solutions and software to optimise
energy storage
Operates mainly in the US
Demand Energy (US) 6.0 nc 28 Controlled by Enel (Italy)
Operates mainly in the US
Green Charge Networks (US) 7 nc 35 80% controlled by Engie
Operates mainly in the US
Greensmith Energy (US) 29.0 nc 38 Operates mainly in the US
Acquired by par Wärtsilä (Finland) in
May 2017 for €160m (source: BNEF)
Wärtsilä (revenues €4.8bn, 18,000
headcount) manufactures electricity
generators and boat engines
Sonnen (Germany) 28.7 nc 83 Specialises in storage systems for
private individuals
Stem Inc. (US) 36 nc 140 Operates mainly in the US
Sunverge Energy (US) 6.9 nc 18 Specialises in storage systems for
private individuals Source: SG Cross Asset Research/Equity
Electro Power Systems
14 November 2017 15
A highly qualified and experienced management team and
Board of Directors
The management team
Carlalberto Guglielminotti (CEO) took the helm at EPS in 2013. Prior to that, he was a
partner at 360 Capital Partners, which is EPS’s main shareholder with a 28% stake. At 360
Capital Partners, he specialised in strategic planning and the implementation and marketing of
several technological projects. He also co-founded several companies, including Blackshape
Aircraft (aerospace) and Restopolis (on-line technological platform for restaurant reservation).
Restopolis is now part of The Fork (Trip Advisor group). Carlalberto Guglielminotti also worked
for several years as an analyst for different investment banks, incl. Bank of Scotland, and as
an Associate at Linklaters law firm, where he specialised in structured financing, in particular
in the renewable energy sector.
Ilaria Rosso (Chief Innovation Officer) is co-founder of EPS. She holds a PhD in chemistry
from the University of Turin, and has devoted the last 14 years to researching various
applications for hydrogen, including fuel cells. She is also Vice-President of the European
organisation, New Energy Industry Grouping (NEW-IG). NEW-IG is the European
Commission’s sole industry partner in the programme to accelerate the adoption of fuel-cell
based technologies (2014-2020 budget €1.4bn). Ilaria Rosso has published more than 50
scientific papers and was awarded the “European Prize for Women Innovators” in 2011 by the
European Community.
Daniele Rosati (Vice President of Engineering) has been responsible for the most complex
R&D and engineering projects concerning the development of power converters, digital
controllers and integrated renewable energy systems. Responsible for the Milan-based team
of engineers and researchers, he has been in charge of the project management, resource
planning, and certification of products. He led and actively participated in the commissioning
and site testing of the most complex battery energy storage systems ever developed in
modern electrical grids (e.g. Terna). He is co-author of several international publications in the
field of Power Electronics and Renewable Energies. He is co-inventor of patents related to
Distributed Power Generation and Renewable Energies. Daniele Rosati is lecturer and visiting
professor at the Power Generation Systems, Renewable Energies and Microgrids at the
Department of Energy of Politecnico di Milano.
Giuseppe Artizzu (Executive Director, Strategy and Development) joined EPS in late 2014,
and is responsible for strategic development. Mr Artizzu has spent his entire career in the
energy sector, including ten years at Lehman Brothers (London branch) coordinating the
bank’s corporate finance activities in the European renewable energy space. He participated
in the creation of Cautha, one of the leading Italian renewable developers. Giuseppe Artizzu is
a visiting professor in the energy field at the Polytechnic School of Milan.
Andrea Rossi (Administration, Finance and Control) joined EPS in 2016, and has 20 years’
experience in the energy field. Previously, he was CFO of Global Renewables Investments, a
fund specialised in renewable energy in Europe, Africa and Asia. Andrea Rossi has also been
an analyst at Merrill Lynch and Reuters, and CFO of Segro.
Michela Costa (Executive Vice-President, Corporate Operations) coordinates the group’s HR,
Legal & Corporate Affairs and Safety & Communications departments. Michela Costa was a
senior associate at Clifford Chance, and then for ten years was General Counsel at British
Petroleum and Sorgenia – one of the main Italian energy operators.
Electro Power Systems
14 November 2017 16
Board of Directors
Massimo Prelz Oltramonti (Chairman of the Board and Independent Director) has been a
senior adviser for the investment fund GMT Communications Partners since 2004. Previously,
he was Executive Director Europe for the Advent International investment fund. During his
career in investment capital, Prelz has mounted around 20 financial operations, notably in the
telecoms and media domains, and has held seats on the boards of numerous listed
companies, including ESAT Telecom, SBS SA, Edap-Technomed and Cityfibre Holding.
Emanuela Banfi (Deputy Chairman and Independent Director) has over 20 years’ experience
in the finance sector. From 2000 to 2005 she was Executive Director at Lehman Brothers in
London (equity and debt capital markets, originating and structuring transactions), before
moving on to become Managing Director at Société Générale in Milan from 2006 to 2013. In
2015, she joined Natixis as a Senior Banker.
Cesare Maifredi (Director) is a partner at 360 Capital Partners investment fund. He was
previously senior manager at McKinsey and operated essentially in the energy sector
(renewable energies, storage, power generation). Cesare Maifredi sits on the board of
directors of around 10 companies, operating in the energy, digital and medical equipment
fields.
Sonia Levy-Odier (Independent Director) is General Secretary of Euro Formadis, a French
distance learning company, and Board Member at the HR solutions company Job & Co. Prior
to that, she was a partner at the Private Equity funds Aster, Archimedia and Cimarosa
Communications.
Davide Peiretti (Director) is financial director and member of the strategy committee at Prima
Electro (a subsidiary of the electrical components company Prima Industrie), which is currently
holds 10% of EPS’s share capital.
Carlalberto Guglielminotti, Giuseppe Artizzu and Michela Costa are also members of the
Board of Directors.
Shareholders
EPS has a stable shareholder base, which has supported the company over many years by
participating in several financing rounds. There are no double voting rights.
Shareholders
% of capital
360 Capital Partners 28%
Ersel Asset Management 14%
Prima Industrie Group 10%
Management 10%
Free float 38%
Total 100%
Source: company
- 360 Capital Partners is a Luxembourg-based venture capital firm with €300m in assets under
management. The firm invests in innovation projects in Europe, particularly in France and Italy.
- Ersel Asset Management is a Turin-based asset management company, with €7.5bn in
assets under management.
Electro Power Systems
14 November 2017 17
- Prima Industrie is an Italian group listed on the Milan stock exchange. The group specialises
in the manufacture of control systems and electronic equipment for industrial uses and is a
world leader in the field of laser cutting. Prima Industrie has a workforce of 1,700, generated
FY16 revenues of €394m, and has a market cap of €380m.
At the reserved capital increase in August 2017, management raised its stake in the company
from 3% to 10%, and to 20% if options and share purchase warrants are exercised.
Capital structure at 30/09/17, without exercise
of share purchase warrants
Capital structure at 30/09/17, if share
purchase warrants are exercised
Source: company Source: company
Earnings, cash flow and financing forecasts
Our estimates, which have not changed, include the following:
- 2017-2019 sales estimates based on the pipeline currently under negotiations (€160m, i.e.
187MW of which 52% for microgrids, 45% for grid support, and 3% for distributed
networks) and our conversations with management;
- a pace of growth in operating charges that should be much slower than sales growth,
particularly for personnel charges. EPS invested heavily in additional human resources in
2016 and 2017 (the group will employ 100 people at the end of this year) and currently
has the scope for much higher production figures than current volumes. In December
2016 EPS also inaugurated a brand new site in Turin and has enough capacity to produce
400MW/year of storage systems;
- operating breakeven which should occur at end-2017/early 2018 once production ramps
up. In terms of free cash flow, breakeven should be reached in 2H18. We expect EPS to
generate a positive net profit as of 2018, with a rapid improvement in profitability
thereafter. Our 2017-2019 estimates are very similar to the Factset consensus forecasts
(four analysts).
- rapid order book and sales growth should thus mean an increase in the WCR, with net
debt of €7.2m in 3Q (€6.0m in 1H, €8.0m estimated for year-end). As a reminder, in April
2017 EPS obtained a €30m loan (some of which is still untapped) from the European
Investment Bank as part of the European Funds Strategic Investment programme. As
cash burn is currently close to €400k/month, this loan provides security for the ramp-up
of EPS’s business in the coming years.
360 Capital
Partners28%
Ersel A.M.14%
Prima Industrie
10%
Management10%
Free float38%
360 Capital
Partners24%
Ersel A.M.12%
Prima Industrie
9%Management
20%
Free float35%
Electro Power Systems
14 November 2017 18
2014 to 2019e earnings trend
€m 2014 2015 2016 2017e 2018e 2019e
Sales 1.6 0.6 7.3 16.0 29.0 38.0
EBITDA -1.6 -3.1 -4.0 -0.5 5.2 8.7
EBITDA margin ns ns ns -3.1% 17.9% 22.9%
Amort. & provisions 0.0 0.0 -1.5 -2.0 -2.0 -2.0
Stock options & warrants 0.0 -4.6 -3.0 0.0 0.0 0.0
EBITA -1.6 -7.7 -8.5 -2.5 3.2 6.5
EBITA margin ns ns ns -15.6% 11.0% 17.1%
Financial result 0.0 0.0 -0.1 -0.4 -0.7 -0.7
Exceptionals 0.0 -2.9 0.0 -2.0 -1.0 -1.0
Taxes -0.1 0.0 0.0 0.0 0.0 0.0
Equity-accounted associates 0.0 0.0 0.0 0.0 0.0 0.0
Net profit -1.7 -10.6 -8.6 -4.9 1.5 4.8
Minorities 0.0 0.0 0.0 0.0 0.0 0.0
Attributable net profit -1.7 -10.6 -8.6 -4.9 1.5 4.8
Number of shares (average), m 5.173 7.882 7.956 8.235 8.440 8.440
EPS (€) -0.33 -0.98 -1.08 -0.35 0.30 0.69
Source: company, SG Cross Asset Research/Equity estimates
SG estimates vs the consensus
€m 2017e 2018e 2019e
Sales
SGe 16.0 29.0 38.0
Consensus 15.6 29.0 39.3
% difference 3% 0% -3%
EBITDA
SGe -0.5 5.2 8.7
Consensus -0.5 4.3 8.3
% difference 0% 21% 5%
EBIT
SGe -2.5 3.2 6.5
Consensus -2.6 3.2 6.5
% difference -4% 0% 0%
EPS (€)
SGe -0.35 0.30 0.69
Consensus -0.35 0.30 0.69
% difference 0% 0% 0%
Source: Factset, SG Cross Asset Research/Equity
Electro Power Systems
14 November 2017 19
Free cash flow trend from 2014 to 2019e
€m 2014 2015 2016 2017e 2018e 2019e
EBITDA -1.6 -3.1 -4.0 -0.5 5.2 8.7
- Financial charges 0.0 0.0 -0.1 -0.4 -0.7 -0.7
- Taxes -0.1 0.0 0.0 0.0 0.0 0.0
Other 0.0 -3.1 0.0 0.0 0.0 0.0
Cash flow before the change in WCR -1.7 -6.2 -4.1 -0.9 4.5 8.0
Change in WCR -3.0 -2.5 0.8 -2.9 -2.3 -1.4
Cash flow from operations -4.7 -8.7 -3.3 -3.8 2.2 6.6
Capex 0.0 -1.4 -5.2 -3.5 -4.0 -5.0
(net of disposals)
Free cash flow -4.7 -10.1 -8.5 -7.3 -1.8 1.6
Financial investments 0.0 0.0 0.0 0.0 0.0 0.0
(net of disposals)
Cash flow from investments -4.7 -10.1 -8.5 -7.3 -1.8 1.6
Capital increases 0.0 17.9 0.0 1.4 0.0 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0
Other 3.1 0.8 0.0 0.0 0.0 0.0
Cash flow from financial activities 3.1 18.7 0.0 1.4 0.0 0.0
Free cash flow after
financial activities and
investments
-1.6 8.6 -8.5 -5.9 -1.8 1.6
Source: company, SG Cross Asset Research/Equity estimates
Valuation
We have chosen to value EPS using a DCF. This is, in our view, the most appropriate
approach given the absence of directly comparable peers and EPS’s ‘early stage’ profile.
We raise our TP from €13.0 to €18.5, assuming a WACC of 9.0% (vs 10.0% previously) to
factor in rapid improvement in visibility on the business development and the financing of
capex and WCR. We make no change to our FY17-19 estimates, or to our FCF perpetual
growth assumption (3%).
Operating FCF forecasts
€m 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e
Revenues 29.0 38.0 47.1 58.4 72.5 83.3 95.8 110.2 126.7 145.7 167.6
EBIT 3.2 6.5 8.1 10.0 12.4 15.0 17.2 19.8 22.8 26.2 30.1
% of sales 11.0% 17.1% 17.2% 17.1% 17.1% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%
+ Depreciation and Provisions 2.0 2.2 2.7 3.4 4.2 6.7 7.7 8.9 10.2 11.7 13.5
- Tax 0.0 0.0 0.0 0.0 0.0 -4.5 -5.2 -5.9 -6.8 -7.9 -9.0
- Capex -4.0 -5.0 -6.2 -7.7 -9.5 -6.6 -7.6 -8.8 -10.1 -11.6 -13.3
+/- WCR -2.3 -1.4 -1.7 -2.2 -2.7 -1.7 -1.9 -2.2 -2.5 -2.9 -3.4
Operating FCF -1.1 2.3 2.9 3.5 4.4 8.9 10.2 11.8 13.6 15.5 17.9
Discounting rate 0.92 0.84 0.77 0.71 0.65 0.60 0.55 0.50 0.46 0.42 0.39
Discounted FCF -1.0 1.9 2.2 2.5 2.9 5.3 5.6 5.9 6.3 6.5 7.0
Source: SG Cross Asset Research/Equity
Electro Power Systems
14 November 2017 20
DCF assumptions
Valuation (€m) Weighted average cost of capital (%)
Enterprise value 164 Risk-free rate (10 year bond yield) 0.8%
o/w forecast period 28.0% Market risk premium 3.6%
o/w terminal value 72.0% Beta 2.4
Cost of capital 9.4%
Net debt (-)/cash (+) -8
- Minorities 0 Cost of debt after tax 2.8%
+ Value of associates 0
+ Value of marketable securities 0 WACC 9.0%
+/- Other adjustments 0
Normalised revenue growth 15.0%
Normalised EBIT margin 26.0%
Value of equity (DCF) 156 Normalised cash conversion rate 89.0%
DCF SG: value/share (€) 18.5 Perpetual growth rate 3.0%
Source : SG Cross Asset Research/Equity
The table below shows our estimate of EPS’s value per share using various assumptions for
the discount rate and the operating FCF perpetual growth rate (i.e. beyond 2028).
Sensitivity to assumptions for WACC and FCF growth to perpetuity
Growth in FCF to perpetuity/WACC 8.0% 8.5% 9.0% 9.5% 10.0%
1.5% 19.0 17.1 15.5 14.1 12.9
2.0% 20.3 18.2 16.4 14.8 13.5
2.5% 21.8 19.4 17.4 15.7 14.2
3.0% 23.5 20.8 18.5 16.6 15.0
3.5% 25.7 22.5 19.9 17.7 15.9
4.0% 28.5 24.6 21.5 19.0 16.9
Source: SG Cross Asset Research/Equity
These figures raise the following comments:
- Given: i) the risk-free rate (0.8%); ii) the current market risk premium (3.6%); and iii)
estimated balance sheet debt of €8m at 31/12/2017, the WACC (9%) used to value EPS
corresponds to a beta of 2.4x. In our view, this beta level fully reflects the degree of risk
associated with an investment in the company.
- EPS’s discounted terminal value represents between 70% and 80% of its enterprise
value, based on all of assumptions we apply.
Electro Power Systems
14 November 2017 21
Electro Power Systems Sales/division 16
EBIT/division 16
Sales/region 16
Major shareholders (%)
Free float 38.0
360 Capital Partners 28.0
Ersel Asset Management 14.0
Prima Electro S.p.A. 10.0
Management 10.0
Valuation (€m) 12/12 12/13 12/14 12/15 12/16 12/17e 12/18e 12/19e
No. of shares basic year end/outstanding 5.17 5.17 5.17 7.88 8.03 8.44 8.44 8.44
Share price: avg (hist. yrs) or current 6.43 5.31 13.6 13.6 13.6
Average market cap. (SG adjusted) (1) NA NA NA 51 43 115 115 115
Restated net debt (-)/cash (+) (2) 2 0 -1 -9 1 8 10 8
Value of minorities (3) 0 0 0 0 0 0 0 0
Value of financial investments (4) 0 0 0 0 0 0 0 0
Other adjustment (5) 0 0 0 0 0 0 0 0
EV = (1) - (2) + (3) - (4) + (5) NA NA NA 59 42 107 105 107
P/E (x) NA NA NA NM NM NM 46.0 19.8
Price/cash flow (x) NA NA NA NM NM NM 52.2 17.4
Price/free cash flow (x) NA NA NA NM NM NM NM 71.8
Price/book value (x) NA NA NA 4.09 7.68 44.9 28.7 13.1
EV/revenues (x) NA NA NA 99.1 5.73 6.68 3.62 2.82
EV/EBITDA (x) NA NA NA NM NM NM 20.2 12.3
Dividend yield (%) NA NA NA 0.0 0.0 0.0 0.0 7.3
Per share data (€)
SG EPS (adj.) -2.63 -0.48 -0.33 -0.98 -1.08 -0.35 0.30 0.69
Cash flow -1.66 0.17 -0.91 -1.10 -0.41 -0.46 0.26 0.78
Book value -0.77 -0.60 0.097 1.57 0.69 0.30 0.47 1.04
Dividend 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00
Income statement (€m)
Revenues 1.60 1.30 1.60 0.60 7.30 16.0 29.0 38.0
Gross income -3.90 -2.40 -1.60 0.50 3.20 7.50 14.2 19.7
EBITDA -3.90 -2.40 -1.60 -3.10 -4.00 -0.50 5.20 8.70
Depreciation and amortisation -2.80 0.00 0.00 -4.60 -4.50 -2.00 -2.00 -2.20
EBIT -6.70 -2.40 -1.60 -7.70 -8.50 -2.50 3.20 6.50
Impairment losses 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net interest income -0.10 -0.10 0.00 0.00 -0.10 -0.40 -0.70 -0.70
Exceptional & non-operating items 0.00 0.00 0.00 -2.90 0.00 -2.00 -1.00 -1.00
Taxation 0.00 0.00 -0.10 0.00 0.00 0.00 0.00 0.00
Minority interests 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Reported net income -6.80 -2.50 -1.70 -10.6 -8.60 -4.90 1.50 4.80
SG adjusted net income -6.80 -2.50 -1.70 -7.70 -8.60 -2.90 2.50 5.80
Cash flow statement (€m)
EBITDA -4 -2 -2 -3 -4 -1 5 9
Change in working capital 0 3 -3 -3 1 -3 -2 -1
Other operating cash movements 0 0 0 -3 0 0 -1 -1
Cash flow from operating activities -4 1 -5 -9 -3 -4 2 7
Net capital expenditure -1 0 0 -1 -5 -4 -4 -5
Free cash flow -5 1 -5 -10 -9 -7 -2 2
Cash flow from investing activities 0 0 0 0 0 0 0 0
Cash flow from financing activities 3 1 3 19 0 1 0 0
Net change in cash resulting from CF -2 2 -2 9 -9 -6 -2 2
Balance sheet (€m)
Total long-term assets 0 0 0 2 6 8 10 12
of which intangible 0 0 0 1 5 7 8 9
Working capital 0 -3 0 2 2 5 7 8
Employee benefit obligations 0 0 0 0 0 0 0 0
Shareholders' equity -2 -3 1 12 6 3 4 9
Minority interests 0 0 0 0 0 0 0 0
Provisions 0 0 0 0 0 0 0 0
Net debt (-)/cash (+) -1 0 1 8 3 5 2 4
Accounting ratios
ROIC (%) NM 146.1 80.0 -269.5 -107.2 -18.0 15.7 -11.0
ROE (%) NM NM NM -164.3 -96.1 -122.5 46.2 75.0
Gross income/revenues (%) -243.8 -184.6 -100.0 83.3 43.8 46.9 49.0 51.8
EBITDA margin (%) -243.8 -184.6 -100.0 -516.7 -54.8 -3.1 17.9 22.9
EBIT margin (%) NM NM NM NM NM NM 11.0 17.1
Revenue yoy growth (%) NA -18.8 23.1 -62.5 NM NM 81.3 31.0
Rev. organic growth (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBITDA yoy growth (%) NA 38.5 33.3 -93.8 -29.0 87.5 NM 67.3
EBIT yoy growth (%) NA 64.2 33.3 NM -10.4 70.6 NM NM
EPS (adj.) yoy growth (%) NA 81.6 32.0 -197.3 -10.7 67.4 184.1 132.0
Dividend growth (%) NA NA NA NA NA NA NA NA
Cash conversion (%) 70.1 nm nm 131.2 98.8 nm nm 35.4
Net debt/equity (%) NM 3 NM NM NM NM NM NM
FFO/net debt (%) 166.7 NM NM NM 455.6 11.3 NM NM
Dividend paid/FCF (%) NM NM NM NM NM NM NM NM
Source: SG Cross Asset Research/Equity
Products 64.0%
Services 36.0%
Products 64.0%
Services 36.0%
Italy 81.0%
North. America 18.0%
Others 0.9%
W. Europe 0.1%
Electro Power Systems
14 November 2017 22
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14 November 2017 23
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Electro Power Systems
14 November 2017 24
Report completed on 14 Nov. 2017 14:16 CET
APPENDIX
COMPANIES MENTIONED
ABB (ABBN VX, Hold)
AES Corporation (AES UN, No Reco)
Banca Popolare di Milano (PMI IM, No Reco)
Banco Santander (SAN SM, Buy)
Bank of Scotland (, No Reco)
Bosch (BOSH.NS, No Reco)
Credit Agricole Group (ACA FP, No Reco)
Davide Campari-Milano S.p.A. (CPR IM, Buy)
DMG Mori (GILD.DE, No Reco)
DPL Inc. (DPL.N, No Reco)
EDAP TMS (EDAP US, No Reco)
EDF (EDF FP, Buy)
Edison SpA (EDN IM, No Reco)
Electro Power Systems (EPS FP, Buy)
Endesa SA (ELE SM, Buy)
Enel (ENEL IM, Buy)
Enel Finance International SA (nocode400, No Reco)
Enel Green Power (EGPW IM, No Reco)
Engie (ENGI FP, Hold)
European Investment Bank (nocode736, No Reco)
Fossil (FOSL.OQ, No Reco)
General Electric (GE US, No reco)
Hispania Activos Inmobiliarios (HIS SM, Buy)
Interface Inc (TILE.OQ, No Reco)
Lehman Brothers Holdings Inc (LEHMQ US, No Reco)
LION (, No Reco)
McKinsey (, No Reco)
Merrill Lynch (MER US, No Reco)
National Grid (NG/ LN, No reco)
Natixis (KN FP, Hold)
Saft (SAFT FP, No reco)
Samsung Electronics Co Ltd (005930 KS, No Reco)
Segro PLC (SGRO LN, Buy)
Siemens (SIE GR, Buy)
Sorgenia (, No Reco)
Terna (TRN IM, Hold)
Tesla Motors Inc (TSLA.O, No Reco)
Thomson Reuters (TRIL LN, No Reco)
Toshiba (, No Reco)
Wärtsilä (, No Reco)
ANALYST CERTIFICATION
The following named research analyst(s) hereby certifies or certify that (i) the views expressed in the research report accurately reflect his or
her or their personal views about any and all of the subject securities or issuers and (ii) no part of his or her or their compensation was, is, or
will be related, directly or indirectly, to the specific recommendations or views expressed in this report: Jean Michel Belanger
The analyst(s) who author research are employed by SG and its affiliates in locations, including but not limited to, Paris, London, New York,
Hong Kong, Tokyo, Bangalore, Frankfurt, Madrid, Milan, Seoul and Warsaw.
Electro Power Systems
14 November 2017 25
Historical Price: Electro Power Systems (EPS.PA) 2014/2015 Change 2016/2017 Change (Paris time)
22/05/15 New Rating: No Reco 16/11/16 07:22 New Target: 8.2
08/06/15 New Rating: Buy 28/03/17 07:26 New Target: 8.8
08/06/15 New Target: 9.4 22/09/17 07:36 New Target: 13.0
13/11/15 New analyst : Jean
Michel Belanger
Source: SG Cross Asset Research/Equity
VALUATION METHODOLOGY AND RISKS TO RATING, RECOMMENDATION AND PRICE TARGET
Valuation Methodology Electro Power Systems
Our target price is derived from a DCF, with a WACC of 9.0% (beta of 2.4x), a normalised EBITDA margin of 26% and a perpetuity growth rate
of 3.0%.
Risks
1) Length of the sales cycle (usually spans between one and two years); 2) End-customer resistance to technological changes; 3) Depletion of
the company's cash reserves. We estimate current cash burn (based on 2017 revenues) at around €400k/month, and EPS' net cash position
at end 2017 at €-8m.
SG EQUITY RESEARCH RATINGS on a 12 month period
BUY: absolute total shareholder return forecast of 15% or more
over a 12 month period.
HOLD: absolute total shareholder return forecast between 0%
and +15% over a 12 month period.
SELL: absolute total shareholder return forecast below 0% over a
12 month period.
Total shareholder return means forecast share price appreciation
plus all forecast cash dividend income, including income from
special dividends, paid during the 12 month period. Ratings are
determined by the ranges described above at the time of the
initiation of coverage or a change in rating (subject to limited
management discretion). At other times, ratings may fall outside of
these ranges because of market price movements and/or other
short term volatility or trading patterns. Such interim deviations
from specified ranges will be permitted but will become subject to
review by research management.
Sector Weighting Definition on a 12 month period:
The sector weightings are assigned by the SG Equity Research
Strategist and are distinct and separate from SG equity research
analyst ratings. They are based on the relevant MSCI.
OVERWEIGHT: sector expected to outperform the relevant broad
market benchmark over the next 12 months.
NEUTRAL: sector expected to perform in-line with the relevant
broad market benchmark over the next 12 months.
UNDERWEIGHT: sector expected to underperform the relevant
broad market benchmark over the next 12 months.
The Preferred and Least preferred stocks are selected by the
covering analyst based on the individual analyst’s coverage
universe and not by the SG Equity Research Strategist.
Equity rating and dispersion relationship
Source: SG Cross Asset Research/Equity
3
5
7
9
11
13
15
17
05/15 08/15 11/15 02/16 05/16 08/16 11/16 02/17 05/17 08/17
Price Target MA100 Change Reco
43% 44%
13%25% 22%
19%
0
50
100
150
200
250
300
Buy Hold Sell
Updated on 02/11/17
Companies Covered Cos. w/ Banking Relationship
Electro Power Systems
14 November 2017 26
All pricing information included in this report is as of market close, unless otherwise stated.
MSCI DISCLAIMER: The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without
prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or
used to create any financial products, including any indices. This information is provided on an “as is” basis. The user assumes the entire
risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the
information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular
purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any
third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan
Stanley Capital International and the MSCI indexes are service marks of MSCI and its affiliates or such similar language as may be
provided by or approved in advance by MSCI.
IMPORTANT DISCLOSURES
AES Corporation SG acted as passive bookrunner in AES Corp.'s bond issue.
Banco Santander SG acted as Joint Bookrunner in Santander Consumer Finance's Bond issue (EUR; Senior, 5yr)
Banco Santander SG acted as joint-bookrunner in Banco Santander's rights issue.
Banco Santander SG acted as sell side advisor in Hune's diposal by Santander and Bank of America.
Banco Santander SG acted as Joint Bookrunner and Joint Lead Manager in Santander Bond issue (EUR;PerpNC5;RegS;Tier 1).
EDF SG acted as Financial advisor to EDF in the disposal of its stake in EDF Polska (exclusing Rybnik) and Zec
Kogeneracja.
EDF SG acted as financial advisor in the potential acquisition of Areva NP by EDF.
EDF SG acted as Joint Global Coordinator in EDF's right issue
EDF SG acted as Joint Bookrunner in the disposal of EdF shares (ABB) by APE.
Enel SG acted as joint bookrunner in Enel's bond issue (5y, 10y, 30y, USD).
Engie SG is acting as financial advisor to Engie for the disposal of LNG business to Total
Engie SG acted as joint bookrunner in the disposal of Engie's stakes by Government of France (APE).
Engie SG acted as sole global coordinateur and joint bookrunner in Engie's tender offer (FR0011289230, FR0000472334,
FR0010678185, FR0010709451, FR0010721704, FR0010952770, FR0011261924) and joint dealer manager and
structuring advisor in the new bonds issue (EUR, 7-11yr).
European Investment
Bank
SG is acting as as Joint Lead Manager in European investment Bank's bond tap issue (The EUR1.35Bn, 0%, 15
March 2024 ISIN XS1515245089).
European Investment
Bank
SG acted as co-lead manager on EIB's bond increase on the EUR 3.2bn, 0.375%, 15 March 2022 fixed rate.
European Investment
Bank
SG acted as Joint Lead Manager in European investment Bank's bond tap issue (PLN 2.75% Aug 2026, ISIN:
XS1492818866).
European Investment
Bank
SG is acted as Joint Bookrunner in EIB's bond issue (EUR, 15y).
European Investment
Bank
SG acted as joint lead manager in EIB's bond issue (PLN, 7y).
European Investment
Bank
SG acted as joint lead manager in EIB's TAP issue (XS1515245089)(EUR,Feb 2024).
European Investment
Bank
SG acted as joint lead manager in EIB's bond issue (TAP XS1107718279, EUR, Nov 2026).
European Investment
Bank
SG acted as joint lead manager in EIB's bond issue (10yr, PLN).
General Electric SG acted as buy-side adviser to Suez for the acquisition of GE Water, sold by General Electric.
General Electric SG provided bridge loan financing to Suez for the acquisition of GE Water, sold by General Electric.
General Electric SG acted as co-manager in General Electric Capital's bond issue
Terna SG acted as joint bookrunner in Terna's bond issue (EUR, Senior, RegS, 12yr)
During the past 12 months, SG and/or its affiliate(s) received compensation for products and services other than investment banking related
services, or had a non-investment banking, non-securities services related client relationship: ABB, Banca Popolare di Milano, Banco
Santander, Credit Agricole Group, Davide Campari-Milano S.p.A., EDF, Electro Power Systems, Endesa SA, Enel Finance International SA,
Enel Green Power, Enel, Engie, European Investment Bank, General Electric, Lehman Brothers Holdings Inc, Merrill Lynch, National Grid,
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SG and its affiliates beneficially own 1% or more of any class of common equity of Banco Santander, Engie, Terna.
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Electro Power Systems
14 November 2017 27
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Electro Power Systems
14 November 2017 28
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