Public Power Corporation AXIA Research Page 1 PPC S.A. Utilities / Greece Reuters/Bloomberg: DEHr.AT / PPC GA April 18 th , 2016 Important decisions ahead Rating Neutral vs. previous rating Sell Over the next couple of months PPC is going to face significant decisions. With energy market reforms being an important part of first review agenda of the negotiations between the Greek government and the international creditors, the final decisions are expected to provide clarity on PPC’s short to medium term outlook and tackle some very important issues for the company (IPTO privatization, sale of generation plants, sale of State’s stake). With the issues at stake being crucial for the company and given the very limited visibility at this point, we adjust our estimates and eventually lower our TP to EUR 2.90/sh. (from EUR 3.70/sh. previously). Given the significant decline in the stock price since our previous report we now apply a Neutral recommendation on PPC remaining though on the cautious side. Significant details were included in the “leaked” documents of the EU Commission on the outlook of the first review process: IPTO spin-off and privatization. Timetable calls for the completion of the transaction by end 2016. Recall that the plan foresees the State to acquire a 51% stake in IPTO and at least 20% to be sold to a strategic investor and the rest floated at the stock exchange. If the institutions see lack of progress in this plan then the sale of 100% of IPTO to private investors will come into the table again. Sale of generation plants. NOME electricity auctions need to be launched in 2016 lowering PPC’s stake in retail and wholesale market to 50% by 2020. If this does not have the targeted effect, then PPC would have to proceed to the sale of 40% of its active generation plants (c5.0GW) announcing that the sale will be concluded in 2017. VAT on electricity bills. To our view this is the most worrying issue, with the note calling for an increase in electricity VAT to 23% from 13% currently. With PPC focusing on tackling arrears formation, a potential increase in VAT combined with the adjustments in the personal income tax and the lowering of a number of pensions due to fiscal consolidation would burden the company’s efforts. PPC results for 2015 have been burdened by a significant increase in arrears leading to increased provision charges. The company reported losses of EUR 102.5m (vs. profits of EUR 91.3m in 2014), with total provisions increasing to EUR 950.4m vs. EUR 431.1m in 2014. We lower our EBITDA estimates for 2016-17 by 7.6% and 6.3% respectively assuming a more aggressive decline in PPC’s retail market shares and pressured pricing, while we also take a more cautious stance over arrears formation given the expected burden on households’ from the new fiscal measures. For 2016 we expect an EBITDA of EUR 984.9m (+18.4% y-o-y), with net profits seen at EUR 36.9m (vs. losses in 2015). Going forward, note that we currently maintain IPTO in our group estimates, with 2017 EBITDA seen at EUR 1,0359m (+5.2% y-o-y) and net income at EUR 61.7m (+69.9% y-o-y). Note that if we consider the curve out of IPTO as of 31-Dec-2016 according to the proposed scheme by the ministry of Energy, PPC EBITDA in 2017 should settle at EUR 846.6m and net income at EUR 26.4m. In respect of liquidity, PPC parent company is facing maturities of cEUR 300m in 2016 and cEUR 600m in 2017 (including EUR 200m bond redemption), while capex is expected to pick up pace and reach cEUR 941m in 2016. We believe the company’s available credit lines for the Ptolemaida project, the operational FCF of cEUR 2.0bn in 2016-17 (cumulative) and the available cash stock (EUR 580m at end-15) will be sufficient to service the company’s obligations. Regarding valuation we now apply a DCF method, with a 50% weight, and a peer comparison with a weight of 50% (target EV/EBITDA). Our valuation method yields a TP of EUR 2.90/sh. implying a potential downside of 2.0% at current levels. Note that in our valuation we do not consider the curve-out of IPTO that depending of the considered scheme could be either value destructive or neutral for PPC (or either accretive based on valuation). EUR m 2014 2015 2016e 2017f Revenues 5,863.66 5,735.66 5,418.14 5,221.96 EBITDA 1,022.1 828.4 984.9 1,035.9 Net Income 91.3 (102.5) 36.3 61.7 EPS 0.39 (0.44) 0.16 0.27 P/E 7.5 x n.m. 18.9 x 11.1 x EV/EBITDA 6.1 x 6.8 x 5.7 x 5.6 x Net Debt/EBITDA 4.8 x 5.7 x 5.0 x 4.9 x Axia Ventures Group - 4 Vas. Sofias Ave., 10674 Athens Greece, Tel: +30 210 7414400, Fax: +30 210 7414449, Web: www.axiavg.com Please refer to the last page for disclosures and analyst certification Target Price (EUR) 2.90 Previous TP 3.70 Current Share Price* (EUR) 2.96 *15 /04/ 2016 Stock Data Market Cap (EUR m) 686.7 Free Float 49% EV (EUR m) 5.599 Num. of Shares (m) 232.0 Performance 1m 3m 12m Absolute (%) 2.8 -10.6 -39.1 ASE General (Abs) 4.8 5.8 -21.2 Day avg. no traded shr (k-12m) 577 Price high-12 m (EUR) 6.00 Price low-12m (EUR) 2.34 PPC is the leading producer and supplier of electricity in Greece with c7.5 million customers, representing 98% of the Greek electricity market. PPC’s current generation portfolio consists of conventional thermal and hydroelectric power plants, as well as RES units, accounting for c67% of the total installed capacity in the country. Shareholders: Greek State 51.12%, Silchester International 13.8% Analysts: Constantinos Zouzoulas [email protected]+30 210 7424460 Argyrios Gkonis [email protected]+30 210 7424462 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 PUBLIC POWER CORPORATION S.A. ATHEX Composite Index (Rebased)
Transcript
Public Power Corporation
AXIA Research Page 1
PPC S.A. Utilities / Greece
Reuters/Bloomberg: DEHr.AT / PPC GA
April 18th , 2016
Important decisions ahead
Rating Neutral vs. previous rating Sell
Over the next couple of months PPC is going to face significant decisions. With energy market reforms being an
important part of first review agenda of the negotiations between the Greek government and the international
creditors, the final decisions are expected to provide clarity on PPC’s short to medium term outlook and tackle
some very important issues for the company (IPTO privatization, sale of generation plants, sale of State’s stake).
With the issues at stake being crucial for the company and given the very limited visibility at this point, we
adjust our estimates and eventually lower our TP to EUR 2.90/sh. (from EUR 3.70/sh. previously). Given the
significant decline in the stock price since our previous report we now apply a Neutral recommendation on PPC
remaining though on the cautious side.
Significant details were included in the “leaked” documents of the EU Commission on the outlook of the
first review process:
IPTO spin-off and privatization. Timetable calls for the completion of the transaction by end 2016.
Recall that the plan foresees the State to acquire a 51% stake in IPTO and at least 20% to be sold to a
strategic investor and the rest floated at the stock exchange. If the institutions see lack of progress in
this plan then the sale of 100% of IPTO to private investors will come into the table again.
Sale of generation plants. NOME electricity auctions need to be launched in 2016 lowering PPC’s stake
in retail and wholesale market to 50% by 2020. If this does not have the targeted effect, then PPC
would have to proceed to the sale of 40% of its active generation plants (c5.0GW) announcing that the
sale will be concluded in 2017.
VAT on electricity bills. To our view this is the most worrying issue, with the note calling for an
increase in electricity VAT to 23% from 13% currently. With PPC focusing on tackling arrears formation,
a potential increase in VAT combined with the adjustments in the personal income tax and the
lowering of a number of pensions due to fiscal consolidation would burden the company’s efforts.
PPC results for 2015 have been burdened by a significant increase in arrears leading to increased
provision charges. The company reported losses of EUR 102.5m (vs. profits of EUR 91.3m in 2014), with
total provisions increasing to EUR 950.4m vs. EUR 431.1m in 2014.
We lower our EBITDA estimates for 2016-17 by 7.6% and 6.3% respectively assuming a more aggressive
decline in PPC’s retail market shares and pressured pricing, while we also take a more cautious stance over
arrears formation given the expected burden on households’ from the new fiscal measures. For 2016 we
expect an EBITDA of EUR 984.9m (+18.4% y-o-y), with net profits seen at EUR 36.9m (vs. losses in 2015).
Going forward, note that we currently maintain IPTO in our group estimates, with 2017 EBITDA seen at EUR
1,0359m (+5.2% y-o-y) and net income at EUR 61.7m (+69.9% y-o-y). Note that if we consider the curve out
of IPTO as of 31-Dec-2016 according to the proposed scheme by the ministry of Energy, PPC EBITDA in
2017 should settle at EUR 846.6m and net income at EUR 26.4m.
In respect of liquidity, PPC parent company is facing maturities of cEUR 300m in 2016 and cEUR 600m in
2017 (including EUR 200m bond redemption), while capex is expected to pick up pace and reach cEUR 941m
in 2016. We believe the company’s available credit lines for the Ptolemaida project, the operational FCF of
cEUR 2.0bn in 2016-17 (cumulative) and the available cash stock (EUR 580m at end-15) will be sufficient to
service the company’s obligations.
Regarding valuation we now apply a DCF method, with a 50% weight, and a peer comparison with a weight
of 50% (target EV/EBITDA). Our valuation method yields a TP of EUR 2.90/sh. implying a potential downside
of 2.0% at current levels.
Note that in our valuation we do not consider the curve-out of IPTO that depending of the considered
scheme could be either value destructive or neutral for PPC (or either accretive based on valuation).
EUR m 2014 2015 2016e 2017f
Revenues 5,863.66 5,735.66 5,418.14 5,221.96
EBITDA 1,022.1 828.4 984.9 1,035.9
Net Income 91.3 (102.5) 36.3 61.7
EPS 0.39 (0.44) 0.16 0.27
P/E 7.5 x n.m. 18.9 x 11.1 x
EV/EBITDA 6.1 x 6.8 x 5.7 x 5.6 x
Net Debt/EBITDA 4.8 x 5.7 x 5.0 x 4.9 x Axia Ventures Group - 4 Vas. Sofias Ave., 10674 Athens Greece, Tel: +30 210 7414400, Fax: +30 210 7414449, Web: www.axiavg.com Please refer to the last page for disclosures and analyst certification
Target Price (EUR) 2.90
Previous TP 3.70
Current Share Price* (EUR) 2.96
*15 /04/ 2016
Stock Data
Market Cap (EUR m) 686.7
Free Float 49%
EV (EUR m) 5.599
Num. of Shares (m) 232.0
Performance 1m 3m 12m
Absolute (%) 2.8 -10.6 -39.1
ASE General (Abs) 4.8 5.8 -21.2
Day avg. no traded shr (k-12m) 577
Price high-12 m (EUR) 6.00
Price low-12m (EUR) 2.34
PPC is the leading producer and supplier of electricity in Greece with c7.5 million customers, representing 98% of the Greek electricity market. PPC’s current generation portfolio consists of conventional thermal and hydroelectric power plants, as well as RES units, accounting for c67% of the total installed capacity in the country.
EBITDA 828.4 984.9 1,035.9 1,051.7 Source: the Company, AXIA research
In respect of upcoming maturities PPC is facing expiration at a parent level (ex. IPTO) of
EUR 300m in 2016 and EUR 600m in 2017 (including EUR 200m bond redemption). IPTO,
as disclosed in its financial statements is in advanced negotiations to refinance the bulk of
its short term debt amounting to cEUR 370m, while it is facing some small maturities over
the coming years related mostly to EIB.
At the same time capex is expected to pick up its pace approaching EUR 1.0bn mark p.a. as
the construction of the new lignite unit is ongoing.
We believe the company’s available credit lines for Ptolemaida project (cEUR 600m), EIB
lines for transmission and distribution projects (of about EUR 450m), operational FCF of
cEUR 2.0bn in 2016-17 (cumulative) and available cash stock (EUR 580m at end-15) will be
sufficient to service the company’s obligations.
Nevertheless we have to note that any further deterioration in unpaid bills would create
significant challenges to the company.
Table 3. PPC parent (ex. IPTO) maturities
EUR m 2016 2017 2018 2019
EIB 150 150 150 150
GR Banks 150 150 100 1,200
Bonds
200
700
Other
100
Total 300 600 250 2,050 Source: AXIA Research, The Company
Public Power Corporation
AXIA Research Page 4
PPC on the program review
In the beginning of the previous week an EU Commission draft document was “leaked” to
the press containing some critical insights on the key agenda issues of the first program
review between the government and its international creditors. With energy market
reform being discussed at the document we note some significant highlight’s concerning
PPC.
1. Privatization process of IPTO (high voltage grid operator)
The EU commission plan calls for the submission of a detailed action plan and a timetable
according to the appointed independent advisors consultation, for the full unbundling of
IPTO from PPC to be completed by end 2016. In this context in this context, the expression
of interest for the sale of at least 20% of IPTO to a private investor will be launched by
June 2016.
Importantly the draft document provides that should the Institutions, having consulted
the Greek authorities, determine that there is lack of sufficient progress to complete this
process within 2016 (in particular in relation to the identification of and purchase by the
strategic investor), the Hellenic Republic will announce by October 2016 the date of
submission of binding offers for the sale of all its shares in IPTO by December 2016, and
will fully privatize IPTO in 2017.
Recall that the draft plan of the Ministry of Energy released in late 2015 provides for the
State to acquire at a first step 100% of IPTO (most likely the stake will be transferred the
new privatization fund that will be used as a vehicle). At a second stage at least 20% of the
IPTO will be sold to a private strategic investor (a foreign company preferably with
exposure on grid operators-TSO), while a stake up to 29% will be listed on the stock
exchange. The remaining 51% will be maintained under State control.
Yet the draft note does not provide any further details on the crucial issue of PPC’s
compensation from the transaction that depending on the structure could be either value
accretive of destructive.
According to the initial scheme the payments to PPC will be handled by the State. PPC’s
compensation will come in two steps from: i) the funds raised through the sale of the 20%
to the strategic investor and the 29% that will be listed in the stock market; and ii)
directing IPTO’s profitability top PPC.
A key concern remains the timing of the payments to PPC. Apparently the company will
get a large portion of the equity value after the placement of the strategic investor and
then after the listing of the new entity in the stock exchange. Cash streams will be
provided going forward on an annual basis form the operational profitability of IPTO (up to
10% of EBITDA) but it is still unclear when this stream of payments will start and for how
long will it last.
According to the available information on the structure we estimate that this
transaction will have a negative impact on our 2017 estimated EPS of PPC more than
50% as IPTO, being a regulated electricity transmission company enjoys an especially high
amount of operational profitability, as well as a very high EBITDA margin.
Our main assumptions include: 1) IPTO is deconsolidated form PPC as of end Dec-16; 2)
IPTO is valued at its BV, i.e. EUR 916m, while the new entity assumes the debt (EV at EUR
1.4bn); 3) PPC uses the proceeds from the equity offering (cEUR 450m) to repay existing
debt (the most expensive part with the relevant interest around 5.5%); 4) PPC as of 2017
starts receiving cash flow stream equal to 10% of IPTO’s EBITDA.
If PPC received a 100% upfront payment (as in the case of a 100% privatization) for the Book Value of IPTO, the transaction could be EPS neutral for the company.
Net Debt 4,752.5 4,912.8 4,278.6 4,677.4 EBT -106.6 51.2 37.2 19.9 Net Debt/Equity 83% 90% 102%
Total liabilities 11,403.0 11,149.0 9,289.6 9,351.8 Net Income -102.5 36.3 26.4 14.1 ROE 0.6% 0.6% 0.3% *As EV we assume the RAB seen at EUR 1.53bn for 2016, EUR 1.7bn for 2017 and EUR 1.79bn for 2018 Source: AXIA Research, The Company
Public Power Corporation
AXIA Research Page 6
2. Sale of PPC’s generation plants / NOME auctions
The EU commission plan calls for the transfer to HRADF (Greece’s privatization fund) of
the remaining 34% of PPC owned by the State (17% is already owned by HRADF), and
launch the process leading to the sale to one or more private investors of at least 40% of
PPC’s active generation plants, aiming at the sale to be concluded by 2017; PPC will
launch the process for separating the asset, appointing an advisor by June 2016 with the
tender process being initiated in January 2017, and binding offers submitted by June 2017;
Alternatively the commission calls the Greek authorities to agree with the Institutions the
design of the NOME system of auctions, with the objective of lowering by 25% the retail
and wholesale market shares of PPC by 2017, and to bring them below 50%
At this point EU Commission calls for the imminent implementation of NOME electricity
auctions that will allow direct access to lignite and hydro generation to third parties with
the scope to reduce PPC’s footprint in both retail and wholesale. In this respect extensive
discussions were made amongst market participants and the market regulator (RAE) on
the framework. Yet despite the pressuring deadlines no specific details are available on
the implementation of the auctions scheme and importantly on the starting auction price
which remain the key factor both for PPC (cannot be set below its generation cost) and for
the market participants (must offer a meaningful discount to the pool price SMP).
The alternative option brings us back to the “small PPC” scheme that was initiated by the
previous administration as a measure to lower PPC’s exposure in the markets and enhance
competition. In this version there will be sale of specific generation plants (that is c5.0GW
out of the total 12.5GW in operation by PPC), while there is no provision for retail supply
operations as was in the initial “small PPC” plan.
If such a scheme is put forward, it could be seen as positive for the group under certain
conditions and would materially improve the liquidity of the company, as well as remove
some significant capex requirements.
We note that as various press reports have suggested, PPC’s management has already
held some preliminary negotiations with foreign electricity companies for potential
concessions (JV’s) on PPC’s units.
3. Capacity payments / tariff adjustments
Adopt the temporary capacity payment scheme, as approved by the European Commission
in March 2016. In addition, PPC as a prior action will conclude the discussions of HV tariffs
with all its customers, and the adopted tariffs shall be cost based and take into account
consumption characteristics (profiles) of customers that affect costs.
This point is in line with what was already suggested in the MoU. Note that for 2016 we
assume that the capacity payments scheme will be applicable as of April 1st
costing PPC cEUR
60m (net). Recall that no capacity payments were booked in 2015, while for 2014 the charge
for PPC was EUR 175m.
Going forward the Greek market should move towards the introduction of a permanent
scheme for capacity availability remuneration. We think that this could be implemented
through the introduction of a capacity auctions market, according to international practices.
In such a model, the market operator would request a specific capacity for system stability
and producers would then submit an offer for their capacity. Similar schemes are
implemented in other EU countries (UK for example), with CACs ticket level seen slightly
below the estimated for the Greek market figure for 2016. We expect further progress on
this scheme to be made later within 2016.
In our modeling exercise for PPC we assume, expenses for PPC of EUR 60m in 2016 and
assume an effective ticket of EUR 35k/MW for 2017-onwards (i.e. an expense for PPC of 77m
p.a.).
Public Power Corporation
AXIA Research Page 7
4. VAT tax increase in electricity to 23% from 13%
In the context of a series of parametric measures to generate additional revenues of EUR
1.2% of GDP in the context of fiscal consolidation, EU Commission has proposed the
streamlining of VAT exemptions including the introduction of the standard VAT rate for
utilities (electricity, gas)
In our view, this issue is the most crucial and imminent for PPC given the significant increase
in unpaid bills over the last couple of years and especially in 2015.
The company has initiated within the second half of 2015 various action to tackle the issue
including amongst others paced power cuts, enhanced installments scheme, discounts to
prompt paying clients.
According to management as of end 2015, approximately 15% of total overdues or EUR
380m were under settlement corresponding to approximately 220,000 customers, a
development that despite its early stage could be seen as positive and could lead to
provision reversals in the following quarters.
Still the government is targeting new fiscal consolidation measures of cEUR 5.4bn up to
2018, providing for a significant impact on households’ disposable income and ability to
meet their payments.
All in all it is becoming more and more obvious that energy market reforms and specifically
issues concerning PPC are a key part of the review agenda. The government through the
ministry of Energy has already submitted its proposals that are inline with its own political
agenda.
On the other hand the institutions (that are pushing for deep reforms in the energy market)
seem to agree to the key items of the proposed reforms by the government but they also
present alternative solutions in order to tackle any potential delays.
In this context it is worth noting the recent comments by Energy Minister Panos Skourletis
that an agreement has been reached on the pending issues of the energy market reform
agenda. In this context the sale of IPTO (High voltage grid operator) will follow draft plan as
was proposed (51% State, 49% private investors) with a private strategic investor (with
exposure to grid operation) acquiring at least 20% while the CEO will be appointed by the
State following an agreement with the private investor. The procedure for the sale is of 20%
is expected to be launched in June. Yet no details are disclosed on PPC’s compensation that
remains the most sensitive issue for the company.
Public Power Corporation
AXIA Research Page 8
Valuation
Based on our updated estimates and the introduction of a weighted DCF/peer multiple
methodology we lower our target price to EUR 2.60/sh. from EUR 3.70/sh. previously.
The stock price has declined significantly since our previous report (-31.4%) and at current
levels we are Neutral on PPC (vs. Sell previously), remaining though on the cautious side
given the limited visibility and the significant potential implications for the company given
the outcome of the negotiations between the government and the country’s international
creditors.
Note that in our valuation we do not consider the curve-out of IPTO, that depending of the
considered scheme could be either value accretive or value destructive for PPC.
Our valuation methodology we apply a DCF method with a 50% weight and a peer
comparison, with a weight of 50% (targeted EV/EBITDA).
Table 4. PPC valuation summary
Method Weight Equity Value Per share
DCF 50% 576.7 2.50
Multiples 50% 841.0 3.30
Weighted TP
2.90
Current price
2.96
Upside/(downside)
-2.0% Source: AXIA Research
Our DCF method derives a TP of EUR 2.50/sh., with our WACC set at 10% (9% risk free rate,
6.0% market premium, 45% gearing) and assuming 1.0% terminal growth.
LT Debt / Total Capita l i ztion 4.4 x 7.1 x 6.5 x 6.8 x 6.9 x 7.2 x
Total Debt / Total Capita l i zation 7.2 x 8.1 x 7.8 x 7.5 x 7.6 x 7.9 x
Net Debt/EBITDA 5.1 x 4.8 x 5.7 x 5.0 x 4.9 x 5.1 x
FFO / Total Debt 0.1 x 0.1 x 0.1 x 0.2 x 0.2 x 0.2 x
Gearnig (Total debt / Debt+Equity) 0.5 x 0.5 x 0.5 x 0.5 x 0.5 x 0.5 x
Net Debt / Equity 0.8 x 0.8 x 0.8 x 0.8 x 0.8 x 0.9 x
Coverage Ratios 2013 2014 2015E 2016F 2017F 2018F
FFO Interest Coverage ((FFO + Int.) / Int.) 2.8 x 4.3 x 4.2 x 5.1 x 5.3 x 5.2 x
Pretax Interest Coverage (EBIT / Int.) 1.2 x 1.9 x 0.5 x 1.3 x 1.5 x 1.4 x
Source: PPC, AXIA VG Research
Public Power Corporation
AXIA Research Page 13
Disclosures
General information This research report was prepared by AXIA Ventures Group Limited, a company incorporated under the laws of Cyprus (referred to herein, together with its subsidiary companies and affiliates, collectively, as “AXIA”) which is authorised and regulated by the Cyprus Securities and Exchange Commission (authorisation number 086/07). AXIA is authorized to provide investment services in the United Kingdom, Cyprus, Greece and in Portugal pursuant to its permissions under the Markets in Financial Instruments Directive and may also provide similar services in other countries, inside or outside of the European Union, subject to the applicable provisions. AXIA Ventures Group Limited is not a registered broker-dealer in the United States (U.S.), and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. In the U.S., this research report is intended solely for persons who meet the definition of “major U.S. institutional investors” in Rule 15a-6 under the U.S. Securities and Exchange Act, as amended, or persons listed under Rule 15a-6(4)) and is meant to be disseminated only through “Axia Capital Markets LLC”, a wholly owned subsidiary of AXIA Ventures Group Limited and associated US registered broker-dealer in accordance with Rule 15a-6 of the US Securities and Exchange Act. Content of the report The persons in charge of the preparation of this report, the names of whom are disclosed below, certify that the views and opinions expressed on the subject security, issuer, companies or businesses covered by this research report (each a “Subject Company” and, collectively, the “Subject Companies”) are their personal opinions and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research report. Whilst all substantial sources of information for the research are indicated in this report, including, without limitation, bases of valuation applied to any security or derivative security, such information has not been disclosed to the Subject Companies for their comments and no such information is hereby certified. All information contained herein is subject to change at any time without notice. No member of AXIA has an obligation to update, modify or amend this research report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the Subject Company is withdrawn. Further, past performance is not indicative of future results. Persons responsible for this report: Constantinos Zouzoulas (analyst). Key Definitions
AXIA Research 12-month rating*
Buy The stock to generate total return** of and above 10% within the next 12-months
Neutral The stock to generate total return**between -10% and 10% within the next 12-months
Sell The stock to generate total return** of and below -10% within the next 12 months
Under Review Stock’s target price or rating is subject to possible change
Restricted Applicable Laws / Regulation and AXIA Ventures Group Limited policies might restrict certain types of communication and investment recommendations
Not Rated There is no rating for the company by AXIA Ventures Group Limited
* Exceptions to the bands may be granted by the Investment Review Committee of AXIA taking into account specific characteristics of the Subject Company **Total return: % price appreciation equals percentage change in share price from current price to projected target price plus projected dividend yield.
Rating history for Public Power Corporation S.A.
Date Rating Share Price (EUR) Target Price (EUR)
31/10/2013 Buy 10.67 12.60
26/04/2014 Buy 11.21 13.30
26/02/2015 Buy 7.5 8.90
25/05/2015 Under Review 5.06 U/R
03/06/2015 Neutral 4.68 5.50
08/03/2015 Under Review 4.14 U/R
18/12/2015 Sell 4.17 3.70
18/04/2016 Neutral 2.96 2.90
Public Power Corporation
AXIA Research Page 14
AXIA Ventures Group Limited Rating Distribution as of today
Coverage Universe Count Percent Of which Investment
Banking Relationships Count Percent
Buy 11 78%
Neutral 3 21%
Sell 0 0%
Restricted
Not Rated
Under Review 2 14%
Independence and objectivity, conflicts of interest management None of the analysts in charge of this report are involved in activities within AXIA where such involvement is inconsistent with the maintenance of that analyst’s independence or objectivity. None of them has received or purchased shares in any Subject Company prior to any private or public offering of those shares. However, the analysts responsible for the preparation of this report may interact with trading desks or sales personnel for the purpose of gathering and interpreting market information with regard to the Subject Companies. As an investment services provider engaging in a wide range of businesses, AXIA is active in the field of activities which may include the provision of services to issuers of securities, with respect to underwriting or placing of financial instruments or with respect to advice on capital structure, industrial strategy and related matters (“investment banking services”). The nature of such activities, in conjunction with the activity of production and issuance of research reports, may be considered as leading to situations of conflict of interests when the research reports cover an issuer with whom AXIA has an ongoing or has recently had a business relationship for the provision of investment banking services. AXIA has all the necessary internal structures and arrangements in order to identify and avoid or, should avoidance be impossible, to manage such situations in a manner consistent with the highest standards, in accordance with its internal conflicts of interest policy. In compliance with such arrangements, analysts and other staff who are involved in the preparation and dissemination of research (including, without limitation, this report) operate independently of management and the reporting line is separate from AXIA’s investment banking business. “Chinese Wall” procedures (procedures separating the availability of information of any Subject Company) are in place between the investment banking and research businesses to ensure that any confidential and/or price sensitive information is handled appropriately. In all cases when, at the time of preparation or issuance of a report, an issuer covered by such report is in a business relationship with AXIA for the provision of investment banking services, Axia includes a note in the report, drawing the attention of the recipients to such fact. The same note is included when such business relationship has been terminated less than 12 months before the issuance of the report. However, it cannot be fully precluded that issuers covered by a report may be in discussions with AXIA’s investment banking department for a potential future cooperation in investment banking matters, even though a business relationship does not already exist. In such cases AXIA may not be able to announce the fact of such discussions in the reports even if such reports cover the specific issuer. Therefore, even if this research report does not mention any existing or recent business relationship with an issuer whose securities are covered by the report, such issuer may be a potential future customer of AXIA in the field of investment banking services. It is noted that, even in such case, the persons in charge of this report do not participate in any such discussion and their remuneration is not determined based on the proceeds of the department providing investment banking services and that such situation is not reasonably expected to impair the independence or objectivity of AXIA’s reports.
Investment decisions Investors should make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives when investing. Investors should consult their independent advisors if they have any doubts as to the applicability to their business or investment objectives of the information and the strategies discussed herein. Investments involve risks and recipients should exercise prudence and their own independent judgment in making their investment decisions. Therefore, this research report should not be regarded by recipients as a substitute for the exercise of their own judgment. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. It is published solely for information purposes. This research report is being furnished to certain persons as permitted by applicable law, and accordingly may not be reproduced or circulated to any other person without the prior written consent of a member of AXIA. This research report may not be relied upon by any retail customers or persons to whom this research report may not be provided by law. It does not constitute a factual representation, a financial promotion or other advertisement, is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction and may not be relied on in any manner by any recipient. Unauthorized use or disclosure of this research report is strictly prohibited. Investing in any non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States.
Public Power Corporation
AXIA Research Page 15
No liability Neither AXIA nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report. AXIA does not represent or warrant that any investments will increase in value or generate profits. Any responsibility or liability for any information contained herein is expressly disclaimed. Any opinions or information contained herein is subject to change at any time without notice and may differ from other opinions expressed professionally by persons within AXIA. This material should not be construed as a solicitation or recommendation to use AXIA to effect transactions in any security mentioned herein or as an attempt to induce securities transactions by such recipients in any manner whatsoever. AXIA is not providing this research report pursuant to any express or implied understanding that the recipients will direct commission income to AXIA. Recipients In the countries of the European Union, this report is communicated by AXIA to persons who are classified as eligible counterparties or professional clients and is only available to such persons. In any other country outside the European Union, this report is addressed exclusively to persons entitled to receive research reports from foreign Investment Firms according to the applicable legal and regulatory provisions. The information contained in this research report is not addressed to and does not apply to any other categories of investors than those specified above. AXIA in relation to its research complies with the applicable requirements and laws concerning disclosures and these are indicated on this legend or in the research report where applicable. By accepting this research report, you agree to be bound by the foregoing limitations. This material is not intended for the use of private investors.
Public Power Corporation
AXIA Research Page 16
AXIA Ventures Group
10 G. Kranidiotis, Suite 102
4, Vas. Sofias Ave., 3rd Floor
645 Fifth Avenue, Suite 903
Berkeley Sq. House, Berkeley Sq.
Avenida da Liberdade 240, 4th floor
1065 Nicosia, Cyprus
10674 Athens, Greece New York, NY 10022, US London, W1J 6BD, UK 1250-096 Lisbon, Portugal
