PPC | HEDNO bid: value crystallization, balance sheet optionality
PPC identifies Macquarie as highest bidder for HEDNO – PPC announced on Friday that the bidding process for the sale of a 49% stake in the electricity distribution network operator HEDNO has been completed. Following the submission of four binding offers (by CVC, KKR, Macquarie and First Sentier), PPC identified Spear WTE Investments Sarl, a member of the Macquarie Infrastructure and Real Assets Group (MIRA), as the highest bidder. Macquarie’s offer values 49% of HEDNO at an EV of €2,116mn, including €804mn pro-rata net debt. This indicates an EV of €4.3bn for 100% of HEDNO, i.e. c1.5x RAB and c9.9x 2021e EV/EBITDA.Implied HEDNO value well ahead of expectations; new €14.80 PT – We previously valued HEDNO at €3.7bn, using a RAB-based valuation and a DCF at 5.3% WACC. In the light of the aforementioned offer price, which came in c€630m ahead of our expectations, we have adjusted our valuation for PPC accordingly. Reflecting the value implied by the HEDNO transaction in our model (equity value of €1.3bn for the 49% stake to be disposed) and rolling forward our valuation to 2022, we have raised our PT to €14.80 per share from €11.60 previously.
HEDNO monetization adds balance sheet optionality, substantially lowering leverage – We have long argued that the sale of HEDNO, a high-quality asset with regulated income/returns, could attract strong investor interest and help crystallize value, thus proving a significant short-term catalyst for the shares. From a balance sheet perspective, the disposal will underpin PPC’s deleveraging efforts given the €1.3bn equity value attached to the 49% stake in HEDNO. This will be even more so the case for the non-HEDNO business, which will see pro-forma leverage fall to
Public Power Corp. is a vertically intergrated electric utility engaged in electricity generation, transmission and distribution throughout Greece. At Dec 31 2014, Co. and its subsidiaries generated electricity in its own 62 power generating stations of Co. and from the additional stations which belong to its wholly owned subsidiary PPC Renewables S.A, facilitated the transmission of electricity through its own power lines of approximately 12,273 km and distributed electricity to consumers through its own distribution lines for Medium and Low voltage of 235,100 km which are managed by its wholly owned subsidiary Hellenic Distribution Network Operator (HEDNO S.A.) (Medium and Low voltage).
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.
Our team has consistently gained recognition among institutional investors for its quality research, having ranked No. 1 team in Greece at the Extel Surveys of 2013-2016 and 2018. We have also been named Leading Brokerage Firm in Greece over 2014-2016 and in 2018.
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