EUR 400.00 For Business Accounts Only

TERNA ENERGY | Capacity expansion continues

Delivers on ambitious wind capacity installation program … – Terna Energy’s installed capacity has now reached 986 MW, the vast majority in wind. An additional 158 MW in the US is due to be completed by year-end and another 19 MW of wind capacity in Greece are currently under construction and targeting completion in 2019. Both wind parks are already reflected in our numbers. On top of these mgt has guided for another 100 MW of wind capacity in Greece, which we had not previously reflected (completion in 2019-2020), bringing total installed capacity at c. 1,260 MW from 1,160 MW previously. Mgt targets an ambitious 2GW capacity target, which is achievable in the long-term, given that Greece remains underinvested in terms of wind capacity targets and Terna Energy has an excellent track record so far.

… and expands non-wind activities – On top of the aforementioned installed and under construction wind projects, another two projects are currently under construction or in pre-construction phase targeting completion in 2019, namely a 1.5 MW Waste Management facility (EBITDA contribution as of 2019) in Epirus and a 2.4 MW Peloponnese Waste Management project (completion in 2019).

Operating capacity is supported by favourable dynamics – On an operational level, wind performance data ytd appear to be favourable, despite a relatively weak start to the year. March was particularly strong (wind operators’ avg load factor +680 bps), offsetting negative trends in January-February and bringing Q1 load factors 150 bps higher yoy to 30.1%. April performance has also been favourable (+320 bps yoy), signaling for an overall healthy H1. During Q1, Terna Energy once again outperformed the market, with its group wind load factor reaching 35.1% in Q1 (+400 bps yoy), helped by accretive load factors outside Greece. We expect favourable trends will remain in place in the long-term, owing to new capacity additions at accretive locations and enhanced efficiency in new wind parks due to technological advances.

Valuation; New EUR6.0 TP – We have revisited our model following the release of the Q1 trading update. Terna Energy’s Q1 results pointed to robust overall performance, in line with our numbers, while management guided for additional capacity installations in the medium term, which we had not anticipated, warranting an upgrade of our long-term estimates, which led to a new TP of €6.0 per share from €5.40 previously. Our new TP implies a