Utilities: CTG bids for EDP and EDPR
On May 11th CTG (EDP’s largest shareholder @ 23.3%) announced it was launching an offer for EDP at a price of Eur3.26/sh and for EDPR at a price of Eur7.33/sh. We were surprised that CTG fired the opening salvo in the battle for the control of EDP, but apparently it decided to anticipate any action from European utilities, which could also be interested in EDP, namely for its exposure to renewables (EDPR represents approx. 40% of EDP’s EV), which are in demand currently. In this context, this action from CTG may force other possible suitors to move, thus we would not rule out the possibility of counter-bids for EDP. We are fine tuning our numbers post 1Q18 results but more importantly we are setting our new FV for EDP as a weighted average of the possible outcomes (CTG bid fails, fundamental value; CTG bid; counter-bid at premium) yielding a value of Eur3.37 per share, but retaining our NEUTRAL recommendation. For EDPR, we maintain our FV at Eur8.0/sh but downgrade the stock to NEUTRAL (from Buy) since it does not have enough upside to warrant a positive recommendation.EDP Renovaveis is a renewable energy company based in Spain. Co. is engaged in activities related to the electricity sector, namely the planning, construction, operation and maintenance of electricity generating power stations, especially hydroelectric, mini-hydroelectric, wind, solar, thermal solar, photovoltaic, biomass and waste plants, among others. Co. designs, develops, manages and operates power plants. Co. generates electricity using renewable energy sources mostly wind energy. Co. owns EDP Renewables Europe that operates in several European countries and Horizon Wind Energy, which operates in the United States. Co. is a part of the Energias de Portugal group.
EDP Energias de Portugal is a utility company engaged as a generator, distributor and supplier of electricity in Portugal, and as an electricity generation company and a gas distributor in the Iberian Peninsula. In addition, Co. is a wind power operator with windfarms for energy generation in the Iberian Peninsula, the U.S., Canada, Brazil, France, Belgium, Italy, Poland and Romania and is engaged in developing wind projects in the U.K. Co. is also engaged in generating solar photovoltaic energy in Portugal, Romania and the U.S, and in Brazil it is engaged as an operator in electricity generation. As of Dec 31 2015, Co. had 9.7 million electricity customers and 1.4 million gas customers.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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