Spanish TSOs: Regulatory noise to continue in 2018
We expect news about the update of the regulation post-2020 to continue in 2018, even if a clearer picture should not emerge until 2019. Nevertheless, in our view their current share prices already incorporate expectations of lower regulated revenues and we had also previously assumed a drop of 100bps in 2020/2021, a middle ground between maintaining the current returns and maintaining the current spreads to the Spanish 10Y bonds. Aside from noise on the update of regulation we expect Red Eléctrica’s 2018 main theme to be the potential purchase of Hispasat, a non-core business which would nevertheless allow some releveraging of the balance sheet. Enagás’s 2018 should be fairly quiet, and we do not expect major international acquisitions as the company should be focused on consolidating the current portfolio. We maintain our NEUTRAL ratings on the Spanish TSOs after updating our estimates and rolling over the valuation to 2018. We now set REE’s FV at Eur 20.5 (from Eur 19.0) and ENG’s FV at Eur 24.8 (from Eur 22.4).Enagas is a gas transportation company based in Spain. Co. is engaged in the technical distribution and storage of gas through pipelines as well as the provision of regasification services. Co. and subsidiaries are engaged in the ownership, administration, storage, pipeline transportation, distribution flow, and sale of natural gas. As a transport company, Co. also provides gas and manages the gas infrastructures.
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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