Raising Our FVE for Red Electrica on Likely Adoption of a WACC-based Model; Shares Overvalued
We raise our fair value estimate for Red Electrica by 7% from EUR 16.7 to EUR 17.8 per share on likely shift from a bond-linked to a WACC-based remuneration model from 2020 onward after a recent proposal of the Spanish regulator CNMC. We anticipate this proposal to be cleared by the ecological transition ministry. The CNMC proposal reflects an improvement in the Spanish regulatory backdrop to which Red Electrica is fully exposed, but shares appear overvalued after the recent rebound. We maintain...Red Electrica is engaged in the transmission of electrical energy, the operation of the system and the management of the transmission network in the Spanish electricity system. In addition, through its subsidiaries, Co. is engaged in the acquisition, holding and management of foreign securities, co-ordination of international exchanges, provision of telecommunications services for third parties, provision of consultancy, engineering and construction services outside the Spanish electricity system, securing of funds, carrying out of financial transactions and provision of financial services.
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