EUR 100.00 For Business Accounts Only

IBERIAN DAILY 05 APRIL (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CELLNEX, IBERDROLA.

Cooling signs in the US job market
The gains of European stock markets cooled off after US job surveys came in below expectations. Thus, in the Euro STOXX, Consumer Goods and Retail led gains, whereas Energy and Basic Resources were the worst performers. On the macro side, in Spain, March’s unemployment fell unexpectedly, hitting lows from 2008 whereas the Social Security Affiliates totalled 20.4 M persons. In the euro zone production prices slowed down more than expected in February. In the US, February’s factory orders dropped mora than expected whereas February’s final durable goods orders confirmed the preliminary data. On another note, February’s JOLT job survey slowed lower hiring and some operators expect no rate rises in May. However, from the Fed, L. Mester suggested rates will be raised to 5%, remaining at this level for some time. On the geopolitical front, Finland became NATO’s 31st member whereas the US and the UK are adding pressure for the approval of Sweden’s accession. According to Russia, the accession increases risks of an escalation of the conflict.
What we expect for today
European stock markets would open with slight drops amid the dichotomy between a weaker cycle and the end of rate rises. Currently, S&P futures are down -0.1% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US rose (VIX 19.00). Asian markets are rising (China is closed for holiday and Japan’s Nikkei +1.5%).
Today in Germany we will learn February’s factory orders, in Spain February’s industrial output, in the euro zone March’s final services PMI, in Mexico March’s preliminary inflation and March’s consumer confidence, and in the US March’s ADP private job survey, February’s trade balance and March’s non-manufacturing ISM.


COMPANY NEWS

IBERDROLA, BUY
At yesterday’s closing bell the company announced it has signed a letter of intent with Mexico Infrastructure Partners (MIP) for the sale of generation power plants with a total installed capacity of 8,539MW in Mexico (8,436MW in gas combined-cycle power and 103MW in an onshore wind farm; 76% of its capacity in Mexico and 14% of its total capacity). The valuation means an EV of US$ 6 Bn (€ ~5.55 Bn; 4.2% ofIBE’s EV and ~12% of its net debt), which could be adjusted on the completion date. The deal is financially backed by Mexico’s Fondo Nacional de Infraestructura (FONADIN) and by other stated-owned financial institutions linked to the Mexican government and is subject to the signing of the final contracts, the necessary regulatory approval and the fulfilment of some usual conditions in this type of agreements. We understand that the stance of the current Mexican government on the energy model in the country could have influenced the decision behind this divestiture (that would harm private generation companies), although the deal would be also consistent with IBE’s strategy announced in its CMD held in Nov’22 where it expected to financed part of its 2023-25 Strategic Plan (€ 58 Bn) through asset sales (8%) and strategic alliances (7%) although the EV of this divestiture alone already exceeds this target. We should also add that in 2022 it sold 49% of Wikinger to finance its development and in January it announced the agreement with Norges for the sale of 49% of renewable farms in Spain (in principle 1,200Mw). The fact that it is also seeking out partners for assets in the UK is known thus far (East Anglia Three), and in Germany (Baltic Eagle), with speculations also suggesting the US renewable assets. As for the asset valuation, our valuation of 100% of the Mexican business totals € 7.857 Bn (around 6% of the EV), and thus the sale price (€ 5.55 Bn for 76%) would be around -8% below our estimate. In any case, the impact on our T.P. is irrelevant (