Nuclearelectrica: status quo fairly priced (downgraded to HOLD)

Nuclearelectrica’s (SNN) share price has moved up 14% in the past 12 months, while the BET Index advanced by 29%. In our view, the underperformance was the result of the changes in the regulatory framework, limiting the net realised price at RON 450/MWh via a windfall tax and an obligation to sell at this price, which had a constraining impact on profitability. We expect falling power prices in the medium term, on the back of falling gas prices, with German spot power prices nearing EUR 70/MWh starting 2026E and forward prices at EUR 90/MWh. In this context of falling prices, we expect the current regulatory framework to be removed and the Romanian power market to be liberalised again, starting in April 2025. We expect contracting profitability in 2023-24E and a rebound in 2025-26E, after liberalisation, with profit falling significantly during the retubing of unit 1 (2027-29E). We have increased our capex assumptions, to reflect the company’s budget, and include somewhat higher capex for retubing (EUR 2.3bn vs. the company’s current guidance of EUR 1.9bn). We have not included any capex for the SMRs, while we include a EUR 185m equity contribution for units 3 and 4, to finance the pre-construction phase. Nuclearelectrica is fairly valued, in our view; thus, we have downgraded our rating to HOLD (from Buy), and set our 12M price target (PT) at RON 50.6 (from RON 55.2).