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FDE | PRICE | EUR44.4 | VALUATION RANGE | EPS 06/22e | EPS 06/23e |
VALUATION (UPSIDE) | EUR43 (-3%) EUR78 (+76%) | 5% | 28% | -25% | 41% |
Favourable environment for FDEs green energy business
12 OCTOBER 2022 at 05:46*
Thomas Martin
(+44) 203 430 8435
Thomas.Martin@exanebnpparibas.com
FDE's business remains aligned with key energy trends in Europe
The domestic generation of green energy is clearly aligned with European energy ambitions in the face of reduced gas supply from Russia. Power and gas prices rose to record levels this summer, and although they have pulled back from recent peaks, they remain at extremely healthy levels compared to history. With storage inventories nearing capacity and winter demand ahead, we are in a potentially slack 'shoulder' period, but prices look set to remain strong this winter and winter 2022/23 also looks likely to be challenging. The EU has proposed measures to transfer some of the windfall from high prices to consumers, however, FDE does not believe it will be directly impacted by these measures.
Forecasts increased, despite some headwinds
We update our power and French gas price forecasts ahead of FDEs FY 22 results on 20th October, we remove the benefit from Belgian Green Certificates from our analysis, revise our forecast ramp up of CHP projects reflecting approval delays, model some French CHP units selling at higher (market/PPA) prices and include the recently acquired Cryopur business in our forecasts. These revisions result in a ~4% reduction to our op CF forecasts for 2022, a 44% increase in 2023, estimates broadly unchanged for 2024-26 (bearing in mind our prior forecasts incorporated monetisation of Belgian Green Certificates from 2024) and a 22% increase for 2027. FDE delivered revenues of EUR9.3m for FY 4Q 22 and an EBITDA margin of 62% in FY H1 22, ahead of the calendar YE 2022 targets (revenue run-rate of EUR35m with EBITDA margins of 45%).
Shares offer ~70% upside to upper end of our valuation range
Our valuation range increases from EUR41-61/sh to EUR43-78/sh, a ~18% increase at the mid- point. Our valuation range is defined by our risked NAV for the developments to YE 2023, and at the upper end by our NAV for future projects post 2023. We see ~6% downside to the bottom end of our valuation range, and ~70% upside potential at the top end.
Price (11 October 2022) | EUR44.4 | Performance(1) | 1w | 1m | 3m | 12m | |||
Market cap (EURm) | 229 | Absolute(%) | (7) | (26) | (26) | 105 | |||
Free float (EURm) | 229 | Rel. Utilities(%) | (0) | (13) | (14) | 130 | |||
EV (EURm) | 237 | Rel. MSCI SMID(%) | (2) | (17) | (17) | 171 | |||
3m avg volume (EURm) | 1.2 | ||||||||
Refinitiv / Bloomberg | FDEL.PA / FDE FP | ||||||||
Country | France | ||||||||
Financials | 06/22e | 06/23e | 06/24e | 06/25e | Valuation metrics(2) | 06/22e | 06/23e | 06/24e | 06/25e |
EPS, Adjusted (EUR) | 1.38 | 6.05 | 6.68 | 4.33 | P/E (x) | 24.3 | 7.3 | 6.6 | 10.2 |
EPS, Company (EUR) | 1.38 | 6.05 | 6.68 | 4.33 | Net yield (%) | 0.0 | 0.0 | 0.0 | 0.0 |
EPS - Refinitiv (EUR) | 1.35 | 3.73 | 5.68 | 5.93 | FCF yield (%) | (1.8) | 7.7 | 5.4 | 1.2 |
Net dividend (EUR) | 0.00 | 0.00 | 0.00 | 0.00 | EV/Sales (x) | 7.6 | 3.5 | 2.6 | 2.5 |
EV/EBITDA (x) | 13.0 | 4.7 | 3.8 | 4.8 | |||||
Sales (EURm) | 26.0 | 68.3 | 87.8 | 87.7 | EV/EBITA (x) | 15.8 | 5.2 | 4.4 | 6.3 |
EBITA, Adj. (EURm) | 12.6 | 45.3 | 50.5 | 34.9 | EV/CE (x) | 2.1 | 2.1 | 1.7 | 1.4 |
Net profit, Adj.(EURm) | 7.1 | 31.2 | 34.5 | 22.4 | |||||
ROCE (%) | 9.8 | 30.8 | 28.6 | 17.1 | |||||
Net Debt/EBITDA, Adj. (x) | 1.7 | 0.2 | - | - | All valuation metrics based on adjusted figures | ||||
Source: BNP Paribas Exane (estimates), Refinitiv (consensus) (1) In listing currency, with dividend reinvested | (2) Yearly average price for FY ended 06/22 |
SPONSORED RESEARCH: Exane is receiving compensation from FDE to cover and produce research on the stock.
- Date and time (London Time) on which the investment recommendation was finalised. It may differ from the date and time of broad dissemination on the website. See Appendix (on p26) for Analyst Certification, Important Disclosures and Non-US Research Analyst disclosures.
Changes to risked NAV
Summary of changes to risked NAV
The table below summarises the impact of changes to our risked NAV. Our Core NAV for the 2023 expansion program increases from EUR41.2/sh to EUR42.6/sh. Our Future projects NAV, incorporating projects expected to commence production post 2023, increases from EUR61.1/sh to EUR77.8/sh.
Figure 1: Summary of changes to risked NAV
Previous | Current | Change | ||||
EUR/sh | % | EUR/sh | % | EUR/sh | % | |
Core Producing NAV excl financials | 36.4 | 60% | 46.8 | 60% | 10.4 | 29% |
Financials | (12.9) | -21% | (18.2) | -23% | (5.3) | 41% |
Operating sites NAV | 23.5 | 38% | 28.6 | 37% | 5.2 | 22% |
Development projects NAV | 17.8 | 29% | 13.9 | 18% | (3.8) | -22% |
Core NAV - 2023 expansion plan | 41.2 | 67% | 42.6 | 55% | 1.3 | 3% |
Future sites 2024+ backed by 2P reserves - CHPs | 19.9 | 33% | 35.2 | 45% | 15.3 | 77% |
Future projects NAV | 61.1 | 100% | 77.8 | 100% | 16.6 | 27% |
Source: BNP Paribas Exane estimates
We have updated our gas and power price forecasts, revised our modelled expansion plan, removed Belgian green certificates from our valuation, rolled forward our NAV to Jan 2023, incorporated CryoPur into our estimates and an increased cost of capital.
BNP Paribas Exane Research | FDE | 12 OCTOBER 2022 | page 2 |
Changes to forecasts
Increasing power and gas price forecasts
We revise our French gas and French/Belgian realised power price assumptions as shown below.
Figure 2: Gas and power price forecasts
FY 22E | FY 23E | FY 24E | FY 25E | FY 26E | FY 27E | |
FR gas price incl assumed hedging (EUR/MWh) | 46.7 | 120.9 | 123.9 | 61.9 | 48.3 | 43.3 |
FR power price - ave incl FiT & mkt sales (EUR/MWh) | 72.7 | 139.2 | 149.9 | 99.1 | 94.0 | 85.9 |
BE power price incl assumed hedging (EUR/MWh) | 195.1 | 287.3 | 269.2 | 153.4 | 136.3 | 120.2 |
Source: BNP Paribas Exane estimates
Our assumptions reflect increases in French gas and Belgian power prices which are expected to persist into the medium term. Our French power price forecast incorporates the FiT which applies to the bulk of FDE's power generated by its CHP fleet today, with an increasing contribution from sales at market prices over time.
Gas inventories nearly full going into winter
The French regulator has stated that gas inventories equate to ~99% of storage capacity putting the country in the best possible position ahead of winter. French storage is equivalent to ~2/3 of winter consumption for private citizens and small/medium sized companies, i.e. excluding demand from large industrial firms and utilities.
The French regulator notes gas supply could be tight this winter, with the high price paid impacting the national trade balance and state budget, with energy saving required.
Belgian gas storage facilities are ~93% full as of early October, ~1% ahead of prior year levels.
Gas imports are of course anticipated to continue through winter, predominantly from
Norway and via LNG, alongside trade with neighbouring European countries.
Across Europe more generally gas inventories have increased to 996TWh as of 30 Sept, only just below the two highest years historically (1,074TWh in 2020 and 1,067TWh in 2021). The rate of build has been the second greatest in history, growing by ~700TWh since the end of winter 2021/22. Inventories typically continue to build until late October, but this is weather/demand dependent. Gas demand this winter will also be impacted by weather trends, with a knock on impact upon exit storage inventories, gas and power prices.
EU gas inventories are >89% full and UK storage is >94% full, well ahead of the EU's target of 80% (with a preference to reach 85%). This puts Europe in a strong position to deal with the challenges it faces, but storage capacity was never designed to alleviate major long-term supply disruptions, it was only designed to balance seasonal variations in demand.
Short-term gas price weakness, as European buying slows owing to high storage levels, should give way to strengthening prices through winter as seasonal heating demand kicks in. The precise timing of this will be driven by weather trends, and the extent to which consumers delay turning on their heating systems.
BNP Paribas Exane Research | FDE | 12 OCTOBER 2022 | page 3 |
French nuclear power generation will also likely be a key driver of power prices
Power generation from the French nuclear fleet has been lower than anticipated recently owing to a number of factors. The identification of stress corrosion cracking has resulted in reactors being taken offline for repairs, some reactors are shut for routine maintenance and warm weather during summer caused cooling issues leading to reactors running at reduced rates (water used for cooling was warmer than usual). Out of the 56 reactors in the fleet, 32 were taken offline for maintenance owing to technical problems, considerably reducing available generation capacity.
Figure 3: French available nuclear generation capacity
Available nuclear generation capacity (GW)
55
50
45
40
35
30
25
20
Source: Datastream, BNP Paribas Exane estimates
This has had an impact on both domestic and regional power prices, since France has historically been a large exporter of power.
EDF intends to bring the reactors back on-line this winter; the extent to which this is successful will likely impact French, and broader European, power prices this winter.
We show below charts summarising recent price movements in French gas and
Belgian power markets, the futures curve and our forecasts.
BNP Paribas Exane Research | FDE | 12 OCTOBER 2022 | page 4 |
Figure 4: Belgian power prices
Belgian power prices - historic | Belgian power prices; futures curve (current and prior to |
Ukraine invasion) and BNPPE estimates |
EUR/MWh
800
700
600
500
400
300
200
100
0 | ||||
Jan-18 | Jan-19 | Jan-20 | Jan-21 | Jan-22 |
BE baseload power |
EUR/MWh
800
700
600
500
400
300
200
100
0 | |
10/2/2022 Aug 2023 Jun 2024 | Apr 2025 Feb 2026 |
BE pwr BNPPE est | BE baseload pwr future |
BE pwr fut 18/02/22 |
Source: Datastream, BNP Paribas Exane estimates
Figure 5: French gas prices
French gas prices - historic | French gas prices; futures curve (current and prior to Ukraine |
invasion) and BNPPE estimates |
250
200
150
100
50
0 | ||||
Jan-18 | Jan-19 | Jan-20 | Jan-21 | Jan-22 |
FR PEG gas |
EUR/MWh
250
200
150
100
50
0 10/2/2022 Dec 2023 Feb 2025 Apr 2026 Jun 2027
FR PEG gas BNPPE est PEG futures
FR gas fut 18/02/22
Source: Datastream, BNP Paribas Exane estimates
BNP Paribas Exane Research | FDE | 12 OCTOBER 2022 | page 5 |
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La Française de l’Energie SA published this content on 12 October 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 October 2022 15:01:00 UTC.
