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Un'analisi su ABENGOA
We downgrade our recommendations on Abengoa to Underweight, despite the price moves over the last two weeks.
It would be tempting to recommend an Overweight after the recent declines, but we believe Abengoa is in a worse liquidity and net leverage position (corp/NRDP) versus last November.
In addition, there is an increasing equity requirement related to its Transmission & Distribution (T&D) lines in Brazil.
Accordingly, we do not expect a similar bounce back versus November should Abengoa execute on its capital increase and announce an updated strategic plan:
€650mn capital increase for capex and debt repayment
In our view the company took on investor feedback, discontinuing its Greenbridge facility, and addressed higher equity capex in Brazil by announcing a capital increase, although the announcement of the latter felt rushed following the 1H15 earnings call. Abengoa announced a €650mn capital increase on Monday, of which €300mn will be used to reduce corporate debt. It has not given any details on underwriting so far, only that Abengoa's key shareholder, Inversión Corporativa (holding company owned by the founding families, with Abengoa as its main asset), stated it will participate in the capital increase with new money. Abengoa also announced a sale of its bioenergy assets. We were disappointed by the downward revision of FY15E corporate FCF down to €600-800mn from €1,400mn (corporate capex was revised up), driven by the change in Brazilian National Development Bank (BNDES) funding in Brazil.
Liquidity: adequate, but tighter in downside case in 2016
Liquidity is adequate in the very near term, in our view. We estimate available corporate liquidity of €926mn, excluding required cash deposits related to confirming lines, cash/STFI in business not immediately available, undrawn working capital lines, and APW1 escrow. Adding the agreed cash inflows due in 2H15 increases available corporate liquidity to €1.5bn, versus 2015 corporate maturities of €1.0bn - assuming no roll out/extension and including the €375m repayment of the ABGSM 2016 bond before maturity. In a downside scenario, the liquidity situation becomes tighter in 2016. The planned capital increase would supplement liquidity, though we assume more than half will effectively be used to fund higher-than-expected 2015E equity capex.
Brazil: higher T&D returns but tougher financing
Abengoa's required equity capex related to Brazil T&D has increased by €761mn versus 1Q (€684mn lower leverage), which in our view is in response to lower BNDES funding. Financing conditions have become tougher for Brazilian T&D since January 2015 because the BNDES, a key source of funding for infrastructure projects in Brazil, has been financing a lower share of total capex (from 70% to 50%). This could be exacerbated by BRL depreciation, which, if unhedged, negatively impacts project costs in local currency. Regulatory returns have been bumped up for new auctions (starting in January 2015) after limited interest in previous auctions due to low returns. The higher returns reflect both the need to improve returns and the new financing conditions.
We downgrade our recommendations on Abengoa to Underweight, despite the price moves over the last two weeks.
It would be tempting to recommend an Overweight after the recent declines, but we believe Abengoa is in a worse liquidity and net leverage position (corp/NRDP) versus last November.
In addition, there is an increasing equity requirement related to its Transmission & Distribution (T&D) lines in Brazil.
Accordingly, we do not expect a similar bounce back versus November should Abengoa execute on its capital increase and announce an updated strategic plan:
€650mn capital increase for capex and debt repayment
In our view the company took on investor feedback, discontinuing its Greenbridge facility, and addressed higher equity capex in Brazil by announcing a capital increase, although the announcement of the latter felt rushed following the 1H15 earnings call. Abengoa announced a €650mn capital increase on Monday, of which €300mn will be used to reduce corporate debt. It has not given any details on underwriting so far, only that Abengoa's key shareholder, Inversión Corporativa (holding company owned by the founding families, with Abengoa as its main asset), stated it will participate in the capital increase with new money. Abengoa also announced a sale of its bioenergy assets. We were disappointed by the downward revision of FY15E corporate FCF down to €600-800mn from €1,400mn (corporate capex was revised up), driven by the change in Brazilian National Development Bank (BNDES) funding in Brazil.
Liquidity: adequate, but tighter in downside case in 2016
Liquidity is adequate in the very near term, in our view. We estimate available corporate liquidity of €926mn, excluding required cash deposits related to confirming lines, cash/STFI in business not immediately available, undrawn working capital lines, and APW1 escrow. Adding the agreed cash inflows due in 2H15 increases available corporate liquidity to €1.5bn, versus 2015 corporate maturities of €1.0bn - assuming no roll out/extension and including the €375m repayment of the ABGSM 2016 bond before maturity. In a downside scenario, the liquidity situation becomes tighter in 2016. The planned capital increase would supplement liquidity, though we assume more than half will effectively be used to fund higher-than-expected 2015E equity capex.
Brazil: higher T&D returns but tougher financing
Abengoa's required equity capex related to Brazil T&D has increased by €761mn versus 1Q (€684mn lower leverage), which in our view is in response to lower BNDES funding. Financing conditions have become tougher for Brazilian T&D since January 2015 because the BNDES, a key source of funding for infrastructure projects in Brazil, has been financing a lower share of total capex (from 70% to 50%). This could be exacerbated by BRL depreciation, which, if unhedged, negatively impacts project costs in local currency. Regulatory returns have been bumped up for new auctions (starting in January 2015) after limited interest in previous auctions due to low returns. The higher returns reflect both the need to improve returns and the new financing conditions.
Roba da pazzi se si considera che il settore delle rinnovabili è sostenuto dai governi e Abengoa non è una Pmi tedesca, di quelle che emettono bond da 15-30 milioni e poi saltano come petardi. Ha un giro d'affari da oltre 7 miliardi con presenza in tutto il mondo. Per me l'aumento di capitale (prima o poi si farà) e metterà al sicuro i bondholders.
