European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Siemens Gamesa Renewable Energy, S.A. / Event-Driven

<div>
On 18 May, economic daily Expansion said that <a href="https://www.smartkarma.com/entities/siemens-ag" target="_blank" data-smartkarma-citation="entities:21713:1" rel="noopener">Siemens AG (SIE GR)</a> was planning to launch a delisting bid for <a href="https://www.smartkarma.com/entities/siemens-gamesa-renewable-energy-s-a" target="_blank" data-smartkarma-citation="entities:21270:1" rel="noopener">Siemens Gamesa Renewable Energy, S.A. (SGRE SM)</a>.
The CNMV (National Securities Market Commission, the Spanish market watchdog) suspended Siemens Gamesa trading shortly after 9 a.m. and until 2:30 p.m. and asked Siemens to clarify whether it will launch an exclusion takeover bid for Gamesa.
<ul>
<li>Siemens Energy (ENR GR) explained in a note to the CNMV that it was conducting a "strategic review" of its entire portfolio of assets, and that Siemens Energy was not "currently" working on a delisting bid, although it acknowledged that it had hired external advisers for the strategic review.</li>
<li>Siemens Gamesa's shares resumed trading and closed at €26.52, far from the €38.48 reached on 7 January (historical high).</li>
</ul>
Siemens Gamesa needs to step up changes to adapt to a rapidly evolving wind energy sector. Although Siemens Energy has control of the group's management, by holding the majority of Siemens Gamesa's capital, having 100% would give it total freedom to accelerate change.
There have already been some rumours of a possible takeover bid, the last one in December 2020, when it was discussed the interest of large Asian groups such as Shanghai Electric, and the Japanese conglomerate Mitsubishi, according to Expansion. These two companies reportedly approached Siemens in recent months to discuss the purchase of some Siemens Gamesa assets.
</div>
<div>
Siemens is already undergoing a deep business transformation and cost adjustment. Current prices (estimated multiples of 25.0x and 15.6x EV/EBITDA 2021e and 2022e respectively) already discount a scenario of strong growth and leave little room for pressure from higher supply costs or increased competition.
Siemens paid €20 per share (24% less than the current price) for the 8% it bought from Iberdrola in February 2020, and would not presumably be wiling to pay a high bid premium in case it decided to launch a bid for Siemens Gamesa. At current market prices (without assuming any premium), the amount of the possible takeover bid would amount to c. €5,900 mn euros (32.8% of the capitalization of Siemens Energy and 5.3% that of Siemens).
The stake in Siemens Gamesa represents c. 67.6% of the market cap of Siemens Energy. Siemens Gamesa provides about half of Siemens Energy's EBIT, which suggests that the other businesses of Siemens Energy are undervalued. Siemens Energy is 46.07% owned by Siemens.
I value Siemens Gamesa using a DCF model. My TP is €30.3/share, a 14.3% premium to the closing price on 18 May. Although I am positive on Siemens Gamesa, I do not believe that Siemens will launch a bid anytime soon.
</div>


On 18 May, economic daily Expansion said that Siemens AG (SIE GR) was planning to launch a delisting bid for Siemens Gamesa Renewable Energy, S.A. (SGRE SM).
The CNMV (National Securities Market Commission, the Spanish market watchdog) suspended Siemens Gamesa trading shortly after 9 a.m. and until 2:30 p.m. and asked Siemens to clarify whether it will launch an exclusion takeover bid for Gamesa.

Siemens Energy (ENR GR) explained in a note to the CNMV that it was conducting a "strategic review" of its entire portfolio of assets, and that Siemens Energy was not "currently" working on a delisting bid, although it acknowledged that it had hired external advisers for the strategic review.
Siemens Gamesa's shares resumed trading and closed at €26.52, far from the €38.48 reached on 7 January (historical high).

Siemens Gamesa needs to step up changes to adapt to a rapidly evolving wind energy sector. Although Siemens Energy has control of the group's management, by holding the majority of Siemens Gamesa's capital, having 100% would give it total freedom to accelerate change.
There have already been some rumours of a possible takeover bid, the last one in December 2020, when it was discussed the interest of large Asian groups such as Shanghai Electric, and the Japanese conglomerate Mitsubishi, according to Expansion. These two companies reportedly approached Siemens in recent months to discuss the purchase of some Siemens Gamesa assets.


Siemens is already undergoing a deep business transformation and cost adjustment. Current prices (estimated multiples of 25.0x and 15.6x EV/EBITDA 2021e and 2022e respectively) already discount a scenario of strong growth and leave little room for pressure from higher supply costs or increased competition.
Siemens paid €20 per share (24% less than the current price) for the 8% it bought from Iberdrola in February 2020, and would not presumably be wiling to pay a high bid premium in case it decided to launch a bid for Siemens Gamesa. At current market prices (without assuming any premium), the amount of the possible takeover bid would amount to c. €5,900 mn euros (32.8% of the capitalization of Siemens Energy and 5.3% that of Siemens).
The stake in Siemens Gamesa represents c. 67.6% of the market cap of Siemens Energy. Siemens Gamesa provides about half of Siemens Energy's EBIT, which suggests that the other businesses of Siemens Energy are undervalued. Siemens Energy is 46.07% owned by Siemens.
I value Siemens Gamesa using a DCF model. My TP is €30.3/share, a 14.3% premium to the closing price on 18 May. Although I am positive on Siemens Gamesa, I do not believe that Siemens will launch a bid anytime soon.


There are two approvals pending:
<ul>
<li>
New Mexico Public Regulation Commission (PRC)
</li>
<li>
Nuclear Regulatory Commission
</li>
</ul>
PRC hearing examiner, Ashley Schannauer, wants Avangrid to address concerns and explain why the company didn't make some disclosures ($25 million in penalties and disallowances for poor service over the past 16 months). The hearing examiner order directs the filing companies to submit response proposals by 18 May and tentatively scheduled a status conference to determine next steps by 28 May.
Meanwhile Iberdrola has posted solid Q1 results and has announced that it will subscribe to 81.5% ($3,260 mn) of Avangrid's $4 bn increase, with the Qatar Investment Authority (QIA, top shareholder in Iberdrola with a 6% stake) subscribing the remaining $740 mn.
<div>
The concerns of the PRC hearing examiner, although legitimate in my view, are more akin to a public dress down "you kids have been very naughty", but should not significantly delay the approvals needed for the acquisition of PNM. The deal seems on track for completion during H2 2021.
PNM closed on 12 May at $49.15, vs. an offer price of $50.3.
</div>
<ul style="list-style-type: disc;">
<li>which represents a gross spread of 2.3%, c. 4.6% annualized (assuming the deal completes in six months), which I consider attractive for a low-risk deal that is almost certainly to close in H2 2021.</li>
<li>Reiterate Long PNM.</li>
</ul>

There are two approvals pending:


New Mexico Public Regulation Commission (PRC)


Nuclear Regulatory Commission


PRC hearing examiner, Ashley Schannauer, wants Avangrid to address concerns and explain why the company didn't make some disclosures ($25 million in penalties and disallowances for poor service over the past 16 months). The hearing examiner order directs the filing companies to submit response proposals by 18 May and tentatively scheduled a status conference to determine next steps by 28 May.
Meanwhile Iberdrola has posted solid Q1 results and has announced that it will subscribe to 81.5% ($3,260 mn) of Avangrid's $4 bn increase, with the Qatar Investment Authority (QIA, top shareholder in Iberdrola with a 6% stake) subscribing the remaining $740 mn.

The concerns of the PRC hearing examiner, although legitimate in my view, are more akin to a public dress down "you kids have been very naughty", but should not significantly delay the approvals needed for the acquisition of PNM. The deal seems on track for completion during H2 2021.
PNM closed on 12 May at $49.15, vs. an offer price of $50.3.


which represents a gross spread of 2.3%, c. 4.6% annualized (assuming the deal completes in six months), which I consider attractive for a low-risk deal that is almost certainly to close in H2 2021.
Reiterate Long PNM.


Iberdrola (Avangrid)/PNM Resources: Regulator's Reprimand and Capital Increase

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

EDP - Energias de Portugal SA / Event-Driven

The changes to the S&amp;P Global Clean Energy Index have been announced. There are 52 additions to the index to take the number of index constituents up to 82. The changes are effective after the close of trading on 16 April.The 52 additions and capping changes will result in a one-way turnover of close to 55% and will require the ETFs tracking the index to trade US$12bn to rebalance their portfolios.The largest buying impact in terms of ADV to trade will be on <a href="https://www.smartkarma.com/entities/edp-energias-de-portugal-sa" target="_blank" data-smartkarma-citation="entities:21362:1" rel="noopener">Edp - Energias De Portugal Sa (EDP PL)</a>, <a href="https://www.smartkarma.com/entities/sse-plc" target="_blank" data-smartkarma-citation="entities:22163:1" rel="noopener">SSE PLC (SSE LN)</a>, <a href="https://www.smartkarma.com/entities/northland-power-inc" target="_blank" data-smartkarma-citation="entities:25480:1" rel="noopener">Northland Power (NPI CN)</a>, <a href="https://www.smartkarma.com/entities/enel-americas-sa-c3a67f8a-ad13-45ff-a676-cbc513b8c458" target="_blank" data-smartkarma-citation="entities:25965:1" rel="noopener">Enel Americas SA (ENIA US)</a>, <a href="https://www.smartkarma.com/entities/drax-group-plc" target="_blank" data-smartkarma-citation="entities:21911:1" rel="noopener">Drax Group PLC (DRX LN)</a>, <a href="https://www.smartkarma.com/entities/meyer-burger-technology-ag" target="_blank" data-smartkarma-citation="entities:25013:1" rel="noopener">Meyer Burger Technology Ag (MBTN SW)</a> and <a href="https://www.smartkarma.com/entities/centrais-eletricas-br-sp-adr" target="_blank" data-smartkarma-citation="entities:28638:1" rel="noopener">Centrais Eletricas Br-Sp Adr (EBR US)</a>.The largest selling impact will be on <a href="https://www.smartkarma.com/entities/meridian-ener-partly-paid-sh" target="_blank" data-smartkarma-citation="entities:4327:1" rel="noopener">Meridian Energy (MEL NZ)</a>, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a>, <a href="https://www.smartkarma.com/entities/verbund-ag" target="_blank" data-smartkarma-citation="entities:22563:1" rel="noopener">Verbund AG (VER AV)</a>, <a href="https://www.smartkarma.com/entities/innergex-renewable-energy-inc" target="_blank" data-smartkarma-citation="entities:25479:1" rel="noopener">Innergex Renewable Energy (INE CN)</a>, <a href="https://www.smartkarma.com/entities/cia-energetica-de-spon-adr" target="_blank" data-smartkarma-citation="entities:28644:1" rel="noopener">Cia Energetica De-Spon Adr (CIG US)</a>, <a href="https://www.smartkarma.com/entities/boralex-inc" target="_blank" data-smartkarma-citation="entities:25478:1" rel="noopener">Boralex Inc (BLX CN)</a> and <a href="https://www.smartkarma.com/entities/scatec-solar-asa" target="_blank" data-smartkarma-citation="entities:25120:1" rel="noopener">Scatec Solar ASA (SSO NO)</a>.Among the current index constituents, there will be buying on <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a> and <a href="https://www.smartkarma.com/entities/vestas-wind-systems-a-s" target="_blank" data-smartkarma-citation="entities:22524:1" rel="noopener">Vestas Wind Systems A/S (VWS DC)</a>.We recommend buying the surprise inclusions and unwinding the positions by implementation date. A lot of the stocks that will have a reduction in index weight have been sold off over the last few months and the active positions will be covered leading up to implementation date - we recommend buying these stocks in the days leading up to implementation date since the stocks could rally once the overhang of passive selling has been removed.

The changes to the S&amp;P Global Clean Energy Index have been announced. There are 52 additions to the index to take the number of index constituents up to 82. The changes are effective after the close of trading on 16 April.The 52 additions and capping changes will result in a one-way turnover of close to 55% and will require the ETFs tracking the index to trade US$12bn to rebalance their portfolios.The largest buying impact in terms of ADV to trade will be on Edp - Energias De Portugal Sa (EDP PL), SSE PLC (SSE LN), Northland Power (NPI CN), Enel Americas SA (ENIA US), Drax Group PLC (DRX LN), Meyer Burger Technology Ag (MBTN SW) and Centrais Eletricas Br-Sp Adr (EBR US).The largest selling impact will be on Meridian Energy (MEL NZ), Contact Energy (CEN NZ), Verbund AG (VER AV), Innergex Renewable Energy (INE CN), Cia Energetica De-Spon Adr (CIG US), Boralex Inc (BLX CN) and Scatec Solar ASA (SSO NO).Among the current index constituents, there will be buying on Orsted A/S (ORSTED DC) and Vestas Wind Systems A/S (VWS DC).We recommend buying the surprise inclusions and unwinding the positions by implementation date. A lot of the stocks that will have a reduction in index weight have been sold off over the last few months and the active positions will be covered leading up to implementation date - we recommend buying these stocks in the days leading up to implementation date since the stocks could rally once the overhang of passive selling has been removed.

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

Iberdrola, via its subsidiary Avangri,d announced the acquisition of PNM on 21 October.announced the merger of both companies.
<ul>
<li>Under the proposed transaction, shareholders of PNM will receive $50.30 per share, in cash, representing a premium of 10% over PNM's share price as of Oct. 20, 2020.</li>
<li>for a transaction value, as reported, of $8,300 mn and $4,342 mn in total consideration to shareholders.</li>
<li>11.7x EV/Fwd EBITA and 24.,4x P/Fwd EPS.</li>
</ul>
The hurdles are being cleared (read on for details) and the transaction is expected to close by the end of December.
PNM began trading on 12 January at $48.41,
<ul>
<li>which represents a gross spread of 3.75%, which I consider attractive for alow-risk deal that is almost certainly to close by the end of December 2021, i.e. almost a year.</li>
<li>Recommendation is LONG PNM.</li>
<li>Average 3-months daily volume is 2,012,899</li>
</ul>

Iberdrola, via its subsidiary Avangri,d announced the acquisition of PNM on 21 October.announced the merger of both companies.

Under the proposed transaction, shareholders of PNM will receive $50.30 per share, in cash, representing a premium of 10% over PNM's share price as of Oct. 20, 2020.
for a transaction value, as reported, of $8,300 mn and $4,342 mn in total consideration to shareholders.
11.7x EV/Fwd EBITA and 24.,4x P/Fwd EPS.

The hurdles are being cleared (read on for details) and the transaction is expected to close by the end of December.
PNM began trading on 12 January at $48.41,

which represents a gross spread of 3.75%, which I consider attractive for alow-risk deal that is almost certainly to close by the end of December 2021, i.e. almost a year.
Recommendation is LONG PNM.
Average 3-months daily volume is 2,012,899


PNM Resources - Iberdrola, Work-In-Progress, Attractive Spread

<a href="https://www.smartkarma.com/entities/iberdrola-sa" target="_blank" data-smartkarma-citation="entities:21276:1" rel="noopener">Iberdrola SA (IBE SM)</a> accelerates its expansion in the United States. <a href="https://www.smartkarma.com/entities/avangrid-inc" target="_blank" data-smartkarma-citation="entities:26503:1" rel="noopener">Avangrid Inc (AGR US)</a> , an 81.5% Iberdrola controlled company has announced an agreement to acquire <a href="https://www.smartkarma.com/entities/pnm-resources-inc" target="_blank" data-smartkarma-citation="entities:16546:1" rel="noopener">Pnm Resources (PNM US)</a>, a New Mexico and Texas power company listed on the NYSE.
Iberdrola offers $50.3 in cash, for a total equity value of $4,317.5 mn (€3,663.5 mn), according to a relevant fact sent to the CNMV. Iberdrola has undertaken to provide Avangrid with "the funds that are necessary" for the price of the transaction.
The offer price represents:
<ul>
<li>10% premium over PNM's price per share at the close of Tuesday 20 October and 19.3% premium to PNM Resources 30-day VWAP</li>
<li>22.8x Capital IQ's consensus P/E estimate</li>
<li>2.2x P/BV</li>
<li>12.6x EV/Forward EBITDA vs. 10.9x for comparable companies.</li>
</ul>
The proposed transaction is all cash and I do not see obvious regulatory issues, therefore I expect the merger arbitrage spread to narrow quickly.

Iberdrola SA (IBE SM) accelerates its expansion in the United States. Avangrid Inc (AGR US) , an 81.5% Iberdrola controlled company has announced an agreement to acquire Pnm Resources (PNM US), a New Mexico and Texas power company listed on the NYSE.
Iberdrola offers $50.3 in cash, for a total equity value of $4,317.5 mn (€3,663.5 mn), according to a relevant fact sent to the CNMV. Iberdrola has undertaken to provide Avangrid with "the funds that are necessary" for the price of the transaction.
The offer price represents:

10% premium over PNM's price per share at the close of Tuesday 20 October and 19.3% premium to PNM Resources 30-day VWAP
22.8x Capital IQ's consensus P/E estimate
2.2x P/BV
12.6x EV/Forward EBITDA vs. 10.9x for comparable companies.

The proposed transaction is all cash and I do not see obvious regulatory issues, therefore I expect the merger arbitrage spread to narrow quickly.

PNM Resources - Iberdrola: Friendly Acquisition

Spain

Iberdrola S.A. generates, distributes, trades, and markets electricity in the United Kingdom, United States, Spain, Portugal, and Latin America.  The Company specializes in clean energy and more specifically wind power.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Iberdrola SA (IBE SM)

Siemens/Siemens Gamesa: Bid Rumours

I value Siemens Gamesa using a DCF model. My TP is €30.3/share, 14.3% premium to closing price on 18 May. Although I am positive on SGRE, I do not...

Jesus Rodriguez Aguilar

Iberdrola (Avangrid)/PNM Resources: Regulator's Reprimand and Capital Increase

PRC's concerns delay the approvals needed. The deal seems on track for completion during H2 2021. Gross spread 2.3%, c. 4.6% annualized (assuming...

Jesus Rodriguez Aguilar

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

There are 52 additions to the S&P Global Clean Energy Index. One-way turnover is nearly 55% and the ETF benchmarked to the index will need to trade...

Brian Freitas

PNM Resources - Iberdrola, Work-In-Progress, Attractive Spread

PNM began trading on 12 January at $48.41, a gross spread of 3.75%, which I consider attractive for a low-risk deal that is almost certainly to...

Jesus Rodriguez Aguilar

PNM Resources - Iberdrola: Friendly Acquisition

Iberdrola offers $50.3 in cash. Iberdrola has undertaken to provide Avangrid with the necessary funds. I do not see any obvious regulatory issues,...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)