Utilities Sector

• Kontrol Technologies reported Q1 financial results that were below our expectations.
• Revenue came in at $1.5M vs. our estimate of $1.9M and adjusted EBITDA was ($0.2M) vs. our estimate of $0.2M.
• KNR ended the quarter with $11.2M in cash & equivalents with minimal debt ($0.20/share in net cash), compared to its market cap of $9.1M.

• CEO Chris Hayes hosted SPRU’s 1Q25 results call. Spruce Power is a leading owner-operator of residential solar power purchase agreements (PPAs) and solar lease agreements (SLAs).
• Spruce grows through the acquisition of mature portfolios.
• Spruce now owns the cash flows from ~85,000 home solar assets and contracts, up from 21k in 2018. 

• Adani Power delivered strong FY25 earnings and plans to expand capacity to 30.7 GW by FY30 through brownfield, greenfield, and acquisition-driven growth.
• Godda, Jharkhand (110km from Bangladesh) project supports high realisations, but Bangladesh receivable buildup (~USD 900 million) remains a working capital risk, with gradual collections ongoing.
• Adani Power offers strong margins, improving ROCE, and trades at ~16.6× FY25 P/E.

Telecom Plus trades as Utility Warehouse (UW). It sells energy, broadband, mobile and selected insurance products to consumers who value their time and money and appreciate the simplicity and service. Aware of their own inertia, such consumers are wary of special offers that may ultimately cost them more. UW targets these low-churn customers through a small army of self-employed partners, keeping costs and overheads low. Energy is the most important product, being the biggest cost for most households and the most easily switched. For several years the market was disrupted by a proliferation of undercapitalised operators with unsustainable business models. After the invasion of Ukraine and the leap in energy prices, these operators folded, restoring price rationality. Customer growth has returned to its previous trend rate of double digits.

• Adani Energy Solutions (ADANIT IN)’s Q4 FY25 PAT jumped 87% YoY to INR 714 crore, driven by strong transmission execution and distribution growth.
• The company’s record order book of INR 59,936 crore and aggressive smart metering ramp-up signal sustained growth ahead.
• AESL is strengthening its position across transmission, distribution, and metering, reinforcing its multi-year growth visibility.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Adani Green Energy, Meituan
• US equity rose for the sixth consecutive day, the best streak since March 2022, as it continued to look past weak consumer confidence and labour data as well as no signs of an easing in the tariff situation .
• The S&P 500 was up by 0.6%, and the Nasdaq by 0.5%. US Treasury yields shrank 3-5 bps across the curve. The biggest move was probably a 6.7% correction in steel prices (HRC), following a YTD spike.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Adani Green Energy, Nickel Industries
• The US equity market rebounded overnight to erase earlier losses in the day. The S&P 500 was up for a fifth straight day (its longest streak since November 2024), albeit at just 0.1%.
• In the US, the Dallas Fed manufacturing activity index plunged to negative 35.8 (-14.1 e / -16.3 p) in March, reaching its lowest level since May 2020. The survey showed executives describing the situation as “chaos” and “insanity”.

Jersey Electricity (JEL) is bringing forward capital spending to boost resilience and improve the security of its supply. Our analysis indicates that the £180m capex plan over the next five years, which includes £120m for what is referred to as ‘The Big Upgrade’, is comfortably affordable given the current health of JEL’s balance sheet (gearing peaks at less than 30% in 2029) and should not require above-inflation retail price increases beyond 2025. JEL beat our expectations for FY24 earnings, and looks well hedged to price exposures for the next two years.

• ENN Energy (2688 HK) is not required to submit a merger control filing to the SAMR, suggesting it is making a step ahead in meeting the pre-conditions. 
• The use of onshore bank loans and cash balance as a refinancing source and consideration payment will lower financing costs, boosting the value of ENN Natural Gas H-share.
• The current share price is 9.3 and 17.7% below the low-bound and high-bound of our estimated value range. It is also less vulnerable to the current tariff war.

• Naturgy Energy Group plans a tender offer to repurchase 9% of shares at €26.50/share, with potential upside due to Spanish proration rules.
• Lensar is being acquired by Alcon for $14/share plus a CVR up to $2.75/share, with shareholder approval likely.
• OCI N.V. announced a $1bn cash distribution and potential future dividends, raising net cash estimates to €9.19/share.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Insignia Financial (IFL AU), Oneconnect Financial Technology (6638 HK), ENN Energy (2688 HK), Seven & I Holdings (3382 JP), Smart Share Global (EM US), Domain Holdings.
• Lowest spreads: Makino Milling Machine Co (6135 JP), Sinarmas Land (SML SP), Shibaura Electronics (6957 JP), Tenma Corp (7958 JP), Aeon Delight (9787 JP), Naigai Trans Line (9384 JP). 

• Naturgy plans to repurchase 9% of shares at €26.5/share, with a potential €1.5/share profit opportunity.
• Spanish tender law Article 38.1 allows a linear distribution of 25% of shares among tendering shareholders.
• Previous similar tenders by Abertis and Duro Felguera saw priority allocations of 660 and 683 shares, respectively.

• Since late-February (2/25/25 Compass and 2/27/25 Int’l Compass) we expected an 8-10% pullback to provide a buying opportunity.
• But that all changed last week (4/1/25 Compass and 4/3/25 Int’l Compass), when we downgraded our outlook to bearish/cautious, citing several concerning developments.
• Despite the 90-day pause, we remain cautious and we continue to favor defensives as long as the S&P 500 and ACWI-US are below their 200-day MAs.