Classification of NuWays AG to MPCES Energy Solutions N.V.

Company Name:	MPCES Energy Solutions N.V.
ISIN:	NL0015268814
Reason for the research:	Update
Recommendation:	Buy
from:	01.11.2024
Target price:	NOK 20.00
Target price on sight of:	12 months
Last rating change:
Analyst:	Christian Sandherr

Strong op. progress, impairments weighing on consolidated P&L; chg. est.

Q3 proportionate sales increased by some 29% yoy to $ 3.6m as the group's energy output increased to 30.7 GWh driven by the ramp up of the company's production portfolio but also higher energy prices at its El Salvador sites. As a result, the proportionate EBITDA strongly increased to $ 2.6m, a 72% margin (+126% yoy). Thanks to the group's tight cost control (-30% overhead costs yoy), the consolidated EBITDA turned positive at $ 1.4m.

While the 9M consolidated EBIT figure was still negative at $ 1.4m, this was mainly due to impairments to the tune of $ 1.35m. This should provide investors with confidence that the consolidated EBIT is seen to turn positive in FY25e, also partially carried by the San patricio project turning operational.

Furter portfolio adjustments looming. As already visible during Q2, MPCES’ CHP plant in Puerto Rico was not producing any electricity in Q3 due to the absence of demand from the offtaker, which is undergoing a long-term restructuring of its manufacturing site and business. As a result, MPCES has impaired some $ 0.8m of the project’s book value and has put the project up for sale. Taking into account the offtaker’s financial situation, we would expect the sales to take place at a notable discount (~ 50%) to the remaining book value of $ 8.3m. We expect the sale to be signed at the end of Q1/early Q1.

Further, MPCES decided to discontinue three development projects due to a low likelihood of ultimately running them at internally required IRRs. While the company has recorded impairments for two projects (Acacia and Matarredonda), we expect the company to be able to sell the third one (Pacande) at or above the book value of roughly $ 0.8m, eNuW.

Liquidity no reason for concern. While the free cash (excl. cash in project companies and cash deposited as collateral to secure project-related bank guarantees) stood at only $ 1.6m at the end of Oct., this figure should strongly increased towards the end of the year (eNuW + $4-4.5m) due to the imminent sale of the CHP plant and the Pacande development project. On top, MPCES is still pursuing farm downs of several project, which are currently running inefficient funding structures (i.e. 100% equity).

Guatemala project progressing as planned. The construction of its 65MW PV project, which begun at the end of February, is progressing as planned and reached 50% completion. Installation of modules shoud begin shortly. While MPCES has not yet signed a co-investor (49% stake of the project), we expect this to happen until the end of this year, which was also confirmed by management during the earnings call. Importantly, finding a co-investor has ultimately no impact on the construction timeline as MPCES has already fully financed the project. Once the project is completed (eNuW: mid-2025), it is seen to generate annualized sales of some $8m.

We confirm our BUY ratin with a new NOK 20 PT (old: NOK 23) based on based on sum-of-the-parts (SOTP) valuation, separately accounting for the value of its current IPP portfolio (NPV) and its development backlog (multiple).

You can download the research here: http://www.more-ir.de/d/31155.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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