Weekly Utilities 21-25 Jan 2013

Europe Equity Research
18 January 2013
J.P.Morgan Weekly Utilities Wire

21 - 25 January 2013
The Week That Was The utilities sector was down 1.0% this week while the Stoxx 600 was flat. The best performer was REE on a successful bond issuance and its receipt of a greater than expected capex programme from the Spanish government. The weakest performer was RWE, on concerns surrounding its exposure to weakening power prices, and its limited progress on debt reduction. The Week Ahead The deadline for UK water companies to respond to the regulator (Ofwat) on proposed licence modifications falls on Wednesday, and we expect the European Parliament Industry and Energy Committee to give its opinion on backloading during the week. Pair Trade Monitor We maintain our long Gas Natural / short E.ON which is 59.0% in the money and our long United Utilities / short National Grid which is 8.0% in the money. J.P. Morgan latest research We downgraded RWE to Underweight this week, and also published on the attribution of the Spanish tariff deficit, ENI bond issue which is convertible into Snam stock, and the affect of LV tariff increases in Greece on PPC. All links to published research inside.
The Weeks Ahead
Mon 21 Tue 22 Wed 23 Thu 24 Fri 25 Mon 28 Tue 29 Wed 30 Thu 31 Fri 1
Source: Company data, J. P. Morgan estimates. Consensus source: Bloomberg. All times are as per London.
European Utilities Javier Garrido

AC
(34-91) 516-1557 javier.x.garrido@jpmorgan.com
Edmund Reid
(44-20) 7155 6676 edmund.reid@jpmorgan.com
Vincent de Blic, CFA

(44-20) 7155 6623 vincent.deblic@jpmorgan.com
Nathalie F Casali
(44-20) 7325-9023 nathalie.x.casali@jpmorgan.com
Sarah L Laitung, CFA

(44-20) 7325-6826 sarah.laitung@jpmorgan.com J.P. Morgan Securities Ltd.
European Utilities relative performance

120 110 100 90 80
EVN ex div; 0.42 gross DPS, 3.3% gross yield IBE pays div; 0.14 gross DPS, 3.5% gross yield Deadline for UK water companies to respond to Ofwat licence modifications SSE ex div; 25.2p net DPS; 28p gross DPS; 1.9% gross yield European Parliament Industry & Energy Committee to give opinion on backloading
E.ON analyst and investor conference (2013 guidance); United Utilities interim management statement; PNN ex div; 8.76p net DPS; 9.73p gross DPS; 1.5% gross yield Ofwat city briefing; Fortum OYJ FY12 results
Jan Mar May Jul Sep Nov 12 12 12 12 12 12

Europe Utilities index absolute Europe Utilities relative to Stoxx600
Source: Bloomberg, J. P. Morgan estimates
See page 19 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.morganmarkets.com
Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com
Europe Equity Research 18 January 2013
Table of Contents
Sector performance..................................................................3 The week ahead ........................................................................6 Pair trades.................................................................................7 Commodities, hydro & wind ....................................................9 Electricity demand monitor ...................................................12 J.P.Morgan latest research....................................................13 Macro, dividends & bonds.....................................................15 Valuation comps.....................................................................16
Please see the relevant research report, some links to which are provided herein, or the most recent company-specific research published by J. P. Morgan for important disclosures, including a discussion of valuation and risks, for any security recommended herein before forming any investment opinion whatsoever. J. P. Morgan research is available at http://www.morganmarkets.com, or you can contact the analysts named below or your J. P. Morgan representative.
Sector performance
Last week
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% REE, 8.4% EDF, 5.9% Shanks, 4.9% PPC, 4.5% Snam, 3.9% Sector, -1.0% Market, 0.0% Endesa, -2.9% SSE, -3.0% ZE PAK, -3.2% Drax, -3.7% RWE, -4.5%
Total return ()
Relevant country index
Source: Bloomberg. Priced at close on 17 January 2013. Total returns are all in Euros
Top 5 last week REE (+9.6% relative to the European Utilities sector) In the last week the Spanish Government has given REE larger than expected capex for the period 2013-16, and REE has issued a 400m 9-year bond at attractive rates. EDF (+7% relative) On Monday EDF announced an agreement with the French Government regarding the CSPE tariff deficit. EDF will be remunerated for it at 1% above government bonds, and recover the 4.9bn of accumulated deficit at the end of 2012 by 2018. Shanks (+6% relative) On Monday, Shanks announced that they had signed a 25 year PFI contract with Wakefield council, estimated to be worth c.750m over its life. PPC (+5.6% relative) No real news flow. Snam (+5% relative) On Tuesday ENI issued bonds convertible into c. 289m of Snam. This bond issuance has pushed out the overhang risk on an 8-9% stake in Snam for at least 3 years.
Bottom 5 last week Endesa (-1.9% relative) Over 60% of the 2013E tariff deficit is attributable to the non-mainland territories, this means that Endesa/Enel is likely to have to finance 1bn more of the tariff deficit than the market perceives. SSE (-2% relative) No real news flow. ZE PAK (-2.2% relative) Ze Pak fell with polish power prices, which were down 2.1% this week. Drax (-2.7% relative) On Wednesday S&P announced it had downgraded Draxs long term credit rating to BB from BB+. S&Ps reasons for the downgrade included a reduction in Draxs credit metrics from the recent debt issuance, the execution risk entailed in Draxs biomass conversion, and Draxs exposure to commodity prices. RWE (-3.5% relative) RWE fell on concerns surrounding its exposure to the continuing fall in power prices, its limited progress on debt reduction and the risk that negative noise into the elections in Germany could further weigh on the shares.
Last month
RWE Nat Grid Veolia SSE Drax Centrica Severn Trent CEZ EON Suez Env Fortum
Last 3 months
EON RWE GDF Suez CEZ Pennon EDF Severn Trent Nat Grid SSE UU Drax Fortum Centrica
Elia GDF Suez UU Endesa Pennon PGE Enel EDPR Terna EDF Iberdrola Snam EDP Gas Nat EGP ZE PAK Shanks Enagas % 10
REE 20 25
Veolia PGE Iberdrola Endesa Snam Suez Env Enel EDPR Elia Terna EGP EDP Enagas REE Shanks Gas Nat 0 % 20 40
PPC 30
-40 -20
PPC 60
-10
-5
15
Last 12 months
GDF Suez EDF EON CEZ Fortum EDPR Iberdrola Pennon EGP
Year to date
RWE CEZ Nat Grid
Shanks Suez Env PGE Enel RWE Drax Severn Trent EDP Snam Nat Grid Veolia Gas Nat Endesa Elia SSE Terna UU Centrica Enagas REE 0 20 40 % 60 80 100
Veolia Severn Trent SSE GDF Suez Centrica Drax Suez Env EON Elia Fortum
PPC 120 -10 -5 0
Iberdrola Enel Pennon UU Endesa PGE Terna Snam EDF EDP Gas Nat EDPR ZE PAK EGP Shanks Enagas PPC % 5 10 15
REE 20
-40
-20
Source: Bloomberg. Priced at close on 17 January 2013. Total returns are all in Euros
The week ahead

Mon 21 Tue 22 EVN ex div; 0.42 gross DPS, 3.3% gross yield IBE pays div; 0.14 gross DPS, 3.5% gross yield SSE ex div; 25.2p net DPS; 28p gross DPS; 1.9% gross yield Deadline for UK water companies to respond to Ofwat licence modifications The 24 water companies which will be expected to respond to Ofwat must do so by 23 January. All three of the listed water companies have already accepted the licence modifications. However if any of the other water companies rejected the proposals Ofwat would refer that company to the Competition Commission (CC). If the CC made any alterations to the licence of a company whom Ofwat had referred to them, all other water companies licences would be similarly altered. European Parliament Industry & Energy Committee to give opinion on backloading We expect the European Parliament Industry and Energy Committee to give its opinion on backloading on either the 23 or 24 January. Thu 24 Fri 25
Wed 23
Pair trades
We base these short-term ideas on historical trading relationships and imminent newsflow. Our fundamental and longer term preferences are not affected.
Ongoing pair trades

Long term rec Stoxx Euro Utilities L Gas Natural S E.ON L United Utilities S National Grid OW N N UW Date added 19-Apr-08 18-Oct-12 18-Oct-12 29-Nov-12 29-Nov-12 Price added at 322.3 12.01 18.56 693.50 706.00 Latest close price* 261.8 13.95 13.95 711.00 682.50 Total return -27.7% +19.5% -24.8% +4.4% -3.3% +8.0% Pair trade performance n/a +59.0%
Source: Bloomberg. Past performance may not be indicative of future performance. * Close on 17 January 2013.
1.1 1 0.9 0.8 0.7 0.6 0.5
Gas Nat/EON
Long Gas Natural/short E.ON +59.0% in 12 weeks. Maintain We believe that consensus is underestimating the sustainability of higher Gas Nat earnings in the gas supply business. The renegotiation of LNG contracts and growth in volumes drives 121% EBITDA growth in this business in 2012-14 on our estimates. We are 8-10% above consensus EPS for 2013-14 and we keep this pair trade on as we expect consensus upgrades to drive continued share price performance. Gas Nats exposure to distribution networks gives it a solid cash flow generative base and underpins its 13.6% equity FCF yield. We forecast ND/EBITDA to drop from 3.7x in 2011A to 2.4x 2014E, which means that unlike E.ON, Gas Nat will not need to make disposals of regulated assets. We are concerned about E.ON's high leverage and strategic positioning due to pressure from renewables and poor demand. The macroeconomic backdrop is clearly a major risk in this pair trade. Whilst markets appear to be increasingly relaxed about the risk of a tail risk event in the Euro area now, we will be watching the newsflow carefully for any turn in sentiment. JPM strategists believe that Moodys recent decision to maintain Spains credit rating at Baa3 was positive though, and any forthcoming request for a bailout should also be positive.
0.4 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12
1.1 1.1 1.0 1.0 0.9 0.9
United Utilities/National Grid
Long United Utilities /short National Grid +8.0% in 6 weeks. Maintain UUs share price underperformed Grids following Ofwats licence modification proposals on 26 October, which raised market concerns about excessive regulatory intervention However, this morning United Utilities have accepted Ofwat's revised license modifications, published on 21 December. This has removed any risk of a direct UU referral to the Competition Commission. In contrast, we believe that Ofgems Final Proposals for National Grid, published on 17 December, are challenging and that Grid may choose to reject at least part of the proposals (we see gas transmission and London gas distribution as particularly at risk). A rejection would lead to a Competition Commission referral and continued uncertainty over Grids dividend policy.
Source: Bloomberg. Vertical line indicates where pair trade initiated
0.8 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12
Ratio (first stock divided by second stock) 1yr avg plus 2*standard deviations
1yr avg minus 2*standard deviations
Closed trades
Since inception in April-08 we have had 33 winners (pair trades end in positive territory) and 11 losers (negative).
Last 18 months
L VIE, S SEV L CNA, S DRX L EON, S GSZ L CEZ, S FUM L ENE, S IBE L RWE, S FUM L UU, S NG L EON, S FUM L CNA, S SSE L GSZ, S EOAN L PNN, S SVT Opened 2 Feb 11 28 Oct 10 8 Apr 11 29 Sep 11 08 Jul 11 3 Feb 12 23 Feb 12 14 Jun 12 8 Apr 11 09 Au 12 16 Aug12 Closed 26 Mar 11 08 Apr11 6 May 11 14 Oct 11 21 Oct 11 17 Feb12 7 June 12 12 Jul 12 9 Aug 12 19 Oct 12 16 Nov 12 Profit/(loss) +1.3% -10.5% +2.9% +7.6% -4.5% +6.8% +5.6% +14.0% -1.7% -6.9% -3.1%
Source: Bloomberg. Past performance may not be indicative of future performance.
Commodities, hydro & wind

Power year/season ahead forwards CO2
13 55
or /MWh
12 11 10
/t
Jun-12
Germany '14
45
9 8 7
35 Apr-12
Aug-12
UK Win13/14
Oct-12
Nordpool '14
Dec-12
Spain '14
6 Jan-12
Mar-12
May-12
CO2 '14
Jul-12
Sep-12
Nov-12
CO2 '15
Oil European Brent

130 125 120 115 105 100 95 90 85 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 110
Gas
29 28 28 27 27 26 26 25 25 24 24 23 Jan-12
/MWh
$/bbl
Mar-12
May-12 Jul-12 TTF Gas '14
Sep-12 Nov-12 TTF Gas '15
Coal
130 125 120 115
UK winter 2013/14 clean dark spread

20 18 16 14 12 10 8 6 4 2 0 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 UK Win13/14 Clean Dark Spread
$/t
110 105 100 95 90 Jan-12 Mar-12 May-12 Jul-12 Sep-12

API2 '14
Nov-12
API2 '15
Source: Bloomberg
/MWh
International freight
11 11 10 10
Recyclate prices - UK
350 300 250 200
$/t
9 9 8 8 7 7 6 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
/t
150 100 50 0 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov 07 07 07 08 08 09 09 09 10 10 11 11 12 12 12
Glass Paper Plastic Metal
Source: Bloomberg
Source: Bloomberg
Legacy Oil-linked long term contract gas price spread to TTF spot gas price, 2014
38.0 36.0 34.0 32.0 30.0 28.0 26.0 24.0 22.0 20.0 Mar 11 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 -7.0 -8.0 -9.0 Jul 11 Nov 11 Spread (RHS)
Source: Bloomberg, RWE
Mar 12 LTC (LHS) TTF (LHS)
Jul 12
Nov 12
10
Nordic hydro conditions

95% 85% 75%
Percent
French hydro conditions

90% 80% 70% 60% 50% 40% 30% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
2007 2008 2009 2010 2011 2012
65% 55% 45% 35% 25% 15% 2009 2010

Series1
2011
1990-2006
2012
Source: Nordpool spot
Source: RTE
Spanish hydro conditions

17,000 15,000 13,000
Italian hydro conditions

6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
7 year average 2010 2011 2012
GWh
11,000 9,000 7,000 5,000 2007 2008 2009

Actual
2010
2011
2012
2013
10 year average
Source: Spanish Environment Ministry
Source: Terna
Greek hydro conditions

3,300 3,100 2,900 2,700 2,500 2,300 2,100 1,900 1,700 1,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012
Source: DESMIE
Spanish wind conditions

15% 13% 11% 9% 7% 5% Jan Mar May Jul Sep Nov 2009 2008 2012 2010 2011
2011
2010
9 year average
Source: Red Electrica de Espaa. Output last month as a proportion of output in the previous 12 months
GWh
11
Electricity demand monitor

% y-o-y
0% -1% -2% -3% -4% -5% -6%
-4.9% -2.5% -1.2% -2.0% -3.2% -0.9% -1.8% -2.4% -1.6% -1.9% -2.8% -3.1% -1.0%
Spain (adjusted for weather and working days)
Italy (adjusted for weather and working days)

0% -2% -4% -3.3% -3.1% -6% -8% -10% -12% Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
-1.9% -4.9% -4.0% -5.8% -0.9% -1.4% -1.2% -3.7% -5.6% -3.6%
-9.6%
Dec- Jan-1Feb- Mar- Apr-1May- Jun-1Jul-1 Aug- Sep- Oct-1Nov- Dec11 2 12 12 2 12 2 2 12 12 2 12 12
Germany (adjusted for working days)

4.3% 5% 4% 3% 2% 1% 0.0% 0.3% 0% -1% -0.3% -2% -0.9% -1.3% -1.5% -1.3% -1.0% -3% -2.2% -3.1% -4% -3.3% -3.5% Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12
UK (unadjusted)
10% 5% 0% -5% -10% -6.6% -15%
-12.0% -5.3% -5.5% -2.1% -0.9% -1.7% 5.4% 6.9% 5.1% 0.4% 4.1% 2.7%
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Nordpool (unadjusted)
17.8% 20% 15% 7.5% 7.0% 10% 2.1% 1.7% 5% 0.4% 0% -0.3% -0.4% -0.1% -0.9% -5% -1.5% -5.9% -10% -15% -14.1% -20% Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12
France (adjusted for weather and working days)

1% 0.4% 1% 0.0% 0% -1% -0.4% -0.4% -1% -0.7% -0.9% -1.0% -2% -1.2% -1.3% -1.4% -2% -1.6% -3% -3% -2.7% -3.0% -4% Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Source: DECC, National Grid, Terna, Red Electrica, Nordpool, RTE, Platts, Company data, J.P. Morgan estimates.
12
J.P. Morgan latest research

Vincent de Blic, CFA
(44-20) 7155-6623 vincent.deblic@jpmorgan.com
RWE: Earnings outlook deteriorating, debt still too high and some political risk; downgrade to Underweight
We are downgrading RWE from Neutral to Underweight and cutting our PT from 32 to 28. We think the continued fall in power prices, limited progress on debt reduction and risk of negative noise into the elections in Germany could further weigh on the shares. Our new 2014E EPS is 14% below median consensus the 8.7x implied P/E is not compelling given the execution risk on deleveraging and LT growth outlook, in our view. Click here for the full report
15 January 2013
Javier Garrido
(34-915) 161-557 javier.x.garrido@jpmorgan.com
15 January 2013
Spanish utilities/Enel: 2.9bn tariff deficit in 13E, but 78% attrib to ELE/Enel. GAS, IBE and EDP get only a small share ALERT
The absence in the 2013 government budget of any extra contribution to pay for electricity costs and the removal of the obligation to eliminate the electricity tariff deficit (TD) in 2013 (published by the government on 31 Dec 2012) have pushed the market to factor in more uncertainty in the investment case of the Spanish utilities. We agree that the existence of a TD in 2013 creates more risks. However, we disagree on the market assumption about how the 13E TD will be allocated and hence on its impact on the net debts of the companies. As 60%+ of the 13E TD is attributable to the non mainland territories (Endesa monopoly), this means that ELE/Enel should finance 1bn of higher TD than what the market perceives, while IBE and GAS should finance 0.6bn and 0.2bn less respectively. In other words, IBEs and GASs 13E cash flows should surprise on the upside, while ELE/Enel is likely to struggle to improve materially its FCF. We reiterate our bullish stance on GAS and our preference for Southern European utils (incl IBE) vs. Central Europe. Click here for the full report
Sarah Laitung, CFA

(44-20) 7325-6826 sarah.l.laitung@jpmorgan.com
Snam: Bond convertible into Snam shares reduces overhang risk - ALERT
The bonds being issued by ENI today should push out the overhang risk on an 8-9% stake in Snam for at least the next 3 years, if not permanently. We would expect ENI to continue to look at options for the remaining 11-12% of Snam it owns that is not covered by the convertible bonds, including potential placements with sovereign wealth funds. We therefore see much lower risk of Snam shares being placed in the market near term. Snam is trading at a very reasonable 1.7% EV premium to Dec2013 RAB and 7.1% 2012E dividend yield. Click here for the full report
15 January 2013
13
Sarah Laitung, CFA

(44-20) 7325-6826 sarah.l.laitung@jpmorgan.com
Public Power Corp: 9% tariff increase slightly disappointing although further hikes in 2013 not ruled out - ALERT
Yesterday the government announced that LV tariffs will be increased by 8.6-9.2% from 1 January 2013. PPC had requested 10.8% (although we believe this includes the renewables levy), and the press had speculated last week that the increase would be 10-11%. We therefore see the ruling as a slight disappointment, particularly as the scope of the social tariff is widening, which will put more pressure on standard tariffs in 2014. However, importantly the statement leaves the door open for further tariff increases later in 2013, with the requirement to make tariffs fully cost reflective by June being reiterated. With continued uncertainty in the regulatory environment, we stay Neutral. Click here for the full report
15 January 2013
14
Macro, dividends & bonds

Macroeconomic events
Mon 14 Jan Tue 15 Jan Wed 16 Jan UK: Dec Labour market report Thu 17 Jan US: Jan PMI Euro area: PMI
Source: Bloomberg, J. P. Morgan.
Fri 18 Jan UK: 4Q12 GDP estimate
Dividend calendar
Company PENNON GROUP PLC SSE PLC UNITED UTILITIES GROUP PLC E.ON SE EVN AG IBERDROLA SA Declared 29 Nov 12 14 Nov 12 28 Nov 12 12 Nov 12 13 Dec 12 23 Oct 12 Ex 30 Jan 13 23 Jan 13 19 Dec 12 06 May 13 22 Jan 13 03 Jan 13 Record 01 Feb 13 25 Jan 13 21 Dec 12 03 May 13 21 Jan 13 02 Jan 13 Payable 04 Apr 13 22 Mar 13 01 Feb 13 06 May 13 25 Jan 13 22 Jan 13 Gross DPS 9.73 28.00 12.71 1.10 0.42 0.14 Type Semi-Anl Semi-Anl Semi-Anl Annual Annual Semi-Anl Interim Interim Interim Regular Cash Regular Cash Interim Gross yield 1.5% 1.9% 1.8% 7.9% 3.3% 3.5%
Source: Bloomberg. Priced at close on 17 January 2013.
Dividend yield spread

Spread of European Utilities sector forward dividend yield over Eurozone bond yields
700 600 500 400 300 200 100 0 -100 -200 Jan 06
Spread (bps)
Jan 07
Jan 08
Jan 09
Jan 10
Jan 11
Jan 12
Jan 13
Source: Bloomberg, J. P. Morgan estimates. Price at close on 17 January 2013.
15
Valuation comps
J.P. Morgan Cazenove Utilities equity based valuation comps Current Price Potential Mkt Cap Free float Adj EPS CAGR 12m fwd cons Equity based Rating Price target upside (%) (m) (m) 2011-15 P/E 5yr avg E.ON UW 13.97 14.00 0.3% 26,610 24,228 4.3% 10.0 RWE UW 29.43 28.00 -4.8% 18,089 15,366 -7.4% 8.7 GDF SUEZ UW 15.35 14.00 -8.8% 34,790 20,014 -1.0% 11.9 EDF OW 14.71 44.00 199.2% 27,188 4,213 14.4% 13.7 Fortum N 14.11 13.90 -1.5% 12,535 6,172 0.6% 12.4 CEZ N 651.70 900.00 38.1% 13,569 4,098 2.8% 9.8 PGE N 18.92 20.00 5.7% 8,571 3,267 11.3% 10.3 ZE PAK OW 30.72 32.00 4.2% 387 183 -14.7% 5.6 Elia N 33.97 28.00 -17.6% 2,050 1,068 n/a 14.4 Veolia UW 8.88 9.66 8.8% 4,614 3,372 23.6% 14.4 Suez Environnement OW 9.01 11.98 33.0% 4,596 2,550 2.2% 14.1 North Europe -weighted average 37.1% 2.0% 10.9 Simple average 23.3% 3.6% 11.4 Enel N 3.20 Iberdrola N 4.09 Endesa N 17.33 EDP OW 2.41 Gas Natural OW 13.95 Public Power Corp N 6.69 Red Electrica OW 43.20 Enagas OW 17.86 Snam OW 3.64 Terna OW 3.12 South Europe - weighted average Simple average National Grid Centrica SSE Drax United Utilities Severn Trent Pennon Shanks UK - weighted average Simple average UW OW UW UW N N OW OW 682.50 338.40 1433.00 553.50 711.00 1578.00 658.00 97.00 3.50 5.60 18.50 3.00 15.50 3.20 50.00 19.00 4.20 3.20 9.2% 36.8% 6.8% 24.4% 11.1% -52.2% 15.8% 6.4% 15.4% 2.5% 14.0% 7.6% -6.2% 7.9% -17.0% -26.8% -0.8% 2.0% 1.8% 44.3% -5.2% 0.6% 10.4% 47.7% 35.4% 29.0% 20% 13% 30,128 24,586 18,343 8,820 13,960 1,552 5,843 4,264 12,309 6,275 20,715 22,972 1,456 4,436 4,420 759 4,455 3,289 6,127 4,057 1.1% 2.7% 1.4% 5.7% 9.9% n/a 11.4% 9.7% 3.3% 6.1% 3.9% 5.7% 2.7% 6.6% n/a -12.9% n/a n/a n/a n/a 3.7% -1.2% 24.5% 11.2% 15.0% 17.8% 3.3% 5.0% 8.3 11.0 9.6 9.9 9.7 7.7 12.3 10.9 13.0 14.9 10.5 10.7 11.2 11.5 11.0 9.4 14.0 13.9 15.0 12.9 11.7 12.4 27.9 15.6 19.1 21.7 11.1 12.1 2011E 10.6 6.4 10.3 7.7 9.7 8.6 13.6 4.7 16.4 14.4 10.6 9.8 10.3 7.3 8.6 8.6 7.8 12.0 nm 12.1 11.9 12.6 16.6 9.6 10.8 13.3 13.1 12.7 10.0 20.6 17.8 13.9 13.5 13.8 14.4 42.0 16.2 23.5 29.1 11.3 12.8 2012E 6.2 7.2 10.0 6.6 10.6 7.8 8.8 4.7 16.2 11.8 12.6 8.3 9.3 8.5 8.7 10.3 7.5 9.7 22.4 10.8 10.8 13.0 15.5 9.7 11.7 12.5 12.2 12.4 11.1 17.2 17.9 15.5 12.7 13.1 13.9 28.6 14.8 18.7 21.7 10.5 12.1 Adj P/E 2013E 10.6 7.5 11.8 6.1 10.4 7.8 10.9 8.8 15.2 10.3 12.1 10.0 10.1 8.1 8.8 9.8 7.9 9.8 14.5 9.5 10.0 13.2 14.7 9.5 10.6 12.9 11.6 12.3 24.4 16.3 18.1 14.9 9.7 13.3 15.0 24.1 12.7 15.9 18.4 11.0 12.1 2014E 9.8 8.6 11.3 5.0 10.7 7.5 8.8 7.6 n/a 8.3 11.1 9.6 8.9 7.4 8.5 8.7 6.7 8.8 5.2 8.6 9.1 11.6 13.3 8.6 8.8 12.4 11.1 12.1 33.7 14.7 18.1 12.9 8.4 12.9 15.4 18.9 11.5 13.6 15.2 10.5 11.0 2015E 9.0 8.7 10.7 4.5 9.5 7.7 8.9 8.9 n/a 6.2 9.7 9.0 8.4 7.0 7.8 8.2 6.3 8.2 3.6 7.9 8.2 11.1 13.1 8.0 8.1 12.0 10.2 n/a 17.3 n/a n/a n/a n/a 11.4 13.2 17.5 10.6 12.6 14.0 9.3 9.3 2011E 7.2% 6.8% 9.8% 8.2% 7.1% 7.1% 9.7% n/a 4.1% 7.9% 7.2% 7.8% 7.5% 8.1% 8.0% 5.8% 7.7% 5.9% n/a 5.0% 5.5% 6.6% 6.7% 7.3% 6.6% 6.4% 5.1% 6.2% 5.6% 5.0% 4.9% 4.0% 4.1% 5.7% 5.2% n/a 1.9% 1.9% 1.9% 6.9% 6.3% Gross yield (%) 2012E 2013E 2014E 7.9% 5.4% 5.7% 6.8% 6.8% 6.8% 9.8% 9.8% 9.8% 8.8% 9.5% 10.5% 7.1% 7.1% 7.1% 7.7% 7.7% 9.4% 7.6% 4.6% 5.7% 6.4% 3.4% 3.9% 4.1% 4.1% n/a 7.9% 7.9% 8.4% 7.2% 7.2% 7.2% 8.0% 7.2% 7.6% 7.4% 6.7% 7.5% 7.2% 8.0% 4.8% 8.3% 6.2% 1.6% 6.0% 6.5% 6.9% 6.4% 7.2% 6.2% 6.7% 5.5% 6.5% 5.0% 5.4% 5.3% 4.3% 4.3% 6.0% 5.4% 1.0% 2.0% 1.7% 1.5% 7.0% 6.1% 7.5% 8.0% 5.1% 8.3% 6.2% 2.4% 6.9% 7.0% 7.1% 6.4% 7.4% 6.5% 6.8% 5.8% 6.9% 2.3% 5.6% 5.7% 4.6% 4.5% 6.2% 5.3% 1.2% 2.4% 2.0% 1.8% 6.9% 5.9% 8.1% 8.0% 5.7% 8.7% 6.8% 6.7% 7.5% 7.7% 7.4% 6.6% 7.8% 7.3% 7.0% 6.2% 7.2% 1.7% 5.9% 6.0% 4.9% 4.7% 6.5% 5.4% 1.6% 2.6% 2.3% 2.1% 7.2% 6.5% 2015E 6.1% 6.8% 6.6% 11.1% 7.9% 9.8% 5.6% 3.4% n/a 10.6% 7.6% 7.1% 7.5% 8.7% 8.0% 6.1% 9.1% 7.3% 9.7% 8.3% 8.5% 7.6% 6.8% 8.1% 8.0% 7.2% 6.3% n/a 3.2% n/a n/a n/a n/a 6.7% 5.6% 1.7% 2.8% 2.5% 2.3% 7.3% 7.1%
640.00 365.00 1190.00 405.00 705.00 1610.00 670.00 140.00
29,703 20,899 16,439 2,411 5,785 4,465 2,852 460
28,812 20,058 16,428 1,761 5,609 4,333 2,832 454
EDP Renovaveis OW Enel Green Power OW Renewables - weighted average Simple average SECTOR - weighted average Simple average EDP ex EDPR Enel ex EGP
4.26 1.51
4.70 2.23
3,715 7,550
950 2,394
5.6 5.6 6.0 5.1 4.8 11.4% 11.8% 11.7% 12.1% 12.7% 6.5 7.8 7.5 6.9 6.5 9.4% 8.3% 8.6% 9.3% 10.0% Source: J.P. Morgan estimates, Company data, Bloomberg. 2011 represents the 12 months to Dec-11 or Mar-12 etc ** Under applicable law and/or J. P. Morgan Chase & Co policy all recommendations and price targets for this company have been removed
Source: J. P. Morgan estimates. ** Under applicable law and/or J. P. Morgan Chase & Co policy all recommendations and price targets for this company have been removed. Priced at close on 17 January 2013. 16
J.P. Morgan Cazenove Utilities EV based valuation comps EV&ND based E.ON RWE GDF SUEZ EDF Fortum CEZ PGE ZE PAK Elia Veolia Suez Environnement North Europe -weighted average Simple average Enel Iberdrola Endesa EDP Gas Natural Public Power Corp Red Electrica Enagas Snam Terna South Europe - weighted average Simple average National Grid Centrica SSE Drax United Utilities Severn Trent Pennon Shanks UK - weighted average Simple average EDP Renovaveis Enel Green Power Renewables - weighted average Simple average S ECTOR - weighted average Simple average EDP ex EDPR Enel ex EGP Rating UW UW UW OW N N N OW N UW OW 2013 EV (m) 57,224 45,827 79,937 76,133 19,081 19,859 9,319 745 5,145 12,568 15,833 2011E 7.1 5.8 5.0 5.1 7.6 5.7 5.7 3.8 11.0 5.7 7.0 5.9 6.3 5.9 7.5 5.6 8.0 7.5 9.9 9.6 8.7 9.6 9.6 7.3 8.2 9.2 5.8 10.1 5.2 11.2 9.7 10.8 5.9 9.0 8.5 10.7 8.1 9.1 9.4 7.0 7.7 EV/EBITDA*** 2012E 2013E 2014E 5.9 6.3 5.8 5.8 5.4 5.1 5.2 5.9 5.7 4.7 4.4 3.8 8.1 7.9 7.9 5.7 5.7 5.5 4.8 5.4 4.8 4.5 4.7 4.8 11.0 10.8 n/a 4.9 4.7 4.4 7.1 6.9 6.2 5.6 5.7 5.3 6.2 6.2 5.4 6.1 7.4 5.6 7.5 6.6 7.2 8.7 8.0 9.6 9.1 7.0 7.6 9.1 5.6 10.3 5.9 10.9 10.2 11.7 5.8 9.0 8.7 9.8 7.7 8.5 8.7 6.8 7.4 5.7 7.0 5.3 7.2 6.3 6.2 7.7 7.3 9.3 8.7 6.6 7.1 8.9 5.0 10.3 10.5 10.7 10.2 11.5 5.3 8.8 9.0 9.2 6.9 7.8 8.1 6.6 7.3 5.3 6.5 5.0 6.5 5.7 5.1 7.0 6.8 9.3 8.5 6.2 6.6 8.8 4.7 10.5 11.8 10.4 10.3 10.4 4.8 8.7 9.0 8.7 6.4 7.4 7.6 6.3 6.9 2015E 5.5 5.0 5.7 3.3 7.3 5.4 4.5 5.6 n/a 3.8 5.8 5.0 5.2 5.0 6.0 4.7 5.9 5.3 4.7 6.3 5.9 9.2 8.4 5.8 6.1 8.7 4.3 n/a 8.3 n/a n/a n/a n/a 7.4 7.1 8.3 5.9 6.9 7.1 5.6 5.9 2011E n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 1.2% 7.2% 3.2% 4.2% n/a n/a n/a n/a 17.5% 11.1% -3.7% n/a 10.8% 8.3% n/a n/a n/a n/a 6.4% 6.6% EV premium to RAB 2012E 2013E 2014E n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3.2% 6.0% 4.1% 4.6% 22.1% n/a n/a n/a 11.9% 11.5% 5.4% n/a 18.2% 12.7% n/a n/a n/a n/a 13.7% 10.0% n/a n/a n/a n/a n/a n/a n/a n/a 3.1% 4.0% 3.4% 3.5% 18.2% n/a n/a n/a 8.1% 9.5% -3.8% n/a 14.1% 8.0% n/a n/a n/a n/a 10.7% 6.5% n/a n/a n/a n/a n/a n/a n/a n/a 3.3% 1.5% 2.7% 2.4% 14.3% n/a n/a n/a 6.9% 8.0% -14.1% n/a 10.5% 3.8% n/a n/a n/a n/a 8.0% 3.3% 2015E n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3.2% -1.2% 1.8% 1.0% 10.4% n/a n/a n/a n/a n/a n/a n/a 10.4% 10.4% n/a n/a n/a n/a 6.9% 4.1%
N N N OW OW N OW OW OW OW
97,848 56,563 37,569 28,726 31,845 8,596 11,277 7,486 26,212 12,569
UW OW UW UW N N OW OW
56,076 25,288 26,046 2,255 12,374 9,714 5,902 788
OW OW
8,769 12,888
7.4 7.0 6.8 5.9 5.3 5.8 6.0 5.6 5.2 4.9 Source: J.P. Morgan estmates, Company dat , Bloomberg. 2011 represent the 12 months to Dec-11 or Mar-12 et i a s c ** Under applicable law and/or J. P. Morgan Chase & Co policy all recommendat ions and price targets for t is company have been removed h ***Year end EV/adj FY EBITDA
Source: J. P. Morgan estimates. ** Under applicable law and/or J. P. Morgan Chase & Co policy all recommendations and price targets for this company have been removed. *** Year end net debt/FY EBITDA. Priced at close on 17 January 2013.
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J.P. Morgan Cazenove Utilities net debt based valuation comps EV&ND based E.ON RWE GDF SUEZ EDF Fortum CEZ PGE ZE PAK Elia Veolia Suez Environnement North Europe -weighted average Simple average Enel Iberdrola Endesa EDP Gas Natural Public Power Corp Red Electrica Enagas Snam Terna South Europe - weighted average Simple average National Grid Centrica SSE Drax United Utilities Severn Trent Pennon Shanks UK - weighted average Simple average EDP Renovaveis Enel Green Power Renewables - weighted average Simple average SECTOR - weighted average Simple average Rating UW UW UW OW N N N OW N UW OW 2013 ND (m) 11,699 8,877 32,306 25,839 7,939 6,906 21 214 2,951 10,517 8,624 2011E 3.9 3.5 3.3 4.0 2.9 2.2 0.1 2.0 6.4 5.1 4.2 3.6 3.4 3.8 4.7 1.4 5.3 4.3 6.2 4.7 3.9 4.6 4.9 4.1 4.4 4.1 1.0 3.5 -0.7 5.7 5.0 5.1 1.7 3.6 3.2 5.5 2.8 3.9 4.1 3.8 3.7 economic ND/EBITDA**** 2012E 2013E 2014E 3.4 3.5 3.2 3.6 3.3 3.0 3.5 3.6 3.5 3.7 3.4 3.0 3.3 3.3 3.4 2.3 2.3 2.2 0.3 0.4 0.4 2.2 2.1 2.4 6.5 6.5 n/a 4.5 4.3 4.1 4.3 4.3 3.8 3.5 3.4 3.1 3.4 3.4 2.9 3.9 4.3 1.3 5.0 3.7 4.0 4.3 3.6 4.9 4.9 3.9 4.0 4.1 1.1 3.7 -0.9 5.7 5.4 5.9 1.9 3.7 3.4 5.1 2.8 3.7 3.9 3.7 3.6 3.5 3.8 1.1 4.6 3.4 3.0 3.7 3.2 5.0 4.8 3.5 3.6 4.1 0.9 4.0 -0.4 5.7 5.5 5.9 1.8 3.7 3.4 4.8 2.7 3.5 3.7 3.5 3.5 3.3 3.3 0.9 4.0 3.1 2.3 3.3 3.0 5.1 4.9 3.2 3.3 4.1 0.7 4.4 0.5 5.6 5.7 5.2 1.6 3.8 3.5 4.8 2.5 3.5 3.7 3.3 3.2 2015E 3.0 2.9 3.5 2.5 3.1 2.2 0.2 3.2 n/a 3.6 3.5 2.9 2.8 3.0 2.8 0.7 3.5 2.8 2.2 2.9 2.5 5.2 4.9 2.9 3.0 4.2 0.5 n/a 0.5 n/a n/a n/a n/a 3.0 1.7 4.6 2.3 3.2 3.4 2.9 2.8 2011E 1.9 1.4 2.3 1.7 2.9 1.8 -0.3 1.0 6.1 3.9 3.7 1.9 2.4 3.1 3.9 1.8 4.8 3.7 6.9 4.0 3.9 4.3 4.4 3.4 4.1 4.1 1.0 3.5 -0.7 5.7 5.0 5.1 1.7 3.2 3.2 5.5 2.6 3.6 4.0 2.3 3.3 financial ND/EBITDA*** 2012E 2013E 2014E 1.5 1.2 1.0 1.3 1.0 0.6 2.5 2.4 2.2 1.6 1.5 1.2 3.3 3.3 3.3 2.0 2.0 1.9 -0.1 0.0 0.1 1.5 1.4 1.7 6.2 6.2 n/a 3.2 3.0 2.9 3.8 3.7 3.3 1.9 1.8 1.7 2.4 2.3 1.8 3.0 3.6 1.5 4.5 3.2 5.0 3.6 3.6 4.6 4.4 3.2 3.7 4.1 1.1 3.7 -0.9 5.7 5.4 5.9 1.9 3.3 3.4 5.1 2.6 3.5 3.9 2.3 3.2 2.7 3.3 0.9 4.2 2.9 4.5 3.1 3.2 4.7 4.3 2.9 3.4 4.1 0.9 4.0 -0.4 5.7 5.5 5.9 1.8 3.3 3.4 4.8 2.5 3.3 3.7 2.2 3.0 2.5 2.9 0.5 3.7 2.4 3.8 2.7 3.0 4.9 4.3 2.6 3.1 4.1 0.7 4.4 0.5 5.6 5.7 5.2 1.6 3.3 3.5 4.8 2.4 3.3 3.6 2.0 2.8 2015E 0.8 0.4 2.2 0.9 3.1 1.9 0.2 2.5 n/a 2.5 3.0 1.6 1.7 2.2 2.4 0.2 3.2 2.2 3.5 2.4 2.5 5.0 4.3 2.3 2.8 4.2 0.5 n/a 0.5 n/a n/a n/a n/a 2.5 1.7 4.6 2.2 3.0 3.4 1.8 2.3
N N N OW OW N OW OW OW OW
46,920 26,273 6,011 16,732 14,525 6,188 4,586 3,285 13,148 6,171
UW OW UW UW N N OW OW
25,659 4,389 10,183 -77 6,590 5,250 3,023 273
OW OW
4,562 4,721
Source: J.P. Morgan estmates, Company data, Bloomberg. 2011 represents the 12 months to Dec-11 or Mar-12 etc i ** Under applicable law and/or J. P. Morgan Chase & Co policy all recommendat ions and price targets for this company have been removed ***Year end ND/adj FY EBITDA **** Year end economic net debt (including provisions and ot er adjustments where appropriat )/FY EBITDA h e
Source: J. P. Morgan estimates. ** Under applicable law and/or J. P. Morgan Chase & Co policy all recommendations and price targets for this company have been removed. *** Year end net debt/FY EBITDA. Priced at close on 17 January 2013.
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Companies Recommended in This Report (all prices in this report as of market close on 17 January 2013) E.ON (EONGn.DE/13.97/Underweight), Gas Natural (GAS.MC/13.95/Overweight), National Grid (NG.L/683p/Underweight), Public Power Corp (DEHr.AT/6.69/Neutral), RWE (RWEG.DE/29.43/Underweight), United Utilities (UU.L/711p/Neutral)
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.
Important Disclosures
Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in E.ON, RWE, Gas Natural, National Grid, United Utilities, Public Power Corp. Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for RWE, Gas Natural, National Grid within the past 12 months. Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of E.ON, RWE. Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: E.ON, RWE, Gas Natural, National Grid, United Utilities, Public Power Corp. Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: RWE, Gas Natural, National Grid. Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: E.ON, RWE, Gas Natural, National Grid, United Utilities, Public Power Corp. Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: E.ON, RWE, Gas Natural, National Grid. Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking RWE, Gas Natural, National Grid. Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from E.ON, RWE, Gas Natural, National Grid, United Utilities. Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from E.ON, RWE, Gas Natural, National Grid, United Utilities, Public Power Corp. Broker: J.P. Morgan Securities plc acts as Corporate Broker to United Utilities. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com. Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research website, www.jpmorganmarkets.com.
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Coverage Universe: Garrido, Javier: EDP (EDP.LS), Enagas (ENAG.MC), Endesa (ELE.MC), Enel (ENEI.MI), Enel Green Power (EGPW.MI), Gas Natural (GAS.MC), Iberdrola (IBE.MC), PGE (PGEP.WA), Red Electrica (REE.MC), Terna (TRN.MI), ZE PAK (ZEEP.WA) J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2013
J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 44% 53% 42% 71% Neutral (hold) 44% 46% 49% 62% Underweight (sell) 12% 34% 9% 51%
*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com , contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.
Other Disclosures
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Weekly Utilities 21-25 Jan 2013

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Weekly Utilities 21-25 Jan 2013

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Europe Equity Research

J.P.Morgan Weekly Utilities Wire

European Utilities Javier Garrido

(34-91) 516-1557 javier.x.garrido@jpmorgan.com

Vincent de Blic, CFA

Sarah L Laitung, CFA

European Utilities relative performance

Jan Mar May Jul Sep Nov 12 12 12 12 12 12

Source: Bloomberg, J. P. Morgan estimates

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Relevant country index

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

PPC 120 -10 -5 0

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

The week ahead

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Ongoing pair trades

1.1 1 0.9 0.8 0.7 0.6 0.5

0.4 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

1.1 1.1 1.0 1.0 0.9 0.9

United Utilities/National Grid

0.8 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12

1yr avg minus 2*standard deviations

Source: Bloomberg. Past performance may not be indicative of future performance.

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Commodities, hydro & wind

Oil European Brent

May-12 Jul-12 TTF Gas '14

Sep-12 Nov-12 TTF Gas '15

UK winter 2013/14 clean dark spread

110 105 100 95 90 Jan-12 Mar-12 May-12 Jul-12 Sep-12

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

9 9 8 8 7 7 6 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12

Mar 12 LTC (LHS) TTF (LHS)

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Nordic hydro conditions

French hydro conditions

65% 55% 45% 35% 25% 15% 2009 2010

Source: Nordpool spot

Spanish hydro conditions

Italian hydro conditions

11,000 9,000 7,000 5,000 2007 2008 2009

Source: Spanish Environment Ministry

Greek hydro conditions

Spanish wind conditions

Javier Garrido (34-91) 516-1557 javier.x.garrido@jpmorgan.com

Europe Equity Research 18 January 2013

Electricity demand monitor

Spain (adjusted for weather and working days)

Italy (adjusted for weather and working days)

Dec- Jan-1Feb- Mar- Apr-1May- Jun-1Jul-1 Aug- Sep- Oct-1Nov- Dec11 2 12 12 2 12 2 2 12 12 2 12 12