The Aluminium Glow. Initiation of Coverage. Mytilineos Holdings S.A. Target Price (EUR) 10.20

Transcription

1 Initiation of Coverage Mytilineos Holdings S.A. Holding / Greece Reuters / Bloomberg: MYTr.AT /MYTIL GA October 21, 2014 The Aluminium Glow We initiate coverage on Mytilineos with a Buy rating and a target price of EUR10.20/share. Mytilineos currently trades at a FY:14e EV/EBITDA and P/E of 4.0x and 10.4x respectively, while for FY:15 EV/EBITDA and P/E are estimated at 3.8x and 7.1x, respectively. Mytilineos is a standout investment proposition for the Greek stock market given the strong dynamics of its aluminium business (c50% of the group FY:15F EBITDA derives from the aluminum business), geographical diversification (c65% of 2014E EBITDA form abroad) and healthy balance sheet (2015e Net-debt-to EBITDA at 0.9x). Management s success in driving the cost base for Aluminum of Greece (AoG) sharply lower (20% reduction between ), in conjunction with the solid outlook for the aluminum market (forecasted demand CAGR for aluminum for the period of 4.2%), allows for strong profitability gains, starting this year. Metka (the EPC-construction subsidiary) should continue to produce robust operating profitability in the short-term (next months) on the back of the execution of a EUR1.3bn backlog. Visibility for the medium term is low, although we recognize the prospects of the sector in the international markets Metka is targeting, as well as in Greece. The contribution of the energy division to the group should remain positive supported by the Capacity Assurance Certificates-CACs, while the medium-to-longer term outlook for CCGT operators in Greece is positive due to the favorable demand-supply dynamics. Catalysts Key catalysts include: (i) levels of LME and/or premiums combined with production costs for AoG; (ii) the execution of Metka s backlog and new order inflow; (iii) reforms in the Greek electricity market; (iv) M&A opportunities in the Greek market (i.e. Larco, small- PPC). Strong balance sheet and improving dynamics drive EPS momentum The group s strong performance over the past few years (that mainly reflect Metka s success and AoG cost cutting efforts) is depicted by the sharp reduction of the group s net debt. The net debt from EUR725m in 2012 is expected to settle at EUR337m in FY:14e and at EUR246m in FY:15e. Net-debt-to EBITDA from 4.4x in 2012 is forecasted at 1.3x in FY:14e and 0.9x in FY:15e. Mytilineos is expected to post net income of EUR63.8m in FY:14e (+174% y-o-y) and EUR93.9m in FY:15e (+47.2% y-o-y), driven mainly by: (i) profitability improvements in the AoG operations; (ii) the performance of Metka; and (iii) lower financial expenses. The EPS CAGR for FY:13-18e is seen at 35.2%. Given the strong cash flow, the group is expected to resume its dividend policy starting from the current fiscal year (last dividend was for fiscal year 2008) Our SOTP valuation yields a TP for Mytilineos of EUR10.20/share, implying a 79.6% upside. Rating Buy vs. previous rating - Target Price (EUR) Current Share Price* (EUR) 5.67 *20/Oct/ 2014 Market Cap Cap (EUR (EUR m) m) Free Free Float Float 50% 63% Enterprise Value Value (EUR (EUR m) m) No. No. of of Shares (m) (m) Performance 1m 3m 12m Absolute (%) ASE General (Abs) Daily avg. no. of traded shares 12M (th.) 323 Price high 12 months (EUR) 7.32 Price low 12 months (EUR) Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 MYTILINEOS HOLDINGS S.A. ATHEX Composite (Rebased) Mytilineos is a leading industrial group in Greece with 3 distinct activities: (i) Metals & Mining (including Aluminum of Greece - one of the largest aluminum producers in Europe); (ii) EPC (Metka, a regional player); and (iii) energy (largest IPP in Greece). The group also has exposure in the defense related applications. Shareholders Structure: Mytilineos Family 32.0%, Foreign Institutionals 16.4%, Greek Institutional 12.1%, Retail 34.5%, Fairfax Financial Holdings 5.0% t EUR m e 2015f 2016f e 2015f 2016f Sales 1, , , ,102.6 EV/Sales EBITDA EV/EBITDA margin 16.6% 20.2% 23.0% 22.1% wecvwcwc P/E EBIT gfvwrvgwrv Diluted EPS EBT webitdabe Div. yield 0.0% 1.9% 2.8% 2.6% Net Income EBITDA (%) DPS (EUR) Constantinos Zouzoulas: constantinos.zouzoulas@axiavg.com; Tel: Argyrios Gkonis : argyrios.gkonis@axiavg.com; Tel : Please refer to the last page of this report for important disclaimers and analyst certification

2 Table of Contents Investment case....3 Risks...7 Valuation.8 Summary financials 10 Group overview.11 Metallurgy-AoG 15 Construction-Metka..24 Energy-Next day profitability driver?...25 Examining new opportunities.38 Group estimates and forecasts..39 Appendix Aluminium market overview and outlook. 43 Greek electricity market challenges for CCGT units Detailed financials..50 Disclosures 51 AVG Research Page 2

3 Investment Case We initiate coverage on Mytilineos with a Buy rating and a target price of EUR10.20/share, implying a 79.6% upside potential from current levels. Mytilineos trades at a FY:15-16 EV/EBITDA of 3.8x and 4.1x respectively, while on P/E for FY:15-16 trades at 7.1x and 7.6x. We view Mytilineos as one of the most solid cases in the Athens Stock Exchange due to its prospects, strong cash flow generation and management s quality. Specifically, we recognize as a major catalyst the successful efforts of the group to rationalize and optimize the cost base of Aluminum of Greece (AoG), which in conjunction with the fairly high (all-in) aluminum prices is expected to boost 2015F (adjusted) EBITDA more than 6x higher versus At the same time the construction division (Metka) is expected to generate significant cash flows from the execution of its current EUR1.3bn backlog that will enrich further its net cash position (EUR283m at H1:14), while offering upside potential vis-à-vis new projects both from abroad and in Greece (in Greece we see significant opportunities especially in concession type assets). Finally, Mytilineos as the largest IPP (Independent Power Producer) in the country is expected to be a key beneficiary in the restructuring of the domestic electricity market, while in the short-to-medium term the capacity certificates scheme provides support to the division s profitability. The ongoing deleveraging efforts of the group (FY:15 net debt-to-ebitda at 0.9x) should allow it to take advantage of new opportunities as and when presented, especially in respect of the Greek market (privatizations, concessions, developments in the energy market). Key investment themes include the following: i) the performance of the Aluminium market; ii) Metka s ability to replenish its backlog adding new profitable projects; iii) regulatory decisions related to the capacity/flexibility remuneration of natural gas fired units; and iv) opportunities from privatizations/concessions. An ambitious cost cutting effort yields better than expected results Over the last few years AoG has managed to lower its cash costs by cusd500/tn (or USD130m p.a. on a recurring basis) from cusd2,500/tn in AoG is now standing amongst the lower cost producers in the EU. The impressive cost reduction was achieved through the successful restructuring of AoG s cost base, better control of production but most importantly specific actions that helped reduce significantly the energy related expenses. Risk is on the upside, as we could expect further reductions in the electricity tariffs driven by the restructuring of the domestic electricity market and lower natural gas prices. We assume total aluminium cash costs for AoG to slide from USD2,016/tn in 2014 to ceur1,900/tn in Very favorable demand-supply dynamics for the aluminium market EIU and major market producers are estimating a 5.6%-7% growth in demand for 2014 as the International AIuminium Institute is forecasting global primary aluminium consumption to grow by 4.0% CAGR for driven mainly by China. Significant capacity curtailments over the last 5 years on the back of higher energy costs resulted in a market deficit for 2014 in the Aluminium market and is expected to remain so in the medium-term as producers with idle capacity have not yet reacted. The overall market for 2014 will run on a supply deficit according to converging industry estimates on the back of increased consumption, while going forward the market, ex-china, is expected to remain in deficit. LME prices have rallied since the lows of USD1,708/tn in Q1:14 to USD1,985/tn in Q3:14 and are expected above USD2,000/tn for Q4:14. Going forward EIU forecasts prices of USD2,154/tn for 2015 and 2,250/tn for We adopt a cautious stance for assuming market prices of USD2,028/tn and USD2,069/tn, while we account for the market to move closer to the 10-year average of EUR2,100 for the long term. AVG Research Page 3

4 Aluminium premiums remain at all time highs The lack of physical availability of the metal has resulted in very high premium prices driven by the contago in the aluminium market that keeps locked large amounts of metal. Low interest rates and warehousing costs are seen keeping the aluminium market in contago for the short to-medium term at least, thus providing a strong conviction for high premium levels. Mytilineos reported premiums of USD450/tn in 2013 (or 27% of LME reported price) and we estimate to settle in the region of USD570/tn for FY:14 (30% of LME price), while 2015 levels are seen even higher at USD609/tn (30% of LME price). A normalization of demand-supply and regulatory actions in the market are expected to lower stock levels in the medium-to-longer term as we account for the normalization of the AoG premiums of cusd400/tn (or c20% of LME price vs. an average of 22% of the last 5-years). Metka s strong cash flow to continue Despite the weak pace of backlog replenishment, Metka (a strong regional EPC player focusing in the construction of gas-fired power plant) still has a cushion of EUR1.3bn of projects under construction that are expected to be executed in the next 2-3 years with very strong EBITDA margins (15%-17%). Note that c81% of this backlog is related to international projects The profitability of these projects will add to the strong EUR283m cash pile of the company (end H1:14). The medium-to-longer term potential for Metka remains positive both because of increased opportunities in Greece (infrastructure projects, privatizations, etc) and because of the underlying dynamics of the markets in focus for EPC projects (mainly MENA region) We expect a very strong performance for Metka in 2014 and 2015 as it concludes a large part of its backlog, booking EBITDA for FY:14E and FY:15F of EUR110.8m and EUR71.2m respectively. In the subsequent years we expect EBITDA to normalize at the EUR60-65m level. Mytilineos is the largest IPP in Greece with 1.2GW in commercial operation Mytilineos, the largest IPP in the country (operating three CCGT units with total capacity of 1.2GW or 10% of the total conventional installed capacity in Greece) is expected to benefit from the ongoing capacity payments scheme that is estimated to contribute ceur80m p.a. in the medium-term to the division s EBITDA, despite the very low load factors reported up till now in 2014 (c10%). In the longer term, increasing demand, unit retirements and system stability needs are expected to push higher the utilization rates of the units of all IPPs, including those of Mytilineos. Also in the longer term potentially lower natural gas prices should allow healthy and profitable load factors for the units and strong prospects from the division. The group in an effort to benefit from the opening of the electricity market is engaging in the retail supply sector, which based on our estimates could result in net profits for in the region of EUR5-10m p.a. Note that we do not include this activity in our current estimates. 70MW of wind parks in Mytilineos is planning to expand more aggressively in RES, by adding 70MW of wind parks in to its 53.5MW RES installed portfolio taking advantage of favorable wind environment with regulations/opportunities with PPAs that include guaranteed production uptake with predetermined FiTs for 20-years. The group is expected to invest ceur90m in taking advantage of the subsidization scheme for RES investments in the country. In our model we assume that Mytilineos will hold a RES portfolio of 123.5MW by 2016 that will generate ceur20m of EBITDA p.a. Massive reduction in the group s net debt Group net debt stood at EUR346m in H1:14 from EUR725m at the end of Strong cash flows from Metka to lead Net Debt/EBITDA from 4.4x in 2012 to 1.3x in end-2014 Driven by a strong AoG performance, Net Debt/EBITDA at end-2015 is expected to settle below the 1.0x benchmark, while our estimates include a dividend distribution commencing in Looking forward we expect the group to turn to cash positive by AVG Research Page 4

5 Examining new opportunities We view Mytilineos efforts to drastically reduce debt as a strategic move that will allow the group to take advantage of new opportunities, as presented, especially in the Greek market. The group has already stated that it could be conditionally interested in the privatization of Larco (one of the five largest ferronickel producers in the world). We believe that a potential acquisition of Larco by Mytilineos could lead to another very successful turnaround story, similar to that of AoG. Mytilineos could also express interest in the opportunities presented in the thermal energy sector, especially following the regulatory efforts to liberalize the market. Other opportunities could exist in the form of privatizations, concessions as well as acquisitions, as the Greek market reforms are implemented. Mytilineos management has laid down the framework for providing a clear vision, based on business sense and its ability to restructure and grow diverse business units. EPS is expected to grow by 35.2% CAGR during driven by the profitability gains from AoG Group revenues for 2014 are seen at EUR1,239m, down by 11.7% y-o-y on the back of lower sales from the energy division (lower energy sales do not affect profitability though), while 2014E EBITDA is seen at EUR250.1m up by 7.5% (y-o-y) on the back of the performance of AoG. For 2015 we expect a further drop in revenues of 8.0% y-o-y due to the expected decline in Metka s performance, while 2015F consolidated EBITDA is seen declining by 7.0% y-o-y affected by the slowdown in Metka s business. Our estimates call for 2014 EPS of EUR0.55 vs. EUR0.20 in 2013 on the back of Metka s solid performance and AoG turnaround. For 2015 EPS is estimated at EUR0.80 (+47% y-o-y). Going forward and assuming normalized conditions across all divisions we would expect net profits in the region of EUR100m p.a., yielding an EPS CAGR of 35.2% for F. Our sum of the parts valuation yields a target price of EUR10.20/share Out TP is 79.6% higher than current market levels. Our valuation is driven by AoG performance and we feel that the market is not fully incorporating the dynamics of this division in its assessment of the group. Note that NAV adjusted for HQ overheads of EUR136.8m and corporate net debt of EUR166.6m, stands at EUR1,190.6m: Aluminium of Greece total estimated equity valuation stands at EUR613.2m through our DCF exercise. The group s 50% stake in Metka contributes EUR342.0m to the valuation. The energy division in total accounts for EUR466.9m of NAV, including the two CCGT units as well as 123MW of RES portfolio. Finally, we account for EUR6.0m p.a. Metka management fees which contribute EUR71.9m to our valuation. Mytilineos trades at 4.0x and 3.8x on E EV/EBITDA and 10.4x and 7.1x on respective P/E. There is no direct comparison to peers, but that said we do note the following: On a divisional basis, AoG on our numbers trades at EV/EBITDA of 6.0x and 6.6x with its industry peers trading at 6.7x and 6.4x respectively on EV/EBITDA. Metka currently trades at 1.6x and 2.5x for EV/EBITDA and 5.5x and 8.3 P/E respectively with our selected group of peers trading at 7.3x and 5.4x E EV/EBITDA and 12.9x and 11.5x E P/E. CCGT units on our valuation, trade at EUR0.4m/MW on a NAV/MW basis, which is in-line with recent domestic transaction multiples. AVG Research Page 5

6 What could drive our valuation higher? Higher levels of LME and/or premiums; Lower production costs for AoG on the back of lower electricity prices and favorable commodity levels; Higher than expected new order inflow for international EPC and domestic infrastructure projects; Stronger that forecasted EBITDA margins for Metka both on the international front and for the domestic projects; Favorable outcome for the CACs remuneration scheme following the ongoing consultation; Lower natural gas prices would positively affect electricity production as well at the operations of the Aluminium unit; AVG Research Page 6

7 Risks LME prices and premia: AoG is expected to contribute c40% of consolidated EBITDA by In this context fluctuations in the LME would materially affect the performance of the group. In the past the management has successfully hedged a large part of its production, thus remaining protected during the price downtrend in holding one of the largest hedging books industry-wide. The company has not hinted on any similar actions as current LME market dynamics are dictating a favorable outlook for the price levels. Electricity regulatory environment: As the Greek electricity market is in a restructuring phase, operation of the natural gas fired units is burdened by the current market framework and natural gas prices. It is important to highlight that the energy division s performance is supported by the Capacity Assurance Certificates scheme that contributes ceur120m (all three power plants) of EBITDA to the group. The current certificate framework ends at year end-2014 but we see a limited risk of not being renewed at similar levels as the market is recognizing the importance of CCGT units for the country s energy mix. Execution risks: Given Metka s exposure on international projects in regions/countries of intense geopolitical concern like Syria and Iraq, a number of issues could impact the timely execution of fixed-price contracts. Such a case is the execution of Syria II project which is taking place at a much slower pace than expected. Metka has a strong track record of carefully assessing project potentials and as such has not faced any major project backdrops. Backlog replenishment: Increased competition in the markets that Metka is already active in the MENA region could set some hurdles to its effort to book new profitable contracts. Political, regulatory and financing issues are major factors regarding the availability of new projects for the company. This risk should be mitigated by tapping new markets for EPC projects and increasing opportunities in the domestic infrastructure market as well. Aluminium production costs: Over the last few years AoG has adopted a major cost optimization program managing to lower aluminium cash costs from 2,500 USD/tn in 2010 to below 2,000 USD/ton currently. Key driver to this has been the successful negotiation with PPC over an arbitration decision on the electricity tariffs. Any decisions/actions that could increase the energy costs would have a significant impact in AoG s profitability as electricity expense accounts for c41% of total aluminium cash costs. Currency fluctuations: With a significant part of its revenues in USD from aluminium sales, the execution of construction contracts as well as its exposure to natural gas, the group is affected by exchange rate risk. AVG Research Page 7

8 Valuation We initiate coverage on Mytilineos with a Buy rating and a target price of EUR10.20/share, implying an upside potential of 79.6% from current levels. Mytilineos is currently trading at a deep discount to our target price as we think that in our view the market is underestimating failing to evaluate: (i) the underlying operating dynamics of the AoG business as a result of the successful cost restructuring efforts and the supportive existing and future aluminium market environment; (ii) the strong cash flow generation from the execution of the current backlog of Metka and; (iii) the secure EBITDA flow (due to CACs) and long-term prospects of the energy division. We recognize the concerns of investors towards the Greek market, but nevertheless we have to stress that c65% of Mytilineos Group EBITDA for 2014 is derived from international markets. We adopt a sum-of-the-parts methodology in order to better demonstrate the incremental value of each division of the group. Exhibit 1: Mytilineos Group-SOTP valuation Amounts in EUR m Valuation Method EV (@ 100%) Equity Value Mytilineos Stake Equity Value for Mytilineos Metallurgy & Mining Aluminium of Greece DCF % Construction Metka DCF % Energy RES portfolio DCF % Korinthos Power DCF % Ag. Nikolas Viotias DCF % Capitalized fees and HQ costs Metka management fee DCF 71.9 (-) HQ Overheads DCF Corporate Net Debt (end-2014) Group NAV 1,190.6 Num. of Shares (m) Value Per Share Current Share Price 5.67 Upside 79.6% Source: AVG Research Regarding each division s valuation method we note: Aluminium of Greece: Our DCF exercise is based on a 10% WACC and a 1.0% terminal growth to the average of the FCF. Metka: Under our DCF exercise on a WACC of 12.5% in order to account for the exposure of the company to regions with high geopolitical tension (MENA), but retain from adopting a terminal growth to perpetuity. CCGT units: We adopt a 10-year explicit forecast period with a WACC assumption set at 9.0% due to the nature of the utility industry, while including a 1.0% growth rate taking into account the positive long term growth prospects for IPPs. RES portfolio: Our valuation for the RES portfolio of the group is based on a DCF exercise. Note that we account for 70MW of wind parks expected to come online between 2015 and We make explicit estimates for the following 20 years and we do not apply any terminal values. Our average WACC is set at 6.5%. Finally, we note that we capitalize HQ costs (estimated at EUR15m p.a.) and Metka management fees (estimated at EUR6.0m p.a.) on a DCF exercise. AVG Research Page 8

9 Exhibit 1.b: Peer group valuation multiples per division Aluminium industry EV/EBITDA P/E Company Country Alcoa Inc. UNITED STATES 7.4 x 5.8 x 5.2 x 19.7 x 14.8 x 13.0 x ALUMETAL S.A. POLAND 8.9 x 8.2 x 8.0 x 6.1 x 6.5 x 6.4 x Aluminium Bahrain BSC BAHRAIN 6.2 x 5.1 x 4.3 x 14.7 x 9.8 x 9.1 x Aluminum Corporation of China Limited Class H CHINA 11.4 x 8.4 x 13.3 x AMAG Austria Metall AG AUSTRIA 8.3 x 6.8 x 5.8 x 17.4 x 14.0 x 11.4 x Century Aluminum Company UNITED STATES 10.6 x 5.4 x 3.7 x 21.8 x 10.0 x 8.3 x Constellium NV Class A NETHERLANDS 6.6 x 5.9 x 5.0 x 12.9 x 9.9 x 7.8 x Kaiser Aluminum Corporation UNITED STATES 8.5 x 7.4 x 6.8 x 19.7 x 15.7 x 14.8 x National Aluminium Co. Ltd. INDIA 8.3 x 6.7 x 7.4 x 15.9 x 14.4 x 14.2 x Noranda Aluminum Holding Corporation UNITED STATES 8.0 x 5.3 x 4.1 x 21.5 x 8.7 x Rio Tinto plc UNITED KINGDOM 5.7 x 5.4 x 4.7 x 9.8 x 10.0 x 8.8 x United Co. RUSAL Plc RUSSIA 14.1 x 9.2 x 7.9 x 17.8 x 6.2 x 5.7 x AMAG Austria Metall AG AUSTRIA 8.3 x 6.8 x 5.8 x 17.4 x 14.0 x 11.4 x United Co. RUSAL Plc RUSSIA 14.1 x 9.2 x 7.9 x 17.8 x 6.2 x 5.7 x Hydro International plc UNITED KINGDOM 5.6 x 4.5 x 16.1 x 11.8 x Median 8.3 x 6.7 x 5.8 x 17.4 x 10.9 x 8.8 x Average 8.8 x 6.7 x 6.4 x 15.9 x 11.8 x 9.6 x Contractors EV/EBITDA P/E Company Country Duro Felguera, S.A. SPAIN 4.6 x 5.2 x 5.0 x 8.4 x 9.8 x 11.2 x Abengoa S.A. Class A SPAIN 8.1 x 7.3 x 6.9 x 21.5 x 13.1 x 9.9 x Elecnor S.A. SPAIN 7.1 x 6.1 x 5.6 x Technip SA FRANCE 5.2 x 4.0 x 3.5 x 12.8 x 9.5 x 8.8 x Aker ASA Class A NORWAY 3.4 x 2.2 x 2.3 x 5.4 x 5.9 x 4.9 x Petrofac Limited UNITED KINGDOM 6.4 x 5.2 x 4.6 x 10.0 x 8.3 x 7.2 x Chicago Bridge & Iron Co. NV NETHERLANDS 5.7 x 4.9 x 4.4 x 9.5 x 8.2 x 8.3 x AMEC plc UNITED KINGDOM 9.4 x 7.0 x 6.0 x 12.9 x 11.1 x 10.1 x Fluor Corporation UNITED STATES 5.7 x 4.9 x 4.4 x 14.8 x 12.5 x 11.2 x Babcock & Wilcox Company UNITED STATES 9.1 x 6.8 x 6.4 x 15.9 x 11.8 x 10.7 x McDermott International, Inc. UNITED STATES 20.8 x 5.4 x 3.8 x 36.8 x 9.8 x Great Lakes Dredge & Dock Corporation UNITED STATES 7.3 x 5.4 x 26.5 x 14.5 x 9.6 x MasTec, Inc. UNITED STATES 7.4 x 5.9 x 17.0 x 12.0 x 11.6 x Jacobs Engineering Group Inc. UNITED STATES 8.1 x 6.0 x 5.3 x 14.1 x 12.1 x 10.8 x Average 7.8 x 5.4 x 4.8 x 13.5 x 12.3 x 9.3 x Median 7.3 x 5.4 x 4.6 x 12.9 x 11.5 x 9.9 x Energy Companies EV/EBITDA P/E Company Country E.ON SE GERMANY 4.3 x 4.9 x 4.8 x 13.7 x 13.4 x 13.4 x EDP - Energias de Portugal SA PORTUGAL 7.6 x 7.3 x 6.7 x 12.8 x 12.4 x 11.7 x Endesa S.A. SPAIN 5.5 x 5.1 x 4.8 x 17.9 x 16.2 x 28.8 x Enel S.p.A. ITALY 4.8 x 4.8 x 4.6 x 11.6 x 11.0 x 10.5 x Gas Natural SDG, S.A. SPAIN 7.2 x 6.8 x 6.5 x 15.1 x 14.2 x 13.1 x GDF SUEZ SA FRANCE 6.1 x 5.7 x 5.6 x 13.9 x 12.7 x 12.0 x Iberdrola SA SPAIN 8.7 x 8.5 x 8.2 x 14.7 x 14.1 x 13.3 x CEZ as CZECH REPUBLIC 6.8 x 7.2 x 7.4 x 10.7 x 12.9 x 14.2 x RWE AG GERMANY 3.5 x 3.1 x 2.9 x 11.8 x 11.8 x 12.2 x SSE plc UNITED KINGDOM 9.7 x 9.7 x 9.5 x 12.7 x 13.1 x 12.3 x VERBUND AG Class A AUSTRIA 11.9 x 10.6 x 9.5 x 40.8 x 26.9 x 20.0 x Average 6.9 x 6.7 x 6.4 x 15.8 x 14.3 x 14.5 x Median 6.8 x 6.8 x 6.5 x 13.7 x 13.1 x 13.1 x Mytilineos Group Greece 4.0 x 3.8 x 4.0 x 10.2 x 6.9 x 7.5 x Source: Factset, AVG Research AVG Research Page 9

10 Summary Financials Initiation of Coverage Profit & Loss (in EUR m) e 2015f 2016f Turnover 1, , , ,102.6 Cost of Goods Sold (1,140.5) (954.3) (840.8) (820.3) Gross Profit Operating Expenses Other Income EBITDA Depreciation EBIT Net Investment Inc. (Exp.) (14.9) Net Interest Inc. (Exp.) (58.1) (49.9) (34.5) (27.7) Other (bank fees) (13.2) (5.9) (1.9) (2.0) EBT Taxes (13.1) (22.2) (35.0) (31.9) Net Profit After Tax Minorities (44.8) (44.3) (30.2) (25.5) EAT Dividends Balance Sheet (in EUR m) Net Fixed Assets Investments Other LT Assets & Accruals Total Fixed Assets Inventories Debtors Cash & Equivalents Marketable Securities Other Current Assets Total Current Assets Total Assets Creditors Short Term Debt Other Total Current Liabilities Long Term Debt Minorities Other LT Liabil. & Prov Total Liabilities Total Equity Growth Rates Turnover (3.5%) (11.7%) (8.0%) (3.3%) EBITDA 40.9% 7.5% 5.1% (7.0%) EBIT 60.0% 11.7% 5.1% (10.6%) EBT 45.1% 62.1% 22.2% (8.9%) EAT 15.1% 183.7% 47.2% (6.8%) EPS 8.7% 174.1% 47.2% (6.8%) Ratios Gross Margin 18.7% 23.0% 26.3% 25.6% EBITDA Margin 16.6% 20.2% 23.0% 22.1% EBT Margin 5.7% 10.5% 14.0% 13.2% Net Margin 1.6% 5.2% 8.2% 7.9% Tax Rate 16.2% 17.0% 22.0% 22.0% ROE (avg) 2.7% 7.2% 9.9% 8.5% Net Debt / Equity 59.0% 36.8% 24.9% 14.5% 2013 Group Revenues Breakdown (EUR m) Metallurgy Construction Energy 2013 Group EBITDA Breakdown (EUR m) Metallurgy Construction Energy Group EBITDA (EUR m) e 2015f 2016f 2017f 2018f Group Net Debt (EUR m) e 2015f 2016f 2017f 2018f

11 1, , , , , % 20.0% 15.0% 10.0% 5.0% 0.0% Mytilineos Holdings Mytilineos Group overview Mytilineos Group is a Greece-based industrial conglomerate that has established a strong position in a number of sectors through strategic mergers, acquisitions and investments in crucial and developing domestic industry sectors. The group is active in: Metallurgy and Mining sector through the operations of its 100% subsidiary Aluminium of Greece (AoG); Construction, through its 50% subsidiary Metka (fully consolidated, listed on Athex, Mcap of EUR465m); and Energy sector, through its 100% subsidiary Protergia focusing on electricity production. Exhibit 2: Mytilineos Group performance Exhibit 3: Mytilineos 2013 revenue breakdown 18.0% 19.2% 1, , % 1, , % 16.3% 25.8% 31.9% % Revenues (EUR m) EBITDA (EUR m) EBITDA margin Metallurgy Construction Energy Source: The Company AVG Research The establishment of the group is dated back to 1908 when the Mytilineos family first activities in mining and metallurgy began. The group was listed on Athex in 1995 and in 1998 acquired a majority stake in Metka. In 2005 Mytilineos acquired AoG and in 2008 fired up its first natural gas fired electricity production unit in Greece. President and CEO of the group is Mr. Evaggelos Mytilineos, with Mytilineos family holding 31.8% of the total shares. In 2013 Fairfax Financial acquired a 5.02% stake (treasury shares) for a consideration of EUR5.13/share. Exhibit 4: Mytilineos Shareholding structure Exhibit 5: Metka shareholding structure 5.0% 15.4% 12.1% 16.4% 16.4% 34.5% Mytilineos Evaggelos Mytilineos Ioannis Retail Foreign Institutional Investors Greek Institutional Investors Fairfax Financial Holding 10.3% 23.1% 10.7% 5.9% 50.0% Mytilineos Holdings Kempen Capital Management Foreign Institutional Investors Greek Institutional Investors Retail Source: The Company AVG Research Metallurgy and Mining-A significant player in Aluminium and Alumina production in Europe Aluminium of Greece is the largest fully vertically integrated producer of alumina and aluminium in Europe with an annual output of 185k tons of aluminium and 810k tons of alumina. The company controls the bauxite mine Delphoi-Distomon, which is the second largest bauxite producer in the country and S.E. Europe. Since the acquisition of AoG, the group has focused on the operational streamlining of the unit and has made significant improvements starting from the construction of an on-site CCGT-CHP power plant in From 2011, following the management s efforts within the MELLON cost cutting initiative, AoG has lowered significantly its unit production costs and is now one of the most efficient producers in the EU. AVG Research Page 11

12 Exhibit 6: Metallurgy division performance % % 25.7% % % 16.7% 15.0% % 5.7% % % 0 0.0% e 2015f Revenues (EUR m) EBITDA (EUR m) EBITDA margin Exhibit 7: AoG key figures e 2015f Aluminium Volume sales (k'tn) Alumina Volume sales (k'tn) LME prices (USD/tn) 2,395 2,018 1,780 1,905 2,028 Premia (USD/tn) EUR/USD Aluminium cash costs (USD/tn) 2,495 2,304 2,144 2,016 1,933 Source: the Company AVG Research Construction-Metka, a major EPC player in MENA region Metka is a leading contractor specializing in energy related projects and more specifically in the construction of natural gas fired power plants. The company has capitalized on its experience from the domestic energy sector and has expanded aggressively abroad undertaking projects in Europe, Turkey, Middle East and Africa. The current backlog of EUR1.3bn provides visibility for a strong performance over the next couple of years, while the company is taking advantage of its focused bidding strategy having managed to post significantly above average EBITDA margins (15-17%). Going forward Metka is expected to turn part of its focus to the domestic construction market in order to capture local opportunities. At the same time the international environment seems challenging given the geopolitical tensions in a number of targeted markets. But the medium-to-longer term prospects of the MENA (region in terms of CCGT plant construction) are seen as being positive allowing Metka to take advantage of its track record in the region. Exhibit 8: Construction division performance Exhibit 9: Metka backlog replenishment evolution 1, % % 17.9% 17.0% % % 10.0% 0.0% e 2015f Revenues (EUR m) EBITDA (EUR m) EBITDA margin 1,728 1, , , , e 2015f Backlog (Year-end) (EUR m) Replenishment (New Orders) (EUR m) Source: the Company AVG Research Energy-Greece s leading IPP During the last 10 years Mytilineos has followed an ambitious ceur700m investment program in the energy sector with the group being the largest independent power producer (IPP) in the country, holding assets in thermal production as well as RES. Protergia (the energy division subsidiary) operates a portfolio of three CCGT units with a total capacity of 1.2GW and another 54MW of installed RES projects. The company, is well placed to benefit from the ongoing restructuring and the longer term dynamics of the domestic electricity market. At this point we note the current market environment is pressuring the operation of the CCGT units to low load factors, while in the short-term the capacity/flexibility payments scheme will provide significant support to the division s profitability. The energy division is also pushing forward the expansion of the group s RES portfolio, and is expected to add 70MW of wind parks in Also the group is becoming active in the electricity supply market as well as natural gas trading through its JV with Motor Oil, M&M Gas. AVG Research Page 12

13 Exhibit 10: Energy division s performance Exhibit 11: Protergia electricity generating portfolio % 60.0% % 50.0% 40.0% 24.1% 22.2% 30.0% % % % 0.0% e 2015f Revenues (EUR m) EBITDA (EUR m) EBITDA margin Unit Capacity (MW) Technology Commission date AoG 334 CCGT-CHP 2008 Korinthos Power 436 CCGT 2012 Viotia 444 CCGT 2011 Wind Parks 36 RES Photovoltaic 11.5 RES Small hydro 6 RES Total capacity 1,268 Source: the Company AVG Research Solid outlook for the group ahead Going forward revenues in the coming periods will be driven by the performance of AoG, as the division is benefiting from the hike in aluminium market, compensating the slowdown in Metka s activities. The energy division is expected also to report lower sales impacted current market framework but this will have no impact on the division s EBITDA. Group revenues for 2014E are seen at EUR1,239m (-11.7% y-o-y), though expected to slide to more normalized levels of EUR1.1bn in the coming years. On the other hand, group margins should expand significantly driven by the impressive turnaround in AoG business. AoG is expected to post 6x higher EBITDA (adj.) in 2014 vs. 2013, while its margins should also remain high in the coming years. Metka s EBITDA contribution will be impacted inevitably by the declining top line performance but margins remain strong. Finally, energy division contribution is seen stable (EUR80-90m p.a. in EBITDA) driven by the capacity payments and new RES. Group consolidated EBITDA for 2014 is seen at EUR250m (+7.8% y-o-y) and further improved to EUR262.7m in 2015 (5.1% y-o-y). Group EPS is expected to grow by 35.2% in with net profits reaching EUR63.8m in 2014 and EUR93.9m in 2015, positively impacted by the declining financing costs and lower debt levels. Exhibit 12: Revenues estimates breakdown (EUR m) Exhibit 13: EBITDA estimates breakdown (EUR m) e 2015f 2016f 2017f 2018f Metalurgy Construction Energy 2014e 2015f 2016f 2017f 2018f Metalurgy Construction Energy Source: the Company AVG Research Increased cash flows from AoG and Metka are expected to help aggressively reduce group debt over the coming years, with Net Debt for 2016 seen at EUR153m vs. EUR510m at year end-2013 and EUR724m at year end Net Debt/EBITDA should also settle below the 1.0x benchmark by 2015 from 4.4x in Finally, we expect Mytilineos to resume its dividend policy (last dividend for fiscal year 2008) starting form fiscal year 2014, assisted by the group s strong cash flow generation. AVG Research Page 13

14 1, , , , % 22.0% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% Mytilineos Holdings Exhibit 14: Group revenues and EBITDA estimates Exhibit 15: Group net debt and net debt/ebitda evolution 1, % 22.1% 22.2% 1, , % 1, , % e 2015f 2016f 2017f e 2015f Revenues (EUR m) Group Net Debt (EUR m) Net Debt/EBITDA Source: The Company AVG Research Exhibit 15.a: Group revenues breakdown by region for 2014 Exhibit 15.b: Group EBITDA breakdown by region for % 36.9% International Domestic 63.1% International Domestic 75.9% Source: AVG Research AVG Research Page 14

15 Metallurgy Division-Aluminum of Greece (AoG) The Metallurgy division flagship company, AoG, is set to provide a spectacular turnaround of its performance driven by the impressive cost restructuring initiatives and the favorable momentum and outlook for the aluminium market. We forecast AoGs EBITDA to grow by 69.1% y-o-y in 2014 and by 76% y-o-y in 2015 as LME prices and premiums are expected to remain high. EBITDA CAGR for is seen at 22% as we assume more normalized market conditions from 2015 onwards. Our DCF exercise returns an equity value for the division of EUR613.2m implying a average EV/EBITDA multiple of 6.3x vs. an industry average of 6.5x. Exhibit 16: LME prices on an upward trend ($/t) 2,098 2,119 2,057 2,017 1,960 1,965 1,891 1,845 1,800 1,773 1,785 Exhibit 17: Premiums remaining at all time highs % 30.0% 20.0% % Premiums ($/t) % on LME Cash Price 5y Average Premiums (% on LME Cash) 0.0% Exhibit 18: Favorable USD/EUR momentum Exhibit 19: Cost cutting (Aluminium Cash Costs $/t) 2,551 2,506 2,495 2, , ,016 1,933 1,927 1,904 1, e 2015f 2016f 2017f 2018f Exhibit 20: AoG Revenues estimates (EUR m) Exhibit 21: AoG EBITDA estimations (EUR m) e 2015f 2016f 2017f 2018f e 2015f 2016f 2017f 2018f Source: Bloomberg, The Company, AG Research AVG Research Page 15

16 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Mytilineos Holdings AoG- a regional leading producer of aluminium and alumina Aluminum of Greece (AoG) is a 100% owned subsidiary of Mytilineos that was acquired from Pechiney (now subsidiary of Alcan) in AoG is among the leading producers in alumina and primary aluminum in S.E. Europe. Its current alumina production capacity stands at 815,000t (c17% of EU total), while it also produces 165,000t of primary aluminum. AoG is a vertically integrated company with: its own bauxite production (second Bauxite producer in EU c700ktpa); alumina refinery; aluminum smelter; a 330MW co-generation power plant; and self-owned docking facilities as the unit has been constructed near the sea. The company produces and sells alumina and aluminum in Greece and abroad. In 2013 c30% of its total production was sold domestically, 55% exported to the EU and the remaining exported to international markets. The main markets for AoG are Italy and Germany. The company in 2013 signed a USD2.0bn contract with Glencore for the bulk amount of its produced alumina. AoG sources c50% of bauxite needs from its own bauxite mines while the rest is acquired through longterm contracts signed with S&B Industrial Minerals and international commodity traders. In respect of electricity (c41% of total production costs), the main supplier is the Public Power Corporation and tariffs are set through bilateral agreements. Aluminium market outlook is favorable LME prices on the rise supported by strong fundamentals In Q1:14 LME prices recorded the lowest reading over the last 5 years or 30% lower than the last 5 year average. Since the lowest reading (in February 4 th at USD1,641/tn), LME spot prices have rallied by 17.5% to date settling at a 30-day average of USD1,945/tn. Exhibit 22: LME Aluminium Prices ($/t) 3,500 3,000 2,500 2,000 1,500 1,000 Source: Bloomberg, AVG Research M LME Aluminium Cash Forwards Past 5y Average Past 5y High Past 5y Low We expect these price levels to be maintained in the medium-to-longer term supported by demand-supply dynamics of the aluminium market. AVG Research Page 16

17 Demand driven by China Both the short and the long term demand trends for the metal are favorable. In the short-term, demand is expected to remain strong due to increased consumption from emerging markets, mainly China. Despite the recent economic slowdown, China has reached a critical size to significantly impact the market as it now accounts for 50% of the total global aluminium demand. In the long-term, transportation and construction are expected to drive the global demand for aluminium as these two sectors account for 60% of the total aluminium take. According to International Aluminium Institute (IAI), global aluminium demand for is estimated to grow by 6.5% CAGR, reaching 64kmt in 2018 from 50kmt in Aluminium consumption is estimated to reach 94kmt in 2030 implying a CAGR growth rate of c4.2%. Exhibit 23: Aluminium Consumption estimates (mt) 120, ,000 80,000 60,000 40,000 20, Source: IAI, Alcoa, AVG Research Exhibit 24: Aluminium demand dynamics Region Demand (mmt) (%) of total Demand Growth rate for 2014 Russia 1 1.9% 2% Brazil % 1% Other 2 3.8% 4% MENA 2 3.8% 8% SE Asia 2 3.8% 8% India % 5% North Asia % 5% North America % 5% Europe % 2% China % 10% Total 52.8 Constrains in Supply The supply side is currently facing constraints on the back of capacity curtailment over the last few years. With production costs on the rise, driven by higher energy costs and bauxite/alumina sourcing difficulties but also limited funding availability, many producers have reduced capacity either permanently or on a temporary basis. The recent rally both in LME prices as well as in premiums could push producers with idle capacity to start weighing up restart options. We note however that such decisions will be taken based on the specific characteristics of each producer (location, sourcing of materials, cost base), therefore the LME levels are just one part of their consideration. Keeping this in mind production is expected to lag demand in the ex-china world for the following years. Alcoa, a leading aluminium producer revised its estimates on aluminium market deficit for 2014 to 1,201mmt from 0.7mmt earlier this year, while Rusal (another leading player) estimates market deficit to reach 1,051mmt until Exhibit 25: Capacity curtailments since 2012 (ex-china) (mt) Exhibit 26: Aluminium production ex-china (mmt) Permanently Idle Temporary idle f 2015f 2016f 2017f 2018f Production Consumption Balance Source: Companies statements, Rusal, AVG Research AVG Research Page 17

18 30/3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/ /3/2014 1/12/04 1/7/05 1/2/06 1/9/06 1/4/07 1/11/07 1/6/08 1/1/09 1/8/09 1/3/10 1/10/10 1/5/11 1/12/11 1/7/12 1/2/13 1/9/13 1/4/ Mytilineos Holdings while premiums remaining at high levels Market premiums (that is the amount paid on top of LME prices related to warehousing, fabrication and delivery costs) surged to record highs of cusd450/tn (or 22.5% of LME price ytd average- vs. 6.6% in 2010) driving the all-in aluminium prices to a 14-month high during the second quarter of this year to cusd2,500/tn. The rising premium levels are attributed to two main reasons: Contago in the aluminium market that has locked in warehouses (LME and non-lme) large stockpiles of metal attached to financing deals (key factors here are the low interest rate and warehousing costs), making very difficult the timely access to metal despite the high inventory levels; and Curtailments in capacity in the world ex-china that turned market into a deficit and thus making physical availability to metal difficult. Exhibit 27: Regional premiums performance (USD/t) Exhibit 28: Global aluminium Inventory levels (k mt) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: IAI, Bloomberg, AVG Research Japan Rotterdam LME has intensified its efforts to face the high inventory levels that reached record highs since the beginning of the financial crisis. Regulatory efforts have not made much of an impact on the market yet, as a slow decline in inventories is absorbed instantly by the market. Given that fundamental contago drivers (low interest rates and warehousing costs) will be maintained at least in the short term and the market being in a deficit, we would expect premium levels for the short to medium term at least to remain in the USD /tn region on average. This market environment is expected to lead to considerable profitability gains for AoG, as we expect the average premium realization for the metallurgy division to reach USD571/t for 2014 (30% over our 2014E LME price) and USD609/t (30% over 2015E LME price). Our assumptions are based on the geographical characteristics of the premiums for AoG and also on the product mix that is traditionally curved towards billets (c65-68% of total smelter output) that traditionally carry the higher premiums amongst smelters endproducts, with Mytilineos reporting a premium for billets of cusd800/tn during Q3:14. In the medium to long term thought, we would expect a normalization and gradual return of premiums for AoG to the levels of c20% over LME prices ( average), driven by the rationalization of the global inventories that will increase availability for end-users. Exhibit 29: Contago in the aluminium market (USD/tn) Exhibit 30: Realized premia as % of LME price for AoG % 19.0% 15.2% 16.3% 23.3% 25.3% Source: Bloomberg, AVG Research 15M LME Forward LME Spot Premia (USD/tn) AVG Research Page 18

19 provide visibility for strong top line performance Taking into account both LME price drivers and premiums evolution estimates we derive a cash realization for the aluminium production of AoG at USD2,476/tn for 2014 and USD2,637/tn in At the same time we do not expect any capacity surges or curtailments from the company, thus we account for output levels of 175,000 tones of aluminium p.a. Note that AoG smelter processes c350ktns out of the total 815ktns output of the alumina refinery. The remaining alumina is sold to the market through long-term deals. In this respect we note the deal with Swiss-based Glencore to sell alumina for over a 10-year period with the contract size reportedly at USD2.0bn and Glencore contributing c20% of the bauxite input for the production. All in all, at this point we expect a robust top line performance of AoG in the coming years driven by the rising aluminium all-in prices, while the secured alumina sales provide strong support. We note that we do not account for any hedging to lock current LME levels as the management is expected to try to benefit the most from the current market momentum. Exhibit 31: LME prices assumptions ($/t) 2,098 2,119 2,057 2,017 1,960 1,965 1,891 1,845 1,800 1,773 1,785 Exhibit 32: Premiums assumptions % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Premiums ($/t) % on LME Cash Price 5y Average Premiums (% on LME Cash) 0.0% Source: Bloomberg, AVG Research Controllable cash costs down by 25% within 3 years Since the acquisition of the AoG Mytilineos has been making constant efforts to improve the efficiency of the plant and reduce operating expenses. In 2011 Mytilineos group launched its MELLON cost efficiency program targeting some USD145m of sustainable cost savings from AoG s operations. In order to put this into context, the aluminium production costs for AoG back in 2011 stood at cusd2,500/tn, positioning AoG at the bottom of the 3 rd quartile in the global cost curve. Following the efforts of the management team across all lines of the cost structure (energy, raw material, technology, personnel), AoG now records, according to our estimates, a cash cost of cusd2000/tn that is sliding lower, having achieved a bulk portion of its targeted savings. More specifically, we estimate cusd130m p.a. in sustainable cost reduction, with the large of these efforts implemented during 2012 and This effort positions AoG high in the second quartile of the global cost curve, as one of the most efficient EU producers. Exhibit 33: AoG cash costs dynamics ($/t) 2,551 2,506 2,495 2,304 2,144 2,016 1,933 1,927 1,904 1, e 2015f 2016f 2017f 2018f Source: AVG Research AVG Research Page 19

20 Key achievements that played an important role in the total cost reduction are: Competitive electricity tariffs. Electricity tariffs account for c40% of the total aluminium production costs (the production of 1.0tn of aluminium consumes c13.5gwh). AoG covers its electricity needs from PPC (the main energy producer that exploits the low cost lignite and hydro reserves of the country). AoG as the largest industrial consumer (accounting for 5-6% of the total domestic demand) is charged based on a bilateral agreement with PPC. Nevertheless we note that in late 2013 the market regulator following an independent arbitration over the dispute between PPC and AoG on the charged tariffs ruled in favour of AoG, setting the tariff charges at EUR40.7/MWh for the period between July 2010 and December 2013 (significantly lower that what PPC was charging) thus resulting in a significant one off gain for AoG of EUR29m booked in Q3:13. Note that the aforementioned amount includes grid charges, Public Service obligations and administrative fees, while on top of that AoG has to pay taxes, RES fees and other administrative fees. We assume an all in electricity price for AoG at EUR45/MWh going forward. In house CHP unit providing steam using natural gas, lowering oil share in overall cost base. Since the CHP unit came online oil consumption has been reduced according to AoG to 5.0ktns vs. 117ktns back in 2009, resulting in sustainable cost savings of cusd40m p.a. Labor Costs-Productivity. Management has achieved a reduction in employee related expenses from 15.8% of COGS (ex-depreciation) in 2009 to 9.8% in 2013, or from ceur60m in 2009 to EUR39m in 2013, while keeping the number of employees at the same levels. Raw materials, freight, logistic improvements etc. Specific actions resulted to estimated cost savings of USD30-40m p.a. Exhibit 34: AoG production cost dynamics Exhibit 35: AoG refinery cost structure 3.8% 19.4% 9.6% 25.3% 2.6% 39.3% Other Fabrication Coke Alumina Oil Electricity 2015f Source: Mytilineos, AVG Research Expectations for even lower cost base We identify two key areas that could potentially generate additional cost savings for AoG in the medium to long term. Both of them are related to the energy intensity of the aluminium sector. The restructuring of the domestic electricity market. The domestic electricity market has entered a new restructuring phase in a bid to tackle inefficiencies and promote competition following the agreement with the county s international lenders. The spin-off and privatization of the High Voltage Grid Operator (IPTO), the spin-off and the privatization of the small-ppc, NOME type electricity auctions and increased mandate for market coupling are setting a basic framework for structural changes. A key point in this opportunity is the leading presence of the group s energy division in the domestic market that could result in significant synergies for both divisions. Natural gas prices. Mytilineos group utilized c1.5bcm of natural gas and paid some EUR400m in 2013 for natural gas with 1/3 attributed to the AoG unit. The negotiations on natural gas prices between DEPA (Greece s natural gas provider) and Gazprom in early 2014 resulted to a c11% discount on realized prices for Mytilineos group. Yet, natural gas prices in Greece remain c10% above the continental EU realizations, while currently there is no pipeline link to major EU hubs. In this context we note: i) the proximity of the country to a number of potential natural gas pipelines; ii) the shale gas impact on the market; iii) lower LNG demand from Japan; and v) geopolitics normalization in MENA AVG Research Page 20

21 and Eastern Europe as potential catalysts that could affect natural gas prices for AoG and lead to lower production costs. Exhibit 36: AoG quarterly adj. EBITDA performance Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Adjusting for one-off gains in 2013, Source: Mytilineos, AVG Research EBITDA (EUR m0 LME Price (% change) FX effect AoG, books the bulk of its expenses in Euro with the exemption of some imports for limited quantities of bauxite and other raw materials (coke, soda) used by the refinery and the smelter. At the same time the majority of its sale contracts are USD denominated. The current strengthening of the USD against the Euro provides an additional boost in the AoG performance. We account for EUR/USD in our model at 1.34 for FY:14 and at 1.25 thereafter. Please refer to Appendix I, page 43, for more details on the aluminium market overview and outlook AVG Research Page 21

22 Assumptions and estimates for AoG Overall we expect a strong performance from AoG in the coming years Below we summarize our key assumptions and estimates: We account for 2014, 2015 and 2016 LME prices of USD1,905/t, USD2,028/t and USD2,069t respectively. In the long run we set our assumption at USD2,110/t for 2017 and USD2,153/t for 2018 converging with the long term average LME quote; We expect a stable production output of 175ktns p.a. from the smelter; Regarding Alumina, given the Glencore contact, we assume a price of USD302/t for 2014 to gradually reach up to USD344/t in 2018, with stable annual output at 477ktns p.a. from the refinery. Our estimates on premia call for realized cash considerations of 30%, 30% and 22% on top of our 2014E-16E LME prices. Going forward we expect premia to settle at c20% of our LME long run estimates. On the cost side, we retain a rather conservative approach as we account for aluminium production costs of USD2,016/t for 2014 and USD1,933/t throughout the remaining forecast period, keeping the risk from further cost curtailment efforts to the upside. Based on these assumptions we expect revenues for AoG for 2014 at EUR431m (+0.9% y-o-y) and at EUR494m for 2015 (+14.5% y-o-y), with revenues CAGR of 3.3%. Turning to the EBITDA line, we expect AoG to deliver EBITDA of EUR72.2m in 2014 (+68.9% y-o-y) and post a further 76% increase in 2015 at EUR127.1m, resulting in a CAGR of 12.5%. Exhibit 37: AoG modeling assumptions and forecasts 2014e 2015f 2016f 2017f 2018f Aluminium output (k't) Alumina output (k't) LME prices (USD/t) 1,905 2,028 2,069 2,110 2,153 Premia (USD/t) EUR/USD Revenues (EUR m) y-o-y 0.9% 14.5% -2.7% 0.8% 1.4% Aluminium cash costs ($/t) 2,016 1,933 1,927 1,904 1,902 y-o-y -6.0% -4.1% -0.3% -1.2% -0.1% EBITDA (EUR m) EBITDA margin 16.7% 25.7% 24.0% 23.7% 23.6% y-o-y 68.9% 76.0% -9.3% -0.5% 0.9% Source: AVG Research Exhibit 38: 2015E EBITDA sensitivity to LME prices and EUR/USD exchange rate 2015E EBITDA LME Price ($/t) ,900 1,950 2,028 2,100 2, EUR/USD exchange rate Source: AVG Research AVG Research Page 22

23 Growth Mytilineos Holdings Valuation Our DCF valuation on AoG returns a targeted EV of EUR759m, while the end-14 estimated Net Debt stands at EUR145.1m, thus the equity valuation for Mytilineos reaches EUR614.3m. Our WACC stands at 9.0% (risk free of 5.5%, risk premium at 4.5%, beta at 1.0), while we set long term growth at 1.0%. Targeted capital structure (Debt/Equity) at 40%. Exhibit 39: AoG DCF exercise EUR m 2014e 2015f 2016f 2017f 2018f EBIT (+) Depreciation (-) Taxes Gross Cash Flow (-) Capex (-) Change in WC FCF NPV of FCF Terminal Value EV Net Debt (end-2014) Equity Value Source: AVG Research Exhibit 40: Sensitivity to WACC and terminal growth I n t e r WACC 8.00% 8.50% 9.00% 10.00% 0.00% % % % % Source: the Company AVG Research Exhibit 41: WACC assumptions Risk free (Rf) 5.50% Market risk premium (Rf-Rm) 4.50% Beta 1.0 Tax rate 26.0% Cost of Equity 12.0% Target Capital Structure( Debt/Equity) 40.0% WACC 9.00% In terms of multiples our valuation yields an average EV/EBITDA of 6.3x vs. an industry average of 6.5x for the same period implying a small discount which we believe is partially justified by our country risk assumptions. Exhibit 42: AoG peer group EV/EBITDA, EBITDA growth and EBITDA margin EV/EBITDA EBITDA growth (y-o-y) EBITDA margin Company Alcoa Inc. 7.4 x 5.8 x 5.2 x 36.6% 22.2% 7.4% 14.4% 16.4% 16.6% ALUMETAL S.A. 8.9 x 8.2 x 8.0 x 48.3% 10.3% 4.2% 6.6% 6.9% 6.9% Aluminium Bahrain BSC 6.2 x 5.1 x 4.3 x -3.7% 10.5% 7.8% 16.9% 18.2% 19.3% Aluminum Corporation of China Limited Class H 11.4 x 8.4 x 13.3 x 195.2% 35.2% -37.1% 9.0% 11.5% 7.2% AMAG Austria Metall AG 8.3 x 6.8 x 5.8 x -3.8% 21.6% 11.8% 13.9% 14.6% 14.7% Century Aluminum Company 10.6 x 5.4 x 3.7 x 498.5% 69.5% 22.3% 11.4% 17.2% 20.1% Constellium NV Class A 6.6 x 5.9 x 5.0 x 8.0% 22.9% 18.6% 8.0% 8.5% 9.1% Kaiser Aluminum Corporation 8.5 x 7.4 x 6.8 x -8.3% 13.3% 5.0% 13.3% 14.0% 13.4% National Aluminium Co. Ltd. 8.3 x 6.7 x 7.4 x 59.6% 21.2% 0.7% 17.2% 19.7% 18.5% Noranda Aluminum Holding Corporation 8.0 x 5.3 x 4.1 x 41.7% 47.4% 24.7% 8.2% 11.3% 13.5% Rio Tinto plc 5.7 x 5.4 x 4.7 x 8.6% 3.5% 10.6% 40.1% 40.1% 41.6% United Co. RUSAL Plc 14.1 x 9.2 x 7.9 x 104.4% 44.7% 8.5% 13.5% 17.8% 18.1% AMAG Austria Metall AG 8.3 x 6.8 x 5.8 x -3.8% 21.6% 11.8% 13.9% 14.6% 14.7% United Co. RUSAL Plc 14.1 x 9.2 x 7.9 x 104.4% 44.7% 8.5% 13.5% 17.8% 18.1% Hydro International plc 5.6 x 4.5 x 14.9% 19.0% 5.9% 6.4% Median 8.3 x 6.7 x 5.8 x 36.6% 21.6% 8.5% 13.5% 14.6% 15.7% Average 8.8 x 6.7 x 6.4 x 73.4% 27.2% 7.5% 13.7% 15.7% 16.5% AoG (@ Axia Research Valuation) 10.5 x 6.0 x 6.6 x 68.9% 76.0% -9.3% 16.7% 25.7% 24.0% Source: Factset, AVG Research AVG Research Page 23

24 Construction-Metka Metka is a leading EPC contractor focusing on turnkey projects for natural gas fired power plants mainly in MENA region. Despite our conservative stance on expected new backlog from this region in the coming years, we recognize the strong potential of these markets for energy projects based on the demandsupply dynamics. Metka could secure new projects as it capitalizes on its expertise, its stand-out track record and its strong ties with both equipment providers and energy producing companies. At the same time, as the Greek economy sets for a rebound, opportunities will arise for infrastructure related projects, privatizations but also private investments. So far the company has won a large railway upgrade tender (ceur220m) in Greece, while we highlight Metka s bid (jointly with Corporacion America) for the privatization of the country s regional airports. Our DCF model returns an equity value for Metka of EUR684.0m or EUR13.2/share (the company is listed in the Athens stock exchange currently trading at EUR8.93/share). Please find more details on Metka on our recent initiation report: Metka-Well positioned for the new growth cycler Exhibit 43: Metka revenue estimates (EUR m) Exhibit 44: Metka EBITDA estimates e 2015f 2016f 2017f 2018f e 2015f 2016f 2017f 2018f Source: AVG Research Background check and business model Metka is focused on the East Med region with key expertise the construction natural gas CCGT (Combined Cycle Gas Turbine) power plants. Also Metka has strong expertise in technically demanding infrastructure applications like complex steel constructions, civil engineering applications and oil & gas/refinery market, while is co-producing defense related applications with major industry players. Gaining expertise from local projects (gas fired units and complex infrastructure applications), the company turned its focus in the second part of last decade to international projects in the Balkans, Turkey and Europe, undertaking contracts for major energy players (EON, RWE, OMV) and major equipment suppliers (GE, Siemens, Ansaldo, Alstom). Metka built on its relationship with the energy community and eventually turned its attention to the booming energy markets of the Middle East and Africa, where demand for new energy projects was and remains very strong. Over the last 5 years the company has successfully opened 7 new markets signing projects with a total value of EUR3.1bn. By 2013 Metka s sales mix comprised by 88% international projects in vs. 57% in 2010 and 20% in Exhibit 45: Metka s historical EBITDA performance (EUR m) Exhibit 46: Metka s new-order intake p.a. (EUR m) , Source: AVG Research AVG Research Page 24

25 International EPC sector is the focus region Focusing on energy thirsty regions The main characteristics of the markets Metka is aiming at are: i) limited or inefficient electricity production infrastructure that cannot cope with rising demand; ii) availability or proximity to natural gas sources (reserves/pipelines) that make natural gas both an accessible and affordable energy source. During 2000 to 2013 electricity consumption in the Middle East increased by 5.5% CAGR while Africa posted a 3.7% CAGR for the same period. At the same time natural gas consumption in Middle East and Africa increased by 7.1% and 5.8% CAGR in these regions, respectively. Exhibit 47: Implied Load Factors at key markets for Metka Consumption per Capita (TWh/mil) Electricity Consumption (TWh) Nigeria Algeria Jordan Syria Turkey UK Greece Europe Qatar Kuwait USA Source: OECD, AVG Research Exhibit 48: Electricity Consumption per capita (TWh/m) Demand to remain strong OECD and EIA estimates call for a continuing strong trend in electricity consumption in the Middle East and Africa in the following decades. Regarding the Middle East, EIA expects 90GW of total installed capacity to be added up to 2040, pointing to a CAGR growth of 1.1%, with 26GW estimated to be added up to 2020 ( CAGR at 1.6%). The agency estimates that the bulk of the new capacity will be natural gas fired (57GW out of total 90GW to be natural gas fired), with 15.4GW coming online up to Following similar and stronger trends, Africa is expected to almost double its installed capacity by adding 144GW up to 2040 from c140gw currently, posting a 1.9% CAGR growth. Note that 50% of this new capacity is estimated to be natural gas fired (62GW), but in this case growth is backward loaded with only 24.6GW installed up to Exhibit 49: Estimated M. East gas fired capacity evolution (GW) Exhibit 50: Estimated Africa gas fired capacity evolution (GW) Source: OECD, EIA, AVG Research but geopolitical concerns will weigh on the short term prospects vis-a-vis new order intake. Despite the persisting strong demand for new capacity, MENA region, especially over the last 3-4 years, is witnessing significant geopolitical turmoil. There is no visibility for normalization (especially in the Middle East) at least in the short-to-medium term and this is impacting EPC contractors. Moreover this has impacted new contract flow, as well as execution risks and the ability to secure favorable financing terms. AVG Research Page 25

26 We expect a slowdown in new orders from abroad Metka up till now has shown a remarkable track record of carefully selecting and securing its projects thus limiting the impact of turmoil in its project flow. That said, we are more cautious about its ability to continue at the same pace over a short-to-medium term horizon. In an effort to mitigate the above described environment, we would expect the company to turn its focus to new markets (sub-saharan Africa, Nigeria). Metka s potentials are backed up also by its strong relationships with equipment suppliers that make Metka a preferred partner in the MENA region as well as the solid brand name from the successful and timely execution of projects for local energy companies. In addition we have to note Metka s competitive advantage in executing fast track projects. We estimate that Metka will have no problem booking cumulative international EPC contracts of ceur600m (that is 1-2 medium sized power plants or similar fast track projects p.a.) in the next 3-years ( ). Note that during the last three years ( ) Metka booked new contacts of EUR1.4bn in total, with the major portions standing for international EPC. While margins should slide The combination of good cost control, superior risk management, efficiency and the timely execution of fixed-price projects has allowed Metka to create a strong competitive advantage whilst enjoying very high margins, better than most peer companies. Over the past few years management has guided the targeted EBITDA margin of 15%-17% that the company comfortably delivered. Going forward we would expect Metka to maintain its strong profitability on the international front but we remain cautious and assume lower margins on these projects on the back of: i) increased competition that would prompt for pressured bidding; and ii) lower profitability projects that might find their way on Metka s backlog in its attempt to replenish. Nevertheless, we note that EBITDA margin is strongly related to project nature and risks, thus we would expect projects in Syria and Iraq to carry stronger margins as to ones in Jordan and Algeria. Under our current assumptions we expect strong performance for the next couple of years following the execution of the current contracts (c16.5% EBITDA margin for ), while in the longer term we assume EBITDA margin from the international EPC sector to gradually reach 13.5%. Exhibit 51: Metka s EBITDA margin performance 23.7% 21.8% 19.6% 20.1% 17.6% 20.7% 16.0% 16.83% 18.0% 16.98% Exhibit 52: Peer group EBITDA margin Chicago Bridge and Iron 9.78% 8.98% 9.38% 8.46% Duro Felguera, S.A % 13.46% 12.95% 11.95% Fluor Corp. 3.51% 5.01% 3.48% 5.11% Petrofrac 14.62% 13.12% 13.51% 16.02% Abengoa S.A. Class A 12.50% 12.90% 12.70% 14.90% Elecnor S.A. 8.00% 8.80% 3.70% 10.10% Technip SA 12.60% 12.20% 12.10% 11.20% Aker ASA Class A 21.10% 19.50% -8.80% 7.00% Average 11.86% 11.75% 7.38% 10.59% Median 12.55% 12.55% 10.74% 10.65% Source: OECD, EIA, AVG Research AVG Research Page 26

27 The Greek market becomes attractive again Looking for opportunities in Greece In order to support the country s new and more extroverted economic growth plan that focuses more on domestic production of goods and services, Greece is expected to invest more than EUR25bn by 2020 in applications that will enhance its dynamics. At the same time, a more flexible economy allows for increased private investments. In this context it is important to note that Metka is one of the few local players that could benefit from these investments as it takes advantage of its flexible structure, expertise and strong backlog. Metka s turn to the Greek market is supported by: New infrastructure projects included in the Public Investment Program Privatization of state owned assets offer opportunities for upgrading/expanding existing infrastructure. The private public partnership projects (PPPs) that should generate a pool of medium to large contracts. New investments in the country, as investor s appetite for opportunities in Greek assets increase. Exhibit 53: Gross fixed capital formation for Greece (EUR bn) Exhibit 54: Gross capital formation of total economy (% * 2014* 2015* -1.6% -7.4% 6.8% -21.1% -8.4% 5.3% -13.7% -3.6% -19.2% -2.9% -6.4% 7.6% 11.1% 5.0% 5.7% -25.8% * 2014* 2015* Greece EU (28 countries) Source: Ameco, AVG Research Infrastructure/concession projects are a key focus area Metka recently signed with ERGOSE (rail network operator) a project for the completion of a rail track upgrade. Metka was awarded preferred bidder late in 2013 but the signing of the contract has been delayed until recently. The budget of the project stands at EUR274m, with Metka offering a c17.5% discount, thus accounting for ceur220m of invoices for Metka. The execution of the project is expected to start in 2015 and to be completed within Metka has submitted a binding bid for the privatization of the country s regional airports in a JV with Corporacion America. Note that the tender consists of 14 major regional airports and another seven smaller ones that will be tendered in two groups-clusters. Under the tender s terms the contractors will undertake the operation of the airports for 30 years with an option for another 10 years and the possibility for a further extension if there is sufficient interest. Contractors will also have to implement investments in the infrastructure of airports for the first three years, estimated reportedly at EUR m. Keep a watchful eye on other potential projects for Metka Cyprus natural gas terminal. Metka has shown interest in natural gas upstream related projects in Cyprus. Metka has expressed its interest for the construction of the infrastructure that will allow the sourcing of natural gas to Cyprus from abroad until the exploit of its own off-shore gas reserves is implemented. Metka is participating in the tender in a consortium with M&M Gas (a JV of Mytilineos and Motor Oil) and the consortium has advanced to the second stage of the process. Power Plant Projects. In respect of concession type investments management has indicated that it could consider investing further in power plants. This could entail Metka taking a stake in existing AVG Research Page 27

28 energy assets or participating in the funding of new units. Under this approach Metka could assiste the financing of some projects as the company also undertakes their construction. Salamina subsea interconnection. According to press reports the company has expressed its interest to participate in the tender for a subsea tunnel interconnection of Salamina-Perama (a small island next to Athens). The project refers to the construction of 1.1km subsea tunnel that is budgeted at ceur400m. The project will be funded exclusively by the toll fees. Order intake We would not expect Metka to get involved in general construction projects (highways for example), but rather to target more complicated infrastructure projects and technically demanding infrastructure applications. This would allow Metka to take advantage of its traditional expertise and book profitable deals. As such we recognize amongst others: waste management projects; opportunities arising for the need of complex energy related infrastructure projects; infrastructure upgrades on State assets; and opportunities related to other projects under the country s privatization scheme, i.e. airports, railways etc. We conservatively estimate that Metka will secure EUR750m of contracts in Greece during the period and profitability Regarding the domestic projects we believe that Metka will follow a more aggressive bidding behavior at least in the short term in order to attract contracts while facing competition from the traditional domestic players (Ellaktor, Gek Terna, J&P Avax). Nevertheless although our estimates for the general construction sector call for an average EBITDA margin of % we assume that Metka will target applications carrying above average margins, thus we look for EBITDA margins in the high single digits. Mature current backlog at EUR1.3bn Metka has a current backlog of ceur1.3bn (from EUR1.7bn at end 2013) that is clearly skewed towards highly profitable international energy related EPC projects. Based on the contracts timetables we have a sound view on the expected performance over the next couple of years that will be driven by the execution of the current backlog. We note that we take a more conservative stance on the Syria II project completion. Metka has already executed c17% of the EUR678m budget while we account for another EUR60m to be booked in H2:14. In our model we expect the company to book EUR60m in 2015, EUR80m in 2016 and the balance in beeween In the current backlog we do not include Metka s signed project in Iraq (Al-Anbar) budgeted at cusd1.0bn that the company has sold to the Chinese SEPCO III. We do not exclude the potential for Metka to book oneoff income gains from this transaction in the region of 1-2% of the project value either in H2:14 or early Note that Metka s defense project division is also executing a contract for the Taiwanese government in co-production with Intracom Defense electronics and Raytheon Company, while in 2013 it had completed a similar project for UAE government. Exhibit 55: Major Projects included in current backlog Country Algeria Jordan Iraq Syria Project Owner Equipment Supplier Capacity (MW) Expected End Date Contract Value (EUR m) SPE GE 368 H2:15 93 SPE GE 590 H2: SPE GE 178 H1:14 48 SEPCO Alstom 143 H1: SEPCO Alstom 146 H1:13 82 Rep. of Iraq GE 1,250 H1: Rep. of Iraq 146 H1: PEEGT Ansaldo 700 H2: PEEGT Ansaldo 724 Delayed 678 Greece ERGOSE H2: Source: The Company, AVG Research AVG Research Page 28

29 Assumptions and estimates Revenue forecasts Signed backlog at the end of H1:14 stood at EUR1.3bn. The current backlog provides us with adequate visibility over the next couple of years for top line performance with the risk being on the upside especially from the signing and execution of fast track projects as well as the pace of execution of Syria II project. From the new order intake we account for EUR340m of revenues (in total) in from abroad and EUR400m from Greece. More specifically we expect: The completion of the current contracts in Algeria that will contribute ceur170m in 2014 and ceur140m in 2015; The completion of the remaining of the contract in Jordan that will contribute EUR76m in 2014 We model Iraq projects to be completed by 2016 contributing EUR100m in 2014 and 2015 respectively with the remaining EUR50m in 2016; In Syria we expect the completion of the first project (Syria I) within 2014 contributing EUR97m (H1:14 booked EUR32.7m). Regarding the second project (Syria II) the execution of which has been slow, the company booked EUR116m in H1:14 and we call for the project to be completed in the next four years bringing EUR218m in 2014, EUR60m in 2015, EUR80m in 2016 and the remaining EUR320m in ; Regarding the ERGOSE project in Greece, as well as per the project specs, we expect the railtrack project to be completed in 18-months, contributing EUR110m both in 2015 and in Finally, as we have noted above we expect after 2015 the company to start executing new EPC orders and infrastructure related projects, which we assume to contribute revenues of ceur200m p.a. Operating Profitability For the current international backlog we feel comfortable with management s guidance for an EBITDA margin of 15%-17% as the sales mix is clearly skewed towards EPC projects abroad. Still the blended margin should slide lower as the company executes the ERGOSE project in Greece, which we calculate comes with an EBITDA margin of 8%. Going forward regarding the new projects from abroad we assume that the company will adopt a more aggressive approach in its efforts to book new contracts given strong competition especially in tapping new markets. As far as the new orders in Greece, we believe that Metka s expertise on sophisticated applications would allow the company to secure projects that carry high single digit EBITDA margins. Exhibit 56: Revenues and EBITDA estimates for Metka (EUR m) Revenues e 2015f 2016f 2017f 2018 EPC Defense Infrastructure Total Revenues EBITDA y-o-y 10.7% 7.3% -28.0% -6.8% -1.8% 2.7% EPC margin 16.8% 17.1% 17.2% 16.2% 15.9% 16.3% Defense margin 36.8% 25.0% 25.0% 25.0% 26.6% 21.2% Infrastructure margin 8.8% 4.0% 8.2% 9.0% 8.2% 7.2% Total EBITDA margin 16.8% 17.0% 15.2% 13.5% 14.1% 14.3% Source: AVG Research AVG Research Page 29

30 Growth Mytilineos Holdings Valuation Our DCF valuation is adopting a WACC of 12.5% which depicts :i) Metka s current exposure to region with geopolitical tension; and ii) the inefficient capital structure. Our WACC is derived on the basis of a 6.5% risk free rate and a 7.0% market risk premium, reflecting exposure to MENA region. Beta is set at 1.2x. We assign no terminal growth. Targeted capital structure (Debt/Equity) at 25% We point out the low sensitivity of our valuation to WACC and growth rate assumptions as illustrated in Exhibit 2. This is mainly attributed to the cash rich position of the company. Exhibit 57: Metka DCF exercise Source: AVG Research 2014e 2015f 2016f 2017f 2018f EBIT (+) Depreciation (-) Taxes paid Gross Cash Flow (-) Change Working Capital (-) Capex (+) Non-Oper. Cash Flow FCF Discounted FCF Continuing Value 91.4 EV Net Cash Position (end 2014) Equity Value Mytilineos Stake 50.0% Equity Value for Mytilineos Stake Exhibit 58: Valuation sensitivity to WACC and terminal WACC TP 11.5% 12.0% 12.5% 13.0% 0.0% % % % % Exhibit 59: WACC Assumptions Risk free (Rf) 6.5% Market risk premium (Rf-Rm) 7.00% Beta 1.2 Tax rate 26.0% Cost of Equity 15.0% Target Capital Structure Debt/Equity 25.0% WACC 12.5% Source: The Company AVG Research Exhibit 60: Metka peer group valuation multiples and forecasted EBITDA margins P/E EV/EBITDA Dividend Yield EBITDA margin Company Country Duro Felguera, S.A. SPAIN 8.4 x 9.8 x 11.2 x 4.6 x 5.2 x 5.0 x 7.4% 6.6% 6.2% 10% 11% Abengoa S.A. Class A SPAIN 21.5 x 13.1 x 9.9 x 8.1 x 7.3 x 6.9 x 3.2% 3.4% 3.7% 5% 5% Elecnor S.A. SPAIN 7.1 x 6.1 x 5.6 x 2.8% 3.1% 3.4% Technip SA FRANCE 12.8 x 9.5 x 8.8 x 5.2 x 4.0 x 3.5 x 3.3% 3.8% 4.2% 10% 8% Aker ASA Class A NORWAY 5.4 x 5.9 x 4.9 x 3.4 x 2.2 x 2.3 x 6.8% 8.4% 8.7% 9% 6% Petrofac Limited UK 10.0 x 8.3 x 7.2 x 6.4 x 5.2 x 4.6 x 3.7% 4.3% 4.8% 6% 6% Chicago Bridge & Iron Co. NV NETHERLANDS 9.5 x 8.2 x 8.3 x 5.7 x 4.9 x 4.4 x 0.6% 0.6% 0.7% 11% 11% AMEC plc UK 12.9 x 11.1 x 10.1 x 9.4 x 7.0 x 6.0 x 4.2% 4.6% 5.0% 11% 11% Fluor Corporation US 14.8 x 12.5 x 11.2 x 5.7 x 4.9 x 4.4 x 1.3% 1.3% 1.4% 17% 18% Babcock & Wilcox Company US 15.9 x 11.8 x 10.7 x 9.1 x 6.8 x 6.4 x 1.4% 1.5% 1.5% 9% 7% McDermott International, Inc. US 36.8 x 9.8 x 20.8 x 5.4 x 3.8 x 0.0% 0.0% 0.0% 48% 12% Great Lakes Dredge & Dock Co. US 26.5 x 14.5 x 9.6 x 7.3 x 5.4 x 72.7% 0.8% 1.5% 9% 8% MasTec, Inc. US 17.0 x 12.0 x 11.6 x 7.4 x 5.9 x 0.0% 0.0% 11% 10% Jacobs Engineering Group Inc. US 14.1 x 12.1 x 10.8 x 8.1 x 6.0 x 5.3 x 0.0% 0.0% 0.0% 17% 15% Average 13.5 x 12.3 x 9.3 x 7.8 x 5.4 x 4.8 x 7.7% 2.7% 3.2% 13% 10% Median 12.9 x 11.5 x 9.9 x 7.3 x 5.4 x 4.6 x 3.0% 2.3% 3.4% 10% 10% Metka Greece 5.5 x 8.3 x 10.0 x 1.6 x 2.5 x 3.0 x 7.3% 4.8% 4.0% 17.0% 15.2% Source: Factset, AVG Research AVG Research Page 30

31 Energy Division-The next day profitability driver? Mytilineos Holdings Following an extensive investment program since 2007, Mytilineos Group invested over EUR700m eventually to become the largest Independent power Producer (IPP) in the country, holding a portfolio of three natural gas fired units (1.2GW total capacity) and exposure to RES (53.5MW installed). Currently the energy division, and more specifically CCGT units, are operating under challenging market conditions impacted mainly by regulatory restrictions, soft demand and increased RES penetration. We look favorably at the long term prospects of the division, as we believe it could significantly support future profitability of the group on the back of regulatory market changes, demand evolution, natural gas prices and an overall EU wide re-assessment of the role of natural gas-fired fleet in electricity generation. In the short term, the division will continue to generate EUR80-90m of EBITDA p.a. driven by the capacity adequacy certificates scheme and increasing RES capacity. We derive a valuation for the energy division of EUR477.4m (equity value). Exhibit 61: Mytilineos natural gas fired portfolio Unit Agios Nikolaos Korinthos Power Aluminium of Greece Location Viotia Korinthos Viotia Technology Combined Cycle Thermal Unit (CCGT) Combined Cycle Thermal Unit (CCGT) Combined Heat and Power Plant (CHP/High Efficiency CHP) Commission Date January 2011 April 2012 May 2008 Capacity (MW) Construction Cost (EUR m) Owner Entity Protergia Korinthos Power Aluminium of Greece Operator Entity Protergia Protergia Protergia Mytilineos Group Stake 100% 65% 100% Other Stakeholders - 35% Motor Oil - Source: The Company, AVG Research Note that the profitability and valuation of CCGT-CHP unit of AoG is accounted for in the Metallurgy and Mining division (Aluminium of Greece). Protergia (energy division subsidiary) assumes only the operation and management of the unit. Brief overview of the Greek electricity market The Greek electricity market currently operates under a day-ahead mandatory pool scheme, with all energy produced in the country (including imports) ejected into the pool. The units are then dispatched following a merit order curve whereas RES production is fully dispatched before all others. The System Marginal Price (SMP) is determined by the merit curve, as all units are obliged to submit their offers at least at their variable costs. Lignite fired units set the SMP for most of the time (60%-70%) followed by natural gas units and hydro. Currently SMP is in the region of EUR55/MWh. Public Power Corporation (PPC) holds the dominant stake in electricity generation in Greece (12.5GW, 75% of total installed capacity) with Mytilineos being the largest Independent Power Producer (IPP) in the country with 1.2GW installed. Other local IPPs include Elpedison holding 810GW and Heron with 569GW installed. With respect to the production mix of the Greek market, lignite is the key source covering 50% of total production with natural gas and hydro covering 15% and 8% respectively (2013 figures). We note the booming RES sector contribution that increased its stake in the production mix from 7% in 2009 to 16% currently. Demand in the country is primarily driven by household and SME s consumption that account for 90% of the total demand, while large industrial clients account for 10% of the total demand (2013). Demand in the country over the last 5 years declined by 9.0% following a GDP decline of 29% during the respective period. Over the last decade electricity demand has risen by a 0.7% CAGR, while during demand grew at a c3.4% CAGR. Please refer to Appendix II, page 46, for more details on the Greek electricity market AVG Research Page 31

32 Jan Feb Mar Apr May Jun jul Aug Sept oct Nov Dec Jan Feb Mar Apr May Jun jul Aug Sept oct Nov Dec Jan Feb Mar Apr May Jun jul Aug Sept oct Nov Dec Jan Feb Mar Apr May Mytilineos Holdings Exhibit 62: Electricity Demand in Greece (GWh) 58,000 56,000 54,000 52,000 50,000 48,000 46,000 44,000 42, Exhibit 63: Market capacity highlights Installed Capacity (MW) Thermal 10, % Hydro 3, % RES 4, % Total 17,426 Thermal Units by Technology (MW) Lignite 4, % Natural Gas-CCGT 3, % Natural Gas-OCGT % Aluminium CHP % Oil % Total Thermal 10,239 Source: IPTO, AVG Research Current market conditions Natural gas fired units in the Greek market (owned both by PPC and IPPs) are currently running on very low load factors impacted by the market framework. Following the abolition of the Variable Cost Recovery Mechanism (VCRM allowed natural gas units to recover their variable cost plus a small profit margin) and the 30% biding rule (allowed natural gas units to place bids at very low prices in order to get dispatched), natural gas producers are effectively operating only at certain peaking hours of the system given the low System Marginal Prices. Exhibit 64: SMP evolution (EUR/MWh) Source: LAGIE, AVG Research The increased RES penetration in the Greek market that is covering a big part of intraday demand is limiting the operation timeframes for the natural gas fired units during day time. On the contrary, late in the afternoon when RES and especially photovoltaic production get out of line, the system requires a fast ramp-up of conventional units. The flexibility of CCGTs is key at this point as the units can ramp-up their production at a fast pace and cover the declining RES. Considering that when a CCGT unit is dispatched from the operator its technical specs keep it online for six to eight hours, we understand that producers are cautious when placing their bids as they might catch themselves operating under their variable costs. The Greek market regulator, in order to compensate all the producers for the availability of their capacity to the system, has launched over the last few years a Capacity Assurance Certificate (CACs) scheme that is aiming to cover fixed and capital costs of the units. For 2014 this amount was set at EUR45k per available MW, with modern CCGT units like Mytilineos receiving two certificates. That represents for Protergia units ceur80m p.a. on the EBITDA line. According to our estimates this amount is considered adequate to provide support to the division in terms of covering fixed and capital costs. Exhibit 65: Greek electricity markets CACs structure (for period) Unit Type Certified Capacity (MW) Number of Certificates per MW Unit Capacity Remuneration (EUR/MW) Lignite (PPC) 3,692 1x 45 CCGT (PPC) 1,706 2x 90 CCGT (IPP) 2,174 2x 90 Hydro (PPC) 2,582 1x 45 Total 10,154 Source: IPTO, RAE, AVG Research AVG Research Page 32

33 Going forward As the operational availability and flexibility of the natural gas fired units is necessary to the system, the regulator has launched a public consultation for the establishment of a framework for the CACs. We expect, at least in the short-to-medium term, the remuneration fees to remain at current levels. In our modeling we assume CACs of EUR40k per MW for At the same time the market framework is in a restructuring mode aiming to enhance competition amongst players. The establishment of intraday balancing market (current only day forward market exists), interconnections with bordering countries and rising demand (most importantly demand spikes) are expected to widen the operational timeframe of the CCGT units and thus allow higher utilization rates (30%-40%). During this period the profitability of Protergia will continue to be supported mainly by CACs as we expect marginal gains from the actual operational performance of the units (sparking spreads between EUR10-13/MWh). We assume EBITDA during this period from the two thermal units of ceur70m p.a. In the longer term, we believe that improved market structure, increased demand (accounting for the interconnection of Crete and Cyclades islands by 2019) and lower natural gas prices could allow the operation of the CCGT units under more normalized conditions (sparking spreads at EUR18-20/MWh). In this environment we expect Mytilineos units to report utilization rates of c55%. We also account for a significant reduction of CACs after 2020 in the region of EUR20k/MW. Exhibit 66: Electricity demand evolution scenarios (GWh) Exhibit 67: Demand peak evolution estimates (GW) Low Reference Max Source: IPTO, AVG Research Modeling assumptions and valuation for natural gas fired units In the table below we summarize our modeling assumptions for the CCGT units of Mytilineos Group operation. Exhibit 68: CCGT units modeling assumptions Load factor 15% 22% 30% 35% 40% 50% 50% SMP (EUR/MWh) CACs (EUR/MW) (2x) Natural Gas Prices (DEPA) (EUR/MWh-th) LNG shipments (EUR/MWh-th) Ratio (DEPA/LNG) 90% 85% 80% 75% 75% 70% 65% Special tax on natural gas prices 5% 5% 5% 5% 5% 5% 5% Effective Price (EUR/MWh-th) Spark Spread (EUR/MWh) CO2 prices (EUR/ton) Other Variable Costs (% on sales) 6% 6% 6% 6% 6% 6% 6% Overheads (% on sales) 3% 3% 3% 3% 3% 3% 3% All-in spread (EUR/MWh) Source: AVG Research AVG Research Page 33

34 Expansion in the supply market could potentially add ceur5-10m p.a. to EBITDA Protergia has recently been involved in the electricity retail supply market looking to take advantage of opportunities arising from the liberalization of the market. PPC currently controls c98% of the supply in the country with other small independent players controlling the remaining 2%. Following the launch of the NOME auctions scheme that will allow access to cheap lignite and hydro production to all suppliers, we could estimate that Protergia will gain a 3-4% market share in the close period from PPC. Note that past attempts by some independent players in the supply market managed to get as much as 8% market share from PPC. Under this assumption and keeping in mind an average consumption for the country of 50TWh p.a. a 3-4% market share would result to volume sales of 1,750GWh. If on this volume we apply a marginal gain of EUR3-4/MWh, we get forecast gains in the region of EUR5-10m p.a. from this activity. At this point we do not include this activity in our valuation as we await for more solid evidence of its market performance. RES portfolio 70MW of new wind parks coming online in Protergia is active in the RES sector having currently installed 53.5MW in wind parks, photovoltaic parks and small hydro units. At the same time the company holds a significant portfolio of RES projects with cumulative capacity above 1.2GW, out of which it intends to install 70MW of wind parks over the next couple of years contributing ceur20m in EBITDA in Exhibit 69: Protergia RES portfolio Num. of Parks Capacity (MW) FiT (EUR/MWh) Wind Small hydro PV Total 53.5 Source: The Company, IPTO, AVG Research Exhibit 70: RES figures in Greece MW Currently Installed 2020 penetration IPTO Capacity estimates Wind 1,495 2,800 PV 2,270 4,000 Small Hydro Biomass/Biogas Joint Production Total 4,119 7,369 The company is taking advantage of a favorable environment for RES operators in the country, as Greece is trying to provide incentives to producers to align with EU targets. Below we summarize the key regulatory framework for RES developers and operators in the country: Guaranteed Power Purchase Agreement (PPA) with duration of 20 years with the optionality of further expansion. Thus all RES production is submitted into the market pool with priority, eliminating any market related risk. Guaranteed Feed-in-Tariffs (FiTs) for the entire production. FiTs per RES class is pre-determined by the regulator, so all the production is purchased under specific FiT for the lifetime of the PPA. Subsidization on Capex that reaches 30%-40% of the total investment. Alternatively the operator of the park can receive higher tariffs on its production if they did not receive the subsidy. In 2014 the regulatory authority (RAE) and the ministry of Energy proceeded with changes to the framework allowing more clarity on the RES market and helping reduce and eventually eliminate the deficit in the RES payable account. RES producers are paid based on their PPAs by the electricity market operator (LAGIE). Given that currently SMP is standing below FiT levels across all RES classes, there are two special levies that have been introduced to the retail clients and wholesale market participants in order to tackle the deficit. Following the relevant legislation initiative the market reduced its payable cycle from 10 months in end 2013 to 2-3 months posting a significant improvement in market liquidity. AVG Research Page 34

35 Exhibit 71: RES modeling assumptions Key assumptions Wind PV Small Hydro FiT (EUR/MWh) Load factor 27% 16% 40% CPI 1% 1% 1% Overheads (% on revenues) 3% 3% 3% O&M (% on revenues) 15% 12% 5% Municipal tax (% on revenues) 5% 5% 5% Capex per MW (EUR m) Exhibit 72: Capacity evolution estimates e 2016e 2017e 2018e Wind PV Hydro Source: The Company, IPTO, AVG Research We expect the company to install 70MW of wind parks in Assuming an investment of EUR m per MW, Protergia will need to invest ceur90m to install 70MW. Given the subsidization framework, we can assume that the company will finance its projects with 35% bank debt (that is EUR31m), 35% subsidy (EUR31m) while the rest 30% (EUR30m) will be contributed in equity from Protergia/Mytilineos group. Regarding the financing we note that following the recap of the domestic banking sector financing is now more feasible, especially for investments with the specific characteristics and we keep in mind the strong cash flow generation capabilities from Mytilineos Group activities in EPC and metallurgy. Exhibit 73: RES division Revenues and EBITDA estimates EUR m 2014e 2015f 2016f 2017f 2018f Installed Capacity Sales Wind PV Hydro EBITDA EBITDA margin 79.2% 78.2% 77.6% 77.3% 77.1% Wind EBITDA margin 77.0% 76.8% 76.5% 76.2% 76.0% PV EBITDA margin 80.0% 79.7% 79.4% 79.1% 78.8% Hydro EBITDA margin 87.0% 87.0% 87.0% 87.0% 87.0% Source: AVG Research For the valuation of the RES portfolio we made explicit forecasts based on the above mentioned assumptions for up to 20 years (duration of the PPAs). Our DCF exercise is based on an average WACC of 6.5%. Exhibit 74: RES division valuation RES Class EV/MW multiple (EUR m) Equity Value/MW (EUR m) Equity Value (EUR m) Wind (166 MW) PV (11.5MW) Hydro (6.0MW) Source: AVG Research Total EV: Total Equity Value: AVG Research Page 35

36 Our forecasts and assumptions for the energy division Summarizing our assumptions for the energy division we highlight: CACs standing at EUR40,000/MW going forward, with Mytilineos units receiving two certificates; SMP gradually increasing to EUR60/MWh in 2020form EUR55/MWh for FY:14; Utilization rates remain pressured until 2019 in the region of 35%, while going forward we expect utilization factors to reach 60% following increased demand; Regarding natural gas prices we maintain the 5% special tax going forward, while we gradually increase LNG s stake in the supply mix (to reach 30% in 2020 from 5% currently). We also assume some mild reduction in natural gas prices driven mainly by the macro market environment; We account for a gradual increase in CO2 prices reaching EUR12-13/ton in 2020 from EUR6.0/ton currently. Finally, regarding the RES division we assume the group will implement its capacity expansion program adding 35MW in 2015 and 35MW in For new installations we assume overnight cost of EUR/MW of EUR1.3m Revenues from energy sales for 2014 are seen declining by 58% y-o-y on the back of the lower utilization of the CCGT units following the abolishment of the VCRM within this year. Going forward we expect revenues from the division to move higher driven by higher utilization rates of the CCGTs (on the back of higher SMP and demand), while in the RES division we account for the gradual commissioning of the new MWs. Despite the drop in expected revenues, EBITDA performance of the division in 2014 is seen declining by just 10.3% y-o-y as profitability is supported by the CACs remuneration (CACs are flat y-o-y). Going forward we account for a gradual pick up of the division s EBITDA on the back of improvements in the sparking spreads and new wind capacity. Exhibit 75: Energy division Revenue and EBITDA estimates 2013* 2014e 2015f 2016f 2017f Revenues CCGT units y-o-y -60% 9% 1% 29% RES y-o-y -1% 59% 37% 0% Total Energy y-o-y -58% 13% 4% 25% EBITDA CCGT units margin 22.4% 48.9% 39.6% 39.3% 34.8% y-o-y -12.0% -11.4% 0.0% 13.8% RES margin 75.0% 79.2% 78.2% 77.6% 77.3% y-o-y 4.7% 56.8% 36.0% -0.4% Total Energy margin 24.1% 51.2% 43.7% 44.7% 39.6% y-o-y -10.3% -3.4% 6.9% 10.3% Source: AVG Research AVG Research Page 36

37 Valuation of the Energy Division We apply a DCF exercise for the valuation of the two CCGT units. We set the WACC at 9.0%, while we account for a long term growth of 1.0%. As a sanity check we compare our derived NAV/MW multiple of 0.42x (average) for the two natural gas fired units with the relevant metric of the Gek Terna transaction that sold 25% of a similar CCGT unit to QPI last year yielding an NAV/MW of 0.44x. Exhibit 76: Korinthos Power (436MW) DCF valuation EBITDA (-) Tax Paid (-) Maintenance Capex (-) Changes in WC FCF Discounted FCF Terminal Value EV EV/MW 0.8 Net Debt NAV Mytilineos stake 65% Equity Value for Mytilineos Source: AVG Research Exhibit 77: Ag. Nikolaos Viotias (444MW) DCF valuation EBITDA (-) Tax Paid (-) Maintenance Capex (-)WC changes (10% of sales) FCF Discounted FCF Terminal Value EV EV/MW 0.7 Net Debt NAV Mytilineos Stake 100% Equity Value for Mytilineos Stake Exhibit 78: Mytilineos Energy division SOTP valuation EUR m MW EV EV/MW Debt Equity Value Mytil. Stake Equity For Mytil Stake Korinthos Power % 117 Viotia % 205 RES % 156 Total 1, Source: AVG Research AVG Research Page 37

38 Examining new opportunities Group net debt for end-2014 stands at EUR337m according to our estimations from EUR725m in 2012, with net debt/ebitda declining from 4.4c in 2012 at 1.3x at end-2014 We view Mytilineos efforts to drastically reduce debt as a strategic move that will allow the group to take advantage of new opportunities, as presented, especially in the Greek market. The group has already stated that it could be conditionally interested in the privatization of Larco (one of the five largest ferronickel producers in the world). Mytilineos could also express interest in the opportunities presented in the thermal energy sector especially following the regulatory efforts to liberalize the market. Finally, the group could look after privatizations, concessions and M&A activity, while the Greek economy is set for a rebound Exhibit 78: Mytilineos group net debt (EUR m) Exhibit 79: Net Debt/EBITDA evolution e 2015f 2016f 2017f 2018f e 2015f 2016f 2017f 2018f -0.4 Source: The Company, AVG Research The case of Larco Larco is a state-owned metallurgy company that stands among the global top five nickel producers. The company operates four mines in central and northern Greece, while its smelting unit is located in Larymna (Central Greece). Its assets contain proven lateritic ore reserves exceeding 100 million tones at a grade of 0.95%-1.00% nickel. The company is operating at its full production capacity of 19,000tn p.a. of Ferro-nickel. The company is owned by 55.2% by the (Hellenic Republic Asset Development Fund) with the remaining stakes held by NBG 34.4% and PPC 11.4%. The Greek State includes the company in its asset privatization scheme and has transferred its stake to the HRADF. Yet, the exact framework of the privatization process as well as the timing remains unknown. Mytilineos, having already gained valuable experience from the AoG operations and turnaround, has iterated that under specific terms could be interested in this privatization. We think that the potential acquisition of Larco by Mytilineos could lead to another very successful turnaround story, similar to that of AoG. Privatization of energy assets In the context of electricity market reforms, the states has launched a scheme to spin-off and privatize 30% of PPC s generation and supply divisions, in order to reduce the company s effective monopoly in the electricity market. Recall that PPC is the only energy producer that operates lignite and hydro fired units and has access to lignite mine fields. According to the framework that has been voted by the parliament the new company (so called small-ppc ) will receive 30% of the generation portfolio (including lignite fired units and mines and large hydro units) and supply clientele on a representative basis. Given that Mytilineos is the largest IPP in the market holding a portfolio of 1.2GW, we could assume tha the group could be interested in these assets. Specifically we believe the group could benefit by a more diverse portfolio of electricity generating assets in order to enhance its competiveness and increase its footprint in the local electricity market. AVG Research Page 38

39 Group estimates and forecasts Mytilineos revenues are forecasted at EUR1,239.2bn in 2014 or -12.9% y-o-y mainly the result of lower energy sales, while they are expected to settle at the level of EUR1,140bn to EUR1,190bn over the period , as we take a cautious approach on Metka s turnover and a more defensive stance on aluminum prices for the medium term. On the other hand, EBITDA is seen up 7.8% y-o-y in 2014 and up 5.1% y-o-y in 2015 on the back of aluminum prices, CAC s and Metka s profitability. For the our conservative approach on Metka s turnover and margins as well as on LME drive EBITDA slightly lower for the period. We expect EPS to grow by 35.2% CAGR in mainly due to AoG turnaround. We expect medium term sustainable group turnover of EUR bn p.a. Metallurgy is expected to post revenues for 2014 of EUR432m (-5.2% y-o-y) impacted by the very low aluminium prices during the first part of the year (reached USD1,641/tn in H1:14). Note that since the lows LME has rebounded significantly and we expect an average price for H2:14 close to USD2,000/tn, while premia remain in high levels. For 2015 as we expect the LME prices and premia to move higher (all-in prices of USD2,700/tn) we forecast revenues of EUR494m (+14.5% y-o-y). Going forward we account for normalized all-in prices of USD2,500/tn that translate to revenues in the region of EUR m. Construction (Metka) division is expected to post 7.7% y-o-y increase in revenues for 2014 (EUR651m) driven by the execution of the projects in Syria, Algeria and Jordan. For 2015 we expect a significant decline in revenues of 28% y-o-y mainly attributed to our cautious approach on the Syria II project completion, with 2015 revenues seen at EUR468.7m. Going forward we expect the company to post revenues in the region of EUR m p.a. supported by the completion of domestic infrastructure projects and some new projects abroad. Note that we do not exclude the possibility of a one-off positive item in H2:14-early 2015 related to the project in Iraq. The impact of this item is estimated at 1%-2% of the USD1.0bn contract. Energy division s revenues are seen significantly declining in 2014 impacted by the low utilization rates of the units (c10% ytd). For 2014 we expect the division to post revenues of EUR156.1m (- 57.7% y-o-y). Going forward increased load factors (30-40%) are pushing division s revenues higher to EUR176.8m in 2015, posting a 13% CAGR. We expect group revenues for 2014 at EUR1,239m vs. EUR1,432m in 2013 (-12.9% y-o-y) affected by the energy division decline. For 2015 group revenue is seen declining by 8.0% y-o-y at EUR1,140m impacted by the decline in construction division. Going forward we expect group revenues in the region of EUR1,100-1,200m. Exhibit 80: Revenue forecasts breakdown EUR m e 2015f 2016f 2017f 2018f Metallurgy y-o-y -9.9% -5.2% 14.5% -2.7% 0.8% 1.4% % of total 31.9% 34.9% 43.4% 43.6% 42.4% 41.5% Construction y-o-y 19.1% 7.7% -28.0% -6.8% -1.8% 2.7% % of total 42.3% 52.5% 41.1% 39.6% 37.5% 37.1% Energy y-o-y -17.3% -57.7% 13.3% 4.5% 24.6% 10.3% % of total 25.8% 12.6% 15.5% 16.7% 20.1% 21.4% Discontinued -6.3 Total 1, , , , , ,185.9 y-o-y -2.1% -12.9% -8.0% -3.3% 3.7% 3.7% Source: AVG Research AVG Research Page 39

40 Exhibit 81: Historical and forecasted revenues (EUR m) e 2015f 2016f 2017f 2018f Source: The Company, AVG Research Metalurgy EPC Energy Discontinued Sharply higher margins driven by AoG AoG is the key driver of the strong profitability of the group in the coming periods. With cash costs reduced to cusd2,000/tn for 2014 and to cusd1,900/tn for 2015, the division is set for a spectacular improvement of its profitability. EBITDA for 2014 is seen at EUR72.3m improving by 50.1% y-o-y or by 280% on an adjusted basis (2013 included positive one-offs of EUR29m). A further improvement by 76% y-o-y is expected in 2015 with 2015E EBITDA standing at EUR127.3m driven by higher LME prices and further cost reductions. Going forward we normalize our top line estimates and assume no further cost reductions, thus resulting in EBITDA settling in the region of EUR110m p.a. Construction division (Metka) is expected to continue posting above sector high profitability margins especially for international EPC projects. We expect a slight improvement in EBITDA of 2.7% y-o-y for 2014 with the division reporting EBITDA of EUR110.8m. Going forward, as we account for lower revenues as well as lower margins, EBITDA in 2015 and 2016 is seen settling at EUR71.2m and EUR59.2m respectively. From 2017 onwards we expect the division to post an EBITDA in the region of EUR60-65m. Energy EBITDA to be driven by the CAC scheme for the CCGT units and the new wind parks coming online in We expect 2014 EBITDA of EUR79.9m (-10.3% y-o-y) despite the big top line drop (-57.7% y-o-y). Going forward we expect slightly higher EBITDA levels of EUR77.2m for 2015 and EUR82.5m in 2016, due to higher utilization rates and a contribution of ceur10m p.a. from 2016 from the 70MWs of new wind parks. Group Consolidated EBITDA for 2014 is seen at EUR250.1m (+7.8%) y-o-y positively impacted by the improvements in the AoG performance. For 2015 we expect EBITDA of EUR262.7m that will be further enhanced by AoG performance. Note that we account for overhead costs of EUR13m p.a. Going forward we expect the group to report EBITDA in the region of EUR m. Regarding capex, we assume: i) EUR30-35m p.a. for AoG mainly related to maintenance; ii) EUR5-8m p.a. for Metka; iii) something in the region of EUR1-2m p.a. for the CCGT units; and finally iv) we assume capex for the new RES installation (70MW) of EUR90m split between 2015 and AVG Research Page 40

41 Exhibit 82: Group EBITDA forecasts EUR m e 2015f 2016f 2017f 2018f Metallurgy margin 10.6% 16.7% 25.7% 24.0% 23.7% 23.6% % of total 19.7% 27.5% 46.2% 44.9% 43.1% 42.8% y-o-y 66.3% 50.1% 76.0% -9.3% -0.5% 0.9% Construction margin 17.9% 17.0% 15.2% 13.6% 14.1% 14.3% % of total 44.0% 42.1% 25.8% 23.0% 22.7% 23.1% y-o-y 14.8% 2.7% -35.7% -16.8% 2.4% 3.5% Energy margin 24.1% 51.2% 43.7% 44.7% 39.6% 36.5% % of total 36.3% 30.4% 28.0% 32.1% 34.1% 34.1% y-o-y 36.8% -10.3% -3.4% 6.9% 10.3% 1.7% Other (inc. HQ costs) Discontinued -1.6 Total EBITDA margin 16.3% 20.2% 23.0% 22.1% 22.2% 21.8% y-o-y 29.9% 7.8% 5.1% -7.0% 3.9% 1.8% Source: AVG Research Exhibit 83: Historical and forecasted EBITDA breakdown (EUR m) 68.0 Source: The Company, AVG Research e 2015f 2016f 2017f 2018f Metalurgy EPC Energy Other (inc. HQ costs) Below the EBITDA line we account for: Depreciation charges of EUR63.9m for 2014 and gradually increasing to EUR71.8m by 2018; Significantly lower financial expenses from 2015 onwards stemming from the deleveraging of the group due to the strong cash flows of AoG and Metka and also via the refinancing of the group s debt in 2014 at significantly lower interest rates. Effective tax rate is estimated at 17% for 2014 due to Metka s low effective tax rate for this year (bulk of the revenues booked abroad) and at 22%-23% onwards. Minorities attributed to Metka (50%) and Korinthos Power CCGT (35%) Finally, 2014 net income after minorities is seen at EUR63.8m (+174.1% y-o-y). In 2015 a further 47% y-o-y increase is expected with 2015F net income standing at EUR93.9m. In the longer term we expect income to move closer to the EUR100m benchmark EPS CAGR is seen at 35.2% AVG Research Page 41