ADMIE Holding owns a 51% stake in IPTO, a Greek regulated utility. IPTO owns, manages and operates the Greek electricity transmission grid. The network includes 11,732km of high-voltage lines. The company plans c €4bn in investments over 2020–29.
ADMIE Holding reported 9M19 results, with net income up 12% y-o-y, and said that IPTO’s 2019 development capex plan is being implemented in a timely manner. We believe the stock continues to trade at an excessive discount to peers and to the implied regulated asset base (RAB) value. Such a discount would only be justified if allowed regulatory returns were significantly below the actual cost of capital, which we believe is not the case. Our valuation is broadly unchanged at €2.89/share and is roughly in line with the RAB value implied by IPTO.
IPTO has launched large projects for the interconnection of the Greek islands to reduce costs for consumers, improve security of supply and environmental sustainability. Most Greek islands rely on expensive and polluting fuel-oil-fired plants (often close to tourist areas); currently the extra costs of running these plants is shared among all Greek consumers (4–12% of a retail consumer’s bill). The construction of interconnections should allow for the replacement of these plants with renewables and imports from the mainland, lowering both costs for consumers and carbon emissions.