Mytilineos operates three main businesses: metallurgy (aluminium/alumina production), power & gas (power production/supply and gas trading) and large-scale infrastructure EPC. It operates in 29 countries across Europe, the Middle East and Africa and has 2,700 employees.
Mytilineos issued its first bond on the international debt capital market. The €500m five-year bond issue has a 2.5% coupon, lower than initial expectations and below the current weighted average cost of debt for the group. In addition to refinancing existing debt, the proceeds will be used to finance organic growth capex. Among the growth projects, we believe a new €300m gas-fired power plant has the potential to generate double-digit returns. In our view the share price does not fully reflect the lower country risk premium and we see room for a further re-rating. Our forecasts and valuation are unchanged.
Although Mytilineos operates in highly competitive international markets, it has leveraged the synergies between the three divisions to build a portfolio of assets that have in common a low-cost, competitive positioning. In particular, the highly efficient gas-fired plants and access to cheap natural gas allow Power & Gas to achieve high load factors and higher-than-average margins. Production costs for both alumina/aluminium allow Metallurgy to be profitable and strongly cash flow generative. The EPC business is well positioned to capture a growing number of international renewable projects.