Metlen Energy & Metals — A new name for its next phase

Metlen Energy & Metals (ASE: MYTIL)

Last close As at 19/07/2024

EUR35.40

0.00 (0.00%)

Market capitalisation

EUR5,113m

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Research: Industrials

Metlen Energy & Metals — A new name for its next phase

Mytilineos recently announced a company name change to Metlen Energy & Metals. The decision to rebrand is in line with its strategy of establishing a strong international identity. It also confirmed its intention to examine an international listing, including on the London Stock Exchange. We profile Metlen and examine how it could look in the context of an LSE listing. It would rank c 90th in the LSE’s largest index firms on market capitalisation and c 50th based on earnings, indicating potential re-rating upside. Metlen is a c€5bn market capitalisation firm listed in Athens with two core pillars: an integrated Energy business (power generation and distribution, a high-growth renewables business and gas supply and trading) and Metals (Europe’s largest integrated bauxite, alumina and aluminium producer).

Written by

Andrew Keen

MD - Head of Content, Energy & Resources, Industrials

Industrials

Metlen Energy & Metals

A new name for its next phase

Company outlook

Industrials

25 June 2024

Price

€36.2

Market cap

€5.2bn

Net debt (€m) at end Q124

1,592

Shares in issue (excluding share buyback)

138.4m

Free float

78.5%

Code

MYTIL

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.9)

0.1

10.0

Rel (local)

1.8

0.1

(2.0)

52-week high/low

€39.5

€31.0

Business description

Metlen Energy & Metals is a global industrial and energy company, operating in two main business segments: Energy and Metallurgy. Metlen is strategically positioned at the forefront of the energy transition as an integrated utility, while also having a successful, fully vertically integrated, green metallurgy business. Metlen’s strengths are from its synergies across the entire business, aiding the company’s objective of becoming a global leader.

Next events

H124 results

25 July 2024

Analysts

Andrew Keen

+44 (0)20 3077 5700

Harry Kilby

+44 (0)20 3077 5724

Metlen Energy & Metals is a research client of Edison Investment Research Limited

Mytilineos recently announced a company name change to Metlen Energy & Metals. The decision to rebrand is in line with its strategy of establishing a strong international identity. It also confirmed its intention to examine an international listing, including on the London Stock Exchange. We profile Metlen and examine how it could look in the context of an LSE listing. It would rank c 90th in the LSE’s largest index firms on market capitalisation and c 50th based on earnings, indicating potential re-rating upside. Metlen is a c€5bn market capitalisation firm listed in Athens with two core pillars: an integrated Energy business (power generation and distribution, a high-growth renewables business and gas supply and trading) and Metals (Europe’s largest integrated bauxite, alumina and aluminium producer).

Year
end

EBITDA
(€m)

Net income
(€m)

EPS
(€)

DPS*
(€)

P/E**
(x)

Yield**
(%)

12/22

823

466

3.42

1.20

4.6

7.6

12/23

1,013

605

4.46

1.58

8.3

4.3

12/24e

1107

666

4.81

1.69

7.7

4.6

12/25e

1171

709

5.12

1.80

7.2

4.9

Note: *Final distributed dividend per share. **FY22 and FY23 at the year-end price; FY24e and FY25e at last close price.

A highly synergistic, high-growth energy business

Metlen currently generates c 12% of Greece’s domestic power generation, moving to 20% by the end of 2024 with ambitions to reach 30% in years to come. It owns three highly efficient CCGT power plants and one CHP plant, with combined annual production of 5.1TWh in FY23, plus 0.6TWh from renewable energy sources (RES), taking total generation to 5.7TWh in FY23. Its RES business accounts for 31% of FY24e earnings, with 0.8GW of installed capacity and a total global pipeline of c 12GW. We value Metlen’s RES business at 9.7–9.8x EV/EBITDA (FY24) and note that recent transactions for European RES firms have been at far higher multiples (the €3.2bn purchase of Terna Energy by Masdar at 17.4x EV/EBITDA and the €6.1bn offer for Neoen by Brookfield Asset management at 17x EV/EBITDA). Metlen’s RES business is diverse, well-funded and high growth, and these transactions highlight the potential for higher multiples being applied.

Vertically integrated, green metallurgy business

Metlen operates the largest vertically integrated aluminium business in Europe, providing low-cost, low-carbon alumina and aluminium. The company also recently announced its intention to produce gallium, which is in line with the European Commission’s strategy for critical raw materials.

Valuation: Undervalued for a €1bn+ EBITDA business

Metlen exceeded €1bn in EBITDA in 2023, with our estimates (and consensus) now expecting this to be a milestone in its secular growth rather than a cyclical peak. We value Metlen at €49/share (up from €45/share in our last update). Our DCF valuation has risen to €47/share due to minor earnings revisions and we blend this with a peer multiple valuation of €51/share to reflect the potential of peer re-rating with an additional listing. Metlen trades on an FY25e P/E of 7.2x, relatively low in comparison to peers.

Investment summary

Company description: A global energy and metals firm

Metlen is a global industrial and energy company, operating in two main business segments: energy and metallurgy. It is at the forefront of the energy transition as an integrated utility (gas trading, power generation and distribution), while having a fully vertically integrated green metallurgy business. These businesses are highly synergistic and deal with energy in many forms (aluminium smelting is highly energy intensive and aluminium is sometimes referred to in the industry as ‘solid electricity’). Metlen’s competencies across the entire value chain mean that it can exploit synergies between its different business sectors.

Metlen’s assets are low cost and low carbon. Its aluminium operations are in the first quartile of the cost curve and are the largest fully integrated aluminium assets in Europe. It has continued to strengthen its backward integration recently by purchasing additional bauxite operations and continues to extend its production of recycled aluminium. Its gas-fired power plants in Greece are highly efficient and among the lowest cost in Greece due to its leading position in gas trading and regasification access in Greece. It has significantly accelerated its renewable energy sources (RES) business in recent years so that it now accounts for 31% of FY24e EBITDA, driven by a strong pipeline of solar projects in Europe and globally. Metlen continues to leverage synergistic links between these businesses and its activities include power infrastructure development, including in the UK market.

Valuation: Undervalued for a €1bn+ EBITDA business

Metlen currently trades at P/E multiples of 7.7x in FY24e and 7.2x in FY25e. It trades at EV/EBITDA ratios of 6.0x in FY24e and 5.6x in FY25e (our estimates are broadly in line with consensus), a significant discount to peers. As a comparison, its peer group trades at a range of multiples, from 5.2x for metals to 9.7x for RES, with an FY24 Metlen EBITDA-weighted average of 7.7x, a 38% premium to Metlen’s market multiple. In our view, Metlen’s multiple looks low for a business that has high-quality, low-cost assets in power generation and aluminium production, and very low for a company with a high-growth renewable energy business that accounts for almost one-third of its earnings. We value Metlen at €49/share (up from €45 in our last update). Our DCF valuation has risen to €47/share after incorporating recent results and some minor adjustments to earnings based on commodity, energy and electricity price assumptions, which are broadly in line with forward curves, and we now blend this with a peer multiple valuation of €51/share to reflect the potential of peer re-rating with an additional listing.

Financials: We forecast a 10% EPS CAGR

Metlen exceeded €1bn in EBITDA in 2023, with our estimates (and consensus) now viewing this as a milestone in its secular growth rather than a cyclical peak. In its recent AGM, management provided guidance for EBITDA of €1.0–1.2bn in FY24 and net profit over €600m (up to c €700m). Our updated forecasts are in line with this guidance (FY24 EBITDA €1.103bn, net income €662m).

Exhibit 1: Earnings estimate changes by key division (EBITDA)

Edison new

Edison old

Difference (%)

€m

2024e

2025e

2024e

2025e

2024e

2025e

Metals

287

292

255

248

13%

18%

Energy

813

841

836

899

-3%

-6%

of which M Renewables

342

369

311

340

10%

8%

Construction, concessions, subcontracts and other

27

50

26

26

3%

93%

Group EBITDA

1,107

1,171

1,117

1,173

-1%

0%

Net income

666

709

669

717

0%

-1%

EPS (€)

4.81

5.12

4.83

5.18

0%

-1%

Source: Edison Investment Research

We forecast a 10% CAGR in EPS from FY23 to FY25. The balance sheet remains strong (1.1x net debt/EBITDA in FY24e, and 1.0x net debt/EBITDA in FY25e, both excluding non-recourse debt) and debt costs remain relatively low (for example Metlen raised a seven-year, €500m bond in July 2023, with 91.2% subscribed to by retail investors and a yield of 4%).

Sensitivities and risks

In our view, the key risks for Metlen are fluctuations in in commodity prices (alumina/aluminium and natural gas in particular) and exchange rates.

What would Metlen look like as a UK listed company?

Metlen announced on 25 April that as part of its strategic review, it is considering a potential international listing on the LSE within the next 12–18 months. If it proceeds, it would demonstrate a strong vote of confidence in the UK market, as well as fitting with its international growth ambitions.

Inclusion in market indices is dependent on a number of factors, but a simple ranking by earnings and market capitalisation for Metlen indicates that it would be in the 100 largest listed firms. By our estimates (and based on available data from LSEG on 10 June), Metlen would rank around 90th in relation to market cap, c 55th by EBITDA and c 50th by net earnings (before exceptionals).

Metlen’s earnings exposure would be relatively unique, with integrated aluminium operations, fully integrated power generation and distribution operations in Greece, and a growing global RES business. It would provide investors with an opportunity to invest in a combination of assets with high levels of synergies between multiple business activities. Importantly, its RES business (unlike many UK-listed investment trusts) is linked to a strongly cash-generative industrial base, so is not dependent on raising further capital, which has proved difficult for some trusts when trading at discounts to net asset value.

In our view, the overall relative position of its market cap versus its earnings reflects a re-rating potential and this also holds when comparing Metlen to a relevant peer group. If we assume Metlen were to be viewed as an industrial firm, we can compare it to a subsection of the market. As of 10 June (data from LSEG) in terms of market capitalisation, at £4.48bn (€5.32bn), Metlen would rank among the top 20 industrial listed companies, being most similar in size to IMI. However, when considering EBITDA as the key metric, Metlen’s £886m (€1.01m) would place it 13th, just below DCC, which also has an energy business focused on energy solutions and the energy transition and is therefore Metlen’s closest competitor in the UK with regard to its energy business (especially its M Renewables and construction of solar portfolios business).

Exhibit 2: Top 30 LSE listed industrial companies – EBITDA versus market cap

Source: LSEG, Edison Investment Research (as at 10 June 2024). Note: Metlen is circled. Regression includes the top 30 UK listed industrial firms; those with over £2bn in EBITDA excluded from chart for clarity.

Exhibit 3: Top 30 LSE listed industrial companies – net income excluding exceptionals versus market cap

Source: LSEG, Edison Investment Research (as at 10 June 2024). Note: Metlen is circled. Regression includes the top 30 UK listed industrial firms, those with over £2bn in EBITDA excluded from chart for clarity.

The charts above plot EBITDA and net income versus market cap for firms classified as industrials within the UK’s largest 100 firms. The relationship is somewhat loose (there are a wide variety of firms in this category, including airlines), but it does indicate that Metlen (highlighted by a circle) looks below the trend in terms of market cap to EBITDA and net earnings relationships.

If Metlen is successful, it would be the first newly listed firm to immediately join the LSE’s top companies since Deliveroo’s IPO in 2021, against the recent trend of large names, such as Flutter, CRH and DS Smith, away from LSE listings through either moving to the US or via buyouts from private equity firms.

Metlen’s UK operations

Metlen’s business has continued to expand its presence in the UK. In January, it celebrated its 10-year milestone of active and ongoing operation in the UK. Some of the UK companies with which Metlen is working closely include LightSource BP, GE Vernova, Gresham House, Vodafone, Centrica and Quinbrook, as well as government organisations such as National Grid and Scottish Power, as an integrated developer. As of January 2024, Metlen has a total of 82 projects in its portfolio, with a total contract value of €2.5bn in the UK alone.

Looking specifically at the renewable energy arm of its UK operations, Metlen has a portfolio of solar projects with a total capacity of 1.25GW. The Cleve Hill project, an engineering, procurement and construction (EPC) contract signed with Quinbrook Infrastructure Partners, is the largest licensed solar park in the UK, with total capacity of 373MW. The contracted value amounted to £114m and the project will produce 374GWh of renewable electricity per year. Metlen has an additional 650MW of owned assets, which are currently in various stages of development and implementation. At the end of Q124, 45% of Metlen’s Power Projects business total pipeline was directly connected to the UK, amounting to c €800m, further enhancing its aspirations to increase its operations in the UK.

Metlen can also be considered a potential market leader in the UK regarding the EPC of battery energy storage systems (BESS) with 732MW/1.18GWh of projects, which account for 30% of the UK market. The majority of this is being built for its long-term business partner Gresham House. To put this in perspective, on 18 April 2024, Gresham House Energy Storage Fund (GRID, see our latest note), which is the UK’s largest BESS operator with regard to assets under management, released a trading statement, which confirmed that its operational capacity had increased to 740MW/864MWh, and was expected to increase to 1.07GW/1.70GWh by the end of 2024.

Metlen’s association with market leaders is therefore not only in the BESS market segment but also in solar photovoltaic (PV), and its involvement in the construction of the UK’s first high-capacity east coast subsea link (see below) demonstrates Metlen’s credibility among UK market leaders, as well as its ability as an EPC contractor.

UK’s first high-capacity east coast subsea link

In December 2023, Metlen, in consortium with GE Vernova, was awarded a £1bn contract, by National Grid Electricity Transmission and SP Transmission, part of SP Energy Networks, to build the UK’s first high-capacity east coast subsea link. The joint venture will oversee the construction of a 525kV, 2GW bipole Voltage-Sourced Converter and HVDC subsea transmission cables from Torness in East Lothian, Scotland to Hawthorn Pit in County Durham, England. The subsea cable will enable the transmission of renewable energy to power more than two million homes across the UK. The cable system is expected to be roughly 190km in length and the design phase began in January 2024, with construction to begin in 2025.

Ireland

On 29 May, Metlen announced that it had signed two 10-year power purchase agreements (PPA) to provide energy generated from two solar farms in Ireland to Keppel DC REIT’s two Dublin facilities. The solar farms are in Gorey, Wexford, have a combined capacity of 14.28MW and, once completed, will produce c 13.6GWh of renewable electricity per year while displacing 6.250 tonnes of CO2 each year.

Company overview under new structure

In 2023, Metlen completed its first full year of operation under the new organisational structure announced in December 2022. The aim of this transformation was to further develop and enhance the company's competitiveness across all its business activities on an international scale.

Metlen has two core business segments: the energy sector and the metallurgy sector. These segments are connected and complementary, allowing for the creation of valuable synergies.

The key objectives of Metlen's organisational transformation include:

1.

Implementing a modern and sustainable business model that promotes internal synergies, effective decision-making and efficient internal communication.

2.

Increasing recognition of the company's true financial value and continuing to enhance it, with a focus on evaluating the company's credit rating.

3.

Developing human resources by creating conditions for merit-based advancement and a clear value proposition for employees.

4.

Pursuing and expanding into new value-creating opportunities, such as infrastructure and concessions in Greece, new technologies and entry into new international markets.

By aligning its organisational structure and strategic focus, Metlen aims to further strengthen its competitiveness and create value for its stakeholders across its complementary energy and metallurgy sectors.

Exhibit 4: EBITDA breakdown for FY23

Source: Metlen, Edison investment Research

Exhibit 5: Divisional breakdown of EBITDA forecasts

Source: Metlen accounts, Edison Investment Research

Energy sector

Metlen’s new organisational structure of its energy segment is broken down into five business activities:

M Energy Generation and Management.

M Energy Customer Solutions.

M Integrated Supply and Trading.

M Power Projects.

Metlen is the largest Greek private company operating across the entire energy spectrum, serving as an integrated energy utility. Its business activities span the full energy value chain. The company engages in the development, construction and operation of thermal power units, renewable energy projects and electric power infrastructure projects. Additionally, Metlen is involved in the retail supply of electricity and natural gas. Beyond its core energy operations, it also offers a range of other competitive energy-related products and services. These include energy efficiency solutions, smart city services and hydrogen infrastructure development. The company's diversified energy portfolio and complementary service offerings position it as a comprehensive provider of energy solutions. Its broad expertise and capabilities allow it to serve the evolving needs of its customers across the energy sector.

Metlen owns an extensive operating thermal and natural gas energy portfolio, with total capacity exceeding 2GW. The company held a significant market share in FY23, accounting for more than 13.5% of Greece's active and licensed installed thermal power generation capacity (in Q124 this increased to 17.4%).

Metlen’s renewable energy division is a global manufacturer and contractor of solar and BESS projects. Its renewable portfolio at end Q124 totalled 0.8GW of installed capacity, with projects spanning Greece and international markets, and is growing strongly organically with a pipeline of 12.0GW (excluding potential projects from the PPC deal) in solar capacity. The development of its RES projects is based on an asset rotation model.

In addition to its own energy assets, Metlen is a leading international EPC contractor. It specialises in executing large-scale, value-added energy projects across a diverse range of sectors, including:

conventional electricity generation;

energy transition initiatives;

energy efficiency solutions;

digital transformation;

smart city infrastructure; and

Internet of Things platforms.

Metlen’s extensive expertise and capabilities as both an energy producer and EPC contractor position it as a comprehensive provider of cutting-edge energy solutions. Its diversified energy portfolio and project delivery services enable it to address the evolving needs of clients and markets on a global scale.

Metals sector

Metlen operates the only fully vertically integrated, bauxite-to-aluminium production facility in Europe. This complex includes:

bauxite mining and alumina refining operations;

primary aluminium smelting;

a dedicated port facility for logistics and shipping; and

an onsite electricity co-generation unit.

Metlen's Aluminium of Greece plant has been in continuous operation for over 50 years, with more than 15 years of ongoing developmental progress. This site is now one of the most advanced and efficient aluminium production facilities in the EU. The plant has an annual production capacity exceeding 185,000 tonnes of primary aluminium and 860,000 tonnes of alumina.

On 5 February, Metlen announced that it had secured a prospecting licence from the Ghana Integrated Aluminium Development Corporation (GIADEC) in north-west Africa for the exportation and subsequent extraction of bauxite deposits. The area is estimated to have a geological reserve of 300Mt of bauxite. As the mine is gradually developed, management expects it to reach annual production capacity of 10Mt, which, at the current market price, equates to an annual turnover of $500m. The company's vertical integration is a strategic competitive advantage, allowing it to optimise operations, logistics and production costs across the full value chain.

Subsidiaries

As part of its organisational transformation, Metlen has established two new strategic subsidiaries to expand its presence in the infrastructure sector, both domestically and internationally. The first subsidiary is METKA ATE, which specialises in construction activities. The second subsidiary is M Concessions, which will serve as Metlen's investment arm for concession projects and public-private partnerships (PPPs), both within Greece and in international markets. By leveraging its construction expertise through METKA ATE and its concessions investment capabilities through M Concessions, Metlen can capitalise on infrastructure projects and PPP opportunities in Greece and across global markets.

Divisional earnings breakdown

Energy

Electricity and NG supply

Metlen is the largest vertically integrated private company in the electricity and natural gas (utility) sector in Greece. Through its subsidiary, Protergia, Metlen supplies retail electricity and natural gas. Metlen’s energy generation portfolio capacity is greater than 2GW and has a significant share (more than 17.4% in Q124 and 19% at the end of May 2024) of Greece’s electricity supply. By the end of 2024, Metlen is aiming to exceed 30% of Greece’s annual energy consumption in the years to come.

Metlen also imports and trades natural gas, which has strengthened and created further synergies in its power and gas business. Natural gas supply in Greece is through pipeline imports (principally from Turkey) and the regasification of LNG on Revithoussa Island (Metlen is active in LNG imports into Revithoussa and gas supply). The Revithoussa LNG terminal has a nominal regasification capacity of up to 7bcm per year, which is enough to cover Greece’s entire natural gas supply. In addition, Greece has recently commissioned a new LNG terminal (FSRU) in Alexandroupolis, with a nominal regasification capacity of 5.5bcm per year. Metlen has dramatically increased the number of slots it has booked in the Revithoussa terminal, securing 40–50% of Revithoussa’s auctioned capacity over the next four years.

Exhibit 6: Energy and natural gas supply

Q124

2023

2022

FY23 vs FY22
% change

Total amount of power and gas meters

550k

525k

345k

53%

Market share

17.4%

13.50%*

7.60%*

-

Source: Metlen, Edison Investment Research. Note: *At end December.

Throughout 2023, natural gas prices in Europe experienced a significant decrease. This has been attributed to both high natural gas inventories in the EU, which were at 80% in mid-January 2023, and milder weather conditions seen throughout the year. Natural gas prices have not yet reverted to pre-Ukraine levels.

Electricity demand stayed at lower levels, recording a decrease of c 2.5% year-on-year. Among other macro pressures, this decline is a result of higher electricity prices since the invasion of Ukraine, which have yet to revert to pre-crisis levels and there is no suggestion that these prices will revert soon. Although Greek electricity prices decreased fairly rapidly at the start of 2023 from the significant highs seen in 2022, by May they had levelled out and remained fairly constant, at roughly double pre-Ukraine levels, for the rest of the year and into January 2024.

Metlen’s power business earns a margin based on three relative competitive advantages: its efficiency in generation assets, its leading position in sourcing gas and its low CO2 output. For more detail, please see our update note published on 21 March 2023.

Thermal power production

Metlen’s total Greek power production for FY23, from both thermal and renewable units, totalled 5.7TWh, which corresponds to 11.6% of Greece’s total demand. Looking specifically at the company’s thermal plants, three combined-cycle gas turbine (CCGT) plants and one high-efficiency combined heat and power (CHP) plant produced a cumulative c 5.1TWh, which represented just over 10% of Greece’s interconnected system and 33.2% of production from natural gas plants (up from 25.9% in FY22).

The Nikolaos CCGT plant contributed towards Metlen’s thermal production for the first time in FY23, contributing c 27% of total thermal production for the year. The plant is one of the largest and most efficient in Greece, as well as one of the largest power stations in Europe. It has a total capacity of 826MW and will operate at a thermal efficiency of more than 63%. We expect the plant to play a significant role in growing Metlen’s profitability in future years, due to its high degree of efficiency and flexibility in supplying electricity at competitive prices.

Renewables

Metlen’s M RES business is a key driver of its growth in the coming years. In Q124, Metlen achieved a record net profit of €158m, an increase of 10% on Q123. This was primarily driven by the performance of its RES business and supported by both electricity generation (which was enhanced by the operation of the new 826MW CCGT) and the consistently robust performance of its metallurgy business.

As can be seen in Exhibit 7, we expect Metlen’s M RES business to be driving factor in the company’s growth in the coming years. For FY24 and FY25, we forecast EBITDA of €342 and €369m respectively. We also forecast that the energy business will make up c 75% of Metlen’s total EBITDA in FY24 and 77% in FY25, at similar levels to FY23 but up from 67% in FY22.

Exhibit 7: Energy breakdown of EBITDA forecasts

Source: Metlen accounts, Edison Investment Research

Exhibit 8: RES portfolio at end-Q124 (GW)

RES in operation

0.8

Under construction

1.6

RTB* and late-stage development**

3.0

Early-stage development**

6.6

Total

12.0***

Source: Metlen, Edison Investment Research. Note: *RTB (ready to build) within the next six months. **Includes Edison estimates from Canadian investment. ***Excludes potential projects from PPC deal.

On 11 April, Metlen announced a strategic cooperation agreement with PPC Group for the development of a solar portfolio of up to 2,000MW across four countries: Italy (503MW), Romania (516MW), Croatia (445MW) and Bulgaria (500MW). The value of the deal is estimated to be up to €2bn spread across the next three years. The portfolio consists of a large number of solar projects at various stages of development. Metlen will undertake the development and construction of the projects. Once the projects are completed and connected to the grid, PPC will acquire the projects.

The agreement with PPC Group is an example of Metlen’s Asset Rotation Plan, which allows the company to continue to grow its M Renewables portfolio, despite the current and unfavourable interest rate environment. As a result of the rotation plan, Metlen is able to have a self-funded RES development model, enhanced by its cash-generative operating portfolio, while maintaining low leverage levels and a strong credit profile.

Italian sustainable energy growth

Metlen considers Italy a strategic market for the future growth of its RES business. The country's central location in the Mediterranean, acting as a gateway to other European markets, makes it an ideal hub. Additionally, Italy's geographic and climatic conditions are favourable for both solar and wind power generation projects.

Metlen has an extensive pipeline of projects in Italy with a combined capacity of c 3.6GW, which it plans to complete over the next four years. This pipeline comprises:

2.4GW of PV solar plants with an average plant capacity of 30MW.

873MW of energy storage, including an 8MW plant in Cheremule (Sardinia) that is already operational.

84MW of ready-to-build brownfield development wind assets in Sardinia, Basilicata and Molise.

A 35MW green hydrogen plant in Taranto that has already obtained a positive environmental impact assessment.

Capitalising on Italy's ambitious renewable energy targets and favourable regulatory environment, Metlen aims to become a key player in the Italian PPA market by developing and acquiring wind and solar projects.

Furthermore, Metlen recently celebrated the opening of its new office in Milan, which will serve as the company's headquarters for central Europe. The office employs 120 people, but this number is expected to double by the end of 2024 and reach 400 by 2026.

Aluminium business

Exhibit 9: Total production volumes (k tonnes)

2022

2023

2024e

Alumina

861

869

880

Primary aluminium

187

183

190

Recycled aluminium

50

56

60

Total aluminium production

237

239

250

Aluminium & alumina prices ($/t)

3 Month London Metals Exchange

2,716

2,287

2,450

Alumina Price Index (API)

362

344

368

Source: Metlen, Edison Investment Research

The average price for aluminium (3M LME) in 2023 decreased by 16% from the previous year to $2,287/t (2022: $2,716/t). In the last two months of 2023, the increase in the aluminium price to $2,382/t was largely driven by a weaker US dollar. The aluminium billet premia declined further in 2023, with the average price standing at $460/t from $600/t at the beginning of 2023. However, the billet premia price has been following an upward trend in 2024, currently at around $600/t, and is expected to further improve throughout the year. Metlen has also hedged its 2024 and 2025 production at higher levels than the current LME price. Metlen’s aluminium business is also benefiting from lower power prices and increased use of renewable energy.

Metlen’s announcement of the prospecting licence from GIADEC and the 100% acquisition of Imerys Bauxites means it has secured a long-term supply for its Aluminium of Greece plant, the largest vertically integrated bauxite, alumina and primary aluminium production unit in the EU. The investment in Imerys also provides Metlen with the possibility of exploring opportunities in the supply of critical raw materials (ie gallium) and rare earths (scandium) to Europe.

Exhibit 10: Metallurgy EBITDA forecast breakdown

Source: Metlen accounts, Edison Investment Research

Exhibit 11: LME primary aluminium three-month rolling forward

Source: LSEG, Edison Investment Research

AGM summary

After 115 years, Mytilineos announced its decision to rebrand to Metlen Energy & Metals. This move aligns with the company's strategy of establishing a strong international brand identity as its portfolio and operations continue to expand globally. The proposed name change was well received by shareholders, indicating their support for the company's vision and growth plans. The rebranding exercise marks a new era for Metlen, positioning it to capitalise on promising opportunities in the energy and metals sectors globally. Management's outlook included EBITDA in the range of €1–1.2bn for FY24 and net profit over €600m (up to c €700m). The company reiterated its intentions to pursue a listing on the LSE. However, it acknowledged that the process is complex and that it will proceed methodically.

Valuation: Should reflect further EBITDA growth

Our primary valuation method has been a 10-year DCF analysis. We are revising this to a 50:50 blended approach of DCF and peer group-based EV/EBITDA to reflect the potential re-rating due to an international listing, as well as to reflect its growing diversity of earnings, with RES accounting for a more significant share. Our DCF valuation is €47.3/share and our peer-group multiple valuation is €50.7/share, with a blended valuation of €49/share.

Our key DCF assumptions include a weighted average cost of capital (WACC) of 7.5% and a 1% terminal growth rate for Metallurgy, Power & Gas (P&G) and Sustainable Engineering Solutions (SES), and 2% for Renewables & Storage Development (RSD). We assume terminal capex (included in terminal cash flow) for the P&G and Metallurgy divisions at 1.5x depreciation. These assumptions are unchanged from our last review. Our revised DCF valuation reflects the recent results and some minor adjustments to earnings based on commodity, energy and electricity price assumptions, which are broadly in line with forward curves. Our DCF valuation has increased from €45/share to €47/share as a result. We cross-check this overall firm DCF against divisional-based DCFs (sum-of-the-parts based, see Exhibit 13).

Exhibit 12: DCF valuation

Components

Edison new EV (€m)

Per share
(€)

EBITDA 2024e (€m)

Implied EV/EBITDA (x)

Edison old EV (€m)

Per share (old) (€)

Difference old vs new (%)

Per share difference (€)

Metlen Energy & Metals

8,228

59.5

1,107

7.4x

8,089

58.4

2%

2%

Net cash/(debt) at end FY23

(1,453)

(10.5)

(1,631)

(11.8)

-11%

1.3

Other adjustments*

(229)

(1.7)

(229)

(1.7)

0%

0.0

Total equity value

6,547

47.3

6,228

45.0

5%

2.3

Number of shares (m)

138.4

138.4

0%

Value per share (€) (rounded)

47.0

45.0

5%

Source: Edison Investment Research. Note: *Includes associates, minority interests and employment benefits. 

Exhibit 13: Divisional DCF valuation (cross-check)

Components

Edison new EV (€m)

Per share
(€)

EBITDA 2024e (€m)

Implied EV/EBITDA (x)

Edison old EV (€m)

Per share
(old) (€)

Difference old vs new (%)

Per share difference (€)

Energy

5,933

42.9

813

7.3x

5,852

42.3

1%

1%

of which M Renewables

3,355

24.2

342

9.8x

2,970

21.5

13%

13%

Metals

2,059

14.9

287

7.2x

1,875

13.6

10%

9%

Construction/conc. subs./other**

151

1.1

27

5.6x

153

1.1

-1%

-1%

Enterprise value

8,143

58.8

1,107

7.4x

7,880

56.9

3%

3%

Net cash/(debt) at end FY23

(1,453)

(10.5)

(1,631)

(11.8)

-11%

1.3

Other adjustments*

(229)

(1.7)

(229)

(1.7)

0%

0.0

Total equity value

6,462

46.7

6,020

43.5

7%

3.2

Number of shares (m)

138.4

138.4

0%

Value per share (€) (rounded)

47.0

43.0

9%

Source: Edison Investment Research. Note: *Includes associates, minority interests, employment benefits. **Construction, concessions, subcontracts and other.

Exhibit 14: Peer group multiple analysis

EV
(€m)

Per share
(€)

Market multiple
2024

EBITDA 2024e
(€m)

Energy

7,035

50.8

8.7x

813

of which Generation/Supply/Distribution

3,718

26.9

7.9x

471

of which M Renewables

3,317

24.0

9.7x

342

Metals

1,493

10.8

5.2x

287

Construction, concessions, subcontracts and other

172

1.2

6.4x

27

Enterprise value

8,699

62.9

7.7x

1,126

Net cash/(debt) at end FY23e

(1,453)

Other adjustments*

(229)

Total equity value

7,017

Number of shares (m)

138.4

Value per share (€) (rounded)

50.7

Source: Edison Investment Research, Refinitiv. Note: *Includes associates, minority interests and employment benefits. Prices as at 10 June 2024.

Exhibit 15: Sensitivities of DCF valuation (€/share) to WACC and terminal growth rate assumptions

Share valuation (€/share)

WACC

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

Terminal growth rate

0.0%

60.8

53.2

46.7

41.2

36.3

32.0

28.3

0.5%

66.1

57.5

50.2

44.0

38.7

34.0

30.0

1.0%

72.3

62.4

54.2

47.3

41.4

36.3

31.9

1.5%

80.0

68.4

59.0

51.1

44.6

38.9

34.1

2.0%

89.6

75.7

64.7

55.7

48.2

41.9

36.6

2.5%

101.9

84.9

71.7

61.1

52.6

45.4

39.4

3.0%

118.3

96.6

80.4

67.8

57.8

49.6

42.8

Source: Edison Investment Research

Financials: Q124 update

Please see our most recently published flash note, which covers Metlen’s Q124 results.

As anticipated by management, turnover decreased by 16% year-on-year due to the significant decline in natural gas, electricity and metal prices. Net profit and EPS both increased by 10% year-on-year, reaching €158m (€143m in Q123) and €1.141, respectively. EBITDA also rose by 12% year-on-year to €252m (€225m in Q123), benefiting from the steady profitability growth witnessed in its energy business, particularly in M Renewables. These results led to a substantial strengthening of Metlen's EBITDA margin, which increased by 5.5% to 22%, further confirming the robustness of Metlen's business model, which aims consistently to generate high levels of profitability regardless of energy price fluctuations.

Q124 was a record-breaking quarter for Metlen in terms of profitability levels, primarily driven by M RES, supported by both enhanced energy generation from the operation of the new 826MW CCGT and the continued consistent and robust performance of the metallurgy sector. Metlen's Q124 results demonstrate that it has laid the foundations to consolidate its profitability at levels above €1bn, as it did in its FY23 results, while entering a new phase of strong growth.

Despite the significant decrease in the average 3M LME aluminium price, which was down 9% year-on-year in Q124, Metlen’s Metallurgy business was able to record profitability at similar levels to the record-high levels obtained in Q123, with revenues of €205m (Q123: €225m) and EBITDA of €70m (Q123: €75m). This performance was mainly attributed to Metlen’s management via securing favourable LME prices, the $/€ FX rate and strict cost control. The acquisition of Imerys Bauxite is expected to further enhance the company’s vertically integrated production model.

Exhibit 16: Financial summary

€m

2021

2022

2023

2024e

2025e

Year end 31 December

PROFIT & LOSS

 

 

Revenue

 

2,664

6,306

5,492

6,354

7,180

Cost of Sales

(2,299)

(5,341)

(4,511)

(5,281)

(6,046)

Gross Profit

365

965

981

1,072

1,134

EBITDA

 

359

823

1,013

1,107

1,171

Operating profit (before amort. and excepts.)

279

279

734

900

915

Exceptionals

Operating Profit

279

734

900

915

947

Other

1

(9)

(18)

(8)

(8)

Net Interest

(41)

(90)

(112)

(70)

(50)

Profit Before Tax (norm)

 

239

635

770

837

889

Profit Before Tax (reported)

 

239

635

770

837

889

Tax

(41)

(133)

(160)

(168)

(178)

Profit After Tax (norm)

198

507

620

669

711

Profit After Tax (FRS 3)

198

502

610

669

711

Minority interests

(18)

(34)

(3)

(3)

(2)

Discontinued activities

(1)

(2)

(2)

0

0

Average Number of Shares Outstanding (m)

136.0

138.4

138.4

138.4

138.4

Net income (normalised)

180

473

618

666

709

Net income (FRS3)

180

466

605

666

709

EPS - normalised (€)

 

1.33

3.42

4.46

4.81

5.12

EPS - normalised fully diluted (c)

 

1.33

3.42

4.46

4.81

5.12

EPS - reported (€)

 

1.19

3.37

4.37

4.81

5.12

Final distributed dividend per share (€)

0.42

1.20

1.58

1.69

1.80

Gross Margin (%)

13.7

15.3

17.9

16.9

15.8

EBITDA Margin (%)

13.5

13.1

18.4

17.4

16.3

Operating Margin (before GW and except.) (%)

10.5

10.5

11.6

14.4

13.2

BALANCE SHEET

Fixed Assets

 

2,188

2,480

3,253

4,206

4,713

Intangible Assets

446

461

662

530

542

Tangible Assets

1,429

1,686

1,984

3,068

3,564

Right of use assets

48

59

175

175

175

Investments/Other

266

274

432

432

432

Current Assets

 

2,901

4,422

4,956

5,406

5,608

Stocks

469

840

1,335

1,398

1,436

Debtors

1,818

2,427

2,631

3,018

3,159

Cash

603

1,060

920

920

942

Other

12

95

71

71

71

Current Liabilities

 

(1,786)

(2,726)

(2,897)

(3,494)

(3,721)

Creditors

(1,704)

(2,552)

(2,270)

(2,514)

(2,741)

Short-term borrowings

(82)

(174)

(627)

(980)

(980)

Long-Term Liabilities

 

(1,682)

(1,955)

(2,645)

(2,645)

(2,645)

Long-term borrowings

(1,324)

(1,602)

(2,186)

(2,186)

(2,186)

Other long-term liabilities

(358)

(353)

(459)

(459)

(459)

Net Assets (ex-minority)

 

1,621

2,222

2,667

3,473

3,954

CASH FLOW

Operating Cash Flow

 

277

966

380

898

1,216

Net Interest

(23)

(31)

(78)

(70)

(50)

Tax

(33)

(43)

(139)

(160)

(168)

Capex

(380)

(716)

(1,054)

(803)

(743)

Acquisitions/disposals

8

(9)

14

0

0

Financing

(32)

2

6

0

0

Dividends

(52)

(70)

(167)

(219)

(234)

Other

20

50

44

0

0

Net Cash Flow

(214)

150

(994)

(353)

22

Opening net debt/(cash)

 

538

803

716

1,893

2,246

HP finance leases initiated

(51)

(63)

(183)

0

0

Other

0

(0)

1

0

0

Closing net debt/(cash)

803

716

1,893

2,246

2,224

Non-recourse debt

440

750

900

Adjusted net debt/(cash)

803

716

1,453

1,496

1,324

Source: Company accounts, Edison Investment Research.

Contact details

Revenue by geography (for FY23)

8 Artemidos
Str. Maroussi, 15125 Athens
Greece
+30 210-6877300/+30 210-6877476
www.metlengroup.com

Contact details

8 Artemidos
Str. Maroussi, 15125 Athens
Greece
+30 210-6877300/+30 210-6877476
www.metlengroup.com

Revenue by geography (for FY23)

Management team

CEO and chairman: Evangelos G Mytilineos

CFO: Eleftheria Kontogianni

After graduating with a BSc in economics from the University of Athens and an MSc in economics from the London School of Economics, Evangelos G Mytilineos took over the family business in 1978 and in 1990 founded Mytilineos Holdings Group (now Metlen Energy & Metals). By acquiring the majority shareholding of METKA (1998) and Aluminium of Greece (2005) and making sizeable investments in the energy sector (it is now the largest independent power producer in Greece), he turned the company into one of Greece’s leading industrial groups.

Eleftheria Kontogianni joined Metlen in April 2018 and became CFO in January 2023. Her previous experience before joining Mytilineos includes being financial planning & analysis manager for the Hellinikon Project as well as MIS manager at Titan Cement. Eleftheria studied financial & banking management at the University of Piraeus and achieved an ACCA qualification in 2011.

Management team

CEO and chairman: Evangelos G Mytilineos

After graduating with a BSc in economics from the University of Athens and an MSc in economics from the London School of Economics, Evangelos G Mytilineos took over the family business in 1978 and in 1990 founded Mytilineos Holdings Group (now Metlen Energy & Metals). By acquiring the majority shareholding of METKA (1998) and Aluminium of Greece (2005) and making sizeable investments in the energy sector (it is now the largest independent power producer in Greece), he turned the company into one of Greece’s leading industrial groups.

CFO: Eleftheria Kontogianni

Eleftheria Kontogianni joined Metlen in April 2018 and became CFO in January 2023. Her previous experience before joining Mytilineos includes being financial planning & analysis manager for the Hellinikon Project as well as MIS manager at Titan Cement. Eleftheria studied financial & banking management at the University of Piraeus and achieved an ACCA qualification in 2011.

Principal shareholders

(%)

Mytilineos family

21.5

Fairfax

4.7

Vanguard

2.9

BlackRock

2.3

FMR LLC

2.2


General disclaimer and copyright

This report has been commissioned by Metlen Energy & Metals and prepared and issued by Edison, in consideration of a fee payable by Metlen Energy & Metals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Metlen Energy & Metals and prepared and issued by Edison, in consideration of a fee payable by Metlen Energy & Metals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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