EUR2.40 Theolia - futuren-group.com · Since its transfer to a regulated market in 2005, Theolia has seen different phases: from success in the beginning thanks to a booming green

Claire Deray +33 1 5365 3538 [email protected]

RewiredWe expect 2012 to have started to see the benefits of the restructuring that began in 2010. Theolia is now entering a new development phase not yet factored in by the market. In our view, as the recent share price hike is only the start of the rebound, we initiate coverage with a Buy rating and a EUR2.4 TP.

Price EUR1.61

Target EUR2.40

France | Electricity

Theolia

Previous None Buy

INITIATION OF COVERAGE 14 February 2013

Reuters TEO.PA Bloomberg TEO FP Index DJ Stoxx 600

In brief > Difficult track record > Now a producer of wind electricity, generating recurring revenues > Margin rebound of 2011 expected to be confirmed in 2012 > Restructuring achieved, more offensive development strategy

Year Sales EB IT N et EP S P / E P / B V P / C F EV/ EV/ EV/ D iv.end pro fit sales EB IT D A EB IT yie ld31 D ec (EUR m) (EUR m) (EUR m) (EUR ) (%)2012E 65.5 7.9 -16.4 -0.16 ns 0.9 11.9 5.1 12.9 42.5 0.0

2013E 60.7 12.3 -8.4 -0.08 ns 0.9 8.6 5.5 11.6 27.3 0.0

2014E 55.2 14.1 -7.4 -0.07 ns 1.0 14.4 9.3 18.6 36.1 0.0

2015E 69.1 17.0 -0.6 -0.01 ns 1.0 7.9 7.4 14.0 30.1 0.0

2016E 73.9 18.8 -4.3 -0.04 ns 1.0 9.2 9.0 16.8 35.3 0.0

Source: Kepler Capital Markets

Stock data In detail A mixed past Since its transfer to a regulated market in 2005, Theolia has seen differentphases: from success in the beginning thanks to a booming green sector with a high reached in 2007 (market cap above EUR1bn) to the debacle which beganin 2008 amid internal disorder and tougher conditions in the sector, finallyreaching a bargain value in August 2012 (market cap below EUR80m).

Restructuring benefits starting to shine through With the arrival of new managers, notably Fady Khallouf in mid-2010 (current CEO), Theolia launched a restructuring plan aiming to: 1) focus the business onone activity: wind farm development and management for owned and third-party accounts; 2) lower opex; 3) improve its financial health. We see a furthersales decline in 2012 (disposals), but the confirmation of the margin reboundstarted in 2011 (EBITDA margin exp. at 41% after 38% in 2011 or 2% in 2010).

Back to development Thanks to its operating recovery and its debt refinancing, the company is nowready to resume development. We are not surprised by the recent acquisition ofthe control of Breeze Two Energy (owned park x2, not yet in estimates).

Initiating coverage with a Buy rating and EUR2.4 TP The recent share price rebound looks like a catch-up effect and we expect a further increase in parallel with the confirmation of a results recovery andfleet increase. We initiate coverage with a Buy rating and a EUR2.4 TP.

Market cap (EURm) 104Free float 83%Shares outstanding (m) 65Daily trade volume ('000) 442YTD abs. performance 21%52-week high (EUR) 2.452-week low (EUR) 1.2Enterprise value (EURm) 336Net debt (EURm) 240

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Feb 12 May 12 Aug 12 Nov 12

Theolia DJ Stoxx 600 (rebased)

Please refer to the last page of this report for “Important disclosures” and analyst(s) certifications.

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461

Kepler Capital Markets Theolia 2

Key financials

Theolia

Rating Buy Market cap EUR104m Bloomberg TEO FP Top Shareholders Claire DerayTarget price EUR2.40 EV EUR336m Reuters TEO.PA Concert 13.4% [email protected] Price EUR1.61 Float 83% APG 3.9% +33 1 5365 3538

31 December Income statement (EURm) 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016ESales 70.0 328.6 154.5 67.5 65.5 60.7 55.2 69.1 73.9Change (%) -77.2% 369.7% -53.0% -56.3% -2.9% -7.3% -9.2% 25.3% 7.0%EBITDA adjusted -33.5 26.2 12.1 24.7 26.0 29.0 27.4 36.6 39.3EBITDA margin (%) -47.9% 8.0% 7.8% 36.6% 39.7% 47.8% 49.7% 53.0% 53.2%EBIT adjusted -196.5 32.2 -34.5 -18.0 7.9 12.3 14.1 17.0 18.8EBIT margin (%) -280.8% 9.8% -22.3% -26.7% 12.1% 20.3% 25.6% 24.6% 25.4%Net financial -39.1 -30.8 45.6 -18.0 -22.4 -19.8 -20.7 -16.8 -22.3Associates -3.8 -13.5 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2Non recurring items na na na na na na na na naPretax profit -235.5 1.4 11.1 -36.0 -14.5 -7.5 -6.6 0.2 -3.5Income tax 11.9 0.4 -4.5 -0.9 -1.0 -0.5 -0.5 -0.5 -0.5Tax rate (%) 5.1% -31.9% 40.3% -2.4% -6.9% -6.7% -7.6% 222.7% -14.3%Minorities 0.8 0.3 0.9 0.7 0.7 0.8 0.8 0.9 0.9Reported net earnings -243.3 -20.8 5.9 -38.5 -16.4 -8.4 -7.4 -0.6 -4.3Adjustments 109.3 -1.6 15.1 30.2 2.7 1.9 0.0 0.0 0.0Adjusted net earnings (group) -134.0 -22.4 21.0 -8.4 -13.7 -6.5 -7.4 -0.6 -4.3Change (%) -chg +chg +chg -chg -chg +chg -chg +chg -chg

Cash flow statement (EURm) 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016ENet earnings -244.1 -21.1 5.0 -39.2 -17.1 -9.2 -8.2 -1.5 -5.2D&A 156.7 18.7 36.8 43.3 18.1 16.7 13.3 19.6 20.5Change in TWC -129.2 54.3 33.9 -4.7 5.7 0.4 2.5 -1.6 0.3Others 68.9 57.4 55.3 17.4 12.6 11.0 6.0 2.0 2.0Operating cash flow -147.7 109.2 131.0 16.8 19.4 19.2 13.7 18.7 17.9Capex -46.4 -27.9 -38.2 -26.9 -19.7 -17.0 -129.8 -21.8 -168.2Free cash flow -194.1 81.4 92.8 -10.1 -0.2 2.2 -116.1 -3.1 -150.3Disposals 3.0 3.4 1.7 2.3 2.2 0.0 0.0 0.0 0.0Financial investments -64.6 -20.0 -15.8 0.2 0.0 0.0 0.0 0.0 0.0Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Equity issued net of buy back 2.0 0.0 56.3 0.0 0.0 0.0 0.0 0.0 0.0Others -2.2 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0Net debt change 275.2 -102.1 -158.6 6.6 -2.0 -2.2 116.1 3.1 150.3

Balance sheet (EURm) 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016EIntangible assets 172.2 179.3 161.4 121.0 119.2 112.7 108.7 106.7 104.7Property, plant & equipment 341.7 311.9 278.8 295.7 296.4 296.6 413.2 415.4 563.0Financial assets 41.7 28.9 51.6 23.9 12.2 7.5 5.3 5.2 4.9Cash and cash equivalents 90.8 94.2 110.4 87.8 91.8 95.9 63.5 62.2 20.9Current and other assets 272.3 129.5 89.5 88.8 86.3 80.0 72.6 91.0 97.3Total shareholders' equity 169.8 148.7 220.0 195.0 177.8 168.6 160.4 158.9 153.7Pension provisions 0.1 0.0 0.1 0.2 0.2 0.2 0.2 0.2 0.2Financial liabilities 589.2 490.5 348.1 332.1 334.1 336.1 419.7 421.5 530.6Other liabilities & provisions 159.6 104.6 123.5 90.1 93.8 87.9 83.0 99.8 106.4 Net debt 498.4 396.3 237.7 244.2 242.3 240.1 356.2 359.3 509.7Capital employed 665.6 567.1 486.0 461.7 454.9 448.2 558.3 560.1 705.4

Ratios 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016ECapex/D&A (%) 28.5% -468.1% 82.0% 63.0% 108.3% 101.6% 977.6% 111.2% 819.0%ROE (%) -46.7% -13.9% 11.3% -4.0% -7.2% -3.7% -4.4% -0.4% -2.6%ROCE (%) -32.7% 5.2% -6.5% -3.8% 1.7% 2.7% 2.8% 3.0% 3.0%Net debt/EBITDA (%) na 1,511.1% 1,961.8% 988.8% 930.4% 827.1% 1,299.3% 981.0% 1,295.8%Net debt/equity (%) 293.6% 266.6% 108.0% 125.3% 136.2% 142.4% 222.1% 226.1% 331.5%

Per share (EUR) 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016EEPS adjusted -9.60 -0.91 0.10 -0.38 -0.16 -0.08 -0.07 -0.01 -0.04EPS reported -12.24 -1.04 0.11 -0.60 -0.25 -0.13 -0.07 -0.01 -0.04CFPS -0.73 2.40 0.13 0.21 0.14 0.19 0.11 0.20 0.17BVPS 6.76 6.57 3.69 1.98 1.81 1.72 1.65 1.64 1.60DPS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Year-end number of shares (m) 19.9 19.9 55.1 63.8 64.9 64.9 100.4 100.4 100.4

Valuation 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016EP/E ns ns 42.5 ns ns ns ns ns nsP/BV 4.3 1.0 1.1 1.2 0.9 0.9 1.0 1.0 1.0P/CF na 2.8 32.5 10.7 11.9 8.6 14.4 7.9 9.2Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%FCF yield -33.3% 60.0% 40.7% -7.0% -0.2% 2.1% -71.8% -1.9% -93.0%EV/sales 15.1 1.6 2.9 5.6 5.1 5.5 9.3 7.4 9.0EV/EBITDA na 19.8 37.4 15.3 12.9 11.6 18.6 14.0 16.8EV/EBIT na 16.1 na na 42.5 27.3 36.1 30.1 35.3EV/capital employed 1.8 0.8 0.9 0.8 0.7 0.7 1.0 0.9 1.0



Contents

Rewired

Key financials 2

Summing up: why the stock is a Buy 4

Valuation 6 Summary 6

DCF 6

Peers 7

Transactions in the sector: EUR2.9 per share

Drivers and catalysts 10 Results recovery expected to be confirmed in 2012 10

Pipeline of projects, good visibility on portfolio growth 11

More offensive development strategy 12

Constructing the forecast 14 Electricity generation for own account 14

Management for third parties and other activities 15

Only the beginning of the margin recovery 15

Risk to our rating 16

Additional insights: a tough market context 18 Booming market but recent slowdown 18

Still some market potential 19

Competition 25

Wind power: hot it works 25

Company background: poor track record 28 199-2008: development phase 28

2009-2012: restructuring phase 28

Glossary 32

Appendix: scenarios by country 33

Research ratings and important disclosures 39

Legal and disclosure information 40


Summing up: why the stock is a Buy Theolia was created in 1999, shortly after the signing of the Kyoto protocol, and was listed in 2002. The aim was to create a company able to develop turnkey projects to generate electricity based on renewable energies (wind, solar, biomass, etc.). To accelerate its development during 2005-08, the company spent close to EUR240m in acquisitions financed through capital increases and convertible bonds issuance. After a succession of acquisitions and partnerships, at the end of 2008 Theolia had 2,580MW of projects in the pipeline and an installed capacity of 671MW (o/w 360MW owned by the company).

Probably aware of the market slowdown in terms of new capacities, in 2008 management decided to change its business model to become a producer of electricity based on wind energy (ensure significant recurring revenues), and stopped the sale of wind farms. However, to begin its new projects Theolia needed cash, which was hard to find amid the financial crisis of 2008-09. Therefore, it was forced to reorganise its activities, operating structure and financing.

As of 2008, Marc Van’t Noordende (who had replaced the founder of the company Jean-Marie Santander) oversaw the first phase of restructurings. The company initiated the disposal or the stop of activities not linked to wind energy (organic fuel, water, etc.), the exit from non-core countries (eastern Europe, Greece, Spain, etc.), restarted wind farm sales (to generate immediate cash) and launched a cost-cutting programme (targeting EUR4m in cost savings).

The second step, managed by Fady Khallouf, the current CEO, continued the cost-cutting programme (EUR10m expected to be reached in 2012) and targeted a clean-up of the company’s base: 1) focus on sales of electricity instead of sales of wind farms; 2) rationalisation of the company to become an integrated industrial player; 3) change in accounting method to better reflect its specific business profile; 4) depreciation of GW and assets; 5) renegotiation of convertible bond terms; 6) refinancing of debt, and 7) raise of funds following convertible bonds refinancing.

Theolia is now a fully integrated and pure player in the European wind industry. The company has a good track record in wind power projects from development consulting to turnkey solutions, and also in operating plants. Theolia operated 930MW, of which close to 300MW for its own account and 630MW for third parties, in Germany (55% of sales), France (28%), Morocco (10% of sales) and Italy (7%). Moreover, the company had a pipeline of more than 1,000MW of projects (repowering in Morocco included).

At the end of 2012, Theolia is expected to have stabilised its activity (EUR65.5m in sales expected, -2.9% YOY, o/w 3/4 in sales of electricity for own account, coming from EUR294m in 2009, o/w 17% for own account), continued its margin improvement (40.5% expected in reported EBITDA margin, from 2% in 2010), restored its financial health (debt corresponding to projects financing if we consider conversion of bonds and with long maturity) and paved the way for more aggressive development (creation of TUIC to invest in future projects, on-going significant development in Morocco, etc.).

We were therefore not surprised by the announcement of the acquisition of the control of Breeze Two Energy, who owns 337 MW in Germany and in France. It will more than double Theolia’s own capacity (stake at 70% ie fully consolidated), and add at least EUR47m in sales on full year base (+70% compared with our estimate for 2012). In light of the maturity of the wind turbines (commissioned between 2006 and 2008) and the price paid (less than 1x installed MW versus 1.4x on the market), it is highly likely that the operating performance of the farms is not yet up to company standards.

2005-08: the golden age

2008-12: restructuring phase

2012: end of the restructuring

New development phase: promising deal


In a first step, the consolidation of Breeze Two Energy could therefore have a negative impact on margins for own account division (positive impact on the consolidated margin as Theolia’s other activities have lower margins). After synergies (higher sales thanks to a better use of wind turbines and lower opex), farms’ performance is expected to be improved, which could boost sales and results growth in the years ahead. Pending more details on the Breeze Two Energy deal, we have not yet integrated the operation into our scenario and our valuation approach (+EUR0.5 estimated on our target price, DCF approach).

As it is hard to foresee acquisitions or disposals, we have based our scenario for project delivery on the existing portfolio: repowering of Morocco on a 2015 horizon (closure of site in 2014) and mainly deliveries in Italy and France over 2015-20. Moreover, thanks to German farms, the company also has bright prospects in repowering projects (expected as of 2019-20). Therefore, we expect a decline in sales for 2013 and 2014, offset by continuing margin improvement and a decline in asset write-offs in terms of results. A pick-up in sales and results is expected for 2015 in parallel with the delivery of projects. As wind farm projects are based on tariffs guaranteed for 15-20 years, the rebound is expected to be durable.

Successful debt restructuring and H1 2012 results have sparked the share price rebound, which is expected to continue in parallel with the confirmation of the recovery and a more offensive development strategy. Therefore, we initiate coverage on the stock with a Buy rating and EUR2.4 TP (a combination of transactions in the sector and DCF methods).

Cautious scenario: consolidation expected for 2013 2014, acceleration in results growth expected as of 2015

New company profile not yet priced in


Valuation

Summary Based on a DCF model and transactions approach, we obtain a target price of EUR2.4, implying 50% upside from current share price.

Table 1: Valuation approach EUR per shareDCF 2.0Transactions 2.9Average 2.4Source: Kepler Capital Markets

DCF In light of its project portfolio in France, Italy and Morocco, Theolia is set to enter a new investment phase in 2014, which is expected to weigh on FCF generation for at least the next five years. Moreover, new growth drivers are expected to come from repowering projects, thanks to its German portfolio as of 2019.

These wind farms could generate cash over the length of their life (around 20 years) with relatively good visibility, as tariffs are guaranteed over the 15-20 years following delivery of the project (depending on the country). We therefore see it as more appropriate to base our DCF approach on a 20-year period. For details of our sales and results forecasts see Constructing the forecast (page 14) and the appendix (page 35). We have based our scenario on the following assumptions:

• Discount rate at 7.0% (low risk thanks to guarantee on tariffs). • No significant change in WCR. • EUR5m in recurring capex a year. • No disposal and no acquisition of assets. • Valuation fully diluted, ie bonds converted on the basis of 4.32 new shares for

one bond.

Table 2: Summary of our assumptions EURm 2013 2014 2015 2016 2017 2018 2019 2020 (…) 2030 2031 2032 2033 2034Sales 60.7 55.2 69.1 73.9 74.0 110.9 110.8 116.5 122.3 118.6 120.1 123.6 124.3Growth -7.3% -9.2% 25.3% 7.0% 0.0% 49.9% -0.1% 5.1% -4.8% -3.0% 1.3% 2.9% 0.6%EBITDA 29.0 27.4 36.7 39.3 39.2 71.8 71.7 76.6 83.8 80.9 82.4 85.5 86.1EBITDA margin 47.8% 49.7% 53.1% 53.2% 53.0% 64.7% 64.7% 65.7% 68.6% 68.2% 68.6% 69.2% 69.3%Amortization 16.7 13.3 19.6 20.5 29.1 37.7 38.9 40.5 36.2 35.4 37.1 36.1 36.1% of sales 27.5% 24.1% 28.4% 27.8% 39.3% 34.0% 35.1% 34.8% 29.6% 29.8% 30.9% 29.2% 29.0%EBIT 12.3 14.1 17.1 18.8 10.1 34.1 32.8 36.0 47.7 45.6 45.2 49.4 50.0EBIT margin 20.3% 25.6% 24.7% 25.4% 16.3% 34.4% 33.1% 34.3% 43.1% 42.6% 41.7% 44.1% 44.3%Tax -4.1 -4.7 -5.6 -6.2 -3.3 -11.2 -10.8 -11.9 -15.7 -15.0 -14.9 -16.3 -16.5Tax rate 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0%Change in WCR 0.4 2.5 -1.6 0.3 0.0 -1.1 0.0 -0.8 0.1 0.8 -0.1 0.1 0.1

Investments -17.0 -129.8 -21.8 -168.2 -169.4 -25.7 -34.1 -5.0 -27.1 -30.4 -22.1 -9.0 -5.0% sales 28.0% 235.3% 31.5% 227.5% 229.0% 23.2% 30.8% 4.3% 22.2% 25.6% 18.4% 7.3% 4.0%Operating capex -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0 -5.0Construction of new farms -12.0 -124.8 -16.8 -163.2 -164.4 -20.7 -29.1 0.0 -22.1 -25.4 -17.1 -4.0 0.0Free Cash flows 8.4 -104.6 7.6 -134.8 -133.5 33.8 26.7 58.8 41.2 36.3 45.3 60.3 64.7Growth -1343% -107% -1872% -1% -125% -21% 120% -37% -12% 25% 33% 7%Discounted FCF 7.9 -91.4 6.2 -102.5 -94.8 22.4 16.6 34.0 12.0 9.9 11.5 14.3 14.3Sum of FCF 12.4 Terminal Value 302.1 Infinite growth 2.0% Wacc 7.0% Beta 1.8 Risk premium 4.5% Risk Free rate 2.5% Enterprise value 322.6 Net Debt excl convertible bonds 138.4 Minorities -3.6 Equity method 9.2 Equity value 196.9 Nb of share fully diluted 100.4 Implied fair value (EUR) 2.0 Source: Kepler Capital Markets


Table 3: Sensitivity table Wacc 6.0% 6.5% 7.0% 7.5% 8.0%

Infin

ite

Gro

wth

1.0% 3.0 2.2 1.5 1.0 0.5 1.5% 3.4 2.5 1.8 1.2 0.7 2.0% 3.9 2.9 2.0 1.4 0.9 2.5% 4.6 3.3 2.4 1.6 1.0 3.0% 5.5 3.9 2.8 1.9 1.3


Through our DCF approach, we obtain a valuation of EUR2.0 per share.

Peers It is hard to find a relevant sample of peers for analysis. There is little consensus data available for small companies and performances are so varied (portfolio of projects, margin, leverage, etc.) that it is difficult to use multiples in our valuation approach.

For bigger players, multiples are more stable. However, in light of the relatively low margins and erratic track record, it would be hard to apply comparable multiples to assess Theolia’s prospects. Therefore, we have decided not to use a peer analysis in our valuation.

Table 4: Peer sample Country Price (EUR) Market Cap

(EURm) Sales 2011

(EURm) EBITDA margin

2011 (%) EBIT margin

2011 (%) Net margin

2011 (%) Gearing 2011

(%)Theolia France 1.6 103 68 36.6 Ns Ns 125Small players Greentech Energy Denmark 1.3 134 45 37.8 13.7 2.1 48PNE wind Germany 2.8 126 100 12.3 12.0 1.3 13Alerion Clean power Italy 4.0 174 63 61.3 16.3 9.0 219Aerowatt* France 17.8 35 21 62.0 27.1 -0.9 439Big players Falck Renewables Italy 1.0 302 246 53.6 31.4 8.1 174Edp Renewables Portugal 4.0 3,467 1,086 74.0 35.8 12.3 79Enel Green Power Italy 1.4 7,240 2,500 14.5 38.0 16.8 59* Ongoing offer at EUR18 Sources: Kepler Capital Markets, Thomson Reuters

Table 5: Peer multiples P/E EV/ Sales EV/EBITDA EV/EBIT 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014Theolia na na na 5.1 5.5 9.2 12.9 11.5 18.5 38.4 27.1 35.9Small players Greentech Energy -170.0 267.1 173.1 32.5 27.2 30.4 8.8 8.4 8.5 12.9 13.0 13.2PNE Wind 7.3 5.1 4.6 1.4 1.2 1.2 7.3 7.9 8.5 15.4 12.1 14.0Alerion Clean Power 23.5 26.7 16.7 5.2 5.5 5.9 6.7 6.9 6.9 11.4 10.8 10.9Aerowatt 28.3 33.0 5.5 7.4 7.4 Nc 10.1 9.8 Nc 15.0 16.5 NcBig players Sechilienne 13.7 13.5 12.3 2.3 2.3 1.9 7.5 7.2 5.8 11.4 11.1 8.7Falck Renewables 11.5 10.3 9.1 3.8 4.0 3.9 6.7 7.1 6.7 12.7 11.5 10.8Edp Renewables 26.5 22.1 16.6 6.5 5.9 5.3 8.9 8.3 7.2 17.8 15.9 13.4Enel Green Power 16.1 14.5 12.3 4.6 4.3 4.1 7.4 6.9 6.4 11.9 10.9 10.0Source: Kepler Capital Markets

Transactions in the sector: EUR2.9 per share Transactions have been frequent in the green energy sector, whether it concerned isolated energy plants or full services companies. We have limited our analysis to deals in Europe for onshore wind power over the past two years.

The best indicator in our view is EV/MW (installed or in construction, depending on the deal). In our sample (Table 6), the average EV/MW ratio comes out at 1.46x. For Theolia, considering an installed base of close to 300MW (owned capacities), it implies an EV of EUR437m or an equity value of EUR289m or EUR2.9 per share (fully diluted).

Kepler C

apital Markets

Theolia 8

Table 6: Deals over past two years Date Target Description Country Bidder Seller EV

(EURm)Sales

(EURm)EBITDA (EURm)

EV/ Sales

EV/ EBITDA

Total MW

EV/ MW

Dec 2012 Iberdrola Renovables France Wind farms France GE (40%), Munich Re (40%), EDF Energies Nvls (20%)

Iberdrola 350 321 1.1

EDP Renovavei Portugal (49% Owner and operator of wind farms

Portugal China Three Gorges EDP Renovaveis 991 138.6 110.7 7.2 9.0 644 1.5

GDF Suez canadian renewable generation portfolio (40%)

Wind farms (660 MW) and solar plants

Canada Mitsui & Co GDF Suez 1,500 1.5

Wind farm Julicher Land and Iberdrola Renovables Deutschland

Owner and operator of wind farms

Germany MVV Energie Iberdrola 53 126 0.4

IP Maestrale Investments (80) Operating of wind farms Italy ERG GDF Suez 859 636 1.4 Oct 2012 RP Global Holding (49.99%) Wind farms Poland Marguerite Fund RP Global Holding 103 - Deutsche Bucht Construction of wind farms Germany Windreich 210 - Sep. 2012

Starke Wind Polska Development, construction and operation of wind farms

Poland EDF Energies Nouvelles

Boreas Wind farm Greussen (71.4%), Windkraft Sohland (74.2%) and Parco Eolico Monte Vitalba (85%)

Wind farms Germany and Italy

Capital stage (private equity) European Energy 7 34

Aug 2012 Tir Mostyn & Foel Goch, Scout Moor, Bagmoor

Wind farms UK Meag Munich Ergo AM HgCapital Renewable Power Partners Fund

200 102 2.0

Wind Towers Limited (40.05%) Generation of electricity UK Scottish & Southern Energy Marsh Wind Technology - Aerowatt (65.25%) Owner and operator of wind

farms and solar power plants France JMB Energie Group Omnes Capital; Viveris Mgt;

Demeter Partners 37 27.5 13.4 1.3 2.8 113 0.3

Jul 2012 Umwelt Windrad UWR Wind farm operation Germany GGE Finans Synerco 8 - Eight wind farms Wind farms France Groupe E SA; EOS Holding; SI-

REN 120 88 1.4

Jun 2012 Malpica (35%) Wind farms Spain Elecnor Enel Green Power 17 - AES Corporation (St. Patrick wind

farm); InnoVent (Minority Stake) Producer of wind power France Boralex Europe AES Corporation 34 35 1.0

Bandalera and Rodera Alta wind Farms Wind farms Spain Leading swiss renewables Capital Riesgo Global 70 - May 2012 Galata Wind Enerji; Akdeniz Elektrik

Uretim Operator of wind farms Turkey Dogan Enerji Private investors 226 126 1.8

Broadview Energy 3 wind farms UK Infinis Wind Broadview Energy 25 - Sistemas Energeticos Mas Garullo

(27% Stake) Production of electricity from

wind farms Spain Iberdrola Renovables Enel Green Power Espana -

Sistemas Energeticos La Muela, S.A. (30% Stake)

Production of electricity from wind farms

Spain Iberdrola Renovables Enel Green Power Espana -

GW Energi Operator of wind farms and turbines

Denmark GWE Holding 37

Apr 2012 Cottbuser Halde Wind farm Germany Epuron Green Wind Energy 42 28 1.5 Bardy Wind Farm Wind farm Poland Grupa Energetyczna Enea Vestas Wind Systems;

Equiventus Capital 50 -

Scan Energy Designing, developing, financing and selling

renewable energy projects

Denmark Peak Boys Renewable Energy Invest; Thorsager Invest

350 -

Fersa Energias Renovables Renewable energy generation (group of companies)

Spain Greentech Energy Systems 287 43.0 29.9 6.7 9.6 700 0.4

Vindmoller Owner and operator of wind turbines

Denmark European Wind Investment Essex Invest -

Mar 2012 Img - Energias Electricity from renewable power

Portugal WTG Corporation Imatosgil Invest 12 -

Feb 2012 Raiffeisen Environment & Energy Wind farms Bulgaria LUKErg Renew Raiffeisen 39 40 1.0 Jan 2012 Freenergy (60.17%) Operating wind farms Estonia Vardar Eurus - AAG Holding (Wind farm in Pottelsdorf) Wind farm Austria EVN AAG Holding - Dec 2011 Alto do Seixal and Les Forques Wind farms Spain Gas Natural Fenosa Gamesa 64 42 1.5 Sepe Du Parc Eoilen De Nelausa and

d'Aussac Vadalle Wind farms Spain Gamesa Allianz

Serra do Moncoso Cambas (51%) Wind farm Spain Enel Green Power ACS 25 - Explotaciones Eolicas de Aldehuelas

(47.5%) Wind farm operator Spain Agrupacio Energias Renovables 47 -

Holleben and Bippen Wind farms Germany BKW FMB Energie Wpd 53 - Renovalia Energy (wind assets) Operation and development of

wind farms Spain First Reserve Renovalia Energy 112 300 0.4

Source: Mergermarket

Kepler C

apital Markets

Theolia 9

Table 7: Deals over past two years (continued) Date Target Description Country Bidder Seller EV

(EURm)Sales

(EURm)EBITDA (EURm)

EV/ Sales

EV/ EBITDA

Total MW

EV/ MW

Nov 2011 Wind power business of Busan Mutual Wind power Germany Vattenfall Europe Windkraft Busan Mutual Savings Bank 81 0 - Bottenviken Vind Owner and operator of wind

power farm Sweden Kalix Vindkraft Swelandia International 0 -

Oct 2011 Balabanli Wind Energy Electricity Generation

Wind power company Turkey Borusan EnBW Energy RES Anatolia 0 -

Eolia Renovables (wind farms in France and in Poland)

Operating wind farms France and Poland

Impax Am Eolia Renovables de Inversiones

100

European Energy (51%) Wind farm Bulgaria Alerion Energie Rinnovabili European Energy 18 12 1.5 Martifer Renewables Wind farms Poland Inter IKEA Systems Martifer Renewables 87 28 3.1 Sept 11 Plana De Jarreta (40%); La Carracha

(40%) Wind farms Spain Renerco Renewable Energy Royal Dutch Shell 99 -

Aug 2011 Ecowind Handels und Wartungs (90%) Planning and construction of wind power plants

Austria BayWa AAG Holding 5

Nordkraft Vind (50%) Productor of wind power Norway Nordkraft Produksjon DONG Energy 37 32 1.2 ACS (11 wind farms) Wind farms Spain Bridgepoint ACS 636 443 1.4 Renewable Energy System (Wadlow

project 85%) Wind farms UK Barclays Infrastructure Renewable Energy System 26

Jul 2011 Nuon Belgium Producer of renewable energy Belgium Eni Nuon Energy 157 - Ventotec: Luederstorf-Parstein wind

Farm Wind farm Germany HelveticWind Deutschland Ventotec 23 -

Proventus Wind Power (33.3%) Owner and operator of wind farms

Sweden Folksam Proventus Wind Power 71

Gamesa: Conesa II and Savalla wind farms

Wind farms Spain Iberdrola Renovables Gamesa 50 -

ACS wind farms Winf farms Spain Gas Natural Fenosa ACS 100 96 1.0 Jun 2011 Arctic Wind Operation of wind farms Norway Finnmark Kraft Statoil 320 Sarepta Energi (50%) Develops, owns, and operates

wind power plants Norway TronderEnergi Kraft Statoil 192 -

IVPC Power 3 Operating of five wind farms Italy ERG Italian Vento Power 235 112 2.1 Infingen Energy (German assets) Wind farms Germany European Sustainable Power Fund Infingen Energy 155 129 1.2 Gamesa: Energia: Catalonian wind

farm Wind farm Spain Greentech Energy Systems Gamesa 56 30 1.9

Sameole Owner and operator of wind farms

France IWB Renewable Smafi-Unvest 70

May 2011 Projet Green and Beaufort 5 wind farms Germany EOS Holding 199 164 1.2 Freudenberg Brieske Management +

Uelitz + Fuchsberg Wind farms Germany EOS Wind Deutschland Scan Energy 91 -

Eviag Producing and developing wind power plants

Germany Fuhrlaender -

Greentech Energy Systems (81.28%) Development, construction, and operation of wind energy

projects

Denmark GWM Renewable Energy 349 14.6 3.0 23.8 115.9 960 0.4

Apr 2011 O2 Vind Construction and sale of wind farms

Sweden Anemoi Proventus Wind Power -

Power International (Hohlenhole wind farm)

Wind farm Germany Meinl Bank Power International 47 24 2.0

Heliasetym Owner and operator of wind farms

Spain Grupo ENERSIS 8 -

Slieve Divena, Dalswinton and Minsca windfarms

Wind farms UK Infinis Scottish & Southern Energy 328 17.8 14.7 18.4 22.4 97 3.4

EDF Energie Nouvelles (50%) Development, construction, and operation of electricity

power plants

France EDF Listed company 6,657 1,573 390.8 4.2 17.0

Mar 2011 Generaciones Especiales (20% Stake) Developer of wind power plants

Spain EDP Renovaveis Sociedad de Promocion y Participacion

1155 5,650 0.2

Iberdrola Renovables (20%) Development, construction, and operation of electricity

Spain Iberdrola Listed company 12,914 2,241 1,456 5.8 8.9

Feb 2011 Gamesa Energia Wind farm Spain Iberdrola Renovables Gamesa Energia 48 - Jan 2011 Rheidol wind farm Wind farm UK Infinis E.ON 99 - Gamesa Corporacion Wind farm Poland RWE Innogy Cogen; HEAG

Suedhessische Energie Gamesa Corporacion 32 -

Source: Mergermarket


Drivers and catalysts

Results recovery expected to be confirmed in 2012 Sales out on 15 February: consolidation of the activity Due to the disposal of wind farms to TUIC (Theolia Utilities Investment Company only owned at 40%), we expect a decline of capacity in owned plants (-3.9% expected on average for Q4 compared with +2.3% at the end of September) and a 4.2% increase in capacity managed for third parties. Adding in a neutral impact for weather (after very favourable conditions in Q1 and less favourable for Q2 and Q3 notably in Germany), we expect sales of EUR14.8m for the own account division in Q4 and EUR1.9m in the management for third parties.

Due to the high base offered by Q4 2011 (4MW sold in Germany and 12MW in France), it is highly likely that the development, construction and sales division will post a drop in sales, weighing on the company’s performance in Q4. We expect Q4 sales of EUR17.9m, down 35% YOY. All in all, our annual sales forecast for 2012 comes out at EUR65.5m, down 2.9%, mainly due to fewer wind farm disposals, as Theolia did not need cash to finance projects (first success of the restructuring plan implemented in 2010).

Table 8: Q4 2012 sales forecasts Q1 11 Q2 11 Q3 11 9M 11 Q4 11 2011 Q1 12 Q2 12 Q3 12 9M 12 Q4 12E 2012EElectricity for own account 11.2 10.6 9.9 31.7 15.4 47.1 14.7 11.6 9.2 35.5 14.8 50.3Change -13.5% 88.4% 30.7% 21.1% 0.0% 25.5% 31.1% 9.6% -7.2% 12.0% -3.9% 6.8% Management for third parties 1.6 1.4 1.3 4.3 1.9 6.2 2.1 1.4 1.1 4.5 1.9 6.5Change 23.3% 10.9% 25.7% 19.7% 42.1% 25.8% 27.9% 0.1% -18.1% 4.9% 1.4% 3.8% Development, construction, sale 0.8 0.9 0.9 2.6 9.9 12.6 2.9 2.4 1.0 6.3 1.0 7.3Change -88.1% -98.7% -92.6% -97.1% 0.0% -88.6% 261.2% 158.4% 13.6% 140.9% -90.1% -41.9% Non wind activities 0.2 0.6 0.5 1.4 0.2 1.6 0.3 0.5 0.5 1.2 0.2 1.4Change 23.2% 8.8% 6.3% 10.1% 0.0% 11.5% 2.5% -20.1% -3.0% -9.6% 0.0% -8.4% Total sales 13.9 13.5 12.6 40.0 27.5 67.5 19.9 15.9 11.8 47.6 17.9 65.5Change -34.5% -82.6% -40.0% -66.7% -20.3% -56.3% 43.4% 17.7% -6.7% 18.9% -34.7% -2.9%Source: Kepler Capital Markets

Results out in April: confirmation of margin recovery In light of the good start of the year (the EBITDA margin rose from 28% to 44% in H1, despite less favourable weather in H2), we think Theolia will continue to improve its margins significantly with close to 41% expected for FY 2012, +230bp YOY (Table 8).

The company will also benefit from lower goodwill amortisation (EUR0.8m expected after EUR28m in 2011, due to projects in Italy amid a decline in tariffs). EBIT is likely to turn positive, at EUR7.9m. Given its debt restructuring (non-recurring charges), financial charges are expected to increase in 2012, which could weigh on the net result: minus EUR15.6m expected restated for GW depreciation, versus minus EUR10.2m in 2011.


Table 9: 2012 results forecasts EURm H1-10 H2-10 2010 H1-11 H2-11 2011 H1-12 H2-12E 2012ESales 99.0 55.5 154.5 27.4 40.1 67.5 35.8 29.7 65.5Changes -5.6% 0.0% -47.5% -72.3% -27.8% -56.3% 30.8% -25.9% -2.9% EBITDA reported -1.4 4.9 3.4 7.6 18.2 25.8 15.9 10.6 26.5% of sales -1.5% 8.8% 2.2% 27.7% 45.5% 38.2% 44.4% 35.8% 40.5% EBIT -8.5 -26.0 -34.5 0.8 -18.8 -18.0 5.6 2.3 7.9% of sales -8.6% -46.9% -22.3% 2.8% -46.9% -26.7% 15.7% 7.6% 12.1% EBIT restated* -6.6 -13.1 -19.7 1.4 9.0 10.4 7.0 2.3 9.2% of sales -6.7% -23.5% -12.7% 5.0% 22.5% 15.4% 19.4% 7.6% 14.1% Financial charges -19.1 64.7 45.6 -6.7 -11.3 -18.0 -14.2 -8.1 -22.4 Taxes -0.1 -4.4 -4.5 0.3 -1.2 -0.9 -0.9 -0.1 -1.0 Net profit -28.0 22.4 5.9 -6.6 -59.9 -38.5 -9.9 -6.5 -16.4 NP before GW -26.4 45.3 18.9 -5.4 -4.8 -10.2 -9.1 -6.5 -15.6 FCF -5.8 9.1 3.3 -5.7 -4.5 -10.1 16.0 -16.2 -0.2 Net debt 375.8 237.7 237.7 231.0 244.2 244.2 239.1 242.3 242.3 Equity 119.0 220.0 220.0 231.0 195.0 195.0 184.7 177.8 177.8* Restated for non-operating charges and revenues (goodwill depreciation, gains on disposals, etc.) Source: Kepler Capital Markets

Pipeline of projects, good visibility on portfolio growth Its pipeline of projects of more than 1,000MW (Morocco included) could allow the company to double its current installed capacity of 904MW (owned and managed for third parties) on a 5-10 year horizon.

Table 10: Current pipeline of projects MW 2008 2009 2010 2011 2012E Probability to be delivered

(Kepler scenario)France 78 0 18 15 15 Delivered in December 2012Italy 51 27 0 10 10 Delivery in January 2013Germany 92 4 7 - - -India 25 13 - - - -In construction 247 44 25 25 25 100%France 57 33 27 18 18 Building expected for 2014-2015

and delivery for 2015-2016Italy 25 75 99 87 38 Morocco 100 100%Germany 5 6 - - - India 300 152 - - - -Brazil 105 - - - - -Obtained permits 491 266 126 105 156 100%France 352 62 144 186 160 50%Italy 254 171 165 132 128 50%Germany 38 27 35 4 4 50%Morocco - - - 200 200 100%Brazil 70 - - - - -Permits pending validation 713 260 344 522 492 70%France 348 270 178 173 132 25%Italy 90 90 90 144 144 25%Germany - 9 4 15 15 25%Brazil 23 - - - - -Central and Eastern Europe 80 - - - - -In Development 461 369 352 532 491 15%Total pipeline 1912 939 847 1,175 1,055 56%Source: Theolia

On a short-term view, only 10MW will be delivered in Italy in early 2013; other greenfield projects will not be implemented before 2014-15 and thus not delivered before 2015-16. However, Theolia is expected to benefit from a repowering project in Morocco (current capacity doubled on a 2015-16 horizon to 100MW) and is likely to resume its external growth strategy (sound financial health now restored).


More offensive development strategy After a period of operational and financial restructuring (2009-12), the company is now ready to re-launch a more offensive development strategy.

Repowering project For old plants (mainly in Germany in Theolia’s case), Theolia and other market players are expected to offer contract extensions, thanks to a repowering of the existing equipment allowing for an improvement in wind turbine performance (2x for the first generation of wind turbines). Fifteen to twenty new contracts are expected to be signed with new conditions (feed-in tariffs, financing, etc.). Repowering projects are expected to be led shorter than greenfield projects (less studies needed) and with low risks (good knowledge of wind conditions).

In specific cases, Theolia can decide to bring forward the end of contracts, allowing wind farm electricity generation to be boosted. In Morocco (the turbines put in place by EDF in 2000 are not really appropriate for local conditions), the existing 50MW will be replaced by new turbines and capacity doubled to 100MW. Theolia, which was the only shareholder, will have only 80% of the new entity, as the project is partly financed by ONE (the local electricity operator), but will remain the operator of the wind farm.

Penetrating new countries Management has announced its intention to find new growth drivers outside its current coverage (Germany, France Italy and Morocco). Theolia will focus on countries with wind power potential and that are renewable energy friendly (feed-in tariff systems or minimum price) and with sound financial health (durable incentive scheme) like Central or North European countries.

Developing management for third parties To have better absorption of its fixed cost structure and higher recurring revenues, Theolia would like to increase the management of wind farms for third parties (less than 10% of sales in 2011), not only for projects developed by the company but also for external projects.

Accelerating development through TUIC To ensure its development, Theolia has to find partners to finance its projects. To accelerate financing, the company launched a new investment structure in 2011 named Theolia Utilities Investment Company (TUIC). TUIC is owned by Theolia (40%), IWB (30% Industrielle Werke Basel, a Swiss producer and distributor of electricity) and Badenova (30%, a German company present in utilities sector). The target is to invest in wind projects in France, Germany and Italy for around 200MW (around EUR300m in investment targeted for EUR100m in equity). In the event of higher leverage (20-25%) TUIC could invest in more than 300MW.

Theolia already sold two wind farms in France to TUIC in 2011 (project) and 2012 (operational site) for a total of 33.4MW. When a wind farm is integrated into TUIC’s scope, electricity generation is proportionally consolidated (40%), megawatts installed are dispatched between owned capacities (40%) and third parties (60%), and Theolia consolidates 60% of management fees (operating and maintenance still managed by Theolia).

TUIC allows Theolia to continue to operate and control its wind turbines but with limited equity consumption thanks to a reduced stake at 40%, enabling it to develop more projects. Theolia’s future projects are expected to be sold to TUIC rather than to third parties, with the exception of some small wind farms in Germany, where the tax credit system offers investors attractive yields (attractive exit price for Theolia). However, in the event of an interesting offer, Theolia could decide to sell some of its farms or projects to investors.


Acquisition of projects: Breeze Two Energy To accelerate country penetration or its development programme, the company could seize external growth opportunities like the recent (closure on 1 February) deal with Breeze Two Energy. On 28 January, Theolia has announced its intention to acquire 70% of class C bonds, and the control of Breeze Two Energy (fully consolidated and 30% in minorities), a German company which owns and operates wind farms for 337MW: 311MW in Germany and 26MW in France. It will allow the company to double its installed base of own wind turbines.

In light of: 1) the maturity of wind turbines (commissioned between 2006 and 2008; recent fleet), 2) the sales unveiled for Breeze Two Energy (EUR47m in sales on a full-year basis compared with close to EUR51m for Theolia with lower capacities); 3) the transaction price (EV announced at EUR309m, less than 1x installed MW compared with 1.4x on the market), it is highly likely that margins are lower than Theolia’s performance. Short term, consolidation would have a negative impact on margin generated by own wind farms.

However, thanks to Theolia’s skills in Germany and France, it is highly likely that the performance of Breeze Two Energy will be quickly improved, with at least +10% in sales expected (wind turbines optimisation notably through maintenance operations) and EBITDA margin expected to reach company standards thanks to a decrease in opex.

Before synergies, we expect +72% on total sales for Theolia (based on 2012 estimates), +106% on EBITDA and a neutral impact on EPS. After synergies we expect the impact of +79% on reported sales, +140% on EBITDA. At cruising speed, Breeze Two Energy could add EUR35-EUR40m in FCF a year, EUR0.5 per share in our valuation by DCF approach (net of debt).

In terms of financing, as the entry price appeared relatively attractive, the net debt/EBITDA ratio will not be significantly affected. Theolia will therefore be able to finance future developments in its organic projects (promising pipeline).

Table 11: Impact of Breeze Two Energy consolidation (Kepler forecasts) EURm Theolia

2012E Breeze Two

Energy Consolidation on 12months

Change vs 2012E

After synergies

Change vs 2012E

Own account MW 298 337 635 113% 635 113% 0/w Germany 149 311 460 209% 460 209% 0/w France 84 26 110 31% 110 31%

Sales for own sites 50 47 97 93% 102 103% Total sales 66 47 113 72% 117 79% EBITDA for own account 36 28 64 78% 73 103% % of sales 72% 60% 66% 72% Total EBITDA 27 28 55 106% 64 140% % of sales 40% 60% 49% 54% Net debt 242 516 113% 516 113% Net debt / EBITDA 9.1 9.4 8.1 Source: Kepler Capital Markets

Potential tender offerings In Morocco, Theolia has already obtained the repowering of the existing wind farm with capacity doubled (from 50MW to 100MW) and a new programme of 200MW. With Theolia having signed a partnership with the local electricity operator (ONE owns 20% of the new entity), we are rather confident it can secure new contracts in this region.

In Brazil, Theolia still has some employees to prospect local projects. However, as the auction system does not include a minimum tariff, the company has not yet been a candidate to develop any wind farms, as the big operators have offered low prices that would not generate enough yield to make them attractive for Theolia.

Even though management has announced its intention to accelerate development by acquisition, as it is hard to foresee, we have based our scenario on the existing projects portfolio: no major growth in the fleet expected before 2015.


Constructing the forecast

Chart 1: 2011 sales by division Chart 2: 2011 sales by country

Electicity generation for own account,

70%Management for third

parties, 9%

Development, construction,

sale, 19%

Non wind activities, 2% France, 28%

Germany, 56%

Morocco, 6%Italy, 10%

Source: Theolia

Electricity generation for own account Electricity generation activity (two-thirds of expected sales in 2012) is influenced by the weather (hard to foresee) and changes in capacity (deliveries or disposals). For the coming years we have to integrate other factors: the extension of existing contracts, repowering of equipment, and/or a halt to operations.

We base our estimates on the following assumptions (details in appendix, page 34):

• For all regions: 1) EUR1.5m in capex to build 1MW until 2020 and EUR1.0m thereafter (capacity of turbines now almost fully optimised, efforts now focused on reducing construction costs) ; 2) investments made linearly two years before the delivery; 3) leverage at 75%; 4) ongoing projects sold to TUIC (owned at 40% by Theolia) excluding Morocco (owned at 80%), a target of 150-200MW for TUIC portfolio achieved thanks to current pipeline delivery based on our assumptions (Table 9); 5) 2,500 full-load hours for equipment; 6) management fees at 5% for farms sold to TUIC; 7) stable feed-in tariff policy; 8) retention rate of 90% for repowering projects;

• For Morocco: 1) No operation in 2014 due to works for repowering; 2) 12 months to re-build equipment; no electricity generation for 2014, and capacity doubled to 100MW on a 2015 horizon; 3) 80% owned by Theolia in the new structure (proportional integration for electricity generation); 4) 5% of electricity generated for third parties in management fees; 5) +10% in electricity generation per MW thanks to the repowering; 6) building of an additional 200MW expected to be started in 2016-17 and delivery in 2017-18; 7) no further gain of tender offering (see Table 32 for our assumption in terms of probability of capacity increase); 8) 20-year contracts; 9) electricity price warranty estimated at around EUR50 / MWh for the repowering contract and for additional 200MW.

• For Italy: 1) 10MW delivered in early 2013; 2) 38MW in 2016; 3) 64MW in 2018 (50% of 128MW); 4) 36MW in 2020 (25% of 144MW); 4) tariff at 70% of the base tariff (floor warranty) + degression rate.

• For France: 1) 18MW delivered in 2015; 2) 80MW in 2018 (50% of 160MW); 3) 33MW in 2020 (25% of 132MW); 4) degression rate on tariff at 1% until 2021 (like in Germany); 5) extension of contract at the end of the 15 years for five more, and then repowering.

• For Germany: 1) 2MW delivered in 2018; 2) 4MW on 2020; repowering started on 2020; 3) degression rate at 1% until 2021 and 0.5% thereafter.


Management for third parties and other activities • Non-wind activities: solar park in Germany, sales expected to be stable. • Development, construction and sale. As wind turbine disposals are hard to

predict, we only assume development and construction for third parties for the division; minimum sales of around EUR1.5m a year and fees linked to expected deliveries (2% of the third parties’ shares).

• Management for third parties: depending on: 1) change in capacity: projects expected to be sold to TUIC (only 40% of wind turbines booked in owned capacities), ramp-up of activity in Morocco (only owned at 80%), and no new external contracts; 2) weather: neutral impact (hard to foresee).

All in all, we expect a further sales decline in 2013 due the absence of farm disposal, and in 2014 due to the repowering project in Morocco (demolition planned for 2014 and new farm expected to be operational only in 2015), which is expected to be offset by a sales rebound in 2015 and 2016. With the acquisition of Two Breeze Energy, Theolia will add EUR47m to its sales with a potential of improvement which will allow the company to offset sales decline expected in the existing scope for 2013 and 2014 (not yet integrated into our scenario, pending details on the deal).

Table 12: Sales forecasts by division 2009pf* 2010 2011 2012E 2013E 2014E 2015E 2016EElectricity for own account 51.9 37.5 47.1 50.3 51.2 44.6 58.9 62.0Change -27.7% 25.5% 6.8% 1.8% -12.8% 31.9% 5.4% Management for third parties 4.3 5.0 6.2 6.5 6.5 6.5 6.8 7.1Change 0.0% 25.8% 3.8% 1.0% 0.0% 4.1% 3.5% Development, construction, sale 236.5 110.6 12.6 7.3 1.6 2.5 2.0 3.4Change -53.2% -88.6% -41.9% -78.6% 63.1% -21.2% 69.5% Non wind activities 1.7 1.4 1.6 1.4 1.4 1.4 1.4 1.4Change -17.5% 11.5% -8.4% 0.0% 0.0% 0.0% 0.0% Total sales 294.4 154.5 67.5 65.5 60.7 55.2 69.1 73.9Change -47.5% -56.3% -2.9% -7.3% -9.2% 25.3% 7.0%* Only management fees booked versus total electricity generation for third parties previously Source: Kepler Capital Markets

Only the beginning of the margin recovery As we do not factor in the sale of projects, management contract wins or significant development for third parties, we estimate that Theolia will stabilise its operating results and losses for those activities.

For owned farms, Theolia is expected to benefit from planned deliveries, a positive mix effect (higher margins for new projects) and economies of scale (eg, ramp-up in Italy and Morocco). Therefore, we expect a continuing margin rebound after the take-off that began in 2011 (Table 12).

Despite the expected sales decline, we see EBITDA being sustained in 2013 and 2014, with a significant rebound in 2015 in parallel with the pick-up in revenues (delivery of projects).

Table 13: EBITDA margin forecasts by division EURm 2009 pf* 2010 2011 2012E 2013E 2014E 2015E 2016EElectricity for own account 35.2 24.7 33.5 36.2 37.0 34.6 44.8 47.4% of sales 67.8% 65.9% 71.1% 72.0% 72.2% 77.4% 76.1% 76.4% Management for third parties -1.0 -12.9 0.9 1.9 2.0 2.0 2.0 2.1% of sales -22.5% -260.8% 14.4% 30.0% 30.0% 30.0% 30.0% 30.0% Development, construction, sale -6.7 -5.8 -7.5 -11.0 -9.0 -8.0 -8.5 -8.5% of sales -2.8% -5.2% -59.7% 0.0% 0.0% 0.0% 0.0% 0.0% Non wind activities 0.8 1.5 1.2 1.4 1.3 1.3 1.3 1.3% of sales 48.5% 107.0% 76.7% 95.0% 90.0% 90.0% 90.0% 90.0% Headquarter 17.1 -4.1 -2.3 -2.0 -2.2 -2.4 -3.0 -3.0 Total EBITDA reported 45.5 3.4 25.8 26.5 29.0 27.4 36.6 39.3% of sales 15.4% 2.2% 38.2% 40.5% 47.8% 49.7% 53.0% 53.2%*Only management fees booking for wind farms managed for third parties Source: Kepler Capital Markets


Following a restructuring phase, and as goodwill has been significantly reduced (less than EUR40m expected for 2012 versus a top at EUR145m in 2007), we forecast only EUR2-3m a year in asset depreciations (average assumption). EBIT is therefore expected to follow the EBITDA change. After a year penalised by debt restructuring (non-recurring financial charges), 2013 is expected to post a decline in financial charges. For the years to come, financial charges are expected to follow debt increases linked to project financing.

Table 14: Summary of our results forecasts EURm 2009 pf* 2010 2011 2012E 2013E 2014E 2015E 2016ESales 294.4 154.5 67.5 65.5 60.7 55.2 69.1 73.9Changes 0.0% -47.5% -56.3% -2.9% -7.3% -9.2% 25.3% 7.0% EBITDA reported 45.5 3.4 25.8 26.5 29.0 27.4 36.6 39.3% of sales 15.4% 2.2% 38.2% 40.5% 47.8% 49.7% 53.0% 53.2% EBIT 26.0 -34.5 -18.0 7.9 12.3 14.1 17.0 18.8% of sales 8.8% -22.3% -26.7% 12.1% 20.3% 25.6% 24.6% 25.4% EBIT restated** 23.4 -19.7 10.4 9.2 12.3 14.1 17.0 18.8% of sales 7.9% -12.7% 15.4% 14.1% 20.3% 25.6% 24.6% 25.4% Financial charges -30.8 45.6 -18.0 -22.4 -19.8 -20.7 -16.8 -22.3 Taxes 2.5 -4.5 -0.9 -1.0 -0.5 -0.5 -0.5 -0.5Tax rate 52.6% 40.3% -2.4% 33.0% 33.0% 33.0% 33.0% 33.0% Net profit -24.8 5.9 -38.5 -16.4 -8.4 -7.4 -0.6 -4.3 NP before GW -29.4 18.9 -10.2 -15.6 -8.4 -7.4 -0.6 -4.3 FCF 75.5 3.3 -10.1 -0.2 2.2 -116.1 -3.1 -150.3 Net debt 396.3 237.7 244.2 242.3 240.1 356.2 359.3 509.7 Equity 143.1 220.0 195.0 177.8 168.6 160.4 158.9 153.7*Only management fees booking for wind farms managed for third parties, ** Restated for non-operating charges and revenues (goodwill depreciation, gains on disposals, etc.) Source: Kepler Capital Markets

Given the pipeline of projects, it is highly likely that FCF will remain negative, implying a debt increase with a reported gearing above 350% in 2016E. However, as debt will correspond to wind farm financing (backed by tariff guaranty, and non-recourse financing for Theolia), it will not be a brake on the company’s development.

Risks to our rating Feed-in tariff or incentive scheme As wind power is uncompetitive in many regions (twice as expensive as nuclear power in France currently), in the event of termination of public subsidies (feed-in tariff, tax credit, etc.), projects would be affected. Players in the segment are therefore highly exposed to government decisions for their future projects. To decrease risks relative to incentive schemes, Theolia has decided to pursue projects in countries with a real strategy of developing renewable energies. The company stopped all its development in Greece and Spain in 2009, which was a rather good decision considering the current economic context and rigorous plans implemented by the governments there.

Interest rate exposure Restated for bonds (coupon at 2.7%), Theolia’s financial debt corresponds to project financing for around EUR230m (2012E). Each project has its own financing, based on a variable rate almost fully edged (close to 90% of debt in fixed rate post edging tools). The current fleet is therefore not really exposed to a change in the interest rate. However, an interest rate increase or lack of financing could hamper future development, as leverage remains relatively high in the sector: 70-80 of debt for 30-20 in equity.


Potential dilution Due to the likely conversion of bonds, the number of shares is expected to significantly grow before end-2014 or even before end-2013 (conversion ratio at 3.46 shares in 2014 vs. 4.32 for 2013): +54%, which we have integrated into our fully diluted EPS approach. Adding in stock options (out of the money, not integrated in our dilution calculation), the total creation of shares could reach close to 57%.

Table 15: Potential dilution (restated for consolidation of shares operated on July 2012) Number of shares EUR per shareShares at the end of 2012 64.89 Convertible bonds 35.5 Total stock options 1.2 2010-2011 0.07 >3.6 0.23 >5.0 0.15 >6.0 0.30 >7 0.40 >10Potential creation of shares 36.7 56.5%Source: Theolia

2010 stock options (1,500,000 or 750,000 restated for consolidation of shares) were attributed to Fady Khallouf and 2011 stock options (810,000 or 405,000) to managers. The target was to motivate managers to improve the company’s performance without an immediate impact on P&L. The company could attribute other stock options or free shares to its managers for the years ahead. In light of the relatively low weight of the attributions (less 2% of the capital) and the ambitious strike, we do not consider the plans as negative for shareholders.

Asset depreciation With goodwill at EUR40m (EUR145m in 2007), accounting for around 10% of assets, risks relative to the writedown of goodwill are now significantly lower (French and German assets are mainly the least risky). In terms of asset depreciation, all projects not yet connected to the grid are exposed to potential value change, which is intrinsic to the sector. In 2011, the change in tariff announced in Italy implied EUR6.1m depreciation for projects (in addition to the EUR21m goodwill write-off in Italy). Depreciations are hard to foresee and could have a significant impact on our results estimates but with no impact on cash generation.

Ongoing projects are booked in inventories, intangible assets or tangible assets depending on their maturity, and in or after EBITDA in the P&L. At the end of 2011, total assets not yet installed represented around EUR75m.

Table 16: Consolidation depending on project maturity Assets EURm P&LProjects pending permits Stocks 12.8 Gross profit impactedProjects with permits Intangible assets 31.6 EBIT impactedMorocco: concession contract Intangible assets Nc EBIT impactedProjects in construction Tangible assets 30.9 EBIT impactedInstalled park Tangible assets 255.7 EBIT impactedSource: Theolia


Additional insights: a tough market context

Booming market but recent slowdown Strong development since early 2000s Table 17: Annual growth rate for electricity production by energy source 2001-11 Energy source Solar 45.8%Wind 28.3%Biomass 7.5%Fossil 4.1%Geothermal 3.1%Hydraulic 3.1%Non-renewable waste 0.3%Nuclear -0.3%Marine energies -0.4%Source: Observ’ER

Despite a growing weight, renewable energies still represent less than 20% of the world’s electricity production. Of this, hydraulic still makes up the lion’s share with more than 80% of the electricity production from renewables energy sources.

Chart 3: Structure of electricity production in the world in 2011 Chart 4: Structure of electricity production from renewable energies

Geothermal, 0.3% Wind, 2.1%

Solar, 0.3%Hydraulic,

16.3%

Non-renewable

waste, 0.2%

Nuclear, 11.7%

Biomass, 1.3%

Fossil, 67.9%

Geothermal, 1.6% Wind, 10.3% Biomass,

6.2%Solar, 1.4%

Hydraulic, 80.5%

Source: Observ’ER

Growing awareness of the part played by carbon gas emissions in global warming resulted in the signature of the Kyoto Protocol in 1997, targeting a 3-5% reduction in the carbon emissions of industrialised countries by 2008-12 relative to 1990. This has resulted in the emergence of a “green business” sector with a ten-year golden age (Theolia created in 1999): booming market boosted by subsidies notably from European countries to accelerate the penetration rate of renewable energies in the utilities sectors.

Chart 5: Wind power evolution

0

50,000

100,000

150,000

200,000

250,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

World installed capacity (MW) New installed capacity (MW)

Source: World Wind Energy Report 2011

From 1998 to 2011, the installed capacity of wind power grew by 28% a year, with a peak reached in 1999 (+42%) and a low in 2011 (+20%). In terms of new installed capacity, after five years of strong growth (2005-09), 2010 and 2011 were almost flat versus 2009.


Slowdown over past two years Chart 6: Growth in new installed capacity

8%

45%

9%

18%

3%

35% 33% 31%36%

42%

-1%

6%

-10%

0%

10%

20%

30%

40%

50%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Growth in new installed capacity

Source: World Wind Energy Report 2011

New installed capacity continues to accelerate in emerging countries (China and India), but in mature countries market growth has slowed due to difficulties in financing projects following the 2009 financial crisis and cuts in European government subsidy programmes.

Table 18: New installed capacity in main countries (in blue countries where Theolia is present) 2009 (MW) 2010 (MW) Change 2011 (MW) ChangeChina 8,950 13,687 53% 17,292 26%US 9,922 5,573 -44% 6,653 19%India 1,270 2,319 83% 2,827 22%Germany 1,857 1,443 -22% 1,977 37%Canada 950 726 -24% 1,273 75%Spain 2,245 1,240 -45% 1,158 -7%Italy 1,119 948 -15% 1,090 15%France 1,036 1,320 27% 1,025 -22%Sweden 462 604 31% 754 25%UK 612 539 -12% 540 0%Source: Global Wind Power market Outlook, Make Consulting, Mars 2012

Due to Theolia’s exposure to Germany, France and Italy (73% of the projects in the pipeline at the end of 2008), the company has been deeply affected by the less favourable context in those countries.

Even though the market is less favourable, wind capacity is expected to continue to grow due to efforts still focused on carbon emission reduction and as production costs are expected to continue to decline. In parallel with grid parity (when the price for wind electricity will be equal or lower than the price of purchasing power from the electricity grid), renewable energy will be increasingly less dependent on tax credits or feed-in tariffs.

Still some market potential Short-term outlook: market still growing Even though the market is likely to be less booming, wind capacity is expected to continue to grow in every country in the coming years (Table 18). The hierarchy is not expected to change significantly: China first, followed by the US, and with Germany first in Europe.

Table 19: New installed capacity outlook (MW) 2011 2012E 2013E 2014E 2015E 2016EUS 6,653 9,700 2,500 3,370 4,340 5,472Canada 1,273 1,700 2,100 2,500 3,000 2,325Brasil 500 1,255 1,660 1,635 1,500 1,650Mexico 306 555 765 1010 1020 1050Other Latam 275 459 1161 1962 1836 1814Total Americas 9,007 13,669 8,186 10,477 11,696 12,311Germany 1,977 1,800 1,800 1,800 1,800 1,800Spain 1,158 1,200 100 200 500 700France 1,025 1,200 1,400 1,500 1,500 1,500UK 540 1,200 800 600 700 700Italy 1,090 950 800 800 800 800Turkey 421 600 600 700 800 1,000Sweden 754 1,000 1,100 800 800 700Other Europe 2,803 3,637 4,376 4,441 4,260 4,490Total Europe 9,768 11,587 10,976 10,841 11,160 11,690China 17,292 18,500 20,200 20,800 20,400 20,000India 2,827 2,100 2,400 2,600 2,800 3,000Other Asia Pacific 654 1,310 1,697 1,795 2,222 2,660Total Asia Pacific 20,773 21,910 24,297 25,195 25,422 25,660ROW (Africa and Middle East) 52 945 1,345 1,400 1,360 1,375Total 39,600 48,111 44,804 47,913 49,638 51,036Source: BTM consult ApS, rapport 2010


Focus on Europe According to the EWEA (European Wind Energy Association), by 2020, power capacity equivalent to 42% of the EU’s current capacity needs to be built to replace ageing power plants and meet the expected increase in demand. The commission has identified the overall needs for energy infrastructure at EUR200bn by 2020, including EUR140bn for electricity.

For renewable energies, in 2009 EU countries adopted a programme named triple 20 with targets to be met by 2020:

• Reduce gas emissions by at least 20% below 1990 levels. • At least 20% of gross final energy consumption will come from renewable energy

sources (12.5% in 2010). • Reduce primary energy use by 20% compared with projected levels (to be

achieved by improving energy efficiency).

Table 20: Share of renewable energy in gross final energy consumption (%) 2004 2005 2006 2007 2008 2009 2010 Target 2020EU (27 countries) 8.1 8.5 9 9.9 10.5 11.7 12.5 20Belgium 1.9 2.3 2.6 2.9 3.3 4.5 5.1 13Bulgaria 9.6 9.5 9.6 9.3 9.8 11.9 13.8 16Czech Republic 6.1 6.1 6.5 7.4 7.6 8.5 9.2 13Denmark 15.1 16.2 16.5 18 18.8 20.2 22.2 30Germany 5.1 5.9 6.9 9 9.1 9.5 11 18*Estonia 18.4 17.5 16.1 17.1 18.9 23 24.3 25Ireland 2.2 2.7 2.9 3.3 3.9 5.1 5.5 16Greece 6.9 7 7 8.1 8 8.1 9.2 18Spain 8.2 8.3 9 9.5 10.6 12.8 13.8 20France 9.3 9.5 9.6 10.2 11.3 12.3 12.9 23Italy 5.3 5.3 5.8 5.7 7.1 8.9 10.1 17Cyprus 2.4 2.4 2.5 3.1 4.1 4.6 4.8 13Latvia 32.8 32.3 31.1 29.6 29.8 34.3 32.6 40Lithuania 17.1 16.9 16.9 16.6 17.9 20 19.7 23Luxembourg 0.9 1.4 1.4 2.7 2.8 2.8 2.8 11Hungary 4.4 4.5 5.1 5.9 6.6 8.1 8.7 13Malta 0.1 0.1 0.2 0.2 0.2 0.2 0.4 10Netherlands 1.9 2.3 2.7 3.1 3.4 4.1 3.8 14Austria 22.9 25 26.6 28.9 29.2 31 30.1 34Poland 7 7 7 7 7.9 8.9 9.4 15Portugal 19.2 19.6 20.8 22 23 24.6 24.6 31Romania 16.8 17.6 17.1 18.3 20.3 22.4 23.4 24Slovenia 16.2 16 15.5 15.6 15.1 18.9 19.8 25Slovakia 6.1 6.2 6.6 8.2 8.4 10.4 9.8 14Finland 29.1 28.7 29.9 29.5 31.1 31.1 32.2 38Sweden 38.7 40.6 42.7 44.2 45.2 48.1 47.9 49United Kingdom 1.1 1.3 1.5 1.8 2.3 2.9 3.2 15Norway 58.4 60.1 60.6 60.5 62 65.1 61.1 67.5Croatia 15.2 14.1 13.8 12.4 12.2 13.2 14.6 20*Raised to 35% in 2011 Source: Eurostat

These targets promise a sustained incentive scheme from many states, which are expected to continue to sustain the market for renewable energies.

For wind energy, a study by ECN (Energy research Centre of the Netherlands, NREAP summary report) indicates that the EU’s wind energy capacity could reach 143.2GW by the end of 2015 (126.7GW onshore and 15.6GW offshore) and 213.6GW by the end of 2020 (168.8GW onshore and 44.2GW offshore), implying an annual installation of 13,300MW, above BTM forecasts (Table 18). Theolia’s main markets are expected to continue to invest in wind power installation.

Renewable energies increasingly more competitive Bigger and taller turbines, better aerodynamics and better controls have improved the electrical efficiency of wind turbines. In addition to a sharp decline in manufacturing, building and maintenance charges, the cost of energy for onshore wind turbines has fallen by 14% for every doubling of installed capacity between 1984 and 2011.

According to an EWEA (European Wind Energy Association) analysis, nuclear will cost EUR102/MWh in 2020 (current price at EUR42/MWh in France based on ageing fleet, and EUR90/MWh estimated on a 2020 horizon) – the average price across Europe taking into account the fact that nuclear plants take a long time to build, which pushes up the initial capital cost. Onshore wind energy, meanwhile, will see a price drop by 2020, falling to EUR58/MWh, and offshore wind will cost EUR75/MWh.


The future development of electricity generation based on renewable energies is likely to need increasingly fewer subsidies. As with the nuclear segment and hydraulic power, governments have been present at the start of the market and are expected to gradually become less involved. Moreover, following Fukushima, some countries have announced plans to decrease or stop electricity generation from nuclear power plants, which suggests the need to find new energy sources, and could accelerate the development of renewable energies. Germany, for instance, which ranks sixth in energy generation based on nuclear plants in the world (5% of the market), unveiled plans to close nuclear power plants by 2022, which offers rather bright prospects for alternative energies.

Growing generation of electricity Of course, electricity generation is influenced by climate factors. However, thanks to a growing wind turbine fleet and the increasing productivity of equipment, electricity generation from wind energy has posted steady growth for many years: +16% on average in Germany or +59% in France over 2000-11 (Table 20). In light of the pipeline of projects, and as installed capacities are not totally operational, generation of electricity is expected to continue to grow in the years ahead.

Table 21: Electricity generation by wind for top ten countries (in TWh) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 CAGRUSA 5.6 6.7 10.4 11.2 14.1 17.8 26.6 34.4 55.4 73.9 94.7 119.7 32%China 0.6 0.7 0.9 1.0 1.3 2.0 3.9 5.7 14.8 26.9 44.6 73.2 54%Germany 9.4 10.5 15.9 18.9 25.5 27.2 30.7 39.7 40.6 38.6 37.8 46.5 16%Spain 4.7 6.8 9.3 12.1 15.7 21.2 23.3 27.6 32.9 38.1 44.2 42.4 22%India 1.7 2.2 2.7 3.6 4.5 6.6 8.7 11.8 13.7 17.8 19.9 26.0 28%UK 0.9 1.0 1.3 1.3 1.9 2.9 4.2 5.3 7.1 9.3 10.2 15.5 29%France 0.1 0.1 0.3 0.4 0.6 1.0 2.2 4.1 5.7 7.9 10.0 12.2 59%Italy 0.6 1.2 1.4 1.5 1.8 2.3 3.0 4.0 4.9 6.5 9.1 10.1 30%Denmark 4.2 4.3 4.9 5.6 6.6 6.6 6.1 7.2 6.9 6.7 7.8 9.8 8%Portugal 0.2 0.3 0.4 0.5 0.8 1.8 2.9 4.0 5.8 7.6 9.2 9.1 44%Source: EIA (Energy information Association)

Market specifics France Nuclear power is the main energy source in France (79% of the production). The second source is renewable energy: water, with hydraulic power (9%). Despite strong growth over the past decade (+46% a year for solar and +28% for wind), electricity production from renewable energies remains low: 0.4% of total production for solar energy and 2.2% for wind energy. During his election campaign, François Hollande announced plans to cut the share of nuclear power to 50% by 2025 by boosting renewables.

Chart 7: Structure of electricity production in France in 2011 Chart 8: Structure of electricity production from renewable energies Marines energies,

0.1%Wind, 2.2%

Biomass, 0.9%

Hydraulic, 8.9%

Non-renewable

waste, 0.4%

Nuclear, 78.7%

Solar, 0.4% Fossil, 8.5%

Marines energies,

0.8% Wind, 17.5%

Biomass, 7.0%

Solar, 2.9%

Hydraulic, 71.8%

Source: Observ’ER

The French government has set a target of 25GW of wind power, including 6GW offshore, to conform to the EU Renewables Directive, which requires France to meet 23% of final energy demand with renewable sources by 2020. Production of 25GW of wind energy would produce 55TWh every year, thereby accounting for 10% of the country’s total electricity consumption. France has the second-largest wind potential in Europe, and potential locations are well distributed across the country.

The 25,000W targeted by 2020 implies 16% growth in installed capacity a year; of which +13% for onshore farms. In terms of electricity generation, it implies annual growth of more than 17% (o/w +13% for onshore production).


Chart 9: Share of renewable energy in final energy consumption (F) Chart 10: Wind power installed capacity (F)

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010

2020 target: 23%

%

0

5,000

10,000

15,000

20,000

25,000

2004 2005 2006 2007 2008 2009 2010 2011

2020 target: 25,000MW

Source: Eurostat, Source: World Wind Energy Association

Feed-in tariffs were introduced in France in 2001. They were revised in 2006 and reconfirmed in 2008. For 2011, the tariff was EUR82/MWh for onshore installations and EUR200/MWh for offshore installations. This tariff will serve as the base for the first ten years. For the following five years the tariff will be adjusted depending on the turbine performance (no major impact expected on the final price).

The tariff is revised each year taking into account the general economic conditions (it was lowered in 2010 due to the economic context).

Table 22: Feed-in tariff in France EUR/MWh 2008 2009 2010 2011 2012Tariffs for the first 10 years of wind farms 83.6 86.1 81.6 81.9 84.7Source: Theolia

For the time being, feed-in tariffs can only be implemented for projects located in “ZDE” areas (areas for the development of wind power), and with a minimum of five wind turbines, which reduces the possibilities for wind farm development in certain areas where the development of small wind farms is more suitable for local conditions. Besides the financial crisis and the deteriorating economic context, the wind sector has been hit by heavier administrative steps which have made development phases longer and resulted in a slowdown in installed capacity (-22% in 2011 vs. 2010).

However, in light of the target announced for 2020, it is highly likely that the slowdown in new installed capacity will be only temporary and the market is expected to rebound (at least 1,300MW a year to meet the 2020 targets, back to the 2010 level). ZDE’s criteria is expected to be cancelled, allowing quicker developing and an expansion of potential areas.

Germany With more than 20% of its production of electricity based on renewable energies in 2011, Germany is one of the best performers in the world. Wind is the first renewable energy source with close to 38% of the market.

Chart 11: Structure of electricity production in Germany in 2011 Chart 12: Structure of electricity production from renewable energies Non-

renewable waste, 1.1%

Wind, 8.0% Biomass, 6.0% Solar, 3.2%

Hydraulic, 4.0%

Nuclear, 17.6%

Fossil, 60.2%

Geothermal, 0.01%

Wind, 37.7%

Biomass, 28.5%

Solar, 14.9%

Hydraulic, 19.0%

Source: Obersv’ER

In the summer of 2011, the German parliament voted in favour of fully phasing out nuclear energy by 2022. Following this decision, the German government adopted a package of measures: “The path to the energy of the future - reliable, affordable and environmentally sound”. Moreover, amendments were made to seven laws, including the Renewable Energy Sources Act.


The amended EEG (Erneuerbare-Energien-Gesetz) sets Germany’s target for renewable energy in final energy consumption at a minimum of 35% by 2020 (18% previously targeted) and 80% by 2050. It implies 45,750MW in wind energy on a 2020 horizon, annual growth of 5% for the installed capacity, of which close to +3% for onshore farms, and close to 9% a year for electricity generation based on wind energy (o/w +5% for onshore farms). Due to its ageing wind mill fleet, Germany is likely to benefit from the repowering of its existing sites.

Chart 13: Share of renewable energy in final energy consumption (D) Chart 14: Wind power installed capacity (D)

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008 2009 2010

2020 target: 35%%

0

10,000

20,000

30,000

40,000

50,000

2004 2005 2006 2007 2008 2009 2010 2011

2020 target: 45,750

MW

Source: Eurostat Source: World Wind Energy Association

In Germany, feed-in tariffs were raised to EUR92/MWh in 2009, and serve as the basis for the calculation of prices for the first twenty years of the farms. A degression ratio has been implemented to take into account lower costs as production volumes increase and the technology moves down the learning curve (2009 tariff discounted by 1% a year). A premium of EUR5/MWh has been created for projects with specific technologies or for repowering projects (improving the performance of existing sites). For offshore projects, feed-in tariffs were EUR150/MWh until 2011, then EUR130/MWh for new projects, then cut by 5% each year.

Table 23: Feed-in tariff in Germany EUR/MWh 2008 2009 2010 2011 2012Tariffs for onshore farms 80.3 92.0 91.1 90.2 89.3Premium for specific technologies (until 2014) - - 5.00 4.95 4.90Total 80.3 92.0 96.1 95.1 94.2Source: Theolia

Even though Germany may appear advanced in terms of renewable energies, in light of its 2020 targets, it is highly likely that wind market will continue to hold up well: no acceleration expected but no slowdown either.

Italy Chart 15: Structure of electricity production in Italy in 2011 Chart 16: Structure of electricity production from renewable energies

Geothermal, 1.9%

Wind, 3.2%Biomass,

3.6%

Non-renewable

waste, 0.8%Solar, 3.5%

Hydraulic, 17.6%

Fossil, 69.4%

Geothermal, 6.2% Wind, 10.8%

Biomass, 12.0%


59.1%

Source: Observ’ER

To meet the 2020 target, wind power installed needs to grow by more than 8% a year (o/w 7.5% for onshore projects) and generation of electricity by 9% a year (o/w +8% for onshore farms).


Chart 17: Share of renewable energy in final energy consumption (It) Chart 18: Wind power installed capacity (It)

0

5

10

15

20

2004 2005 2006 2007 2008 2009 2010

2020 target: 17%

%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004 2005 2006 2007 2008 2009 2010 2011

2020 target: 12,680

MW

Source: Eurostat Source: World Wind Energy Association

Initially based on a quota model and green certificates (requirement for fossil energy producers to introduce a proportion of renewable energy), Italy has changed its rules since early 2013 to implement the equivalent of feed-in tariffs like those in France and Germany due to the higher cost of the previous system. In 2011, the price of wind energy in Italy was EUR149/MWh, the most attractive in Europe, compared with EUR82 in France or EUR90 in Germany (before premium).

Italy has announced tariffs for 2013 (for 20 years), which will serve as the base for future prices, and a degression of 2% will be implemented each year. Contracts will be awarded and the final prices issued will be based on bids in a tendering process. Bids qualify if they offer to produce at a price of at least 70% of the base tariff. For capacity above 5MW, the price would be at least EUR88.9/MWh (close to the price in Germany).

Table 24: Base tariff announced in Italy for 2013 (maximum price) On shore Base tariff EUR/MWh>1 MW< 5 MW 135>5 MW 127Source: Wind-works.org

Energy producers in Italy can also choose to sell their power generation directly to the wholesale market.

Morocco Chart 19: Structure of electricity production in Morocco in 2011 Chart 20: Structure of electricity production from renewable energies

Wind, 2.8%


8.5%

Fossil, 88.4%

Wind, 24.4%

Solar, 2.3%

Hydraulic, 73.3%

Source: Observ’ER

Mainly based on hydraulic power, electricity from renewable energy has been penalised by recurrent drought over the past few years. To fulfil its ambitious programme of 42% of the electricity coming from renewable energies by 2020, Morocco is expected to sharply increase its capacity in solar and wind power plants. The target is to raise installed capacity from 291MW for wind power to 2,000MW. ONE (Electricity National Office) has launched a tender offering. Private companies will be in charge of developing, financing and operating the project for 20 years with a warranty price for electricity (estimated at EUR45-50).


Competition There are many competitors in the market: producers of other energy sources (oil and gas, nuclear, etc.), and companies operating in renewable energies, including only developers, operators or investors, or diversified companies. The biggest players are mainly North American or European companies (Table 24), and are giants compared with Theolia (almost ten times bigger).

Table 25: Main players in market Country MW in the database Developers Acciona Energia Spain 8,194 NextEra Energy Resources USA 6,433 Iberdrola Renewables Spain 4,599 EDF-EN France 4,366 EDP Renovaveis Portugal 3,563 Invenergy USA 3,481 E.ON Climate Renewables Germany 3,476 RES UK 2,079 WPD Germany 2,063 CLP Group China 1,684 Theolia France 955 Operators NextEra Energy Resources USA 8,894 Iberdrola Renewables Spain 7,404 Acciona Energia Spain 6,817 EDF-EN France 5,521 EDP Renovaveis Portugal 5,431 E.ON Climate Renewables Germany 4,921 Invenergy USA 2,962 Dong Energy Denmark 2,635 RWE Germany 2,405 Enel GreenPower Italy 2,255 Theolia France 600 Owners NextEra Energy Resources USA 7,762 Acciona Energia Spain 6,349 Falck Renewables Italy 4,633 Iberdrola Renewables Spain 4,594 EDP Renovaveis Portugal 4,333 EDF-EN France 3,584 E.ON Climate Renewables Germany 3,187 Invenergy USA 2,800 Edison Mission Group USA 2,291 Infigen Energy Australia 1,699 Theolia France 304 Source: the windpower.net

In a context of feed-in or fixed tariffs, small players will continue to play a role in the market. In countries with tender offerings with no floor for prices or related to non-mature technologies (eg, offshore projects), it is more likely that only the big operators will be involved as they can better assume the higher risks.

Wind power: how it works Building Wind farm projects take a long time to be implemented, between three and ten years from the prospecting phase to their connection to the grid, depending on litigations in the building project and the time it takes to get the green light from local authorities (including feed-in tariffs), and run for 15-20 years (20 years in Germany, Morocco and Italy and 15 years in France).

At the end of the contract, the developers have to return the fields to owners in their original state (able to cultivate fields again). Very often operators will propose continuing the management of wind turbines on the site through an extension of the contract or the implementation of new wind turbines (repowering) with better productivity, allowing the signature of a new contract.

We estimate that to build a 10MW wind farm in Europe, the company has to invest around EUR15m (connection costs included). The wind turbines themselves represent the bulk of construction costs at more than 75% of the total.


Chart 21: Wind farm projects investment

Turbine and equipment, 75%

Transport, 2% Engineering, 6%Foundations, 8%

Connection, 7%Insurance, 1%

0%10%20%30%40%50%60%70%80%90%

100%

Breakdown of construction costs

Source: www.uvcw.be

Management The services that companies like Theolia offer to the wind turbine owners range from simple supervision to the planning of the production phase and maintenance intervention to optimise the availability of the farms. Depending on the extent of services, commissions for management range from 2% to 6% of the sales generated from the sale of electricity.

Wind turbine managers can be the builder or the owner of the site, or independent operators. In Theolia’s case, it operates its own farms (30% of the installed capacity) as well as farms for third parties, which ensures recurring revenues (only 10% of sales). Most of the time, Theolia outsources the technical maintenance of its sites to specialised companies.

As the raw material is free, and opex for wind turbines is relatively low (less than 30% of sales), the EBITDA margins for existing projects are high. FCF generation is therefore great, offering interesting yields (from 6% to 9%), thanks to the leverage used to finance projects (80/20 debt/equity or 70/30 depending on projects).

Wind farm profitability To estimate the yield offered by a wind farm, we have tried to put into figures the typical generation of FCF from a 10MW project in Germany (Table 25). We have based our analysis on the following assumptions:

• Construction costs at EUR1.5m per MW; EUR15m for our project. • Leverage at 80% and financing cost at 4.5%. • Full load production at 2,500 hours a year. • Electricity price at EUR94.2/MWh, price offered in 2012 in Germany premium

included. • Twenty-year project based on the length of the feed-in tariff in Germany. • Opex based on: EUR2/MWh for rents, EUR11.0/MWh for maintenance, EUR1

/MWh for Insurance, EUR5 MWh for other charges and 3.5% of sales for taxes. • Linear depreciation of the investment; EUR1m a year. • 33% in tax rate. • WACC at 6%. • Demolition costs offset by gains on steel recycling.

Over the length of the contract, the net present value of future FCF is estimated at EUR1.5m, compared with an initial investment at EUR15m; a return on investment of 10%.


Table 26: Cash flow generation for 10MW wind farms in Germany Year 0 1 2 3 4 5 6 7 8 9 10 (..) 17 18 19 20Annual generation (MWh) (1) 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000Acquisition price (EUR/MWh) (2) 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2 94.2Generation per year (EURm) (1)*(2) 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36 2.36Rents -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.045 -0.046Maintenance -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.278 -0.281 -0.284Insurance -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.034 -0.035 -0.035Taxes -0.084 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082 -0.082Other charges -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131 -0.131EBITDA 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78% of sales 76% 76% 76% 76% 76% 76% 76% 76% 76% 76% 76% 76% 76% 75%Depreciation -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75EBIT 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03Financial charges -0.54 -0.51 -0.49 -0.46 -0.43 -0.40 -0.37 -0.33 -0.30 -0.26 0.05 0.10 0.16 0.22RCAI 0.49 0.52 0.55 0.58 0.61 0.64 0.67 0.70 0.74 0.77 1.08 1.14 1.19 1.24IS -0.16 -0.17 -0.18 -0.19 -0.20 -0.21 -0.22 -0.23 -0.24 -0.26 -0.36 -0.38 -0.39 -0.41Rate 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0%net profit 0.33 0.35 0.37 0.39 0.41 0.43 0.45 0.47 0.49 0.52 0.73 0.76 0.80 0.83Change in WCR 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Investments -15.0 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10FCF -15.0 1.52 1.51 1.50 1.49 1.48 1.47 1.46 1.45 1.44 1.43 1.33 1.31 1.29 1.27Cumulative FCF -15.0 -13.48 -11.97 -10.46 -8.97 -7.48 -6.01 -4.55 -3.09 -1.65 -0.23 9.38 10.69 11.98 13.25Discounted FCF -15.0 1.43 1.35 1.26 1.18 1.11 1.04 0.97 0.91 0.85 0.80 0.49 0.46 0.43 0.40% Debt 80% % Shareholder's fund 20% WACC 6.0% NPV 1.5 IRR 7.2% Source: Kepler Capital Markets


Company background: poor track record

1999-2008: development phase Theolia was created in 1999, shortly after the signing of the Kyoto protocol, and was listed in 2002. The aim was to create a company able to develop turnkey projects to generate electricity based on renewable energies (wind, solar, biomass, etc.) in many countries. The business model was to develop and finance projects from the prospecting process to delivery, for a period of 3-10 years (depending on how long it takes to get the green light from local authorities), and to sell part of those projects to third-party investors interested in the prospect of recurring revenues and interesting yields.

After a ramp-up phase, the development of new projects would be financed by the delivery of projects in the pipeline. Moreover, as Theolia would be in charge of farm management (operation, maintenance, etc.) and would keep the ownership of some farms, it would imply growing recurring revenues.

Over 2005-08, the company spent close to EUR240m on acquisitions (paid until 2010 due to earn-out), financed by a capital increase and convertible bonds issuance.

Table 27: Past external growth operations Year Acquisition Country Business VE VE/Sales VE/EBITDA Installed MW Projects MW 2005 Ventura France Wind farm turnkey solutions - - - - - Wind projects Germany Generation of electricity 34 8 11 28.5 - 2006 Natenco Germany Turnkey wind farms and

management for third parties (Greece, Central Europe, India or

Brasil

105 1.8 9.7 25 for owned windturbine and 140

for third parties

900

Polargen (51%) Netherlands Co-generation and biogas - - - 23 25 Wind farm Germany Electricity generation - - - 6 - Wind projects Spain Electricity generation - - - - From 58 to 73 2007 Wind farms (from GE Energy) Germany Electricity generation - 5 - 165 - Maestrale Green Energy Italy Wind farm developer 7 - - 0 500 Eco2lutions (35%) Germany Carbon credit brokerage 25 - - - - 2008 Compagnie Eolienne du Détroit Morocco Electricity generation 45 - - 50 - Wind projects France Electricity generation - - - 14 20 Source: Theolia

As a result of a series of acquisitions and partnerships, at the end of 2008 Theolia had 2,580MW of projects in the pipeline: 49% in France, 17% in Brazil, 13% in India, 16% in Italy and 5% in Germany; and an installed capacity of 671MW (o/w 360MW owned by the company): 78% in Germany, 15% in France and 7% in Morocco.

Probably aware of the market slowdown in terms of new capacities, in 2008 management decided to change its business model to become a producer of electricity based on wind energy (ensure significant recurring revenues), and stopped the sale of wind farms. However, to begin its new projects Theolia needed cash, which was hard to find amid the financial crisis of 2008-09. Therefore, it was forced to reorganise its activities, operating structure and financing.

2009-12: restructuring phase Faced with major difficulties, the company launched a restructuring programme that can be summed up as: 1) a focus on only one activity: wind farm development and management for own or third-party accounts; 2) reducing opex; 3) improving the company’s financial health.


Exit of peripheral businesses and countries In 2009, the first step was to sell or stop activities not linked to wind energy. The remaining non-wind activity is a solar farm in Germany which the company tried to sell in 2007, but as the buyer failed to find financing, the deal was cancelled. Solar farm is still in Theolia’s scope.

Table 28: Disposal of peripheral activities in 2009 Category Business PriceBiocard (97%) Organic fuel EUR1Thenergo (27%) Solar energy in Spain, Biogas in Italy, Dispatchable energy in France, etc. EUR15mBusiness in Canada Water energy EUR1Assets in France Dispatchable energy EUR0.4mSource: Theolia

The company also centred its investments on four main countries: France, Germany, Italy and Morocco. Projects and partnerships in Spain, Central Europe and Greece have been stopped. To generate cash, the company also sold wind farms (installed or in projects) in 2009 and 2010.

Table 29: Disposals in wind energy Country Buyer Installed MW Projects MW VE2009 France Energiequelle - 32 (delivery planned for 2010) 3.3 Germany RheinEnergie 80 20.6 (delivery planned for 2009) 141.6 France Boralex 7 49 32.4 Germany 45 Nc 2010 Germany Dortmunder Energie - 55.5 Nc Italie (39%) Repower Produzione - 30 NcSource: Theolia

Cost-cutting programme At end-2008, the company announced its intention to reduce its cost structures, mainly at its headquarters, notably through staff cuts (EUR4m in cost savings targeted). In 2009, the cost-cutting programme at its headquarters was raised to EUR5m. Adding in the end of activities in some countries and cost reduction in subsidiaries, management targeted close to EUR10m in cost savings. Since the peak reached in 2008, headcount has been reduced by 30%.

Chart 22: Change in staff

237

295270

255230

208

0

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 Jun-12

Source: Theolia

Improving financial health New accounting methods Since its listing on a regulated market, Theolia has significantly changed its consolidation method to better reflect its specific business profile. For wind farms operated for third parties, only management fees are booked in sales versus full electricity generation before (-EUR34m on sales in 2009; -10%), and amortisation for wind farms has been reduced for sites expected to be sold (EUR6m less in amortisation in 2009).

GW depreciation As the company was partly built through M&A deals during the market peak (2005-08), the entry price and thus goodwill associated have significantly grown to reach close to EUR145m in 2007 (o/w EUR75m linked to Natenco acquisition) or more than 20% of the total assets.


In a less favourable market context, Theolia depreciated its goodwill to better reflect the value of its assets. Goodwill was therefore reduced to less than EUR41m at the end of June 2012; around 10% of total assets.

Chart 23: Goodwill booked in assets

0

20

40

60

80100

120

140

160

2007 2008 2009 2010 2011 Jun-12

EURm

Source: Theolia

Debt restructuring In 2007, Theolia issued convertible bonds (for around EUR240m) to finance its acquisition programme. Bondholders had the possibility to force the company to reimburse its debt on a 2012 horizon, which Theolia could not ensure due to the absence of FCF generation since 2009. Therefore, in 2010 management decided to change the bond modes: 1) maturity date postponed to 2041 or to 2015, considering than post 2014 the coupon will be reduced to 0.1% versus 2.7% currently; 2) reimbursement price lowered to EUR15.29 per bond versus EUR20.8 previously; 3) conversion ratio raised to 8.64 shares for 1 bond until 2013 (4.32 after 2012 consolidation of shares) and 6.91 for 2014 (or 3.46 after consolidation), versus 1 for 1 before; 4) no possibility to convert bonds post 2014; and annual interest raised to 2.7% versus 2.0% previously.

In France, debt relative to wind turbine financing has been modified to adapt the covenants to the reality of operations, implying EUR2m in financing charges in H1 2012. However, the restructuring is expected to have a positive impact on the cost of debt.

Chart 24: Change in debt

136%

347% 343%

158% 170% 173%

54%91% 68% 60% 70% 68%

0%50%100%150%200%250%300%350%400%

0

100

200

300

400

500

600

700

2007 2008 2009 2010 2011 Jun-12Total financial debt Financial debt excluding convertible bondsReported gearing Gearing with bonds considered as equity

EURm

Source: Theolia

Amid a decline in results and a restructuring programme, Theolia has managed to control the weight of its debt relatively well.

Management and shareholder changes Jean-Marie Santander founded the company with Jacques Bucki and managed it until September 2008. He pursued the company’s development strategy of external growth operations (CED in Morocco) and the acceleration of projects overseas (Italy, India, Brazil) amid a deteriorating market context (2006-08), increasing the company’s cash-out. He also decided to stop the disposal of sites to become a generator of electricity. All this sped up the decline of results and the deterioration of the balance sheet.


To manage the company’s restructuring and recovery, he was replaced by Marc Van't Noordende, former COO of Essent, a Dutch company specialised in generation, transport and the sale of electricity and gas. Marc Van’t Noordende implemented a cost-cutting programme at end-2008, decided the withdrawal from non-wind activities and re-launched the disposal of wind turbines to improve cash generation.

He was replaced by Fady Khallouf (current CEO) in May 2010 to speed up financing restructuring and start the operating rationalisation. Fady Khallouf (51 years old) was in charge of the company’s recovery. He had previously occupied management positions at Tecnimont, Edison, EDF, and Suez.

Initially owned by its founder, Jacques Bucki, the shareholding structure has evolved considerably since 2006 following significant operations on the capital (raise of cash, acquisition paid by shares, etc.). The main step was the entry of General Electric and FC Holding (previous owner of Natenco) in 2007 to pay for acquisitions with stakes of 17% and 13% respectively. GE sold its stake to Gama Enerji in 2008, and as FC Holding did not subscribe to the raising of funds, its stake quickly decreased in parallel with the debt restructuring. Free float remains high at 87%, and the main shareholders are now individual shareholders who act in concert (13% of the capital). APG is a Dutch pension fund.

Table 30: Shareholding breakdown (% of the capital) June 04 (FY end before 2006) December 06 December 08 December12

Jacques Bucki (founder) 78% Fortis 16% FC Holding* 11.0% Michel Meeus 6% FL Holding 7% Management 1.0% Pierre Salik 5% Pictet 5% Gama Enerji 17.0% Brigitte Salik 3% Total concert 13% APG 4% Others 22% Others 73% Others 71% Others 83% Total (nb of shares, m restated for 2012 consolidation)

0.9 12.7 19.9 64.9

*Natenco partly paid by shares Source: Theolia

Restructuring well underway but not really visible in figures yet The last reported full year was 2011. Sales were down by 56% due to the strategy of a slowdown in wind farm disposals, which benefited to the EBITDA margin (38% vs. 2% in 2010). However, the EBITDA rebound was not enough to offset the still high capex programme (EUR27m for EUR21m in cash flow), implying negative free cash flow. Moreover, a recovery was not really visible in the EBIT performance, which was still negative at minus EUR18m, due to high asset depreciation (EUR26m for Italian assets following changes in feed-in tariff conditions). Restated for intangible asset depreciation, EBIT turned positive at EUR10m, after minus EUR19.7m in 2011.

H1 2012 results are more representative of Theolia’s recovery potential. Combining a favourable base, increased capacity (delivery of projects), good weather conditions and small disposals in Germany, sales grew by more than 30% in H1. The EBITDA margin continued its rebound to 44% and, thanks to lower asset depreciation, reported EBIT was slightly positive at EUR5.6m. FCF also became positive at EUR16m. In our view, H1 2012 is a good illustration of the effect of the restructuring programme.


Table 31: Main operating performance indicators EURm 2007 2008 2009 2009pf* 2010 2011 H1 2012Sales 306.5 70.0 328.6 294.4 154.5 67.5 35.8Changes 93.4% -77.2% 369.7% -47.5% -56.3% 30.8% EBITDA reported 14.6 -37.8 49.6 45.5 3.4 25.8 15.9% of sales 4.8% -54.0% 15.1% 15.4% 2.2% 38.2% 44.4% EBIT -38.7 -196.5 32.2 26.0 -34.5 -18.0 5.6% of sales -12.6% -280.8% 9.8% 8.8% -22.3% -26.7% 15.7% EBIT restated** -3.2 -67.3 27.8 23.4 -19.7 10.4 7.0% of sales -1.1% -96.2% 8.5% 7.9% -12.7% 15.4% 19.4% Net profit -48.3 -243.3 -20.8 -24.8 5.9 -38.5 -9.9 NP before GW 8.2 -136.8 -25.3 -29.4 18.9 -36.4 -9.1 FCF -22.0 -194.1 81.4 75.5 3.3 -10.1 16.0 Net debt 223.2 498.4 396.3 396.3 237.7 244.2 239.1 Equity 403.1 169.8 148.7 143.1 220.0 195.0 184.7* Only management fees for wind farms managed for third parties, ** Restated for non-operating charges and revenues (goodwill depreciation, gains on disposals, etc.) Source: Theolia


Glossary Capacity factor: annual charge/nominal charge: between 25% and 50% for wind power, compared with 80-90% for nuclear power. In other words, a wind turbine is at its maximum capacity only during a quarter or a half of its potential use in a year.

Feed-in contract: the contract governing the contractual relationship between the wind power producer and the purchaser. In France, for instance, the feed-in contract is issued by EDF AOA (Agence Obligation d'Achat – feed-in agency) or a designated local distribution company (Entreprise Locale de Distribution - ELD).

Feed-in tariff: the price at which the purchaser buys wind electricity. The feed-in tariff is determined by government order.

Grid parity: occurs when the production cost per kWh of wind power matches the retail price offered by the power utility.

kWh: energy generated in one hour for a power of 1000W. For a wind turbine of 10MW, which would produce during 2,500 hours a year (capacity factor at 29%), it implies the generation of 2,500*10MW = 25 000MWh a year. Based on the feed-in tariff in France for 2012 (EUR84.7/MWh), it would imply more than EUR2m in sales for electricity generation for such a farm.

Table 32: Conversion table Gigawatt (GW) Megawatt (MW) Kilowatt (kW) Watt (W)Gigawatt (GW) 1 1,000 1,000,000 1,000,000,000Megawatt (MW) 1 1,000 1,000,000Kilowatt (kW) 1 1,000Watt (W) 1Source: Kepler Capital Markets


Appendix: scenarios by country

Kepler C

apital Markets

Theolia 35

Table 33: Assumptions for Morocco 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E MW total 50 0 100 100 100 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 QP Theolia 100% 100% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% Owned capacities 80 80 80 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 Third praties 20 20 20 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 Projects phase 1

MW 50 0 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Full load hours 2,900 2,900 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 Annual generation (Mwh) 145 0 319 319 319 319 319 319 319 319 319 319 319 319 319 319 319 319 319 319 319 319 Price / MWh 45.2 45.2 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0

Projects phase 2 MW 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Full load hours 3,190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190 Annual generation (Mwh) 638 638 638 638 638 638 638 638 638 638 638 638 638 638 638 638 638 Price / MWh 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0

Total investment (EURm) 15 135 150 150 Theolia share (EURm) 12 108 120 120 Source: Kepler Capital Markets

Kepler C

apital Markets

Theolia 36

Table 34: Assumptions for Italy 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E Base tariff EUR/MWh 127 124 122 120 117 115 113 110 110 110 110 110 110 110 110 110 110 110 110 110 110 110 Minimum EUR/ MWh 89 87 85 84 82 80 79 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 Degression rate (Kepler scenario) 2% 2% 2% 2% 2% 2% 2% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Portfolio (Giunchetto 2010)

MW 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 Theolia share 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% 51% Maturity 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 74 Price / MWh 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 77.2 77.2 77.2 77.2 Sales (EURm) 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 5.7 5.7 5.7 5.7

Projects phase 1 MW 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 Price / MWh 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 88.9 77 Sales (EURm) 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

Projects phase 2 MW 38 38 38 38 38 38 38 38 38 38 38 38 38 38 38 38 38 38 38 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 Price / MWh 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 83.7 Sales (EURm) 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8

Projects phase 3 MW 64 64 64 64 64 64 64 64 64 64 64 64 64 64 64 64 64 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 160 160 160 160 160 160 160 160 160 160 160 160 160 160 160 160 160 Price / MWh 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 80.4 Sales (EURm) 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13

Projects phase 4 MW 36 36 36 36 36 36 36 36 36 36 36 36 36 36 36 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 Price / MWh 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 77.2 Sales (EURm) 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7

Total investment (EURm) 28.5 28.5 48 48 27 27 29.8 10 Theolia share (EURm) 11.4 11.4 19.2 19.2 10.8 10.8 15.2 4 Source: Kepler Capital Markets

Kepler C

apital Markets

Theolia 37

Table 35: Assumptions for France (owned capacities and future projects) 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E Tariff EUR/ MWh 83.9 83 82 81 81 80 79 78 77 77 77 77 77 77 77 77 77 77 77 77 77 77 Degression (Kepler assumptions) 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Portfolio 1 (2006)

MW 36 36 36 36 36 36 36 36 36 36 36 36 36 36 32 32 32 32 32 32 32 Theolia share 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Maturity 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 Full load hours 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 72 72 72 72 72 72 72 72 72 72 72 72 72 72 81 81 81 81 81 81 81 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 Sales (EURm) 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

Portfolio 2 (2007) MW 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 22 22 22 22 22 22 Theolia share 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Maturity 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 Full load hours 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 49 49 49 49 49 49 49 49 49 49 49 49 49 49 49 55 55 55 55 55 55 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 Sales (EURm) 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

Portfolio 3 (2011) MW 37 37 37 37 37 37 37 37 37 37 37 37 37 37 37 37 37 37 33 33 33 Theolia share 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% Maturity 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 83 83 83 Price / MWh 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 77.4 77.4 77.4 77.4 77.4 77.4 77.4 77.4 Sales (EURm) 8 8 8 8 8 8 8 8 8 8 8 8 8 7 7 7 7 7 6 6 6

Portfolio 4 (2012) MW 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 28 28 28 28 25 25 Theolia share 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% Maturity 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 62 62 Price / MWh 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 84.7 77 77 77 77 77 77 77 Sales (EURm) 6 6 6 6 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5

Projects phase 1 MW 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 Price / MWh 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 77.4 77.4 77.4 77.4 Sales (EURm) 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3

Projects phase 2 MW 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 Price / MWh 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 79.7 77.4 77.4 Sales (EURm) 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 15 15

Projects phase 3 MW 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 Price / MWh 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 78.2 Sales (EURm) 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4

Total investment (EURm) 13.5 13.5 60.0 60.0 24.8 24.8 32.4 21.9 33.1 24.8 Theolia share (EURm) 5.4 5.4 24.0 24.0 9.9 9.9 21.8 8.7 13.2 9.9 Source: Kepler Capital Markets

Kepler C

apital Markets

Theolia 38

Table 36: Assumptions for Germany (owned capacities and owned projects) 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E Tariff EUR/ MWh (premium included) 93.3 92.3 91.4 90.5 89.6 88.7 87.8 86.9 86.5 86.1 85.6 85.2 84.8 84.3 83.9 83.5 83.1 82.7 82.3 81.8 81.4 81.0 Degression (Kepler assumptions) 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% Portfolio 1 (2000)

MW 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Maturity 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 13 Full load hours 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 3 3 3 3 3 3 3 3 7 7 7 7 7 7 7 7 7 7 7 7 7 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 86.1 86.1 86.1 86.1 86.1 86.1 86.1 86.1 86.1 86.1 86.1 86.1 86.1 Sales (EURm) 0.2 .0.2 0.2 0.2 0.2 0.2 0.2 0.2 1 1 1 1 1 1 1 1 1 1 1 1 1

Portfolio 2 (2001) MW 9 9 9 9 9 9 9 9 9 0 8 8 8 8 8 8 8 8 8 8 8 8 Maturity 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 Full load hours 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 9 9 9 9 9 9 9 9 9 20 20 20 20 20 20 20 20 20 20 20 20 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 85.6 85.6 85.6 85.6 85.6 85.6 85.6 85.6 85.6 85.6 85.6 85.6 Sales (EURm) 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2

Portfolio 3 (2002) MW 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 26 26 26 26 26 26 26 26 26 26 26 Maturity 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 Full load hours 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 29 29 29 29 29 29 29 29 29 29 65 65 65 65 65 65 65 65 65 65 65 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 85.2 85.2 85.2 85.2 85.2 85.2 85.2 85.2 85.2 85.2 85.2 Sales (EURm) 2 2 2 2 2 2 2 2 2 2 6 6 6 6 6 6 6 6 6 6 6

Portfolio 4 (2004) MW 36 36 36 36 36 36 36 36 36 36 36 36 32 32 32 32 32 32 32 32 32 Maturity 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 Full load hours 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 36 36 36 36 36 36 36 36 36 36 36 36 81 81 81 81 81 81 81 81 81 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 84.3 84.3 84.3 84.3 84.3 84.3 84.3 84.3 84.3 Sales (EURm) 3 3 3 3 3 3 3 3 3 3 3 3 7 7 7 7 7 7 7 7 7


Portfolio 6 (2006) MW 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9 9 9 9 9 9 9 Maturity 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 Full load hours 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 14 14 14 14 14 14 14 14 14 14 14 14 14 14 21 21 21 21 21 21 21 Price / MWh 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 82.0 83.5 83.5 83.5 83.5 83.5 83.5 83.5 Sales (EURm) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2


Portfolio 8 (2009) MW 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 0 7 7 7 7 Maturity 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 Full load hours 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,500 2,500 2,500 2,500 Annual generation (Mwh) 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 17 17 17 17 Price / MWh 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 92.0 82.3 82.3 82.3 82.3 Sales (EURm) 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 1 1 1 1


Kepler C

apital Markets

Theolia 39

Table 37: Assumptions for Germany (owned capacities and owned projects) - continued 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E Portfolio 9 (2010)

MW 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 12 12 12 Maturity 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 30 30 30 Price / MWh 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 91.1 81.8 81.8 81.8 Sales (EURm) 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 2


Projects phase 1 MW 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Price / MWh 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 88.7 Sales (EURm) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Projects phase 2 MW 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 Theolia share 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% Maturity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Full load hours 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Annual generation (Mwh) 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 Price / MWh 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9 Sales (EURm) 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8

Total investment (EURm) 3.0 5.6 0.0 2.7 8.1 26.2 0.0 32.4 29.7 8.6 5.4 0.0 6.9 12.2 7.2 Theolia share (EURm) 1.2 8.4 0.0 2.7 8.1 26.2 0.0 32.4 29.7 8.6 5.4 0.0 6.9 12.2 7.2 Source: Kepler Capital Markets


Research ratings and important disclosures Disclosure checklist - Potential conflict of interests

Stock ISIN Disclosure (See Below) Currency Price Aerowatt FR0010396119 14 EUR 17.80 Alerion IT0004720733 nothing to disclose EUR 4.02 EDF FR0010242511 nothing to disclose EUR 14.24 EDP RENOVAVEIS ES0127797019 nothing to disclose EUR 3.97 Falck Renewables IT0003198790 nothing to disclose EUR 1.11 Gamesa ES0143416115 nothing to disclose EUR 2.17 GDF Suez FR0010208488 nothing to disclose EUR 14.93 Greentech Energy DK0010240514 nothing to disclose DKK 9.50 Iberdrola ES0144580018 nothing to disclose EUR 3.83 PNE Wind DE000A0JBPG2 nothing to disclose EUR 2.82 RWE DE0007037129 nothing to disclose EUR 27.97 Sechilienne FR0000060402 nothing to disclose EUR 15.30 Suez Environnement FR0010613471 nothing to disclose EUR 9.84 Theolia FR0011284991 nothing to disclose EUR 1.61

Source: Factset closing prices of 13/02/2013 Stock prices: Prices are taken as of the previous day’s close (to the date of this report) on the home market unless otherwise stated.

Key: 1. Kepler Capital Markets (KCM) holds or owns or controls 5% or more of the issued share capital of this company; 2. The company holds or owns or controls 5% or more of the issued share capital of KCM; 3. KCM is or may be regularly carrying out proprietary trading in equity securities of this company; 4. KCM has been lead manager or co-lead manager in a public offering of the issuer’s financial instruments during the last twelve months; 5. KCM is a market maker in the issuer’s financial instruments; 6. KCM is a liquidity provider in relation to price stabilisation activities for the issuer to provide liquidity in such instruments; 7. KCM acts as a corporate broker or a sponsor or a sponsor specialist (in accordance with the local regulations) to this company; 8. KCM and the issuer have agreed that KCM will produce and disseminate investment research on the said issuer as a service to the issuer; 9. KCM has received compensation from this company for the provision of investment banking or financial advisory services within the previous twelve months; 10. KCM may expect to receive or intend to seek compensation for investment banking services from this company in the next three months; 11. The author of, or an individual who assisted in the preparation of, this report (or a member of his/her household), or a person who although not involved in the preparation of the report had or could reasonably be expected to have access to the substance of the report prior to its dissemination has a direct ownership position in securities issued by this company; 12. An employee of KCM serves on the board of directors of this company; 13. As at the end of the month immediately preceding the date of publication of the research report Kepler Capital Markets, Inc. beneficially owned 1% or more of a class of common equity securities of the subject company; 14. Kepler Capital Markets SA (“KCM”) and UniCredit Bank AG have entered into a Co-operation Agreement to form a strategic alliance in connection with certain services including services connected to investment banking transactions. UniCredit Bank AG provides investment banking services to this Issuer in return for which UniCredit Bank AG received consideration or a promise of consideration. Separately, through the Co-operation Agreement with UniCredit Bank AG for services provided by KCM in connection with such activities, KCM also received consideration or a promise of a consideration in accordance with the general terms of the Co-operation Agreement. Rating history: Kepler Capital Markets’ current rating for Theolia is "Buy" and was issued on 14 February 2013 (Initiation of coverage).. We did not disclose the rating to the issuer before its publication and dissemination.

Rating ratio Kepler Capital Markets Q4 2012 Rating breakdown A BBuy 51% 0.0%Hold 31% 0.0%Reduce 17% 0.0%Not Rated/Under Review/Accept Offer 1% 0.0%Total 100.0% 0.0%Source: Kepler Capital Markets A: % of all research recommendations B: % of issuers to which Investment Banking Services are supplied From 9 May 2006, KCM’s rating system consists of three ratings: Buy, Hold and Reduce. For a Buy rating, the minimum expected upside is 10% in absolute terms over 12 months. For a Hold rating the expected upside is below 10% in absolute terms. A Reduce rating is applied when there is expected downside on the stock. Target prices are set on all stocks under coverage, based on a 12-months view. Equity ratings and valuations are issued in absolute terms, not relative to any given benchmark.

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