German buy-and-build Photovoltaics IPP · 2017. 8. 7. · COMPANY NOTE 5 December 2014 THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC. kbcsecurities.com Refer to important

COMPANY NOTE

5 December 2014

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

kbcsecurities.com Refer to important disclosures, disclaimers and analyst certifications at the end of the body of this research.

COLEXON German buy-and-build Photovoltaics IPP ELECTRICITY CURRENT PRICE € 1.49 ACCUMULATE GERMANY TARGET PRICE € 1.70 INITIATING

FY/e 31.12 2014E 2015E 2016E 2017E Sales (€ m) 14.1 24.1 24.3 24.3 REBITDA (€ m) 11.2 18.6 20.0 20.0 Net earnings (€ m) 6.7 1.5 2.9 3.3 Diluted adj. EPS (€) -0.02 0.05 0.09 0.11 Dividend (€) 0.00 0.00 0.00 0.00 P/E 30.63 15.91 14.09 EV/REBITDA 16.20 9.37 8.02 7.31 Free cash flow yield -142.6% 8.1% 28.6% 30.6% Dividend yield 0.0% 0.0% 0.0% 0.0%

Source: Thomson Reuters Datastream Source: KBC Securities Bloomberg HRPK GR Colexon develops, owns, operates and improves power

generation facilities that produce PV power. It was created in 2014 out of the merger of 7C Solarparken and the ‘old’ Colexon. The newly-created group operates 50 projects for a combined total capacity of 71.5MWp. Colexon also owns a PV Estate business with around 60ha of owned land property.

• Colexon generates stable cash flows, guaranteed by legally fixed feed-in-tariffs for a period of 20-years. >90% of Colexon’s PV installations are located in Germany, where tariffs are protected via the Bestandsschutz. Management monitors its park’s performance internally, providing it with flexibility and optimization capacity.

• Short-term focus is on integrating the ‘old’ Colexon activities with 7C Solarparken, and optimising the ‘old’ Colexon PV park’s performance ratio. In addition management intends to grow its portfolio by consolidating the German 1-5MWp PV segment.

• We expect Colexon to reach its Economic EBITDA ‘clean’ guidance for 2014 and 2016 of respectively € 15.4m (€ 15.7m KBCSe) and € 20.0m (€ 20.0m KBCSe).

• We project CFPS 2014-16 growth of 32% and Economic net debt / Economic EBITDA falling from 8.2x at end-2014 to 5.6x at end-2016. Our TP is set at € 1.70/sh and we initiate coverage with an Accumulate rating.

• KBC Securities has been involved in a Corporate Finance relationship with 7C Solarparken over the last 12-months.

Reuters HRPG.DE http://www.colexon.de Market Cap € 50m Shares outst. 33.6m Volume (Daily) € 0.01m Free float 32.4% Next corporate event

Ex. General Meeting 14: 12 December 2014 Performance 1M 3M 12M Absolute 9% 7% 35% Rel. FAZ 2% 5% 29% 12-m Hi/Lo € 1.54/1.08

Dieter Furniere

Financial Analyst - Brussels

KBC Securities NV

+32 2 429 18 96

[email protected]

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CONTENTS

EXECUTIVE SUMMARY ..................................................................... 3

SWOT .................................................................................................. 5

BACKGROUND ................................................................................... 6

Company description 6

Position in the solar value chain 8

Company projects 11

Colexon – 7CSP merger history 11

Management structure 12

Shareholder structure 13

SHINING a LIGHT ON THE BUSINESS ............................................ 14

The basics 14

The market 14

A call on Germany 17

FINANCIALS ...................................................................................... 18

Outlook 2014-16 22

VALUATION ....................................................................................... 28

Peer analysis 28

DCF (FCFE) 29

Strategic action 30

Valuation summary 30

COMPANY NOTE

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EXECUTIVE SUMMARY

Activities Colexon Energy (‘Colexon’) develops, owns, operates and improves power generation facilities that produce PV power. It was created in 2014 out of the merger of 7C Solarparken (7CSP) and the ‘old’ Colexon. The newly-created group operates 50 projects for a combined total capacity of 71.5MWp. Colexon also owns a PV Estate business with around 60ha of owned land property. At the EGM of 12 December, 2014 management will propose to change the name of the group to 7C Solarparken AG.

Why renewable energy? Renewable energy as a sector is supported by the fact that resources

(wind, sun) are freely available, with a high level of medium-term predictability and low greenhouse gas emissions. Since most forms of renewable energy are not yet competitive on a stand-alone basis, they require government support. Photovoltaics (PV) has the advantage that it is a proven technology, producing electricity at moments of peak demand, often close to the location of consumption, keeping distribution and transmission losses to a minimum.

A call on Germany Over 90% of Colexon’s PV installations are located in Germany, the

world’s leading market for renewable energy. The advantages of the German market are that the tariffs (FiT) set by the EEG are fixed for 20 years, the Bestandsschutz, which protects investors against retroactive tariff cuts, renewable energy priority offtake, a well-meshed grid, and a government committed to further strengthening the grid in order to allow a smooth integration of renewable energy in to the overall energy mix.

Short-term strategy Rather than chasing aggressive growth, the short-term focus will be on

integrating the ‘old’ Colexon activities with 7CSP, and optimising the ‘old’ Colexon PV park’s performance ratio.

Medium-term strategy Management keeps an eye open for new investment opportunities. It

bought a 4.4MWp project in 2014 (Pflugdorf) and plans an additional small investment in 2015. Colexon is not involved in the development or construction of PV projects, but rather focuses on acquiring assets with an existing track record. These might be ‘distressed’ assets that can be turned around, rather than new-builds at relatively low IRRs. The Group has built up technical, operational, financial and legal know-how to develop and operate medium-scale PV projects. Its focus is on Germany, primarily the 1-5MWp segment, which remains highly fragmented. According to management the open market for investors represents around 45% of the total market.

Proven track record We acknowledge management’s track record of value creation, its

internal capabilities (financial, technical), broad network, the use of quality components and tight cost management.

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Risks We see the biggest risks as the company’s relatively small scale, its

dependency on a small number of key people, the recurring corporate costs, the holding debt, the old EPC legacy, adverse weather conditions, not being able to raise additional funding and a failure to find sufficient attractive new projects.

Possible strategic investment With a portfolio nearing 100MWp, and new-build IRRs in Germany at

all-time lows, Colexon might come on to the radar of larger institutional investors (i.e. pension and insurance funds) or maybe even utilities and Stadtwerke looking to grow their portfolios. A strategic partner might also be an option. We believe management should first focus on merging 7CSP with ‘old’ Colexon and keeping a tight grip on holding costs. An acquisition is not our base case scenario.

CAGR 14-16E CFPS of 32% We expect Colexon to reach its Economic EBITDA ‘clean’ guidance for

2014 and 2016 of respectively € 15.4m (€ 15.7m KBCSe) and € 20.0m (€ 20.0m KBCSe). Colexon can profit from stable cash flows and returns guaranteed by legally-fixed feed-in tariffs for a period of 20 years. Management monitors the park’s performance internally, providing it with a certain flexibility and optimization capacity. Management is also steering the company with an eye on cash flow per share (CFPS), which it believes strikes the right balance between operational income and debt leverage. We expect a CFPS CAGR 2014-16 of 32%, driven by cost restructuring, portfolio optimization, external growth, debt reduction and the cancellation of 2.3m own shares.

Leverage and liquidity position We expect Net Economic Debt / Economic EBITDA to move to 5.6x by

end-2016 from 8.2x today, and management target of well below 6.5x. At end-2014 we expect Colexon to have € 18m of cash on its balance sheet, of which € 7m free liquidity. To fund new acquisitions we believe the company can re-finance its corporate loans that expire in 2015, bring forward cash trapped in the DSRAs, re-finance existing projects, rotate its portfolio, sell own shares or raise equity.

Valuation Our valuation model, which is based on peer multiples (EV/EBITDA,

P/CF) and DCF (FCFE), yields a fair value of € 1.70. With 14% upside to our TP we initiate coverage with an Accumulate rating.

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SWOT

STRENGTHS WEAKNESSES

• Focus on Germany • Guaranteed FiTs ensure stable revenues and cash

flows • German Bestandsschutz creates regulatory protection • Attractive financing conditions • Non-recourse loans via SPVs • Projects ring-fenced from Colexon • Portfolio of existing parks equipped with quality

components • Minimal development and construction risk • In-house servicing (financial, technical) • Relatively young portfolio with average remaining FiT

life of just over 16 years (on maximum of 20) • Proven track record of attracting new projects

• Relatively small scale • Dependency on a small number of key people • Recurring corporate costs • Leverage at holding level, although limited • Old EPC legacy (until end-2016)

OPPORTUNITIES THREATS

• Consolidation of a fragmented German PV market • Economies of scale • Increase share liquidity • Streamline organisation • Deal flow thanks to industry network • Extensive pipeline via external O&M contracts • Robust industrial & financing relations • New growth can come from the acquisition of

underperforming assets at returns of new-build IRR + at least 250bps

• Advantageous weather conditions • Strategic partnerships • Can become a take-over target

• Increased criticism of high cost of renewable energy • Part of operating costs are inflation-linked while

revenues are not • Increased competition in bidding for secondary PV

parks from insurance companies, utilities, private equity, renewable energy funds etc.

• Failure to attract cash to fund growth • Higher-than-budgeted losses at holding level • Unable to find new projects at IRR + 250bps • Failure to improve the duration of the portfolio • Adverse weather conditions • Technical failure of key components • Debt at the holding level • Handling of complicated old EPC projects

COMPANY NOTE

5 December 2014


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BACKGROUND

COMPANY DESCRIPTION

ACTIVITIES The past Colexon develops, owns, operates and improves power generation

facilities that produce PV power. It was created out of the merger of 7C Solarparken (7CSP) and the ‘old’ Colexon. 7CSP was founded in 2008 by Steven de Proost and Peter Van Assche. The ‘old’ Colexon originated from the 2009 reverse-merger of Colexon (wholesale trading, project development) and Danish Renewagy (PV plants owner and operator). After years of restructuring, ‘old’ Colexon was restructured and streamlined into a pure-play PV IPP (independent power provider). At the EGM of 12 December 2014, management will propose to change the group’s name to 7C Solarparken AG.

HISTORY OF THE ‘OLD’ COLEXON

2005-08* 2009-10* 2011-1H12* 2H12-2013* 2014+ **

Business model EPC & trading EPC & Trading + IPP EPC & Trading + IPP IPP IPP

Main assets Purchase contract with First Solar

50MWp IPP in Germany

IPP asset base down to 25MWp

Portfolio Portfolio

Sales-oriented management

Initiation of restructuring Skills to restructure Restructuring

Technical and financial expertise

Main risks Access to off-takers for panels

International project realization

Goodwill of IPP Handling of old EPC projects

Dependency on small number of

key people

Aggressive equity & debt financing

Failed growth story Handling of old EPC projects

Huge cost base lead to solvency constraints

Manage holding cost & debt

Geographies Germany Worldwide Europe Germany Germany

Headcount 20 125 From 125 to 25 20 17

Growth outlook High High Low Low Low

Risk profile Medium High Very High Medium Medium

Source: 7C Solarparken, KBC Securities * management presentation EGM Colexon (15/02/2013) ** KBC Securities The present After the merger between 7CSP and ‘old’ Colexon, the newly-created

group operates 50 projects for a combined total capacity of 71.5MWp. The company's focus is to buy, refurbish and operate/maintain an own-asset portfolio under state-backed feed-in contracts with the aim of producing clean power uncorrelated to the global economy. The Group has built up technical, operational, financial and legal know-high to develop and operate medium-scale PV projects. Colexon also owns a PV Estate business with around 60ha of owned land. Services to its IPP portfolio and consulting to third-parties cover the bulk of the corporate costs.

COMPANY NOTE

5 December 2014


7

The portfolio is relatively young, with an average remaining lifetime

(under FiT) of just over 16 years. The average normal production is budgeted at 1,020 kWh/kWp.

Share price performance Colexon’s share price collapsed as a result of aggressive debt

financing, an unsuccessful international strategy and contraction in EPC & trading activities. A restructuring programme was initiated, whereby Colexon fell back on an IPP model, but still held on to some EPC legacy. Shares started to revive after 7CSP showed interest in late-2012, with an actual merger taking place in early-2014. During the summer of 2014, a 2-for-1 reverse stock split materialized.

SHARE PRICE PERFORMANCE COLEXON -5Y SHARE PRICE PERFORMANCE COLEXON YTD

Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream A call on Germany Colexon has made a strategic call on Germany to maximize

investment security, while it also has some historical exposure – albeit to a lesser extent – to France, Italy and the Benelux. These markets provide regulatory, economic and political stability. This is especially true of Germany, where the Bestandsschutz creates regulatory certainty. Today, >90% of the portfolio is located in Germany, predominantly in the sunnier Bavaria and Saxony regions.

A CALL ON GERMANCY OPERATING DATA

IPP Portfolio Key data

Capacity 71.5MWp Normal production, average 1,020kWh/kWp Remaining lifetime under FIT Slightly above 16 years Most popular inverters SMA, Siemens Most popular panels First Solar, Canadian Solar

Source: Colexon (CMP 29/09/2014)


COMPANY NOTE

5 December 2014


8

POSITION IN THE SOLAR VALUE CHAIN Downstream asset business Colexon operates a downstream asset business with no module

production and limited (heritage) EPC involvement. The recent bankruptcies of SAG Solarstrom, Conergy, Centrosolar and Gehrlicher Solar are proof that the German PV EPC and module production segment were hard hit. Capital Stage on the other hand has proved that an IPP model can succeed, and it is this model that Colexon is developing further.

Technical and financial expertise Colexon’s operations are focused on asset ownership through the

acquisition of operating parks. It has a strong focus on optimisation through technical upgrades and re-financing. Via repairs and optimization, Colexon can maintain a high performance ratio for the existing solar parks, which together with its focus on finance; can also lead to a revaluation of the existing installations. As such Colexon is in permanent dialogue with all stakeholders (landlords, insurance, telecom, EPC company, banks…).

‘old’ Colexon legacy It can use its expertise to review potential acquisitions, which supports

the development of its portfolio. Furthermore it provides O&M services for its own PV parks and for those of others. The latter is mostly limited to the guarantees remaining from the ‘old’ Colexon, which as a former EPC contractor assumed a 5-year product warranty with O&M service contracts that are either unprofitable or in some cases were even offered for free. At the end of 2014, a total of 27MWp external projects were still under contract, the last of which will expire at end-2016.

Component suppliers Since Colexon in some cases owns the land on which its projects are

located (20MWp PV estate potential) or has leasing extension clauses once the 20-year FiT periods expire, it is important that the assets perform consistently well. Project components are sourced from leading suppliers such as First Solar, Canadian Solar, SMA and Siemens.

LARGE VARIETY OF PANEL BRANDS INVERTERS

Source: Colexon (04/06/2014) Source: Colexon (04/06/2014)

First Solar18%

CanadianSolar13%

Moser Baer8%

Solarfun9%Sovello

7%

Gesolar6%

Chaori5%

CEEG PV5%

Solon4%

German Solar4%

Suntech4%

Yingli3%

Others14%

SMA38%

Siemens21%

SolarMax18%

Power One16%

AEG power solutions

4%

Fronius2%

KACO1%

COMPANY NOTE

5 December 2014


9

Relatively high entry barriers The high initial investments, bankability and technical complexity

create relatively high entry barriers, which should favour Colexon, which has already been active in the field for over 5 years.

COLEXON’S OPERATING MODEL

Source: Colexon An example of Colexon’s technical expertise is the turnaround of the

Astenhof (3MWp) installation (part of the Waldeck project), which was in financial distress after some halls on which the PV installation was erected collapsed under the pressure of snow. The Colexon team invested € 4.5m to relocate the project to three different sites, increasing annual EBITDA from € 0.8m to € 1.2m. Management could use this experience with other projects.

A PLAY ON CONSOLIDATION As inflow of new-build projects slows down, since new-build projects

are no longer sufficiently attractive, management believes it should focus on consolidation and the creation of a larger portfolio. Colexon intends to play an active role as a consolidator. As such Colexon is not exposed to development and construction risk as it would have been when developing projects itself.

Drivers of consolidation The drivers of consolidation are: i) fewer new installations;

ii) undermanaged projects; iii) over-leveraged projects; and iv) owners not seeing projects as core parts of their businesses.

Management has been in discussions with customers who signed a

warranty and O&M service contract with the ‘old’ Colexon, to consider a potential re-acquisition of their parks. These installations are well known to Colexon and enjoy high-quality components according to management. In addition management continues to scope the market for ‘distressed’ projects which it believes it can optimize to increase the performance ratio.

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5 December 2014


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Targets projects of 1-5MWp Colexon typically targets project owners and portfolios with a size of 1-

5MWp across Germany. Consolidation should allow Colexon to realize synergies in operating and to finance a larger size portfolio. The market is still very fragmented. German Capital Stage for instance claims to be the leading independent IPP with a market share of 1% across Germany. According to management, the open market for investors is ~45% and consists of three main categories: • 250 kWp: mainly corporates investing on their own roofs, and

leasing firms. • 1-5 MWp: segment of ~15% of the market which consists mainly

of contractors having assets on their books, small developers and fiscally-driven investors. This segment is clearly the most fragmented with more than 1,500 projects and driven by non-strategic investors.

• > 5 MWp: dominated by i) institutional investors (pension funds,

insurance companies, retail funds) and ii) utility-scale operational investors like Capital Stage NV who run an IPP model.

MARKET SEGMENTATION GERMANY ACQUISITION STRATEGY CAPITAL STAGE

Source: Colexon (January 2013) Source: Capital Stage Competition for PV assets Competition for PV assets comes from the insurance sector (i.e.

Allianz, Munich RE, AXA), institutional (infrastructure) funds (i.e. NIBC Infrastructure), closed-end funds, Stadtwerke often via Bürgerenergie (i.e. Stadtwerke Leipzig, Stadtwerke München), retail investors participating in dedicated funds (i.e. Wattner), Energy dealers (i.e. Naturstrom) and IPPs (i.e. Capital Stage, CEE Conetwork, Enerparc). By targeting the 1-5MWp area, Colexon avoids direct competition with larger institutional and insurance investors in our view, while it could become a target itself, having amassed a sufficiently large portfolio.

Large utility> 5MWp

Smallutility

> 1MWp

Large commercial > 250 kWp

Small commercial> 10kWp

Residential< 10kWp

CLOSED MARKET OPEN MARKET

COMPANY NOTE

5 December 2014


11

COMPANY PROJECTS Colexon’s total portfolio amounts to 71.5MWp spread over 50 different

projects (some clustered). Over 75% of the PV projects are ground-mounted, the remaining are erected on rooftops. The average remaining portfolio lifetime is just over 16 years, making it a relatively young asset base. >90% of the projects are located in Germany, the remainder being in France, Italy and the Benelux.

COLEXON – 7CSP MERGER HISTORY

2012-2013: rejection of merger proposal In December 2012, The Belgian company 7CSP tried to acquire the German listed entity Colexon via a reverse-merger. They valued ‘old’ Colexon at € 0.75/share. However, the majority of Colexon’s shareholders voted against the takeover in February 2013.

2014: approval of merger proposal Under a new offer in early-2014, 7CSP was able to convince

Colexon’s shareholders, and acquired newly-issued shares in Colexon in return for an 80% stake, through a reverse acquisition. This valued ‘old’ Colexon at € 0.75/sh (€ 1.50 post reverse stock-split). The legal acquirer is Colexon Energy AG and the economic acquirer (under IFRS) is the Belgian company 7C Solarparken NV, which already owned 25% of Colexon. The ordinary and extraordinary general Meeting of 17 April 2014 approved the reverse-merger between 7CSP and Colexon with a majority of 94.37%. The administrative court had no legal challenges against the transaction.

Reverse stock split The decision for a capital reduction through reverse stock split (2 to 1

shares) has been entered in the commercial register together with that for the contribution in kind of 7CSP Solarparken NV in Colexon Energy against 24.7m new shares (after reverse stock split), thereby making. 7CSP the legal daughter of Colexon Energy AG and the existing 7CSP shareholders, shareholders of Colexon Energy AG.

Option loan It was also decided to issue an option loan with preference rights for

the existing ‘old’ Colexon shareholders. This loan has a planned volume of € 1.5m at a rate of 3% and a duration of one year. Attached to the loan are 4.4m options to buy new shares in Colexon Energy at € 1.56/sh between 1 September 2014 and 31 December 2014, at € 1.76/sh in 2015 and € 1.98/sh in 2016. Quoted prices are after the reverse stock split.

Why Colexon? According to management, the advantages of the proposed

transaction for both groups are: i) integration and optimization synergies; ii) 7CSP can utilize Colexon’s key personnel to reinforce and grow its services business; iii) portfolio will expand to investable size and operational synergies will strengthen geographic clusters; iv) 7CSP’s stock market listing will make it easier to attract new types of investor into the capital.

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EGM of 12 December 2014 An EGM will be held on 12 December 2014 to decide on: i) the change

of corporate headquarters from Hamburg to Bayreuth, ii) a change of the corporate name from Colexon Energy AG to 7C Solarparken AG, iii) the appointment of KPMG as new auditors; iv) the cancellation of own shares previously held by 7C Solarparken NV in Colexon Energy AG; v) the authorization to buy back shares up to 10% of issued capital and iv) the introduction of an allowed capital.

MANAGEMENT STRUCTURE Colexon’s management consists of a team of energy practitioners who

combine individual track-records in fund management, energy law, utilities industry banking, engineering and maintenance of electrical installations.

Management Steven De Proost, founder and CEO of 7CSP, has been Colexon’s

CEO since 1 June 2014. His responsibilities are: strategic & corporate development, investor relations and technical operations. Koen Boriau, former COO of 7CSP, took the role of CFO on 28 May 2014. His responsibilities are project operations, legal affairs and finance. Both are part of the Board of Directors. Jan Habicht (former Colexon) is the Chief Quality Controller, while Philippe Cornelis (former 7CSP) is the Chief O&M.

MANAGEMENT TEAM

Source: Colexon, KBC Securities Supervisory Board The Supervisory Board consists of three members: Markus Keinle

(lawyer), Paul Decraemer (Investment Manager), who will take the role of Chairman, and Joris De Meester (business leader). The latter two are former members of the 7CSP Board of Directors.

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SHAREHOLDER STRUCTURE

Management ownership 7CSP’s former management team has a significant equity stake in the company, but without a blocking majority. For the majority of the shares a 12-month lock-up period began in early October 2014.

Proposed capital reduction Colexon announced that it will host an EGM on 12 December 2014.

The agenda includes, among other things, the proposal to adopt a capital reduction by cancellation of 2.3m (out of 33.6m) of existing own shares. As a result, share capital of € 33.6m will be reduced by € 2.3m to € 31.3m.

Other important shareholders are wealthy Belgian families,

entrepreneurs, value investors, and institutional investors. Just below 20% of the shares (just above 20% post capital reduction) are not bound to the 12-month lock-up. These are the ‘old’ Colexon shareholders. Own shares, held by the ‘old’ Colexon, represent 1.2% of outstanding shares, pre-cancellation, or 1.3% post.

SHAREHOLDER STRUCTURE POST 7CSP – COLEXON TRANSACTION (* IN CASE OF LOCK-UP)

Old shareholder structure New shareholder structure **

Rodolphe de Spoelberch * 11.2% Rodolphe de Spoelberch * 12.0% Power X holding NV * 8.3% Power X holding NV * 8.9% Distri Beheer 21 Comm VA * 8.2% Distri Beheer 21 Comm VA * 8.8% Steven De Proost * 7.2% Steven De Proost * 7.7% Own share, 7CSP (proposed to be cancelled) 6.8% Own share, 7CSP (proposed to be cancelled) 0.0% XIX-Invest NV * 6.1% XIX-Invest NV * 6.5% DVP Invest BVBA * 5.5% DVP Invest BVBA * 5.9% Peter Van Assche * 3.4% Peter Van Assche * 3.6% Viba Sweets GmbH 3.1% Viba Sweets GmbH 3.3% Paul Decraemer * / *** 2.5% Paul Decraemer * 2.7% Sufina Comm VA * 2.2% Sufina Comm VA * 2.4% Black Swan Fund 1 NV * 2.0% Black Swan Fund 1 NV * 2.1% Own shares (old Colexon) 1.2% Own shares (old Colexon) 1.3% Free float, 7CSP shareholder * 17.1% Free float, 7CSP shareholder * 18.4% Free flat, 'old’ Colexon shareholders 15.3% Free flat, 'old’ Colexon shareholders 16.4%

Source: Colexon (CMP 29/09/2014), KBC Securities * adjusted for cancellation of “Own share, 7CSP” as to be proposed at the EGM of 12 December 2014 ** post cancellation of 2.3m in shares *** Chairman of the Supervisory Board

Free Float The free float amounts to 32% pre-cancellation and 35% post

cancellation. Of the free float, respectively 17% and 18% are bound to a 12-month lock-up meaning the actual free float is much lower. Free float excludes ownership of >3% or <3% in the case of key shareholders (Management, Supervisory Board etc).

COMPANY NOTE

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SHINING A LIGHT ON THE BUSINESS

Below we discuss the basics of a PV (photovoltaics) project, the advantages of PV and renewable energy in general, the regulatory context and the economics.

THE BASICS A solar project Solar electricity systems, also known as solar photovoltaics (PV),

capture the sun's energy using photovoltaic cells. These cells don't need direct sunlight to work; they can still generate some electricity on a cloudy day. The cells convert the sunlight into electricity. PV cells are made from layers of semi-conducting material, usually silicon, although alternatives like thin film exist. Groups of cells are mounted together in modules that can be mounted on a roof or installed in a ground-mounted project. The power of a PV cell is measured in kilowatts peak (kWp), which is the rate at which it generates energy at peak performance in full direct sunlight during the summer.

HOW SOLAR WORKS EUROPEAN ANNUAL PV MARKET SCENARIOS UNTIL 2018

Source: Solar Panels Canada, Green Mountain Energy Source: EPIA, KBC Securities Technical and operational characteristics

The main advantages of PV are: i) it’s a proven technology; ii) with a long equipment lifespan (25-30 years); iii) producing electricity at moments of peak demand; iv) with low pollution compared to fossil fuels; v) easy to install and sizable; vi) it’s highly predictable; vii) freely available (sunlight) in contrast to fossil fuels (coal, gas); viii) and with low operating costs.

THE MARKET Global installed capacity and new build Data from the European PV sector organization EPIA shows that over

2013 at least 38GW of PV systems were installed globally, up from 30GW in 2012. This compares to 139GW of total PV installed at end-2013. PV still represents less than 1% of global electricity supply. Almost 11GW of PV capacity was connected to the grid in Europe in 2013, compared to 18GW in 2012 and more than 22GW in 2011.

202 705 985 997 2,023

5,7085,833

13,651

22,259

17,726

10,975

13,04513,65614,505

16,08017,185

6,8526,983

7,4497,955

8,290

0

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical data High scenario Low scenario Medium scenario

MW

COMPANY NOTE

5 December 2014


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For the first time since 2003 Europe has lost its leadership to Asia in

terms of new installations. Germany was the top European market with 3.3GW new connections. Europe remains the world’s leading region in terms of cumulative installed capacity, with 82GW as of 2013. This represents about 59% of the world’s cumulative PV capacity, down from 70% in 2012 and about 75% of the world’s capacity in 2011. Asia Pacific countries are growing fast, with 41GW now installed.

European PV market becomes increasingly challenging

Overall, the future of the European market is uncertain for the coming years. The drastic decrease of some support regimes will push some markets down in 2014 according to EPIA, with a small number of emerging markets in Europe that could offset any major decline. Given these new conditions, the short-term prospects for the European markets are stable in the best case, but could decline. Low and high-end scenarios will also depend on the price of PV modules.

2020 NREAP PV TARGETS BY COUNTRY INDIVIDUAL COUNTRY TARGETS (2020)

Installed MWp 2013 NREAP Comment

Belgium 2,847 1,340 Reached 2011 Bulgaria 1,107 303 Reached 2012 Czech Republic 2,221 1,695 Reached 2010 France 4,473 4,860 Reached 2014 Germany 35,586 51,753 Reached 2020 Greece 2,542 2,200 Reached 2013 Italy 17,861 8,000 Reached 2011 Spain 4,826 8,367 Reached 2020 UK 2,829 2,680 Reached 2013


Source: European Commission, Eurostat, Directive 2009/28/EC, NREAP, EurObserve’ER 2013, RWE Group

EU 20/20/20 Directive Since most renewable energy sources are not yet competitive with the

traditional sources of electricity production, governments have put incentive schemes in place. In Europe, the 20/20/20 Directive sets the framework for individual country policies as Member States are obliged to derive a share of their energy consumption from renewable resources.

52.4%

33.0%

34.4%

31.9%

24.7%

27.8%

26.3%

20.6%

21.3%

20.8%

14.2%

17.9%

13.7%

10.6%

50.2%

40%

38%

34.2%

31%

30.4%

25.3%

24%

24%

22.7%

18.3%

23%

15.3%

Sweden

Latvia

Finland

Austria

Portugal

Estonia

Denmark

Slovenia

Romania

Lithuania

Spain

Bulgaria

France

Slovakia

49%

40%

38%

34%

31%

25%

30%

25%

24%

23%

20%

16%

23%

14%

12.3%

11.1%

11.3%

12.5%

9.8%

13.5%

7.5%

7.0%

6.8%

4.5%

4.2%

8.9%

3.0%

19.6%

15.5%

13.5%

20.2%

13%

16.15%

16%

13%

12.3%

14.5%

15%

3.1%

10.2%

Germany

Poland

Czech Republic

Greece

Hungary

Italy

Ireland

Cyprus

Belgium

Netherlands

UK

Luxembourg

Malta

RES share in gross final energyconsumption in 2012 (%),EurObserv'ER estimation

Gap up to target achievementfor 2020 based on national RESpotential as forecasted by MS(% indicates target achievementas cited in NREAP)

18%

15%

13%

18%

13%

17%

16%

13%

13%

14%

15%

11%

10%

National target for RES sharein gross final energy consumptionin 2020 (according to Directive2009/28/EC)

Ix%

COMPANY NOTE

5 December 2014


16

New “ambitions” for 2030 The European Commission has formulated new “ambitions” for 2030.

Renewable energy is no longer a target as under 20/20/20, but an instrument for reducing greenhouse gas emissions, conditional on being competitive and improving security of supply. By 2030 Member States need to reduce CO2 emissions by 40% versus 1990 (from the current target of -20% by 2020). Europe aims to achieve 27% (up from 20% by 2020 currently) from renewables. All countries can independently choose their fuel mix.

THE ECONOMICS LCOE (evolution) Fraunhofer ISE A study from Fraunhofer Institute for Solar Energy Systems (ISE)

shows that the cost of generating electricity (LCOE: Levelized Cost of Electricity) from renewables has decreased rapidly in recent years and has even caught up with the generation costs from conventional power plants. Forecasts for Germany indicate that the cost of producing electricity from PV and wind will be less than fossil fuel plants by 2030.

EU PRICE TREND CRYSTALLINE MODULES € / WP * LCOE IN GERMANY UP TO 2030

Source: www.europe-solar.de * Chinese, incl. tax Source: Fraunhofer ISE Prognosis of electricity generation costs from renewables and conventional power plants in Germany up to 2030, based on a learning curve analysis. “Electricity Generation Costs from Renewable Energies” (Fraunhofer ISE, November 2013)

We see particular logic in the idea of electricity from PV-installations

being produced close to the point of consumption, avoiding energy distribution and transmission losses, and competing with electricity consumed at the level of the retail client. This narrows the gap to grid parity.

As long as these technologies are not competitive on a stand-alone

basis, government incentive regimes are intended cover the difference between the LCOE of renewable energy sources versus traditional power sources and stimulate new-build. The support is reduced as technologies mature. Given the importance of regulatory support, the stability of these regimes is crucial; retro-active reductions in particular are not allowed. We believe Germany is a good example of a trustworthy regulatory regime (see below).

0.30

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

36 42 51 2 14 17 32 38 2 32 3 20 36 51Min price non bankable, €/w Max price non bankable, €/wMin price bankable, €/w Max price bankable, €/w

Yr 2010 Yr 2011 Yr 2012 Yr 20130.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0.22

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0.22

2013 2018 2023 2028

€/kWh

Photovoltaics

Wind Offshore

Wind Onshore

Biogas Brown coal Hard coal CCGT

COMPANY NOTE

5 December 2014


17

SPVs Since solar projects can be seen as underlying collateral, generating

fixed cash flows. They can be structured in Special Purpose Vehicles (SPV). As a result, financial institutions are typically willing to provide 70-80% of the initial investments with bank debt. This is particularly important since financing is provided at the time when the risk is highest, namely during the construction phase. SPVs are ring-fenced from the holding company which owns the project, without recourse.

A CALL ON GERMANY >90% exposure to Germany with strong regulatory protection

Colexon is >90% exposed to Germany. The German renewable energy regime is called Erneubare Energie Gesetz (EEG) and the country has a binding national target for renewables development. The Bestandsschutz protects investors against retro-active tariff cuts. Despite some debates on the cost of renewable energy support, Germany remains committed to providing a stable regulatory framework. Germany has been a front-runner and is still the centre of the European renewable energy industry, particularly since the decision to completely exit nuclear.

EEG The EEG came into force in 2000 to stimulate renewable energy

investments in the country. The EEG has been amended a number of times, reflecting changes in market conditions and government targets. Incentives for PV are fixed for a period of 20 years with regular review to track installation price trends. The German EEG also guarantees connection and priority off-take by the grid operators. The FIT support is financed by the grid operators who charge the fees to the end-consumers.

EEG review The German government adopted a bill amending the Renewable

Energy Sources Act (EEG). It is intended to cut costs for the support renewables from 1 August 2014 by opening up renewable energy sources to more market competition, while ensuring continued renewables growth. The EEG reform will generally apply to all new plants starting operations on 1 August 2014. The main points of the new EEG that are relevant to PV are: i) renewables growth shall be encouraged to lift their share of the energy mix to 35% (from 25%) by 2020, 40% to 45% by 2025 and 55% to 60% by 2035; ii) annual growth of 2.5GW in PV, onshore wind of 2.5GW, Biomass up to 100MW and offshore wind towards 6.5GW until 2020 and 15GW by 2030; iii) under the EEG 2014, direct marketing will be the rule; only in exceptional cases will operators of renewable plans receive feed-in tariffs, iv) stabilize EEG levy at current levels of € 62.4/MWh (2014). A further revision of the EEG will be introduced by 2017 with a change in system from feed-in tariffs to auctioning (tender-system).

German new build PV barely attractive According to Colexon’s management “the absolute return on new PV

parks is no longer high enough to tease IPPs and industrial operators. Only financial institutions and insurance companies remain attracted by new-build PV due to the spread above the German bund.”

COMPANY NOTE

5 December 2014


18

FINANCIALS

Financial reporting post reverse acquisition

The 7CSP-Colexon transaction is to be regarded as a reverse acquisition (IFRS 3). The buyer is 7C Solarparken NV and the acquiree is Colexon Energy AG. 7CSP first adopted IFRS with the 3Q14 results. Hence, the P&L for 7CSP is shown for the FY14 while the P&L for ‘old’ Colexon is shown from the date of first consolidation (09/09/2014). ‘Old’ Colexon’s balance sheet and off-balance items are marked-to-market and included in the figures of the economic acquirer 7CSP.

In anticipation of the upcoming FY14 IFRS reporting, a review of

FY13’s audited figures for 7CSP has been provided under Belgian GAAP. FY13 will be re-stated as the IFRS figures of 7C Solarparken NV stand-alone. Up to the 1H14 results, the ‘old’ Colexon figures were still shown.

We have begun our own analysis based on the 9M14 IFRS reporting

of 18 November 2014 and the pro-forma figures provided. The figures discussed in this company note are based on guidance provided by Colexon (see presentation Colexon of 29/09/2014). Note that this guidance was provided in an unaudited and non-IFRS form.

CASH FLOW CONVERSION STRATEGY

Source: Colexon (CMP 29/09/2014) Below we discuss the financials of Colexon starting from the initiatives

new management has taken like cost rationalisation, asset efficiency and a selective growth. Management steers the company as a function of cash flow per share (CFPS).

1.COST RATIONALISATION

• Opex savings: € 2m

• Improved managementof warranty periodphase-out and externalO&M contracts

2.ASSET EFFICIENCY

• Major maintenance andoptimisation initiative toincrease thePerformance Ratio by atleast 0.75%

3.SELECTIVE GROWTH

• Consolidate in the1-5MWp segment

• PV Estate build-up tosecure lifetime value

low

low

high

high CAPITAL INTENSITY

CASH FLOW CONVERSION

Objective: CFPS to rise to € 0.40 by 2016, or 20+% per year

COMPANY NOTE

5 December 2014


19

1. Cost rationalisation: integrating ‘old’ Colexon with 7CSP

A first initiative is the launch of a cost rationalisation programme. While over 2013 7CSP employed 0.20 FTEs per MWp owned, at ‘old’ Colexon the level was 0.73. Management targets 0.25 by 2016 for the new group. It has therefore rolled-out a € 2m Opex reduction program 2014-16 that will chase: i) a drastic reduction of hierarchical layers as ‘old Colexon’ counted more middle-management than operational staff. The objective is to save € 0.9m in personnel expenses by 2016, by at least halving the existing number of employees (at the 9M14 results, Colexon employed 18 moving to 17 people); ii) cancellation and renegotiation of 4 expensive contracts (i.e. offices, IT). At the AGM on December 12, 2014, Colexon will propose to move its German HQ from Hamburg to Bayreuth. And iii) internalising consulting competencies from 7CSP to dramatically cut annual spending on management advisory services.

TARGETED OPEX SAVINGS ‘OLD’ COLEXON

Corporate level ‘old’ Colexon (€ m) 2012 2013 2014E 2016E

Personnel expenses -2.5 -1.6 -1.7 -0.6 Other Opex -4.0 -2.4 -1.8 -0.9 o.w. advisory -2.0 -1.2 -0.9 -0.4 o.w. offices & IT -0.8 -0.5 -0.3 -0.1 o.w. others -1.3 -0.6 -0.5 -0.4 Total Opex -6.6 -4.0 -3.5 -1.6

Source: Colexon (CMP 29/09/2014) A second part of the cost rationalisation programme relates to the

improved management of old issues like external warranties and external O&M. As an EPC contractor, Colexon assumed a 5-year product warranty often in combination with O&M service contracts that were either unprofitable or in some cased even offered free of charge. Management estimates that by end-2014, 27MWp’s external projects will still be under contract, and the last contract will expire by end- 2016.

# FTE PER MWP IPP WARRANTY AND O&M LOSS EXPOSURE (MWP) *

Source: Colexon (CMP 29/09/2014) Source: Colexon (CMP 29/09/2014)

* phasing out warranty period and external O&M losses

0.20

0.73

0.25

7C Solarparken, 2013 "old" Colexon, 2013 New group, 2016

6

23

33

48

4541

27

17

1 0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

COMPANY NOTE

5 December 2014


20

EPC warranties Management believes 2014-16 cumulative losses from the external

projects may amount to € 2m at full expiry. This € 2m cash erosion has been accounted for in the 2016 net debt budget. Discussions with different customers are currently underway to consider a potential re-acquisition of their parks, since these installations are said to be well known to Colexon and would have high-quality components. We have assumed the release of € 1m of EPC provisions in 2014, € 0.7m in 2015 and € 0.3m in 2016, based on an above-average total cost of € 30/kWp.

One-offs Over 2014 we assume € 2.8m in one-offs as per the company

guidance, related in part to the restructuring of the ‘old’ Colexon HQ, transaction expenses and the Astenhof re-location. We have assumed no further one-offs over 2015-16.

Holding Structure While the former 7CSP was break-even at holding level as a result of

recurring corporate income from the O&M of own and third-party parks, and consultancy and (PV) real estate income, the new structure in our view is still subject to recurring corporate costs of € 0.5-1.0m (3-6% of Group REBITDA). We believe this is linked to the reporting requirements of being a listed company and the lack of big O&M income at the level of ‘old’ Colexon. By way of comparison, German PV IPP Capital Stage reported an EBITDA Holding loss of € 4m, on a total Group EBITDA of € 50m (8% of Group EBITDA).

2. Asset efficiency Management has analysed the discrepancies in the performance ratio

(PR) between the installations of the ‘old’ Colexon (PR = 77%) and 7CSP (PR = 82%). The difference of 5% can be explained by four items: i) 1.5% degradation relating to differences in age: ii) 1.0% plant availability reflecting different reaction times and best practices monitoring; iii) 1.5% mismatch due to sub-optimal design and a high tolerance range of First Solar panels; and iv) 1.0% related to structural differences in equipment.

ASSET EFFICIENCY SEGMENTATION GERMAN PV INSTALLATIONS


77.0%

82.0%

1.5%

1.0%

1.5%

1.0%

Colexon old Degradation Plantavailability

Mismatch Various 7C Solarparken

26MWp in 2013 41MWp in 2013

Industrial Rooftop < 1MWp

15%

Freefield > 1 MWp26%Commercial

Rooftop < 250kWp46%

Residential rooftop < 10kWp

13%

COMPANY NOTE

5 December 2014


21

Management believes it can increase the availability of the ‘old’

Colexon installations by 1% by transferring best practices, while a mismatch reduction with focus on Thierhaupten and Zernsdorf should lead to another 1% increase in performance ratios. A 0.75% higher performance ratio for the group would imply an increase in EBITDA of ~ € 0.15m. Our model takes this into account.

3. Selective growth Without new investments, EBITDA will decline as assets degrade at

an average of 0.4% p.a. and also because FiT remuneration is fixed, and part of the Opex is inflation-linked. The characteristics of PV assets also mean that the lifetime is typically limited to a 20-year FiT period with a potential extension of 5-10 years. In total, without new investments, EBITDA over time would move to zero. As the remuneration received per MWh of new projects declines, to achieve the same absolute EBITDA, Colexon will need to attract a larger number of projects. Obviously the investment per MWp will also decline in-line with the equipment cost evolution, but conversely more MWp can be bought for the same money. Nevertheless, in a going concern situation, in order to absorb the holding cost, growth in revenues and EBITDA needs to be protected by attracting new projects. The PV Estate portfolio should also offer a certain cushion, especially in terms of protecting the terminal value.

Since Colexon is not involved in the development and construction of

new projects itself, growth is sought through selective acquisitions. Part of the focus is on underperforming assets: i) operating parks with a PR of 75-80%, with known components and identifiable optimisation; ii) parks held by developers, contractors and module suppliers due to a lack of financing; iii) parks not meeting financial covenants that have been transferred to creditors or restructuring departments.

Our calculations suggest that new parks with FIT in November 2014

and at good locations (1,020 kWh/kWp) generate a post-tax equity IRR of ~6%. This should still attract pure financial investors given the spread to German Bunds. Colexon itself calculates 6%. Their internal hurdle rate for growth expansion is to reach an equity IRR of at least 250bps above new-build, excluding optimisation potential.

60ha PV Estate portfolio Next to the 71.5MWp in installed capacity, Colexon owns a PV Estate

portfolio of 60ha. Colexon defines PV Estate as a passive ownership of real estate with PV installations on it. Good reasons to invest in a PV Estate are: i) the recurring cash flows: typically 3-4% of FiT revenues during 20 years; ii) residual value: a PV installation is technically able to run for 25-30 years with the potential to sell electricity to end-consumers; iii) perpetual value: the site can be relicensed as a repowering PV farm or start eventually a new operating life. Management claims yields of at least 8%. Through the ownership of the land, Colexon can also keep the land lease internal.

COMPANY NOTE

5 December 2014


22

PV ESTATE PORTFOLIO > 3m IN NAV

Asset real estate region land size (ha) capacity (MWp) operator

Sandersdorf conversion land Sachsen Anhalt 9.3 5.1 7C Solarparken Zerre * conversion land Sachsen 28.5 8.0 various incl. 7C Solarparken Hausen logistics hall Bayern n.r. 0.1 external Bayreuth office building Bayern n.r. 0.1 7C Solarparken Pflugdorf agricultural land Bayern 16.5 4.4 7C Solarparken Kettershausen agricultural land Bayern 5.1 2.4 Colexon

Source: Colexon (CMP 29/09/2014) * after 20 years operational life Colexon becomes the owner of an additional 5.5MWp currently not owned OUTLOOK 2014-16 Budget 2014 The table below shows the budget of Colexon management for the

year 2014. Focus is on net cash flow (proxy of ‘Funds From Operations’), and Economic EBITDA (‘clean’). Note that IFRS 11 requires the de-consolidation of the Italian operations included under JV Solar SRL, while Colexon’s guidance at end-September 2014 still included 50% of the JVs EBITDA (€ 1.4m at 100%), debt (€ 9.3m) and cash flow (€ 0.9m). Nevertheless, at the 9M14 results published on 18 November 2014, management re-iterated its EBITDA and CFPS guidance, citing a strong outlook for savings, optimisation and growth.

KEY FIGURES 2014 ***

7CSP 7CSP ‘old' Colexon New Group

(Unaudited) (€ m) 1H14 2014 (budget) 2014 (budget) 2014 (budget)

Revenues 6.7 12.5 11.4 23.9 EBITDA 5.7 10.3 3.1 13.4 Economic EBITDA 5.7 10.3 2.3 12.6 One-time effects -0.1 -0.1 -2.6 -2.8 Economic EBITDA 'clean' 5.9 10.5 4.9 15.4 Net cash flow 4.0 6.8 -0.9 5.9 Net cash flow 'clean' 4.1 6.9 1.7 8.7 Net economic debt * 69.1 74.7 58.6 133.3 # shares (m) ** 24.7 *** 8.9 33.6 CFPS (per share) 0.28 0.20 0.26

Source: Colexon (CMP 29/09/2014) * own shares are not deducted from debt ** own shares are included in the outstanding shares *** set before the deconsolidation of the Italian JVs

2014 forecasts In spite of a good 1H14, the summer was less sunny and as such

2014 looks to become a normal year with regard to irradiation. On a pro-forma basis Economic EBITDA ‘clean’ is budgeted at € 15.4m (€ 15.7m KBCSe) Management expects € 2.8m in one-off costs mostly related to the Astenhof relocation costs at the level of Colexon, which will take Economic EBITDA to € 12.6m (€ 12.9m KBCSe). The year-end debt position should be higher versus 1H14 at the level of 7CSP given the consolidation of the newly-acquired Pflugdorf project (4.4MWp + 16.5ha agricultural land). On a pro-forma basis, Net cash flow ‘clean’ is seen at € 8.7m (€ 8.6m KBCSe) or a CFPS at € 0.26/sh (€ 0.26 KBCSe).

COMPANY NOTE

5 December 2014


23

ECONOMIC EBITDA BRIDGE GUIDANCE 2014-16 (€ m) ECONOMIC DEBT 2014-16 GUIDANCE (€ th)

Source: Colexon (CMP 29/09/2014) Source: Colexon (CMP 29/09/2014) 2015 forecasts There is no concrete guidance for 2015. However, adjusting 2014

Economic EBITDA ‘clean’ for the expected cost savings, asset efficiency, the full impact of Waldeck and Pflugdorf, and additional growth, we arrive at Economic EBITDA ‘clean’ of € 18.6m. Assuming lower interest cash outs, Net cash flow ‘clean’ would amount to € 11.8m. With debt servicing (including corporate loans and Anleihe) at € 13.7m, a new project to be financed (€ 4.9m debt, hence we assume € 2.1m equity) and the release of EPC-related provisions (€ 0.6m KBCSe) management falls € 4.6m short, so would need to tap into its liquidity position of € 7.4m (KBCSe) at end-2014 according to our calculations. Other options are to re-finance the corporate loans and Anleihe (€ 2.9m), bring forward cash trapped in the DSRAs (~€ 8-9m KBCSe), re-finance existing projects, rotate its portfolio, sell own shares (€ 0.6m) or raise additional funding.

2016 forecasts For 2016 management guides for Economic EBITDA ‘clean’ of € 20m

(€ 20m KBCSe). Net cash flow per share is seen at € 0.40/sh (€ 0.45 KBCSe), which would imply cash flow of € 13.4m (€ 14.1m KBCSe). Company guidance assumes 33.6m shares, while we have already adjusted for the proposed cancellation of 2.3m in shares. The delta between EBITDA and net cash flow mainly relates to interest payments since Colexon does not yet pay tax.

Irradiation volatility of -5/+5% has a € -1m / € +1m impact on

Economic EBITDA ‘clean’. 2016 debt repayments are seen at € 10.7m, which would imply that

over 2016 alone liquidity would improve. Management can use this liquidity to acquire new projects. Post 2015, we have not assumed any new projects in our model.

15.4

20.0

1.9 0.150.7

1.2 0.6

2014 proforma

Cost savings Assetefficiency

Full impactWaldeck

Full impactPflugdorf

Additionalgrowth

2016guidance

149,402

130,372

1,3501,500

5,460

5,548

4,960

5,116

4,904

Grosseconomicdebt 2014

Corporateloan 7C,

2015

AnleiheColexon,

2015

Projectdebt IPP7C, 2015

Projectdebt IPP7C, 2016

Projectdebt IPPColexon,

2015

Projectdebt IPPColexon,

2016

Newproject,2015

Grosseconomicdebt 2016

COMPANY NOTE

5 December 2014


24

GUIDANCE 2014-16 ***

(Unaudited) (€ m) 2014 2016

Revenues 23.9 Economic EBITDA 'clean' (REBITDA) 15.4 20.0 _margin 65% n/a Net cash flow 5.9 n/a Net cash flow 'clean' 8.7 13.4 NCF 'clean' - EBITDA 'clean' -6.7 -6.6 Gross economic debt 149.4 130.4 DSRA, Bausparcash, free liquidity 16.1 15.4 o.w. DSRA 8.4 o.w. Bausparcash 2.4 o.w. Liquidity 5.3 Net economic debt * 133.3 115.0 # shares (m) ** 33.6 33.6 CFPS (per share) ** 0.26 0.40

Source: Colexon (CMP 29/09/2014) * own shares not deducted from debt ** own shares former 7CSP assumed to be cancelled conform with 24/10/2014 announcement by Colexon to propose cancellation of 2.3m shares at a EGM to be held on 12/10/2014 *** set before the deconsolidation of the Italian JVs Consolidated numbers Below we present 9M14 reported numbers and our forecast for 2014-

16. For comparison purposes we added 2014 in a pro-forma format accounting for the full consolidation of ‘old’ Colexon. Our figures are broadly in-line with management guidance and our revenues calculation start from the MWp installed, average operating hours and FiTs and direct marketing received. We have deconsolidated the Italian JVs. We only assume fairly low revenues from the Holding. We have assumed corporate costs will fall after the announced restructuring and Opex at the project level of € 25/MWp. One-off costs of € 2.8m are only assumed for 2014. Note that the reported 2014 IFRS numbers are distorted by these and other one-offs, in particular badwill and revaluation effects resulting from the purchase price allocation (PPA) methodology related to the reverse acquisition of Colexon. Below EBITDA, figures are distorted by the fact that Colexon is a heavy user of deferred taxes given the phase of growth; while financial income over 2014 is furthermore impacted by a capital gain on own Colexon shares and income from associates, relating to the Italian JVs (IFRS 10/11).

SHORT P&L

(IFRS) (€ m) 9M14A PF ** 9M14A * 2014E PF ** 2014E * 2015E 2016E

Revenues 19.4 12.0 21.6 14.1 24.1 24.3 One-off expenses -1.9 -6.6 -1.3 -6.1 0.0 0.0 EBITDA 16.7 16.9 17.1 17.3 18.6 20.0 _margin 86% 141% 79% 122% 77% 82% REBITDA 14.8 10.3 15.7 11.2 18.6 20.0 _margin 76% 86% 73% 79% 77% 82%

Source: Colexon, KBC Securities * as reported ** pro-forma

COMPANY NOTE

5 December 2014


25

Medium-term expectations Excluding external growth, Colexon’s revenues and EBITDA should

remain fairly stable until 2027 as the PV parks receive a fixed FiT for 20 years, and only a small part of project Opex is inflation linked. Based on our analysis of Colexon’s portfolio, the last project will exit the FiT-period in 2033. Management expects to be able to produce electricity for at least another 5 years after the FiT expires, although this will happen at prevailing market prices, which are significantly below the FiTs of the current portfolio.

Cash flow per share Management is steering the company as a function of cash flow per

share (CFPS), which it believes strikes the right balance between operational income and debt leverage. CFPS is defined as Economic EBITDA ‘clean’ (REBITDA) after interest and tax payments, or as Funds from Operations (FFO). We believe this is a fairer metric than EBITDA and net profit since it adjusts for non-cash items that often blur IFRS numbers.

In addition, management will ensure that new investments or potential

disposals, and capital increases or capital reductions have an immediate accretive effect on CFPS. With no additional investments, we believe lower interest paid is the main growth driver of cash flow per share.

Colexon announced that it would hold an EGM on 12 December 2014.

The agenda includes the proposal to adopt a capital reduction by cancelling 2.3m existing own shares, out of 33.6m shares currently outstanding. At the 9M14 results management confirmed its guidance to grow CPFS by at least 20% p.a. 2014-16 to reach € 0.40 per share. This guidance does not take into account the cancellation of own shares, and excludes the Italian JVs (2MWp). Our 2016 forecast of € 0.45 per share (CAGR 2014-16 32%) already accounts for the cancellation of the 2.3m own shares. Before cancellation we are at € 0.42 per share.

CASH FLOW PER SHARE TARGET FORECASTED NET DEBT / EBITDA EVOLUTION


0.230.26

0.280.26

0.40

2012 2013 2014 2014 PF 2015 2016

CFPS 2014-16

12.0

7.3

8.7x

< 6.0x

2014 2015 2016

Colexon 7C Solarparken New group

COMPANY NOTE

5 December 2014


26

CASH FLOW PER SHARE CALCULATION

(IFRS) (€ m) 9M14 PF ** 2014E PF ** 2015E * 2016E *

REBITDA (Economic EBITDA ‘clean’) 14.8 15.7 18.6 20.0 - Cash interests -5.1 -7.1 -6.8 -6.1 - Taxes paid 0.0 0.0 0.0 0.0 = Net Cash Flow 9.7 8.6 11.8 14.0 # shares outstanding 33.6 33.6 31.3 31.3 CFPS 0.29 0.26 0.38 0.45 CPPS (Colexon guidance) *** > € 0.26 > € 0.40

Source: Colexon, KBC Securities * as reported ** pro-forma *** set based on 33.6m of shares outstanding Debt position Economic debt, which is defined as the nominal value of debt to be re-

reimbursed, or financial debt as per IFRS adjusted for value of swaps and valuation changes, is seen at € 149.4m at end-2014. Colexon expects to have an available liquidity of € 5.3m by end-2014 (€ 7.4m KBCSe), while € 8.4m is restricted cash or cash trapped in the DSRA accounts and another € 2.4m is cash trapped in Bausparkonto. As such, Net economic debt is guided at € 133.3m at end-2014 (€ 127.6m 9M14). Guidance still includes the Italian JVs. We are at € 133.9m including the JVs and at € 129.3m excluding. Management expects gross debt to drop to € 130.4m by 2016, in line with the maturity profile. Based on the further build-up of DSRA, Bausparcash and free liquidity, it expects Net economic debt (incl. Italian JVs) to fall to below € 115m by 2016. We are at € 111.8m. These figures assume cash-outs related to historical cases and warranties at € 2m before 2016, while economic net debt does not take into account the value of own shares.

BALANCE SHEET

(IFRS) (€ m) 9M14 2014E 2015E 2016E

Non-Current Assets 195.6 193.1 190.0 179.1 Current Assets 33.5 29.2 24.6 27.3 o.w. cash & cash equivalents 22.5 18.2 13.6 16.3

o.w. other current assets 11.0 11.0 11.0 11.0

Total Assets 229.1 222.4 214.6 206.3 Total Equity 41.1 37.0 38.8 42.1 Non-current liabilities 167.0 167.0 157.4 145.9 o.w. Long term debt 141.0 141.0 132.4 121.5

o.w. other 26.0 26.0 25.0 24.4

Current Liabilities 21.0 18.4 18.4 18.4 o.w. Short term debt 11.5 8.9 8.9 8.9

o.w. other 9.5 9.5 9.5 9.5

Total Liabilities 229.1 222.4 214.6 206.3

Source: Colexon, KBC Securities Leverage Net economic debt / economic EBITDA is targeted well below 6.5x by

2016, which according to management offers a sufficient window to start paying dividends or to see growth accelerating through re-financing. We see end-2016 Net Economic Debt / REBITDA at 5.6x.

COMPANY NOTE

5 December 2014


27

In search of optimum financing According to the company, banks tend to accept 7.5x EBITDA as

optimum financing on IPP parks. This is at the high end of what renewable energy IPPs typically present (5.5x), although Colexon is supported by its exposure to Germany, and a holding cost which it continues to manage well. These larger IPP peers also typically pay-out a dividend which could require a different leverage. The allowed spread could drive management to add additional leverage to its existing portfolio by refinancing the existing bank debt. This would enable additional cash trapped in the projects to be released, depending on the prevailing DSRA (EBITDA / interest + debt) criteria.

BALANCE SHEET RATIOS

€ m 2014E * 2015E 2016E

Financial debt (IFRS) 149.8 141.3 130.4 Economic debt 147.5 138.9 128.1 Economic debt Italian JVs (50%) 4.7 4.2 3.7 Cash 18.2 13.6 16.3 o.w. DSRA 8.4 8.4 8.4 o.w. Bausparcash 2.4 2.4 2.4 o.w. Liquidity 7.4 2.8 5.5 Net debt (IFRS) 131.6 127.6 114.1 Net economic debt 129.3 125.3 111.8 Net economic debt (incl. Italian JVs) 133.9 129.5 115.5 Net debt / REBITDA (IFRS) 8.4 6.9 5.7 Net economic debt / REBITDA 8.2 6.7 5.6 Net Economic Debt / REBITDA (incl. Italian JVs) 8.1 6.7 5.6

Source: Colexon, KBC Securities * pro-forma Colexon may pay out a dividend in the future when the portfolio

reaches a decent size.

COMPANY NOTE

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VALUATION

Below we present our valuation framework which consists of a peer analysis and a DCF (FCFE) framework.

PEER ANALYSIS Shortcomings of a peer analysis We acknowledge that a peer comparison has its shortcomings given

the differences in regulation, returns, asset mix, business strategy and leverage. Another shortcoming of using multiples is that these often fail to capture the timing of future cash flow and required capital spending. However, peer multiples are still one of the most commonly-used valuation metrics, especially in the renewables space.

Capital stage In selecting our peer universe, we understand that the German and

Canadian markets have similar regulatory protection, and numerous listed renewable energy IPPs, though companies listed in Canada are often much larger and more liquid. However, again the business mix of the companies observed is very diverse. Within the full universe, we see Capital Stage as Colexon’s closest peer, owning primarily a PV portfolio (>80% of revenues), with a focus on Germany (>70%).

7CSP NV value creation track record According to the company, consecutive capital increases were

executed at an average multiple of 5.0x CFPS (Cash Flow Per Share) and 10.5x EV/EBITDA for the year ahead. Management said it has doubled CFPS over the last three years.

PEER COMPARISION

EV / EBITDA

Country Market cap (m) Currency FY14 FY15 FY16

Capital Stage Germany 334 Euro 8.6 6.9 6.1 Alerion Clean Power Italy 115 Euro 9.6 8.5 7.7 Boralex Canada 369 Canadian Dollar 9.7 9.3 8.0 Falck Renewables Italy 291 Euro 7.1 6.1 5.9 EDP Renovaveis Portugal 4,710 Euro 8.9 7.7 7.0 Enel Green Power Italy 9,470 Euro 8.5 8.1 7.4 Brookfield Renewables Canada 7,152 Canadian Dollar 11.0 11.5 11.0 Transalta Renewables Canada 988 Canadian Dollar 11.7 11.2 10.9 Innergex Canada 789 Canadian Dollar 15.9 15.5 15.7 Etrion Sweden 114 Swedish Krona 17.2 10.9 7.9 Average

10.8 9.6 8.7

Source: JCF, Capital Stage, KBC Securities Based on an average 2015 peer EV/EBITDA we obtain a fair value of

€ 1.75/sh while at Capital Stage’s 2015 P/CF metric (4.8x), we obtain a fair value of € 1.86/sh. Note that we have taken into account the cancellation of 2.3m own shares as of 2015.

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DCF (FCFE) Free Cash Flow to Equity (FCFE) The stable, semi-regulated cash flows of Colexon provide a good

basis for a DCF valuation. We have chosen a FCFE-based DCF approach. We believe this best captures the post-tax returns required by investors. Our FCFE definition starts with FFO, and we adjust for the release of cash trapped in the DSRA and Bausparkonto accounts over time, the changes in debt and capex needs. We assume a 20-year FiT period for the portfolio and a 5-year life-time extension at a conservative EBITDA margin of € 5/MWh. In some cases Colexon owns the land while in other cases it has an operating licence to produce PV power for 30 years. This so-called “golden end” is highly profitable as the projects are amortized and all debt has been repaid. We have also assumed the holding growing with inflation. Our valuation model assumes Colexon will not pay tax until 2018, then moving gradually to a tax rate of 30%. This results in an average tax rate over our DCF (FCFE) lifetime of ~20%.

Discount rate We have used a discount rate (post tax equity IRR) of 6.0%. This

implies a post-tax WACC of 4.55%, which compares to Capital Stage using a WACC of 4.37% to 4.53% in its latest impairment test. Investors are increasingly looking for fixed returns and some investors (i.e. retail, Bürgerenergie, insurers, pension funds etc.) are targeting a post-tax equity IRR of 6%. This is still well ahead of the current Germany Bund Yield. Colexon itself chases an IRR of 250bps on top of new-build projects, which yield ~6%. An industry analysis and our own COE calculation suggest that a post-tax equity return of 6-7% is normal in the current macro-economic climate.

We have added to our NPV (2015-38) the free liquidity at end-2014

(€ 7.4m), the book value of the Italian JVs (€ 1.5m) and the value of own shares (€ 0.6m). We have not added the € 3.0m NAV of the PV Estate since a big part of that value is already included in our FFO forecasts, and because we do not assume any residual holding or dismantling costs. Capital Stage assumed the future scrap value of PV parks at roughly equal the dismantling costs.

Based on this valuation method, we obtain a fair value of € 1.61 per

share. A 5% lower or higher output than budgeted would impact our fair value by ~15%.

No growth assumed Our base case scenario does not assume any terminal value.

Additional value could be created by acquiring underperforming assets, buying assets on a debt free basis and adding leverage, extending debt maturity of existing projects or taking the holding to the break-even level. Assuming 1% terminal growth in our DCF via the ‘Ewige Rente’ methodology (COE – g), would add 10% to the value.

COMPANY NOTE

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DCF FCFE-MODEL (€ m) OPTIMUM VALUE BY GROWING THE PORTFOLIO

NPV (sum) 2015-2038 40.8

Free liquidity end 2014 7.4

Own shares 0.6

Italy JV (Book Value) 1.5

Equity Value 50.3

N° of shares 31.3

€ / share 1.61

Source: Colexon, Source: Ernst & Young STRATEGIC ACTION M&A ? With a portfolio nearing 100MWp, and new-build IRRs in Germany at

all-time lows, Colexon might come on to the radar of larger institutional investors or maybe even utilities and Stadtwerke, looking to grow their portfolios. This also fits with the launch of various YieldCos. Investors in larger portfolios are generally willing to accept lower returns because they benefit from diversifications, and they avoid exposure to development and construction risk. This is also confirmed by E&Y, which plotted the required returns against the portfolio size (see graph above). An acquisition is not our base case scenario.

Strategic partnership? A strategic partner might also be an option. As a reference, in

November, Capital Stage closed a long-term partnership with the insurance company Gothaer Group, where the latter provided investment capital of € 150m. We believe Colexon management should first merge 7C Solarparken with ‘old’ Colexon and keep a tight grip on holding costs.

VALUATION SUMMARY Accumulate TP € 1.70 Our valuation model, which is based on peer multiples (50%

weighting) (EV/EBITDA, P/CF) and DCF (FCFE) (50% weighting), yields a fair value of € 1.70 (6-months). This compares to the warrant value of the option loan of € 1.56 (2014), € 1.76 (2015) and € 1.98 (2016). Since this option valuation was set, Colexon has begun restructuring the ‘old’ Colexon, has purchased Pflugdorf and has re-located Astenhof (Waldeck). With 14% upside to our TP of € 1.70 we initiate coverage with an Accumulate rating.

COMPANY NOTE

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FINANCIAL DATA Income statement (€ m) 2014E 2015E 2016E 2017E Sales 14.1 24.1 24.3 24.3 COGS 5.0 -2.7 -2.2 -2.2 Gross profit 19.2 21.3 22.2 22.1 Operating costs -8.5 -12.0 -11.6 -11.6 Other income & costs 0.0 0.0 0.0 0.0 EBIT 10.7 9.3 10.6 10.5 Net interest -4.7 -6.8 -6.1 -5.4 Other non-operating 1.5 0.2 0.2 0.2 Pre-tax earnings 7.5 2.7 4.8 5.3 Taxes -0.6 -0.9 -1.5 -1.7 Associates 0.0 0.0 0.0 0.0 Discontinued & other 0.0 0.0 0.0 0.0 Consolidated earnings 6.8 1.8 3.2 3.6 Minority interests -0.1 -0.3 -0.3 -0.3 Net earnings 6.7 1.5 2.9 3.3 Depreciation and amortisation -6.6 -9.3 -9.4 -9.4 Amortisation other intangibles/ Impairments 0.0 0.0 0.0 0.0 Non recurring elements included in EBIT -6.1 0.0 0.0 0.0 REBITDA 11.2 18.6 20.0 20.0 EBITDA 17.3 18.6 20.0 20.0 REBITA 4.6 9.3 10.6 10.5 EBITA 10.7 9.3 10.6 10.5 Net earnings from continued operations 6.7 1.5 2.9 3.3 Adjusted net earnings -0.8 1.5 2.9 3.3 Balance sheet (€ m) 2014E 2015E 2016E 2017E Intangible assets 0.8 0.8 0.8 0.8 Tangible assets 177.6 175.4 165.9 156.5 Financial assets 1.5 1.5 1.5 1.5 Other assets 17.6 16.8 15.2 13.5 Inventories 0.3 0.3 0.3 0.3 Receivables 6.3 6.3 6.3 6.3 Cash & equivalents 18.2 13.6 16.3 19.8 TOTAL ASSETS 222.4 214.6 206.3 198.8 Equity 36.8 38.7 41.9 45.5 Minorities 0.2 0.2 0.2 0.2 Provisions 1.2 1.2 1.2 1.2 LT financial debt 141.0 132.4 121.5 110.7 Other liabilities 30.0 29.0 28.3 28.0 Payables 4.4 4.4 4.4 4.4 ST financial debt 8.9 8.9 8.9 8.9 TOTAL LIABILITIES 222.4 214.6 206.3 198.8 Net working capital 2.1 2.1 2.1 2.1 Capital employed 176.3 173.2 162.2 151.1 Net debt 131.6 127.6 114.1 99.7 Net debt, incl. off-balance items 131.6 127.6 114.1 99.7 Cash flow statement (€ m) 2014E 2015E 2016E 2017E Consolidated earnings 6.7 1.5 2.9 3.3 Depreciation, amortisation & impairment 6.6 9.3 9.4 9.4 Other cash flow from operations 5.8 0.0 1.0 1.5 Change in working capital -2.3 0.0 0.0 0.0 CASH FLOW FROM OPERATIONS 16.9 10.8 13.3 14.2 Net capital expenditure -88.1 -7.0 0.0 0.0 Acquisitions / disposals 0.0 0.0 0.0 0.0 Other cash flow from investments 0.0 0.0 0.0 0.0 CASH FLOW FROM INVESTMENTS -88.1 -7.0 0.0 0.0 Dividend payments 0.0 0.0 0.0 0.0 Shares issues 8.7 0.0 0.0 0.0 New borrowings / reimbursements 70.1 -8.4 -10.7 -10.7 Other cash flow from financing 0.0 0.0 0.0 0.0 CASH FLOW FROM FINANCING 78.8 -8.4 -10.7 -10.7 Fx and changes to consolidation scope 1.3 0.0 0.0 0.0 CHANGE IN CASH & EQUIVALENTS 8.8 -4.6 2.6 3.6 Free cash-flow -71.2 3.8 13.3 14.2 Change in net debt 131.6 -4.0 -13.5 -14.4

COMPANY NOTE

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Performance criteria 2014E 2015E 2016E 2017E Sales growth - 70.4% 1.2% -0.1% Gross profit growth - 11.3% 4.1% -0.3% REBITDA growth - 65.8% 7.8% -0.4% EBITDA growth - 7.5% 7.8% -0.4% REBITA growth - 102.4% 14.2% -0.8% EBIT growth - -12.8% 14.2% -0.8% Pe-tax earnings growth - -64.0% 76.5% 11.5% Net earnings growth - -77.4% 92.5% 12.8% Earnings growth from continued operations - -77.4% 92.5% 12.8% Adjusted earnings growth - -298.9% 92.5% 12.8% Gross margin 135.6% 88.6% 91.2% 91.0% REBITDA margin 79.4% 77.2% 82.3% 82.1% EBITDA margin 122.3% 77.2% 82.3% 82.1% REBITA margin 32.5% 38.7% 43.6% 43.4% EBIT margin 75.5% 38.7% 43.6% 43.4% Net working capital / sales 15.0% 8.8% 8.7% 8.7% CAPEX/ Sales 623.9% 29.1% 0.0% 0.0% FCF / Sales -504.4% 15.7% 54.7% 58.6% Depreciation / Capital Expenditure 7.5% 132.5% - - Capital expenditure / EBITDA 510.0% 37.7% 0.0% 0.0% Net debt / Equity + Minorities 355.7% 328.7% 271.3% 218.3% Net debt / EBITDA 7.6 6.9 5.7 5.0 EBITDA / net interest 3.7 2.7 3.3 3.7 Pay-out ratio - - - - Net earnings margin 47.5% 6.3% 12.0% 13.6% x CE turnover (Sales / avg. CE) 0.1 0.1 0.1 0.2 x Leverage (avg. CE / avg. equity) 4.8 4.6 4.2 3.6 = Return on Equity (avg) 18.2% 4.0% 7.3% 7.5% Return on Equity - adjusted -2.1% 4.0% 7.3% 7.5% Return on Capital Employed 5.5% 3.6% 4.3% 4.6% Return on Capital Employed - adjusted 2.4% 3.6% 4.3% 4.6% Per share data (€) 2014E 2015E 2016E 2017E weighted average # shares (m) 33.59 31.30 31.30 31.30 weighted average # shares, diluted (m) 33.59 31.30 31.30 31.30 Basic EPS 0.20 0.05 0.09 0.11 Adjusted EPS -0.02 0.05 0.09 0.11 Diluted EPS 0.20 0.05 0.09 0.11 Diluted, adjusted EPS -0.02 0.05 0.09 0.11 Diluted EPS: y/y growth - -75.7% 92.5% 12.8% Diluted EPS: CAGR 3Y - -19.2% 34.0% 11.0% Adjusted, diluted EPS: y/y growth - - 92.5% 12.8% Adjusted, diluted EPS: CAGR 3Y - - 34.0% 11.0% REBITDA / share 0.33 0.59 0.64 0.64 EBITDA / share 0.51 0.59 0.64 0.64 REBITA/share 0.14 0.30 0.34 0.34 EBIT/ share 0.32 0.30 0.34 0.34 Net book value / share 1.10 1.24 1.34 1.45 Free cash flow / share -2.12 0.12 0.43 0.45 Dividend (€) 0.00 0.00 0.00 0.00 Valuation data 2014E 2015E 2016E 2017E Max share price (€) 1.54 - - - Min share price (€) 1.10 - - - Reference share price (€) 1.49 1.49 1.49 1.49 Reference market capitalisation 49.9 46.5 46.5 46.5 Enterprise value (€ m) 181.5 174.2 160.7 146.2 P/E - 30.6 15.9 14.1 EV/sales 12.9 7.2 6.6 6.0 EV/REBITDA 16.2 9.4 8.0 7.3 EV/EBITDA 10.5 9.4 8.0 7.3 EV/REBITA 39.5 18.7 15.1 13.9 EV/EBIT 17.0 18.7 15.1 13.9 EV/Capital employed 1.0 1.0 1.0 1.0 P/ NBV 1.4 1.2 1.1 1.0 Free cash flow yield -142.6% 8.1% 28.6% 30.6% Dividend yield 0.0% 0.0% 0.0% 0.0% Source: KBC Securities *Historic valuation data are based on historic prices

COMPANY NOTE

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DISCLOSURE & DISCLAIMER SECTION The company disclosures can also be consulted on our website http://www.kbcsecurities.com/disclosures. KBC Securities uses an absolute rating system including terms such as Buy, Accumulate, Hold, Reduce and Sell (see definitions below). Definition

BUY Expected total return (including dividends) of 10% or more over a 6-month period

ACCUMULATE Expected total return (including dividends) between 0% and 15% over a 6-month period

HOLD Expected total return (including dividends) between -5% and 5% over a 6-month period

REDUCE Expected total return (including dividends) between –15% and 0% over a 6-month period

SELL Expected total return (including dividends) of -10% or worse over a 6-month period Due to external factors and in exceptional cases, KBC Securities allows the use of ratings such as Accept the Offer, Black Out, No Recommendation or Suspended. Our analysts assign one of those ratings based on their investment outlook and valuation for the concerned stock. The valuation can be based on different methodologies such as DCF (discounted cash flow), absolute multiples, peer group multiples, sum-of-parts or NAV (Net Asset Value). The valuation is reflected in a 6-month target price. Occasionally, the expected total return may fall outside of these ranges because of price movement and/or volatility. Such deviations will be permitted but will be closely monitored. Investors should carefully read the definitions of all ratings used in each research report. In addition, since the report contains more complete information concerning the analyst’s view, investors should carefully read the entire report and not infer its contents from the rating alone. KBC Securities may disclose the drafts of its reports to the issuers before their dissemination for the purpose of verifying the accuracy of factual statements, except when the draft includes a rating or a target price. In case the draft has been amended following this disclosure, such amendments will be indicated in the concerned report.

Stock rating % of covered universe % of covered universe with investment banking relationship during last year

BUY 22.20% 0.00%

ACCUMULATE 34.20% 0.00%

HOLD 40.20% 0.00%

REDUCE 1.70% 0.00%

SELL 1.70% 0.00% Colexon develops, owns, operates and improves power generation facilities that produce PV power. The price target for Colexon Energy AG is based on following parameters: Discounted Cash Flow (DCF), Peer Group Multiples The risks which may impede the achievement of our price target are: Relative small scale. Dependent on small number of key people. Not break-even at holding level which is also not debt free. Old EPC legacy. Weather volatility. Any reference made to a DCF valuation for Colexon Energy AG is based on the following parameters: a forecast period from 2015 until 2038, a perpetual growth rate of 0% and a calculated WACC of 6%. Below is an overview of the stock ratings and target price history in the last 12 months for the stock described in this report.

Date Rating Target price

2014-12-05 Accumulate € 1.70 KBC Securities will provide periodic updates on companies/industries based on company-specific developments or announcements, market conditions or any other publicly available information.

http://www.kbcsecurities.com/disclosures

COMPANY NOTE

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CONTACT DETAILS

ANALYST TEAM Analyst Contact Coverage

Wouter Vanderhaeghen (Head of Research) +32 2 429 37 30 Shipping & Industrials Jan De Kerpel +32 2 429 84 67 Biotech & Pharma Ruben Devos +32 2 429 58 43 Telco & Media Matthias De Wit +32 2 429 37 17 Financials Yves Franco +32 2 429 45 04 Holdings & Staffing Dieter Furniere +32 2 429 18 96 Engineering, Transport & Utilities Wim Hoste +32 2 429 37 13 Chemicals & Breweries Guy Sips +32 2 429 30 02 Small & Midcaps Benelux Koen Overlaet-Michiels +32 2 429 37 21 Real Estate Alan Vandenberghe +32 2 429 18 06 Credit Research Dirk Verbiesen +32 2 429 39 41 Oil Services & Construction Pascale Weber +32 2 429 37 32 Retail & Food Producers EQUITY SALES TEAM Sales Contact

Sebastien Fuki (Head of Sales) +32 2 417 53 43 Stefaan De Lathouwer +32 2 417 44 68 Xavier Gossaert +32 2 417 53 68 Margo Joris +32 2 417 25 66 Kris Kippers +32 2 417 28 08 Augustin Lanne +32 2 417 51 45 Tim Leemans +32 2 417 32 28 Marco Miserez +32 2 417 36 81 Sales (US) Hubert Dubrule (Head of US Sales) +1 212 845 22 74 Sebastiaan Pol +1 212 845 20 52 Sofie Van Gijsel +1 212 541 06 48 Sales Trading Isabel Sebreghts +32 2 417 63 63 Tim Leemans +32 2 417 32 28 Marco Miserez +32 2 417 36 81 Loïc De Smet +32 2 417 36 99 BOND SALES TEAM Sales Contact

Alexander Lehmann (Head of Sales) +32 2 417 46 25 Maurizio Bartolo +32 2 417 48 02 Bert Beckx +32 2 417 31 57 Toon Boyen +32 2 417 25 65 Valentin Checa +32 2 417 25 40 Alban Kerdranvat +32 2 417 25 45 Bart Mathijssen +32 2 417 57 12 Koen Princen +32 2 417 44 65

COMPANY NOTE

5 December 2014

Copyright © 2014 KBC Securities

The company disclosures can be consulted on our website http://www.kbcsecurities.com/disclosures.

KBC Securities NV Havenlaan 12 Avenue du Port 1080 Brussels Belgium +32 2 417 44 04 Regulated by FSMA and NBB

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Analyst certification: The analysts identified in this report each certify, with respect to the companies or securities that the individual analyses that (i) the views expressed in this publication reflect his or her personal views about the subject companies and securities, and (ii) he or she receives compensation that is based upon various factors, including his or her employer’s total revenues, a portion of which are generated by his or her employer’s investment banking activities, but not in exchange for expressing the specific recommendation(s) in this report. This publication has been prepared by KBC Securities NV which is regulated by FSMA (Financial Services and Markets Authority) and by NBB (National Bank of Belgium) or one of its European subsidiaries (together "KBC Securities"). This publication is provided for informational purposes only and is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. This document is not produced by KBC Securities USA, Inc. No part of this publication may be reproduced in any manner without the prior written consent of KBC Securities.

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