Ardour Gamesa

1

Projects delayed, but not canceled We initiate coverage with an ACCUMULATE rating and price target of €11.50. We expect near term uncertainty to weigh on the stock. Despite large framework agreements, management delivered a somber outlook for 2009. We are positive on the Company beyond 2009 and believe Gamesa will be able to build on its leading position. The Company is vertically integrated with production facilities in all major markets and Gamesa benefits from a close relationship with the Spanish Utility Iberdrola.

Poor outlook weighs on the stock. Management guides towards a reduction in sales in 2009 and an increase in working capital due to the Company continuing to sell wind farms in the US and China as well as Gamesa selling 30% - 40% of its turbines into the spot market in 2009 up from <5% in 2008. These sales have less favorable payment terms.

Framework contracts. Although Gamesa boasts one of the largest order backlogs for the entire sector, we believe large framework contracts do not give clear visibility into future order intake. Some of its strategic accounts have delayed orders due to the current economic environment.

Not so bad after all. Gamesa has credit lines of €1.4b in place and should have no trouble financing the increase in working capital. Furthermore, we expect its large strategic accounts will resume placing orders in 2010. We expect news on the proposed JV with Iberdrola Renovables to act as a catalyst for the stock.

Stock has been oversold. Our price target of €11.50 is derived from the sum of our valuations for Gamesa’s turbine business and its wind farm activities. We assign a multiple of 12.0x to our 2010E adj. EPS and value the wind project JV with a DCF model. Although our price target implies 23.1% upside we would not be aggressive buyers due to our belief that investors will remain concerned about its ability to manage costs in a market slow down environment.

Key figures 2008A 2009E 2010E 2011E Sales (€m ) 3,651.0 3,358.0 4,415.0 5,502.7 EBIT (€m) 204.9 208.2 313.5 434.7 EBIT margin (%) 5.6% 6.2% 7.1% 7.9% Net income (€m) 320.0 155.7 211.2 304.1 Consolidated EPS (€) 1.32 0.64 0.87 1.25

Quarterly EPS 1Q 0.14 0.06 0.12 0.18 2Q 0.38 0.15 0.23 0.33 3Q 0.66 0.15 0.23 0.34 4Q 0.13 0.28 0.29 0.41

Adjusted P/E (x) 14.5 17.4 11.2 7.7 EV/EBITDA (x) 4.9 5.3 3.9 3.0 Book value per share (€) 6.2 6.8 7.7 9.0 FCF (€) 410.0 (378.7) 260.5 223.1

Rating information Rating ACCUMULATE Price target €11.50 Previous closing price €9.34

Price performance

€ 0

€ 10

€ 20

€ 30

€ 40

3/16/08 6/16/08 9/16/08 12/16/08 3/16/09 Source: Bloomberg and Ardour Capital Investments International GmbH

Market data Market cap (€m) 2,282.0 Shares outstanding (m) 243.3 Avg. daily volume (3mo) 2,165,936 52-week range (€) 7.74 - 36.18 Primary Exchange Continuous Free float 68.0%

Shareholder structure

Iberdrola, S.A 23.9% Lolland S.A 5.0% Blackrock Investment 3.4% Marsico Capital 3.1% Barclays Bank 3.0% Others 61.6%

Source: Company and Ardour Capital Investments International GmbH

See pages 13 - 14 for important foreign affiliate disclosures, rating and price target changes, analyst certification, and additional disclosures. Notice to US investors: This research report has been prepared in whole or in part by foreign research analysts who are associated persons of Ardour Capital Investments LLC. These research analysts are not registered/qualified as research analysts with the NYSE and/or NASD, but instead have satisfied the registration/qualification requirements or other research related standards of a foreign jurisdiction that have been recognized for these purposes by NYSE and NASD.

March 17, 2009

Initiating Coverage Wind Energy

GAMESA (GAM/MCE) ACCUMULATE

Analyst Name: Scott McCollister

Phone No. +49 (0)30 275 74 855

e-mail: [email protected]

GAMESA CORPORACIONS TECHNOLOGICA SA

2

PROFILE Gamesa is an integrated wind turbine manufacturer and wind project developer. The Company is one of the world’s largest wind turbine manufacturers with a market share of 12.2% in 2008. Gamesa delivered 3,303MW of turbines to its customers in 2008, up from 2,919MW in 2007. The Company has its headquarters in Spain and has established production facilities in Spain, the US and China.

Gamesa has undergone major transformations having divested its non-core businesses (aeronautics and solar) and recently formed a JV with Iberdrola Renovables to develop and operate wind farms in Europe. Gamesa benefits from this close relationship with Iberdrola, which is also a major shareholder with a 23.9% holding.

Management publish three year business plans and recently delivered on their 2006-08 plan which set the goals of an EBITDA CAGR of 15.0%, a ROCE of 16.0% and financial strength (measured by net debt / EBITDA) of <2.5x for the period.

Table 11: Actual vs targeted performance for 2008

Figure 38: 2008 Target Consolidated 2008 Turbine Manufacturing + holding) Growth CAGR EBITDA

05-08 > 15% CAGR EBITDA 05-08 + 18%

CAGR EBITDA 05-08 + 40%

Profitability ROCE > 16% ROCE = 15%* ROCE = 25% Financial Strength

NFD/EBITDA < 2.5x

NFD/EBITDA 0.1x

NFD/EBITDA -0.3x

Cash Flow Generation

> € 200 mil. 05-08

~ € 1.000 mil. 05-08

~ € 1.000 mil. 05-08

Source: The Company and Ardour Capital Investments International GmbH

In the new 2009-11 business plan, management is targeting a ROCE of >25.0%, EBIT of 11.0% and market share of greater than or equal to 16.0%. According to our market growth estimates this would translate into ~6,500MW annual production capacity in 2011.

PRODUCTION FACILITIES Gamesa has been investing in facilities in Spain, the US and China. At the end of 2008, Gamesa produced 3,600MW, of which 2,200MW (61%) came from of Spain, 500MW (14%) from China and 900MW (25%) from the US.

In China, the Company set up its first operation in 2006 and now operates a fully integrated production center Tianjin. At this location, Gamesa has nacelle assembly and generator and gearbox production capacity. Gamesa will begin marketing its 2.0MW turbine in China. It is a larger turbine than the sub-megawatt turbine which it currently produces for this market. European manufacturers are increasingly marketing multi megawatt turbines in China as a way of offering a superior turbine to those currently produced by domestic competitors.

In the US, Gamesa established nacelle assembly and tower and blade production facilities in 2006. The site is one of the largest in the US. In 2008, it produced 900MW equating to ~11% of the US market. In 2009, Gamesa intends to increase nacelle and blade capacity by 30% through higher productivity.

Gamesa targets 6,000MW of operational capacity in 2010.

Gamesa is the only wind turbine company that pays a dividend.


3

Table 12: Gamesa capacity development and targets 2005 2008 2011

% of WTG total cost

% In-house

Δ capacity (MW)

Year end capacity (MW)

% In-house

% In-house

25% Nacelles 100% 2,000 > 3,800 100% 100%

20% Blades* 100% 2,800 > 4,000 80% 80%

15% Gearbox 40% 1,600 2,300 60% 60%

5% Generator 50% 1,000 > 1,800 50% 60%

7% Electric cab. 30% 3,500 Units > 4,400 > 50% 60%

25% Towers* 30% 2,300 > 3,600 > 50% 50%

* Includes supply from strategic alliances


Looking forward, Gamesa is continuing its growth path. In Spain, Gamesa is establishing an automated 900MW blade facility which is targeted for mass production in 2011. In India, Gamesa will bring the MADE nacelle facility on line. Gamesa targets 200MW of capacity by the end of 2009.

WIND FARM PROMOTION Gamesa intends to exit the wind farm development business and become a pure turbine manufacturer. The first step in this direction was taken in June 2008 when Gamesa and Iberdrola Renovables announced that the two companies intend to establish a JV for the promotion and operation of wind farms in Europe. The two companies pooled their European development business (excluding UK) into the JV, thereby creating an entity with a 22GW development pipeline.

Gamesa’s stake in the JV for European wind farms (excluding Spain) is 24.0% (IBR 76.0%). For wind farms in Spain, Gamesa will have a stake of 23% (IBR 77.0%). Gamesa’s stake could increase to 32.0% depending on the number of MWs awarded to Gamesa by 2010. Gamesa put its development activities in Spain (5,114MW) and Rest of Europe (5,002MW) into the JV.

Figure 18: Wind portfolio in MW

Gamesa Total Prior WF

Portfolio (MW)

6,690

1,826

5,114

5,002

940

0

5,000

10,000

15,000

20,000

1

RoW

Rest

Spain

China

USA

Promotion Portfolio

(Continental Europe)

10,000

22,000

0

5,000

10,000

15,000

20,000

25,000

Gamesa Joint Venture


The remaining projects in Gamesa’s wind development portfolio were classified as rest of world (ROW) with 940MW, USA with 6,690MW and China with 1,826MW. The ROW assets are in the process of being sold to Iberdrola for €65m. When the sale is finalized we expect that €25m will be recorded as income in discontinued operations.

We expect the JV to be finalised by end of 1H09.


4

The move to a pure turbine manufacturer will be completed when Gamesa divests its project development activities in China and the US. Current market conditions are likely to slow this process and Gamesa will most likely continue developing projects in these two markets. Gamesa targets the sale of 250MW of wind farms in the US and 50MW in China in 2009.

BENEFITS OF THE JV The formation of this JV gives Gamesa visibility into future order volume. It will allow Gamesa to capture some of the value added from operating wind farms, and it will eliminate corporate governance issues that arose when Gamesa sold turbines to its largest shareholder.

Gamesa will gain from having a stake in the value add that was normally transferred to the owner of the project. We estimate this amount to be somewhere between the net present value of a wind farm (€0.3m to €0.5m per MW) and the amount that Gamesa would have earned if it had sold the wind farm outright (€0.2m per MW on an EBITDA level). After 2010, Gamesa will have the option to sell its stake in the JV to Iberdrola Renovables.

Until then Gamesa will be able to receive a portion of profits from the JV. The formation of the JV for Gamesa actually lowers near term earnings in exchange for capturing more of the value in the future. The two companies have disclosed little about how the JV will develop, and we expect guidance in the first half of 2009.

ORDER BACK LOG Gamesa’s order backlog was bolstered with the formation of the JV with Iberdrola Renovables. According to the deal, Gamesa will supply 4,500MW of turbines over the 2010-12 time period. The 1,500MW per year represents an increase of 600MW per year, as compared to the original 2006-09 frame work contract between the two companies. 2,800MW of the 4,500MW are to be supplied to the JV. The contract covers 25% of Gamesa’s goal of producing 6,000MW in 2010. These new orders increased Gamesa’s backlog to 11,700MW at the end of 2008.

Figure 19: Impact of JV on orders in MW

913 9131,552 2,902

4,653

7,803

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Before to the agreement after the agreement

China USA EU & RW


In addition to the 4,500MW of orders from Iberdrola Renovables, Gamesa’s order backlog grew with orders from Longyuan Electric Power Group of China, Endesa (ELE/MCE–NR), EDP (EDPR/ELI–NR), Sorgenia Group and Molinos del Ebro.

Although the Company will capture more of the value added, earnings will be lower in the near term.


5

2008 EARNINGS ANALYSIS For 2008, Gamesa grew sales 26.9% y-o-y to €3,651m of which €152m was from wind farm sales and the remaining €3,499m was from turbine sales. Gamesa’s ASP for turbines for the year (sales/deliveries in MW) was €0.95m/MW up from €0.85m per MW in 2007. Prices were up on higher commodity prices as well as increased demand.

The number of turbines delivered and sold increased from 2,919MW and 3,289MW in 2007 to 3,303MW and 3,684MW in 2008 respectively. World market share based on turbines delivered decreased from 14.5% in 2007 to 12.2% in 2008.

New Chinese entrants have been growing fast and are capturing market share. Chinese turbines are produced almost exclusively for the Asian market. We do not see their growth as a large threat to Gamesa’s US and European sales.

Gamesa reported that EBITDA from its wind turbine business increased from €393m in 2007 to €531m in 2008. The figures do not include holding costs and vary from reported EBITDA at the consolidated level. Results are seasonal with 4Q being the strongest.

Figure 20: WC to sales in €m EBITDA in €m

-

200

400

600

800

1,000

1,200

1Q/07 3Q/07 1Q/08 3Q/08

0%

10%

20%

30%

40%

Sales Margin

-

50

100

150

200

1Q/07 3Q/07 1Q/08 3Q/08

0%

5%

10%

15%

20%

EBITDA Margin


EBIT increased to €205m from €162m in 2007. The margin remained flat y-o-y at 5.6%. Gains of two percentage points at the gross profit level were offset by higher other operating costs and depreciation. The net financial result improved to (€46m) versus (€65m) owing to more favorable balance between cash and debt.

The results are typically weighted heavily towards 4Q but an extraordinary provision reduced 4Q08 profit from continuing operations. The provision was due to a decision to accelerate depreciation on some older equipment. Profit from continuing operations in 2008 came in at €155m of which only €5m was recorded in 4Q08. With profit from discontinued operations (sale of solar and wind farm business areas) of €165m the Company reported consolidated net income of €320m versus €222m in 2007.

The balance sheet had cash and equivalents of €529m and a net debt position of €206m vs €212m in 2007. The debt to equity ratio improved from 66.8% in 2007 to 48.7% in 2008. Working capital was flat y-o-y at 23.6%. For an explanation of working capital please refer to page 43.

An extra provision cuts into earnings from continuing operations.


6

OUTLOOK FOR 2009 For 2009, we project negative sales growth of 8% y-o-y to €3,358m followed by a resumption of the growth trend in 2010 of 31.5% growth in 2010E and 24.6% in 2011E. Our estimates are driven by our industry demand model, ASP expectations and our capacity model for Gamesa.

The negative growth this year is due to our estimate that 3,200MW will be sold versus 3,684MW in 2008. Gamesa projects they will sell 30% to 40% of their turbines into the spot market in 2009. From this we take away, that its large strategic accounts are not placing actual orders as outlined in their framework contracts. Our projections are at the low end of guidance to account for low visibility into the spot market.

We forecast MW production to grow at a three year CAGR of 11.5% for the period through 2011E to 5,110MW. This figure is low compared to Gamesa’s goal of a capacity of 6,000MW in 2010. We believe the Company will achieve this rate of production in 2012E or sooner when demand warrants it.

At the EBIT level, we forecast an increase in margin for 2009E to 6.2%, which is at the low end of management guidance. Looking over the 2010-2012 time periods we project margin expansion to 8.5%. This is due to improved product mix with larger turbines, cost cutting measures and process optimization. We target EBIT of €208m for 2009E.

The divestment of the wind project development and other non-core businesses will however negatively impact the bottom line. We forecast a negative net income CAGR of 1.5% for 2009-11E. Our continued operations net income estimate for 2009E is €131m. With net income from discontinued operations of €25m we project consolidate net income of €156m. In terms of EPS continuing operations is €0.54 and consolidated EPS is €0.64.

Table 13: Ardour vs Consensus

(€m) Year Low Mean High Ardour Difference

Sales 09E 2,612 3,307.4 4,260 3,358.0 1.5%

10E 1,934 3,776.2 5,438 4,415.0 16.9%

11E 3,107 4,634.0 6,687 5,502.7 18.7%

EBIT 09E 90 247.0 492 208.2 (15.7%)

10E 105 304.6 599 313.5 2.9%

11E 155 402.1 811 434.7 8.1%

EPS (€) 09E 0.34 0.78 1.75 0.54 (31.0%)

10E 0.25 0.92 2.16 0.83 (9.1%)

11E 0.31 1.31 2.70 1.22 (7.0%)

Source: Bloomberg and Ardour Capital Investments International GmbH

Looking to consensus, our estimates vary greatly from the mean. This is due to Gamesa having undergone a major change with the formation of its JV. Many analysts have not yet updated their estimates. We believe the formation of the JV will result in a reduction in earnings in the short term.

Fewer megawatts to be sold in 2009 interrupts growth trend this year.

Management guide to sales of €3.3b to €3.6b, an EBIT margin of 6% - 7% and a working capital to sales ratio of 35% - 45%.


7

Balance sheet & cash flow

Working capital to sales jumps to 42.9% this year compared to 23.6% in 2008. The increase in working capital is largely due to the Company selling up to 40% of its turbines in 2008 to the spot market compared to <5% in 2008. Selling into this market means that Gamesa has less favorable payment terms. We believe Gamesa is less likely to receive prepayments and final payment terms could also be extended. Gamesa may not receive payment for turbines delivered in 4Q09 until 2010.

According to our estimates this will result in a €625m investment in working capital. Of this amount, €576m will be in the turbine business unit bringing working capital to sales to 23.5% up from 5.0% in 2008. The remaining €48m in working capital comes from the US and China wind farm business area. We project a working capital to sales ratio of 210% up from an estimated 205% in 2008. Gamesa has a syndicated credit line of €1,400m through 2010 and we do not project a short fall in liquidity.

Management has caused much confusion on the working capital issue when they reported in their 2008 annual results presentation that working capital to sales will increase from <5% in 2008 to 35-45% in 2009. On face value this has caused much concern in the market as investors quickly deduced that the working capital investment could exceed €1,000m in 2009. The truth behind the numbers is the 5% figure only represents the turbine business, while the 2009 working capital guidance of 35-45% includes both business areas. When comparing like with like; projected investment in working capital is €300m to €600m less depending which end of the guidance is achieved.

Table 14: What is what with working capital in €m 2006A 2007A 2008A 2009E 2010E 2011E 2012E

Working Capital for Group 905 753 862 1,487 1,437 1,559 1,833

WC % of sales 37.9% 23.1% 23.6% 41.5% 32.5% 28.3% 26.7%

Turbine

Sales 1,922 2,800 3,499 3,196 3,960 4,957 6,214

Working Capital 634 168 175 751 936 1,068 1,243

% of Sales 33.0% 6.0% 5.0% 23.5% 23.6% 21.5% 20.0%

Wind Farm

Sales 472 576 335 350 455 546 655

Working Capital 427 516 687 735 500 491 590

% of Sales 90.5% 89.6% 205.1% 210.0% 110.0% 90.0% 90.0%

Source: Ardour Capital Investments International GmbH

Looking to 2010-12 time period we look to see the working capital to sales in the turbine business area trend down to 20%. Gamesa has a high level of vertical integration and we believe that it will require higher investments in working capital then its peers. For the US and China wind farm business area we project the working capital to sales percentage will trend down to 90% in 2012. This is in line with what was achieved in 2006 and 2007.

Gamesa’s existing credit lines will cover our projected investment in working capital.


8

SUM OF PARTS VALUATION

We initiate coverage on Gamesa with an Accumulate rating and set a price target of €11.50. While our price target implies 23.1% upside, we feel negative sentiment could weigh on the stock and we would not be aggressive buyers at present. Our primary valuation method is a sum-of-the-parts approach, which we consider the most appropriate due to Gamesa’s business activities in wind turbine manufacturing and wind farm promotion with Iberdrola Renovables.

Table 15: Gamesa sum of the parts In € Continuing operations 12x 2010E adjusted EPS 10.00 Wind development portfolio JV Iberdrola 1.50 Price target 11.50 Source: Ardour Capital Investments International GmbH

For Gamesa’s core business, we assign a 12x multiple to our 2010E adjusted EPS forecast for continuing operations of €0.83 producing a value of €10.00. We believe that Gamesa should trade at a 14.2% discount to Vestas due to the projected build up in working capital, debt levels and unclear communications. We also feel that Gamesa, with its high fixed asset base, could be the most exposed to margin pressure if sales volume does not increase.

As outlined on the following page, we value the JV stake at €1.50 per share with a DCF. Including the wind operations, our price target implies a 2010E P/E multiple of 13.8x for Gamesa.


9

PROJECT DEVELOPMENT JV For Gamesa’s stake in the JV with Iberdrola Renovables, we have calculated a value of €367m, which equates to 24% of the sum of the net present values per MW installed in the future discounted to 2009.

Our net present value per MW of €0.35m is calculated using a discounted cash flow model that has the following key inputs: WACC of 8.0%, 2,200 hours of full load operation per turbine, an average selling price of €95/MWh and an EBITDA margin of 73%. Based on our assumption that investors will require similar rates of return for projects completed this year as in the future, we have assumed that the present value of projects at time of completion in future years will be similar to present value of projects completed today.

Since the announcement in mid-2008, little information has been disclosed about the JV. Our estimates for MWs installed are inline with guidance of 2,800MW during the 2009-12 time period.

We do not assume Gamesa will sell its stake at the end of 2012, and we project that the two companies will continue to co-develop projects.

To account for risks in the pipeline beyond 2012 we adjusted our figures based on a 25% probability that the JV will continue to add MW per annum. We expect news on the JV in the coming months when the deal has been finalized. At that time we will adjust our estimates.

The 750MW to third parties are projects which Gamesa had already committed to third parties. The contribution from these sales flows into our EPS for discontinued operations.

Table 16: Wind farm development at JV

in €m 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E

MW 350 600 600 800 800 800 800 800 800 800 Free cash Flow 123 210 210 280 280 280 280 280 280 280 PV of FCF's 123 194 180 222 206 191 176 163 151 140 Base case 123 193 178 220 204 48 44 41 38 35 Third Party MW 250 250 250

PV of FCF's 1,122

Terminal value 281

Third Party 128

EV of JV 1,531

GAM 24% 367

Per share € 1.50 Source: Ardour Capital Investments International GmbH


10

DCF MODEL As a sense check we use a DCF model with a WACC of 10.3%. This derives a fair value of €17.92 per share. The difference between the two valuations stems from the fact that the DCF capturers the long term growth while the PE multiple focuses on near term earnings. We did feel, as with the other reports, it was relevant to present this model as it illustrates the value of the Company based on projected cash flows and not current market dynamics which often become disconnected from fundamentals.

• EBIT margin will grow from 6.2% in 2009 to 9.1% in 2013.

• Free cash flow will turn positive in 2010E.

• CAPEX to sales will trend down to 2.8% in 2012.

• Working capital to sales will trend down to 26.7% in 2012.

Table 17: Gamesa DCF

Free Cash Flow Valuation (€m) 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ESales 3,358 4,415 5,503 6,869 7,962 9,225 10,590 11,926 13,349 14,522 % growth -8.0% 31.5% 24.6% 24.8% 15.9% 15.9% 14.8% 12.6% 11.9% 8.8%

EBIT 208 313 435 584 725 821 932 1,038 1,108 1,205 EBIT margin % 6.2% 7.1% 7.9% 8.5% 9.1% 8.9% 8.8% 8.7% 8.3% 8.3%

NOPLAT 156 235 326 438 543 616 699 778 831 904 depreciation 94 110 138 137 143 166 191 215 240 261 - Working capital changes (577) 4 (122) (274) (332) (254) (264) (254) (263) (227) - Others 98 65 54 48 44 40 38 36 34 32 Operating cash flow (229) 414 396 349 399 568 663 775 842 970 - CAPEX (150) (154) (172) (193) (216) (242) (271) (304) (340) (381) Free cash flow (379) 260 223 156 182 326 392 471 501 589 Discount rate 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3%Years 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 Present value factor 0.91 0.82 0.74 0.67 0.61 0.55 0.50 0.46 0.41 0.37 Present value, FCF (343) 214 166 105 111 180 197 214 207 220

Terminal EBITDA Multiple(€m) 18 5x 6x 7x 8xPresent value, explicit period 1,272 8% 18.72 21.43 24.14 26.85Present value, terminal value 3,289 Discount Rate 9% 17.12 19.59 22.06 24.53Enterprise value 4,560 10% 15.67 17.92 20.18 22.43 - Debt (735) 11% 14.34 16.40 18.46 20.52 + Cash/Marketable securities (FY08A) 529 Shareholder value 4,355 AssumptionsShares outstanding m 243 WACC 10.3% Sales CAGR (09-12) 17.1%Share Price Valuation € 17.92 Term. Period EBITDA €m 11.0% Sales CAGR (13-18) 13.3%



11

SUMMARY FINANCIAL DATA

Regional sales

39%

21%

13%

17%

10%

Spain USAChina Rest o f EuropeRest o f World


Sales and EBIT margin

0

2,000

4,000

6,000

8,000

2005 2007 2009E 2011E

0%

2%

4%

6%

8%

10%


CAPEX to sales

0%

2%

4%

6%

8%

10%

2005 2007 2009E 2011E Source: Company and Ardour Capital Investments International GmbH

Working capital to sales

0%

10%

20%

30%

40%

50%

60%

2005 2007 2009E 2011E


Key metrics 2008A 2009E 2010E 2011E 2012E Sales growth 26.9% (8.0%) 31.5% 24.6% 24.8% EBITDA margin 13.6% 14.0% 14.4% 15.0% 15.0% EBIT margin 5.6% 6.2% 7.1% 7.9% 8.5% ROCE (%) 14.0% 10.0% 15.1% 19.8% 23.8% ROE (%) 21.2% 9.4% 11.3% 14.0% 15.7% Working cap /sales % 23.6% 42.9% 32.5% 28.3% 26.7% CAPEX/sales (%) 4.3% 4.5% 3.5% 3.1% 2.8% Debt to equity 48.7% 71.2% 64.2% 54.9% 43.3% Net debt (€m) 205.6 658.4 453.5 266.5 118.0 Asset turnover 0.8 0.6 0.7 0.8 0.8 Income statement (€m) 2008A 2009E 2010E 2011E 2012E MW 3,684 3,200 4,500 5,110 6,160 Sales 3,651.0 3,358.0 4,415.0 5,502.7 6,869.4 Gross profit 1,093.3 1,017.5 1,337.7 1,667.3 2,060.8 SGA (597.8) (547.4) (702.0) (841.9) (1,030.4) Other cost 495.0 470.1 635.8 825.4 1,030.4 EBITDA (92.0) (94.0) (110.4) (137.6) (137.4) Dep. & amortization (198.1) (167.9) (211.9) (253.1) (309.1) EBIT 204.9 208.2 313.5 434.7 583.9 Net fin. result (45.7) (63.0) (62.9) (64.7) (56.3) EBT 159.1 145.2 250.6 370.1 527.6 Income tax (4.0) (14.5) (47.6) (74.0) (131.9) Profit (Con.) 155.0 130.7 203.0 296.0 395.7 Profit (Discount.) 165.0 25.0 8.2 8.1 11.3 Consol. net profit 320.0 155.7 211.2 304.1 407.0 EPS 1.32 0.64 0.87 1.25 1.67 EPS adjusted 0.64 0.54 0.83 1.22 1.63 Balance sheet (€m) 2008A 2009E 2010E 2011E 2012E

Cash and equiv. 529.0 525.6 749.3 929.8 1,000.8 Inventories 829.0 1,208.9 1,545.3 1,870.9 2,266.9 Acc. Receivable 1,491.0 1,443.9 1,898.5 2,256.1 2,782.1 Financial and other 74.0 75.5 77.0 78.5 80.1 Current assets 2,923.0 3,253.9 4,269.9 5,135.4 6,129.9 Intangible Assets 447.5 469.9 493.4 518.0 543.9 Property, P& E 331.2 380.9 419.0 452.5 488.7 Defer tax assets 272.3 285.9 300.2 315.2 331.0 Assets for sale 801.0 881.0 657.0 657.0 766.2 Total assets 4,775.0 5,271.6 6,139.5 7,078.1 8,259.7 Trade payables 2,048.7 1,846.9 2,384.1 2,916.4 3,640.8 Defer tax (others) 98.4 100.7 123.6 143.1 164.9 Fin. Liabilities ST 231.6 357.0 364.1 345.9 328.6 Current liabilities 2,378.7 2,304.6 2,871.9 3,405.4 4,134.3 Fin. liabilities. LT 255.0 579.0 590.6 602.4 542.2 Provisions / others 372.5 429.5 496.9 576.9 672.0 Lia. for sale (fin. debt) 262.8 294.8 305.3 314.4 325.3 Total liabilities 3,269.0 3,607.9 4,264.7 4,899.2 5,673.8 Shareholder equity 1,508.0 1,663.7 1,874.8 2,179.0 2,585.9

12

OTHER PUBLIC COMPANIES MENTIONED IN THIS REPORT

Closing prices as of March 16, 2009

COMPANY SYMBOL EXCHANGE PRICE RATING

ACCIONA SA ANA MCE €81.45 NR AMERICAN INTERNATIONAL GROUP AIG NYSE $0.83 NR BABCOCK & BROWN WIND PARTNER BBW ASX AUD0.85 NR BORALEX INC -CL 'A' BLX TSE CAD6.55 NR BP PLC BP LON £4.59 NR CHINA HIGH SPEED TRANSMISSION 658 HKG HKD9.27 NR DONGFANG ELECTRIC CORP LTD-A 600875 SHA CNY31.95 NR EDF ENERGIES NOUVELLES SA EEN EPA €29.72 NR EDISON INTERNATIONAL EIX NYSE $28.77 NR EDP RENOVAVEIS SA EDPR ELI €5.87 NR ENDESA SA ELE MCE €14.70 NR ENEL SPA ENEL BIT €3.49 NR ERG RENEW SPA EGR BIT €0.65 NR GALP ENERGIA SGPS SA-B SHRS GALP ELI €8.73 NR GDF SUEZ SZE EPA €26.23 NR GENERAL ELECTRIC CO GE NYSE $9.66 NR GREENTECH ENERGY SYSTEMS GES CPH DKK9.00 NR HANSEN TRANSMISSIONS INT HSN LON £0.84 NR IBERDROLA RENOVABLES SA IBR MCE €2.99 NR LEHMAN BROTHERS LEHMQ OTC $0.04 NR RWE AG RWE FRA €51.56 NR SCOTTISH & SOUTHERN ENERGY SSE LON £11.17 NR SIEMENS AG-REG SIE FRA €44.34 NR SUZLON ENERGY LIMITED 532667 BOM INR35.20 NR TERNA ENERGY SA TENERG ATH €3.98 NR THEOLIA TEO EPA €2.26 NR VEOLIA ENVIRONNEMENT VIE EPA €16.47 NR WACHOVIA / WELLS FARGO & CO WFC NYSE $13.70 NR XINJIANG GOLDWIND SCI&TECH-A 002202 SHE CNY35.40 NR

13

ANALYST CERTIFICATION I, Scott McCollister, hereby certify that the views expressed in this research report accurately reflect my personal views about the companies under coverage and the securities of each. I also certify that I have not been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report. FOREIGN AFFILIATE DISCLOSURE This report has been prepared by Ardour Capital Investments, LLC or its affiliate Ardour Capital Investments International, GmbH, both of which are subsidiaries of Ardour Capital Partners, LLC (collectively Ardour Capital). Ardour Capital Investments, LLC is regulated by the FINRA and the United States Securities and Exchange Commission, and its headquarters are located at 350 5th Avenue, Suite 3018, New York, NY 10118. Ardour Capital Investments International GmbH is registered in Germany, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), and is located at Oranienburger Straße 23, 10178 Berlin. Research analysts from Ardour Capital International GmbH are not registered/qualified pursuant to NYSE and NASD qualifications and are not subject to NASD Rule 2711 and incorporated NYSE Rule 472 restrictions or communications with a subject company, public appearances, and trading securities held by a research analyst account. In the United States, this report is distributed by Ardour Capital Investments, LLC. Disclosures in this section and in the DISCLAIMER section referencing Ardour Capital include all affiliated entities unless otherwise specified. RATINGS METHODOLOGY Ardour Capital uses a ratings system for research reports consisting of the following categories, BUY, ACCUMULATE, HOLD, REDUCE, and SELL. These ratings will cover the intermediate time frame, which we define as 12 months into the future. A buy rating will be assigned to a company considered to possess outstanding growth prospects by the covering analyst. Metrics will include an expected common stock appreciation of at least 20% for the intermediate future. This expected appreciation will be substantiated by a clearly defined and prominently displayed valuation methodology. An accumulate rating will be assigned to a company considered to have positive upside stock appreciation potential between 10% and 20%. However, in some cases, quantitative analysis will forecast stock price appreciation of greater than 20%, but extenuating circumstances will lead the analyst to assign an accumulate, as opposed to a more aggressive buy rating. The analyst’s reasoning will be clearly stated in the investment summary section of the report. A hold rating will be assigned to a company that is expected to experience flat to moderate growth in the intermediate future. As with an accumulate rating, quantitative measures may point to a more aggressive rating; however, the covering analyst may have near-term concerns that will be prominently spelled out in the investment summary section of the report. This growth may be deemed attributable to purely industry dynamics and not necessarily fundamental issues. A reduce rating will be assigned to a company that the analyst believes is nearing the target price or is overvalued due to an unexplained run-up in the stock price. The analyst now recommends that investors should take some profit. A sell rating will be assigned to a company that either is experiencing fundamental difficulties, or the stock price has exceeded the analyst’s target price. • Ardour Capital Investments, LLC does not currently receive compensation of any kind from Gamesa Corporacions

Technologica SA. • As of January 1, 2009, the breakdown of ratings of all companies Ardour Capital follows is, by percentage:

Buy/Accumulate = 64.0%, Hold/Suspend = 30.0%, Reduce/Sell = 6.0%. • As of January 1, 2009, the breakdown of ratings of all companies Ardour Capital follows and receives or has received

investment banking compensation from in the previous year is, by percentage: Buy/Accumulate = 0%, Hold = 0%, Reduce/Sell = 0%.

DISCLAIMER This material has been prepared and/or issued by Ardour Capital Investments, LLC and or one of its consultants or affiliates. This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other instruments mentioned in it. The information, including any third-party information, may not be accurate or complete in its entirety, and it should not be relied upon as such. Ardour Capital Investments, LLC and its affiliate Ardour Capital Investments International, GmbH, are both subsidiaries of Ardour Capital Partners, LLC (collectively, Ardour Capital) and are not acting in a fiduciary capacity. The products mentioned herein may not be eligible for sale in some states or countries and may not be suitable for all investors. The potential yield created by these products may be adversely affected by exchange rates, interest rates, or other economic and political factors. An investor’s return may be less than the principal invested. Ardour Capital Investments, LLC and/or its affiliates may now, in the past, or in the future make markets, or deal as principal in the securities or derivatives thereof, mentioned in this document. In addition, Ardour Capital Investments, LLC and/or its affiliates, its shareholders, directors, officers, and/or employees and consultants, may from time to time hold a long or short position in these securities. Ardour Capital Investments, LLC may be engaged to perform investment banking, advisory, or other services from the company mentioned in this document, and may receive compensation for such services. This document may not be reproduced in any manner without the prior written authorization of Ardour Capital Investments, LLC and/or its affiliates. Opinions expressed herein reflect the opinions of Ardour Capital Investments, LLC and/or its affiliates and the author/analyst, and are subject to change without notice. This report is not meant for retail customer distribution. © 2009 Ardour Capital Investments, LLC and/or Ardour Capital Investments International GmbH. All rights reserved.

14

SCHEDULE OF RATINGS AND PRICE TARGET CHANGES

Figure 25: Gamesa

Gamesa (GAM) Three-Year Rat in g an d Price H is tory

€ 0

€ 5

€ 10

€ 15

€ 20

€ 25

€ 30

€ 35

€ 40

3/16/2006 9/16/2006 3/16/2007 9/16/2007 3/16/2008 9/16/2008 3/16/2009

Price as of latest date: €9.34 (March 16, 2009 Close)

Date Closing Price Price Target Rating

March 16, 2009 €9.34 €11.50 ACCUMULATE

BUY/ACCUMULATE

HOLD/SUSPEND

SELL/REDUCE

BUY/ACCUMULATE

HOLD/SUSPEND

SELL/REDUCE

15

Equity Research Walter Nasdeo, Director of Research (212) 375-2958 [email protected]

United States

Richard Baxter (617) 441-4044 [email protected] Adam Krop (212) 946-6828 [email protected] JinMing Liu (212) 946-6830 [email protected] Robert Lahey (212) 946-6826 [email protected]

Shawn Lockman (212) 946-6826 [email protected]

Meghan Moreland (212) 946-0280 [email protected]

Europe

Ellis Acklin* +49 30 232 57 380 [email protected]

Scott McCollister* +49 30 275 74 855 [email protected] Stephen Love* +49 30 275 95 418 [email protected]

Alan Hoefig* +49 30 232 57 381 [email protected]

Institutional Sales Team Brian Greenstein, Managing Partner (212) 375-2956 [email protected]

Jean-Marc O’Brien (212) 375-2952 [email protected]

Michael Lavelle (212) 946-6824 [email protected]

Klaus Korzilius (212) 946-6831 [email protected]

Thomas Higgins (212) 946-6829 [email protected]

Paul Kacperowski—Trading (212) 375-2955 [email protected]

*Employed by Ardour Capital Investments International GmbH, a non-US affiliate of Ardour Capital Investments, LLC registered with BaFin but not registered/qualified pursuant to NYSE and NASD qualifications.

Ardour Capital Investments, LLC, Member of FINRA/SIPC 350 Fifth Avenue, Suite 3018, New York, NY 10118 +1 212 375-2950 Ardour Capital Investments International GmbH, Registered with BaFin Oranienburger Straße 23, 10178 Berlin, Germany +49 30 275 74 854

Ardour Gamesa

Documents

Transcript of Ardour Gamesa