For legal reasons we are not able to publish this research report in the internet. Please ask the issuing bank for a copy.

For legal reasons we are not able to publish this research report in the internet. Please ask the issuing bank for a copy.

For legal reasons we are not able to publish this research report in the internet. Please ask the issuing bank for a copy.

Disclaimer
The publication of this document on our website serves exclusively to facilitate access to information and to offer the reader non-binding information.
The assessments and recommendations in the following publication by LBBW (Landesbank Baden-Württemberg) are based not on investigations carried out by MVV Energie AG, but rather on third-party investigations, reports, recommendations and assessments made. MVV Energie AG thus has no influence on the origins or topicality of this publication and can therefore not vouch for its completeness and accuracy or confirm, support or agree to the information contained therein.
Furthermore, the information on our website does not constitute any guarantee, assurance or any other warranty. It does not represent any offer to acquire or dispose of shares in MVV Energie AG, recommendation in this respect or request to submit corresponding offers.
Extensive information about liability, copyright and data protection at MVV Energie AG can be found under "data protection" at the bottom of this page.

Research Report

Company Update: Overvalued “anchor of stability“

Highlights

• Estimate update: EPS 2011/12: -9.9%; 2012/13: -3.5%; earnings dent expected to be ironed out by FY 2013/14
• No substantial contributions from investments expected before 2015
• "Takeover scenario" remains improbable

Estimates updated and expanded to FY 2013/14: While we expect an earnings dent in fiscal years 2011/12 and 2012/13, this should be ironed out again in subsequent periods. The full auctioning of CO2 (from 2013), lower generation margins and the temporary effect resulting from a power plant outage in Kiel weigh considerably on MVV’s performance. Positive effects are expected from the expansion of renewable energies, the successful sales business for electricity and gas, the expansion of district heating, efficiency increases and the earnings contributions from current investment projects, which should largely provide for a robust earnings situation in the medium term. Current investment projects such as the CHP coal power plant GKM 9 and the waste-material processing plant are not expected to make substantial earnings contributions before FY 2014/15. Despite a challenging environment we consider MVV Energie capable of generating profits on a sustainable basis, which is particularly due to its diversification strategy in terms of positioning and an early adaptation of strategic measures. As efficiency gains were achieved more rapidly than previously expected (even though they were largely offset by additional burdens), we consider an expansion of the "einmal gemeinsam" ["Once Together"] programme realistic.

Valuation remains overexpensive: We have based our valuation largely on the DCF model and substantiated this with a valuation according to multiples. The DCF model yields a fair value per share of about EUR 19.70. The multiples comparison indicates an ambitious valuation, even if we take our target price of EUR 19 as a basis and grant the share a premium because of MVV Energie’s solid earnings performance. While we consider the "takeover scenario" unlikely at the moment, this prospect remains relevant in the medium and longer term. The share price development should therefore continue to be driven by this scenario in future. However, we do not currently see any indications with regard to the operating development that could provide the share with upward impetus. In total, we regard the opportunity and risk ratio for the MVV Energie share as negative.

Research Report

Company Update: Federal Council blocked act on closed loop recycling

Highlights

• Impact: slightly positive in the short run – we would have seen MVV’s activities only partly affected
• We continue to expect declining margins in the waste to energy field

The planned act on closed loop recycling management (Gesetz zur Kreislaufwirtschaft) has been blocked by the Federal Council (Bundesrat). The planned new regulation affects mainly the collection of waste and would a) strengthen the position of private companies at the expense of municipalities and b) move the priority towards recycling instead of waste incineration currently. Even so, the act failed to get the approval of the federal council (Bundesrat). As a consequence it is likely that the EU will start a treaty violation proceeding.

Our view:

In our point of view, the planned new act had negative ramifications for MVV’s waste to energy activities as more recycling would lead to lower waste incineration volumes and thus would have fuelled price pressure. For the time being, the blocking of the new act is rather good news for MVV. Even so, we expect EU law will be enforced in the long run.

A strengthening of private companies in the waste collection business would not affect MVV, as the company is not positioned at this stage from the value-added chain. All in all we would not expect a significant impact for MVV’s activities which should additionally benefit from long-lasting contracts.

Nevertheless, we continue to expect decreasing margins in the waste to energy business in Germany as margins are at a very high level (MVV is generating an EBIT-margin of >30% based on our estimates) which are considered to be not sustainable. Most recently, waste to energy activities contributed approx. 25% to the MVV’s adj. EBIT.

Research Report

Results Preview: Results in line with expectations - outlook confirmed

Highlights

• 9M figures bang in line with expectations
• Target price cut to 19 EUR driven by slightly increased WACC
• (DCF) and lower valuation according to multiples

Slightly softening development as expected: MVV Energy reported 9M figures slightly below previous years level (adj. EBIT -2% to 247.6m EUR. This development was as expected mainly driven by

• the relatively warm weather conditions in Q2 and Q3 (Jan-Jun 2011), which negatively impacted EBIT contributions in gas and district heating activities.
• Lower generation margins (clean dark spreads) hit margins in electricity generation.
• While the company was able to benefit from the decoupling of spotmarket gas prices from prices of long-term supply contracts in recent quarters, this impact further abated.
• Positive development in supraregional gas and electricity distribution.

Guidance was confirmed: MVV confirmed its current guidance (EBIT on FY 10/11 level of 239.4m EUR) as expected. Be aware that Q4 results are usually slightly negative due to seasonal reasons. We confirm our estimates unchanged.

Target price is cut to 19 EUR: Despite the weak and increasingly volatile share price performance in recent weeks - which had happened without any fundamental negative news we continue to remain negative on the share exclusively due to valuation reasons. The target price of 19 EUR (previously 25 EUR) is based on our valuation on a DCF model (22 EUR) and a multiples analysis (16 EUR - including a 30% premium on major listed European utility peers), both weighted equally. This is driven by a substantial drop in fair value derived from the multiples comparison due to lower market values also of the peer group. Additionally we increased our WACC assumption to a 6% after tax level. The share remains influenced by potential changes of the shareholder structure, which is however unlikely to happen at this point of time.

Research Report

Results Initial View: Q1 2010/11: Strong set of numbers, as expected - outlook unchanged

Highlights

• Strong set of numbers, as expected
• Outlook confirmed - we affirm our estimates
• Sell recommendation confirmed, TP 25 EUR unchanged

Strong set of numbers, as expected: Q1 2010/11 figures were perfectly in line with our estimates: Adj. EBIT rose by 7.9% to 91.3m EUR (LBBW 90.3m EUR). Net profit adjusted climbed by 22% to 45m EUR (LBBWe 45.4m EUR - see chart below). As anticipated, the development was supported by beneficial weather conditions, mainly in November and December 2010. The company achieved to increase thermal heating and gas supplies by 15% and 10% respectively. Electricity sales volume rose by 27%, which had been driven by the successful supra-regional sales and distribution activities especially in the B2B segment.

Outlook confirmed unchanged: Despite the strong start into the financial year 2010/11, MVV "only" confirmed its guidance ("Sales/adj. EBIT in line with the previous year"), as anticipated. The company referred to the mild weather conditions in January among others. We confirm our estimates and continue to consider the guidance as conservative, as outlined in our comprehensive Company Flash as of 17 January 2011. However, we will have to adopt our model to the new reporting structure.

Sell recommendation confirmed: Despite the fact that we see the "takeover scenario" at the moment as less likely, this will remain a prospect in the medium to longer term in our view. As a result, this should also overlie the development of the share price in future. The price should remain at a higher level than would otherwise fundamentally be justified. The valuation according to multiples points to an ambitious valuation which continues to anticipate a strategic premium. The opportunity-risk ratio in our view is negative overall.

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Research Report

Results Preview: Q1 2010/11: Solid set of numbers expected

Highlights

• We anticipate a positive set of numbers, due to beneficial weather conditions - guidance should be confirmed
• New reporting structure temporarily impairs visibility
• Significant extraordinary items

Strong set of numbers expected: We assume MVV Energy will report a strong set of numbers supported mainly by the beneficial weather conditions (key financials see chart below). This development is expected to be based mainly on former Gas and District Heating, which should have been well supported given this backdrop.

Besides that, we assume key trends seen in recent quarters are likely to continue, i.e. decreasing margins due to falling electricity prices and power-generating margins (falling clean dark spreads), successful supra-regional sales activities in electricity and gas (B2B) and margin pressure in the energy-to-waste field among others. We anticipate MVV will confirm its guidance for the full fiscal year 2010/11 ("sales/adj. EBIT in line with the previous year"), which we consider to be conservative.

New reporting structure temporarily impairs visibility: The company will report its figures according to its new reporting structure, which had been announced in the wake of its annual report (details are outlined in recent Company Flash as of 17 January 2011. We will adopt our model to the new structure, as soon as underlying parameters and pro-forma figures for previous years quarters and FY figures are available. Unadjusted figures will be distorted by significant extraordinary items: MVV already announced to book provisions for restructuring expenditures of 31 m EUR in Q1. In addition, we assume an IAS 39 effect in the magnitude of +20 m EUR.

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Research Report

Company Update: Staying the course in challenging times

Highlights

• Guidance for 2010/11 seems conservative
• Medium-term prospects through 2012/13: sideways
• EPS and price target marginally reduced
• "Takeover scenario" continues to impact the valuation

Solid development in the 2009/10 FY: With the sideways movement of adjusted EBIT (EUR 239.4m +0.2 %), MVV almost met our expectations exactly. The stable profit trend can be appreciated in that the largely burdening extraordinary factors included in it have been offset. The annual forecast (sales/adj. EBIT in FY 2010/11 in line with the previous year) is conservative in our view given the omission of one-off burdens from the previous year (EUR 18m) and announced cost reductions (EUR 10m) in spite of the challenging general conditions. We expect a 5.8 % rise in sales and 1.6 % in adjusted EBIT.

Medium-term prospects pointing sideways: Our estimates call for a sideways development of 2012/13 adjusted EBIT compared to the recently concluded FY 2009/10. The additional efforts announced for efficiency increases (EUR 20-30m) should ultimately be more or less offset by the burdens from higher CO2 procurement costs in the course of the full auctioning starting in 2013 as well as the lower power-generating margins. Positive effects expected from the successful marketing of electricity and gas, the expansion of district heating and the anticipated completion of block 9 should largely be consumed by the margin pressure, especially in the Environmental Energy segment.

Recommendation reaffirmed: Despite the fact that we see the "takeover scenario" at the moment as less likely, this will remain a prospect in the medium to longer term in our view. As a result, this should also overlie the development of the share price in future. The price should remain at a higher level than would otherwise fundamentally be justified. The valuation according to multiples points to an ambitious valuation which continues to anticipate a strategic premium. The opportunity-risk ratio in our view is negative overall given the fact that we do not see any indications of this expectation proving true within our recommendation timeframe of 12 months.

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Research Report

Company Update: Annual report published - no concrete earnings outlook given yet

Highlights

• Figures without major surprises compared with previously published preliminary results and our estimates
• Outlook: MVV is “cautiously optimistic regarding its sales and earnings performance” in FY 2010/11

MVV Energie AG (MVV) published its annual report for the FY 2009/10 on Thursday 30.12.2010. On skimming through, we perceive no major surprises compared with preliminary results, published as of 17 December 2010, which were in line with our estimates (please refer to Alert as of 17.12.2010).

Outlook most interestingly: MVV is cautiously optimistic regarding its sales and earnings performance in FY 2010/11. In terms of sales, assuming that weather conditions are normal, the company expects to be able to match the previous year’s level. This assessment is in particular based on the expansion in its wind energy capacities, the further expansion expected in the nationwide sales business and the increase in district heating supply. In terms of earnings performance, MVV does not provide a concrete guidance for FY 2010/11 due to the unstable underlying framework in coming financial years, e.g. future developments in energy prices, the Federal Government’s new Energy Concept, weather conditions as well as regulatory and competitive factors. In addition to these uncertain external parameters, MVV refers to internal parameters, i.e. the strategic alignment and implementation of the “Once Together” group project. Driven by joint efficiency enhancements, MVV aims to generate material and personnel cost savings in the magnitude of annually 20 to 30 m EUR in FY 2012/13 compared with FY 2009/10. As indicated already in the wake of preliminary figures, these measures will lead to a provision requirement of approx. EUR 31 m in FY 2010/11. In our point of view, these cost savings will contribute to mitigate charges associated mainly with higher CO2 procurement costs and lower generation margins.

Conclusion: MVV showed a solid performance in the FY 2009/10. The cautiously optimistic but vague outlook do we interpret in line with our estimate and consensus estimates. In terms of valuation, MVV remains expensive in our view despite the share price losses in recent weeks. We are currently reviewing our assumptions regarding our estimates for FY 2010/11 to 2012/13 and will conclude the review based on the published annual report shortly.

For legal reasons we are not able to publish this research report in the internet. Please ask the issuing bank for a copy.