Erg soars on the back of Kepler, amid EU fiscal policies and delisting scenarios

(Il Sole 24 Ore Radiocor) - Erg shares soar on the Milan Stock Exchange, buoyed by positive ratings from Kepler analysts, who have upgraded the rating from ‘Hold’ to ‘Buy’ and raised the target price to €27 per share from the previous €24. As a result, the share price (on the morning of 5 June) rose by 7% to €24.9 per share, making it one of the best performers on the Milan Stock Exchange (FTSE MIB down 0.1%). The investment bank’s experts see “an improvement in the outlook for renewable energy operators in Europe”, given that EU member states “will have greater fiscal flexibility to address, among other things, the issue of the affordability of energy bills, accelerating the development of renewables and storage systems, improving authorisation procedures for renewable energy plants and supporting industrial decarbonisation” through Power Purchase Agreements (PPAs), long-term energy purchase contracts. Not only that, Kepler highlights the current scenarios regarding a possible restructuring of Erg, controlled by the Garrone family and backed by the Australian fund IFM, describing the group as “a candidate for delisting, as it is trading at a discount and has a low-debt financial structure”. Among the possible catalysts for the share price, the broker specifically cites the delisting from the Milan Stock Exchange or a “business combination”, against the backdrop of a new business plan to be presented in 2027 – perhaps, Kepler wonders, “after greater clarity has been provided on governance?”. In recent months, as is well known, unconfirmed rumours had circulated regarding interest from major players such as A2A or Eni in the Genoa-based group.

Returning to the report and the ‘European’ factors supporting Erg, Kepler notes that the European Commission has agreed to grant Member States greater fiscal flexibility (amounting to 0.3% of GDP per year, with a cumulative limit of 0.6% of GDP over the period 2026–2028) for investments in energy security and the transition away from fossil fuels. “For Italia, this amounts to around €6.77 billion per year, based on the GDP forecast for 2025,” the analysts point out, adding that they therefore believe “the outlook for renewable energy has improved both in Italia and in Europe, which represents Erg’s main market”. Alerion is also benefiting from this new European development, rising by 1.2%.

The new energy price scenario therefore implies – as the experts point out – an average increase in Erg’s EBITDA of around 6% over the period 2026–2028 and an average rise in net profit of around 20% over the same period. Furthermore, Kepler has included in its model the Nulvi repowering project (121 MW, of which approximately 100 MW is additional capacity), which has obtained all the necessary authorisations and is not included in Erg’s current business plan. “Once completed, we expect the project to contribute at least 300 GWh of annual energy production,” the investment bank writes.

As mentioned, analysts continue to view Erg as “a potential candidate for delisting (thanks to its modest market valuation and low-debt financial structure)”. Indeed, Kepler estimates that “the forecasts provided by management for 2026 are overly cautious” and that “the greater budgetary flexibility granted to the government could also favour the development of renewable energy”. Currently, the share is trading “at around €1.3 million/MW in 2027 and €1.2 million/MW in 2028, levels that represent a discount compared to its historical valuation based on this metric; the investment cost to build new greenfield renewable capacity; the value of existing assets, weighted by technology; and the potential growth value deriving from projects under development after 2028, which the market appears to implicitly value at zero”.