NEOEN EQUITY REPORT

RECENT TRENDS

BUSINESS DESCRIPTION
BUSINESS OVERVIEW
NEOEN is a French producer of exclusively renewable energy headquarter in Paris, France. It was
founded in 2008 and is listed on Euronext Paris since October 2018, traded as a CAC Mid 60 Component.
The company has leveraged opportunities from divestments of different forms of renewable energy
business to expand its portfolio. It is present in 16 countries across three geographic regions: Australia
(48% of capacity in operation and under construction), America (16%), and Europe/Africa (36%).

NEOEN operations can be categorized mainly into 2 broad segments, energy production and energy
storage. It develops, finances, builds and operates solar power plants, wind farms and energy storage
solutions. Historically, revenues are mainly generated from solar and wind power. As at 31 December
2021, the company's total capacity was 5.4 GW made up of 50% solar, 38% wind and 12% battery
storage. In the same year, it recorded a turnover of 333.6 million, made up of 49% solar power (€162.3
million, +13%), 41% wind power (€135.1 million, +11%) and 10% storage (€34.4 million, +5%). Also, the
company’s capacity in operation and under construction was 5.4 GW and it aims to attain 10 GW in operation
and under construction by 2025.

COMPANY STRATEGY AND BUSINESS MODEL

Developed to own ( page 38)
The key factor driving this growth was the contribution from assets commissioned in 2020 and 2021.

PRODUCTS HIGHLIGHT AND COMPANY RESERVES

AUSTRALIA PLANT
Page 20, 47, 48,64,86,
INDUSTRY OVERVIEW
Total energy supply in France (graph)
Total renewable energy supply (graph)
Revenue by geographical area (graph)
Revenue by products (graph)
Share of energy production by country (graph)
France is one of the largest producers and consumers of electricity both in Europe and the
world, making the country a major player in the energy sector. The country is also among the
world’s biggest net exporter of electricity. Energy is France is generated from five primary
sources: coal, natural gas, liquid fuels, nuclear power and renewables. In 2019, the energy
sector represented 2% of the French GDP. The energy was responsible for €44 billion
(approximately $48 billion) of France’s 2019 trade deficit. Empirical analysis in 2018 revealed
that energy represented 9% of monthly budget of an average household.
The French renewable energy market is expected to witness a CAGR of greater than 7.4%
during the forecast period, 2022-2027. Renewable energy is taking a growing share in the
country’s energy mix, representing a target of 25.3% of France’s gross final energy consumption
for 2022. This subsector of the energy sector is of strategic importance to the economic growth
and development of the French economy contricbuting 23% of France’s national electricity
consumption in 2019. and by aligning with the EU’s low-carbon target of 55% 2050. In 2020,
renewables accounted for 19.1% of energy consumption, and the country is increasingly
investing in renewables energy and has set a target of 32% by 2030. The Renewable energy
sector is very diverse, covering ten different sub-sectors: Wood energy: 35.2 % - Hydraulic 17.3
% - Biofuels 12.1 % - Wind 10.4 % - Heat pumps 9.6 % - Renewable waste 4.8 % - Biogas 3.4 %
Solar 3.4 % Others (geothermic, agriculture, marine) 3.6 %. The most developed renewable
energies are still wood energy and hydropower, but onshore windfarms and heat pumps are
two sectors that have progressed the most in the last few years with offshore windfarms
currently under development. The IEA in 2021 warned the country is recording delays in terms
of meeting its own energy and climate goals.
Share and consumption are different.
The French renewable energy market is expected to witness a CAGR of greater than 7.4%
during the forecast period, 2022-2027. France has been one of the worst affected countries due
to the COVID-19 pandemic and was the first to implement large-scale lockdowns and enact
bans on the freedom of movement. As a result, renewable energy manufacturers and service
providers reduced output significantly, and manufacturers further slowed down the value chain
and felt the economic impact of the pandemic. Even though the country did not meet its
specified renewable energy targets in 2020, there was an increase of 2 GW of renewable energy
installed capacity. However, in October 2021, the French Recovery Plan from COVID-19 was
formulated, and the government announced a EUR 30 billion investment plan for 2030,
including EUR 8 billion dedicated to energy technology investment in the decarbonization of
industry. This has made a positive impact on the renewable energy market in the country.
Green energy is a centerpiece of France’s Plan de Relance economic recovery efforts.

However, there are some signs that France is ready to ramp up progress on renewables. In July 2015 the French
government adopted an energy transition law that, among other things, aims to: Reduce the proportion of nuclear
energy from 75% of the energy mix to 50% by 2025,

Reduce the proportion of fossil fuels in France’s energy mix to 30%, and increase renewables to 32% by 2030

Government policy aims to increase renewable energy use; in 2015, the French parliament passed a
comprehensive energy and climate law that includes a mandatory renewable energy target requiring 40% of
national electricity production to come from renewable sources by 2030.[19] A related provision of the 2015 law
was the planned reduction of nuclear energy's share in power production from 75% (2016-2017 data) to 50% by
2025, but this was later delayed by ten years, to 2035, over concerns of carbon emissions, energy security, and
employment.[20][21]

The scope of the French renewable energy market report inclues solar wind hydrogen

Demand Drivers
The shift to cleaner energy, climate protection, increase in energy consumption, technological
development (electric cars), dependency on and availability of fossils fuels are the key demand
drivers of growth in the industry. We believe NEOEN is well-positioned to capitalize on these
drivers for long-term value creation.
Dependency on nuclear energy and fossil fuels:
Climate Protection: An international interest in reducing CO2 output and protecting climate is a
driving force can to a transition to renewable energy in France. The French government
established a decarburization framework anchored in the Energy transition law of 2015 of
national low-carbon (net zero) strategy by 2050 (Strategie National Bas-Carbone, SNBC), with
targets for the reduction of fossil fuel use and emission by sectors. Aiming for an 85% reduction
by 2050 compared to 1990 levels.
In 2019, France enacted into law its goal of reaching net zero emissions by 2050.
Shift to cleaner energy: Increasing demand for clean energy sources is one of the primary
drivers for the solar energy market in the country. The solar power capacity is set to continue
expanding with a target of around 18–20 GW installed by 2023. France has ambitious targets
and incentives, such as the bonus/malus system and conversion bonus to support the switch to
electric and plug-in hybrid vehicles. The Mobility Strategy and 2019 Law on Mobility Orientation
require all sales of new passenger cars to be zero emission in 2040. The Climate and Resilience
Law of 2021 also includes a ban of the sale of the most polluting vehicles from 2030 onwards.
France wants to build 40GW of offshore wind by 2050 spread over 50 wind farms.
Declining lithium-ion battery prices: One of the challenges of the transition to renewable
energy has always been the cost of storage. The continuous decrease in the cost of lithium-ion
batteries by more than 70% since 2012 has led to the increase in energy story deployment in
many countries.
(https://www.gqrgm.com/2-ways-technology-is-transforming-the-renewable-energy-market/ ,
Technological development: Digitalization and repaid adoption of electric vehicles are enabling
renewable energy integration. Analytics and artificial intelligence (AI) are helping plant owners
and operators optimize their renewable energy output. For example, the National Center for
Atmospheric Research (NCAR) developed AI software to improve wind forecasting and is
working on the same for solar forecasting. Plug-in hybrids and electric cars have increased in
popularity in France, rising from 2.5% of all vehicles sold in 2019 to 7.5% in 2021. The electric
vehicle market in France is projected to grow by 14.6% (2022-2027).
(https://www.euractiv.com/section/electric-cars/news/electric-vehicles-sales-in-france-tripled-
in-past-two-years/ , https://www.gqrgm.com/2-ways-technology-is-transforming-the-
renewable-energy-market/, https://www.statista.com/outlook/mmo/electric-vehicles/france ).
Connection of RES to national grid: In 2011, The French legal framework provided general
obligation of the grid operator to connect RES systems to the grid. The so-called Regional
Connection Schemes to Renewable Energy Networks (S3RenR scheme) to share the costs at the
regional level among the renewable project operators and for a small part by the transmission
and distribution system operators. In 2021, France had 17.7 GW of onshore wind energy
connected to the grid and 3.6 GW of offshore wind projects awarded through tenders and calls
for projects (no project is online yet).

Increased in energy consumption: The French economy is expected to grow to around $4.705
trillion. With a population of 67.59 million by 2050. Based on the recent trends domestically, we
expect the renewable energy, to continuously being integrated in national grids and moderately
start replacing fossil fuels.

Industry Supply
Competitive Positioning
Globally: EDF Renewables, Engie SA, Vestas, TotalEnergies SA and Siamens Gamesa Renewable Energy
SA.
EDF has been able to dominate the French electricity market for a long time. EDF is also
a major market player in the field of electricity generation from renewable assets under its
new arm “EDF Energies nouvelles”. The nuclear developer Framatome, which is another
Subsidiary (page 130). EDF remains the largest electricity generator and retailer in France, owning and
operating all nuclear generation capacity and most hydropower generation capacity, for a total of 80% of all
generation capacity.

In France: The French renewable energy market is moderately fragmented. Some of the major
companies operating in the market included…

Porter’s Five Forces

It is relevant to consider the accessibility of new entrants, internal competition, threat of
substitutes to the market and many other items to guarantee the performance and financial
expectations of their shareholders.
Competitive rivalry of existing firms (Moderate-3): In an oligopolistic market just like the
French Renewable energy market, the tend to be a stability in price because oligopolist avoid
experimenting with price changes. As a result of the nature of this market, firms tend to engage
instead in fierce non-price competition such as competing on portfolio development, market
share and technical expertise (examples; seeking out new production assets, compete for
production licenses and permits).
Threat of new entrants (Low-2): Entering the industry requires significant upfront capital. The
cost of generating renewable energy is very high; for example: the cost of setting up a wind mill
or a solar panel etc; which makes entry of new players highly difficult.
Bargaining power of suppliers (Low-2): The primary suppliers in the oil and gas industry are
hardware materials manufacturers such solar pv, turbines builders and battery sellers. There is
a positive correlation between materials cost and renewable energy prices. In NEOEN case, the
company’s developed to own strategy significantly reduces the bargaining power of suppliers
because they build their solar pv and turbines. Also, the continuous decrease in the lithium-ion
battery is an advantage.
Bargaining power of buyers (Low-2): Despite the high concentration of demand in a few
buyers, the absence of collusion amongst buyers leaves them with little bargaining power over
the prices of RES. Also, the nature of the market identified by few sellers of the same product
leads to high switching cost involved in migrating to another RES which reduces the ability of
buyers to determine prices.
Threat of Substitute products (High-4): The global push to achieve a low carbon emission mic in
response to climate change has seen a significant increase in the competiveness of renewable
energy sources through R&D funding coupled with increasing restrictions on fossil fuels. Within
the renewable energy industry, a wide variety of these sources are available namely; hydrogen,
geothermal, solar, wind and biomass, which are being pushed forward in respect to the
“decarbonisation” agenda. Also, France xxx nuclear energy.
SWOT ANALYSIS
Strength
1. Independent producer of renewable energy
2. Integrated business model and develop to own strategy, which gives control throughout
the value chain (competitive advantage).
3. Resources based view; difficulty to imitate
Weakness
Threats
1. Oil and gas accounting for 51% of the global energy mix.
2. Restrain in growth due to major electricity generation from nuclear energy in France.
3. After effect of COVID-19 measures (lockdowns and bans on free movement).
Opportunities
1. Ministry of the Ecological Transition downwards revision the solar PV subsidies (feed-in tariff level)
for a small number of ongoing projects in their remaining years of contracts until 2030 will drive
supply due to potential increase in prices.
2. Government supporting and working towards climate protection/emissions reduction global target.
3. Oil prices volatility.

Industry structure; less or higher players. Perfectively compective market.

Shareholders structure (graph)
ESG (ENVIRONMENT, SOCIAL & GOVERNANCE,) and MANAGEMENT
Management and Board
Neoen’s executive management team has been the driving force behind the company’s overall
success, which consist of five members; Xavier Barbaro who is the founder (Chairman and CEO),
Romain Desrousseaux (Deputy CEO), Norbert Thouvenot (Chief Operating Officer), Olga
Kharitonova (General counsel), Louis-Mathieu Perrin (Chief Financial Officer). The executive
management team averages more than 7 years of experience before joining Neoen and within
the industry. Neoen is governed by a board of directors with seven members, three of whom
are independent, three are women, plus a censor. Neoen has a nominations and remuneration
committee and an audit committee, each of these committees have three members, whom two
on each committee are independent.
Neoen’s governance framework complies with the relevant AFEP-MEDEF recommendations.
Neoen’s board of directors is refreshed by rotation, and so only a portion of the board of
directors’ members’ stand for re-election each year. An annual general meeting decision set the
term of office of four years.
Shareholder Right: Each share gives its holder the right to a percentage, proportionate to the
number of shares issued, of the company’s assets, of the distribution of profits, and the
liquidating distribution.
Each share gives its holder the right to participate in the vote at the general shareholders’
meetings, in accordance with the conditions set forth by law and in these by-laws. Each
ordinary share gives its holder the right to one vote at general shareholders’ meeting s, with
double voting rights as provided for by Article L. 225-123 of the French Commercial Code being
expressly excluded.
Ownership structure: Impala and Cartusia are acting in concert. Cartusia is a long-term
investment vehicle controlled by M. Xavier Barbaro and his family. Impala and Cartusia own
46.51% and 1.61% respectively while Bpifrance, FSP, and free float have 4.69%, 6.49%, 40.70%
respectively. (graph)
Environmental: Neoen is dedicated to energy transition which contribute towards global efforts
to combat climate change. The solar and battery storage projects around the world are set to
deliver affordable and sustainable clean energy to reduce emissions at a competitive price
which aligns with SDG 7 and 13. Neoen undertake environmental impact assessments during
the development phase and offset any unavoidable biodiversity impact once operational.
Social: In Neoen diversity is a source of pride and dynamism with over 32 nationals represented
amongst their team. They are open to hire anyone from any part of the world, upholds the
principles of fairness and non-discrimination, and zero tolerance to harassment in workplace.
Their main priority at the global level is to address gender imbalance in the workforce.
Currently 31% of their employees are women 28% of management position are held by women,
in line with SDG 5 and 10. The project life cycle has the potential to deliver significant local and
regional economic development through direct and indirect job opportunities, supply chain
outcomes and skill development opportunities.
Governance:
Threat to new entrants: In 2020, the Ministry of the Ecological Transition proposed to revise downwards
the solar PV subsidies (feed-in tariff level) for a small number of ongoing projects in their remaining years of
contracts until 2030. The law has been adopted but is under review by the Council of State, as it has created
controversy among project developers and investors. This unilateral contract modification by the government
affects ongoing projects and reduces the generous solar PV tariffs allocated between 2006 and 2010
(reaching EUR 600/MWh for building integrated PV in 2009) with power more than 250 kWp. The French
Recovery Plan does not have any additional incentives for the solar sector. (page 91)

As the European Union implements its 55% emissions reduction target, France will need to increase its
2030 targets for emissions reductions, share of renewables and sector-by-sector energy efficiency.

Assumptions:
 1. The solar energy segment is expected to dominate the market during the forecast
period, owing to increasing solar PV installations across the country.
2. Plans to integrate renewable energy with the national grids are expected to create a
significant amount of opportunity for the renewable energy market in the near future.
3. Electricity generation from nuclear energy is expected to restrain France's renewable
energy market during the forecast period.
4. Russian and Ukraine war to stimulate and bring awareness on dependency of fossil fuels
and non-renewable sources of energy.

For Green Chrono Diagnonsis (16/11/2022)

-TotalEnergies will symbolize our strategic transformation into a broad energy company.
-Why we need to go together, acquisitions,...
-Shares of renewable energy in the market. 
-Both of them have a common goal 9GW BY 2025). If they should be horizontal or vertical. 
-Synergy; Their culture fits (both french). 
-Will the market be more competitive in the feature. 
-If they have a project in the same country: its good to merge so as to reduce cost. 
- Hostile means you dont care about small shareholders. Going to Impala and ask them to sell. 
-Takeover: bad reputation, law suits. 
-Some managers have history have with total and they dont want relationship with Total and dont want
it to be the big guy. 
-Issues new shares (dilute shareholders and some investors maybe not be happy)
-WC and CAPEX is always minimal b/c of shareholders. They need to see investments. 
-Issue bonds 
-Culture: working hours 
-Acquisition of other similar companies in the past means it has the expertise already. 
-Can do synergy of financial aspect but not too important. 
-Talk about the small about global industry then narrow it down to French market because they are
more competitive.

1. 3 or 4 major financial statement (Balance sheet, cash flow, change of equity, P&L)
2. What is found in FP statement ( total assets, liabilities)
3. Is the BS view only the year? A screenshot of assets and liabilities from the inception till
date.
4. P&L shows the revenue and expenses for only thus year: Performance of company
during a specific period of time usually a year. (Difference between P&l and FP is timing)
5. Main subtotal of cash flow statement: operating, financing, investing; how the opening
cash balance, change in cash and closing cash balance.
6. Change in equity: what led to change in equity: dividend payments, etc…)
7. Users of financial statements: stakeholders (employees, banks, government,..)
8. Other sources of information we can use to access the performance of the company
(notes, registration documents, press release, management commentary and
discussion, proxy statement- specific events that require voting of members, analyst
report…)
9. 4 types of audit report: independent auditor report, qualified opinion, adverse opinion,
disclaimer of opinion)
10. Standard that deals with hyperinflation: IFRS 29
11. Standard sectors of IFRS gaps in US gap: FAFB, IASB
12. Conceptual framework of financial reporting: steps to follow
13. Framework of financial reporting
14. Accrual accounting
15. Going concern: Why report like the company will exist forever?
16. Relationship between FP, P&L
17. Value measurement: Fair and nominal value.