Independent Valuator to the PPC S.A. in relation to the sale of 100% of the share capital of “LIGNITIKI MELITIS S.A.” and/or “LIGNITIKI MEGALOPOLIS S.A.”

In accordance with the Supplementary Memorandum of Understanding (the “SMoU”) agreed between the Hellenic Republic and the European Commission and signed on 5 July 2017 in the context of the second review of the European Stability Mechanism (ESM) Financial Assistance Programme for Greece for the period 2015 – 2018,the Hellenic Republic has offered the Commission the commitment to divest around 40% of PPC’s lignite-fired generation capacity. The Commitment contemplates the transfer and contribution of the following assets into two (2) separate legal entities:

• The Megalopoli Divestment Business, which shall consist of Megalopoli 3 and 4 lignite fired units with the relevant exploration and exploitation rights for the associated lignite reserves of Megalopoli and the associated mining infrastructure,
• The Meliti Divestment Business, which shall consist mainly of Meliti 1 lignite fired unit, as well as the option (and related licenses) to build a supplemental lignite fired unit called Meliti 2, together with the Vevi mine, the Klidi mine, the Lofi-Meliti mine and the associated mining infrastructure.

On April 27 2018, Law 4533 (Government Gazette A’75/27.4.2018 - the “Law” ) came into force which stipulates inter alia the spin off and contribution of the above mentioned lignite-fired generation capacity of PPC together with the exploration and exploitation rights of PPC over certain lignite reserves, as well as other related assets, liabilities and human resources as distinct segments into two (2) new legal entities, wholly owned subsidiaries of PPC, and the framework of the international tender procedure to be launched by PPC for the sale of the shares of the new legal entities to interested investor(s), who shall have the financial resources, proven expertise and incentive to maintain and develop the divested generation capacity as a viable and active competitive force in the Greek generation market.
The two (2) new legal entities were established on June 30th, 2018 under the trade name “Lignitiki Melitis SA” and “Lignitiki Megalopolis SA”.
Moreover, an assessment of the fair market value of Lignitiki Melitis S.A. and Lignitiki Megalopolis S.A.  as of has been requested by the management of Power Public Corporation S.A., in view of the prospective sale of the shares of the new legal entities to interested  investor(s).

Kantor's analysis included the following steps, though not limited only to them:

• We conducted desktop research on the industry, the current corresponding operational and financial conditions as well as on  comparable companies
• We examined information which was available on a Virtual Data Room, that contained data related to the Companies, and in particular:
  • Company Strategic Plans  
  • Company historic financial and operational information
  • Information regarding the past, present and future trends of the target market to which the Companies operate

We developed a Discounted Cash Flows (DCF) model in order to estimate the projected Balance Sheet, Profit & Loss and Cash Flows for the Companies, so as to derive a range of values for 100% of the Companies’ equity on a controlling interest basis, based upon assumptions, projections and other available market information. As part of the DCF analysis, we have prepared a main operating scenario on which we have performed sensitivity analysis. The sensitivity analysis includes different values for the Companies’ Weighted Average Cost of Capital (WACC), electricity sale price as well as CO2 price forecast and results in estimating a range of the Companies’ value

We conducted a search of similar transactions relating to the acquisition of companies with similar characteristics to the Companies internationally, that could be used for the valuation of the 100% of the Companies’ equity under the Comparable Transactions method, utilising intelligent databases and other publicly available sources of information.