Berenberg Thematics Executive Summary Battery adoption at the tipping point

10 February 2016 Asad Farid, CFA Analyst +44 20 3207 7932 [email protected]

Nick Anderson Analyst +44 20 3207 7838 [email protected]

Jamie Rosser Analyst +44 20 3465 2732 [email protected]

Chris Armstrong Specialist Sales +44 20 3207 7809 [email protected]

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Berenberg Thematics

What is Berenberg Thematics? Under our Thematics brand, we will focus on big, longer-term themes --- specifically, disruptive technologies, demographics and corporate governance issues --- which we feel investors should be looking at. Within each note, we will highlight trends and issues that we believe to be of interest to investors, and the effect of these on sectors and stocks which we view as beneficiaries or at risk from the specific theme. The companies that we will consider will include those already under coverage, those not covered, and also relevant privately-owned businesses, which we believe will be affected.

THE TEAM Asad Farid has been working at Berenberg for the past four years. His previous focus was on the oil and gas sector where he was the lead analyst for oil field services. Before joining Berenberg, he worked as an economist and banking analyst at AKD Securities and has eight years of sell-side research experience. Asad is an MBA from University of Cambridge and is a CFA charter holder. As apart of his MBA programme, Asad completed internships at Google and with Berenberg’s Technology Hardware team.

Nick Anderson joined the Thematics team in 2016 having previously built up and led the banking team; he joined Berenberg in 2010. Nick has over 20 years’ experience as a topranked sell-side equity analyst including spells as co-head of the Lehman Brothers European banks team and as a transport analyst at both Lehman Brothers and HSBC James Capel. In addition, he has worked as a management consultant at McKinsey. Nick has degrees in economics and management studies from the University of Cambridge and in wine production from the University of Brighton. Jamie Rosser joined Berenberg in September 2014 on the graduate scheme. Having successfully completed the programme, he joined the Thematics team in November 2015. Prior to this, Jamie gained experience through internships with Grant Thornton, Ignis Asset Management and the Phoenix Group. Jamie graduated from the University of Bath with a BSc in Mathematics and has passed the CFA level I exam.

Chris Armstrong has 20 years of experience on both the buy-side (as an analyst and portfolio manager) and on the sell-side, most recently as industrial specialist sales. Chris joined Berenberg as a Swiss equity salesman in 2006, before specialising in industrials in 2009. He has previously been a portfolio manager/analyst at Axa Framlington, Bank of Tokyo-Mitsubishi and NatWest, and holds a BA in Economics from Durham University.

For our disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) and our disclaimer please see the end of this document. Please note that the use of this research report is subject to the conditions and restrictions set forth in the disclosures and the disclaimer at the end of this document.

Berenberg Thematics

Table of contents Battery adoption at the tipping point

4

Battery technology – drivers and implications

5

Automotives – size of the EV market set to grow from $10bn in 2014 to $140bn by 2020

6

Utilities – battery storage to grow from ~$0.5bn to a ~$14bn market by 2020

9

Mass transport – electric bus market to grow from $18bn to $60bn by 2020

11

We identify six sub-sectors and 18 interesting companies which will be benefit from greater battery adoption over the next five years 12 Conversely, we identify four sub-sectors which could see significant disruption over the next 5-10 years 16 Risk to thesis

17

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)

18

3

Berenberg Thematics

Battery adoption at the tipping point ● Disruptive technologies cannot be ignored by investors. In this, our first Berenberg Thematics report, we explore potential disruption to the automotive and utilities industries (7% of Europe’s market cap), among others, from the mass adoption of new battery technologies. We forecast the combined market for electric passenger vehicles (EVs), electric buses (EBs) and battery storage to increase eight-fold to over $200bn by 2020, a five-year CAGR of more than 50%. The tipping point is nearing as battery economics become cost-effective, helped by favourable regulation, expanding product offerings and infrastructure, and surging renewable generation. Many automotive OEMs will survive (those with scale and vision) but some incumbent utilities are at risk (especially those focused on a centralised distribution model). We also identify nine stocks to watch within the extended lithium ion battery value chain. ● Introducing Berenberg Thematics: Our new Thematics product will focus on major, five-year themes that have a material impact across several sectors. A collaborative effort involving all of Berenberg’s sector teams, reports will combine a deep-dive on the theme with a detailed stock analysis of the winners and losers. Our initial focus is on three sub-themes: disruptive technology, demographics and corporate governance. ● Why read this report? Disruptive technologies matter: In 1980, McKinsey forecast that the size of the US mobile phone market would reach 900,000 handsets by 2000. The actual number was 109m. Such new technologies can be “sustaining”, which favour incumbent producers, or “disruptive”, which allow new entrants, after an initial slow rate of adoption, to unexpectedly replace established ones. Digital cameras and mobile phones are recent examples; we think batteries come next. Investors must engage in the debate as transformational change is likely. ● Why now? Battery technology is coming of age: There have been many false dawns in the mass adoption of batteries in the automotive and utilities industries in the last 20 years. But as the comparative cost of batteries finally moves towards parity with incumbent hydrocarbon solutions, mass market adoption is close to tipping point. ● Automotive disruption – the EV market will grow 14-fold to $140bn by 2020: Favourable regulation, falling battery/EV costs, improving product range and expansion in charging infrastructure will drive rapid growth. Scale and vision will separate winners from losers. We think Daimler (Buy), BMW (Hold), Renault (Buy), Volkswagen (Buy) and GM will transition successfully to join Tesla (Sell). Toyota and Peugeot (Sell), in contrast, are challenged. EBs offer an additional $60bn market by 2020 – three-fold growth. ● Utilities disruption – battery storage will be a $14bn market by 2020 – a 28-fold growth: Demand will be driven by renewables investment (creating unpredictable generation), a reduction in battery costs and regulation. Distributed power generation and micro grids threaten the centralised distribution model. Incumbent utilities will be disrupted, but in Europe, RWE (Sell), E.ON (Sell) and Enel (Buy) will be the least threatened given their renewable/storage exposure. ● The lithium ion battery industry offers opportunities: We expect lithium ion to be the dominant battery technology. Consolidation and barriers to entry key to sustained returns for suppliers. Well-placed suppliers within an extended value chain include: low-cost lithium miners, energy storage battery producers, renewables/micro grid equipment suppliers, selected semiconductor manufacturers, and suppliers of next-generation lithium ion batteries. ● Nine stocks to watch: Stocks well placed to benefit from the battery revolution include: Infineon Technologies (Buy), Umicore (Sell), Albemarle, Maxwell, Orocobre, RedT, SMA, BYD and Solar City.

Asad Farid, CFA Analyst +44 20 3207 7932 [email protected]

Nick Anderson Analyst +44 20 3207 7838 [email protected]

Jamie Rosser Analyst +44 20 3465 2732 [email protected]

10 February 2016 Chris Armstrong Specialist Sales +44 20 3207 7809 [email protected]

Berenberg Thematics

Battery technology – drivers and implications

Source: Berenberg

5

Berenberg Thematics

Battery adoption at the tipping point “Mastery itself was the prize” was how Churchill described his initially controversial decision to change the Royal Navy’s fuel from locally-sourced coal to insecure petroleum supplies from Persia (now Iran). History might have unfolded quite differently had the UK delayed this transformative shift to a superior technology prior to the outbreak of World War I. Today, regulatory bodies, automotive companies, power utilities and a diverse array of other sectors are again faced with the question of how to deal with a prospective disruptive shift to battery energy storage which is still considered by many market participants as economically unviable. For the forerunners investing heavily in battery storage, mastery again is the prize. There have, however, been a number of false dawns in the adoption of rechargeable batteries, leading to classic failures such as GM’s EV1 electric vehicle in 1996. Similarly, over the last decade, the euphoria about the anticipated demand for raw materials required for batteries created expectations of a sharp spike in lithium prices along with price increases for other minerals, too, such as graphite, nickel and cobalt. This led to a number of lithium mining project failures for the smaller mining companies when the price increase failed to materialise. The Achilles heel of rechargeable batteries has always been their comparative cost versus hydrocarbon-based power generation, whether for automotive propulsion or electricity generation/storage for utilities. We think that this disadvantage is close to being bridged and that battery technology adoption is at the tipping point. Over the next three years, we believe that batteries will break into the automotive and stationary storage mass markets. Three sectors – automotive, utilities and mass transport – will drive the market for batteries. We expect lithium ion to be the dominant battery technology for the next five years.

Automotives – size of the EV market set to grow from $10bn in 2014 to $140bn by 2020 We expect sales of plug-in electric vehicles (PEVs) to grow from ~0.3m cars in 2014 to 4m by 2020 – a 4% market penetration rate, split equally between all-electric battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). Assuming an average EV price of $35,000, this translates into EV market/sales growing from $10bn in 2014 to $140bn by 2020. This growth will be driven by regulatory requirements for emissions reduction, EV price reduction due to economies of scale in battery manufacturing, wider availability of charging infrastructure and greater diversity of EV offerings by OEMs over the next five years. In our view, there are four factors that will drive electrification of the automotive sector.

Factor #1 – high regulatory support for EVs to reduce the air pollution that is plaguing urban centres Transport-related air pollution is responsible for $0.9tn of economic losses in OECD countries, according to OECD research: Air pollution causes 0.5m premature deaths per annum in OECD countries and 1.6m deaths per annum in China. Economic loss from transport-based air pollution is estimated at $0.9tn per annum in OECD countries (50% of air pollution is attributable to transport, according to the OECD) and $0.6tn for China (assuming transport is responsible for 40% of air pollution in China). Electrification of transportation is a priority for major OECD countries and China in order to reduce transport-related air pollution: Direct purchase subsidies form more than 20% of a car’s purchase price in larger economies. However, the level of direct subsidies for EVs across different countries pales in comparison to the economic loss from air pollution (see chart below). Hence, despite some market concerns, we do not think that the risk of an abrupt end to EV subsidies is very high. We expect subsidies for PHEVs to be phased out sooner than those for BEVs. Continued subsidies for BEVs will provide an impetus to their adoption as manufacturing costs for batteries come down. There is also a possibility that there will be a shift from direct EV subsidies to subsidies for building infrastructure.

6

Berenberg Thematics

EV purchase subsidies – 20% of an EV’s purchase price is subsidised 0

10000

US

No. of de a ths fr o m a i r p o l l u t i o n 2 0 12

E c o n o mi c l o ss ($ b n )

114804

568

1600000

1400

G e r ma n y

72000

277

UK

52430

202

Fra n c e

52600

185

6975

China

7700 US

Ger many

0

C hin a

UK

6600

France

6500

Direct purchase subsidies on new EV (EUR) Source: WHO, OECD, US Department of Energy (DoE), CAAM, Berenberg

Factor #2 – the economics of mass production: battery costs are to decline by $130/kWh (down by 43%) to reach $170/kWh by 2020 Cell level economies of scale – cost reduction of $70/kWh: Battery manufacturing plans announced by Tesla (in partnership with Panasonic), BYD, LG and Samsung will increase global automotive lithium ion battery manufacturing capacity (currently at ~27GWh) by 4x to 110GWh over 2015-2020. Assuming that global production of lithium ion cells (including automotive) doubles by 2020, this should lead to cost savings of 35% (ie $70/kWh) in cell manufacturing. Pack level economies of scale of $60/kWh: Currently, battery pack manufacturing per plant is well below 100,000 packs per annum. However, Tesla’s battery pack manufacturing capacity at its new Gigafactory facility in Nevada will increase from 100,000 packs in 2017/18 to 500,000 packs by 2020/21. We estimate that this will lead to cost savings of 20-25% at the pack level, ie $60/kWh. If battery pack costs decline to $170/kWh by 2020, then the price premium which EVs have versus ICVs will end $/kWh 350 300 70 250 200 60 150 300 100 170 50 0 Battery pack Cell level Pack level Battery pack cost 2015 economies of economies of cost 2020 scale scale

0

2015

2020

20

40

21

12

60

49

49

Battery pack cost $'000

80 Price premium vs battery cost savings

$'000

Tesla S (70kWh) price premium over Jaguar XJ Saloon excl. subsidy

5

Battery price reduction (2015-20)

-9

Others

Source: Berenberg

Factor #3 – a vast improvement in EV product offering by traditional OEMs: at least 13 BEV and 25 PHEV models will be introduced over 20162016-20 Traditional OEMs are entering the EV space, led by Volkswagen, Daimler, GM and Ford: Currently, there are only a few BEV models available in the US and Europe, produced by three main manufacturers: Tesla, BMW and Renault-Nissan. The competitive environment and the number of EV options available to consumers are set to radically alter over the next five years. Traditional OEMs such as Volkswagen, Daimler, GM and Ford have aggressive medium-term EV roll-out plans. Based on their officially announced plans, at least 13 new BEV models and 25 PHEV models across the entire price spectrum (mass market to luxury) will be launched by 2020.

7

Berenberg Thematics

The mass market is where the war will be fought: The main growth market which is likely to open up for EV manufacturers as a result of reduction in battery costs will be the mass market (ie cars priced under $35,000). Although currently the Nissan Leaf and the Renault Zoe are targeted at the mass market, adoption is significantly hindered by their low effective range of below 100 miles. This is set to change in 2016 and 2017, with the launch of two prominent new models – the $35,000 Chevrolet Bolt and the $35,000 Tesla Model 3, both of which will offer a range of ~200 miles. We think that falling battery costs and rising range for smaller EVs will open the mass market for electrification.

Number of available EV models

The number of EV models available to consumers will rise to 58 by 2020

A 200-mile range (ie the Bolt and Model 3 EVs) will significantly lower “range anxiety” among mass market EV owners

70

58

60 50 40 30

20

20 10 0 2015

2020 BEV

PHEV

Source: Berenberg, Company press releases and news reports

Source: Berenberg

Factor #4 – rapid expansion in charging infrastructure to cut range anxiety – China is targeting 5m charging points by 2020 The level of investment in EV charging infrastructure has increased sharply: Global annual spending on EV charging infrastructure rose by more than 3x in 2013-14 versus the prior four years. National, state and city administrations along with automotive OEMs, utilities and charging equipment manufacturers are financing the ongoing investment in charging infrastructure. In countries such as the US, the UK, France and Norway), financial support is available for both residential and high power inter-/intra-city charging points. The global EV charging network is fast expanding: As a result of the high level of investment, the global EV charging network has more than doubled in terms of the number of slow-charging points and risen by 8x for fast-charging points since end-2012. The US is currently leading in the deployment of public EV charging. However, China has announced plans to set up 5m charging points by 2020 in its attempt to raise EV sales to 5m cars by then. This would likely to ease charging network constraints in its main cities, such as Shanghai and Beijing. National and state level support resulting in strong growth in public EV charging network No. of E V c h a rg i n g p o i n t s r e la t ive t o p e t ro l st a t io n s r a t io

34,504

C h in a

0.3

US

0.3

G e r ma n y

0.9

UK

2.0

Fra nc e

2.0

N a t io n a l su p p o r t a n d t a rg e t s

National t arget to inst all 5mn c harging points by 2020 US DoE has invest ed >0.4bn in elec trific ation of t he t ransport at ion sec t or. Numerous stat e level funding sc hemes for c harging infrast ruc t ure No national support apart from R&D EUR44mn spent on set ting up c harging infrast ruc t ure. Subsidy on resident ial equipment at £700. EUR50m alloc at ed t o financ e 50% of EV infrast ruc t ure c harging c osts

Source: IHS, China 13th five-year development plan, US DoE, Berenberg estimates

8

Berenberg Thematics

Utilities – battery storage to grow from ~$0.5bn to a ~$14bn market by 2020 In 2015, ~0.5GW of storage was added globally. With an energy to power ratio of ~2x, this translates into ~1GWh of storage capacity added. We expect the energy to power ratio for energy storage systems to rise to 4-5x by 2020 as more load shifting storage systems are installed to integrate renewables. We expect both grid scale and residential/commercial storage to more than double per annum over 2016-2020 as power networks move from being centralised to distributed interconnected systems. By 2020, we expect annual storage installations to rise to 10GW, which translates into ~45GWh of annual storage. Assuming all-in battery costs of ~$300/kWh, this will translate into a market size of ~$14bn by 2020. Rising renewable generation, reduction in battery costs and regulatory requirements will be the main growth drivers. We believe there are three factors which will drive stationary storage uptake by utilities, the commercial sector and households over the next five years.

Factor #1 – rising renewable investment leading to unpredictable generation; there is an increased need for storage for load/frequency management Battery storage market for frequency smoothing has emerged as renewable generation has increased: Solar and wind power generation as a percentage of total electricity has more than doubled in large economies since 2010. Rising renewables in the electricity mix are making generation more unpredictable and grid balancing more difficult. As a result, battery storage requirements at grid level for frequency smoothing have been increasing globally, led by the US. We expect lithium ion batteries to remain the dominant technology for frequency regulation and other high-power applications. Renewables integration will require battery storage for load shifting: Currently, the global share of wind and solar as a percentage of electricity generation is ~5% (up from 2% in 2010). In the OECD region, it is relatively higher at ~7% (3.2% in 2010), although it is lower (ie 3%) in China and India. The International Renewable Agency (IRENA) expects a 4x increase in the share of renewables by 2030. This radical jump in variable renewable generation will increase the need for storage in our view, especially for load shifting. Flow batteries could potentially be the preferred technology for load shifting applications. Stationary energy storage is headed towards strong long-term structural growth

16000

18000

14000

16000

12000

14000 12000

10000

10000

8000

8000

6000

6000

4000

4000

2000

2000

0

0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Annual Capacity (MW)

Annual revenue (USD thousands)

MW

Global forecast for utility scale battery storage (MW)

Annual Revenue (USD Thousands)

Source: Navigant Research (Jaffe and Adamson, 2014)

Factor #2 – the economics of residential “storage plus solar” are improving: microgrids/electricity trading platforms will emerge Solar and storage costs are fast declining as the scale of manufacturing rises: Battery storage is at the same position of the learning curve as solar PVs were 10-15 years ago. As the scale of manufacturing increases for batteries, we expect the cost of small-scale residential and commercial battery storage to decline from $900/kWh to $500/kWh by 2020E. We also expect the cost of solar PVs to decline by 35% by 2020, in line with its current ongoing downward price trajectory. 9

Berenberg Thematics

We expect the cost of electricity for solar PV and storage to fall below retail tariffs in a number of countries: Currently, residential solar generation plus storage is close to breakeven with retail electricity tariff rate only in Germany. Based on the ongoing reduction in battery costs as well as in solar PVs, we estimate the levelised cost (the cost in $/kWh of building and operating the facility over its lifetime) of electricity (LCOE) for solar generation plus storage to fall below the retail electricity tariff in Germany, Australia, the UK and in a number of states in the US by 2020. We expect microgrids – which allow for electricity trading – to emerge in these countries on the back of rising battery adoption. Lithium ion battery costs have more than halved over the last five years as production has increased

Batteries plus solar to become cost-effective by 2020

900 2001

800

France US (California) US (average)

0.2

UK Germany Australia

China

2002

700

0.3 Price ($/kWh)

2020 Residential Solar plus Storage LCOE ($/kWh)

0.4

0.1

2003

600

2004 2005

500

2006 2007

400

2008 2009

2010

200

0.0

0.1

0.2

0.3

2012

y = -15.6x + 718 R² = 89%

100

0.0

2011

300

0.4

20132014 2015

0 0

2015 Residential retail tariff rates ($/kWh)

5

10

15

20

25

30

35

40

Production (GWh)

Source: Berenberg, Company press releases and news reports

Source: Berenberg

Factor #3 – regulatory requirements are bosting storage Aggressive renewable energy generation targets: High renewable energy targets in Europe and the US are driving uptake of grid scale storage. The state of New York is aiming to produce 50% of its electricity through renewables by 2030. Hawaii is targeting 100% through renewable generation by 2030. Europe has an ambitious target of 20% renewables by 2020. High regulatory requirements for grid storage in California: The California state authorities have issued direct requirements for grid scale storage; its three largest utilities are required to add more than 1.3GW storage by 2020. The state of California requires its three largest utilities to add 1.3GW of grid scale storage by 2020

0 2014

100

Sorage requirement (MW) 200 300 400 500

Renewable target as % of total by 2030

Southern California Edison Pacific Gas & Electric

2016

New York

50%

Hawaii

100%

Vermont

75%

Europe

20% of total generation by 2020

San Diego & Electric

2018

2020 Source: US DoE

10

Berenberg Thematics

Mass transport – electric bus market to grow from $18bn to $60bn by 2020 We expect the number of hybrid and pure (battery-only) electric buses (PEBs) to grow on the back of regulatory requirements, a decline in costs and the introduction of new battery and charging technology which will increase their range. Chinese bus manufacturers, led by BYD, are going to drive this growth. Lithium iron phosphate (LFP)-based technology is likely to dominate in the medium term. Similar to our house view on Tesla (see our Great start but sleepy giants are waking up report, dated 2 February 2016), the bus manufacturing “giants” have small to non-existent pure electric bus offerings, which has given smaller OEMs (such as Wright Bus) a head start. This is soon to change, with Daimler’s offering set to enter production after 2018 and MAN’s by 2020. We see Volvo and BYD as the best plays on electric transit – Volvo because of its first-mover advantage relative to other large European OEMs (it is currently testing its pure electric offering in Gothenburg) and BYD because its scale, international success and ability to partner with other OEMs such as ADL to break into new markets. We dislike smaller OEMs and producers which outsource their electric drivetrains as they will suffer from pricing pressure (unable to sacrifice margin to reduce pricing unlike larger OEMs) and lower margins (giving away too much margin to drivetrain manufacturers in a low margin business) respectively. We see three reasons for the expected growth in the number of EBs.

Reason #1 – regulatory support in China, Europe and US, encouraging electric bus adoption to reduce air pollution blighting urban centres National funding schemes are financing the electrification of mass transit sector: National funding schemes in the US, Europe and China are supporting the hybridisation of the mass transit sector. China is also providing a hefty purchase subsidy of $75,000 on new EBs. City/state authorities are taking an active role in phasing out traditional buses: In London, all single-decker buses passing through its ultra emission zone are required to be zero emission by 2020. The city authorities in Copenhagen are aiming for all city buses to be zero emission by 2025, while in California all buses will need to be zero-emission by 2040. Significant national/local government funding is being provided for the electrification of mass transit

China’s production has grown by 858% yoy, Yutong has emerged as a market leader

US$ m 0

50

100

150 Targets and subsidies

US Low/No Emission Vehicle deployment prog.

55 China

California Zero Emission Truck & Bus P ilot Project Europe Zero Emission Urba n Bus projec t

24

25

London UK Paris

UK Green Bus fund

Source: Berenberg

135 France

Targetting to raise share of new energy buses to 80% by 2019. Purchase subsidy of $75k on an all electric bus All single decker vehicles passing through London's ultra low emission zone must be zero emission. RATP Paris to replace its entire 4,800 bus fleet with zero emission vehicles by 2025

Source: chinabuses.org

Reason #2 – EB and charging infrastructure costs are declining with mass adoption Ongoing reductions in battery costs are making EBs more affordable: Battery pack costs for EBs have declined markedly from c$1,200/kWh in 2009 to c$250-350/kWh today. This has resulted in PEB prices – ie the Proterra – falling from c$1.2m in 2010 to closer to $750,000 today. Cost of fast-charging equipment for buses is also declining with increased adoption: The cost of a Proterra 500kW charger declined from c$1m in 2010 to c$350k in 2015. 11

Berenberg Thematics

The cost of EBs and charging infrastructure has more than halved since 2010 1.2 US$ m 1 0.8 0.6

$260k cost of diesel bus

0.4 0.2 0 All electric bus

Cost of high power charging point (500kW) 2010

2015

Source: Berenberg

Reason #3 – new battery and charging technology will reduce range problems Adoption of LTO-based batteries: Lithium titanate (LTO)-based batteries are able to charge at 10-20x the speed of other lithium-ion-based cells. The adoption of LTO-based cells in mass transport could significantly reduce “range anxiety” by allowing for quick charging at bus stops. Adoption of high-power electric charging equipment as well as inductive charging reduces recharging times: Proterra and ABB are introducing very high-power charging equipment. Bombardier and Conductix Wampfler offer inductive charging technology. High-power fast-charging technologies can improve bus range Charging time for 300kWh battery

Technology

Charging power

Proterra

Conductive

500kW

ABB

Conductive

200kW; 400kW (15s)

Bombardier

Inductive

200kW

45 min

Conductix Wampfler

Inductive

60-180kW

100300min

36min 45-90min

Source: Berenberg

We identify six sub-sectors and 18 interesting companies which will be benefit from greater battery adoption over the next five years We expect lithium ion batteries to be the dominant technology over the next five years. We believe that a number of sectors across the battery value chain will benefit from strong demand growth for batteries in the power and automotive sectors.

SubSub-sector #1 – automotive/bus OEMs that are focusing on electrification of their product portfolio We expect rapid expansion in EV penetration over the next five years led by China, the US and Europe. In the US and Europe, Tesla, the Nissan-Renault alliance and BMW are spearheading the electrification of the automotive sector, especially in the BEV space. In China, the EV market is dominated by four local players, led by BYD. These four players have invested strongly over the last five years in 1) lithium ion battery technology, 2) 12

Berenberg Thematics

upgrading their manufacturing facilities to accommodate EVs and 3) setting up their own battery manufacturing facilities or striking partnerships with dominant battery suppliers. We expect them to benefit from the structural demand growth for the next 5-10 years. We think that the automotive OEMs with the scale and the strongest EV offering will prevail. Traditional OEMS led by Volkswagen, Daimler, GM and Ford have impressive plans for launching new EV models over the next 3-5 years. Their manufacturing scale and strong operating cash flows from their established internal combustion vehicle (ICV) business lines should help finance the investment required to build EV product portfolio while absorbing the associated losses/margin dilution in the mid-term. We discuss the automotive OEMs that we expect to lose out on this growth in the next section. Autos ranking grid – Tesla in the US and Europe along with BYD in China are likely to retain a significant market share while traditional OEMs will catch up in the EV space Company (Country, Market cap)

Lithium ion battery and EV power train technology

Charging infrastructure

Battery manufacturing

Depth of EV offering (current/target over 2016-20)

Mass transport

Tesla US - USD 21.3bn BYD China - HKD 125.8bn BMW Germany - EUR 45.5bn Renault-Nissan France - EUR 20.8bn Japan - JPY 4.9tn VW Germany - EUR 53.9bn GM US - USD 44.1bn Daimler Germany - EUR 64.1bn Ford US - USD 45.4bn

Overall exposure to growth in batteries VERY HIGH VERY HIGH MEDIUM-HIGH

HIGH

HIGH HIGH HIGH MEDIUM

Note: Level of exposure ranking. 5 Stars= VERY HIGH, 4 Stars = HIGH, 3 stars= MEDIUM, 2 Stars= LOW-MEDIUM,1 Star=LOW

Source: Berenberg

SubSub-sector #2 – lithium miners: lowlow-cost players will benefit from continued structural increases in lithium prices in the medium term Lithium prices are headed for a structural bull run, with demand from the automotive and power sectors to exceed supply, even under conservative assumptions for EV penetration rates and stationary storage uptake by utilities. We expect global lithium demand to increase by ~60% by 2020. Supply constraints in the medium term due to the long five- to 10-year project development lead times and stringent regulatory requirements are likely to exacerbate the supply demand imbalance. We expect the lithium majors, especially Albemarle, to benefit from the positive price momentum due to the low-cost profile of its projects. Lithium mining “juniors” such as Orocobre and Western Lithium will play a central role in bringing relatively higher-cost resources into the market. Under our base case scenario, we estimate that global supply of lithium will rise by ~25% by 2020. Hence, we expect a structural increase in lithium prices over the next five years. Lithium miners ranking grid: lithium major Albemarle and minors Orocobre and Western Lithium are bringing 57.5kT (25% of current capacity) of new lithium manufacturing capacity over the next five years Company (Country, Market cap)

Cost profile of the projects

Status of expansion projects

Past experience

Scale

Albemarle US - USD 5.8bn Orocobre Australia - AUD 0.5bn Western Lithium Canada - CAD 0.1bn

Share of Lithium in Earnings

Overall exposure to growth in batteries VERY HIGH

HIGH

MEDIUM

Note: Level of exposure ranking. 5 Stars= VERY HIGH, 4 Stars = HIGH, 3 stars= MEDIUM, 2 Stars= LOW-MEDIUM,1 Star=LOW

Source: Berenberg

13

Berenberg Thematics

SubSub-sector #3 – cathode manufacturers The chemicals required for manufacturing lithium ion cells are the main determinants of a battery pack’s performance (ie in terms of storage capacity, life, safety). They are hence the most value added components of the battery storage system and f0rm the bulk of its cost. This is especially true for the active cathode material which forms more than half of the lithium ion cell cost. Specific cathode chemistries have been perfected after years of R&D and are protected by patents. As a result, we believe that speciality chemical companies such as Umicore and BASF hold a significant pricing advantage in an environment where demand for cathode materials is rapidly rising on the back growth in EVs and stationary storage. We expect that chemical companies with the IPs for the cathode materials such as nickel manganese cobalt (NMC) and nickel cobalt aluminium (NCA) (which are important for automotive applications) to experience the strongest pricing improvement because only a few companies can manufacture battery grade NMC and NCA cathode materials. In contrast, a number of companies in Asia manufacture LFP and LCO (lithium cobalt oxide) cathodes. While demand from storage and EBs is likely to grow strongly for LFP over the next five years, the increasing levels of competition between these players are likely to limit any pricing increase. Umicore and BASF are the market leaders in NMC- and NCA-based cathode materials and are likely to benefit as rising EV penetration leads to demand growth over the next five years Company (Country, Market cap) Umicore: Belgium - EUR 3.7bn JMAT: UK - GBP 4.4bn BASF: Germany - EUR 52.9bn

Type of Cathode Materials

Stationary storage

LFP

Toda Kogyo: Japan - JPY 16.4bn

LCO, LMO, LFP

Sumitomo Chemicals: Japan - JPY 917.1bn

LMO

Tanaka Chemicals: Japan - JPY 12.2bn

NMC

Nippon Chemicals: Japan - JPY 20.5bn

LCO, NMC

3M: US - USD 94.5bn

NMC

AGC Seimi Chemicals: Japan - Private

NMC LCO, LFP, NCM, NCA

Merck KGaA: Germany - EUR 32.1bn

LCO, LFP

L&F Material: South Korea - Private

LCO, LFP

Fuji Pigment: Japan - Private

LCO, LFP

Honjo Chemical: Chemica Japan - Private

LCO, LFP

Citic Guoan Mengguli: China - Private

LCO, LFP

Reshine New Material: China - Private

LCO, LFP

Pulead Technology: China - Private

LCO, LFP

Seimi Tongda Lithium Energy: China - Private

LCO, LFP

Shanshan Tech: China - Private

LCO, LFP

B&M Science and Technology: China - Private

LCO, LFP

NEI Corp: US - Private

Buses

NMC, LFP LCO, NCM, LMO

Henan Kelong New Energy Co: China - Private

EVs

LCO, NMC, NCA, LFP

Nichia: Japan - Private

Targray: Canada - Private

Target market Electronics

NCM LTO, LMNO, LMO, NCA

Source: Berenberg

SubSub-sector #4 – energy storage battery providers There has been robust growth in the stationary storage segment (yearly installations have doubled since 2010), driven by frequency smoothing requirements. Lithium ion technology is hence dominating because of its high power density. We expect that there will be strong growth in storage for load shifting purposes in order to integrate renewables. IHS expects grid storage to grow to 40GW by 2020 from only 538MW in 2015. We think that flow batteries could prove ideal for load management purposes while lithium ion will continue to dominate the frequency management space. Companies that provide low-cost stationary storage systems are likely to experience strong growth in earnings. 14

Berenberg Thematics

Exposure by key market – Maxwell, RedT, Leclanché, Ceres and Intelligent Energy all represent potentially attractive technology acquisitions for larger automotive OEMs and battery manufacturers Company (Country, Market cap)

Grid scale storage/generation

Residential/comme Transportation rcial storage/ Electric generation cars/buses/trucks

Overall exposure to transport electrification, distributed generation/storage

Maxwell Technologies US - USD 0.2bn

VERY HIGH

Johnson Control US - USD 23.2bn

MEDIUM

Details Leading supplier of ultracapacitors ideal for the start stop car market to grow from 22m to 56m vehicles by 2020. Other target growth market is for ultracapacitors are renewable energy capacity firming at the grid level, wind turbine (pitch control) etc Johnson Control is investing $555m in increasing its capacity to manufacture advanced lead-acid batteries to be used in the start stop market for cars and buses. The company also sees the possibility of targeting stationary storage market

Saft France - EUR 0.6bn

VERY HIGH

RedT Energy UK - GBP 35m

VERY HIGH

Leclanche Switzerland - CHF 90m

VERY HIGH

Lithium ion battery manufacturer for stationary storage (grid and residential scale) and automotiove applications.

Ceres UK - GBP 50m

HIGH

Developer of low cost fuel cells able to run on natural gas.The key markets for its fuel cells are residential electricity and heat generation units and back up power for the commercial market.

Intellligent Energy UK - GBP 55m

HIGH

Major Li-ion battery manufacturer supplying industrial, aerospace and stationary storage application at grid and residential level. RedT is one of the leading companies working on flow batteries for large scale load management purposes. The demand for load management is expected to see strong growth as renewable generation continues to rise

Leading developer of hydrogen fuel cells for automotive, back up power and electronics. The company has won an important power management contract to provide backup electricity to Telecom stations in India

Note: Level of exposure ranking. 5 Stars= VERY HIGH, 4 Stars = HIGH, 3 stars= MEDIUM, 2 Stars= LOW-MEDIUM,1 Star=LOW

Source: Berenberg

SubSub-sector #5 – solar integrators, power management, residential storage vendors and micromicro-grid operators We think that the ongoing reduction in the cost of batteries and solar panels will expedite the move towards distributed power generation and distribution. We think that micro grids and energy trading platforms will develop in countries with high electricity retail tariffs and fixed grid charges such as Germany, Australia, the UK and a number of states in the US. Solar PV providers, residential storage and other important equipment suppliers such as invertors are expected to benefit. Exposure by key market Company (Country, Market cap)

Renewable generation

Residential storage

Microgrid-electrity trading platform

Battery management systems

Overall exposure to renewable generation & storage

Solar City US - USD 2.9bn

HIGH

SMA Germany - EUR 1.3bn

HIGH

Infineon Germany - EUR 11.9bn

HIGH

Details Solar City is the leading seller, Installer and financier of solar panale in US and has 33% of the residential market. It now be selling/leasing Tesla's storage products together with its solar panels in the US market. SMA is globally the largest proider of inverters for residential solar generation. It also has an extyensive product portfolio of inverters for residential and commercial storage market. Infineon is the third largest supplier of semiconductors for the automotive sector. These are used in the power train, battrey management systems and sensors within the vehicle. EVs have more than double semi content versus an ICV. Rising EV penetration should benefit Infineon.

Note: Level of exposure ranking. 5 Stars= VERY HIGH, 4 Stars = HIGH, 3 stars= MEDIUM, 2 Stars= LOW-MEDIUM,1 Star=LOW

Source: Berenberg

SubSub-sector #6 – nextnext -generation lithium l ithium ion technology providers We think that the next stage in the evolution of battery technology will follow on from the intensive R&D currently being carried out to develop advanced lithium ion batteries, which have a higher proportion of active materials than other battery types and hence greater energy storage capacity. At the same time, the development of new cell chemistries which can simplify manufacturing methods and reduce costs could be a game-changer in terms of battery adoption. There are promising signs that ongoing R&D into semi-solid and solidstate lithium ion batteries could deliver the next step-up in energy density for batteries. 15

Berenberg Thematics

Companies working on advanced lithium ion batteries 24M US - Private

Semi solid Lithium ion batteries which can be produced at half the cost and have higher energy density

Alevo US - Private

Developing low cost Lithium ion batterues with inorganic electrolyte

Sakti3 US - Acquired by Dyson (UK)

Developing solid state Lithium ion battery

Seeo US - Acquired by Bosch (Germany)

Developing solid state Lithium ion battery

Source: Berenberg

Conversely, we identify four sub-sectors which could see significant disruption over the next 5-10 years SubSub-sector #1 – traditional automotive OEMs that lack lithium ion battery and EV technology We believe that companies which are still relying on nickel metal hydride (NiMH) batteries – which are obsolete in our view because have a low energy density compared with lithium ion batteries – and are not taking aggressive measures to either acquire or build up lithium ion technology will be left behind in the EV space. While hydrogen-based fuel cell technology (which is Toyota’s focus) might become a viable technology over the next 10-15 years, fuel cell electric vehicles (FCEVs) are unlikely to overtake BEVs in terms of popularity – at least not over the next five years – because of hydrogen infrastructure constraints. Hence, Toyota and Peugeot will be unable to benefit from the expected strong growth in PHEVs over the next five years.

SubSub-sector #2 – gas turbine and diesel peaker power plant providers Over the medium term, the expected increase in utility-scale stationary storage facilities will have an impact on use of peaker plants, which are currently predominantly used for balancing seasonal fluctuations in load. These peaker plants are mainly gas-fired because they are cheaper to run than diesel and coal plants. The leading manufacturers of gas-fired combustion turbine (CT) plants are GE, Siemens, Alstom and Mitsubishi Heavy Industries (MHI). These peaker plants suffer from c40% higher operating costs than combined cycle (CC) gas plants and poor utilisation rates (on average below 5%). With storage prices continuing to decline, the economic rationale for gas and diesel peak plants should significantly erode.

SubSub-sector #3 – power utilities with a low focus on/exposure to renewables and storage We expect that distributed power generation coupled with storage and an interconnected grid will replace existing centralised power generation, transmission and distribution models. We think that utilities which are not focusing on: 1) phasing out centralised power generation and replacing it with distributed renewable energy, 2) installing grid scale storage, 3) developing retail offerings of residential storage and power management and 4) installing charging infrastructure, will face a similar disruptive impact to that experienced by regulated utilities over the last decade due to the growth in solar generation.

16

Berenberg Thematics

Utilities ranking grid – RWE, E.ON and Enel have the lowest risk of disruption among European utilities because of their exposure to renewables and storage Company (Country, Market cap)

Distributed renewable generation (excl. hydro)

Grid scale storage

Retail residential storage offering

Charging infrastructure deployment

RWE Germany - EUR 7.4bn E.ON Germany - EUR 18.1bn Enel Italy - EUR 33.1bn Fortum Finland - EUR 10.8bn GDF Suez - Engie France - EUR 34.0bn Iberdrola Spain - EUR 39.5bn Verbund Austria - EUR 3.7bn Centrica UK - GBP 9.7bn Red Electrica Spain - EUR 9.9bn EDF France - EUR 22.4bn SSE UK - GBP 13.8bn Terna Spain - EUR 9.3bn National Grid UK - GBP 35.7bn Note: Level of exposure ranking. 5 Stars= VERY HIGH, 4 Stars = HIGH, 3 stars= MEDIUM, 2 Stars= LOW-MEDIUM,1 Star=LOW

RISK OF DISRUPTION LOW LOW LOW HIGH HIGH MEDIUM HIGH Very HIGH Very HIGH HIGH MEDIUM LOW-MEDIUM LOW-MEDIUM

Source: Berenberg

SubSub-sector #4 – largelarge-scale lithium ion battery manufacturers are likely to suffer from capacity overhang and and weak battery pricing There continues to be 40-50% overcapacity in lithium ion battery manufacturing for both the electronics and automotive sectors. Continued capacity expansion by Asian players such as LG Chem, Samsung and Panasonic over the last decade have commoditised the market. The level of competition and capacity overhang should rise further as a result of the giant battery manufacturing facilities being set up by the likes of Tesla/Panasonic and BYD. Margins for battery manufacturers are likely to remain under pressure in the mid-term.

Risk to thesis The risks associated with the growth of lithium ion batteries in automotive and stationary storage relate to regulation, incentives, environmental impacts and security of supply for critical materials. These are long-term risks and can negatively affect the cost trajectory for batteries and their adoption in the transportation and power sectors. 1)

Regulatory risk: Any abrupt elimination or lowering of subsidies/incentives on EVs or continued restrictions on stationary storage at grid level in Europe could impede growth in batteries.

2)

Security of supply: Cobalt and natural graphite have high supply risk, according to the European Commission. This is because supply of both materials is highly concentrated, 56% of global cobalt production comes from the Congo and 69% of natural graphite from China. Both materials are critical for lithium ion battery manufacturing.

3)

Environmental: Only 1% of lithium ion batteries are recycled. Virgin manufacturing of cathode materials for batteries is more pollutive than recycled cathode materials.

17

Berenberg Thematics

Please note that the use of this research report is subject to the conditions and restrictions set forth in the “General investment investmentstment -related disclosures” and the “Legal disclaimer” at the end of this document. For analyst certification and remarks regarding regarding foreign investors and countrycountry-specific disclosures, please refer to the respective paragraph at the end of this document.

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) Company BMW AG Daimler AG Renault SA Volkswagen AG Peugeot SA RWE AG Tesla Motors Inc E.ON SE Enel SpA Infineon Technologies AG Umicore SA (1) (2) (3) (4) (5)

Disclosures 5 no disclosures 5 no disclosures no disclosures no disclosures no disclosures 5 no disclosures no disclosures no disclosures

Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) and/or its affiliate(s) was Lead Manager or CoLead Manager over the previous 12 months of a public offering of this company. The Bank acts as Designated Sponsor for this company. Over the previous 12 months, the Bank and/or its affiliate(s) has effected an agreement with this company for investment banking services or received compensation or a promise to pay from this company for investment banking services. The Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. The Bank holds a trading position in shares of this company.

Historical price target and rating changes for BMW AG in the last 12 months Date 25 February 15 05 October 15

Price target - EUR 105.00 90.00

Rating Hold Hold

Initiation of coverage 16 October 13

Historical price target and rating changes for Daimler AG in the last 12 months Date 05 May 15 08 February 16

Price target - EUR 100.00 90.00

Rating Buy Buy

Initiation of coverage 10 March 14

Historical price target and rating changes for Renault SA in the last 12 months Date 12 February 15 09 April 15 26 November 15

Price target - EUR 82.00 96.00 105.00

Rating Buy Buy Buy

Initiation of coverage 17 September 14

Historical price target and rating changes for Volkswagen AG in the last 12 months Date 09 March 15 17 July 15 22 September 15 06 October 15 26 November 15

Price target - EUR 300.00 290.00 290.00 150.00 160.00

Rating Buy Buy Under review Buy Buy

Initiation of coverage 26 July 13

Historical price target and rating changes for Peugeot SA in the last 12 months Date 20 February 15

Price target - EUR 13.50

Rating Sell

Initiation of coverage 17 September 14

18

Berenberg Thematics

Historical price target and rating changes for RWE AG in the last 12 months Date 16 April 15 03 July 15 17 August 15 23 October 15 10 February 16

Price target - EUR 19.00 20.00 17.00 14.00 10.50

Rating Sell Hold Hold Hold Sell

Initiation of coverage 12 January 11

Historical price target and rating changes for Tesla Motors Inc in the last 12 months Date 02 February 16

Price target - USD 165.00

Rating Sell

Initiation of coverage 02 February 16

Historical price target and rating changes for E.ON SE in the last 12 months Date 30 April 15 23 October 15 10 February 16

Price target - EUR 13.80 10.00 8.00

Rating Hold Hold Sell

Initiation of coverage 08 November 10

Historical price target and rating changes for Enel SpA in the last 12 months Date 10 September 15 10 February 16

Price target - EUR 4.60 4.00

Rating Buy Buy

Initiation of coverage 14 July 11

Historical price target and rating changes for Infineon Technologies AG in the last 12 months Date 12 March 15 08 January 16 03 February 16

Price target - EUR 9.40 9.40 15.00

Rating Hold Under review Buy

Initiation of coverage 06 January 10

Historical price target and rating changes for Umicore SA in the last 12 months Date

Price target - EUR

Rating

Initiation of coverage 15 July 13

Berenberg Equity Research ratings distribution and in proportion to investment banking services, as of 1 January 2016 in respect of section 5 paragraph 4 of the German Financial Analysis Regulation (Finanzanalyseverordnung – FinAnV) Buy Sell Hold

50.00 % 14.23 % 35.77 %

84.85 % 0.00 % 15.15 %

Valuation basis/rating key The recommendations for companies analysed by Berenberg’s Equity Research department are made on an absolute basis for which the following three-step rating key is applicable: Buy:

Sustainable upside potential of more than 15% to the current share price within 12 months;

Sell: Sustainable downside potential of more than 15% to the current share price within 12 months; Hold:

Upside/downside potential regarding the current share price limited; no immediate catalyst visible.

NB: During periods of high market, sector, or stock volatility, or in special situations, the recommendation system criteria may be breached temporarily.

19

Berenberg Thematics

Competent supervisory authority Bundesanstalt für Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Straße 108, 53117 Bonn and Marie-Curie-Str. 24-28, 60439 Frankfurt am Main, Germany.

General investmentinvestment - related disclosures Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note. Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies covered by Berenberg are continuously followed by the analyst. Based on developments with the relevant company, the sector or the market which may have a material impact on the research views, research reports will be updated as it deems appropriate. The functional job title of the person/s responsible for the recommendations contained in this report is “Equity Research Analyst” unless otherwise stated on the cover. The following internet link provides further remarks on our financial analyses: http://www.berenberg.de/research.html?&L=1&no_cache=1 Legal disclaimer This document has been prepared by Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”). This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements. The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document. This document is not a solicitation or an offer to buy or sell the mentioned stock. The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. The Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content. The Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. The Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services. Analyst certification I, Asad Farid, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Nick Anderson, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Jamie Rosser, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein.

20

Berenberg Thematics

In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Adam Hull, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Tammy Qiu, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Evgenia Molotova, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. Remarks regarding foreign investors The preparation of this document is subject to regulation by German law. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. United United States of America This document has been prepared exclusively by the Bank. Although Berenberg Capital Markets LLC, an affiliate of the Bank and registered US broker-dealer, distributes this document to certain customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this document constitute research of Berenberg Capital Markets LLC. In addition, this document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. This document is classified as objective for the purposes of FINRA rules. Please contact Berenberg Capital Markets LLC (+1 617 292 8200) if you require additional information. ThirdThird-party research disclosures Company BMW AG Daimler AG Renault SA Volkswagen AG Peugeot SA RWE AG Tesla Motors Inc E.ON SE Enel SpA Infineon Technologies AG Umicore SA (1) (2) (3) (4)

Disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures no disclosures

Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior month.* Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.* Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months, or expects to 21

Berenberg Thematics

(5)

receive such compensation in the next 3 months.* There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the analyst knows or has reason to know at the time of publication of this research report.

* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the ‘Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)’ section above. Copyright The Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without the Bank’s prior written consent. © September 2015 Joh. Berenberg, Gossler & Co. KG

22

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+44 20 3207 7835 +44 20 3465 2715 +44 20 3465 2746 +44 20 3465 2673

TELECOMMUNICATIONS Usman Ghazi +44 20 3207 7824 Siyi He +44 20 3465 2697 Laura Janssens +44 20 3465 2639 Paul Marsch +44 20 3207 7857 Michael Summerville +44 20 3207 7914 THEMATIC RESEARCH Nick Anderson Chris Armstrong Asad Farid Jamie Rosser

+44 20 3207 7838 +44 20 3207 7809 +44 20 3207 7932 +44 20 3465 2732

TOBACCO Jonathan Leinster

+44 20 3465 2645

UTILITIES Robin Abrams Andrew Fisher Mehul Mahatma Lawson Steele

+44 20 3465 2635 +44 20 3207 7937 +44 20 3465 2698 +44 20 3207 7887

ECONOMICS Kallum Pickering Holger Schmieding

+44 20 3465 2672 +44 20 3207 7889

E-mail: [email protected] PARIS Vincent Klein +33 1 58 44 95-09 Antonio Scuotto +33 1 58 44 95 03 TRADING LONDON Edward Burlison-Rush

+44 20 3753 3055

ELECTRONIC TRADING Daniel Eichhorn +49 40 350 60 391 Matthias Führer +49 40 350 60 597 CRM Jessica Jarmyn Edwina Lucas Greg Swallow

+44 20 3465 2696 +44 20 3207 7908 +44 20 3207 7833

CORPORATE ACCESS Lindsay Arnold Jennie Jiricny Stella Siggins

+44 20 3207 7821 +44 20 3207 7886 +44 20 3465 2630

EVENTS Laura Hawes Suzy Khan Charlotte Kilby Natalie Meech Ellen Parker Sarah Weyman

+44 20 3753 3008 +44 20 3207 7915 +44 20 3207 7832 +44 20 3207 7831 +44 20 3465 2684 +44 20 3207 7801

E-mail: [email protected] CRM +1 646 445 5573 Laura Cooper +1 646 445 7201 +1 646 445 5576 +1 646 445 5571 CORPORATE ACCESS +1 646 445 5574 Olivia Lee +1 646 445 7212 ECONOMICS Mickey Levy

+1 646 445 4842

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