Скачать презентацию Investor Meetings Northeast Utilities VP Alignment Meeting Board Скачать презентацию Investor Meetings Northeast Utilities VP Alignment Meeting Board

c256f444d4755a51ca1794ee5039eddc.ppt

  • Количество слайдов: 40

Investor Meetings Northeast Utilities VP Alignment Meeting Board of Trustees New York Stock Exchange Investor Meetings Northeast Utilities VP Alignment Meeting Board of Trustees New York Stock Exchange May 28, 2015

Investor Meetings “One Company” Delivering Great Service Employees 1 Investor Meetings “One Company” Delivering Great Service Employees 1

Investor Meetings Alignment: Why One Company Working Together Is So Important 2 Investor Meetings Alignment: Why One Company Working Together Is So Important 2

Investor Meetings Starts with the Customer § Reliability and superior service § Timely resolution Investor Meetings Starts with the Customer § Reliability and superior service § Timely resolution of issues/requests § Lowest reasonable costs § Partnerships to help them succeed 3

Investor Meetings Cost Pressures Coming from Many Directions Generating capacity shortage starting in 2017 Investor Meetings Cost Pressures Coming from Many Directions Generating capacity shortage starting in 2017 - 2018 Insufficient gas in the winter to power our region’s newest generation Additional public policy cost pressures; i. e. Affordable Care Act, low-income rates Solar and other clean power advocates want to extend and expand subsidies 4

Investor Meetings Eversource Can Be an Honest Broker To Resolve Regional Energy Challenges • Investor Meetings Eversource Can Be an Honest Broker To Resolve Regional Energy Challenges • No merchant generation to protect • We are local so we have credibility with policy makers • We are offering highly innovative solutions 5

Investor Meetings Attributes and Challenges in Our Business Lines Electric Distribution Electric Transmission Key Investor Meetings Attributes and Challenges in Our Business Lines Electric Distribution Electric Transmission Key Attributes • Superior service • Strong customer partnerships • Strong regulatory relationships • Superior planning, engineering, operations • Excellent project management • Very favorable FERC cost recovery model Key Challenges • Rising supply costs with our name on the bill • Little growth to offset rising costs Gas Distribution Key Attributes • Strong top-line growth • Fuel of choice • Strong political, regulatory support for growth Key Challenges • Adequate resources to install the pipe • Lower oil prices Key Challenges • NPT siting • FERC ROE review Gas Transmission Key Attributes • New England desperately needs gas • Strong partner in Spectra • Short distance from Marcellus Key Challenges • Need a new regulatory paradigm to support generation 6

Investor Meetings Earnings Mix to Change Significantly Rate Base By Business $20 billion 6% Investor Meetings Earnings Mix to Change Significantly Rate Base By Business $20 billion 6% 10% $13. 6 billion 5% 10% 44% $3 Billion Increase in Transmission Rate Base 50% 40% 35% Projected 2019 Rate Base 2014 Year-End Rate Base Electric Transmission Electric Distribution Gas Distribution Electric Generation *Reflects Eversource’s 40% share of $3 billion of Access Northeast project Gas Transmission* 7

Investor Meetings Keys For Success Invest in the business: Track our capital costs § Investor Meetings Keys For Success Invest in the business: Track our capital costs § Transmission: Capital investment tracked § Electric Distribution: CL&P resiliency, NSTAR Electric CPSL, PSNH REP § Gas Distribution: NSTAR Gas GSEP; Yankee Gas CES, Hopkinton upgrades tracked § Generation: Capital investment tracked Move toward decoupled electric revenues § CL&P, WMECO already decoupled § NSTAR Electric to decouple in next rate case Manage O&M well; track uncontrollable costs where possible § MA utilities pension trackers 8

Investor Meetings Why Are Investors Important to Us? § They own the company § Investor Meetings Why Are Investors Important to Us? § They own the company § They lend to the company so that we can invest in our facilities to bring superior service to our customers § We are all investors in Eversource and we share in the company’s financial success 9

Investor Meetings How Does Wall Street View Us? Firm Price Target 2017 EPS Estimate Investor Meetings How Does Wall Street View Us? Firm Price Target 2017 EPS Estimate Barclays $53. 00 $3. 27 Guggenheim $55. 00 $3. 25 Janney $56. 00 $3. 26 Macquarie $55. 00 $3. 23 US Capital $54. 00 N/A Average $54. 60 $3. 25 BMO Capital $52. 00 $3. 14 Deutsche Bank $53. 00 $3. 20 Evercore $48. 50 $3. 15 Goldman Sachs $50. 00 $3. 24 Wolfe $53. 00 $3. 21 Average $51. 30 $3. 19 Buy Ratings Hold Ratings 10

Investor Meetings How Does Wall Street Value Us? Price – Earnings Ratio: Current Price Investor Meetings How Does Wall Street Value Us? Price – Earnings Ratio: Current Price Year Analyst Average EPS Estimate P/E Ratio Average Regulated Company* $49 2015 $2. 85 17. 2 16. 5 $49 2016 $3. 03 16. 2 15. 6 $49 2017 $3. 21 15. 3 14. 7 *Deutsche Bank, ex midstream, utilities in M&A 11

Investor Meetings Why Does Wall Street View Us Favorably? 1. Historical performance • Provided Investor Meetings Why Does Wall Street View Us Favorably? 1. Historical performance • Provided double-digit total shareholder return for 6 th consecutive year • 2014 return more than double the S&P 500’s return • Dramatically outperformed both the EEI Index and S&P 500 over 5 and 10 years 2014 5 -Year 10 -Year Eversource 30. 5% 145. 8% 297. 7% EEI Index 28. 9% 91. 0% 156. 0% S&P 500 13. 7% 105. 1% 109. 4% 12

Investor Meetings 2. Long-Term Earnings Growth ase 014 B off 2 rowth 8% G Investor Meetings 2. Long-Term Earnings Growth ase 014 B off 2 rowth 8% G 6% - Rate owth r Gr 2 -Yea EPS 7. 9% $2. 75$2. 90 Key Drivers for Long Term Guidance: Positive • FERC-regulated electric and gas transmission investment • Average of 3% O&M reductions through 2018 • Gas expansion and system upgrades - annual sales growth 2% - 4% • Distribution rate relief Negative • Depreciation & property taxes • Interest costs 13

Investor Meetings 3. We Have Key Ingredients For Strong Performance § § § Merger Investor Meetings 3. We Have Key Ingredients For Strong Performance § § § Merger made sense and is working Well run operationally; highly respected management Unusual combination of growth drivers § § Risks well managed Strong regulatory relationships with very limited distribution rate case exposure until late 2017 Ø Transmission Ø Natural gas expansion Ø Cost management Ø NSTAR GAS: currently pending Ø Yankee Gas: no mandated review until 2019 Ø PSNH: rate freeze part of settlement Ø CL&P: to be filed in mid-2017 Ø NSTAR Electric, WMECO: required by mid-2017 14

Investor Meetings 4. Low Risk S&P Electric Utilities Credit Ratings Distribution 14 13 Number Investor Meetings 4. Low Risk S&P Electric Utilities Credit Ratings Distribution 14 13 Number of Issuers 1. ES (Stable) 13 2. SO (Negative) 3 2 A A- BBB+ BBB- 15

How Does the Finance Group Support the Company? § § § Investor Meetings Regulatory: How Does the Finance Group Support the Company? § § § Investor Meetings Regulatory: Manages relationships, filings so we can raise enough revenue to run the business Accounting: Pays our bills, taxes and payroll; accounts for our investments; files financial reports with government authorities so we can raise capital Treasury: Raises capital, manages risk through insurance and ERM; manages pension and other external trusts Budgets and Forecasting: Prepares short- and long-term forecasts and monitors financial and operational performance Investor Relations: Maintains relationships with 500 -1, 000 institutional, 47, 000 individual investors 16

Investor Meetings What Does Wall Street See as the Risks to Our Strategy? § Investor Meetings What Does Wall Street See as the Risks to Our Strategy? § Are we too dependent on execution of our big projects? § Will FERC ROEs remain under pressure? § How many more years can we reduce our O&M? § Do lower oil prices limit future gas conversion activity? § Do high energy, capacity prices in New England limit our ability to increase electric distribution revenues? § Will solar, distributed generation cut our electric sales and profits? § Will higher interest rates hurt all utility stock prices (though it may help our authorized ROEs)? 17

Investor Meetings What Are the Three Things That Worry Me? § Change in regulatory Investor Meetings What Are the Three Things That Worry Me? § Change in regulatory climate § Customer satisfaction levels when faced with escalating electricity prices § Sustaining the growth 18

Investor Meetings Why Will We Be a Winner Long-Term? § Sound, focused, long-term strategy Investor Meetings Why Will We Be a Winner Long-Term? § Sound, focused, long-term strategy (grow revenues, lower costs, align with customer interests) § Operate in a region needing infrastructure development § We are a trusted partner § Collaborative, successful management team 19

Deutsche Bank Markets Research Eversource Energy Presentation to ES VPs Caroline Bone, CFA | Deutsche Bank Markets Research Eversource Energy Presentation to ES VPs Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI(P) 124/04/2015

Deutsche Bank Utilities & Power Research Name Focus Stocks Utilities Since … Research Since Deutsche Bank Utilities & Power Research Name Focus Stocks Utilities Since … Research Since … Before DB … Jonathan Arnold +1 212 250 -3182 jonathan. arnold@db. com Team Leader 1995 1991 US Utilities (ML) Lat Am Utilities (ML, Others) UK Insurance (SGW) Caroline Bone, CFA +1 212 250 -8253 caroline. bone@db. com DUK, ED, ETR, EXC, FE, ITC, ES*, PEG, SO, TE, UIL*, WEC 2007 2005 US Utilities (ML) US E&P (ML) Lauren Duke +1 212 250 -8204 lauren. duke@db. com AEP, CMS, CNP*, D, DTE, EIX, PCG, POR*, PPL, XEL 2006 US Utilities (Bof. A) Abe Azar +1 212 250 -7274 abe. azar@db. com CPN, DYN, NEE, NEP NRG, NYLD 2008 2014 PSEG Notes: * Denotes lead coverage Deutsche Bank Markets Research 19/03/2018 23: 11 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 21

What does a sell-side analyst do? The role of a sell-side analyst § Help What does a sell-side analyst do? The role of a sell-side analyst § Help our clients on the buy-side (mutual funds, hedge funds) with their investment decisions How? § Express views through published ratings (Buy, Hold, Sell) and written reports § § Build detailed financial models to value company stocks and sector § Stay on top of relevant sector trends and drivers Know company details that a buy-sider who might cover multiple sectors will not have time to follow Deutsche Bank Markets Research 19/03/2018 23: 11 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 22

When is the Federal Reserve going to raise rates? The DB view Most expect When is the Federal Reserve going to raise rates? The DB view Most expect the Federal Reserve to begin hiking rates soon § DB strategists/rates experts expect first hike in September § § Market consensus is a Fed hike in November or later DB experts largely agree that long-term interest rates will remain below normal and expect slow and measured hikes Outlook matters for utilities as the sector is a bond proxy § § Source: Higher interest rates = lower utility stock prices Lower interest rates = higher utility stock prices Deutsche Bank Markets Research 19/03/2018 23: 11 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 23

S&P Utilities Performance in 2014 Utilities were the top-performing S&P sector in 2014, supported S&P Utilities Performance in 2014 Utilities were the top-performing S&P sector in 2014, supported by a declining 10 -Year treasury yield S&P Sector Performance - 2014 Source: 10 -Year Treasury Yield (%) Deutsche Bank, Thomson Reuters Deutsche Bank Markets Research 19/03/2018 23: 12 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 24

DB Utilities & Power Research View Our positioning at the start of this year DB Utilities & Power Research View Our positioning at the start of this year Prefer merchant power with exposure to PJM capacity market reforms § FERC approval of proposed reforms expected to be meaningful catalyst, as reforms likely to result in higher capacity prices Underweight regulated utilities § High valuations after strong performance in 2014 § Concern about rising interest rates and impact on regulated utilities (bond proxy) with the Federal Reserve expected to raise rates Source: Deutsche Bank Markets Research 19/03/2018 23: 13 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 25

Strong performance continued into early 2015 Our sector view felt poorly timed in early Strong performance continued into early 2015 Our sector view felt poorly timed in early 2015 as yields fell and utilities continued to outperform hitting an all time high in late January S&P Utilities vs. 10 -Yr Treasury Yield S&P Utilities 12 M Forward P/E vs. S&P 500 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 P/E Relative (95%) P/E Rel. Avg. (88%) P/E Rel. 5 Y Avg. (107%) Investors finally began to worry more seriously about a potential Fed rate hikes, which resulted in a sizable correction in February Source: Deutsche Bank, Thomson Reuters Note: Priced as of May 21, 2015 Deutsche Bank Markets Research 19/03/2018 23: 13 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 26

S&P Utilities Performance – 2015 YTD S&P Sector Performance – 2015 YTD Utilities are S&P Utilities Performance – 2015 YTD S&P Sector Performance – 2015 YTD Utilities are now worst performer § § § Concern about rising interest rates High valuations at start of the year Low natural gas prices § Commodity sensitive stocks like EXC, PEG, FE, ETR, etc. included in the index Source: Deutsche Bank, Thomson Reuters Note: Priced as of May 21, 2015 Deutsche Bank Markets Research 19/03/2018 23: 15 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 27

DB Utilities & Power Research View Our positioning now Still favor PJM-based merchant power DB Utilities & Power Research View Our positioning now Still favor PJM-based merchant power stocks § FERC approval of PJM capacity market reforms pending § Significant upside remains for EXC and DYN, in our view More constructive on regulated utilities, preference for higher growth § S&P Utilities Index down 7% YTD having underperformed S&P 500 by 10% § S&P Utilities now trading at a 5% discount versus S&P 500 § § This compares to five-year average premium of 7% vs. S&P 500 Recently upgraded AEP and NEE to reflect our more constructive view Source: Deutsche Bank, Thomson Reuters Note: Priced as of May 21, 2015 Deutsche Bank Markets Research 19/03/2018 23: 15 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 28

What makes a stock a “Buy”? Preference for above-average earnings and dividend growth potential What makes a stock a “Buy”? Preference for above-average earnings and dividend growth potential § Average regulated utility is expected to grow EPS ~4% per year § Buy-rated stocks typically have earnings growth above that level § Need high conviction that company will deliver on growth Strong total return potential arguably most important factor § PT needs to imply total return of at least 10% (including yield) How do we determine fair value? § Focus on price-to-earnings ratios for regulateds § The dream: Buying an above-average earnings grower that is trading at a discount to peers on price to earnings ratio § In reality, you usually have to figure out what sort of premium valuation this company deserves Deutsche Bank Markets Research 19/03/2018 23: 15 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 29

DB Utilities & Power Comp Sheet Source: Deutsche Bank, Thomson Reuters for stock prices DB Utilities & Power Comp Sheet Source: Deutsche Bank, Thomson Reuters for stock prices and consensus estimates Deutsche Bank Markets Research 19/03/2018 23: 15 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 30

DB Utilities & Power Research View So what’s our view on Eversource? Eversource Energy DB Utilities & Power Research View So what’s our view on Eversource? Eversource Energy (ES) Stock checks many of the boxes for a positive view ü Strong management team with history of delivering on commitments ü Above-average EPS growth potential (6 -8% through 2018) ü Limited near-term regulatory risk ü No need for new equity to finance capital plan Deutsche Bank Markets Research 19/03/2018 23: 17 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 31

DB Utilities & Power Research View So what’s our view on Eversource? Eversource Energy DB Utilities & Power Research View So what’s our view on Eversource? Eversource Energy (ES) So what keeps us Hold rated? § Concern about potential for incremental project delays § § § Access Northeast timing appears tight Northern Pass facing vocal opposition in NH, including Governor currently Valuation not quite attractive enough to disregard incremental delays § Trading at a discount to recent history but still at 5% premium on 2017 E Source: Deutsche Bank, Thomson Reuters Note: Priced as of May 21, 2015 Deutsche Bank Markets Research 19/03/2018 23: 17 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 32

DB Utilities & Power Research View So what’s our view on Eversource? Eversource Energy DB Utilities & Power Research View So what’s our view on Eversource? Eversource Energy (ES) Valuation § Our $53 price target is based on a 16. 5 x P/E multiple applied to our 2017 E EPS estimate. We believe ES merits a 16. 5 x P/E multiple, representing a 10% premium vs. our regulated utility target multiple, given above average earnings growth potential, a lower risk business profile as a mostly T&D utility, above average exposure to FERC-regulated transmission, a strong management team, and no need for new equity in the near future. Risks § Source: Downside risks include transmission project delays or cancellations, reduced support for transmission at FERC, lower-than-expected capital expenditures on growth investments, lower-than-anticipated sales, and higher-thananticipated financing needs. Upside risks include stronger-than-expected merger synergies, acceleration of growth projects, higher sales, and lower financing needs/costs. Deutsche Bank Markets Research 19/03/2018 23: 17 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 33

Appendix 1 Important Disclosures Additional Information Available upon Request 1. Within the past year, Appendix 1 Important Disclosures Additional Information Available upon Request 1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees. 2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company. 3. Deutsche Bank and/or its affiliate(s) acts as a corporate broker or sponsor to this company. 4. The research analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct ownership position in securities issued by this company or derivatives thereof. 5. The research analyst (or, in the US, a member of his/her household) is an officer, director, or advisory board member of this company. 6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 8. Deutsche Bank and/or its affiliate(s) expects to receive or intends to seek compensation for investment banking services from this company in the next three months. 10. Deutsche Bank and/or its affiliate(s) holds more than five percent of the share capital of the company whose securities are subject of the research, calculated under computational methods required by German law (data as of the last trading day of the past month). 11. See footnote headed Special Disclosures for any other relevant disclosures. 14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. 15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services. 16. A draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication. 17. Deutsche Bank and or/its affiliate(s) has a significant Non-Equity financial interest (this can include Bonds, Convertible Bonds, Credit Derivatives and Traded Loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25 m Euros. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http: //gm. db. com. Deutsche Bank Markets Research 19/03/2018 23: 18 Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 2010 DB Blue template 34

Analyst Certification The views expressed in this report accurately reflect the personal views of Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Caroline Bone Deutsche Bank Markets Research Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 35

Equity Rating Key Equity Rating Dispersion and Banking Relationships Buy: Based on a current Equity Rating Key Equity Rating Dispersion and Banking Relationships Buy: Based on a current 12 -month view of total shareholder return (TSR = percentage change in share price from current price to projected target price plus projected dividend yield), we recommend that investors buy the stock. Sell: Based on a current 12 -month view of total shareholder return, we recommend that investors sell the stock. Hold: We take a neutral view on the stock 12 months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes: 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were: Buy: Expected total return (including dividends) of 10% or more over a 12 -month period Hold: Expected total return (including dividends) between -10% and 10% over a 12 -month period Sell: Expected total return (including dividends) of -10% or worse over a 12 -month period Deutsche Bank Markets Research Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 36

Regulatory Disclosures 1. Important Additional Conflict Disclosures Aside from within this report, important conflict Regulatory Disclosures 1. Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https: //gm. db. com/equities under the “Disclosures Lookup” and “Legal” tabs. Investors are strongly encouraged to review this information before investing. 2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank’s existing longer term ratings. These trade ideas can be found at the SOLAR link at http: //gm. db. com. Deutsche Bank Markets Research Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 37

Additional Information The information and opinions in this report were prepared by Deutsche Bank Additional Information The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness. Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own account or with customers, in a manner inconsistent with the views taken in this research report. Others within Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or otherwise. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment banking revenues. Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or estimate contained herein changes or subsequently becomes inaccurate. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst’s judgment. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Prices and availability of financial instruments are subject to change without notice and investment transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Unless otherwise indicated, prices are current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties. Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise to pay fixed or variable interest rates. For an investor who is long fixed rate instruments (thus receiving these cash flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation (including changes in assets holding limits for different types of investors), changes in tax policies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to FX depreciation, or to specified interest rates – these are common in emerging markets. It is important to note that the index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i. e. , coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is also important to acknowledge that funding in a currency that differs from the currency in which coupons are denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to the risks related to rates movements. Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including their tax position, their regulatory environment and the nature of their other assets and liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized Options”, at http: //www. optionsclearing. com/about/publications/character-risks. jsp. If you are unable to access the website please contact your Deutsche Bank representative for a copy of this important document. Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are affected by the currency of an underlying security, effectively assume currency risk. Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and SIPC. Non-U. S. analysts may not be associated persons of Deutsche Bank Securities Incorporated and therefore may not be subject to FINRA regulations concerning communications with subject company, public appearances and securities held by the analysts. Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporated in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under German Banking Law (competent authority: European Central Bank) and is subject to supervision by the European Central Bank and by Ba. Fin, Germany’s Federal Financial Supervisory Authority. United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at Winchester House, 1 Great Winchester Street, London EC 2 N 2 DB. Deutsche Bank AG in the United Kingdom is authorised by the Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation are available on request. Deutsche Bank Markets Research Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 28, 2015 38

 Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch. Korea: Distributed by Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch. Korea: Distributed by Deutsche Securities Korea Co. South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Singapore: by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #18 -00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), they accept legal responsibility to such person for its contents. Japan: Approved and/or distributed by Deutsche Securities Inc. (DSI), registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, and Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories of investment advice, products and services. Recommended investment strategies, products and services carry the risk of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the relevant disclosures, prospectuses and other documentation. Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may from time to time offer those securities for purchase or may have an interest to purchase such securities. Deutsche Bank may engage in transactions in a manner inconsistent with the views discussed herein. Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073 -37) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P. O. Box 301809, Faisaliah Tower - 17 th Floor, 11372 Riyadh, Saudi Arabia. United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U. A. E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. Australia: Retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Please refer to Australian specific research disclosures and related information at https: //australia. db. com/australia/content/research-information. html Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting. Copyright © 2015 Deutsche Bank AG Deutsche Bank Markets Research Caroline Bone, CFA | (+1) 212 250 -8253 | caroline. bone@db. com May 20, 2015 39