European Utilities "What we learnt in Q1 results season" Freshney

Research evidence excerpt

European Utilities "What we learnt in Q1 results season" Freshney

Gonzalo Sanchez-Bordona – M&A taking the front seat for a number of

companies

Expectations of higher interest rates and market volatility seem to be allowing

corporates to become more competitive for acquisitions in M&A processes vs. financial

buyers, something we had not seen in many years. We would argue most companies

keep a balanced disposals-acquisitions position, with regular asset rotation to crystallise

value and/or make strategic shifts. However, companies like Enel, Engie and Naturgy

have become active in M&A processes over the past few weeks and incorporated

acquisitions in their business plans. Engie was the most notable one with the acquisition

of UKPN earlier this year. Enel already secured c15% of its 6GW renewables acquisition

target 2026-28 in Q1 alone and expects to announce further deals soon, in US and

potentially Europe. Spain would be an interesting market too (Endesa), but less obvious

opportunities at the moment. Naturgy has said it has €7-8bn headroom capacity to

acquire assets, and is actively looking for opportunities. e.on announced the acquisition

of the UK retail company OVO. We can't rule out that other companies follow suit, as

M&A may provide better opportunities than organic growth, and investors seem to be

happy with capital raises as long as there is a clear, tangible accretive investment

opportunity. This helps support growth.

Christabel Kelly - Energy security and infrastructure resiliency back in

focus

While the regulated utilities business model is largely insulated from commodity price

and volume volatility, companies re-emphasised the importance of energy security,

infrastructure resilience, and supply diversification. Across the Italian regulated utilities in