UK Utilities "Thoughts on the 7.5% share price decline 15 May" Freshney

Research evidence excerpt

UK Utilities "Thoughts on the 7.5% share price decline 15 May" Freshney

Global Research

18 May 2026ab

UK Utilities Equities

United KingdomThoughts on the 7.5% share price decline 15

May Utilities

Mark Freshney

Analyst

mark.freshney@ubs.com

Bottom line +44-20-7568 3989

The UK Utility sector on Friday had its fourth largest daily decline since privatisation, Gonzalo Sanchez-Bordona

falling c7.5%. The European utility sector ex. UK stocks fell just c2.8%. The acute fall in Analyst

the UK was partly due to shares finally reacting to higher bond yields. Concerns on the gonzalo.sanchez-bordona@ubs.com

future potential ownership structure of the sector were also at play, in our view. As +34-91-745 4147

pointed out in our recent NG note, after the most positive 22 months for Government Wanda Serwinowska, CFA

policy since privatisation, there is little upside risk. We prefer continental European Analyst

Utilities to the UK and have a balance of Sell ratings. Our most-preferred UK Utility is wanda.serwinowska@ubs.com

Pennon (PT 650p, Buy), and our least-preferred is National Grid (PT 1,160p, Sell). +44-20-7568 3980

Christabel Kelly

We believe two points drove the 7.5% move down on 15 May Analyst

1. Rise in UK gilt yields: The 10-yr nominal gilt redemption yield rose +18bps on 15 christabel.kelly@ubs.com

May. But since the start of the conflict in the Middle East on 28 Feb, the same 10-yr +44-20-7568 2358

yield is +100bps and the 30-yr +80bps. We note real gilt yields are up c40-60bps Anna Webb

over the same period, reflecting some higher inflation expectations. The sensitivity Analyst

is that a c50bps move in real yields would be c7-8% off energy and 5% off water anna.webb@ubs.com

stock equity valuations (water stocks are at a lower RAB premium and discounting +44-20-7568 8293