European Utilities Weekly: Turning up

Research evidence excerpt

European Utilities Weekly: Turning up

Deutsche Bank

Research

Europe Industry Date

Germany 26 June 2026

United Kingdom European Utilities

Periodical

Utilities Weekly

Electricity

Turning up

James Brand, CFA

c.1% outperformance, with the end to the war now seemingly fully priced in Research Analyst

After a prolonged period of gradual underperformance for the sector it +44-20-754-74705

outperformed by just over 1% this week through Thursday's close. On an absolute

Olly Jeffery

basis the sector rose by around 2%. European utilities were seen as benefiting from Research Analyst

the uncertainty caused by the US-Iran war, with the prolonged process of reaching +44-20-754-70055

peace more than reversing the outperformance at the start of the war. Peace now

seems fully priced in, with the sector now trading on only a 3% premium to the

market on year ahead P/E. It has now outperformed the market by 6% year to date.

Power and gas prices were typically fairly flat over the week. The UK carbon price

dropped by around 5%, potentially because political changes may make carbon

market alignment less likely. Within the week Elia was the best performer (+6%),

followed by SSE and National Grid (+5%), Italgas (-4%) the worst performer after its

CMD.

A number of stocks stand out on key valuation measures

Pennon, United Utilities, SSE, Snam and Terna (Buys) and Severn Trent (Hold) offer

Sustainable Equity Cashflow yields of more than 10%. In 2031E, Engie, SSE, Veolia,

E.ON (Buys) trade less than 13x, while Pennon, United Utilities, Snam, Terna (Buys)

and Severn Trent (Hold) have economic P/Es of less than 13x, assuming investors

earn the cost of equity between now and then. Snam (Buy) and Severn Trent (Hold)

trade on only a single-digit premium to RAB in 2031E, assuming investors earn their