High Yield Power & Utilities: 1Q26 HY Model Book - Maintaining Sector OW on Rel Val vs the BB Index

Research evidence excerpt

High Yield Power & Utilities: 1Q26 HY Model Book - Maintaining Sector OW on Rel Val vs the BB Index

J P M O R G A N North America Credit Research

01 July 2026

High Yield Power & Utilities

1Q26 HY Model Book - Maintaining Sector OW on Rel

Val vs the BB Index

• We maintain our Overweight sector recommendation on HY Power & North America Corporate Credit -

Utilities. Our Overweight rating is predicated on the sector’s defensive Electric Utilities

attributes and our expectation for the sector to remain firm in the event of Kevin L Kwan AC

continued macro volatility, including any escalation in the Iranian conflict. We (1-212) 270-9455

also see the HY BB index as a better point of comparison for the HY Utilities kevin.l.kwan@jpmorgan.com

index, which trades ~10bp wide to the BB index on a yield basis. Power Erin Daugherty

fundamentals remain strong due to continued data center/AI related power (1-212) 834-6990

demand, and we expect to see strong cash flow from the IPPs given strong erin.daugherty@jpmchase.com

J.P. Morgan Securities LLC

power hedge positions into the summer season. We remain of the view that

most AI/data center related volatility is more of a growth/equity issue, and

would generally be more opportunistic of any weakness in HY Power credits.

We also note the improving credit quality of the index constituents over the past

year, with VST achieving full investment grade ratings, and we expect NRG

to achieve investment grade metrics in the 2027 timeframe.

• FERC Open Meeting supportive of generation build, but execution risks

remain. On June 18th, FERC approved a set of orders that aim to remove

bottlenecks to connect large load customers and data centers to the grid while

prioritizing retail customer affordability. While the approved FERC orders