EU INFRA, RED, UK WATER, EDP, EDPR, IBEX2, ORSTED

Research evidence excerpt

EU INFRA, RED, UK WATER, EDP, EDPR, IBEX2, ORSTED

e project is put into operation.

However, it won’t impact capex or earnings in the 2020s, so is just yet more evidence that RED does have an interesting

invesment-led growth outlook , just still not for some years yet

• UK WATER - Greater Public Control of Water Company Gearing: The Credit Take: Our Thoughts on Proposals to

Cap UK Water Sector Gearing Levels (Research Available). On Friday 10th July, articles from The Telegraph and The

Guardian suggested that the governing Labour party in the UK are considering imposing a legal cap on water company

gearing ratios at 55%, in order to curb debt-funded dividends to shareholders. Every single UK water name in our coverage

universe has gearing above the suggested 55% threshold, implying all companies may become liable to pay fines. We note

though that in the Draft Determinations for PR24, Ofwat proposed an opco gearing ratio cap at 70% but this was dropped in

the Final Determinations following investor feedback that this would significantly limit the investability and financeability

• EDP - Strong momentum should be confirmed by a strong margin in Q2. H1 2026 preview (Research Available). We

expect EDP to report a strong set of results in Q2, which should allow the company to report a broadly stable performance vs

H1 2025 after the drop reported in Q1 due to an exceptionally tough comp. In fact, we believe that the strength in operating

margins in the integrated business in Iberia in Q2 should provide evidence to investors about the robustness of the outlook for

H2, as the higher spreads seen in Q2 26 should be enhanced by the volume benefit from strong hydro in the reservoirs and