European utilities outperformed market, RWE, Veolia, and SSE expected to benefit

From Morningstar: 2025-06-27 08:23:00

In the second quarter, European utilities outperformed the market by 10%, rising 12% due to various factors like declining interest rates, solid results, higher power prices, and generation spreads. Gas prices fell by 5%, supporting clean spark spreads. Capacity additions decreased by 11%, impacting the cancellation of the Hornsea 4 offshore wind project. Networks investments rose by 6% in the first quarter, with further growth expected.

RWE is expected to benefit from financial headroom, reducing investments, and renewable capacity additions. Veolia Environnement’s shift to higher-quality businesses has led to an upgrade in moat rating. SSE is favored for higher investments in the electricity grid, favorable UK regulatory environment, and a strong pipeline of renewables projects. Morningstar’s top picks in European utilities offer potential for growth and returns.



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