Citi backs EU utilities with strong cash flow, data centre growth prospects

Edp Renewables SA

03/12/2025 09:05

** In a note on European utilities, Citigroup says it prefers companies with strong free cash flow and a clear path to monetize data center growth

** It upgrades EDP Renovaveis EDPR.LS to "buy" from "neutral" and includes the Portuguese utility among the most preferred stocks as the broker sees value in the growth pipelines, which are no longer in the shares following EDP stock fall in early November after its capital markets day

** "We view this as unjustified and a free option for the company to deliver additional value", adds the broker

** Citi says EDPR is one of the few European utilities with substantial exposure to the U.S., where power demand growth is significant

** The broker cuts Enagas ENAG.MC to "sell" from "neutral" and includes the Spanish gas grid operator among the least preferred stocks with an expectation of risk/reward tilting negatively into 2026

** Citigroup sees no guarantee of renewal of remuneration for continuity of supply (RCS) incentives which were intended as transitional crucial to dividend visibility, a core part of Enagas' appeal

** Among the most preferred European utilities the broker includes also Engie ENGIE.PA, Elia ELI.BR and Drax DRX.L, while ANA ANA.MC, Snam SRG.MI and Verbund VERB.VI are the least preferred along with Enagas

** Enagas stock is down 2.4%, the worst performer of IBEX 35 index .IBEX35, while EDPR is up around 2.3%

 (Reporting by Tiago Brandao)

 ((Tiago.Brandao@thomsonreuters.com;))