GS sees 2024 as year of 'long duration' and lower energy prices for EU utilities

Elia SA

08/01/2024 10:02

** Goldman Sachs sees 2024 to buck the trend of the
utilities sector three-year underperformance and be
characterised by a re-rating in renewable energy assets, the
discovery of power grids as a growth driver for the sector, and
by sustained retail margins
    ** The broker says that the improved outlook on inflation
and interest rates is likely to favor capital intensive/long
duration assets, such as renewable energy
    ** It adds that the recent decline in energy prices works in
favor of "long customer" supply portfolios, and implies less
risk of regulatory intervention
    ** Its preference is thus for "transformational stories",
which display either a re-rating in their capital-intensive
business, inflecting returns, accelerating grids investments, or
strongly positive earnings revisions
    ** Among such stocks it names "buy"-rated Orsted
 ORSTED.CO , RWE  RWEG.DE , EON  EONGn.DE , Enel  ENEI.MI , SSE
 SSE.L , Engie  ENGIE.PA , Elia  ELI.BR  and Vestas  VWS.CO 
    ** It upgrades Elia and Endesa  ELE.MC  to "buy" from
"neutral" and Redeia  REDE.MC  to "neutral" from "sell"
    ** GS cuts EDP Renovaveis  EDPR.LS  to "neutral" from "buy"
citing recent stock outperformance and Fortum  FORTUM.HE  from
"buy" to "neutral" on weaker medium-term power price outlook,
driven by falling power prices
    


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