Citi expects European electric utilities' results to peak in 2023-2024

VERBUND AG

17/04/2023 11:55

** With European power prices rapidly normalizing over the
last half a year, Citi expects outright power generators'
earnings to peak in 2023-2024 and normalize thereafter
    ** Organic investments largely in the renewable space are
not big enough to cover earnings declines in the medium term, it
says, expecting market debate to focus on the level of
normalized profitability
    ** The brokerage says the low near-term valuation multiples
for Austrian Verbund  VERB.VI  and Finland's Fortum  FORTUM.HE 
are misleading as they are based on windfall profits that are
likely to decline from 2023-2024 onwards
    ** It cuts Fortum to "neutral" from "buy" saying the
visibility on the balance sheet redeployment process is vague,
but sees this as a potential bigger upside
    ** It says Fortum's shares will be driven by Nordic power
prices and dividend yield, adding the disposal of its Russian
assets may be the next catalyst
    ** The broker keeps "neutral" on Verbund saying the stock is
fairly valued and the company needs to prove its capex
reinvestment strategy will create value for shareholders
    ** Citi keeps "sell" on Czech utility CEZ  CEZP.PR  seeing
an outright tender offer for current minorities unlikely, mainly
due to state budget constraints

 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))