High-quality growth key for European power utilities in uncertain 2023, BofA says

VERBUND AG

17/01/2023 11:58

** BofA Global Research says that 2023 winners of European
utilities will be stocks that promise high quality earnings
growth amid a highly uncertain macro and commodity price outlook
    ** The broker says the outlook for power generators is
highly dependent on temperatures through the remainder of Q1,
with the exception of UK gas-fired generation where it expects
earnings to surprise on the upside
    ** BofA expects the focus to shift to structural power
market reform in 2023, as the EU and the UK seek to decouple
power from gas prices, which could improve long-term visibility
    ** It says wind and solar remain attractive thanks to high
power purchase agreement prices and policy developments set to
take place in Europe this year to remove bottlenecks and address
the U.S. Inflation Reduction Act
    ** BofA upgrades Orsted  ORSTED.CO  to "buy" from "neutral"
and Verbund  VERB.VI  to "buy" from "underperform", citing
tailwinds from renewable energy and power market reforms
    ** It downgrades Engie  ENGIE.PA  to "underperform" from
"buy" and Fortum  FORTUM.HE  and E.ON  EONGn.DE  to "neutral"
from "buy", seeing them as losers of the power market reform
    ** Shares in Engie fall 4.3% at 1126 GMT, while Fortum drops
3.5% and E.ON 1.7%
 (Reporting by Diana Mandiá)
 ((diana.mandiaalvarez@thomsonreuters.com))