UBS Equity Preference List European Utilities 2026 08 04

4 August 2026, 07:36 UTC Chief Investment Office GWM Investment Research

European Utilities Equity preferences

The European Utilities Equity Preference list (EPL) is a list of our highest conviction European utilities stocks. Carsten Schlufter UBS Switzerland AG Eurozone sector preference: Neutral Sector view: Utilities remain a compelling structural growth story, propelled by Please see important disclaimers and robust decarbonization efforts and the energy transition - both strongly backed disclosures at the end of this by policymakers and public opinion. The electrification trend is expected to gain document. momentum, with rising electricity demand fueled by the expansion of AI/data centers, electric vehicles, heat pumps, and other technologies. In today’s economic climate, utilities demonstrate notable resilience, and lower bond yields make the sector’s dividend yield of about 5% even more attractive. While the sector continues to deliver solid earnings growth and offers strong earnings visibility, its robust year-to-date performance has pushed valuations well above historical averages.

Latest Changes: We have updated the ‘At a glance’ and the ‘Positioning and key trends’ texts.

Our Top Picks: RWE, Engie, Veolia Environnement

Read the full article for more details about the respective investment case as well as important disclaimers and disclosures.

Benchmark: MSCI Europe Utilities

Most Preferred Company Changes* Currency Weight

E.ON EUR 10.0% EDP Renewables EUR 2.0% Enel EUR 17.0% Engie EUR 13.0% Iberdrola EUR 24.0% Orsted A/S DKK 6.0% RWE EUR 11.0% SSE PLC GBP 9.0% Veolia Environnement EUR 8.0%

Source: UBS, Consider potential trading restrictions, all figures are rounded *Changes since the last publication

Positioning and key trends Global political commitment to the energy transition remains robust, with Europe continuing to lead the way. Sustained investment in power grids and renewable energy infrastructure is expected to support long-term earnings growth across the European utilities sector. Following greater regulatory clarity in the United States, several large European utilities are continuing to expand their investments in the US energy market, attracted by stronger electricity demand growth of

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approximately 3-4% annually over the coming years and compelling return prospects. Looking ahead, electrification is poised to increase significantly. This growth is being driven by the rapid expansion of AI and data centers, cryptocurrencies, electric vehicles, heat pumps, and other electrification-driven technologies, creating a favorable long-term demand backdrop for the sector

Rising capital expenditure is fueling growth. Europe’s energy transition, decarbonization agenda, and the modernization of electricity systems are creating substantial investment needs, especially in networks and generation. The broader trend toward electrification and higher energy consumption is also driving the requirement for new generation capacity. In this supportive environment, utilities are steadily increasing investments in regulated transmission and distribution networks, attracted by favorable returns and high earnings visibility. Renewables remain a strategic priority, though the share of capex allocated to onshore/offshore wind and solar has declined relative to overall investment in recent years. Overall, this elevated investment cycle is expected to drive utilities sector earnings growth in the years ahead.

Power prices remain elevated, albeit volatile, with limited near-term downside risk. European carbon prices continue to be supported by an ETS reform proposal that largely preserves the existing framework, with most changes affecting the market only from 2028 onwards. This should help maintain a constructive carbon price environment over the coming years. At the same time, the ongoing Iran conflict, low European gas storage levels, and recent heatwaves have driven higher gas and power prices while increasing market volatility, creating a supportive backdrop for flexible generators and gas traders. These favorable market conditions were reinforced by a strong Q2 2026 earnings…