UBS Names Engie, RWE, and Veolia as Top European Utility Picks

UBS has highlighted three European utilities—Engie, RWE, and Veolia Environnement—as its top sector picks, emphasizing their strong positioning in renewable energy, infrastructure investment, and environmental services. The selections were detailed in a UBS Equity Compass report, which favors companies with robust growth prospects, defensive business models, and compelling valuations.

Strategic Focus on Energy Transition

According to the report, the investment bank's choices align with what it identifies as transformational opportunities in power and resources. UBS analysts are prioritizing companies that are not only expanding their renewable energy portfolios but also offer investors defensive characteristics through regulated and long-term contracted assets.

Engie (France)

The French integrated utility is undertaking a significant capital expenditure program, committing €34-38 billion to growth investments between 2026 and 2028. Approximately 90% of this capital is allocated to renewables, batteries, and infrastructure. Key points from the analysis include:

• A target to expand renewable and storage capacity from 57 GW in 2025 to 95 GW by 2030.
• The recent completion of its acquisition of UK Power Networks for an enterprise value of £15.8 billion.
• A goal for two-thirds of EBIT to come from regulated and long-term contracted businesses by 2028.
• UBS noted that Engie's shares trade at a significant discount to peers and highlighted its dividend policy, which targets a 65-75% payout ratio with a minimum of €1.1 per share.

RWE (Germany)

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German utility RWE has been recognized for its transformation into a leading global developer of renewable energy. The company plans to invest €35 billion from 2025 to 2030 in offshore and onshore wind, solar, batteries, and hydrogen projects.

• RWE currently has 12.5 GW of capacity under construction, which is expected to increase its total portfolio to 50 GW.
• The company is targeting an 18% compound annual growth rate (CAGR) for its earnings per share (EPS) between 2025 and 2027.
• RWE also has a €1.5 billion share buyback program in place, which it plans to complete by the second quarter of 2026.

Veolia Environnement (France)

As an environmental services specialist, Veolia operates across water, waste, and energy segments. Management is targeting annual organic EBITDA growth of 5-6%, aiming to reach approximately €8 billion by 2027. UBS pointed out that the stock is currently trading near the low end of its historical valuation range, suggesting a potential value opportunity.

Investor Takeaways

The selections by UBS underscore a preference for European utilities that are actively investing in the energy transition while maintaining financial discipline. For investors, these companies represent a blend of growth, driven by massive capital deployment in green energy, and stability, derived from regulated operations and shareholder return programs like dividends and buybacks.