Company Reports

In the first AMP8 re-opener on Aug. 13, Ofwat approved GBP 1.2 billion of additional investment, or 86% of the GBP 1.4 billion requested by United Utilities last April. Shares were flat on Aug. 13.

Despite improving fundamentals under the 2025-30 regulatory period, AMP8, United Utilities' market valuation is impaired by political risk, high UK government bond yields, and AMP7 underperformance versus peer Severn Trent.

Much of Britain's water infrastructure is more than 200 years old and requires major upgrades, notably to reduce storm overflows. This will result in a material investment increase in the five-year regulatory regime that started in April 2025, Asset Management Plan 8, which will support earnings growth.

The Morningstar Developed Markets Europe Utilities Index declined 3.6% on May 15, underperforming the market by 2.1 percentage points. The key driver was a global selloff of government bonds that pushed yields of European government bond yields about 15 basis points higher on May 15.

We remove SSE from European utilities top picks after 40% increase and 35% outperformance versus the S&P 500 since its addition in early November 2025. We replace it with United Utilities and National Grid, which offer more attractive long-duration compounding at current valuations.

United Utilities released fiscal 2026 results above FactSet consensus and raised its AMP8 guidance by GBP 2.5 billion or 28% for investments and by 1% to 10%-11% for regulatory return on equity. The firm intends to raise GBP 0.8 billion of equity. Shares rose nearly 14% on April 30.

Much of Britain's water infrastructure is more than 200 years old and requires major upgrades, notably to reduce storm overflows. This will result in a material investment increase in the five-year regulatory regime that started in April 2025, Asset Management Plan 8, which will support earnings growth.

In its preclose update on March 25, United Utilities confirmed its 2026 underlying earnings per share guidance of around GBX 100 before an accounting change that will raise EPS by GBX 5.

Much of Britain's water infrastructure is more than 200 years old and requires major upgrades, notably to reduce storm overflows. This will result in a material investment increase in the five-year regulatory regime that started in April 2025, Asset Management Plan 8, which will support earnings growth.

The European utilities sector increased by nearly 8% since the end of September, outperforming the market by 5% due to stabilizing interest rates, solid third-quarter results, and hopes that artificial intelligence growth will boost electricity consumption in Europe.

United Utilities released strong half-year results for the beginning of the AMP8 regulatory period, roughly in line with the company-compiled consensus. Underlying revenue increased by 10%, operating profit by 22%, and earnings per share by 49% to GBX 49.60.

European utilities shares decreased by 3% since the end of June, underperforming the market by about 6%.

European utilities rose by 12% in the second quarter, outperforming the market by 10%.

Much of Britain's water infrastructure is more than 200 years old and requires major upgrades, notably to reduce storm overflows. This will result in a material investment increase in the five-year regulatory regime AMP8 that started in April 2025, which will support earnings growth.

European utilities increased by about 10% in the first quarter of 2025 thanks to good full-year results, attractive shareholder remuneration, and limited exposure to US tariffs. The latter was key in the material outperformance of the sector.

Much of Britain's water infrastructure is more than 200 years old and requires major upgrades, notably to reduce storm overflows. This will result in a material investment increase in the next five-year regulatory regime AMP8 starting in April 2025, which will support earnings growth.

Unsurprisingly, no-moat United Utilities accepted Ofwat's final determination for the AMP8 five-year regulatory period that was disclosed last December and included improvements compared with the draft determination released in July. The group announced that it will continue to grow its dividend in line with inflation during AMP8, in line with our expectations. Unlike what it previously contemplated, it will not resort to a rights issue to fund its investments and dividend, which is positive. We maintain our GBX 1,000 fair value estimate and view the shares as fairly valued.

On Dec. 19, Ofwat issued its final determination regarding the features of the AMP8 five-year regulatory period starting in April 2025 for UK water utilities. Regarding United Utilities, allowed returns and expenses are higher than the draft determination released last July and close to our estimates. We confirm our fair value estimate of GBX 1,000 for United Utilities and view the shares as overvalued.

No-moat United Utilities reported solid first-half fiscal 2025 top-line results, translating into an underlying operating profit of GBP 336 million, up 24% year on year. The interim dividend is set at GBX 17.28 per share, 4.2% higher than last year, with management confirming its guidance for a full-year dividend of GBX 51.87 per share. With no changes to our estimates, we maintain our GBX 1,000 fair value estimate and see shares as overvalued.

While wholesale power prices stabilized, government bonds’ yields fell on weak economic indicators and lower inflation in the US and Europe. Second-quarter results were boosted by very favorable hydro conditions that led to some guidance upgrades. This goldilocks scenario bolstered a rally in European utilities, enabling them to massively outperform the market and recover much of their earlier underperformance.