Utilities Sector

• The PSEi is the main benchmark of the Philippine Stock Exchange comprising a fixed basket of 30 companies selected on the basis of market capitalization and liquidity thresholds.
• In this insight, we look at the potential ADDs/DELs for the PSEi index for the February 2027 index rebal event.
• We expect 3 changes based on latest data. However, the reference period is not complete yet and our expectations can change.

• Conglomerate Discount Unlock: The transaction is designed to dismantle the historical conglomerate discount where the market valued ATCO’s non-utility portfolio (ATCO Structures & Logistics, Neltume Ports, ATCO Land and Development, and ATCO Energy) at an implied valuation of just C$1.1 billion. By spinning these out into “New ATCO” alongside a C$700 million cash cushion and zero corporate debt, management is attempting to realize an independent valuation for the modular business alone that is benchmarked against peers at approximately C$2.4 billion.
• High Regulatory and Structural Friction: While the market responded positively to the announcement, the regulatory path to closure in late 2027 is highly complex. The Alberta Utilities Commission (AUC) will apply a rigorous “no-harm” test to the ownership transfer of Canadian Utilities to Emera. Historical precedents, such as the Stores Block Supreme Court case and the AltaLink limited partnership transfer, show the AUC is aggressive in protecting ratepayers, which could lead to significant disallowances of transaction costs and prolonged transition services agreements.
• Sentgraf Governance and Alignment: The preservation of the Southern family’s dual-class share structure in “New ATCO” via Sentgraf Enterprises Ltd. ensures that minority shareholders will continue to have zero voting power while bearing the cyclical execution risk of a standalone industrial business. Although the immediate dividend accretion of 20% via the Emera equity portion acts as a sweet incentive for existing ATCO shareholders, long-term capital allocation at New ATCO will remain highly centralized and family-controlled.

• ATCO is being split – its controlling Canadian Utilities (CU) stake goes to Emera (EMA) in an all-share merger, and the non-utility businesses are spun out as “New ATCO.”
• Per ATCO share, holders receive 0.865 Emera shares plus one New ATCO share.
• In our view, the value unlock sits in New ATCO, which management argues has been hidden behind the CU stake

• CLP Holdings Limited (2 HK) provides institutional investors with a premier defensive utility profile in the Asia-Pacific region, underpinned by its quasi-monopolistic Hong Kong electricity business operating under a predictable 15-year Scheme of Control (SoC) framework offering a permitted return on net fixed assets of 8.0% through 2033.
• Following severe earnings degradation in 2022 caused by wholesale energy market volatility and generation outages in Australia, operating performance has staged a robust recovery; earnings normalized to HK$11,742 million in 2024 and HK$10,468 million in 2025, supported by EnergyAustralia contract repricing and disciplined thermal and renewable performance.
• At a current share price of HK$75.50 and offering an annualized dividend yield of approximately 4.21%, CLP combines low-beta defensive cash generation with an expanding zero-carbon asset base across Greater China, though valuation multiples remain balanced against long-term energy transition capex and lingering retail churn in Australia.

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• Beginning December 2024, a consortium comprising CPP, ADIA, Sumant Sinha, and Masdar, thrice bid for ReNew Energy Global (RNW US), before mysteriously walking away in December 2025.
• On the 29th May, CPP and Sumant Sinha, collectively holding ~50%, returned with a US$6.75/share NBIO, then bumping to US$7.02/share. The prior consortium had bid up to US$8.15/share.
• Terms appeared underwhelming. (Not?) Surprisingly Renew Energy opted to enter into a “definitive transaction agreement”. Form 6-K has been issued. The IFA says fair. No EGM date currently tabled.

• The USD 7.02/share take-private transaction led by CPPIB and Sumant Sinha represents a significant down-round from the defunct USD 8.15/share Masdar-led consortium offer of October 2025, reflecting the valuation discount of US-listed Indian developers compared to domestic peers.
• Grid curtailment and transmission delays present massive operational risks, with a Crisil Ratings March 2026 report warning that over 35 GW of renewable capacity in India faces grid curtailment risk in FY2027, specifically impacting assets under Temporary General Network Access (T-GNA).
• ReNew is highly leveraged, with net debt at INR 671 billion representing a 5.7x net debt-to-EBITDA multiple for operational projects, necessitating an aggressive capital recycling model (such as the INR 4,859 crore Purvah Green Power asset sale in August 2026) to fund intensive capex.

• Jieneng Investment’s offer for Zheneng Jinjiang Environment (ZJE SP) is at S$0.70 a share, a 19.7% premium to the undisturbed price. Two potential S$0.0225 dividends take the total to S$0.7225–S$0.745.
• The Chinese regulatory approvals look low-risk because the buyers are SOEs, a precedent (Canvest) got the same approvals, and waste-to-energy is a favoured sector. The main risk is timing.
• Holders of 83% of disinterested shares have given irrevocables, above the 75% needed. The shares have not closed above S$0.70 for over 5.5 years. This is a done deal.

• Zheneng Jinjiang Environment (ZJE SP), a waste-to-energy infrastructure play, announced yesterday afternoon an Offer, by way of Scheme, from a consortium comprising major shareholder, the Zhejiang Provincial Energy Group. 
• Zhejiang Provincial, inter alia, all of whom are linked to the provincial government of China’s Zhejiang province, are offering S$0.70/share, a 19.7% premium to last close. Terms are not final.
• Scrip into a back-end vehicle is afforded. Terms are just shy of a decade-high. S$0.045/share in dividends to be added. Timing on the PRC reg approvals is the key risk.

• KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX). 
• In this insight, we have presented our expectations for ADDs and DELs for the upcoming semiannual review in December 2026.
• 79% of the reference period for the December 2026 rebal is complete. We see up to 5 ADDs and 6 DELs. 

• The ES50 Index is one of the most highly-tracked European indices and the annual index review takes place in September every year.
• We expect capping flows in the December 2026 quarterly rebal and no fast-entry/exit index changes.
• We also expect no changes at the September 2027 annual review, though a few names are near the border and some large names are held back by the sector test.

• OGE Energy Corp. reported consolidated earnings of $0.56 per diluted share for the second quarter of 2026, an increase from $0.53 per share in the same period of 2025.
• The core electric utility business contributed net income of approximately $120 million, up from $108 million year-over-year, largely driven by warmer weather conditions, and reduced depreciation and interest expenses associated with new assets.
• This positive was partially offset by increased operations and maintenance expenses.

• ONE Gas reported second quarter 2026 financial results demonstrating solid operational and financial execution amidst a warm weather environment that typically suppresses gas demand.
• Adjusted earnings per share (EPS) reached $0.82, marking a 52% increase from $0.54 in the year-ago quarter, supported by approximately $16 million in new revenues from recent rate increases and benefits derived from Texas House Bill 4384.
• On a GAAP basis, EPS grew nearly 40% year-over-year to $0.74.

• PG&E Corporation reported core earnings per share (EPS) of $0.40 for the second quarter and $0.83 for the first half of 2026, reflecting consistent operational execution underpinned by its lean operating system and simple, affordable model.
• The company reaffirmed its full-year 2026 core EPS guidance range of $1.64 to $1.66, representing an approximate 10% increase at the midpoint compared to 2025.
• PG&E projects continued EPS growth exceeding 9% annually from 2027 through 2030, supported by a $73 billion capital investment plan through 2030 that reportedly avoids the need for additional equity financing.

• Portland General Electric reported second-quarter 2026 GAAP net income of $68 million, or $0.59 per diluted share, and non-GAAP net income of $74 million, or $0.64 per diluted share, excluding transformation and acquisition-related expenses.
• Results were in line with expectations, supporting full-year EPS guidance of $3.33 to $3.53 and long-term earnings and dividend growth targets of 5% to 7%.
• Industrial demand remained strong, led by data centers and high-tech customers.

• PPL Corporation reported second quarter 2026 ongoing earnings of $0.33 per share, showing a modest increase compared to the prior year and aligning with management’s expectations.
• The company reaffirmed its full-year 2026 ongoing earnings forecast at $1.90 to $1.98 per share, with a midpoint of $1.94, anticipating stronger earnings growth in the second half driven by recent base rate case approvals in Pennsylvania and Rhode Island.
• Capital investments remain robust, with approximately $2.3 billion deployed through the first half of the year and an expected $5 billion investment for the full year, underpinning efforts to maintain safe, reliable, and affordable energy service.

• Exelon Corporation reported second quarter 2026 adjusted operating earnings of $0.43 per share, aligning with expectations, and reaffirmed full-year guidance of $2.81 to $2.91 per share.
• The company continues to prioritize providing safe, reliable utility services while managing investments and costs amid increasing weather-related challenges.
• ComEd, one of Exelon’s utilities, encountered 16 major weather events this year, including severe storms that impacted over half a million customers.

• The Southern Company reported second-quarter 2026 adjusted EPS of $1.13, exceeding the prior-year quarter by $0.21 and company guidance by $0.13.
• Results benefited from higher electricity usage and customer growth across regulated utilities, increased allowance for funds used during construction, stronger equity investment earnings, favorable taxes, and contributions from Southern Company Gas and businesses such as PowerSecure.
• These gains were partly offset by higher interest expense from increased debt and dilution from additional shares outstanding.

• American Electric Power’s second quarter 2026 results reflect a blend of ongoing growth initiatives alongside some year-over-year headwinds tied primarily to timing-related items.
• The company reported operating earnings of $1.36 per share, down from $1.43 per share in the prior-year quarter, partially impacted by the 2025 transmission minority interest sale and income tax timing effects.
• However, year-to-date operating earnings were slightly higher at $3.01 per share versus $2.98 per share last year, supported by constructive regulatory outcomes, increased normalized sales, and growth in transmission revenues.

• Atmos Energy Corporation reported net income of $1.2 billion or $7.33 per diluted share for the first nine months of fiscal 2026, reflecting a 14.5% increase compared to the prior year.
• The company reaffirmed its full-year earnings per share guidance of $8.40 to $8.50.
• Capital expenditures totaled $3.1 billion year-to-date, with approximately 87% allocated to enhancing safety, reliability, and the integrity of its distribution, transmission, and underground storage infrastructure.

• Black Hills Corporation reported solid progress during the second quarter of 2026, reflecting continued focus on strategic growth, operational execution, and financial discipline.
• The company remains on track to meet its full-year earnings guidance, supported by a nearly $1 billion capital investment plan aimed at serving the increasing energy demands of its customer base across eight states.
• Financially, Black Hills Corporation delivered GAAP earnings per share (EPS) of $0.50 for the quarter, which adjusted to $0.54 excluding $0.04 of merger-related expenses.

• Brookfield Renewable Partners reported record second-quarter 2026 results, supported by strong capital deployment, development activity, and capital recycling.
• Funds from operations reached $421 million, up 13% year-over-year, or $0.62 per unit, representing 11% per-unit growth.
• Over the last 12 months, FFO totaled $1.44 billion, increasing 14%.

• CMS Energy’s second quarter 2026 update maintains a steady outlook rooted in a business model anchored by consistent performance, disciplined capital allocation, and a top-tier regulatory environment.
• The company continues to emphasize utility investments in Michigan, focusing on long-term rate-base growth of 10.5% driven by a $24 billion investment plan.
• CMS Energy reaffirmed its full-year 2026 adjusted earnings per share (EPS) guidance of $3.83 to $3.90 and introduced 2027 guidance of $4.08 to $4.17, projecting annual EPS growth of 6% to 8% in line with its long-term targets.

• CenterPoint Energy reported second quarter 2026 non-GAAP earnings per share (EPS) of $0.40, in line with management’s expectation to meet full-year guidance of $1.89 to $1.91 non-GAAP EPS.
• This midpoint reflects an 8% increase compared to 2025 results, consistent with the company’s long-term guidance to grow adjusted EPS at the mid-to-high end of a 7% to 9% annual range through 2035.
• The reported GAAP EPS stood at $0.37.

• Constellation Energy Corporation reported second quarter results reflecting a continuation of operational strength and financial improvement.
• The company posted GAAP earnings of $1.42 per share and adjusted operating earnings of $2.55 per share, representing a year-over-year increase driven primarily by contributions from the Calpine acquisition, higher capacity prices in the PJM market, and robust commercial performance through portfolio optimization and higher realized customer margins.
• These positive factors were partially offset by higher planned nuclear refueling outages and timing differences related to Illinois’s Zero Emission Credit (ZEC) program revenue recognition, which is expected to have no impact on full-year results.

• American Water Works Company, Inc. reported solid second-quarter and first-half 2026 results, with adjusted EPS of $1.61 in Q2 versus $1.49 a year earlier, representing slightly more than 8% growth.
• Year-to-date adjusted EPS reached $2.62 compared with $2.51 in the same period of 2025.
• Results were supported mainly by authorized rate increases that enabled recovery of capital investments across its 14-state footprint.

• Squeeze-Out Execution Strategy: Because Acciona SA currently holds a 91.1% stake in ACCIONA Energías Renovables (ANE), an automatic minority squeeze-out is legally impossible under Spanish CNMV rules without a prior takeover bid. Any attempt to delist the company will require a formal voluntary delisting tender offer (OPA de exclusión), subjecting the valuation to strict CNMV “equitable price” (precio justo) criteria and independent expert reports, likely benchmarking against the €11.9 billion Enterprise Value implied by the EQT-NBIM consortium’s bid.
• Severe Merchant Cannibalization in Iberia: ANE’s Spanish portfolio faces structural profitability erosion. With 397 hours of negative pool prices on the Iberian Peninsula in Q1 2026 and pure solar PV capture ratios collapsing below 10% in peak generation hours, the financial sensitivity of ANE’s unhedged merchant capacity to cannibalization has intensified. This has undermined the valuation of their solar pipeline and delayed cash-flow recovery.
• Governance Mismatch and Dividend Squeeze: Corporate governance at ANE remains highly compromised by parent-level cash requirements. In June 2026, ANE paid a severely cut dividend of €0.03 per share (a 93% reduction from the prior year) to protect its BBB- credit rating, whereas the parent company Acciona SA increased its own dividend to €5.65 per share, demonstrating a clear extraction of value from ANE’s balance sheet to support the parent’s non-energy divisions.

• EQT Infrastructure and Norges Bank Investment Management have reportedly formed a consortium seeking 100% of ANE, while Ardian remains in the process.
• Selected bidders are meeting management and are expected to confirm prices by mid-October. Acciona reportedly aims to reach an agreement by year-end.
• At €20.52, ANE trades below our €21 no-transaction case, with 41.3% upside to our €29 fairness case and 55.9% to our €32 strategic case.