Utilities Sector

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Adani Green Energy
• UST yields climbed yesterday, led by the long end. This was driven by a spike in long-end JGB yields, following pro-stimulus lawmaker Sanae Takaichi’s election to lead Japan’s ruling party, as well as a sell-off in French bonds after French Prime Minister Sebastien Lecornu unexpectedly resigned.
• The yield on the 2Y UST rose 1 bp to 3.59%, while that on the 10Y UST was up 3 bps at 4.15%. Equities rallied, driven by semiconductor stocks. This came after AMD signed a large chip supply agreement with OpenAI, in a deal that could see OpenAI taking a 10% stake in the chipmaker. The S&P 500 rose 0.4% to 6,740, while the Nasdaq climbed 0.7% to 22,942.

• Global Infrastructure Partners (GIP), a unit of BlackRock, is reportedly closing in on a $38 billion deal to acquire AES Corporation, one of the largest utility and renewable infrastructure companies in the world.
• According to Financial Times, this would be among the biggest infrastructure transactions to date, valuing AES at an enterprise level that includes $29 billion in debt and $9.4 billion in market capitalization.
• Shares of AES surged more than 14% in pre-market trading following the report, although the company has been under pressure, with its stock declining over 30% in the past year.

• Infratil outlined ambitious plans at its recent investor day.
• A subsequent data centre contract win and AUKUS anticipation raised market expectations further.
• -Infratil’s share price supported by mid-September investor day and data centre contract -Growth prioritised via digital infrastructure and renewables -Management’s ambition is to lift market cap to $20bn from the current $10.51bn -Potential for AUKUS-related OpenAI contract

• Since 17 Sep ex-rights, shares rose 9.7% and rights 30.1%; rights discounted to parity on 7/9 sessions (avg −1.8%). Turnover ~DKK 4.94bn total, signalling orderly borrow and stabilising syndicate flows.
• Into 10–14 Oct listing, base case is a supply pulse toward TERP-adjacent levels, then digestion. Near-term path: 106–114 first prints, tests 103–106 on wobble, rebuilds 112–118 as supply clears gradually.
• Trade: buy the listing flush. Start 103–106, add 108–110 reclaim; target 114–118; tight risk below 101. Engage arb only at 1–2% rights discounts. Watch sustained >+1% premium for borrow tightening.

• Back on the 10th December 2024, ReNew Energy Global (RNW US), an Indian renewable energy play, announced a non-binding Offer of US$7.07/share, by way of a Scheme.
• The bidding consortium, comprising (mainly) pre-IPO investors CPP, ADIA, Abu Dhabi Future Energy, and founder Sumant Sinha, collectively holding 64%. Non-binding terms were bumped to US$8/share on the 3rd July.
• ReNew’s Special Committee will provide “public comment regarding these matters at such time as there is a material development in the process, and by no later than 30 September 2025“.

• Vistra Corp shares recently pulled back sharply, dropping over 5% to \$206.82 after hitting an all-time intraday high of \$219.82 just a day earlier.
• The dip follows a downgrade by Jefferies, reflecting mounting investor concerns over delays in finalizing a high-stakes data center deal for the company’s Comanche Peak nuclear facility.
• While Vistra’s CEO Jim Burke expressed strong confidence that a deal will ultimately be signed, uncertainty around its timing and regulatory factors tied to Texas Senate Bill 6 have introduced a level of risk that the market is now pricing in.

• Tokyo Gas is Japan’s largest city gas provider, benefiting from a dominant position in the high-demand Tokyo metropolitan area. The company is navigating a strategic pivot towards decarbonization and overseas growth, outlined in its ‘Compass 2030’ vision, while facing pressures from energy market deregulation and commodity price volatility.
• Financial performance has been volatile, with record profits in FY2023 driven by a lag in fuel cost pass-through, followed by a normalization of earnings in FY2024 and FY2025. Future growth is contingent on the successful execution of its energy transition strategy, including investments in renewables, hydrogen, and international assets, particularly in North America.
• Shareholder returns are a key focus, with a stated policy of a ~40% total payout ratio. However, the company faces risks from fluctuating LNG prices, intensified competition, and execution challenges related to its large-scale investment plans. Activist investor interest highlights potential value unlocking from its significant real estate portfolio.

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• Avangrid is a leading U.S. sustainable energy company with two primary businesses: regulated electric and natural gas networks in the Northeast, and a large, growing renewable energy generation portfolio across 24 states.
• The company is strategically positioned to benefit from the U.S. energy transition, with significant investments in grid modernization and a large pipeline of onshore and offshore wind projects, including the nation’s first commercial-scale offshore wind farm, Vineyard Wind 1.
• Majority-owned by global energy leader Iberdrola, S.A., which has completed a full takeover to delist Avangrid, the company benefits from its parent’s scale, expertise, and financial backing, but faces risks related to project execution, regulatory challenges, and consistently negative free cash flow due to high capital expenditures.

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• Strong Earnings Growth Driven by Favorable Coal Prices: The company has demonstrated a remarkable turnaround in profitability, with net income growing at a 3-year CAGR of 94.23%. This surge is largely attributable to moderating coal prices, which eases margin pressure on its significant thermal power asset base.
• Strategic Pivot to Renewables: Gd Power is actively expanding its renewable energy portfolio, including hydro, wind, and solar, in alignment with China’s national goal of carbon neutrality by 2060. This transition is crucial for long-term sustainable growth and mitigating regulatory risks associated with carbon emissions.
• Attractive Dividend Yield Supported by State Ownership: As a core subsidiary of the state-owned China Energy Investment Corporation, the company offers a robust and growing dividend, reflected in its 5/5 Smartkarma dividend score. The dividend yield has steadily increased, reaching 4.37% in the most recent fiscal year, providing an attractive income proposition for investors.

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• Power Assets Holdings is a global energy investor with a diversified portfolio of regulated utility assets, primarily in electricity and gas transmission and distribution, providing stable and predictable income streams.
• The company maintains a strong financial position with a low-risk profile, characterized by a robust balance sheet, low gearing, and a history of consistent dividend payments, making it an attractive investment for income-focused investors.
• Future growth is expected to be driven by strategic investments in renewable energy and a global transition to greener energy, although the company faces challenges related to regulatory changes, currency fluctuations, and the ongoing transition from fossil fuels.

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• Profitability Surge Driven by Nuclear Restarts: Kansai Electric Power (KEPCO) has seen a dramatic recovery in profitability over the past two fiscal years, primarily due to the progressive restart of its nuclear power plants. This has significantly reduced its reliance on expensive imported fossil fuels, leading to substantial margin improvement and record net income.
• Strategic Focus on Decarbonization and Growth: Management is pursuing a dual-pronged strategy of ensuring a stable energy supply through its nuclear assets while aggressively expanding its renewable energy portfolio. The company has laid out a “Zero Carbon Vision 2050″and plans significant investments in offshore wind and other renewables to drive future growth.
• Persistent Corporate Governance and Regulatory Risks: Despite efforts to reform, KEPCO has a history of significant corporate governance and compliance issues, which remain a key concern for investors. The company operates in a highly regulated industry, making its earnings susceptible to changes in government energy policy, tariff structures, and stringent safety standards for its nuclear operations.

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• Dominant Market Position with Integrated Model: GAIL holds a commanding position in India’s natural gas sector, operating across the entire value chain from transmission and trading to petrochemicals and city gas distribution. Its extensive pipeline network of over 16,000 km provides a significant competitive advantage and a stable revenue stream through transmission tariffs.
• Favorable Industry Growth Outlook: The company is well-positioned to benefit from the Indian government’s policy to increase the share of natural gas in the energy mix to 15% by 2030 from around 7% currently. This policy is expected to drive substantial growth in natural gas consumption, particularly in the City Gas Distribution (CGD) and industrial sectors.
• Significant Capex Plans to Drive Future Growth: GAIL is undertaking substantial capital expenditure, with plans to invest around ₹30,000 crore over the next three years in pipelines, petrochemicals, and CGD projects. A major ₹60,000 crore ethane cracker project in Madhya Pradesh is also planned, which will significantly boost its petrochemical capacity and future earnings potential.

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• Dominant Renewable Energy Player with Strong Growth Trajectory: China Three Gorges Renewables (CTGR) is a leading renewable energy producer in China, backed by its state-owned parent, China Three Gorges Corporation. The company has demonstrated a robust revenue CAGR of 24.51% over the last three years, driven by significant capacity expansion in wind and solar power.
• Strategic Focus on High-Growth Offshore Wind: CTGR has established a formidable position in the offshore wind sector, which is a key growth area in China’s renewable energy landscape. This specialization provides a competitive advantage and potential for higher margins compared to onshore projects.
• Navigating a Transitioning Regulatory Environment: The company’s profitability is subject to China’s evolving energy policies, including the shift from feed-in tariffs to grid-parity pricing. While this presents margin pressure, CTGR’s scale, technological expertise, and strong government relationships position it to navigate these changes effectively.

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• Dominant Market Position with Strong Government Backing: As a subsidiary of the state-owned China National Nuclear Corporation (CNNC), CNNP is a leader in China’s nuclear power sector, which is a strategic priority for the nation’s energy security and decarbonization goals. This backing provides significant competitive advantages, including favorable policies, access to funding, and a clear growth pipeline.
• Clear Growth Trajectory Driven by National Energy Policy: China has the world’s most ambitious nuclear power expansion plan, aiming to reach 70 GWe of installed capacity by 2025 and 110 GWe by 2030. CNNP is a primary vehicle for this growth, with a substantial number of reactors under construction and in the approval pipeline, ensuring a long-term revenue and earnings growth runway.
• High Capital Expenditure and Negative Free Cash Flow: The company’s aggressive expansion strategy requires massive capital investment, leading to consistently negative free cash flow. While this is necessary for future growth, it represents a significant cash burn and reliance on financing until new reactors become operational and start generating returns.

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• As China’s largest nuclear power operator, CGN Power is central to the nation’s ambitious decarbonization and energy security goals, providing a clear, long-term growth trajectory.
• The company benefits from a stable business model with predictable cash flows, underpinned by regulated tariffs and a strong operational track record, making it an attractive investment for income-focused portfolios.
• While the growth outlook is robust, potential risks include shifts in government tariff policies, public perception of nuclear safety, and competition from the rapidly expanding renewables sector.

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• Regulated Utility with a Focus on Clean Energy: Consolidated Edison is a pure-play regulated utility primarily serving New York City and its surrounding areas. The company is heavily investing in infrastructure to support New York State’s clean energy goals, with a planned capital investment of approximately $38 billion between 2025 and 2029.
• Stable Financial Performance and Dividend Aristocrat Status: The company has a long history of stable earnings and has increased its dividend for 51 consecutive years, making it a Dividend Aristocrat and a Dividend King. Its regulated business model provides revenue predictability and supports consistent dividend growth.
• Navigating Regulatory and Market Challenges: While benefiting from a supportive regulatory environment for its clean energy transition, Con Edison faces risks related to regulatory decisions on rate cases, which directly impact its return on equity. The company’s stock performance has at times lagged broader market indices, and it must manage the operational and financial risks associated with its large-scale infrastructure projects.

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• In 2025, 76 primary-listed companies in Singapore executed share buybacks totaling S$1.65 billion, an 80% increase from 2024.
• UOB, DBS, and OCBC led buybacks with a combined S$1.28 billion, driven by capital management initiatives and dividends.
• Secondary-listed Hongkong Land repurchased US$176 million shares, while City Developments completed an off-market buyback of preference shares.

• Ørsted launches a large, DKK 60bn, fully underwritten rights issue, backed by the Danish State, to repair funding after U.S. disruptions and restore balance-sheet flexibility. Dilution is ~68%.
• Scale is akin to an IPO placing by market volume, with substantial dilution for non-participants. Fully underwritten and state-backed, likely strong institutional take-up; expect volatility into allocation and listing.
• Post-Announcement, shares reset lower yet still trade well above theoretical value, leaving mispricing pockets. Expect active flow, volatility through subscription, and potential listing-day pressure.

Rubis’s interim results demonstrated the resilience of its business model amid challenging commodity market conditions and currency headwinds. Despite healthy growth in sales volumes, H125 revenue was down 2% y-o-y on lower realised pricing and a stronger euro. However, tight cost control supported profitability, with EBITDA improving 3%. The company maintained its FY25 guidance, noting positive operating momentum in its key markets. We have slightly tweaked our estimates post results, with our DCF-based valuation remaining broadly unchanged at €37.0/share.

• Exciting growth opportunities abound for New-Zealand based infrastructure play Infratil.
• Management has consistently generated value for shareholders over time.
• -Infratil’s FY25 earnings beat management’s guidance -Exposure to high-growth digital infrastructure -CDC Data Centres appears undervalued -Renewables exposure weighted heavily to solar and battery projects