Jean-Hugues de Lamaze, portfolio manager of the Ecofin Global Utilities and Infrastructure Trust, names three utilities and infrastructure stocks for investors to consider.
Utilities and infrastructure have gained new long-term growth drivers over the past few years. Launched just ten years ago, the Ecofin Global Utilities & Infrastructure Trust (LSE: EGL) offers exposure to those trends, along with some protection against inflation and a high degree of predictability in future cash flows.
Much of our infrastructure dates back to the years after World War II. Decades of underinvestment have left it in need of major capital spending. The US Inflation Reduction Act of 2022 and Germany's 500 billion infrastructure programme are intended to tackle that gap.
After 25 years of decline, electricity demand has begun rising again and could increase by roughly 50% over the next decade. AI data centres consume enormous amounts of power, so they are signing contracts lasting decades to secure supplies - arrangements that are generating strong profits for utilities. Equity markets have not fully priced in these underlying forces, leaving appealing entry points among undervalued companies with promising earnings prospects. Three shares look especially compelling to me.
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Three utilities and infrastructure stocks worth considering
Canadian developer Brookfield Renewable Partners (NYSE: BEP) has taken one of the hardest hits among infrastructure stocks, falling more than 20% from its late-May high. It owns renewable assets across North America and other parts of the world, while building its business around energy infrastructure needed to meet rising global demand. Its holdings also include US nuclear assets through Westinghouse, which it acquired in 2023. Batteries are another major focus: the company has an 80GW development pipeline, strengthened by its 2024 purchase of Neoen, and is positioned to supply data centres. The firm's balance sheet is among the sector's strongest. Over the next three years, we expect earnings to grow by about 15% annually; 90% of that earnings base comes from long-term contracts, while 70% of revenue is tied to inflation. The stock yields 5.5%.
Greece's power-transmission operator ADMIE (Athens: ADMIE) offers exposure to one of Europe's fastest-growing markets. Through its subsidiary IPTO - the country's only transmission system operator - it plans to double its regulated asset base by 2029. Funding for that capital-spending programme came from a £530 million equity issue earlier this year. Under the regulatory framework, ADMIE earns a pre-tax return on equity of 9.8%, placing it at the upper end of the range among European peers. The shares have fallen by more than 10% since late June and now trade at 14 times earnings, with a 2.7% dividend yield. That valuation looks appealing, especially since medium-term annual EPS growth is expected to reach 25%-30%.
SSE (LSE: SSE), the UK-listed energy group, has a strong position in the shift toward cleaner power because it combines flexible renewable generation with transmission assets. By 2030, regulated or fully contracted operations are expected to produce 80% of group revenue. Its regulated asset base is forecast to grow by 25% a year between 2025 and 2030, supported by a fully funded 33 billion capital-expenditure programme. The shares trade at less than 12 times earnings, while annual EPS growth remains firmly in double digits. Dividends are expected to rise by 5%-10% a year over the medium term. That leaves SSE looking unusually cheap compared with other pan-European utility stocks.
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