The dullest corner of the market has found a plug socket. This year has seen a charge of European utilities, which Panmure Liberum reckons owes less to yield-chasers and more to the looming power needs of artificial intelligence (AI) and data centres, a shift that puts several UK names back on the front foot.
Start with the scoreboard. By 7 November, the Stoxx Europe Utilities index was up 25.9% in price terms (31.7% total return) even as government bond yields rose, a break with the sector’s usual inverse dance with rates.
The note argues the decoupling reflects investors' pricing a multiyear step-up in electricity demand tied to data infrastructure.
On the demand side, the UK remains Europe’s largest data-centre hub and is set to stay busy, but Spain and the Nordics are catching up thanks to land, grid and lower power costs.
Panmure models data-centre electricity needs growing at a 14.1–21.7% compound annual growth rate (CAGR) in the UK between 2025 and 2030, with data centres potentially topping 10% of national power demand by 2030.
Across the European Union, the share could reach 5-7%. CAGR is a way of expressing the average yearly growth rate over a period, smoothing out bumps along the way.
Who benefits? The broker’s preferred lineup is Spain's Iberdrola, followed by SSE PLC (LSE:SSE), Germany's RWE and Finland's Fortum.
For UK investors, SSE is the cleanest way to play the theme, with National Grid PLC (LSE:NG.), Drax Group (LSE:DRX) and Centrica PLC (LSE:CNA) part of the wider debate on capacity, connections and flexibility.
Panmure cites estimates that UK hyperscaler investments could lift the combined EBITDA (earnings before interest, tax, depreciation and amortisation) of Iberdrola, SSE and RWE by £1.2 billion by 2030.
It also flags Iberdrola’s tie-up with Echelon in Spain for 1 terawatt hour a year of demand as a straw in the wind.
Valuation still matters, but for now the wiring diagram is about watts.