A broadly upbeat mood was apparent among UK utility leaders as UBS hosted a sector day in London, with most executives signalling confidence in growth prospects as the energy system moves deeper into electrification.
Many share prices are back near 15-year highs, yet management teams argued that long-term demand trends and regulatory clarity still support further investment.
Among UK-listed names, the offshore wind discussion dominated. Companies repeated their message that the upcoming seventh contracts for difference auction risks being constrained by the current £0.9 billion budget, which would only support around 4 to 5 gigawatts of capacity.
UBS says industry expectations of 8 to 10 gigawatts clearing the auction require the government to top up funding.
Price levels of £74 to £81 per megawatt hour look realistic to UBS, although developers insisted that these remain tight given cost pressures and the need to build in contingencies.
SSE PLC (LSE:SSE) noted that Dogger Bank A is now down to its last five turbines and could complete installation this year, with the first unit on Dogger Bank B also due imminently.
On the networks side, Scottish Power and SSE indicated they are comfortable with the new RIIO T3 settlement, which allows a 5.7% real return on equity.
Both said the determination offers solid visibility as the UK grid gears up for a multi-decade period of elevated investment. Scottish Power added that the spending profile is only just beginning and will run towards 2040.
Data centre demand was a consistent talking point. Utilities broadly expect electricity usage to rise materially as hyperscale computing expands, with several citing Ireland as an early example of how quickly data centres can reshape system loads.
SSE highlighted strong interest in new connections in its southern distribution region.
Elsewhere, UBS flagged ongoing work on consumer bills, evolving price caps and rising capital costs across generation technologies. Severn Trent was singled out as pushing for extra investment under reopeners and remains confident of hitting a 13% return on equity in the 2026 financial year.
In terms of stock calls, UBS prefers RWE and Centrica PLC (LSE:CNA). RWE is viewed as undervalued given its offshore wind pipeline and potential upside in the AR7 auction, while Centrica benefits from reinvesting trading cash flows into long-lived assets.
Severn Trent PLC (LSE:SVT) is rated a 'sell' on valuation grounds. SSE is now 'neutral', with UBS arguing it no longer screens as cheap and offers limited dividend support.