Utilities & Renewables: Beta, Multiples & WACC by Sector

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What the numbers say.

The utilities sector has shifted a bit this month. It is valued notably higher than a month ago: the median EV/EBITDA rose to 9.4x and most companies became more expensive, the beta eased to 0.28, and the cost of capital stands at 5.3 %. The sector is more unsettled than in September: the choice of peers and settings moves the value more than it did.

EV/EBITDA is the multiple to use

It is the tightest of the multiples the fundamentals explain, a dispersion of 19 % across the 20 companies. EV/Sales spreads by 38 % because it carries the margin differences with it.

The beta to use: 5 years, monthly, 0.28

Among the stable settings it has the tightest spread across the 20 companies; R² 12 %, 12 of 20 betas significant, less liquid group (median bid-ask spread 0.66 %). It is the smartZebra standard setting. The settings alone move the median beta from −0.08 to 0.29.

The settings matter

Ten of the twenty companies move the EV/EBITDA median by −15 % to +13 %, the settings by up to 158 %. Utilities sits in the settings corner of the map.

Expected growth is not what the market pays for this month

The usual yardsticks for utilities: expected growth and EBITDA margin. Expected growth: partly (rank correlation +0.53 with EV/EBITDA (NTM)). EBITDA margin: rejected (rank correlation +0.35 with EV/EBITDA (NTM)). Median EV/EBITDA (NTM) by sub-group: regulated networks 11.0x, integrated utilities & generation 8.1x.

EV/EBITDA (NTM): median 9.1x → 9.4x

13 more expensive · 7 cheaper

Uniper fell most (−8 %), E.ON rose most (+5 %).

{"m":[["EnBW Energie Baden-Wurttemberg","22.2","21.9","−1%"],["Fortum","14.6","13.8","−5%"],["Snam","11.6","12.1","+4%"],["United Utilities Group","11.2","11.6","+4%"],["Iberdrola","10.8","11.1","+3%"],["Terna","10.9","11.1","+2%"],["National Grid","10.6","10.9","+3%"],["Uniper","11.4","10.5","−8%"],["Elia Group Sa/nv","9.8","9.9","+2%"],["SSE","9.5","9.9","+4%"],["Endesa","8.6","9.0","+5%"],["CEZ","8.6","8.4","−2%"],["E.ON","7.9","8.3","+5%"],["RWE","8.2","7.8","−4%"],["Orsted","7.8","7.5","−3%"],["EDP","7.4","7.4","±0%"],["Naturgy Energy Group","7.2","7.2","±0%"],["Enel","6.5","6.7","+3%"],["Engie SA.","6.4","6.5","±0%"],["Veolia Environnement","6.2","6.4","+3%"]],"b":[["Uniper","0.83","0.83",25],["Veolia Environnement","0.48","0.45",91],["Enel","0.42","0.40",80],["SSE","0.38","0.36",65],["E.ON","0.35","0.33",70],["Orsted","0.34","0.32",36],["Iberdrola","0.36","0.31",66],["Engie SA.","0.31","0.30",53],["National Grid","0.32","0.29",72],["Terna","0.29","0.28",60],["Naturgy Energy Group","0.29","0.28",25],["Endesa","0.31","0.28",36],["Snam","0.28","0.26",56],["RWE","0.27","0.26",55],["United Utilities Group","0.23","0.20",63],["EnBW Energie Baden-Wurttemberg","0.14","0.14",13],["Fortum","0.11","0.13",34],["Elia Group Sa/nv","0.14","0.13",18],["CEZ","−0.03","−0.03",24]],"w":["EnBW Energie Baden-Wurttemberg","Elia Group Sa/nv","CEZ","Uniper","Naturgy Energy Group"]}

Beta (5 years, monthly): median 0.31 → 0.28

12 of 20 significant

Each line runs from last month’s beta (light dot) to this month’s (blue dot), on the same beta setting.

Do the usual yardsticks hold this month?

The usual yardsticks for utilities, tested on the 20 companies this month.

Expected growth

Partly

Rank correlation +0.53 with EV/EBITDA (NTM) · clear link from +0.60

EBITDA margin

Rejected

Rank correlation +0.35 with EV/EBITDA (NTM) · clear link from +0.60

Position on the sector map

This sector in gold, the other 19 sectors in blue. Dashed lines at 40 pp are illustrative.

Construction

Chemicals

Utilities

158

Telecom

Media

Travel & Leisure

Retail

Luxury

Consumer Goods

Logistics

Business Serv.

Aero & Defence

Electrical Eq.

Medtech

Pharma

IT Services

Semiconductors

Software

Automotive

Machinery

Utilities

How much the choices move the result

Beta and fit

R² (median)

12 %

Significant betas

12 of 20

Median bid-ask spread

0.66 %

Beta range across settings

−0.08–0.29

What moves the value?

Change vs. prior month

+4 % vs. September

Peer impact on the median

−15 % to +13 %

Spread from peer choice (pp)

Spread from beta settings (pp)

158

Position on the sector map

Settings decide

Cost of capital

Cost of equity (CAPM)

“kE = rf + β · MRP”

rf = base rate, MRP = market risk premium, β = sector median beta.

WACC

“WACC = E/(D+E) · kE + D/(D+E) · kD · (1 − t)”

kD = base rate + credit spread; t = peer-average tax rate.

Tax rate

“t = average tax rate of the 20 peers”

Shown above as Tax rate (%).

Selection rules

Best-fit multiple

“lowest dispersion across the 20 companies”

The reference multiple is used only as a fallback.

Beta setting

“tightest spread among stable settings”

Replaces 5y monthly only if it passes the two-month rule.

Status

“|Δ value| ≤ 1 % and |Δ β| ≤ 0.03 → stable”

Up to ±5 % / ±0.06 → shifted a bit; beyond → shifted noticeably.

Scope

The 20 largest European listed companies by market value with core business in electric, gas and water utilities and renewable producers; primary listing on a European exchange; banks, insurers, financial services and real estate are excluded.