Report published September 2, 2026
European Utilities: Higher Rates Hurt Perception More Than Fundamentals – Goldman Sachs Research
Source and citation context
- Issuer
- Goldman Sachs
- Report date
- September 2, 2026
- Analysis as of
- Not stated in source
Authors / editors: Alberto Gandolfi, Ajay Patel, Mafalda Pombeiro, Dhwani Khenwar, Lawrence Lavizani, Liam Brueckner
Finvaulta summarizes Goldman Sachs's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
European Utilities have de-rated by c.10% due to rising interest rate concerns, but Goldman Sachs argues the fundamental earnings impact (-3% by 2028E per +50 bp rate hike) is much less severe than market perception. The team recommends favoring growth/renewables (Buy Naturgy) over highly levered names (Sell Terna).
Key Takeaways
- 1.European Utilities debt structure is defensive, with an average debt duration of c.8 years and only c.25% variable rate debt, shielding near-term earnings against rate increases.
- 2.Each +50 bp increase in rates lowers average equity valuations by -7% and 2028E earnings by -3%, but the sector's -10% de-rating has already discounted a +70 bp rate move.
- 3.Higher power prices and under-appreciated pricing power offset rate pressures, boosting EPS by +4% by 2028E for every +10% power price increase.
Table of Contents
- Higher rates hurt perception much more than fundamentals
- Rising rates are a sector negative
- Debt structure for the sector is highly defensive
- Valuation impact more manageable than perception
- Significant move in rates appears already priced in
- Rates don't go up in a vacuum
- Sector pricing power appears under-appreciated
- The economy reflexivity
- Favour growth against high leverage names
- Valuation and key risks
- Disclosure Appendix
Report data
Exhibit 2: Our analysis suggests mark to market of interest rates would create a -c.3% headwind impact on 2028 Net income
| Metric | Estimate | Context |
|---|---|---|
| Average Utilities Debt Duration | 8 years | Average debt duration for the European Utilities sector. |
| Variable Debt Proportion | 25% | Portion of debt stockpile in European utilities that is floating rate. |
| EPS Sensitivity to +50 bp Rates Hike | -3% | Estimated average sector Net Income impact per +50 bp interest rate increase. |
| Equity Valuation Impact to +50 bp Rates Hike | -7% | Estimated average reduction in equity valuations per +50 bp risk-free rate increase. |
| Sector 2026-30E EPS CAGR | 8% | Forecasted average EPS CAGR for European utilities. |
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Authors / Editors
Reported Data Context
- Average Utilities Debt Duration: 8 years (2026) · Source: Goldman Sachs Global Investment Research
- Variable Debt Proportion: 25 % (2026) · Source: Goldman Sachs Global Investment Research
- EPS Sensitivity to +50 bp Rates Hike: -3 % (2028E) · Source: Goldman Sachs Global Investment Research
- Equity Valuation Impact to +50 bp Rates Hike: -7 % (2026) · Source: Goldman Sachs Global Investment Research
- Sector 2026-30E EPS CAGR: 8 % (2026-2030E) · Source: Goldman Sachs Global Investment Research
Securities
Themes
Regions
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