Utilities sector booming as fundraising questions answered
Often considered a dull sector compared with the fast-growing tech industry, utility stocks are having their day in the sun after this exciting announcement.
30th April 2026 15:13
by Graeme Evans from interactive investor
An ambitious plan by United Utilities Group Class A (LSE:UU.) to support new homes, data centres and clean energy in the North West is set to involve retail investors as part of an £800 million fundraising.
The equity issue will underpin £2.5 billion of incremental investment in United’s AMP8 five-year regulatory cycle, taking the total for the 2025-30 period to £11.5 billion.
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Shares jumped almost 13% to a fresh record high of 1,480p as United said its asset base would now grow at a compound annual rate of 10% through to 2030, up from previous guidance of 7%.
Its upgraded financial framework is also targeting regulatory returns of 10-11% in the AMP8 period, an increase of 100 basis points versus prior guidance.
City firm Morgan Stanley pointed out that asset base growth is a key driver of valuations in the sector and that the equity raise also answered questions about funding.
It added: “Amid rising capex needs across regulated utilities, this is not the first time we have seen simultaneous increase in capex and capital raise.
“We view this as a positive with any funding questions answered immediately and with capital going directly to value accretive growth. We also note a strong precedent of markets ultimately taking these announcements well.”
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Midlands-focused Severn Trent (LSE:SVT) shares lifted 246p to 3,293p while South West Water business Pennon Group (LSE:PNN) rallied 36.5p to 553p and near the top of the FTSE 250 index.
Source: TradingView. Past performance is not a guide to future performance.
United disclosed the fundraising plan alongside annual results, which showed earnings per share slightly ahead of expectations at 107.1p. Bill increases more than offset higher operating costs to lift the underlying profit figure by 35% to £1.06 billion.
The group, which has increased its dividend at least in line with inflation for the past 15 years, plans to distribute 35.78p a share on 3 August. This represents a 3.5% rise on the previous year and results in a total for 2025-26 of 53.66p.
United said the first year of its five-year regulatory programme had delivered significant reductions in storm overflow spills and sewer flooding. It said it was “firmly on track” to deliver a 60% reduction in spills by 2030.
Its new investment plans include a £1.4 billion programme that aims to deliver the vital water infrastructure required for thousands of new homes across the region, unlock capacity for data centre expansion and facilitate decarbonisation.
United expects Ofwat’s draft decision on its proposals in August before a final verdict in December.
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The company believes its plans will deliver an additional £17 billion of economic value in the North West and £31 billion nationally by 2050.
Chief executive Louise Beardmore added: “We expect it could create a further 4,000 jobs across our supply chain, on top of the 30,000 supported by our existing AMP8 programme.
“This focused, disciplined and well-funded plan will help us accelerate delivery of the transformation in infrastructure and services that the North West expects and deserves.”
Plans for a further £1.2 billion of investment are expected to be submitted for approval through subsequent submissions in 2027 and 2028 and transitional investment into AMP9.
The placing of new shares, which is not expected to exceed 10% of the current issued share capital, will be carried out through an accelerated bookbuild process and include a retail offer via RetailBook.
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