LIVE MARKETS-Favour exposure to cables in energy transition - Barclays

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FAVOUR EXPOSURE TO CABLES IN ENERGY TRANSITION - BARCLAYS

The recent blackout in Spain and Portugal has put the energy transition and electricity grid resilience under scrutiny and this will likely support grid capex, according to Barclays.

Some have argued that Spain's use of renewable energy as an increasing part of its electricity generation made the blackout more severe. The Spanish government said establishing the cause of the outage will take time and there will be no simple answers.

"The recent Iberian blackouts likely underpin both positive investor sentiment towards, and continued strength in, demand for grid infrastructure/energy transition-related industrial products and systems," Barclays analysts write.

They say that cable manufacturers offer the best exposure to this theme, highlighting Italy's Prysmian PRY.MI and Denmark's NKT NKT.CO.

"The recent blackouts serve to increase our confidence that grid infrastructure capex spend is set to increase, thus warranting higher multiples and earnings estimates," they add.

In contrast, Barclays reiterates an underweight rating on wind energy generation firm Vestas VWS.CO and concerns on equal-weight rated Nordex NDXG.DE.

"Our analysis indicates that Euro wind OEMs (original equipment manufacturers) could be facing declining volumes in their new equipment businesses as utilities capex shifts away from renewables to grid/networks," Barclays adds.

(Samuel Indyk)

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