Jefferies has launched its equity research coverage on Elia Group SA/NV, a major electricity transmission system operator with predominantly regulated operations in Belgium and Germany. The report emphasizes the company's growing regulated asset base, increasing EBITDA, and steady balance sheet growth in line with ongoing infrastructure investments. While the valuation multiples are in line with peer averages, the analysis also highlights potential risks such as regulatory uncertainties and project delays that could affect future performance.
Key Points
- Elia Group's transmission infrastructure covers over 19,000 km serving approximately 30 million end users, with operations primarily regulated in Belgium and Germany.
- The regulated asset base for Elia Transmission Belgium is forecasted to grow substantially, reaching nearly €17 billion by 2030, illustrating ongoing investment in electricity infrastructure.
- Financial metrics reflect growth with increasing EBITDA and EBIT for the Belgian unit and a balance sheet expanding due to capital investments, aligning with the company’s infrastructure commitments.
Jefferies has initiated coverage on Elia Group SA/NV, a key player in Europe's electricity transmission landscape, with significant regulated infrastructure in Belgium and Germany. The company operates an extensive network exceeding 19,000 kilometers of high-voltage electricity lines and services close to 30 million end users through its subsidiaries, Elia Transmission Belgium and 50Hertz Transmission. Notably, 50Hertz operates as a German subsidiary in which Elia holds an 80% stake via Eurogrid, the parent company.
According to Jefferies, Elia Group's operations remain overwhelmingly under regulatory oversight, accounting for 98% of its EBITDA for fiscal year 2024. The German subsidiary 50Hertz contributes approximately 60% of this regulated earnings, while the Belgian operations represent the remaining 40%.
The research points to a consistent expansion in Elia’s regulated asset base, reflecting ongoing capital expenditure on transmission infrastructure upgrades and capacity expansion. For Elia Transmission Belgium, the regulated asset base is projected to advance from €5.9 billion in 2023 to €6.9 billion in 2024, with further growth expected to reach €10 billion by 2026 and nearly €17 billion by 2030 based on Jefferies’ forecasts and company data. These figures correspond to an estimated average-period regulated asset base for the Belgian unit of €9.2 billion in 2026, escalating to €16.1 billion in 2030.
Financially, underlying EBITDA for the Belgian operations has increased from €510 million in 2023 to €596 million in 2024 and is projected to expand to €863 million in 2026 and €1.49 billion by 2030. Underlying EBIT also shows a positive trajectory, rising from €291 million in 2023 to €352 million in 2024, with forecasts indicating €549 million in 2026.
Elia Group’s balance sheet development aligns with its investment strategy, as total assets climbed from €19.4 billion in 2023 to €24.9 billion in 2024, with estimates suggesting they could reach €36.7 billion in 2026 and climb substantially to around €59.9 billion by 2030. Total equity similarly rose from €5.5 billion to €6.2 billion between 2023 and 2024, with Jefferies projecting an increase to €9.6 billion in 2026.
When benchmarked against European peers in the regulated utilities sector, Elia’s enterprise value to EBITDA (EV/EBITDA) ratio is estimated at 11.7 times for 2026 and 9.5 times for 2027. These multiples are generally comparable to the peer group median of 11.4 times and 9.9 times respectively. However, the firm’s EBITDA-to-regulated asset base ratio averages 8.4% across 2025-2029, which is relatively lower than competitors such as National Grid and Terna. This discrepancy reflects the regulatory depreciation methodologies applied in Belgium and Germany.
Jefferies also underscores several risk factors for Elia’s business model, including the potential for regulatory and tariff setting uncertainties within the Belgian and German markets, delays in permitting for critical grid expansion projects, and risks related to financing the sizeable capital expenditures required for infrastructure advancement.
Ownership of Elia is concentrated, with NextGrid Holding holding the largest stake at an estimated 44.8%, followed by Katoen Natie with 9.3%. Other notable shareholders include Atlas Infrastructure Partners at 4.9% and Interfin with 2.9%.
Risks
- Regulatory and tariff uncertainties in the Belgian and German markets pose potential challenges to Elia Group's revenues and profitability.
- Delays in permits for grid expansion projects could hinder the company’s infrastructure development plans and affect growth forecasts.
- Capital expenditure requirements introduce funding risks that may impact the group’s financial flexibility and investment capacity.