The European energy sector has shown surprising resilience. Is this purely a geopolitical risk premium, or are we seeing a genuine re-rating of fundamentals? Would appreciate insights, especially given the ongoing transition away from fossil fuels.
Good question. I'm leaning more towards a short-term geopolitical bounce. The long-term trend away from fossil fuels hasn't fundamentally changed, just paused or diverted slightly.
Interesting point about re-rating. I haven't seen enough to suggest a fundamental shift in valuation multiples, seems more like a supply-shock driven price recovery to me.
Could it be that the 'transition' itself requires a lot of traditional energy infrastructure to support it in the interim? We still need power for manufacturing renewables.
I think it's a mix of both. The geopolitical premium is definitely a factor, but don't underestimate the pricing power many of these utilities still hold, even with the transition.
Are we also seeing increased investment in domestic energy production, leading to better perceived security and thus valuation? Something to consider beyond just the geopolitics.