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Investing.com -- RBC Europe has initiated coverage of Engie with an “outperform” rating, pointing to what the brokerage describes as an underrecognized buildout of battery storage capacity and a path to earnings ahead of market expectations.
The analysts set a €25 price target, implying roughly 25% upside from the prior close, and said the company’s capital plan and earnings mix position it for further consensus upgrades.
RBC said Engie’s battery energy storage expansion stands out in the European utilities sector, with the company planning to increase operational battery capacity from 2.6GW in 2024 to 9GW in 2027.
The analysts estimate this rollout could generate about €0.4 billion in EBIT in 2027, a forecast they believe may prove conservative because of declining project costs and a 20GW pipeline.
They project that Engie’s €5 billion gross BESS capex budget could enable more buildout than currently implied, resulting in 2027 earnings per share about 7% above consensus.
RBC’s initiation comes as Engie continues simplifying its business. The company has cut its geographic footprint in half over six years, and its newest cost-efficiency program is running 92% ahead of budget with €477 million achieved in the first nine months of 2025.
RBC said this progress leaves the company well-positioned to support its €21-24 billion growth capex plan for 2025-27, which allocates 45-55% to renewables and 5-10% to batteries.
RBC highlighted that Engie has raised guidance four times since summer 2023, contributing to a reversal of its long-term underperformance.
The brokerage said the company’s EBIT bridge to 2027 appears achievable, with hydro normalization, lower power prices and disposals offset by new investments and efficiency gains.
Battery deployment remains central to the brokerage’s thesis. RBC’s analysis shows Engie’s pipeline offers some of the highest project returns in its portfolio, and falling battery pack costs since 2023 improve the economics of future projects.
The brokerage said Engie’s plan to hedge half of BESS EBIT through PPAs and contracts reduces exposure to volatile merchant revenue, a risk frequently faced by smaller developers.
The analysts also pointed to the U.S. market as a growing tailwind. Engie holds 8.6GW of operational capacity in the country and signs about 4GW of PPAs per year, with more than half of recent PPA growth coming from the U.S.
They said rising datacenter-driven load growth, higher power price expectations and recontracting opportunities support the value of Engie’s existing American portfolio, even as the company moderates new U.S. investment due to policy uncertainty.
Dividend expectations also form part of the initiation. Engie’s current payout policy of 65-75% of net recurring income implies dividend pressure in 2025 and 2026 as earnings normalize from the energy-crisis peak.
RBC, however, projects earnings 2-7% above consensus through 2027, which it said could allow the company to smooth its dividend profile. Engie’s yield sits at about 6-7%, the highest among its immediate peers.
The analysts said Engie’s earnings stability is set to improve, with 63% of EBIT expected to be regulated or long-term contracted by 2027, up from 42% in 2024.
Merchant exposure is projected to fall to 25% of EBIT, with only 5% linked to absolute power prices and 20% tied to volatility, a dynamic RBC views as favorable amid rising price spreads in European power markets.
RBC added that Engie’s balance sheet has been derisked following its agreement with the Belgian government to settle roughly €16 billion in nuclear waste provisions.
The analysts said the settlement eliminates uncertainty around spiraling waste costs and removes merchant power exposure from the Belgian nuclear assets. Engie’s leverage is expected to remain below its 4x net-economic-debt target.
While political risk in France remains a short-term factor for the share price, RBC noted that roughly 80% of Engie’s French EBIT stems from regulated networks, limiting the operational impact of any volatility.
Exceptional taxes are expected to decline in the 2026 budget, and the analysts said historical patterns show broader French market sentiment tends to have only transient effects on Engie.