On the grid, on the money

Ageing infrastructure across the developed world that may require upgrading, together with increasing demand for power to support the Artificial Intelligence (AI) sector, suggest that significant changes are occurring within energy markets. Ecofin Global Utilities and Infrastructure Trust (EGL) may benefit from these developments. Jean-Hugues de Lamaze, who is approaching his 10th anniversary of managing the fund since its launch in 2016, has navigated an ever-evolving landscape for EGL shareholders.

EGL invests in utilities, power networks, environmental services and, as a diversifier, transportation infrastructure. Through this mix, Jean-Hugues has delivered one-year NAV and share price returns that are ahead of the relevant global utilities and infrastructure indices, as well as wider equity indices. The trust’s discount has also narrowed this year.

Developed markets utilities and other economic infrastructure exposure

EGL seeks to provide a high, secure dividend yield and to realise long‐term growth, while taking care to preserve shareholders’ capital. It invests principally in the equity of utility and infrastructure companies in Europe, North America, and other developed OECD countries.

Source: Bloomberg, Marten & Co

Market backdrop

Falling inflation and interest rates are positive for the sector.

The utilities and wider economic infrastructure sector experienced declines during the period of rising inflation and interest rates that began at the end of 2021. During this period, investors could obtain higher returns with lower risk by holding cash or government bonds, which may have made the sector relatively less attractive. More recently, both prices and rates have declined. Figure 1 shows the extent to which developed markets interest rates have come down since the beginning of 2024.

Figure 1: US (Federal Reserve), eurozone (ECB) and UK (BoE) benchmark interest rates since January 2024

Source: Bloomberg, Marten & Co

With these falling rates, money has returned to the sector, perhaps due to the income streams of companies such as EGL appearing attractive to investors.

There have also been other factors for EGL and the wider sector this year. Firstly, the initial fears sparked by the election of Donald Trump to a second term as US President have not been fully realised. Much of US energy policy is decided by the states, where California governor Gavin Newsom defines his position in contrast to Trump. Some Republican states, such as Texas, remain committed to the energy transition due to their climate and the perceived impact on jobs and growth.

Figure 2 shows the extent to which positive momentum appears to have returned to the sector, with both the relevant European and US utilities indices rising this year.

Figure 2: STOXX Europe 600 Utilities Index vs S&P 500 Utilities Index, rebased

Source: Bloomberg, Marten & Co

As Figure 2 shows, returns have been particularly strong in Europe, notably towards the end of this year. In general, European names still trade on lower valuations than their US peers, but the gap has narrowed. Overall, the sector is seeing an improved earnings outlook while still trading on an attractive valuation.

Invest in the grid

Energy infrastructure is outdated and requires significant investment.

Jean-Hugues has identified expansion of the power grid as a potential investment opportunity. There appears to be a significant need for capital expenditure, with western countries continuing to operate energy infrastructure that, in many cases, dates from the 1950s and 1960s. Governments have recently announced large infrastructure packages, such as the Inflation Reduction Act in the US and the €500bn Special Fund for Infrastructure and Climate Neutrality in Germany.

New generation capacity may need to be connected to the grid, and the shift from baseload to intermittent generation could require changes to grid architecture. The increase in power supply appears to be influenced by demand. Figure 3 shows wholesale electricity prices in the four largest mainland European countries over the past five years.

Figure 3: European wholesale electricity prices, selected countries, rebased, euros per megawatt hour

Source: European Network of Transmission System Operators for Electricity

There was a pronounced spike in the aftermath of Russia’s invasion of Ukraine. The chart also suggests some difference between countries. However, beyond these factors, the chart indicates significant increases in price in recent years, accompanied by notable volatility. The need for increased and more resilient capacity has been identified.

The developed world appears to be entering a period of increasing power consumption, following many years when demand held steady or declined. For example, the UK is consuming less electricity than 25 years ago, which may be due in part to efficiency gains with lighting, heating, and other technologies, but these gains have in many cases reached their limit.

Jean-Hugues cites a recent study by NextEra Energy, the American energy company, that forecasts a 40% increase in power consumption in the US in the coming years, and 50% in Europe and the UK.

This increased demand is occurring in the context of efforts by governments to decarbonise the power grid. The UK has stated a commitment to transitioning to net zero, meaning total emissions will be no more than removals from the atmosphere, by 2050. The National Energy System Operator (NESO) recently reported that a major constraint on delivering net zero may be grid capacity, and referred to the importance of “clearing the Gridlock”, where existing infrastructure appears to lack the capacity to accommodate new power sources.

There are a number of different factors that appear to be contributing to this increased demand, including developments in AI and cloud computing, particularly in relation to powering data centres. Electric vehicles, despite adoption rates being slower than some forecasts, are also contributing to demand, as is the broader trend towards electrification driven by decarbonisation. Overall, this increase could put huge pressure on the grid.

Some of this extra demand may be met by nuclear. For example, the Three Mile Island nuclear plant in Pennsylvania, which shut down in 2019, is being brought back online exclusively to provide power to Microsoft data centres. However, the lack of investment in the nuclear sector in most countries in recent years suggests there could be a lag of 10 years or more before meaningful extra capacity becomes available.

Despite this new demand-supply dynamic, power prices have declined recently from the record-setting highs reached in the aftermath of Russia’s invasion of Ukraine, as natural gas prices – a key component of wholesale electricity costs – have normalised. However, volatile spot prices may not be relevant to the types of companies in EGL’s investable universe, which have very long-term fixed contracts. Approximately 80% of the revenues of European utilities are contracted, compared to less than 40% in 2008, and companies such as NextEra enter into contracts of 20 to 40 years duration, generally at prices that management considers attractive. According to Jean-Hugues, the business models of utilities companies are being steadily derisked, which he believes is not fully recognised by many investors.

The UK

Improving

Figure 4: System Price of electricity, Great Britain, pence per kilowatt hour, seven-day rolling average

Source: Office for National Statistics

Just as in other developed markets, the UK is forecast to see a substantial increase in electricity demand in the coming years. The increase, and volatile nature, of electricity prices has mirrored that seen in many European countries, as shown in Figure 4.

The UK has led the world in phasing out the use of coal.

In some areas, the country appears to have taken a leading role in the energy transition. For example, it has completely phased out coal from its energy mix, with the closure of the last coal-fired plant last year. Jean-Hugues describes the UK as currently offering the most attractive grid for investment, and the second-largest holding in the EGL portfolio is the UK’s National Grid (see page 9).

The UK has some companies trading at notable discounts. For example, SSE (another top-10 holding for EGL, see page 9) is trading on a low valuation multiple, but in November raised £2bn through a share placement at a premium to its market price, which may indicate returning investor confidence.

According to Jean-Hugues, the regulatory position in the UK is generally favourable. This includes the water industry, after the publication of the Independent Water Commission report in July made a number of recommendations for a “reset” in regulation and planning. The report suggests this could lead to a more stable long-term environment, replacing the current five-year price-review cycle. Jean-Hugues has recently added a water company to the portfolio for the first time in many years by buying a small holding of Pennon, though he cautions that it is likely to be the only purchase in the sector.

Recently, there was a reminder of regulatory risk in the broader sector with the Department of Net Zero and Energy Security announcement of a consultation on changing the inflation calculation used in the renewables obligation and feed-in-tariffs schemes. This may result in a switch from the retail prices index (RPI) measure to the lower consumer prices index (CPI), which could negatively impact the net asset values of the affected companies. Jean-Hugues considers this to be a short-sighted move from the government, which he believes will continue to need substantial help in the energy transition from private capital, which values stability and strong contracts. A new “UK premium” is a possible result, but Jean-Hugues states this is something the government will likely want to avoid.

Portfolio – Asset allocation

North America has reverted to EGL’s largest geographic weighting.

Figures 5 and 6 compare the geographic allocation of EGL’s portfolio against the position at the time of the previous note earlier in the year. The long-term trend has been for the North American weighting to be reduced in favour of Europe. Jean-Hugues has confirmed that this remains the case; however, in the six months covered here, the North American allocation has increased and is now the largest allocation, although only slightly. According to Jean-Hugues, the perception that some of the headwinds associated with a potential second Donald Trump presidency have not proven as damaging as initially anticipated may be part of the explanation for this shift.

Jean-Hugues has stated that his starting point for EGL is an equal allocation between North America and Europe, to avoid concentration risk and ensure exposure to key themes, and this is reflected in the current portfolio.

Figures 7 and 8 show the change in sector allocation since the last note. Overall change appears minimal, with a small increase in transportation offset by decreases in integrated utilities, regulated utilities and environmental services. Within transport, Jean-Hugues states he is positive on airports and toll roads exposure, viewing it as a diversifier from data centres. This is exemplified by the holding of Vinci, which has exposure to both. These are long-duration businesses, and although there are periodic threats from the French government to tax toll road operators, these have not resulted in changes, according to management, due to the contracts in the industry.

Top 10 holdings

Figure 9: Top 10 holdings as at 31 October 2025

Source: Ecofin Global Utilities and Infrastructure Trust, Marten & Co

Since the last note in June (using data up to 31 May 2025), there has been a notable change to the top 10 holdings list. Constellation Energy has moved from the tenth largest holding to first, following an increase in its share price. E.ON has fallen from first to eighth, despite a modest rise in the share price, as Jean-Hugues reduced the position. National Grid remains the second-largest holding and appears to be a significant one, given the previously outlined factors related to investing in the grid.

National Grid

Figure 10: National Grid (GBP)

Source: Bloomberg

National Grid (www.nationalgrid.com) owns and maintains the high-voltage transmission network across England and Wales, transporting power from generators to major substations, and operates the regional distribution networks that deliver electricity to homes and businesses in the Midlands, South West England and South Wales. In addition to its UK operations, it owns businesses in the United States, primarily in New York and Massachusetts. Through National Grid USA, the company manages electricity transmission and distribution networks and operates gas distribution networks. Two-thirds of the company’s overall current capital expenditure is in the US.

Jean-Hugues describes this UK/US split as a significant part of the investment case for National Grid. According to Jean-Hugues, it allows for exposure to the UK grid, with some protection against regulation, given that regulators know the company can shift further resources to the US. Jean-Hugues states that although the shares have performed well in recent months, given the higher valuations in the US, he believes that they would trade 50% higher if they were listed there.

The company has recently increased its focus on electricity infrastructure, selling a majority stake in its UK gas transmission business and reinvesting proceeds into grid modernisation and interconnectors. It continues to invest in grid upgrades, digitalisation and cross-border connections.

New additions to the top 10

There are three new names in the portfolio’s top 10: NextEra Energy, Xcel Energy and Iberdrola. All are preexisting holdings that have moved higher up the list, which may be due to further buying, market moves, or a combination of the two.

NextEra Energy

Figure 11: NextEra Energy (USD)

Source: Bloomberg

NextEra Energy (www.nexteraenergy.com) is a US group whose performance is anchored by Florida Power & Light, which is described as America’s largest regulated utility. Population growth and rising electrification in the state appear to support steady demand, allowing the company to pursue a substantial capital programme across transmission and distribution infrastructure. This regulated core is reported to generate predictable earnings and cash flow, which the company states underpins the group’s wider investment activities.

NextEra is one of the world’s largest developers of wind, solar and storage, through its Energy Resources division. The business has added further contracted capacity recently, although the pace of construction appears to have been impacted by supply-chain conditions. The company still has a multi-gigawatt development pipeline.

Previously the largest holding in EGL for a long period, Jean-Hugues trimmed the position around a year ago due to concerns about the agenda of the incoming President Trump and potential risks to NextEra’s future tax credits. However, these risks did not materialise to the extent anticipated. Although the shares traded sideways for most of 2025, they experienced a rally towards the end of the year.

Xcel Energy

Figure 12: Xcel Energy (USD)

Source: Bloomberg

Xcel Energy (www.excelenergy.com) is a US regulated utility based in Minnesota, providing electricity and natural gas across eight Midwestern and Western states. It serves around four million electricity customers and 2.2m natural-gas customers. Its geographically diverse operations provide a broad base of regulated earnings and a stable revenue profile.

Xcel has committed to delivering 100% carbon-free electricity by 2050 and aims to achieve an 80% reduction in carbon emissions by 2035 relative to 2005 levels. Its long-term capital plan allocates substantial investment towards renewable generation, grid modernisation and energy storage. The company states that these initiatives position it among US utilities participating in the energy transition.

The shares have performed in line with the sector this year. The spike in the price in late September appears to have followed settlement agreements related to a 2021 fire in Colorado, which was claimed to be caused by Xcel equipment. Xcel agreed to pay approximately $640m while not admitting guilt, thereby removing a legal risk overhang.

Iberdrola

Figure 13: Iberdrola (EUR)

Source: Bloomberg

Iberdrola (www.iberdrola.com) is a European multinational electric-utility group based in Bilbao, Spain. It supplies electricity and, in some markets, gas, and operates across three main business lines: regulated networks, renewable generation, and liberalised retail/wholesale energy supply. Its operations span multiple geographies, including Spain, the UK, the US (via subsidiaries such as Avangrid), and Latin America.

In recent years, Iberdrola has increased its focus on the energy transition. This year it unveiled an investment plan committing €58bn of capital by 2028, mostly directed at transmission and distribution networks. According to the company, this shift is intended to transform Iberdrola into a more regulated-asset-focused utility, with the aim of reducing exposure to wholesale energy volatility and placing greater emphasis on stable regulated returns.

Iberdrola’s shares have increased over the past year. The company issued a series of corporate results and undertook a €5bn equity raise in the middle of 2025. This was to fund further growth in grid and network investments and was nearly four times oversubscribed.

Performance

Figure 14: Cumulative total return performance over periods ending 30 November 2025

Source: Bloomberg, Marten & Co. Note 1) EGL was launched on 26 September 2016.

Up-to-date information on EGL is available on the QuotedData website.

EGL’s recent performance shows that, as indicated in Figure 14, over one year both NAV and share price growth have been ahead of the relevant utilities and infrastructure indices, as well as UK and world equity indices. Over the five-year period, EGL’s return is below the general equity measures, which may be related to the period when inflation and interest rates increased from the end of 2021. However, EGL’s NAV outperformed the wider utilities and infrastructure sectors over the five-year period.

Figure 15: Performance of EGL NAV and relevant benchmark indices, since inception to 30 November 2025

Source: Bloomberg, Marten & Co

The fund is approaching its 10-year anniversary, which allows for an assessment of Jean-Hugues’s long-term record. Since September 2016, both NAV and share price performance have been ahead of the utilities and infrastructure indices, as well as the UK market. In share price terms, the fund has kept pace with global equities, which have experienced a long-term increase.

Figure 15 shows EGL’s performance against the MSCI World Utilities and S&P Global Infrastructure indices since inception, in graphical terms. The fund has outperformed both over this period, which includes a range of market conditions. The graph, and many of the numbers in Figure 14, suggest that active management may have provided benefits in these sectors, with Jean-Hugues appearing to have identified and taken advantage of specific opportunities and market inefficiencies.

Premium/(discount)

EGL has traded at a discount over the past year, within a 11.5% range.

Over the 12-month period ended 9 December 2025, EGL’s shares traded between a 4.0% and 15.5% discount to NAV. The average over that period was a 10.5% discount. As of publishing, EGL was trading at a 4.3% discount, which appears to continue the narrowing trend observed over the past 12 months, as shown in Figure 16.

Figure 16: EGL premium/(discount) over five years to 9 December 2025

Source: Bloomberg, Marten & Co

There is the potential for the discount to close further if market conditions are broadly favourable, particularly in an environment of low and stable interest rates and inflation. EGL traded at a premium to NAV as recently as the middle of 2023. Conversely, rising interest rates may have a negative impact on the premium/discount position.

Share buybacks

When the trust was trading at a premium, EGL issued new shares, as shown in Figure 17. More recently, with the shares on a consistent discount, this has changed to a policy of regular buybacks.

On 16 October 2025, there was a repurchase of 10.15m shares, or nearly 10% of the total. This followed interactions with a block seller and was completed at the prevailing discount level. It was conducted under the authority granted at the EGL AGM, which covered repurchases up to 16.2m shares. The activist US hedge fund Saba Capital, whose last disclosed position in EGL was 5.11% of the company’s voting rights in August 2024, has been active in the investment trust sector in recent months. Due to dealing confidentiality, EGL has not disclosed the selling party.

Figure 17: EGL share buybacks and issuance

Source: Marten & Co, Ecofin Global Utilities and Infrastructure Trust

Gearing

EGL’s investment policy allows gearing of up to 25% and Jean-Hugues uses this flexibly. The level at any one time reflects his current level of conviction. Net gearing was 9.7% as of 31 October 2025, down from 15.4% at the end of May. This leaves a margin to the 25% maximum should a future market event present particular opportunities.

Dividend

EGL has made four interim dividend payments in 2025, each of 2.125p. The most recent was paid on 28 November.

EGL’s stated aim is to deliver a dividend to shareholders that rises at least in line with inflation. Payouts for 2025 have totalled 8.5p per share, which is an increase of 4.9% over 2024. Based on the latest share price, the current yield is 3.5%. This is down from 3.9% at the time of the last note in June, which may be attributable to an increase in the share price during the intervening period.

In the most recent results statement, EGL’s chairman announced that the board has decided to increase the quarterly dividend by 5.9% to 2.25p per share (9.0p per annum) with effect from the payment to be made in February 2026. This increase is above the rate of inflation for the year and means the trust’s dividend has grown above inflation since inception.

Gearing and reserves can be used to augment the portfolio yield if necessary, and the dividend has not been covered by earnings in recent years. For example, in 2024 dividend per share was 8.1p on revenue earnings of 7.2p. The reserves position was £95m as of 31 March 2025, which equates to 101p per share.

Figure 18: EGL revenue income and dividend by financial year

Source: Ecofin Global Utilities and Infrastructure

Fund profile

Further information regarding EGL can be found on the manager’s website:

https://www.redwheel.com/uk/en/individual/ecofin-global-utilities-and-infrastructure-trust-plc/

Ecofin Global Utilities and Infrastructure Trust Plc is a UK investment trust listed on the main market of the London Stock Exchange (LSE). The trust invests globally in the equity and equity-related securities of companies operating in the utility and other economic infrastructure sectors. EGL is intended for investors seeking a high level of income, income growth, capital preservation, and the potential for some capital growth.

On 1 October 2024, Redwheel completed the purchase of the assets of Ecofin Advisors, the investment manager of EGL. The Ecofin team has relocated to Redwheel’s offices, but there are otherwise no changes to the investment strategy, process or Ecofin brand. Also effective from 1 October, the investment management fee was reduced to 0.9% p.a. of NAV on the first £200m; 0.75% above £200m and up to £400m; and 0.6% thereafter.

EGL does not invest in start-ups, small businesses or illiquid securities, as these may involve higher technological or business risk. Instead, it invests primarily in businesses in developed markets, which have characteristics described as “defensive growth”: a beta less than the market average; dividend yield greater than the market average; forward-looking EPS growth; and strong cash-flow generation.

It also operates with a defined approach to utilities and infrastructure, as follows:

• electric and gas utilities and renewable operators and developers – companies engaged in the generation, transmission and distribution of electricity, gas, liquid fuels and renewable energy;

• transportation – companies that own and/or operate roads, railways, and airports; and

• water and environment – companies operating in the water supply, wastewater, water treatment and environmental services industries.

EGL does not invest in telecommunications companies or companies that own or operate social infrastructure assets funded by the public sector (for example, schools, hospitals or prisons).

No formal benchmark

EGL does not have a formal benchmark and is not constructed with reference to any index.

EGL does not have a formal benchmark, and its portfolio is not constructed with reference to an index. However, for the purposes of comparison, the MSCI World Utilities Index and the S&P Global Infrastructure Index are the global indices identified by the manager as the most appropriate. The company also supplies data for the MSCI World Index and the All-Share Index in its own literature for general interest. The MSCI World Utilities Index includes a strong bias towards US companies and excludes transportation services and some environmental services that EGL invests in.

Previous publications

Readers interested in further information about EGL may wish to read some of the earlier notes that we have published, a list of which is provided below.

IMPORTANT INFORMATION

Marten & Co (which is authorised and regulated by the Financial Conduct Authority) was paid to produce this note on Ecofin Global Utilities and Infrastructure Trust Plc.

This note is for information purposes only and is not intended to encourage the reader to deal in the security or securities mentioned within it. Marten & Co is not authorised to give advice to retail clients. The research does not have regard to the specific investment objectives financial situation and needs of any specific person who may receive it.

The analysts who prepared this note are not constrained from dealing ahead of it but, in practice, and in accordance with our internal code of good conduct, will refrain from doing so for the period from which they first obtained the information necessary to prepare the note until one month after the note’s publication. Nevertheless, they may have an interest in any of the securities mentioned within this note.

This note has been compiled from publicly available information. This note is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of this note is prohibited.

Accuracy of Content: Whilst Marten & Co uses reasonable efforts to obtain information from sources which we believe to be reliable and to ensure that the information in this note is up to date and accurate, we make no representation or warranty that the information contained in this note is accurate, reliable or complete. The information contained in this note is provided by Marten & Co for personal use and information purposes generally. You are solely liable for any use you may make of this information. The information is inherently subject to change without notice and may become outdated. You, therefore, should verify any information obtained from this note before you use it.

No Advice: Nothing contained in this note constitutes or should be construed to constitute investment, legal, tax or other advice.

No Representation or Warranty: No representation, warranty or guarantee of any kind, express or implied is given by Marten & Co in respect of any information contained on this note.

Exclusion of Liability: To the fullest extent allowed by law, Marten & Co shall not be liable for any direct or indirect losses, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note. In no circumstance shall Marten & Co and its employees have any liability for consequential or special damages.

Governing Law and Jurisdiction: These terms and conditions and all matters connected with them, are governed by the laws of England and Wales and shall be subject to the exclusive jurisdiction of the English courts. If you access this note from outside the UK, you are responsible for ensuring compliance with any local laws relating to access.

No information contained in this note shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction.

Investment Performance Information: Please remember that past performance is not necessarily a guide to the future and that the value of shares and the income from them can go down as well as up. Exchange rates may also cause the value of underlying overseas investments to go down as well as up. Marten & Co may write on companies that use gearing in a number of forms that can increase volatility and, in some cases, to a complete loss of an investment.