The budget measures are hitting utility shares on the stock market, with A2A and Hera down

(Il Sole 24 Ore Radiocor) - Heavy selling in utility shares listed on the Milan stock exchange, with A2a and Hera recording the sharpest falls. The sector is being weighed down by the changes introduced by the Meloni government’s new budget. In particular, the document confirms rumours regarding the tightening and extension of the IRAP surcharge for energy companies, set at 5 points in 2027 and 3 points in 2028–29. In 2027, the new surcharge would replace the current 2-point surcharge, thereby resulting in an incremental increase of 3 points.

According to analysts at Intermonte, ‘the technical report estimates revenue of 2.6 billion euros over four years, of which 734 million in 2027’. Brokers point out that the scope includes activities already affected by the ‘Decreto Bollette’ (Utility Bills Decree) at the start of the year, but ‘Ateco code 19.2 relating to oil refining’ would appear to be excluded. The text also prohibits passing on the increased tax burden to prices, tariffs or other charges applied to customers.

The budget also allocates 800 million for the restoration of hydroelectric reservoirs. Beneficiary operators will be required to place between 50 per cent and 80 per cent of their output under two-way contracts with the GSE for a period of 20 years. ‘In terms of impact,’ the analysts write, ‘we confirm that the incremental 3-point increase will lead to a reduction in earnings per share of around 2–3 per cent over the period 2027–2029 for Enel and the multi-utility companies, and of 4–5 per cent for the three regulated companies. The impact on Eni (less than 1%)’.

“Moderate impact,” the experts continue, “on the market capitalisation of utility companies, amounting to 0.5–1 per cent. Although the draft bill has yet to be examined by Parliament, we believe the chances of it being revised are very slim.” Banca Akros points out that “this is clearly negative news, confirming the gradual increase in regulatory risk in Italia”. Specifically, with regard to A2A, the experts estimate an additional cost of around 20 million euros in 2026, equivalent to 3.1 per cent of expected net profit. In 2027, the impact is expected to rise to €30 million, corresponding to 4.6 per cent of projected net profit. The increased tax burden would therefore lead to a reduction in the company’s profitability. The effect would be most significant in 2027, with a growing impact on expected profits.

In the background is the possibility that the ECB may raise interest rates at its December meeting. Such a move risks making utility sector bonds – which typically offer high coupons – less attractive compared to other bonds, whose market yields (and therefore also those on new issues) would tend to rise should the ECB raise rates.