Jefferies upgraded UK water utility Severn Trent to a 'buy' rating and raised its price target by 23%, while cutting rival Pennon to 'hold'. The broker initiated coverage on European transmission operator Elia with a 'buy' recommendation, citing its fast-growing regulated asset base. These moves reflect Jefferies' view of divergent growth paths across the European utilities sector.

The upgrades and downgrades follow improved regulatory clarity in the UK. The government's Water White Paper and Environment Agency's commitment to resolve old enforcement cases provide a clearer path for investment. Jefferies forecasts Severn Trent's regulated capital value to grow at 9% annually through 2030, outpacing Pennon's 5% growth, which justifies the differing ratings and highlights a shift in investor focus.

For European transmission, Elia's 'buy' initiation is based on its projected 17% regulated asset base CAGR through 2029, the fastest among peers. Jefferies also raised National Grid's price target, maintaining a 'buy' after the UK regulator provided clarity on 80% of its regulated assets. These calls signal a preference for operators with strong, visible growth trajectories and supportive regulatory frameworks.