This pressure is most visible among transmission operators in central Europe, where required grid upgrades are much larger than for peers in southern Europe and distribution network operators, Scope Ratings says in its credit outlook for the utilities sector this year. 

Large-scale investment needs in electricity grid infrastructure stand out in Belgium, the Netherlands, France and Germany. For grid operators such as TenneT, Elia, RTE, Alliander and Enexis, annual capex in 2026-27 will be double that of 2023-24. Across our European grid-operator coverage, companies will invest EUR 45bn a year, a dramatic four-fold increase relative to the EUR 11-12bn yearly run rate in 2020-21.

Regulatory frameworks across Europe are adapting to this challenge, having proposed or introduced several investment-friendly measures such as higher allowed returns, greater returns specifically for new investments, and remuneration of work-in-progress projects. While these are a step forward, electricity grid operators still face a wide gap between heavy upfront capex and the actual realisation of cashflow, leading to negative FOCF/debt ratios across most of our coverage.

“To manage this, many utilities have credit-balanced funding plans, combining retained cashflow, debt, hybrid bonds and equity injections,” says Mikel Zabala, Associate Director and lead author of the report.

Some governments are also stepping in to provide strategic support, such as the purchase by German state-owned bank KfW of a 25% stake in TenneT Germany earlier this month.

Leverage is rising for grid operators, with interest cover falling

“Credit metrics are likely to weaken, but our ratings reflect how this deterioration is offset, at least partially, by robust business risk profiles and new capital support,” Zabala says.

Across Scope’s European grid operator coverage, Scope-adjusted debt/EBITDA will rise to around 6.0x during 2026/27, a material increase compared with the average of about 5.0x over 2020-24. Interest cover ratio will fall towards c7.0x by 2026/27, down from levels above 10x in recent years.

“Our ratings already account for this trend, as we balance weaker financial ratios against the grid operators' strong business risk profiles and the support provided by recent or planned equity injections. If funding remains on track, we expect no extra rating pressure for grid utilities,” Zabala says.

Looking specifically ahead to 2026, the credit outlook is broadly stable across the sector, though a clear regional divide has emerged.

“Integrated utilities are well positioned to manage this investment cycle due to stronger balance sheets, positive free cashflow from generation and supply, and flexibility through selective asset disposals. In contrast, Norwegian utilities face unique challenges due to accelerated capex and rigid dividend requirements by municipal owners,” Zabala says.

Currently, about 20% of Scope’s coverage carries a Negative Outlook, about half of which is related to Nordic utilities. Outside of this regional pocket, the sector appears well prepared for 2026, shifting its focus from securing funding to the steady execution of large-scale investments.

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