Last Update 08 Dec 25

SCATC: New Long-Term Power Contracts Will Support Future Cash Flow Visibility

Analysts raised their 12 month price target for Scatec to NOK 121.14, a modest increase driven by slightly lower perceived risk and marginally improved long term profitability assumptions.

Analyst Commentary

Analysts highlight that the recent upgrade and target price reflect a more constructive view on Scatec’s risk profile and earnings trajectory, but they also caution that execution and market dynamics remain key swing factors for the valuation.

Bullish Takeaways

Bullish analysts see the NOK 121 price target as supported by improved visibility on project cash flows, which they believe reduces the discount investors previously applied to Scatec’s pipeline.
They point to a stabilizing funding environment and better access to project finance as catalysts that could accelerate development schedules and support multiple expansion.
Improved assumptions for long term profitability, particularly in emerging markets where Scatec already operates, are viewed as underappreciated drivers of free cash flow growth.
Bullish analysts argue that recent operational execution and a more disciplined capital allocation framework increase confidence that Scatec can deliver on its growth plan without significant equity dilution.

Bearish Takeaways

Bearish analysts remain cautious on regulatory and political risk in several key markets, noting that delays or contract revisions could still pressure returns and justify a higher risk premium.
They highlight execution risk on the project backlog, warning that cost inflation or supply chain disruptions could erode margins and undermine the uplift in long term profitability assumptions.
Some remain concerned that competition in renewables procurement may cap upside to power prices, limiting the scope for further re rating of Scatec’s earnings multiple.
Bearish analysts also flag that any setback in securing attractive financing terms could slow growth or force prioritization within the pipeline, which would challenge the upgraded valuation case.

What's in the News

Started commercial operations at the 273 MW Grootfontein solar power plant in South Africa, backed by a 20-year PPA and expected to deliver 700 GWh of annual output and abate 630,000 tonnes of CO2, making it the largest co located solar PV cluster in the Western Cape (Key Developments).
Awarded a 20-year PPA for a 68 MW floating solar project on the Magat reservoir in the Philippines, expanding Scatec’s presence in hybrid renewable solutions alongside existing hydro and battery assets operated through the SNAP joint venture (Key Developments).
Issued new production guidance for 2025, targeting proportionate power production of 4.1 TWh to 4.2 TWh for the full year (Key Developments).
Reported third quarter 2025 operating results with total power production of 1,202 GWh from its power plants (Key Developments).
Expanded in West Africa via new lease agreements for 64 MW of solar and 10 MWh of battery storage in Liberia and Sierra Leone, supported by a World Bank IFC loan and guarantee facility and using a newly designed mounting structure for future projects (Key Developments).

Valuation Changes

Fair Value: The consensus analyst price target is unchanged at NOK 121.14, indicating a stable central valuation scenario.
Discount Rate: The discount rate has fallen slightly from 10.06 percent to 9.86 percent, reflecting a modest reduction in perceived risk.
Revenue Growth: Long term revenue growth assumptions are effectively unchanged at around 43.56 percent, signaling no material shift in top line expectations.
Net Profit Margin: The forecast net profit margin remains stable at approximately 17.32 percent, suggesting no meaningful revision to profitability assumptions.
Future P/E: The future P/E multiple has edged down marginally from 13.32x to 13.25x, pointing to a slightly less aggressive valuation on forward earnings.

Expansion into emerging markets offers growth but brings significant geopolitical, currency, and regulatory risks that could impact cash flow stability and earnings.
Market optimism on rapid margin and revenue growth may be misplaced due to potential technology price stabilization, supply disruptions, and financing cost challenges.
Strong financial discipline, diverse growth portfolio, and early adoption of batteries position Scatec for resilient earnings, reduced risk, and sustained margin expansion across global markets.

Catalysts

About Scatec

Provides renewable energy solutions worldwide.What are the underlying business or industry changes driving this perspective?

Investor optimism appears high regarding Scatec's expansion into emerging markets like Egypt and South Africa, where the company has secured record project backlogs and near-term growth, but this strategy exposes the company to heightened geopolitical and currency risks, potentially increasing future cash flow volatility and impacting earnings and net margins.
The market may be overvaluing Scatec due to the expectation that falling renewable technology and battery costs will continually translate into higher margins and rapid capacity additions; however, if technology prices stabilize or supply chain disruptions return, future margin improvement and revenue growth could fall short of expectations.
Overreliance on government contracts, PPAs, and regulatory approvals-especially in developing countries-means that any shifts in policy support, fiscal tightening, or payment delays could risk lower-than-anticipated revenue visibility and introduce downward pressure on future earnings.
High expectations are likely being placed on Scatec's ability to efficiently execute its large pipeline and ramp up its operating portfolio, but persistent industry issues like grid constraints, project delays, and curtailments (as already hinted in Brazil and Ukraine) may disrupt revenue timing and compress overall returns.
Assumptions of easy capital access and continuous deleveraging may be optimistic given the potential for persistently high global interest rates, which could increase project financing costs and reduce net margins if debt servicing becomes more expensive than currently projected.

Scatec Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Scatec's revenue will grow by 36.0% annually over the next 3 years.
Analysts assume that profit margins will shrink from 63.4% today to 8.8% in 3 years time.
Analysts expect earnings to reach NOK 877.1 million (and earnings per share of NOK 9.52) by about August 2028, down from NOK 2.5 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting NOK3.8 billion in earnings, and the most bearish expecting NOK387.6 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.3x on those 2028 earnings, up from 6.8x today. This future PE is greater than the current PE for the GB Renewable Energy industry at 6.4x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.35%, as per the Simply Wall St company report.

Scatec Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Scatec's strong financial performance, exemplified by significant year-on-year growth in revenue and EBITDA, robust OpEx control, and high gross margins from both power production and development/construction activities, indicates healthy and resilient earnings potential that could support share price appreciation.
The company's rapidly expanding growth portfolio-including a record-high backlog of 3.2 GW, an additional 2 GW under construction, and a pipeline of 7.7 GW of mature projects across multiple technologies and geographies-signals the potential for continued top-line growth and a doubling of installed capacity over the next two years, which would positively impact future revenues.
Continued reduction in corporate debt and strengthening of the balance sheet, with a clear deleveraging strategy, enhanced capital efficiency, and improved financial flexibility, lowers financial risk and creates capacity for self-funded growth, supporting strong net margins and earnings stability.
Accelerating adoption of battery storage and hybrid solutions, particularly the unexpected earnings upside from batteries in the Philippines, positions Scatec to capitalize on long-term trends in grid flexibility and reserves markets, potentially increasing recurring revenues and improving profit margins as these technologies scale.
Scatec's diversified global footprint (notably in South Africa, Egypt, the Philippines, and new markets) and active asset rotation strategy provide resilience against regional risks and generate recurring proceeds from divestments, which together underpin consistent cash flows, margin expansion, and share price support through business cycles.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of NOK116.0 for Scatec based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK135.0, and the most bearish reporting a price target of just NOK105.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK10.0 billion, earnings will come to NOK877.1 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 9.4%.
Given the current share price of NOK106.8, the analyst price target of NOK116.0 is 7.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Expanded Emerging Market Projects Will Influence Profitability And Mitigate Regulatory Uncertainty