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.