欧洲区域冷却：热浪考验管网并强化增长潜力

District Cooling: Europe's heatwaves are testing the network - andreinforcing its growth potential As Western Europe faces its third heatwave since May, demand for cooling solutions hascome into sharp focus, with sales of fans and air conditioners surging. Less obvious, however,is the pressure extreme temperatures are placing on district cooling infrastructure. Againstthis backdrop, we take a closer look at the district cooling sector - how these systems work,their key advantages and limitations, and their long-term growth prospects. We also examinethe positioning of two leading French utilities active in this market,EngieandVeolia. Bartlomiej Kubicki+49 69 717 4418bartlomiej.kubicki@bernsteinsg.com Thibault Dujardin, CFA+33 1 58 98 59 16thibault.dujardin@bernsteinsg.com A rapidly growing global market.According to Fortune Business insights, the globaldistrict cooling market was valued at $31.2bn in 2025 and is expected to expand at an8.0% CAGR between 2026 and 2034. The Middle East and Africa currently representthe largest market, accounting for 42% of global market. North America and Asia-Pacificaccount for 26% and 25% of the market respectively, while Europe remains significantlyunderpenetrated at just 7%. Abdessamad Raghibi, Ph.D.+212 5 22 86 79 41abdessamad.raghibi@bernsteinsg.com Jorge Alonso Suils+34 915 893 913jorge.alonso@bernsteinsg.com French district cooling output is expected to more than double by 2030.Francecurrently delivers approximately 0.9TWh of district cooling annually, but national targetscall for output to exceed 2TWh by 2030, before reaching 2.5-3.0TWh by 2035. The marketremains fragmented, with leading operators including Engie, Dalkia (EDF), Idex, Corianceand Veolia. Rory Graham-Watson+44 20 7676 7093rory.graham-watson@bernsteinsg.com Ken-Ree Choong+44 20 7676 8243ken-ree.choong@bernsteinsg.com Could Europe accelerate district cooling expansion?Recent heatwaves havehighlighted both the strategic importance and the capacity constraints of existing networks.As extreme weather events become more frequent, we believe policymakers and operatorsmay accelerate investment programs aimed at expanding cooling capacity, improvingnetwork resilience, and supporting the decarbonisation of urban cooling demand. Specialist Sales Gareth Williams+44 20 7762 5256gareth.b.williams@bernsteinsg.com District cooling expansion offers a growing opportunity for both Engie and Veolia,although the activity remains relatively modest within the context of their overall operations.While neither company provides detailed standalone disclosure for district cooling, Veolia'sDistrict Heating & Cooling Networksdivision generated approximately €7.2bn of revenuein 2025, representing around 16% of group revenue. We estimate that district coolingaccounts for only 20–25% of this activity. Likewise, Engie’sLocal Energy Infrastructuresbusiness generated €8.8bn of revenue in 2025, equivalent to roughly 12% of grouprevenue.Despite its currently limited contribution, the development and expansionof cooling projects suggests a favourable long-term growth trajectory for bothcompanies. On our European coverage, we reiterate our Outperform rating with a €40.0 TP forVeolia, as well as our Market Perform rating and €29.4 TP forEngie. We also reiterateour Outperform rating with a 2.10 AED TP for Dubai Central Cooling Systems companyEmpower. BERNSTEIN TICKER TABLE INVESTMENT IMPLICATIONS On our European coverage, we reiterate our Outperform rating with a €40.0 TP forVeolia, as well as our Market Performrating and €29.4 TP forEngie. We also reiterate our Outperform rating with a 2.10 AED TP for Dubai Central Cooling SystemscompanyEmpower. DETAILS As Western Europe faces its third heatwave since May, demand for cooling solutions has come into sharp focus, with sales offans and air conditioners surging (link). Less obvious, however, is the pressure extreme temperatures are placing on districtcooling infrastructure. Against this backdrop, we take a closer look at the district cooling sector - how these systems work, theirkey advantages and limitations, and their long-term growth prospects. We also examine the positioning of two leading Frenchutilities active in this market,EngieandVeolia. For context, please also find the initiation report on Dubai Central Cooling SystemsEmpowercovered by Abdessamad Raghibi. PARIS'S DISTRICT COOLING NETWORKS HAVE BEEN PUT TO THE TEST On 23 June, during the second heatwave of the season, the operator of La Défense's district cooling network - the systemthat supplies cooling to the office towers of Paris's main business district - warned that the network would no longer be ableto operate under normal conditions. "We had built up ice reserves throughout the weekend, reaching 100% of our storagecapacity in preparation for the week. Yesterday, we used nearly two-thirds of that capacity," explained Olivier Fleck, site directorof Idex La Défense. "The problem is that we're consuming more ice