British energy group SSE has rejected calls from hedge fund Elliott Management to break up, saying it will instead sell minority stakes in its power grid businesses to boost investment. invest in “zero” infrastructure such as renewable energy.
Elliott argued about a split or sell SSE’s renewable energy business follows its participation in the FTSE 100 consortium, which also owns the main grid in the north of Scotland, the local network in parts of the UK such as Oxfordshire and properties including including gas-fired power plants.
The spin-off would reflect a reflective move by companies like Spain’s Acciona, which this year floated its renewable energy arm to access financing to support growth in sectors. areas such as solar and wind on land. Spanish utility company Iberdrola also examined a possible spin-off its offshore wind business.
The SSE said on Wednesday it had “carefully considered” splitting the renewables division, but had calculated that the split would result in “quantifiable synergies” of £95 million a year. year as well as £200m in one-time costs in areas such as IT and finance.
It said the renewable fork would also make it more difficult to finance large projects like Dogger Bank, a 3.6 gigawatt wind farm that SSE is building with Norway’s Equinor and Eni of Italy off the northeast coast of England.
“Having a company in half is not the way to tackle the biggest, most difficult projects the world needs. . . we had to do it in a way that ultimately enhanced value,” said longtime SSE CEO Alistair Phillips-Davies. A separate renewable energy arm would have to sell shares in projects at a much earlier stage and therefore would not achieve such attractive returns, he added.
“Scale is important,” Phillips-Davies said, adding: “If you were to scale half that, you would only get half the funding.”
Instead, SSE is increasing the company’s investment in zero infrastructure, including renewables and the electricity grid, to £12.5 billion by 2026, up from its planned spending 7 £0.5 billion earlier in 2025.
The company, which is one of the sponsors of this month’s COP26 climate summit in Glasgow, says it can deliver a quarter of the UK government’s target of quadrupling wind capacity. offshore to 40 gigawatts by the end of the decade. Some of the funding will also go to renewable energy projects abroad, as SSE tries to expand into European markets such as Denmark, Poland and Spain.
The strategy will be supported by the liquidation of a 25% stake in its power grid businesses, SSE said.
But it will also be financed in part by a substantial dividend cut to 60p from 2023. SSE has said that for the current financial year, the company is expected to propose a dividend of 81p plus RPI inflation.
Shares were down nearly 5% in early London trading.
Some analysts have suggested that the SSE may need to rethink its disruptive strategy if it is to succeed in expanding internationally in areas like offshore wind.
Bernstein analyst Deepa Venkateswaran, who this year published research on the benefits of splits, called the SSE’s update “a missed opportunity to unlock further value”.
Phillips-Davies said he expects “all of our shareholders to support us” in implementing its latest plans, which were announced alongside semiannual results showing pre-tax profits. half a year increased 116% to £1.69 billion.
SSE’s statutory results were supported by profits from derivatives contracts, but its adjusted earnings per share, up 44% to 10.5p, were also well above the guided range. before it was 7.5p-10p.
