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SSE rejects Elliott break-up pressure with £12.5 billion renewables plan

·2-min read
SSE will become the biggest constructor of wind turbines in the world  (PA Wire)
SSE will become the biggest constructor of wind turbines in the world (PA Wire)

Energy giant SSE has rejected calls from an activist investor to split itself in two, instead doubling down on a plan to transform it into a major renewable energy player.

SSE today pledged to spend £12.5 billion over the next five years to fund a shift to renewable energy. The announcement means SSE has more than doubled the amount of capital allocated to renewables, with an extra £1 billion now earmarked for each year of the investment programme.

The push will make SSE the biggest constructor of offshore wind turbines in the world and will increase the amount of renewable energy it produces by four gigawatts (GW). SSE will deliver 25% of the UK’s targeted 40GW of offshore wind power by 2030.

The new accelerated net zero plan is fully funded, seeming to rule out equity raises, and SSE promised to keep up investor payouts, albeit at a rebased level. Dividends will be rebased to 60p from 2023, down from around 66p. SSE promised to grow payouts by at least 5% from 2023 to March 2026.

The step up in renewables investment comes as SSE faces pressure to hive off its renewables energy business. Activist investor Elliott has quietly built a stake in the business and is said to be pushing for a break-up behind closed doors. Today’s strategy signals a rejection of that pressure.

SSE chair Sir John Manzoni said the board had "carefully considered a range of strategic alternatives” and “taken independent advice”.

He said: “The Board believes these plans represent the optimal pathway for SSE, positioning it as the UK’s clean energy champion.”

The investment plans were announced alongside half-year results showing adjusted pre-tax profits up 30% to £174 million in the six months to the end of September. Martin Young at Investec said the results were “broadly in-line”.

SSE announced an interim dividend of 25.5p, up from 24.4p.

Shares weakened 78.5p, 4.6%, to 1580p.

“The earnings update is good and mid-term plan looks value positive to us,” UBS analysts wrote. “Yet the stock has been strong recently and some may still be disappointed not to see a carveout of the renewable business today.”

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