When I took over as Chief Executive, SSE was a successful UK company with a rich heritage and a broad, highly diversified business model. That breadth had served us well in the past. However, as the market became more fragmented and complex, and with climate change becoming an ever more urgent priority, it was clear that SSE had to evolve – and that meant simplifying our strategy and our business to give us a laser-like focus on low-carbon electricity.
Since then, we have been steadily focusing the business on a clear strategy of creating value for shareholders and society in a sustainable way by developing, building, operating, and investing in the electricity infrastructure and businesses needed in the transition to net zero. It has involved difficult decisions from shutting down coal plants to selling businesses, and the announcement of an agreement to sell our remaining financial stake in SGN today is symbolic of the journey we’ve been on.
Domestic retail, contracting, E&P, multifuel and SGN are all high-quality businesses which have made important contributions to the company over the years. We made these disposals because they simply did not fit with that net zero electricity asset orientated strategy. In SGN’s case, although it is well positioned to play a key role in the transition to net zero through development of the hydrogen economy, it was a financial investment, covering gas not electricity assets, with limited synergies to the rest of the group.
SSE’s strategic focus is on renewables and regulated electricity networks. With the size of the GB electricity sector set to at least double by 2050 according to National Grid and Climate Change Committee forecasts, and with the generation mix needing to be largely decarbonised by the late 2030s, these businesses are key to enabling a net zero economy. They therefore have strong growth potential and, importantly, they fit together. With common skills and capabilities in the development, construction, procurement, financing, and operation of world-class, highly technical electricity assets, we continue to see a strong strategic logic to them forming the low-carbon electricity core of SSE.
The other businesses we retain are highly complementary to that core. Thermal, like hydro, provides flexibility to balance wind variability and can drive forward the CCS and hydrogen solutions the country will need in the decades ahead. Our customer businesses can provide a valuable route to market for renewables and, in turn, benefit from access to our renewables position. Our Distributed Energy business gives us a foothold in a growth sector. Whilst our Energy Portfolio Management business provides efficient market access and optimisation for our generation and customer businesses and manages commodity risk across the Group. SSE’s business mix is therefore very deliberate, highly effective, fully focused, and well set to prosper over the long term on the journey to net zero and beyond.
"Net zero alignment is good for society, but also creates strong growth options."
Alistair Phillips-Davies
As well as building more offshore wind than any other company in the world right now, we are seeking to bring our world-leading capabilities in offshore wind to carefully selected international markets, working with complementary local partners. We are adding to our enviable wind pipeline with further options in wind and flexible generation technology: pumped storage, carbon capture and storage, hydrogen and batteries. Our aspiration is to reach a net run-rate of over 1GW of new renewables assets per year during the second half of the decade. Our networks businesses are also generating major construction projects and RAV growth, with Transmission’s Certain View of TOTEX for RIIO T2 now around £2.8bn, potentially increasing to over £4bn, and our Draft Distribution business plans setting out a compelling case for over £4bn of TOTEX for RIIO ED2.
The SGN transaction will complete SSE’s current disposals programme, bringing total proceeds to over £2.7bn since June 2020, exceeding original ambitions. This will help fund our growth plans, and we will update our £7.5 billion capex plan in November. Of course, we are planning further capital recycling too as we expect to progress the sale of a stake in Dogger Bank C later this calendar year. As well as renewables partnering, we have been clear that we would also consider, in time, extending a partnering approach potentially via sales of minority interest stakes in our electricity networks businesses. These businesses are core to the strategy, and we would retain control, but partnering remains an option if it could facilitate further growth opportunities
So, all in all, today is an important moment for our strategy. Whilst disposals programmes can be bittersweet as we part with colleagues and friends, we have found these well-run businesses good homes. And these divestments are part of our long-term strategy, acutely focused on creating long-term value for shareholders and society through our core electricity businesses. As a purpose-led company, fully focusing on providing energy needed today, while building a better world of energy for tomorrow, I believe the new, streamlined SSE has a very bright, net zero future.