The SSE plc Board ("the Board") notes the publication of a letter from Elliott Advisors to Sir John Manzoni on 7 December.
On 17 November 2021, SSE announced its 'Net Zero Acceleration Programme' to accelerate sustainable, clean growth, lead the energy transition and maximise value for all stakeholders. The plans include a substantially increased, fully funded £12.5bn strategic capital investment plan to 2026 as well as ambitious targets to 2031.
The Board's evaluation of SSE's strategic review
As part of SSE's strategy review, the Board evaluated and constructively challenged a wide range of possible strategic options, across both electricity networks and SSE Renewables, including the separation of SSE Renewables. This was a rigorous and comprehensive process that involved independent financial and external legal advice, including independent testing by a third-party investment bank appointed by the Board specifically for this purpose. It was informed by constructive engagement with a broad array of shareholders and culminated in the Board's unanimous approval of the strategic plan that was presented to shareholders in November.
The Board is confident that the Net Zero Acceleration Programme represents the optimal pathway for creating long-term value for shareholders and that SSE is best positioned to capture the substantial growth opportunities arising from net zero as an integrated low-carbon electricity infrastructure company.
The Net Zero Acceleration Programme positions SSE as the UK's clean energy champion:
- doubling existing renewables capacity by 2026;
- increasing and maintaining a development pipeline in excess of 15GW and targeting a fivefold increase in renewables output by 2031;
- delivering strong investment in electricity networks with a c10% gross RAV CAGR; and
- deploying flexible energy solutions and exporting its renewables capabilities overseas.
It does so through a fully funded £12.5bn programme which is supported by ratings agencies and which delivers attractive returns to shareholders through an adjusted EPS CAGR of 5-7% and a dividend of at least £3.50 through to 2026.
Having carefully considered it among other options, the Board concluded categorically that the separation of SSE Renewables would not be the best route to maximise growth, execution and value creation for all stakeholders. Full detail on SSE's strategic review and the reasons behind this conclusion is available at the links provided below.
Board composition and expertise
SSE upholds the highest levels of governance and brings a range of perspectives and a breadth of relevant skills and deep experience in energy, including in renewables, critical infrastructure and large project delivery. Furthermore, the Board has substantial experience in finance, government and wider stakeholder engagement. SSE's Board comprises eight independent non-executive directors and three executive directors, and is led by the Chair, who was first appointed to the Board in September 2020 and became Chair on 1 April 2021.
Positive stakeholder reaction
The entire £12.5bn investment programme is fully funded and SSE has received positive initial feedback from shareholders. It prompted Moody's to affirm SSE's Baa1 rating and upgrade their outlook to stable, with S&P since affirming SSE's rating at BBB+. The significant increase in investment in net zero critical projects, which will see SSE enable over 25% of the UK Government's 2030 40GW offshore wind target and over 20% of upcoming UK electricity networks investment, was also welcomed across a wide range of stakeholders, including the UK Prime Minister, Chancellor of the Exchequer, Secretary of State for Business, Energy and Industrial Strategy, and Energy Minister.
Establishing SSE as a clean energy champion in a net zero world
SSE is well positioned to capture the attractive growth opportunities under the Net Zero Acceleration Programme due to the significant work that has been undertaken in recent years to sharpen its focus on the electricity assets needed in the energy transition. This transformation began with the sale of the GB household retail supply business to OVO and continued through a successful disposals programme that generated proceeds of £2.8bn (including SGN, Energy from Waste, E&P and Contracting) and has delivered attractive shareholder returns to date. Since SSE first announced the disposal of its domestic retail business to OVO in September 2019, SSE has achieved a TSR of 54%, which compares to a TSR of 6% and 24% for the FTSE100 and Euro Stoxx Utilities Index respectively.
"The SSE Board is absolutely clear that the accelerated growth plan we set out on 17 November is the right one, and that we have the capacity and strength to deliver it, with a management team that is overseeing the construction of more offshore wind than any other company in the world. We are now focused on execution in order to fulfil the growth potential available to the Group thanks to its clear net zero aligned strategy."
Sir John Manzoni Chair of SSE plc
Sir John Manzoni continued: "The Board maintains the highest corporate governance standards and remains fully engaged on the evolution of the strategy to maximise shareholder value. The carefully chosen composition of the Group means we benefit from a clear focus on low-carbon electricity while also maintaining a unique range of options in high-growth areas right across the net zero value chain."
Alistair Phillips-Davies, Chief Executive, said:
"Our Net Zero Acceleration Programme represents the optimal pathway to accelerate clean growth, lead the energy transition and create value for all stakeholders. Since its launch, we've continued to have constructive and supportive discussions with our major shareholders and stakeholders about the plan.
"We are the UK's clean energy champion; our plans maximise our potential and will mean that we are investing around £7million a day, enabling delivery of over 25% of the UK Government's 2030 40GW offshore wind target and over 20% of upcoming UK electricity networks investment, whilst deploying flexibility solutions and exporting our renewables capabilities overseas.
"Separation puts at risk valuable growth options across the clean energy value chain, would jeopardise our ability to finance and deliver the major infrastructure the UK needs to create jobs and achieve net zero, and would lose shared skills that benefit the group."