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SSE commits to clean energy but stops short of split

by LLB Reporter
17th Nov 21 9:52 am

SSE’s pivot towards renewables has been well-timed. Having sold its household energy supply and services firm at the beginning of 2020, it is not directly exposed to the current energy crisis, where even the larger operators will be running many loss-making accounts as the wholesale cost of gas and electricity soars above fixed tariffs.

“The company’s first half results saw the company double down on its commitment to clean energy as it outlined plans for a multi-billion pound investment funded by the sale of a 25% stake in its network distribution arm,” said AJ Bell’s Russ Mould.

“This is unlikely to be sufficient to get activist investor Elliott off its back, which having joined the shareholder register earlier this year has been reportedly pushing for SSE to take more radical action and separate the renewables assets from the grid business.

“The rationale for such a move is that it could see SSE lifted to the more elevated market valuations enjoyed by other firms which concentrate purely on renewables.

“However, today’s first-half results perhaps offered an indication why SSE is resisting such a move, at least for the time being.

“Renewable output dropped sharply due to unfavourable weather conditions – essentially it just wasn’t windy enough – but the company benefited from higher volumes through its regulated networks division.

“The unpredictability associated with renewables has also affected their role in providing baseload power and perhaps SSE might be tempted to revisit a more dramatic shake-up of the business once the storage technology needed to smooth out the contribution of renewables has developed further.”

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