SSE to update on green powerhouse plans

Scottish energy giant SSE will update investors on its multi-billion-pound investment plans to treble its renewable power generation when it reports full-year figures this week.

The recent sale of two energy-to-waste projects, which raised £995 million in cash, have helped put the Perth-headquartered group on track to raise £2 billion from the sale of non-core assets by autumn of this year as it looks to focus on green investment projects.

Investors will also be keen for news on the group’s dividend payout, following confirmation that it plans to increase its annual distribution by the rate of retail price index inflation out to 2023, with last year’s 80p-a-share annual dividend as the base.

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According to Russ Mould, investment director at AJ Bell, analysts are looking for around 81p a share this time around.

SSE will update on plans to invest as much as £7.5bn to cement its position as a leading renewable energy generator.

He said the confirmation of plans to increase the dividend were likely to be a key factor in the recent strong performance of SSE shares, which are up by a quarter over the past year, outstripping the FTSE 100’s gain of 18 per cent over the same time period.

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“That might surprise investors after a year when in general markets have been looking for recovery and turnaround players rather than perceived plodders like utilities,” said Mr Mould.

He added that other factors that may have attracted investor interest will include the company’s decision to withdraw from the “rough-and-tumble” of the retail energy market and focus on power generation and transmission, as well as the group’s ongoing drive to position itself as a leading provider of renewable energy.

A third of its output in the first nine months of its financial year came from hydro and wind.

Mr Mould said SSE will also provide an update on its proposed £7.5bn investment programme, which is designed to help the firm treble its energy output from renewables by 2030.

“SSE is positioning itself as a leading renewables play,” he said.

In its latest market updates, the group has predicted full-year impact upon profits from the coronavirus of between £150m and £250m as demand for electricity dipped.

Adjusted earnings per share of 85p to 90p are expected, excluding gains on disposals, which would represent an upgrade from an initial estimate of 75p to 80p.

Net debt is expected to fall to around £9.5bn.

Analysts at Citigroup last week singled out SSE as being the best-placed of the UK utilities to deal with rising inflation.

It said the generator has the least inflation-linked debt and should therefore see more of the inflation benefit from revenues coming through to the bottom line. It upgraded its price target on SSE shares to 1,554p.

In March, SSE said it was making progress with options to sell its entire stake in Scotia Gas Networks (SGN) after appointing banks to explore options. SGN distributes natural and green gas to millions of homes and businesses.

Its divestment programme has already seen it sell a 25 per cent stake in the Walney offshore wind farm together with a one-third stake in meter asset provider MapleCo.

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