SSE Plans Stake Sales, Dividend Cut to Fund GBP12.5 Billion Investment Plan; Shares Fall -- Update

By Jaime Llinares Taboada

Shares in SSE PLC fell Wednesday morning after the company unveiled plans to cut the dividend and sell stakes in its electricity network divisions to speed up investment on energy infrastructure through fiscal 2026.

The energy company's Net Zero Acceleration Program includes a capital investment plan of 12.5 billion pounds ($16.79 billion) to 2026, it said. This represents a 65% increase in annual investment on the previous plan, or GBP1 billion a year. The money allocated to expand the renewables business will account for 40% of the total, and has more than doubled from the previous program.

To fund it, SSE plans to rebase the dividend to 60 pence a share in fiscal 2024, the company said. This compares with plans to pay 81 pence plus inflation for the current year ending March 31, 2022. SSE said that the dividend cut will be followed by annual growth of at least 5% to March 2026, and that it expects to pay at least 350 pence a share across the five years to fiscal 2026.

In addition, the capital-expenditure plan will also be funded through the sale of a 25% stake in both SSEN Transmission and SSEN Distribution businesses, the company said.

In the six months ended Sept. 30, these two divisions contributed GBP335.0 million to the group's GBP376.8 million adjusted operating profit, as renewable power generation was hurt by unfavorable weather, it said.

"The big question for the market in advance of today was how this [capital-expenditure plans] would be funded. SSE has gone for the tried and tested route of asset disposals, and has confirmed market fears that this would come with a dividend cut," RBC Capital Markets said.

Shares at 0839 GMT were down 5.4% at 1,569 pence.

SSE said the investment plan will add 4 gigawatts of renewable capacity, doubling current capacity, and increase the asset value of its power networks to GBP9 billion--net of assumed 25% stake sales.

As a result, the company said it expects to increase its adjusted earnings per share at a compound annual growth rate of 5% to 7% to March 2026.

"Today's announcement means SSE will maximize its long-term potential and capture growth opportunities during a critical time for the energy sector, strengthening and growing its core businesses, creating jobs, delivering for wider society and offering attractive shareholder returns," Chief Executive Alistair Phillips-Davies said.

Write to Jaime Llinares Taboada at [e-mail]; @JaimeLlinaresT

(END) Dow Jones Newswires

November 17, 2021 04:14 ET (09:14 GMT)

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